(File Nos. 33-10438 and 811-4919)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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 ss.240.14a-11(c) or ss.240.14a-12
MITCHELL HUTCHINS 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] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
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:
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2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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GLOBAL GROWTH PORTFOLIO
MITCHELL HUTCHINS SERIES TRUST
OCTOBER __, 1998
Dear Contract Owner:
The enclosed proxy materials relate to a special meeting of the
shareholders of Global Growth Portfolio ("Portfolio"), a series of Mitchell
Hutchins Series Trust ("Trust") to be held on October 29, 1998. As an owner of a
variable annuity contract ("Contract") having all or part of its value invested
in the shares of the Portfolio, you have the right to instruct the insurance
company that issued the Contract as to how it should vote the shares
attributable to your Contract.
The Board of Trustees of the Trust ("Board") has called this meeting to
request shareholder approval to change certain investment advisory arrangements:
(a) an amended Investment Advisory and Administration Agreement between the
Trust and Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") and (b)
a new Sub-Advisory Contract under which Invista Capital Management, Inc.
("Invista") would become the Portfolio's investment sub-adviser. The Board has
approved these new advisory arrangements, including the appointment of Invista
as the Portfolio's sub-adviser for foreign securities and the enhanced role of
Mitchell Hutchins as allocator of assets between U.S. and foreign securities
markets and as adviser for the U.S. securities markets. The Board recommends
that you give instructions to vote FOR these proposals.
The Board is also requesting approval of a policy to permit the Board in
the future to approve the appointment of a new sub-adviser to the Portfolio,
terminate a sub-adviser and amend the Portfolio's sub-advisory agreements
without further shareholder approval. The Board believes that Mitchell Hutchins
is especially qualified to select and recommend sub-advisers to provide
portfolio management services to the Portfolio and further believes that the
additional delay and expense associated with seeking further shareholder
approval would result in unnecessary expense to the Portfolio. The Board
recommends that you give instructions to vote FOR this proposal.
Please take the time to review the enclosed proxy statement and give your
voting instructions today by signing and returning the enclosed voting
instruction card.
Thank you for your attention to this matter and for your continuing
investment in the Portfolio.
Very truly yours,
MARGO N. ALEXANDER
President
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GLOBAL GROWTH PORTFOLIO
MITCHELL HUTCHINS SERIES TRUST
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 29, 1998
TO THE CONTRACT OWNERS:
A special meeting of the holders of shares of beneficial interest
("Shares") of the Global Growth Portfolio ("Portfolio"), a series of Mitchell
Hutchins Series Trust ("Trust"), will be held on October 29, 1998 at 10 a.m.,
Eastern time, at 1285 Avenue of the Americas, 14th Floor, New York, New York
10019, for the following purposes:
1. (a) To approve or disapprove an amended Investment Advisory
and Administration Contract between the Trust and Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"),
applicable to the Portfolio.
(b) To approve or disapprove a new Sub-Advisory Contract
between Mitchell Hutchins and Invista Capital Management,
Inc. ("Invista").
2. To approve or disapprove a policy to permit the Board of
Trustees to appoint and terminate sub-advisers, to enter into
sub-advisory contracts and to approve amendments to
sub-advisory contracts, on behalf of the Portfolio without
further shareholder approval.
3. To transact such other business as may properly come before
the meeting or any adjournments thereof.
You are entitled to give voting instructions at the meeting and any
adjournments thereof if you owned a variable annuity contract that had all or
part of its value invested in Shares of the Portfolio at the close of business
on September 15, 1998. If you attend the meeting, you may give voting
instructions relating to these Shares in person. (IF YOU DO NOT EXPECT TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED VOTING
INSTRUCTION CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.)
By order of the Board of Trustees,
DIANNE E. O'DONNELL
Secretary
October ___, 1998
1285 Avenue of the Americas
New York, New York 10019
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED VOTING
INSTRUCTION CARD, DATE AND SIGN THE CARD, AND RETURN THE CARD IN THE ENVELOPE
PROVIDED. IF YOU SIGN, DATE AND RETURN THE VOTING INSTRUCTION CARD BUT GIVE NO
VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS NOTICED
ABOVE. WE ASK YOUR COOPERATION IN MAILING YOUR VOTING INSTRUCTION CARD PROMPTLY.
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INSTRUCTIONS FOR SIGNING VOTING INSTRUCTION CARDS
The following general guidelines for signing voting instruction cards may
be of assistance to you and avoid time and expense in validating your vote if
you fail to sign your voting instruction card properly.
1. INDIVIDUAL CONTRACT OWNERS: Sign your name exactly as it appears in the
registration on the voting instruction card.
2. JOINT CONTRACT OWNERS: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on the
voting instruction card.
3. ALL OTHER CONTRACT OWNERS: The capacity of the individual signing the
voting instruction card should be indicated unless it is reflected in the form
of registration. For example:
REGISTRATION VALID SIGNATURE
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
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GLOBAL GROWTH PORTFOLIO
MITCHELL HUTCHINS SERIES TRUST
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 29, 1998
This is a proxy statement for Global Growth Portfolio, a series of the
Trust, in connection with the solicitation of proxies made by, and on behalf of,
the Board to be used at the special meeting of Shareholders of the Portfolio and
at any adjournments thereof ("Meeting"). This proxy is being first mailed to
Shareholders on or about , 1998.
The Shares of the Portfolio 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 "Companies") to fund the benefits under variable annuity
contracts ("Contracts") issued by the Companies. The Trust is a registered,
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act"), and is organized as a Massachusetts business trust. In
accordance with their view of applicable law, the Companies will solicit voting
instructions from the owners of Contracts relating to the Portfolio ("Contract
Owners") with respect to the matters set forth in this Proxy Statement. In
connection with the solicitation of voting instructions, the Companies will
furnish a copy of this Proxy Statement to all Contract Owners.
Contract Owners will be entitled to be present at the Meeting and give
voting instructions for Shares attributable to their Contracts as of the close
of business on September 15, 1998 (the "Record Date"). There were
Shares of the Portfolio outstanding and entitled to vote as of the Record
Date, representing total net assets of approximately . On the Record
Date, the Companies held the following Shares (representing the indicated
percentage of outstanding Shares of the Portfolio): the Separate Account of
PaineWebber Life Insurance Company held Shares ( %), the
Separate Account of American Republic Insurance Company held
Shares ( %) and the Separate Account of American Benefit Life Insurance
Company held Shares ( %).
Shares of the Portfolio held by the Separate Accounts will be voted by the
Companies in accordance with voting instructions received from Contract Owners.
The Companies will vote Shares of the Portfolio for which a voting instruction
card is returned signed and dated but with no specific instructions as to a
proposal "FOR" the proposal. The Companies will vote Shares of the Portfolio for
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which no voting instruction cards are returned in the same proportion as Shares
of the Portfolio for which voting instruction cards have been returned. To the
knowledge of the Trust's management, as of the Record Date, there are no persons
with the ability to provide voting instructions with respect to more than 5% of
the outstanding Shares of the Portfolio. However, the proportionate voting by
the Companies of Shares for which no voting instruction cards are returned may
result in certain Contract Owners' instructions affecting the vote of 5% or more
of the outstanding Shares. To the knowledge of the Trust's management, as of the
Record Date, the trustees and executive officers of the Trust, as a group, had
the ability to provide voting instructions for less than 1% of the outstanding
Shares of the Portfolio.
The presence, in person or by proxy, of a majority of the Shares on the
Record Date will constitute a quorum for the transaction of business at the
Meeting. In the absence of a quorum or in the event that a quorum is present at
the Meeting, but votes sufficient to approve the proposals are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. Any 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 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.
The solicitation of proxies will be made primarily by mail but also may
include telephone or oral communications by regular employees of [the
Companies,] Mitchell Hutchins or PaineWebber Incorporated ("PaineWebber"), who
will not receive any compensation therefor from the Portfolio. The costs
associated with the Meeting will be borne by [the Portfolio.]
You may revoke any voting instructions by giving another voting
instruction card or by letter or telegram revoking the initial voting
instructions. To be effective, your revocation must be received by the
appropriate 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 voting instructions
previously given.
THE TRUST WILL FURNISH TO THE COMPANIES AND TO THE CONTRACT OWNERS,
WITHOUT CHARGE, COPIES OF THE PORTFOLIO'S MOST RECENT ANNUAL REPORT AND MOST
RECENT SEMIANNUAL REPORT SUCCEEDING SUCH ANNUAL REPORT ON REQUEST. CONTRACT
OWNERS MAY REQUEST SUCH REPORTS FROM ANNUITY ADMINISTRATION, 601 6TH AVENUE, DES
MOINES, IOWA OR BY CALLING TOLL FREE 1-800-367-6058.
Each full Share of the Portfolio is entitled to one vote and each
fractional Share is entitled to a proportionate share of one vote with respect
to each matter voted upon by Shareholders of the Portfolio. Information about
the vote necessary with respect to each proposal is discussed below in
connection with the proposal.
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INTRODUCTION
The Board of Trustees has approved a proposal by Mitchell Hutchins (the
Portfolio's investment adviser and administrator) to change the manner in which
the Portfolio's assets are managed. Under the proposal, Mitchell Hutchins would
become responsible for allocating the Portfolio's assets between U.S.
investments and foreign investments. Mitchell Hutchins would manage the assets
allocated to U.S. investments. A new sub-adviser, Invista Capital Management,
Inc. ("Invista"), would manage the assets allocated to foreign investments.
Implementation of this proposal requires shareholder approval of an amended
Investment Advisory and Administration Contract between the Trust and Mitchell
Hutchins applicable to the Portfolio (Proposal 1(a)) and a new Sub-Advisory
Contract between Mitchell Hutchins and Invista (Proposal 1(b)).
The proposal would not change the Portfolio's investment objective of
long-term capital appreciation or the Portfolio's investment policy of investing
primarily in the equity securities of U.S. and foreign companies. It would
change only the process by which the Portfolio allocates its investments between
U.S. and foreign securities and the identity of the advisers that manage its
investment portfolio. At present, all of the Portfolio's assets are managed by a
sub-adviser, GE Investment Management Incorporated ("GEIM"), which allocates the
Portfolio's assets among the U.S. and foreign markets and determines which
securities the Portfolio purchases and sells.
At its July 9, 1998 meeting, the Board approved Mitchell Hutchins'
recommendation that Mitchell Hutchins assume the role of allocating the
Portfolio's assets between U.S. and foreign securities markets and also become
responsible for the day-to-day management of the U.S. securities segment of the
Portfolio. At the same meeting, the Board also approved Invista's appointment as
sub-adviser responsible for the day-to-day management of the Portfolio's foreign
securities. The Board believes that Mitchell Hutchins' expertise in U.S. equity
securities and Invista's expertise in foreign equity securities provide an
opportunity to enhance the Portfolio's performance.
At the same time, the Board also approved Mitchell Hutchins'
recommendation that the existing Sub-Advisory Agreement with GEIM ("GEIM
Contract") be terminated. The termination of the GEIM Contract is expected to
become effective at the same time that Mitchell Hutchins and Invista assume
their new roles, assuming that the required shareholder approvals are received.
The termination of the GEIM Contract does not require shareholder approval.
If the proposed advisory arrangements are approved, Mitchell Hutchins will
be responsible for allocating the Portfolio's assets between U.S. and foreign
investments. It is currently expected that, in determining the portion of the
Portfolio's assets allocated between these two segments, Mitchell Hutchins will
consider the expected performance of the U.S. equity markets versus that of
certain developed foreign countries included in the Morgan Stanley Capital
International Europe, Australia and Far East Index ("EAFE Index"). The EAFE
Index is a well-known index that reflects most major equity markets outside the
United States. Mitchell Hutchins will utilize this analysis in determining the
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relative attractiveness of the U.S. and foreign market segments. If Mitchell
Hutchins believes that a segment shows greater potential for higher returns on a
risk-weighted basis, Mitchell Hutchins may allocate a higher portion of
Portfolio assets to that segment.
Mitchell Hutchins currently expects to reevaluate the allocation of the
Portfolio's assets monthly. Mitchell Hutchins does not expect to reallocate the
Portfolio's assets to reflect relatively minor changes (that is, less than 5%)
to the asset allocation model used by Mitchell Hutchins. When Mitchell Hutchins
determines that a reallocation of the Portfolio's assets is appropriate, the
Portfolio may effect the reallocation by using cash flows from the purchase or
redemption of its securities in addition to selling portfolio securities from
the applicable segment. The Portfolio also may use futures contracts to adjust
its exposure to U.S. and foreign equity markets in connection with a
reallocation. Mitchell Hutchins will determine the extent to which the Portfolio
uses futures contracts for this purpose and will be responsible for implementing
its decisions using these futures contracts.
For the U.S. portion of the Portfolio's investments, Mitchell Hutchins
expects to follow a disciplined investment process that relies on the Mitchell
Hutchins Equity Research Team and the Mitchell Hutchins Factor Valuation Model.
The Model screens a universe of over 3,500 companies to identify undervalued
companies with relatively strong earnings momentum that rank well in three
measures:
. VALUE: projected dividends, cash flow, earnings and book values
. MOMENTUM: earnings and prices to identify companies that could surprise
on the upside
. ECONOMIC SENSITIVITY: forecast of performance of different equity
securities and industries under various economic scenarios
The Equity Research Team then applies traditional fundamental analysis and
may speak to the management of these companies, as well as their competitors.
Based on the Team's evaluations, Mitchell Hutchins selects securities for
purchase and sale for the Portfolio.
Invista will make a qualitative analysis of a company's fundamental
business prospects and then analyze the long-term ability of the company to
generate free cash flow. Invista will consider factors such as competitive
position, market share, competitive strengths, industry supply and demand
trends, economic conditions, balance sheet strength, earnings, book value,
return on equity, revenue growth and margin development in analyzing the quality
of the company. Invista will also make a quantitative assessment of country
risk, which it considers in assessing the companies under analysis, and will
analyze a large universe of companies to determine the most appropriate
investments for the Portfolio. Invista may make changes in investments as
opportunities or prospects change for particular countries, industries, or
companies.
Under normal circumstances, the Portfolio will invest at least 80% of its
total assets in securities of issuers in the United States and countries
represented in the EAFE Index. The Portfolio may invest up to 20% of its assets
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in securities of issuers located in other countries, for example, in Canada and
in emerging markets. Mitchell Hutchins may also invest, as part of the U.S.
portion of the Portfolio, up to 10 % of the Portfolio's total assets in U.S.
dollar-denominated equity securities and bonds of foreign issuers that are
traded on recognized U.S. exchanges or in the U.S.
over-the-counter ("OTC") market.
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PROPOSAL 1(A): TO APPROVE OR DISAPPROVE AN AMENDED INVESTMENT ADVISORY
AND ADMINISTRATION CONTRACT BETWEEN THE TRUST AND MITCHELL HUTCHINS ASSET
MANAGEMENT INC., APPLICABLE TO THE PORTFOLIO.
Mitchell Hutchins proposed to the Board, and the Board approved at its
meeting on September 10, 1998, an amended Investment Advisory and Administration
Agreement ("Proposed Advisory Contract") between the Trust and Mitchell Hutchins
applicable to the Portfolio. The Proposed Advisory Contract is substantially
similar to the current Investment Advisory and Administration Agreement
("Current Advisory Contract"). Under the Proposed Advisory Contract, Mitchell
Hutchins will have the same duties and responsibilities and will receive the
same compensation as under the Current Advisory Contract. However, as discussed
below, there will be a change in the duties and responsibilities performed
directly by Mitchell Hutchins (rather than through a sub-adviser) and in the net
compensation retained by Mitchell Hutchins.
Under both the Proposed and Current Advisory Contracts, Mitchell Hutchins
will provide a continuous investment program for the Portfolio, including
investment research and management with respect to all securities, investments
and cash equivalents in the Portfolio, and may allocate the Portfolio's
investments between countries, regions or types of investments. Mitchell
Hutchins will determine from time to time what securities and other investments
will be purchased, retained or sold by the Portfolio. Mitchell Hutchins may
delegate to a sub-adviser, in whole or in part, Mitchell Hutchins' duty to
provide a continuous investment management program. Mitchell Hutchins will
supervise all aspects of the operations of the Trust and the Portfolio,
including oversight of the transfer agency, custodial and accounting services,
except as set forth in the Proposed Advisory Contract; provided, however, that
nothing in the Proposed Advisory Contract shall be deemed to relieve or deprive
the Board of its responsibility for and control of the conduct of the affairs of
the Trust and the Portfolio. The Proposed Advisory Contract recognizes that the
adviser may, under certain circumstances, pay higher brokerage commissions by
executing portfolio transactions with brokers which provide the adviser with
research, analysis, advice or similar services.
As Administrator, Mitchell Hutchins will manage the affairs of the Trust
and the Portfolio subject to the supervision of the Board. Mitchell Hutchins
will provide the Trust and the Portfolio with such corporate, administrative and
clerical personnel (including officers of the Trust) and services as are deemed
reasonably necessary or advisable by the Board, including the maintenance of
certain books and records of the Trust and the Portfolio. Mitchell Hutchins will
arrange, but not pay, for the periodic preparation, updating, filing and
dissemination (as applicable) of the Trust's Registration Statement, proxy
material, tax returns and required reports to the Portfolio's shareholders and
the Securities and Exchange Commission ("SEC") and other appropriate federal or
state regulatory authorities. Mitchell Hutchins will provide the Trust and the
Portfolio with, or obtain for it, adequate office space and all necessary office
equipment and services, including telephone service, heat, utilities, stationery
supplies and similar items. Mitchell Hutchins will provide the Board on a
regular basis with economic and investment analyses and reports and make
available to the Board, upon request, any economic, statistical and investment
services normally available to institutional or other customers of Mitchell
Hutchins.
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For both the services provided, and the expenses assumed, with respect to
the Portfolio, the Trust will pay to Mitchell Hutchins a fee, computed daily and
paid monthly, at an annual rate of 0.75% of the average daily net assets of the
Portfolio.
Under both the Proposed and Current Advisory Contracts, Mitchell Hutchins
will not be liable for any error in judgment or mistake of law or for any loss
suffered by the Portfolio, or its Shareholders, in connection with the matters
to which the relevant contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Mitchell Hutchins in
the performance of its duties or from reckless disregard by it of its
obligations and duties under the Contract.
In the Proposed Advisory Contract, paragraphs 2(a) and 5 have been amended
explicitly to permit Mitchell Hutchins to allocate the Portfolio's investments
between countries, regions or types of investments and to delegate to a
sub-adviser or sub-advisers, in whole or in part, Mitchell Hutchins' duty to
provide a continuous investment management program with respect to the
Portfolio, including the provision of investment management services with
respect to a portion of its assets. These changes would permit Mitchell Hutchins
to enter into the proposed Sub-Advisory Contract with Invista, whereby Invista
will manage the foreign portion of the Portfolio's investments and Mitchell
Hutchins will manage the U.S. portion and allocate investments between the U.S.
and foreign segments of the Portfolio.
Furthermore, paragraph 5 has been amended to acknowledge that Mitchell
Hutchins could engage a sub-adviser thereunder subject only to approval of the
Sub-Advisory Contract by the Board of Trustees and to any requirements of the
securities laws pertaining thereto. As described in Proposal 2, Mitchell
Hutchins and the Trust have requested an order from the SEC permitting the
engagement of a sub-adviser by the Board of Trustees acting alone and without
the need for approval by vote of the holders of a majority of the outstanding
shares of the Trust or the Portfolio. See Proposal 2 for more information.
The Current Advisory Contract is dated April 21, 1988, and was last
submitted to a vote of shareholders of the Portfolio on that date.
BOARD CONSIDERATION
In determining to approve the Proposed Advisory Contract, the Board of
Trustees analyzed the following factors, among others: the limited nature of the
revisions to the Current Advisory Contract and the benefits and possible costs
of those revisions, including how they would facilitate the new sub-advisory
arrangements described below at Proposals 1(b) and 2. The Board also considered
the ability of Mitchell Hutchins to perform the services contemplated under the
Proposed Advisory Contract, the change in net compensation to Mitchell Hutchins
under the Proposed Advisory Contract, as well as Mitchell Hutchins' personnel
and experience in providing similar services, its financial condition and
alternative arrangements. After full consideration of these and other factors,
the Board of Trustees, including a majority of those Trustees who are not
"interested persons" as defined by the 1940 Act of the Trust, Mitchell Hutchins
or Invista ("Independent Trustees"), approved the Proposed Advisory Contract and
recommended that it be submitted to the Shareholders for approval.
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Further information about Mitchell Hutchins is set forth below under
"Additional Information" and Exhibits B and D. The form of Proposed Advisory
Contract is set forth in Annex 1.
VOTE REQUIRED
Approval of Proposal 1(a) requires the affirmative vote of the LESSER of
(i) 67% or more of the Shares present at the Meeting, if more than 50% of the
outstanding Shares are represented at the Meeting in person or by proxy, or (ii)
more than 50% of the outstanding Shares entitled to vote at the Meeting.
Both Proposal 1(a) and Proposal 1(b) must be approved by Shareholders
before either can be implemented. If both Proposal 1(a) and Proposal 1(b) are
not approved by Shareholders, the Board of Trustees will then consider what
measures are necessary or appropriate to ensure the continuation of advisory
services to the Portfolio.
THE BOARD RECOMMENDS THAT
CONTRACT OWNERS GIVE INSTRUCTIONS
TO VOTE "FOR" PROPOSAL 1(A).
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PROPOSAL 1(B): TO APPROVE OR DISAPPROVE A NEW SUB-ADVISORY CONTRACT BETWEEN
MITCHELL HUTCHINS AND INVISTA CAPITAL MANAGEMENT, INC. ("INVISTA")
Under the current GEIM Contract, GEIM acts as sub-adviser to the
Portfolio. The GEIM Contract and the Proposed Invista Contract may,
collectively, be referred to as the "Contracts." The provisions of the Contracts
are substantively the same, except for the identity of the sub-adviser appointed
thereunder, the commencement date, certain provisions relating to notice,
provisions relating to the services to be provided, compensation paid and
termination by Mitchell Hutchins, which provisions are described below.
Under the Contracts, the sub-adviser is responsible, subject to the
supervision of the Board and Mitchell Hutchins, for the actual investment
management of the Portfolio's assets allocated to the sub-adviser, including
placing purchase and sell orders for investments and for other related
transactions, and agrees to provide a continuous investment program for the
Portfolio, including investment research and management. Both Contracts
recognize that the sub-adviser may, under certain circumstances, pay higher
brokerage commissions by executing portfolio transactions with brokers which
provide the sub-adviser with research, analysis, advice or similar services.
Under the Proposed Invista Contract, the duties of the sub-adviser have
been amended and clarified. The Proposed Invista Contract provides that the
sub-adviser will: (1) maintain all books and records required by the sub-adviser
pursuant to the 1940 Act and the rules and regulations promulgated thereunder
with respect to transactions on behalf of the Portfolio, and will furnish the
Board and Mitchell Hutchins with such periodic and special reports as the Board
or Mitchell Hutchins may reasonably request; (2) provide the Board or Mitchell
Hutchins with economic and investment analyses and reports, as well as quarterly
reports, setting forth the Portfolio's performance with respect to its
investments and make available to the Board and Mitchell Hutchins any economic,
statistical and investment services that Invista normally makes available to its
institutional investors or other customers; and (3) provide assistance in the
fair valuation of, and use reasonable efforts to arrange for the provision of, a
price(s) from a party(ies) independent of the sub-adviser for each portfolio
security for which the custodian does not obtain prices in the ordinary course
of business from an automated pricing service.
The Contracts provide that the sub-adviser will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Portfolio,
its Shareholders or Mitchell Hutchins in connection with the matters to which
the Contracts relate, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the sub-adviser in the performance of
its duties or from reckless disregard by it of its obligations and duties under
the respective Contracts.
Under the Proposed Invista Contract, Invista would receive a sub-advisory
fee, paid by Mitchell Hutchins, not the Portfolio, computed daily and paid
monthly, at an annual rate of 0.29% of the Portfolio's average daily net assets
allocated to its management. Under this fee arrangement, Invista will receive
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fees based on the value of portfolio assets under its management as these assets
have been allocated to it by Mitchell Hutchins.
Under the GEIM Contract, Mitchell Hutchins pays GEIM a sub-advisory fee at
an annual rate of 0.29% of the Portfolio's average daily net assets. A table
comparing the sub-advisory fees paid by Mitchell Hutchins under the GEIM
Contract during the Portfolio's last two fiscal years and the amounts that would
have been paid during the same periods under the Proposed Invista Contract are
set forth in Exhibit A. As noted above, GEIM manages the entire Portfolio while
it is proposed that Invista manage only the foreign securities segment of the
Portfolio.
The GEIM Contract is terminable by the Trust on no more than 60 nor fewer
than 30 days' notice to Mitchell Hutchins and GEIM; or by a vote of the majority
of the Portfolio's outstanding voting shares; or by Mitchell Hutchins or GEIM on
not more than 60 nor fewer than 30 days' notice to the Trust. The Proposed
Invista Contract provides that the Trust may terminate the Contract on 60 days'
written notice to Invista. The Proposed Invista Contract also permits Mitchell
Hutchins to terminate the contract: (1) on 120 days' written notice to Invista;
(2) upon material breach by Invista of representations and warranties contained
in the Proposed Invista Contract, if such breach has not been cured within a 20
day period after notice of such breach; or (3) immediately, if, in the
reasonable judgment of Mitchell Hutchins, Invista becomes unable to discharge
its duties and obligations under the Proposed Invista Contract, including
circumstances such as financial insolvency of Invista or other circumstances
that could adversely affect the Portfolio. In addition, Invista may terminate
the Contract, without payment of penalty, on 120 days' written notice to
Mitchell Hutchins.
Mitchell Hutchins and the Trust have requested an order of exemption from
the SEC that would permit Mitchell Hutchins not only to terminate the Proposed
Invista Contract, but also to appoint a new sub-adviser, subject to approval by
the Trust Board, but not by the holders of a majority of the outstanding shares
of the Trust or the Portfolio. See Proposal 2 for more information.
If approved by Shareholders, the Proposed Invista Contract will become
effective on or shortly after the date of approval and will remain in effect for
an initial two-year term. Thereafter, the Proposed Invista Contract will
continue in effect if it is approved at least annually by a vote of the
Shareholders or by the Board, provided that in either event continuance is
approved by the vote of a majority of the Independent Trustees, cast in person
at a meeting called for the purpose of voting on such approval.
The GEIM Contract is dated June 8, 1995 and was last submitted to a vote
of shareholders of the Portfolio on that date.
BOARD CONSIDERATIONS
In determining to approve the Proposed Invista Contract, the Board of
Trustees analyzed the factors they deemed relevant, particularly Invista's
above-average past performance for comparable accounts and its overall
capabilities to perform the services under the Contract. The Board also
considered the sub-advisory fees that would be payable to Invista. The Board
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<PAGE>
reviewed the services provided by Invista to its other investment company
clients, the ability of Invista to provide its services to the Portfolio,
including its personnel, operations and financial condition, and other factors
that would affect positively or negatively the provision of those services.
After full consideration of these and other factors, the Board of Trustees,
including a majority of the Independent Trustees, approved the Proposed Invista
Contract and recommended that it be submitted to the Shareholders for approval.
Further information about Invista is set forth below under "Additional
Information" and in Exhibits C and E. The form of the Invista Contract is set
forth in Annex 2.
VOTE REQUIRED
Approval of Proposal 1(b) requires the affirmative vote of the LESSER of
(i) 67% or more of the Shares present at the Meeting, if more than 50% of the
outstanding Shares are represented at the Meeting in person or by proxy, or (ii)
more than 50% of the outstanding Shares entitled to vote at the Meeting.
Both Proposal 1(a) and Proposal 1(b) must be approved by Shareholders
before either can be implemented. If both Proposal 1(a) and Proposal 1(b) are
not approved by Shareholders, the Board of Trustees will then consider what
measures are necessary or appropriate to ensure the continuation of advisory
services to the Fund.
THE BOARD RECOMMENDS THAT
CONTRACT OWNERS GIVE INSTRUCTIONS
TOVOTE "FOR" PROPOSAL 1(B).
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<PAGE>
PROPOSAL 2: TO APPROVE OR DISAPPROVE A POLICY TO PERMIT THE BOARD OF
TRUSTEES TO APPOINT AND TERMINATE SUB-ADVISERS, TO ENTER INTO SUB-ADVISORY
CONTRACTS AND TO APPROVE AMENDMENTS TO SUB-ADVISORY CONTRACTS ON BEHALF OF
THE PORTFOLIO WITHOUT FURTHER SHAREHOLDER APPROVAL.
SUMMARY
At the Board of Trustees' meeting on July 9, 1998, the Board approved, and
recommended that Shareholders of the Portfolio approve, a policy to permit
Mitchell Hutchins, subject to the approval of the Board of Trustees, to appoint
and terminate sub-advisers, to enter into sub-advisory contracts and to amend
existing sub-advisory contracts, on behalf of the Portfolio without further
Shareholder approval (the "Sub-Adviser Approval Policy"). The implementation of
the Sub-Adviser Approval Policy is subject to the receipt of an exemptive order
from the SEC.
THE SECTION 15 EXEMPTIVE ORDER
An application to exempt the Trust from the provisions of Section 15(a) of
the 1940 Act and Rule 18f-2 thereunder (the "Exemptive Application") has been
filed with the SEC. The provisions of the 1940 Act require that shareholders of
a mutual fund approve a sub-advisory contract with the sub-adviser and material
amendments to an existing sub-advisory contract. If the Exemptive Application is
granted by the SEC, and Shareholders approve this proposal, Mitchell Hutchins
will be authorized, subject to approval by the Board of Trustees, to evaluate,
select and retain new sub-advisers for the Portfolio or modify the Portfolio's
existing Sub-Advisory Contracts (including termination) without obtaining
further approval of the Portfolio's Shareholders whenever Mitchell Hutchins and
the Board believe these actions will benefit the Portfolio and its Shareholders.
As explained below, Shareholders would receive detailed information regarding
any change in sub-advisers or a material change to the sub-advisory contract.
There can be no assurance that the SEC will grant the relief requested in the
Exemptive Application.
CURRENT SUB-ADVISER APPROVAL PROCESS
Currently, Mitchell Hutchins has entered into a sub-advisory contract
pursuant to which the selected sub-adviser has authority to provide the
Portfolio with advice concerning the investment management of all (or a portion)
of the Portfolio's assets. The sub-adviser determines what securities shall be
purchased, what securities shall be sold and what portion of the Portfolio's
assets shall remain uninvested. For these sub-advisory services to the
Portfolio, Mitchell Hutchins pays the sub-adviser a monthly fee as specified in
the sub-advisory contract. The sub-adviser bears its own expenses of providing
sub-advisory services to the Portfolio. Neither the Trust nor the Portfolio has
any responsibility to pay sub-advisory fees to the sub-adviser. The Portfolio's
sub-advisory contract is subject to approval by the Board of Trustees, including
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<PAGE>
the Independent Trustees, and in the absence of exemptive relief from the SEC,
any sub-advisory contract is subject to the approval of the Portfolio's
shareholders.
PROPOSED SUB-ADVISER APPROVAL POLICY
Approval of the Sub-Adviser Approval Policy will not affect any of the
requirements under the federal securities laws that govern the Trust, the
Portfolio, Mitchell Hutchins, any sub-adviser, or any sub-advisory contract,
other than the requirement to call a meeting of the Portfolio's Shareholders for
the purpose of approving a sub-advisory contract. The Board of Trustees,
including the Independent Trustees, will continue to evaluate and approve all
new sub-advisory contracts between Mitchell Hutchins and any sub-adviser as well
as all changes to existing sub-advisory contracts. In addition, if the requested
relief is granted by the SEC, the Trust and Mitchell Hutchins will be subject to
several conditions imposed by the SEC to ensure that the interests of the
Portfolio's Shareholders (and Contract Owners) are adequately protected whenever
Mitchell Hutchins acts under the Sub-Adviser Approval Policy. Furthermore,
within 90 days of any change in sub-advisers or a material change to a
sub-advisory contract, the Trust will provide the Portfolio's Shareholders with
an information statement that contains substantially the same relevant
information about the sub-adviser, the sub-advisory contract and the
sub-advisory fee that would be required to be sent to the Portfolio's
Shareholders in a proxy statement. The Companies would forward the information
to the Contract Owners so that the Contract Owners would be advised of the new
sub-advisory arrangements. If not satisfied, the Contract Owners could allocate
the portion of the value of their Contract invested in the Portfolio to another
investment.
Shareholder approval of this Proposal 2 will not result in an increase or
decrease in the total amount of investment advisory fees paid by the Portfolio
to Mitchell Hutchins. If the Trust implements the Sub-Adviser Approval Policy,
Mitchell Hutchins, pursuant to the Portfolio's Investment Advisory and
Administration Agreement, will continue to provide the same level of management
and administrative services to the Portfolio as it has always provided.
If the Exemptive Application is granted, the relief would permit Mitchell
Hutchins to change sub-advisers in the following types of situations: (i) the
sub-adviser has a record of substandard performance; (ii) the individual
employees responsible for portfolio management of the Portfolio move from the
sub-adviser to another investment advisory firm; (iii) there is a change of
control of the sub-adviser; (iv) Mitchell Hutchins decides to diversify the
Portfolio's management by adding another sub-adviser; (v) there is a change in
investment style of the Portfolio; and (vi) Mitchell Hutchins negotiates a
reduction (or the sub-adviser negotiates an increase) in the portion of the
advisory fee that Mitchell Hutchins pays to the sub-adviser. Furthermore, where
there is a decrease in a sub-adviser's compensation paid by Mitchell Hutchins,
the concomitant increase in the compensation available for retention by Mitchell
Hutchins would not be deemed to be an increase in advisory compensation that
requires a Shareholder meeting. The Sub-Adviser Approval Policy will not be used
to approve any sub-adviser that is affiliated with Mitchell Hutchins as that
term is used in the 1940 Act or to materially amend any sub-advisory contract
with an affiliated sub-adviser.
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<PAGE>
REASONS FOR REQUESTING SECTION 15 EXEMPTIVE RELIEF
The Board of Trustees believes that providing Mitchell Hutchins with
maximum flexibility to perform those duties that Shareholders (and Contract
Owners) expect Mitchell Hutchins to perform - selecting, supervising and
evaluating sub-advisers - without incurring the unnecessary delay or expense of
obtaining further Shareholder approval is in the best interests of the
Portfolio's Shareholders (and Contract Owners) because it will allow the
Portfolio to operate more efficiently. Currently, in order for Mitchell Hutchins
to appoint a sub-adviser or materially modify a sub-advisory contract, the Trust
must call and hold a Shareholder meeting of the Portfolio, create and distribute
proxy materials, and arrange for the solicitation of voting instructions from
the Contract Owners. This process is time consuming, slow and costly. These
costs generally are borne entirely by the Portfolio. Without the delay inherent
in holding Shareholder meetings, the Board would be able to act more quickly and
with less expense to appoint a sub-adviser when the Board and Mitchell Hutchins
feel that the appointment would benefit the Portfolio and its Shareholders (and
Contract Owners).
Also, the Board believes that it is appropriate to vest the selection,
supervision and evaluation of sub-advisers in Mitchell Hutchins (subject to
review by the Board), in light of Mitchell Hutchins' significant experience and
expertise in selecting sub-advisers and Shareholders' expectation that Mitchell
Hutchins will utilize that expertise to select the most competent sub-advisers.
Mitchell Hutchins has demonstrated that it has the requisite expertise to
evaluate, select and supervise sub-advisers. The Board believes that many
investors choose to invest in the Portfolio because of Mitchell Hutchins'
experience in this respect.
Finally, the Board will provide sufficient oversight of the sub-adviser
selection process to ensure that Shareholders' and Contract Owners' interests
are protected whenever Mitchell Hutchins selects a sub-adviser or modifies a
sub-advisory contract. The Board, including a majority of the Independent
Trustees, will continue to evaluate and approve all new sub-advisory contracts
as well as any modification to existing sub-advisory contracts. In its review,
the Board will analyze all factors that it considers to be relevant to the
determination, including the nature, quality and scope of services provided by
the sub-advisers. The Board will compare the investment performance of the
assets managed by the sub-adviser with other accounts with similar investment
objectives managed by other advisers and will review the sub-adviser's
compliance with federal securities laws and regulations. The Board believes that
its comprehensive review will ensure that Mitchell Hutchins continues to act in
the best interests of the Portfolio and its Shareholders (and Contract Owners).
Each Sub-Advisory Contract will continue to be subject to all provisions of the
1940 Act, except for the specific provisions of the 1940 Act for which relief is
granted by the SEC.
REQUIRED VOTE
Approval of Proposal 2 requires the affirmative vote of the LESSER of (i)
67% or more of the Shares present at the Meeting, if more than 50% of the
outstanding Shares are represented at the Meeting in person or by proxy, or (ii)
more than 50% of the outstanding Shares entitled to vote at the Meeting.
Adoption of the Sub-Adviser Approval Policy is also conditioned upon receipt of
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<PAGE>
the requested exemptive relief from the SEC. If the SEC declines to grant the
relief requested by the Trust and Mitchell Hutchins, the Sub-Adviser Approval
Policy will not be adopted for the Portfolio.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
CONTRACT OWNERS GIVE INSTRUCTIONS
TO VOTE "FOR" PROPOSAL 2.
-18-
<PAGE>
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION ABOUT MITCHELL HUTCHINS
Mitchell Hutchins, a Delaware corporation and the Portfolio's investment
adviser and administrator, is a wholly owned asset management subsidiary of
PaineWebber, a wholly owned subsidiary of Paine Webber Group Inc. ("PW Group"),
a publicly held corporation. The principal offices of Mitchell Hutchins,
Mitchell Hutchins and PW Group are located at 1285 Avenue of the Americas, New
York, New York 10019.
As of August 31, 1998, Mitchell Hutchins served as adviser or sub-adviser
to 32 investment companies with an aggregate of 69 separate portfolios and
aggregate assets of approximately $40.5 billion. Information concerning advisory
fees paid by other investment companies advised by Mitchell Hutchins with
investment objectives similar to the Portfolio is attached as Exhibit B.
The Trust is authorized to offer two classes of shares - Class H shares
and Class I shares - although only Class H shares are outstanding at the date of
this Proxy Statement. Mitchell Hutchins acts as the distributor of the Class I
Shares under a distribution contract with the Trust dated May 1, 1998 that
requires Mitchell Hutchins to use its best efforts, consistent with its other
businesses, to sell Class I Shares. Under a plan of distribution pertaining to
Class I Shares, the Portfolio pays Mitchell Hutchins a distribution fee at an
annual rate of 0.25% of the average daily net assets of the Portfolio's Class I
Shares. There is no distribution contract or plan of distribution for the Class
H Shares.
The names, addresses and principal occupations of the principal executive
officer and directors of Mitchell Hutchins are set forth in Exhibit D. Each
officer of the Trust is an officer, employee or director of Mitchell Hutchins or
PaineWebber, as indicated under "Information about Certain Trustees and Officers
of the Trust," below. The Portfolio did not pay brokerage commissions to
affiliated brokers during the fiscal year ended December 31, 1997.
ADDITIONAL INFORMATION ABOUT INVISTA
Invista is located at 1800 Hub Tower, 699 Walnut, Des Moines, Iowa 50309
and is an indirect wholly owned subsidiary of Principal Life Insurance Company.
Invista is a registered investment adviser. As of June 30, 1998, Invista had
over $30 billion in assets under management.
-19-
<PAGE>
INFORMATION ABOUT CERTAIN TRUSTEES AND OFFICERS OF THE TRUST
Officers are appointed by the Trustees and serve at the pleasure of the
Board. Information regarding officers and Trustees of the Trust who are
employees or directors of Mitchell Hutchins, PaineWebber or PW Group is provided
below:
MARGO N. ALEXANDER, age 51, president and Trustee of the Trust.
Mrs. Alexander is president, chief executive officer and a director of
Mitchell Hutchins (since January 1995) and an executive vice president
and a director of PaineWebber (since March 1984). Mrs. Alexander is
president and a director or trustee of 32 investment companies for
which Mitchell Hutchins or PaineWebber serves as investment adviser.
T. KIRKHAM BARNEBY, age 52, vice president of the Trust. Mr.
Barneby is a managing director and chief investment officer quantitative
investments of Mitchell Hutchins. Prior to September 1994, he was a senior
vice president at Vantage Global Management. Mr. Barneby is a vice
president of six investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
E. GARRETT BEWKES, JR., age 72, Trustee and chairman of the Board of
Trustees. Mr. Bewkes is a director of PW Group (holding company of
PaineWebber and Mitchell Hutchins). Prior to December 1995, he was a
consultant to PW Group. Prior to 1988, he was chairman of the board,
president and chief executive officer of American Bakeries Company. Mr.
Bewkes is a director of Interstate Bakeries Corporation. Mr. Bewkes is a
director of trustee of 32 investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
MARY C. FARRELL, age 48, Trustee of the Trust. Ms. Farrell is a
managing director, senior investment strategist and member of the
Investment Policy Committee of PaineWebber. Ms. Farrell joined PaineWebber
in 1982. She is a member of the Financial Women's Association and Women's
Economic Roundtable and appears as a regular panelist on Wall $treet Week
with Louis Rukeyser. She also serves on the Board of Overseers of New York
University's Stern School of Business. Ms. Farrell is a director or
trustee of 31 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
LAURENCE CHINSKY, age 29, vice president and assistant treasurer of
the Trust. Mr. Chinsky is an assistant vice president and investment
monitoring officer of the mutual fund finance department of Mitchell
Hutchins. Prior to August 1997, he was a securities compliance examiner
with the Office of Compliance, Inspections and Examinations in the New
York Regional Office of the SEC. Mr. Chinsky is vice president and
assistant treasurer of 32 investment companies for which Mitchell Hutchins
or PaineWebber services as investment adviser.
ELLEN R. HARRIS, age 52, vice president of the Trust. Ms. Harris
is a managing director and a portfolio manager of Mitchell Hutchins.
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<PAGE>
Ms. Harris is a vice president of two investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
DONALD R. JONES, age 38, vice president of the Trust. Mr. Jones
is a first vice president and a portfolio manager of Mitchell
Hutchins. Prior to February 1996, he was a vice president in the asset
management group of First Fidelity Bancorporation. Mr. Jones is a vice
president of two investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
JAMES F. KEEGAN, age 38, vice president of the Trust. Mr. Keegan is
a senior vice president and a portfolio manager of Mitchell Hutchins.
Prior to March 1996, he was director of fixed income strategy and research
of Merrion Group, L.P. From 1987 to 1994, he was a vice president of
global investment management of Bankers Trust. Mr. Keegan is a vice
president of three investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
JOHN J. LEE, age 30, vice president and assistant treasurer of the
Trust. Mr. Lee is a vice president and a manager of the mutual fund
finance department of Mitchell Hutchins. Prior to September 1997, he was
an audit manager in the financial services practice of Ernst & Young LLP.
Mr. Lee is a vice president and assistant treasurer of 32 investment
companies for which Mitchell Hutchins or PaineWebber serves as investment
adviser.
THOMAS J. LIBASSI, age 39, vice president of the Trust. Mr.
Libassi is a senior vice president and a portfolio manager of Mitchell
Hutchins. Prior to May 1994, he was a vice president of Keystone
Custodian Funds Inc. with portfolio management responsibility. Mr.
Libassi is a vice president of five investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
DENNIS MCCAULEY, age 51, vice president of the Trust. Mr.
McCauley is a managing director and chief investment officer -- fixed
income of Mitchell Hutchins. Prior to December 1994, he was director
of fixed income investments of IBM Corporation. Mr. McCauley is a vice
president of 21 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
ANN E. MORAN, age 41, vice president and assistant treasurer of the
Trust. Ms. Moran is a vice president and a manager of the mutual fund
finance department of Mitchell Hutchins. Ms. Moran is a vice president and
assistant treasurer of 32 investment companies for which Mitchell Hutchins
or Mitchell Hutchins serves as investment adviser.
DIANNE E. O'DONNELL, age 46, vice president and secretary of the
Trust. Ms. O'Donnell is a senior vice president and deputy general
counsel of Mitchell Hutchins. Ms. O'Donnell is a vice president and
secretary of 31 investment companies and a vice president and assistant
secretary of one investment company for which Mitchell Hutchins or
Mitchell Hutchins serves as investment adviser.
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<PAGE>
EMIL POLITO, age 37, vice president of the Trust. Mr. Polito is
a senior vice president and director of operations and control for
Mitchell Hutchins. Mr. Polito is a vice president for 32 investment
companies for which Mitchell Hutchins or Mitchell Hutchins serves as
investment adviser.
SUSAN RYAN, age 38, vice president of the Trust. Ms. Ryan is a
senior vice president and portfolio manager of Mitchell Hutchins and
has been with Mitchell Hutchins since 1982. Ms. Ryan is a vice
president of five investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
VICTORIA E. SCHONFELD, age 47, vice president of the Trust. Ms.
Schonfeld is a managing director and general counsel of Mitchell
Hutchins. Prior to May 1994, she was a partner in the law firm of
Arnold & Porter. Ms. Schonfeld is a vice president of 31 investment
companies and a vice president and secretary of one investment company
for which Mitchell Hutchins or PaineWebber serves as investment adviser.
PAUL H. SCHUBERT, age 35, vice president and treasurer of the
Trust. Mr. Schubert is a senior vice president and director of the
mutual fund finance division of Mitchell Hutchins. From August 1992 to
August 1994, he was a vice president at BlackRock Financial Management,
Inc. Mr. Schubert is a vice president and treasurer of 32 investment
companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
NIRMAL SINGH, age 42, vice president of the Trust. Mr. Singh is
a senior vice president and portfolio manager of Mitchell Hutchins.
Prior to 1993, he was a member of the portfolio management team at
Merrill Lynch Asset Management, Inc. Mr. Singh is a vice president of
four investment companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
BARNEY TAGLIALATELA, age 37, vice president and assistant treasurer
of the Trust. Mr. Taglialatela is a vice president and a manager of the
mutual fund finance department of Mitchell Hutchins. Prior to February
1995, he was a manager of the mutual fund finance division of Kidder
Peabody Asset Management, Inc. Mr. Taglialatela is a vice president and
assistant treasurer of 32 investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
MARK A. TINCHER, age 42, vice president of the Trust. Mr.
Tincher is a managing director and chief investment officer - equities
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. Mr. Tincher is a vice president of 13
investment companies for which Mitchell Hutchins or Mitchell Hutchins
serves as investment adviser.
CRAIG M. VARRELMAN, age 39, vice president of the Trust. Mr.
Varrelman is a senior vice president and a portfolio manager of
Mitchell Hutchins. Mr. Varrelman is a vice president of four
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investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
STUART WAUGH, age 43, vice president of the Trust. Mr. Waugh is
a managing director and portfolio manager of Mitchell Hutchins
responsible for global fixed income investments and currency trading.
Mr. Waugh is a vice president of five investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
KEITH A. WELLER, age 37, vice president and assistant secretary of
the Trust. Mr. Weller is a first vice president and associate general
counsel of Mitchell Hutchins. Prior to joining Mitchell Hutchins in June
1995, he was an attorney with the law firm of Brown & Wood. Mr. Weller is
a vice president and assistant secretary of 31 investment companies for
which Mitchell Hutchins or PaineWebber serves as investment adviser.
OTHER INFORMATION
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 Portfolio's shareholders should send such
proposals to the Portfolio at 1285 Avenue of the Americas, New York, New York
10019, attn: Dianne E. O'Donnell, Secretary. They must be received a reasonable
period of time prior to any meeting to be included in the proxy materials.
Moreover, inclusion of such proposals is subject to limitations under the
federal securities laws.
OTHER BUSINESS
Management knows of no business to be presented to the Meeting other than
the matters set forth in this statement, but should any other matter requiring a
vote of Shareholders arise, the proxies will vote thereon according to their
best judgment in the interests of the Portfolio.
By order of the Board of Trustees,
DIANNE E. O'DONNELL
Secretary
October , 1998
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EXHIBIT A
COMPARISON OF SUB-ADVISORY FEES
SUB-ADVISORY FEES PAID AND PAYABLE BY MITCHELL HUTCHINS
The following table compares the sub-advisory fees, expressed both in
dollars and as a percentage of the Portfolio's average daily net assets, paid to
GEIM by Mitchell Hutchins to the sub-advisory fees that would have been payable
to Invista by Mitchell Hutchins if the Invista Contract had been in effect
during the same periods indicated below:
Fees Paid Under Fees Payable(1)
Geim Contract Under Invista Contract
------------- ----------------------
Fiscal Year Ended 12/31/96....... $76,609 0.29% $35,240 0.13%
Fiscal Year Ended 12/31/97....... $70,428 0.29% $45,074 0.19%
- ----------
1 The differences between the aggregate fees paid under the GEIM Contract and
the aggregate fees payable under the Invista Contract reflect an assumed
allocation of the Fund's average daily net assets by Mitchell Hutchins to
Invista during the indicated periods as follows: fiscal year ended 12/31/96,
46%; and fiscal year ended 12/31/97, 64%. This assumption is for illustration
purposes only, as it is not possible to determine retroactively and with
precision the exact percentage of the Portfolio's assets that would have been
allocated to Invista on a monthly basis had the proposed arrangements been in
effect during the periods indicated.
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EXHIBIT B
<TABLE>
<CAPTION>
ADVISORY FEES PAYABLE TO MITCHELL HUTCHINS
BY INVESTMENT COMPANIES OR SERIES THEREOF
WITH INVESTMENT OBJECTIVES SIMILAR TO THE FUND
Annual Investment Advisory
Net Assets as and Administration Fee Rate
of 6/30/98 Expressed as a Percentage of Average
Portfolio ($ Millions) Daily Net Assets, as Of 6/30/98
- --------- ------------ -------------------------------
<S> <C> <C>
PaineWebber Investment Trust II $10.8 0.00%(1)
- PaineWebber Emerging
Markets Equity Portfolio
PaineWebber Managed $33.1 Up to $100 million: 1.20%
Investments Trust -- Over $100 million: 1.10%
PaineWebber Asia Pacific
Growth Portfolio
Global Small Cap Portfolio Inc. $73.7 1.00%
PaineWebber Investment Trust -- $495.8 Up to $500 million: 0.85%
PaineWebber Global Over $500 million to $1 billion:
Equity Fund 0.83%
Over $1 billion: 0.805%
PaineWebber PACE Select $58.6 0.85%(2)
Advisors Trust - PACE
International Emerging
Markets Equity Investments
PaineWebber PACE Select $156.9 0.90%
Advisors Trust -- PACE
International Equity
Investments
</TABLE>
- ----------
1 Without giving effect to fee waivers and/or expense reimbursements, advisory
fees would have been 1.20% 2. Without giving effect to fee waivers and/or
expense reimbursements, advisory fees would have been 1.10%.
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EXHIBIT C
ADVISORY FEES PAYABLE TO INVISTA
BY INVESTMENT COMPANIES OR SERIES THEREOF
WITH INVESTMENT OBJECTIVES SIMILAR TO THE FUND
Portfolio Net Assets as Annual Sub-investment Advisory Fee
--------- of 6/30/98 Rate, as of
($ Millions) 6/30/98
------------ -------
PRINCIPAL
SPECIAL
MARKETS
PORTFOLIO,
INC. *
International $86.6 First $250 million - 1.15%
Emerging Next $250 million - 1.05%
Markets Over $500 million - 0.95%
Portfolio
International $49.8 Entire Portfolio - 0.90%
Securities
Portfolio
International $91.9 First $250 million - 1.00%
SmallCap Next $250 million - 0.90%
Portfolio Over $500 million - 0.80%
PRINCIPAL
VARIABLE
CONTRACTS
PORTFOLIO,
INC.**
International $151.8 First $100 million - 0.75%
Account Next $100 million - 0.70%
Next $100 million - 0.65%
Next $100 million - 0.60%
Over $400 million - 0.55%
- ----------
* Fees for the following three funds indicate what each portfolio pays the
funds' manager, Principal Management Corporation. Principal Management
Corporation passes this entire fee through to Invista. Fees paid represent a
percentage of average daily net assets, as of June 30, 1998.
** Fees for the following five funds indicate what each portfolio pays the
funds' manager, Principal Management Corporation. Principal Management
Corporation reimburses Invista for expenses incurred in rendering sub-advisory
services to each portfolio.
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<PAGE>
Portfolio Net Assets as Annual Sub-investment Advisory Fee
--------- of 6/30/98 Rate, as of
($ Millions) 6/30/98
------------ -------
International $11.0 First $100 million - 1.20%
SmallCap Next $100 million - 1.15%
Account Next $100 million - 1.10%
Next $100 million - 1.05%
Over $400 million - 1.00%
PRINCIPAL $13.1 First $100 million - 1.25%
INTERNATIONAL Next $100 million - 1.20%
EMERGING Next $100 million - 1.15%
MARKETS Next $100 million - 1.10%
PORTFOLIO, Over $400 million - 1.05%
INC.
PRINCIPAL $24.2 First $100 million - 1.20%
INTERNATIONAL Next $100 million - 1.15%
SMALL CAP Next $100 million - 1.10%
PORTFOLIO, Next $100 million - 1.05%
INC. Over $400 million - 1.00%
PRINCIPAL $400.4 First $100 million - 0.75%
INTERNATIONAL Next $100 million - 0.70%
PORTFOLIO, Next $100 million - 0.65%
INC. Next $100 million - 0.60%
Over $400 million - 0.55%
Rodney $21.1 Monthly fee at annual
Square (Invista managed) rate of 0.50% of
Strategic $64.2 average daily net assets
Equity (Full Portfolio)
Portfolio -
International
Equity
Portfolio***
- ----------
*** Fees payable to Invista are based solely on the percentage of the portfolio
to which Invista serves as sub-adviser. Fees payable to Invista are calculated
monthly at an annual rate of 0.50% of average daily net assets.
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EXHIBIT D
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF MITCHELL HUTCHINS
Name Principal Occupation Address
---- -------------------- -------
Margo N. Alexander President, Chief Executive 1285 Avenue of the Americas
Officer and Director of New York, NY 10019
Mitchell Hutchins and
Executive Vice President
and Director of PaineWebber
Jonathan R. Baum Managing Director and 1285 Avenue of the Americas
Director of Sales and New York, NY 10019
Marketing of Mitchell
Hutchins
Julian F. Sluyters Senior Vice President and 1285 Avenue of the Americas
Chief Administrative New York, NY 10019
Officer of Mitchell
Hutchins
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<PAGE>
EXHIBIT E
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF INVISTA
Name Principal Occupation Address
---- -------------------- -------
Craig Barnes President - Invista Capital 1900 Hub Tower,
Management, Inc. Des Moines, Iowa
Ron Keller Executive Vice President - 801 Grand Avenue,
Principal Life Insurance Des Moines, Iowa
Company
Greg Hauser Vice President - Principal Life 801 Grand Avenue,
Insurance Company Des Moines, Iowa
Stephan Jones President - Princor Financial 801 Grand Avenue,
Services Corporation Des Moines, Iowa
Scott Opsal Executive Vice President - 1900 Hub Tower,
Invista Capital Management, Des Moines, Iowa
Inc.
Larry Zimpleman Vice President - Principal Life 711 High Street,
Insurance Company Des Moines, Iowa
Dennis Francis Senior Vice President - 801 Grand Avenue,
Principal Life Insurance Des Moines, Iowa
Company
Richard Prey Senior Vice President - 711 High Street,
Principal Life Insurance Des Moines, Iowa
Company
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<PAGE>
ANNEX 1
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of ______________, 1998 between MITCHELL HUTCHINS SERIES
TRUST, a Massachusetts business trust ("Trust"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered as a
broker-dealer under the Securities Exchange Act of 1934, as amended ("1934
Act"), and as an investment adviser under the Investment Advisers Act of 1940,
as amended,
WHEREAS the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and
offers for public sale 13 distinct series of shares of beneficial interest,
which correspond to distinct portfolios, one of which has been designated as
Global Growth Portfolio; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment
adviser and administrator to furnish certain administrative, investment advisory
and portfolio management services to the Trust with respect to Global Growth
Portfolio and any other Series as to which this Contract may hereafter be made
applicable (each a "Series"), and Mitchell Hutchins is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints Mitchell Hutchins as investment
adviser and administrator of the Trust and each Series for the period and on the
terms set forth in this Contract. Mitchell Hutchins accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. DUTIES AS INVESTMENT ADVISER.
(a) Subject to the supervision of the Trust's Board of Trustees ("Board"),
Mitchell Hutchins will provide a continuous investment program for a Series,
including investment research and management with respect to all securities and
investments and cash equivalents in the Series, and may allocate the Series'
portfolio investments between countries, regions or types of investments.
Mitchell Hutchins will determine from time to time what securities and other
investments will be purchased, retained or sold by the Series. Mitchell Hutchins
may delegate to a sub-adviser, in whole or in part, Mitchell Hutchins' duty to
provide a continuous investment management program with respect to any Series,
including the provision of investment management services with respect to a
portion of the Series' assets, in accordance with paragraph 5 of this Agreement.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution; provided
that, on behalf of any Series, Mitchell Hutchins may, in its discretion, use
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brokers who provide the Series with research, analysis, advice and similar
services to execute portfolio transactions on behalf of the Series, and Mitchell
Hutchins may pay to those brokers in return for brokerage and research services
a higher commission than may be charged by other brokers, subject to Mitchell
Hutchins' determining in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of
Mitchell Hutchins to such Series and its other clients and that the total
commissions paid by such Series will be reasonable in relation to the benefits
to the Series over the long term. In no instance will portfolio securities be
purchased from or sold to Mitchell Hutchins, or any affiliated person thereof,
except in accordance with the federal securities laws and the rules and
regulations thereunder, or any applicable exemptive orders . Whenever Mitchell
Hutchins simultaneously places orders to purchase or sell the same security on
behalf of a Series and one or more other accounts advised by Mitchell Hutchins,
such orders will be allocated as to price and amount among all such accounts in
a manner believed to be equitable to each account. The Trust recognizes that in
some cases this procedure may adversely affect the results obtained for the
Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series, and will
furnish the Board with such periodic and special reports as the Board reasonably
may request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Mitchell Hutchins hereby agrees that all records which it maintains for the
Trust are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Trust and which are required to be maintained by Rule 31a-l under the 1940
Act and further agrees to surrender promptly to the Trust any records which it
maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset value
and the net income of each Series as described in the currently effective
registration statement of the Trust under the Securities Act of 1933, as
amended, and the 1940 Act and any supplements thereto ("Registration Statement)
or as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or person
associated with Mitchell Hutchins which is a member of a national securities
exchange to effect any transaction on such exchange for the account of any
Series, which transaction is permitted by Section 11(a) of the 1934 Act and the
rules thereunder, and the Trust hereby consents to the retention of compensation
by Mitchell Hutchins or any person or entity associated with Mitchell Hutchins
for such transaction.
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the affairs
of the Trust and each Series subject to the supervision of the Board and the
following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of the
Trust and each Series, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Trust and
each Series.
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<PAGE>
(b) Mitchell Hutchins will provide the Trust and each Series with such
corporate, administrative and clerical personnel (including officers of the
Trust) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Trust and
each Series.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Trust's
Registration Statement, proxy material, tax returns and required reports to each
Series' shareholders and the Securities and Exchange Commission and other
appropriate federal or state regulatory authorities.
(d) Mitchell Hutchins will provide the Trust and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Declaration of
Trust, By-Laws, and Registration Statement of the Trust and with the
instructions and directions of the Board and will comply with the requirements
of the 1940 Act, the rules thereunder, and all other applicable federal and
state laws and regulations.
5. DELEGATION OF MITCHELL HUTCHINS' DUTIES AS INVESTMENT ADVISER AND
ADMINISTRATOR. With respect to any or all Series, Mitchell Hutchins may enter
into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
one or more sub-advisers or sub-administrators in which Mitchell Hutchins
delegates to such sub-advisers or sub-administrators any or all of its duties
specified in Paragraphs 2 and 3 of this Contract, provided that each
Sub-Advisory or Sub-Administration Contract imposes on the sub-adviser or
sub-administrator bound thereby all the corresponding duties and conditions to
which Mitchell Hutchins is subject by Paragraphs 2 and 3 of this Contract and
all the duties and conditions of paragraph 4 of this Contract, and further
provided that each Sub-Advisory or Sub-Administration Contract meets all
requirements of the 1940 Act and rules thereunder. Furthermore, to the extent
consistent with the regulations and orders of the Securities and Exchange
Commission, the appointment and engagement of any sub-advisor and delegation to
it of duties hereunder by Mitchell Hutchins shall be subject only to the
approval of the Board of Trustees of the Trust.
6. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby or unless otherwise agreed to by the parties hereunder
in writing. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of Mitchell Hutchins, who may also be a Trustee,
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officer or employee of the Trust, to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar nature.
7. EXPENSES.
(a) During the term of this Contract, each Series will bear all expenses,
not specifically assumed by Mitchell Hutchins, incurred in its operations and
the offering of its shares.
(b) Expenses borne by each series will include but not be limited to the
following (or each Series' proportionate share of the following): (i) the cost
(including brokerage commissions) of securities purchased or sold by the Series
and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Series by Mitchell Hutchins under this
Contract; (iii) expenses of organizing the Trust and the Series; (iv) filing
fees and expenses relating to the registrations and qualification of the Series'
shares and the Trust under federal and/or securities laws and maintaining such
registration and qualifications; (v) fees and salaries payable to the Trust's
Trustees and officers who are not interested persons of the Trust or Mitchell
Hutchins; (vi) all expenses incurred in connection with the Trustees' services,
including travel expenses; (vii) taxes (including any income or franchise taxes)
and governmental fees; (viii) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (ix) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Trust or Series for violation of any law; (x) legal,
accounting and auditing expenses, including legal fees of special counsel for
those Trustees of the Trust who are not interested persons of the Trust; (xi)
charges of custodians, transfer agents and other agents; (xii) costs of
preparing share certificates; (xiii) expenses of setting in type and printing
prospectuses and supplements thereto, statements of additional information and
supplements thereto, reports and proxy materials for existing shareholders;
(xiv) costs of mailing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials to
existing shareholders; (xv) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which the
Trust is a party and the expenses the Trust may incur as a result of its legal
obligation to provide indemnification to its officers, Trustees, agents and
shareholders) incurred by the Trust or Series; (xvi) fees, voluntary assessments
and other expenses incurred in connection with membership in investment company
organizations; (xvii) cost of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xviii) the cost
of investment company literature and other publications provided by the Trust to
its Trustees and officers; (xix) costs of mailing, stationery and communications
equipment; (xx) expenses incident to any dividend, withdrawal or redemption
options; (xxi) charges and expenses of any outside pricing service used to value
portfolio securities; and (xxii) interest on borrowings.
(c) The Trust or a Series may pay directly any expenses incurred by it in
its normal operations and, if any such payment is consented to by Mitchell
Hutchins and acknowledged as otherwise payable by Mitchell Hutchins pursuant to
this Contract, the Series may reduce the fee payable to Mitchell Hutchins
pursuant to Paragraph 8 thereof by such amount. To the extent that such
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<PAGE>
deductions exceed the fee payable to Mitchell Hutchins on any monthly payment
date, such excess shall be carried forward and deducted in the same manner from
the fee payable on succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those Trustees who are interested persons of the Trust.
(e) The payment or assumption by Mitchell Hutchins of any expenses of the
Trust or a Series that Mitchell Hutchins is not required by this Contract to pay
or assume shall not obligate Mitchell Hutchins to pay or assume the same or any
similar expense of the Trust or a Series on any subsequent occasion.
8. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to Global Growth Portfolio, the Trust will pay to
Mitchell Hutchins a fee, computed daily and paid monthly, at an annual rate of
0.75% of the average daily net assets of such Series.
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any other Series, the Trust will pay to Mitchell
Hutchins from the assets of such Series a fee in an amount to be agreed upon in
a written fee agreement ("Fee Agreement") executed by the Trust on behalf of
such Series and by Mitchell Hutchins. All such Fee Agreements shall provide that
they are subject to all terms and conditions of this Contract.
(c) The fee shall be computed daily and paid monthly to Mitchell Hutchins
on or before the first business day of the next succeeding calendar month.
(d) If this Contract becomes effective or terminates before the end of any
month, the fee for the period from the effective day to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
9. LIMITATION OF LIABILITY OF MITCHELL HUTCHINS. Mitchell Hutchins and its
delegates, including any Sub-Adviser or Sub-Administrator to any Series or the
Trust, shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Series, the Trust or any of its shareholders, in
connection with the matters to which this Contract relates, except to the extent
that such a loss results from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract. Any person, even though also an
officer, director, employee, or agent of Mitchell Hutchins, who may be or become
an officer, Trustee, employee or agent of the Trust shall be deemed, when
rendering services to any Series or the Trust or acting with respect to any
business of such Series or the Trust, to be rendering such service to or acting
solely for the Series or the Trust and not as an officer, director, employee, or
agent or one under the control or direction of Mitchell Hutchins even though
paid by it.
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<PAGE>
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE TRUST.
No Trustee, shareholder, officer, employee or agent of any Series shall not be
liable for any obligations of any Series or the Trust under this Contract, and
Mitchell Hutchins agrees that, in asserting any rights or claims under this
Contract, it shall look only to the assets and property of the Trust in
settlement of such right or claim, and not to any Trustee, shareholder, officer,
employee or agent.
11. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove written
provided that, with respect to any Series, this Contract shall not take effect
unless it has first been approved (i) by a vote of a majority of those Trustees
of the Trust who are not parties to this Contract or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by vote of a majority of that Series' outstanding voting
securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of those Trustees of the Trust who
are not parties to this Contract or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or with respect to any given Series by vote of a majority of
the outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the board or by a vote of a majority of the outstanding voting
securities of such Series on sixty days' written notice to Mitchell Hutchins or
by Mitchell Hutchins at any time, without the payment of any penalty, on sixty
days' written notice to the Trust. Termination of this Contract with respect to
any given Series shall in no way affect the continued validity of this Contract
or the performance thereunder with respect to any other Series. This Contract
will automatically terminate in the event of its assignment.
12. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this contract as to any
given Series shall be effective until approved by vote of a majority of such
Series' outstanding voting securities.
13. GOVERNING LAW. This Contract shall be construed in accordance with the
laws of the State of Delaware, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act, provided, however, that
Section 10 above will be construed in accordance with the laws of the
Commonwealth of Massachusetts. To the extent that the applicable laws of the
State of Delaware or the Commonwealth of Massachusetts conflict with the
applicable provisions of the 1940 Act, the latter shall control.
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<PAGE>
14. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "national
securities exchange," "net assets," "prospectus," "sale," "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act, subject to such
exemption as may be granted by the Securities and Exchange Commission by any
rule, regulation or order. Where the effect of a requirement of the 1940 Act
reflected in any provision of this contract is relaxed by a rule, regulation or
order of the Securities and Exchange Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest:________________________ By ________________________________
MITCHELL HUTCHINS SERIES TRUST
Attest:________________________ By_________________________________
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<PAGE>
ANNEX 2
SUB-ADVISORY CONTRACT
Agreement made as of _____________, 1998 ("Contract") between MITCHELL
HUTCHINS ASSET MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"),
and INVISTA CAPITAL MANAGEMENT, INC., an Iowa corporation ("Sub-Adviser").
RECITALS
(1) Mitchell Hutchins has entered into an Investment Advisory and
Administration Agreement, dated ___________, 1998 ("Management Agreement"), with
Mitchell Hutchins Series Trust ("Trust"), an open-end management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act");
(2) The Trust offers for public sale distinct series of shares of
beneficial interest, including a series of shares of the Trust known as Global
Growth Portfolio ("Portfolio");
(3) Under the Management Agreement, Mitchell Hutchins has agreed to
provide certain investment advisory and administrative services to the
Portfolio;
(4) The Management Agreement permits Mitchell Hutchins to delegate
certain of its duties as investment adviser thereunder to a sub-adviser;
(5) Mitchell Hutchins desires to allocate the portfolio investments of the
Portfolio between an international segment and a domestic segment, and to retain
the Sub-Adviser to furnish certain investment advisory services with respect to
the international segment of the investments of the Portfolio, and
(6) The Sub-Adviser is willing to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, Mitchell Hutchins and the Sub-Adviser agree as follows:
1. APPOINTMENT. Mitchell Hutchins hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the international segment of the
Portfolio's investments for the period and on the terms set forth in this
Contract. The Sub-Adviser accepts that appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the supervision and direction of the Trust's Board of
Trustees ("Board") and review by Mitchell Hutchins, and any written guidelines
adopted by the Board or Mitchell Hutchins, the Sub-Adviser will provide a
continuous investment program with respect to the international segment of the
Portfolio's investments, including investment research and management to all
securities and investments and cash equivalents in the Portfolio allocated by
Mitchell Hutchins to the international segment of the Portfolio's investments.
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The Sub-Adviser will manage the Series' assets in cooperation with Mitchell
Hutchins so as to permit the Series (i) to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, as amended
("Code") and (ii) to continue to comply with the diversification requirements
imposed by Section 817(h) of the Code and the regulations thereunder and will
provide Mitchell Hutchins with such information as Mitchell Hutchins may from
time to time request to assure that the Series so qualifies or complies. The
Sub-Adviser will determine from time to time what investments will be purchased,
retained or sold by the Portfolio in the international segment of the
Portfolio's investments. The Sub-Adviser will be responsible for placing
purchase and sell orders for investments and for other related transactions with
respect to the international segment of the Portfolio's investments. The
Sub-Adviser will provide services under this Contract in accordance with the
Portfolio's investment objective, policies and restrictions as stated in the
Trust's currently effective registration statement under the 1940 Act, and any
amendments or supplements thereto ("Registration Statement").
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Portfolio, the Sub-Adviser may, in its discretion, use brokers who
provide the Sub-Adviser with research, analysis, advice and similar services to
execute portfolio transactions, and the Sub-Adviser may pay to those brokers in
return for brokerage and research services a higher commission than may be
charged by other brokers, subject to the Sub-Adviser's determining in good faith
that such commission is reasonable in terms either of the particular transaction
or of the overall responsibility of the Sub-Adviser to the Portfolio and its
other clients and that the total commissions paid by the Portfolio will be
reasonable in relation to the benefits to the Portfolio over the long term. In
no instance will portfolio securities be purchased from or sold to the
Sub-Adviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder. Whenever the
Sub-Adviser simultaneously places orders to purchase or sell the same security
on behalf of the Portfolio and one or more other accounts advised by the
Sub-Adviser, the orders will be allocated as to price and amount among all such
accounts in a manner believed to be equitable over time to each account.
Mitchell Hutchins recognizes that in some cases this procedure may adversely
affect the results obtained for the Portfolio.
(c) The Sub-Adviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to actions by the Sub-Adviser on behalf of the
Portfolio, and will furnish the Board and Mitchell Hutchins with such periodic
and special reports as the Board or Mitchell Hutchins reasonably may request. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records that it maintains for the Portfolio
are the property of the Trust, agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Trust and
that are required to be maintained by Rule 31a-1 under the 1940 Act, and further
agrees to surrender promptly to the Trust any records that it maintains for the
Portfolio upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
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<PAGE>
setting forth the performance of the international segment of the Portfolio's
investments and make available to the Board and Mitchell Hutchins any economic,
statistical and investment services that the Sub-Adviser normally makes
available to its institutional or other customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. FURTHER DUTIES. In all matters relating to the performance of this
Contract, the Sub-Adviser will act in conformity with the Trust's Declaration of
Trust, By-Laws and Registration Statement and with the written instructions and
written directions of the Board and Mitchell Hutchins; and will comply with the
requirements of the 1940 Act and the Investment Advisers Act of 1940, as amended
("Advisers Act") and the rules under each, and all other federal and state laws
and regulations applicable to the Trust and the Portfolio. Mitchell Hutchins
agrees to provide to the Sub-Adviser copies of the Trust's Declaration of Trust,
By-Laws, Registration Statement, written instructions and directions of the
Board and Mitchell Hutchins, and any amendments or supplements to any of these
materials as soon as practicable after such materials become available; and
further agrees to identify to the Sub-Adviser in writing any broker-dealers that
are affiliated with Mitchell Hutchins (other than PaineWebber Incorporated and
Mitchell Hutchins itself).
4. EXPENSES. During the term of this Contract, the Sub-Adviser will bear
all expenses incurred by it in connection with its services under this Contract.
5. COMPENSATION.
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Contract, Mitchell Hutchins, not the Portfolio, will pay
Invista a sub-advisory fee, computed daily and paid monthly, at an annual rate
of 0.29% of the Portfolio's average daily net assets allocated to its
management. Under this fee arrangement, Invista will receive fees based on the
value of portfolio assets under its management as these assets have been
allocated to it by Mitchell Hutchins.
(b) The fee shall be accrued daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) If this Contract becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be pro-rated according to the proportion that such period bears to the
full month in which such effectiveness or termination occurs.
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6. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Portfolio,
the Trust, its shareholders or by Mitchell Hutchins in connection with the
matters to which this Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Contract. Nothing in this paragraph shall be deemed a limitation or waiver of
any obligation or duty that may not by law be limited or waived.
7. REPRESENTATIONS OF SUB-ADVISER. The Sub-Adviser represents, warrants
and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Contract
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Contract; (iii) has met and
will seek to continue to meet for so long as this Contract remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency necessary to
be met in order to perform the services contemplated by this Contract; (iv) has
the authority to enter into and perform the services contemplated by this
Contract; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within forty-five days of the end of the last calendar
quarter of each year that this Contract is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents to
examine the reports required to be made to the Sub-Adviser by Rule 17j-1(c)(1)
and all other records relevant to the Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV, which as of the date of this Agreement is its Form ADV as most recently
filed with the Securities and Exchange Commission ("SEC") and promptly will
furnish a copy of all amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Portfolio or senior management of the
Sub-Adviser, in each case prior to, or promptly after, such change.
(e) The Sub-Adviser agrees that neither it, nor any of its affiliates,
will in any way refer directly or indirectly to its relationship with the Trust,
the Portfolio, Mitchell Hutchins or any of their respective affiliates in
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offering, marketing or other promotional materials without the express written
consent of Mitchell Hutchins.
8. SERVICES NOT EXCLUSIVE. The services furnished by Invista
hereunder are not to be deemed exclusive and Invista shall be free to furnish
similar services to others so long as its services under this Contract are not
impaired thereby or unless otherwise agreed to by the parties hereunder in
writing. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of Invista, who may also be a Trustee, officer or
employee of the Trust, to engage in any other business or to devote his or her
time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature.
9. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date first above
written, provided that this Contract shall not take effect unless it has first
been approved: (i) by a vote of a majority of those trustees of the Trust who
are not parties to this Contract or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by vote of a majority of the Portfolio's outstanding securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually: (i) by a vote of a majority of those trustees of the Trust who
are not parties to this Contract or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or by vote of a majority of the outstanding voting securities
of the Portfolio.
(c) Notwithstanding the foregoing, this Contract may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Portfolio on 60 days'
written notice to the Sub-Adviser. This Contract may also be terminated, without
the payment of any penalty, by Mitchell Hutchins: (i) upon 120 days' written
notice to the Sub-Adviser; (ii) upon material breach by the Sub-Adviser of any
representations and warranties set forth in Paragraph 7 of this Contract, if
such breach has not been cured within a 20 day period after notice of such
breach; or (iii) immediately if, in the reasonable judgment of Mitchell
Hutchins, the Sub-Adviser becomes unable to discharge its duties and obligations
under this Contract, including circumstances such as financial insolvency of the
Sub-Adviser or other circumstances that could adversely affect the Portfolio.
The Sub-Adviser may terminate this Contract at any time, without the payment of
any penalty, on 120 days written notice to Mitchell Hutchins. This Contract will
terminate automatically in the event of its assignment or upon termination of
the Advisory Contract as it relates to the Portfolio.
10. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Contract shall be
effective until approved (i) by a vote of a majority of those trustees of the
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Trust who are not parties to this Contract or interested persons of any such
party, and (ii) by a vote of a majority of the Portfolio's outstanding voting
securities (unless in the case of (ii), the Trust receives an SEC order or
no-action letter permitting it to modify the Contract without such vote).
11. GOVERNING LAW. This Contract shall be construed in accordance with the
1940 Act and the laws of the State of Delaware, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of Delaware conflict with the applicable provisions of the 1940 Act,
the latter shall control.
12. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act, subject to such exemption as may be granted by the SEC by any
rule, regulation or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Contract is made less
restrictive by a rule, regulation or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. This Contract may be signed in counterpart.
13. NOTICES. Any notice herein required is to be in writing and is deemed
to have been given to the Sub-Adviser or Mitchell Hutchins upon receipt of the
same at their respective addresses set forth below. All written notices required
or permitted to be given under this Contract will be delivered by personal
service, by postage mail - return receipt requested or by facsimile machine or a
similar means of same day delivery which provides evidence of receipt (with a
confirming copy by mail as set forth herein). All notices provided to Mitchell
Hutchins will be sent to the attention of Victoria E. Schonfeld, General
Counsel. All notices provided to the Sub-Adviser will be sent to the attention
of Dennis W. Cameron, Compliance Officer.
[rest of page left intentionally blank]
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
1285 Avenue of the Americas
New York, New York 10019
Attest:
By:_____________________ By:______________________
Name: Name:
Title: Title:
INVISTA CAPITAL MANAGEMENT,
INC.
1900 Hub Tower
699 Walnut Street
Des Moines, Iowa 50309
Attest:
By:_______________________ By:_____________________________
Name: Name:
Title: Title:
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FORM OF FRONT OF VOTING INSTRUCTION CARD
Mitchell Hutchins Series Trust
Global Growth Portfolio
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS - OCTOBER 29, 1998
This voting instruction card is solicited on behalf of the Board of Trustees of
Mitchell Hutchins Series Trust ("Trust") and relates to the proposals with
respect to Global Growth Portfolio ("Portfolio") indicated on the reverse side.
The undersigned hereby appoints as proxies Keith A. Weller and Teresa Ritchie,
and each of them (with the power of substitution), to represent and direct the
voting interest of the undersigned held as of the record date at the Special
Meeting of Shareholders to be held at 10:00 a.m., Eastern time, on October 29,
1998, at the offices of the Portfolio, 1285 Avenue of the Americas, 14th Floor,
New York, New York 10019, and any adjournment thereof ("Meeting"), with all the
power the undersigned would have if personally present. The voting interest
represented by this card will be voted as instructed. UNLESS INDICATED TO THE
CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE "FOR" ALL
PROPOSALS RELATING TO THE PORTFOLIO WITH DISCRETIONARY POWER TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
YOUR VOTE IS IMPORTANT. Please date and sign this proxy below and return it in
the enclosed postage paid envelope. This proxy will not be voted unless the
voting instruction card is dated and signed exactly as instructed below.
Please sign your name exactly as it appears on this
card. For joint Contract Owners, either party may sign,
but the name of the party signing should conform
exactly to the name shown on this card. For all other
Contract Owners, the name and capacity of the
individual signing should be indicated unless it is
reflected in the form of registration shown on the
card. Sign exactly as name appears hereon.
------------------------
Signature
------------------------
Signature (Joint)
-------------------
Date
<PAGE>
FORM OF REVERSE OF VOTING INSTRUCTION CARD
WHEN PROPERLY SIGNED, THE VOTING INTEREST REPRESENTED BY THIS CARD WILL BE
DIRECTED AS INSTRUCTED BELOW. IF NO INSTRUCTION IS GIVEN FOR A PROPOSAL,
VOTING WILL BE DIRECTED "FOR" THAT PROPOSAL.
The Board of Trustees recommends that you direct your voting interest FOR each
of the following proposals:
PLEASE NOTE: Both proposal 1(a) and proposal 1(b) must be approved before
either proposal can be implemented
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
1(a). Approve amended FOR AGAINST ABSTAIN
Investment Advisory and / / / / / /
Administration Contract
between the Trust and
Mitchell Hutchins Asset
Management Inc.
applicable to the
Portfolio
1(b). Approve new Sub-Advisory FOR AGAINST ABSTAIN
Contract between Mitchell / / / / / /
Hutchins Asset Management
Inc. and Invista Capital
Management, Inc.
2. Approve a policy to FOR AGAINST ABSTAIN
permit the Board of / / / / / /
Trustees to appoint and
terminate sub-advisers,
to enter into
sub-advisory contracts
and to amend sub-advisory
contract, on behalf of
the Portfolio without
further shareholder
approval.
PLEASE DATE AND SIGN THE FRONT OF THIS CARD
