(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)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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HIGH INCOME PORTFOLIO
(A SERIES OF MITCHELL HUTCHINS SERIES TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
January __, 2001
Dear Contract Owner,
The enclosed proxy materials relate to a special meeting of the
shareholders of High Income Portfolio ("Fund"), a series of Mitchell Hutchins
Series Trust ("Trust"), to be held on March 1, 2001. As an owner of a variable
annuity contract ("Contract") having all or part of its value attributable to
shares of the Fund, 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 of the following proposals that relate to the
management and operation of the Fund:
o A new investment management and administration contract between the
Trust and Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins") with respect to the Fund;
o A new sub-advisory contract between Mitchell Hutchins and Alliance
Capital Management L.P. with respect to the Fund; and
o A policy to permit Mitchell Hutchins and the Board to appoint and
replace sub-advisers for the Fund and to enter into and amend their
sub-advisory contracts without further shareholder approval.
The Board recommends that you give instructions to vote "FOR" these
proposals. The enclosed proxy statement describes each proposal more fully.
Please read this document carefully and give your voting instructions by signing
and returning the enclosed voting instruction card.
Thank you for your attention to this matter and for your continuing
investment in the Fund.
Very truly yours,
Brian M. Storms
PRESIDENT
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HIGH INCOME PORTFOLIO
(A SERIES OF MITCHELL HUTCHINS SERIES TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
MARCH 1, 2001
To the Contract Owners:
NOTICE IS HEREBY GIVEN THAT a Special Meeting ("Meeting") of Shareholders
of High Income Portfolio ("Fund"), a series of Mitchell Hutchins Series Trust
("Trust"), will be held at 1285 Avenue of the Americas, 14th floor, New York,
New York, 10019-6028 on March 1, 2001 at [ ], Eastern time, or as adjourned from
time to time ("Meeting"), for the following purposes:
1. To approve or disapprove a new Investment Management and
Administration Contract between the Trust and Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") with respect to the
Fund;
2. To approve or disapprove a new sub-advisory contract between
Mitchell Hutchins and Alliance Capital Management L.P. with
respect to the Fund; and
3. To approve or disapprove a policy to permit Mitchell Hutchins and
the Trust's Board of Trustees to appoint and replace sub-advisers
for the Fund and to enter into and amend their sub-advisory
contracts without further shareholder approval.
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 attributable to shares of the Fund at the close of business on
January 23, 2001. 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, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED VOTING INSTRUCTION
CARD IN THE ENVELOPE PROVIDED. If you have returned a voting instruction card
and are present at the Meeting, you may change the voting instructions specified
in the voting instruction card at that time. However, attendance in person at
the Meeting, by itself, will not revoke a previously tendered voting instruction
card.
By Order of the Board of Trustees,
Dianne E. O'Donnell
Secretary
51 West 52nd Street
New York, NY 10019-6114
January , 2001
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. 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. IN
ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE URGE YOU TO
INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED VOTING INSTRUCTION CARD.
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INSTRUCTIONS FOR SIGNING VOTING INSTRUCTION CARDS
The following general rules for signing voting instruction cards may be of
assistance to you and avoid the time required to validate your voting
instructions 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
<PAGE>
HIGH INCOME PORTFOLIO
(A SERIES OF MITCHELL HUTCHINS SERIES TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 1, 2001
This proxy statement and enclosed form of voting instruction card are
being furnished in connection with the solicitation of proxies by the Board of
Trustees ("Board") of Mitchell Hutchins Series Trust ("Trust") for use at a
special meeting of shareholders of High Income Portfolio ("Fund"), a series of
the Trust, to be held at 1285 Avenue of the Americas, 14th floor, New York, NY
10019-6028 on March 1, 2001 at [ ], Eastern time, or as adjourned from time to
time ("Meeting"), for the purposes set forth below. It is anticipated that the
first mailing of proxy statements to shareholders will be on or about January
30, 2001.
The Board is soliciting proxies from shareholders of the Fund with respect
to the following proposals:
1. To approve or disapprove a new Investment Management and
Administration Contract between the Trust and Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") with respect to the
Fund;
2. To approve or disapprove a new sub-advisory contract between
Mitchell Hutchins and Alliance Capital Management L.P. ("Alliance
Capital") with respect to the Fund; and
3. To approve or disapprove a policy to permit Mitchell Hutchins and
the Trust's Board of Trustees to appoint and replace sub-advisers
for the Fund and to enter into and amend their sub-advisory
contracts without further shareholder approval.
The shares of beneficial interest ("Shares") of the Fund are currently
sold only to the separate accounts ("Separate Accounts") of AIG Life Insurance
Company (the "Company") to fund the benefits under variable annuity contracts
("Contracts") issued by the Company. 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 Company will solicit voting instructions from
the owners of Contracts relating to the Fund ("Contract Owners") with respect to
the matters set forth in this Proxy Statement. In connection with the
solicitation of voting instructions, the Company 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 January 23, 2001 ("Record Date"). There were [_______] Shares of
the Fund outstanding and entitled to vote as of the Record Date, consisting of [
] Class H Shares and [ ] Class I Shares. Except as set forth in Appendix A, as
of the Record Date, Mitchell Hutchins, the investment manager and administrator
of the Fund, does not know of any person who owns of record 5% or more of either
class of Shares of the Fund or has the ability to give voting instructions with
respect to 5% or more of either class of Shares of the Fund. As of that same
date, the Trustees and officers of the Trust, as a group, had the ability to
provide voting instructions for less than 1% of either class of the Fund's
outstanding Shares.
The Company will vote Shares of the Fund held by the Separate Accounts in
accordance with voting instructions received from the Contract Owners. The
Company will vote Shares of the Fund for which a voting instruction card is
returned signed and dated but with no specific instructions as to a proposal
"FOR" the proposal. The Company will vote Shares of the Fund for which no voting
instruction cards are returned in the same proportion as Shares of the Fund for
which voting instruction cards have been returned.
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The presence in person or by proxy of the holders of a majority of the
outstanding Shares of the Fund is required to constitute a quorum at the
Meeting. Abstentions will be counted as Shares present for purposes of
determining whether a quorum is present but will not be voted for or against any
adjournment or proposal. Thus, abstentions will have the same effect as a
negative vote on adjournment and on the proposals, which require the affirmative
vote of a specified portion of the Fund's outstanding Shares.
In the absence of a quorum or in the event that a quorum is present at the
Meeting but sufficient votes to approve any proposal are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies or to obtain the vote required for
approval of one or more proposals. Any such adjournment will require the
affirmative vote of a majority of those Shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those proxies which
they are entitled to vote "FOR" a proposal in favor of such an adjournment and
will vote those proxies required to be voted "AGAINST" a proposal against any
such adjournment. A shareholder vote may be taken prior to any adjournment of
the Meeting on any proposal for which there are sufficient votes for approval
and it is otherwise appropriate, even though the Meeting is adjourned as to
other proposals.
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,
provide voting instructions at the Meeting, thereby canceling any voting
instructions previously given. Attendance in person at the Meeting by itself,
however, will not revoke a previously tendered voting instruction card.
Each full Share of the Fund 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 Fund. Information about the vote
necessary with respect to each proposal is discussed below in connection with
the proposal.
THE TRUST WILL FURNISH TO THE COMPANY AND TO THE CONTRACT OWNERS WITHOUT
CHARGE COPIES OF THE MOST RECENT ANNUAL REPORT AND MOST RECENT SEMI-ANNUAL
REPORT SUCCEEDING SUCH ANNUAL REPORT UPON REQUEST. CONTRACT OWNERS MAY REQUEST
THESE REPORTS BY WRITING TO PAINEWEBBER INCORPORATED, ATTENTION GARY MEROLA, 499
WASHINGTON BOULEVARD, 12TH FLOOR, JERSEY CITY, NEW JERSEY 07310 OR BY CALLING
PAINEWEBBER SHAREHOLDER SERVICES AT 1-800-647-1568.
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INTRODUCTION
The Board has approved proposals by Mitchell Hutchins to restructure the
manner in which the Fund's assets are managed. To implement new investment
management arrangements for the Fund, the Board, effective October 10, 2000,
terminated the existing investment advisory and administration contract between
the Trust and Mitchell Hutchins with respect to the Fund and approved a new
interim investment management and administration contract with Mitchell Hutchins
("Interim Management Contract") and an interim sub-advisory contract ("Interim
Sub-Advisory Contract") between Mitchell Hutchins and Alliance Capital. Under
the Interim Management Contract, Mitchell Hutchins serves as investment manager
for the Fund and provides portfolio management oversight of Alliance Capital as
sub-adviser, instead of directly managing the Fund's portfolio. The Trust, on
behalf of the Fund, pays Mitchell Hutchins the same annual fee, 0.50% of the
Fund's average daily net assets, under the Interim Management Contract that it
paid under the preceding investment advisory and administration contract. Under
the Interim Sub-Advisory Contract, Alliance Capital provides the Fund with a
continuous investment program for which Mitchell Hutchins, not the Fund, pays
Alliance Capital the annual fee of 0.25% of the Fund's average daily net assets.
The Interim Management Contract and Interim Sub-Advisory Contract will terminate
automatically with respect to the Fund on the earlier of 150 days from their
effective dates or the date Fund shareholders approve the new Investment
Management and Administration Contract and the new Sub-Advisory Contract.
Under the proposed new Investment Management and Administration Contract
and new Sub-Advisory Contract, Alliance Capital, an entity unaffiliated with
Mitchell Hutchins, would continue to manage the Fund's assets as its investment
sub-adviser and Mitchell Hutchins would continue to oversee Alliance Capital's
activities as sub-adviser and evaluate its performance. Mitchell Hutchins would
also continue to provide administrative services to the Fund. The new Investment
Management and Administration Contract also incorporates updated language about
Mitchell Hutchins' ability to appoint sub-advisers, as described further below.
In addition, the Board is asking the Fund's shareholders to approve a policy
that permits Mitchell Hutchins and the Board to appoint and replace sub-advisers
for the Fund and to enter into and amend their sub-advisory contracts without
further shareholder approval.
PROPOSAL 1: TO APPROVE OR DISAPPROVE A NEW INVESTMENT MANAGEMENT AND
ADMINISTRATION CONTRACT BETWEEN THE TRUST AND MITCHELL HUTCHINS WITH RESPECT TO
THE FUND.
Mitchell Hutchins proposed to the Board and the Board approved at its
meeting on November 8, 2000, a new Investment Management and Administration
Contract ("Proposed Contract") between the Trust and Mitchell Hutchins with
respect to the Fund. The Proposed Contract is substantially similar to the
Trust's current Interim Management Contract and the Trust's recently terminated
Investment Advisory and Administration Contract ("Old Contract"). Under the
Proposed Contract, Mitchell Hutchins will have the same duties and
responsibilities and will receive the same compensation as under the Interim
Management and Old Contracts. A form of the Proposed Contract is attached as
Appendix B.
COMPARISON BETWEEN (1) THE OLD CONTRACT AND (2) THE INTERIM
MANAGEMENT CONTRACT AND THE PROPOSED MANAGEMENT CONTRACT
The primary difference between the Interim Management Contract and the
Proposed Management Contract (collectively, the "New Contracts") on the one
hand, and the Old Contract, on the other hand, is the change of Mitchell
Hutchins' role under the New Contracts. Under the Old Contract, Mitchell
Hutchins' role was to provide a continuous investment program for the Fund,
including investment research and management with respect to all securities,
investments and cash equivalents in the Fund, and to determine what securities
and other investments would be purchased, retained or sold by the Fund. Under
the New Contracts, the role of Mitchell Hutchins is to oversee the management of
the Fund's portfolio by one or more investment sub-advisers, rather than
managing the Fund itself. Such oversight includes reviewing prospective
sub-advisers, selecting such sub-advisers, and monitoring and evaluating their
performance. Mitchell Hutchins will report to the Board the results of its
evaluation, supervision, and monitoring duties and will make recommendations to
the Board concerning the renewal, modification or termination of sub-advisory
contracts.
The Old Contract and the New Contracts all permit Mitchell Hutchins to
delegate its duties under the Contracts to a sub-adviser. However, the New
Contracts now specifically anticipate that Mitchell Hutchins will delegate all
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of its investment management duties to a sub-adviser. Furthermore, the New
Contracts explicitly permit Mitchell Hutchins to delegate its duties to more
than one sub-adviser. Under the New Contracts, Mitchell Hutchins also has the
power to allocate and reallocate responsibility for the management of a specific
portion of the Fund's assets among the sub-advisers. In addition, the New
Contracts have been amended to acknowledge that Mitchell Hutchins can engage a
sub-adviser subject only to approval of the sub-advisory contract by the Board
and to any requirements of the securities laws pertaining thereto, which would
permit Mitchell Hutchins to implement Proposal 3 if it is approved by the Fund's
shareholders. As described in Proposal 3, Mitchell Hutchins and the Trust have
received an order from the Securities and Exchange Commission ("SEC") permitting
the engagement of a sub-adviser by the Board acting alone and without the need
for approval by the vote of the holders of a majority of the outstanding shares
of the Fund. See Proposal 3 for more information.
As administrator, under both the Old Contract and the New Contracts,
Mitchell Hutchins will manage the affairs of the Fund, subject to the
supervision of the Board. Mitchell Hutchins will provide the Fund with such
corporate, administrative and clerical personnel (including officers of the
Trust) and services as are deemed reasonably necessary or advisable by the
Board, including the maintenance of certain books and records of the Fund.
Mitchell Hutchins will arrange, but not pay, for the periodic preparation,
updating, filing and dissemination (as applicable) of reports to the Fund's
shareholders and the SEC and other appropriate federal or state regulatory
authorities. Mitchell Hutchins will provide the Fund with, or obtain for it,
adequate office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items.
Mitchell Hutchins will provide the Board on a regular basis with economic and
investment analyses and reports and make available to the Board, upon request,
any economic, statistical and investment services normally available to
institutional or other customers of Mitchell Hutchins.
Under the New Contracts, for both the services provided and the expenses
assumed with respect to the Fund, the Trust will pay to Mitchell Hutchins a fee,
computed daily and paid monthly, at an annual rate of 0.50% of the average daily
net assets of the Fund. This fee is identical to the fee paid to Mitchell
Hutchins under the Old Contract.
Under both the Old Contract and the New Contracts, Mitchell Hutchins will
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust, the Fund or its shareholders in connection with the
matters to which the Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Mitchell Hutchins in
the performance of its duties or from reckless disregard by it of its
obligations and duties under the Contract. The only difference between the
Contracts in this section is that the New Contracts specifically extend the
limitation of liability to Mitchell Hutchins' officers, directors, employees and
delegates and to any sub-adviser to the Fund, whereas the Old Contract does not
explicitly include such persons in its corresponding section. Both the Old
Contract and the New Contracts provide that the Trustees of the Trust and Fund
shareholders will not be liable for any obligations of the Fund or the Trust
under the Contracts, and that Mitchell Hutchins will look only to the assets and
property of the Trust in settlement of any rights or claims under the Contracts.
Both the Old Contract and the New Contracts terminate automatically upon
assignment. The Old Contract and the Proposed Management Contract are terminable
at any time without penalty by the Board or by vote of the holders of a majority
of the Fund's outstanding voting securities on 60 days' written notice to
Mitchell Hutchins or, without penalty, by Mitchell Hutchins on 60 days' written
notice to the Fund. The Interim Management Contract may be terminated at any
time without penalty by the Board or by vote of the holders of a majority of the
Fund's outstanding voting securities on 10 days' written notice to Mitchell
Hutchins or, without penalty, by Mitchell Hutchins on 60 days' written notice to
the Fund.
If approved by the Fund's shareholders, the Proposed Management Contract
will become effective on the date of approval and will remain in effect for an
initial two-year term. Thereafter, the Proposed Management Contract will
continue in effect if it is approved at least annually by a vote of the Fund's
shareholders or by the Board, provided that, in either event, continuance is
approved by the vote of a majority of those Trustees who are not "interested
persons," as defined by the Investment Company Act of 1940, as amended ("1940
Act"), of the Fund or Mitchell Hutchins ("Independent Trustees"), which vote
must be cast in person at a meeting called for the purpose of voting on such
approval.
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The Old Contract is dated April 21, 1988 and was last submitted to a vote
of shareholders of the Fund on May 1, 1998 when the Fund's then sole shareholder
approved the Old Contract and the related Fee Agreement prior to the Fund's
commencement of operations on September 28, 1998. Continuance of the Old
Contract was last approved by the Board, including a majority of the Independent
Trustees, at a meeting held on May 11, 2000. Under the Old Contract, the Fund
paid (or accrued) investment advisory and administrative fees to Mitchell
Hutchins in the amount of $61,666 during the fiscal year ended December 31,
1999.
Further information about Mitchell Hutchins is set forth in Appendix C.
COMPARISON OF THE INTERIM MANAGEMENT CONTRACT AND THE PROPOSED MANAGEMENT
CONTRACT
The Interim Management Contract and the Proposed Management Contract are
substantially similar, with the only differences stemming from the provisional
nature of the Interim Management Contract and the requirements of Rule 15a-4 of
the 1940 Act, as described below.
The Interim Management Contract is only effective for 150 days from its
date of adoption, not two years from the date of adoption as under the Proposed
Management Contract. In addition, only 10 days' written notice is required for
termination of the Interim Management Contract by the Fund, rather than the 60
days' written notice required under the Proposed Management Contract.
The Proposed Management Contract (but not the Interim Management Contract)
provides that Mitchell Hutchins may perform direct portfolio management with
respect to any portion of the Fund's assets for which no sub-advisory
arrangements are in effect upon Board request. To effect such requests, the
Proposed Management Contract also includes provisions related to Mitchell
Hutchins' authorization to pay higher commissions to brokers who provide
research, analysis and other services to the Fund, selection of brokers,
principal transactions, aggregation and allocation or orders, maintenance of
books and records, net asset value and net income computation, and authorization
of transactions on national securities exchanges by members or such exchanges
and retention of compensation from such transactions.
Finally, the Proposed Management Contract (but not the Interim Management
Contract) includes any sub-administrators to the Fund in its limitation on
liability section and provides that the Contract is terminable upon assignment.
EVALUATION BY THE BOARD
Prior to approving the Proposed Management Contract, the Fund's Board,
including a majority of the Independent Trustees, reviewed and analyzed the
factors they deemed relevant, including (1) the services now being provided by
Mitchell Hutchins; (2) the nature, quality, and scope of such services as well
as the Fund's investment performance; (3) the nature and scope of the services
to be provided to the Fund by Mitchell Hutchins under the Proposed Management
Contract; (4) the ability of Mitchell Hutchins to provide such services; and (5)
the potential effect of the Proposed Management Contract on shareholders. The
Trustees reviewed the proposed fees payable to Mitchell Hutchins under the
Proposed Management Contract and noted that the compensation to be received by
Mitchell Hutchins under the Proposed Management Contract is the same as its
compensation under the Old Contract, which the Board previously has determined
to be fair and reasonable. The Board also considered the management, advisory
and/or administration fees paid by other investment companies with similar
objectives and characteristics.
After full consideration of the above listed and other factors, the Board,
including the Independent Trustees, approved the Proposed Management Contract
and authorized the submission of the Proposed Management Contract to the Fund's
shareholders for their approval at the Meeting.
REQUIRED VOTE
Approval of Proposal 1 requires the affirmative vote of the lesser of (1)
67% or more of the shares of the Fund present at the Meeting, if more than 50%
of the outstanding shares are represented at the Meeting in person or by proxy,
or (2) more than 50% of the outstanding shares entitled to vote at the Meeting.
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If the Fund's shareholders do not approve Proposal 1, the Interim
Management Contract will continue in effect for the remainder of its original
150-day term (until March 9, 2001), and the Board will consider what measures
are necessary or appropriate to ensure the continuation of advisory services to
the Fund.
THE BOARD RECOMMENDS THAT CONTRACT OWNERS
GIVE INSTRUCTIONS TO VOTE
"FOR" PROPOSAL 1.
PROPOSAL 2: TO APPROVE OR DISAPPROVE A NEW SUB-ADVISORY CONTRACT BETWEEN
MITCHELL HUTCHINS AND ALLIANCE CAPITAL WITH RESPECT TO THE FUND.
Mitchell Hutchins proposed to the Board, and the Board approved at its
meeting on November 8, 2000, a new sub-advisory contract between Mitchell
Hutchins and Alliance Capital ("Proposed Sub-Advisory Contract"). The Proposed
Sub-Advisory Contract is substantially similar to the Interim Sub-Advisory
Contract adopted by the Board on October 6, 2000. A form of the Sub-Advisory
Contract is attached as Appendix D.
Further information about Alliance Capital is set forth in Appendix E.
PROPOSED SUB-ADVISORY CONTRACT
Under the Proposed Sub-Advisory Contract, Alliance Capital would be
responsible, subject to the supervision of the Board and Mitchell Hutchins, for
the actual investment management of all or a designated portion of the assets of
the Fund, including placing purchase and sell orders for investments and for
other related transactions. Alliance Capital agrees to provide a continuous
investment program for the Fund's assets, including investment research and
management. The Proposed Sub-Advisory Contract recognizes that Alliance Capital
may, under certain circumstances, pay higher brokerage commissions by executing
portfolio transactions with brokers that provide the sub-adviser with research,
analysis, advice or similar services. Subject to its obligations to seek best
execution, Alliance Capital may also place transactions on behalf of the Fund
with Sanford C. Bernstein & Co., LLC ("Bernstein"), an affiliate of Alliance
Capital, or any other broker-dealer deemed to be an affiliate of Alliance
Capital. In addition, the Proposed Sub-Advisory Contract authorizes Alliance
Capital and its affiliated broker-dealers (including Bernstein) to execute
agency cross transactions ("Cross Transactions") on behalf of the Fund. Cross
Transactions are transactions which may be effected by affiliated broker-dealers
acting for the Fund and the counterparty to the transaction. Cross Transactions
enable Alliance Capital to purchase or sell a block of securities for the Trust
or the Fund at a set price and possibly avoid an unfavorable price movement that
may be created through entrance into the market with such purchase or sale
order. As such, Alliance Capital believes that Cross Transactions can provide
meaningful benefits for the Fund and its clients generally. It should be noted
that in a Cross Transaction an affiliated broker-dealer will be receiving
commissions from both sides of the trade and, therefore, there is a potentially
conflicting division of loyalties and responsibilities.
The Proposed Sub-Advisory Contract also provides that Alliance Capital
will (1) maintain all books and records required to be maintained by it pursuant
to the 1940 Act and the rules and regulations promulgated thereunder with
respect to transactions the sub-adviser effects on behalf of the Fund, and will
furnish the Board and Mitchell Hutchins with such periodic and special reports
as the Board or Mitchell Hutchins may reasonably request; (2) provide the Board
or Mitchell Hutchins with economic and investment analyses and reports, as well
as quarterly reports, setting forth the Fund's performance with respect to its
investments and make available to the Board and Mitchell Hutchins any economic,
statistical and investment services that Alliance Capital normally makes
available to its institutional investors or other customers; and (3) provide
assistance in the fair valuation of, and use reasonable efforts to arrange for
the provision of a price or prices from one or more parties independent of
Alliance Capital for, each portfolio security for which the custodian does not
obtain prices in the ordinary course of business from an automated pricing
service.
The Proposed Sub-Advisory Contract provides that Alliance Capital will not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Fund, its shareholders, the Trust or Mitchell Hutchins in connection with
the matters to which the Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Alliance Capital in
the performance of its duties or from reckless disregard by it of its
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obligations and duties under the Contract. In addition, Alliance Capital will
not have any responsibilities for any other series of the Trust, for any portion
of the Fund's assets that it does not manage or for the acts or omissions of any
other sub-adviser for the Fund or the Trust. In particular, if at any time
Alliance Capital only manages a portion of the Fund's assets, Alliance Capital
will have no responsibility for the Fund's being in violation of any law or
regulation or Fund policy or restriction or for the Fund's failure to qualify as
a "regulated investment company" for federal tax purposes, if the portion of the
Fund's portfolio managed by Alliance Capital would not be in such violation or
fail to so qualify if such portion were deemed a separate series of the Trust or
a separate "regulated investment company."
The Proposed Sub-Advisory Contract provides that the Fund, by the vote of
a majority of the Board of Trustees or a majority of its outstanding voting
securities, may terminate the Contract, without penalty, on 60 days' written
notice to Alliance Capital and Alliance Capital may terminate the Contract,
without penalty, on 60 days' written notice to Mitchell Hutchins. The
Sub-Advisory Contract also permits Mitchell Hutchins to terminate the Contract,
without penalty: (1) upon material breach by Alliance Capital of certain
specific representations and warranties in the Contract (E.G., registration as
an investment adviser, adoption of a code of ethics, notification of changes in
control, prohibition on advertising the relationship between Alliance Capital
and the Fund, the Trust or Mitchell Hutchins in promotional materials without
prior consent), if such breach is not cured within a 20-day period after notice
of such breach or (2) if, in the reasonable judgment of Mitchell Hutchins,
Alliance Capital becomes unable to discharge its duties and obligations under
the Contract, including circumstances such as financial insolvency of Alliance
Capital or any other circumstances which could adversely affect the Fund. In
addition, the Contract terminates automatically upon assignment.
Under the Proposed Sub-Advisory Contract, for the services performed and
the expenses assumed, Alliance Capital would receive a sub-advisory fee paid by
Mitchell Hutchins (not the Fund), computed daily and paid monthly, at an annual
rate of 0.25% of the Fund's average daily net assets under Alliance Capital's
management.
If approved by the Fund's shareholders, the Sub-Advisory Contract will
become effective on the date of approval and will remain in effect for an
initial two-year term. Thereafter, the Sub-Advisory Contract will continue in
effect if it is approved at least annually by a vote of the Fund's shareholders
or by the Board, provided that, in either event, continuance is approved by the
vote of a majority of the Independent Trustees, which vote must be cast in
person at a meeting called for the purpose of voting on such approval.
COMPARISON OF THE INTERIM SUB-ADVISORY CONTRACT AND THE PROPOSED SUB-ADVISORY
CONTRACT
The Interim Sub-Advisory Contract and the Proposed Sub-Advisory Contract
are substantially similar. Some of the differences between the two Contracts
stem from the provisional nature of the Interim Sub-Advisory Contract and the
requirements of Rule 15a-4 of the 1940 Act. The Interim Sub-Advisory Contract is
only effective for 150 days from the termination date of the Old Advisory
Contract, not for two years from the date of adoption as under the Proposed
Sub-Advisory Contract. In addition, only 10 days' written notice is required for
termination of the Interim Sub-Advisory Contract by the Fund, rather than the 60
days' written notice required under the Proposed Sub-Advisory Contract. Another
difference is an additional provision in the Proposed Sub-Advisory Contract that
reflects the Board's ability to amend the Contract without shareholder approval
in accordance with the SEC exemptive order discussed in Proposal 3 (if such
Proposal is approved by shareholders). Finally, the Proposed Sub-Advisory
Contract specifically states that the Contract will terminate upon its
assignment or the termination of the Proposed Management Contract.
EVALUATION BY BOARD
In determining to approve the Proposed Sub-Advisory Contract, the Board
analyzed the factors it deemed relevant, particularly Mitchell Hutchins'
decision to refocus its business to the exclusion of providing portfolio
advisory services to most of its bond funds, the expertise that Alliance Capital
offers in providing portfolio management services to other high yield bond
portfolios, the past performance of other similar funds managed by Alliance
Capital, its overall capabilities to perform the services under the Proposed
Sub-Advisory Contract and its willingness to perform those services for the
Fund. The Board also considered the sub-advisory fees that would be payable to
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Alliance Capital. The Board reviewed the services provided by Alliance Capital
to its other investment company clients, the ability of Alliance Capital to
provide these services to the Fund, including its personnel, operations and
financial condition, and other factors that would affect the provision of those
services. After full consideration of these and other factors, the Board of
Trustees, including a majority of the Independent Trustees, approved the
proposed Sub-Advisory Contract and recommended that it be submitted to the
shareholders for approval.
REQUIRED VOTE
Approval of Proposal 2 requires the vote of a "majority of the outstanding
voting securities" of the Fund, as defined in the 1940 Act, which means the vote
of 67% or more of the voting securities of the Fund present at the Meeting, if
the holders of more than 50% of the outstanding Shares of the Fund are present
or represented by proxy, or the vote of more than 50% of the outstanding voting
securities of the Fund, whichever is less.
If Proposal 2 is not approved by the Fund's shareholders, the Interim
Sub-Advisory Contract will continue in effect for the remainder of its original
150-day term (until March 9, 2001) and the Board and Mitchell Hutchins will
consider what sub-advisory services should be provided to the Fund.
THE BOARD RECOMMENDS THAT CONTRACT OWNERS
GIVE INSTRUCTIONS TO VOTE
"FOR" PROPOSAL 2.
PROPOSAL 3: TO APPROVE OR DISAPPROVE A POLICY TO PERMIT MITCHELL HUTCHINS AND
THE TRUST'S BOARD OF TRUSTEES TO APPOINT AND REPLACE SUB-ADVISERS FOR THE FUND
AND TO ENTER INTO AND AMEND THEIR SUB-ADVISORY CONTRACTS WITHOUT SEEKING FURTHER
SHAREHOLDER APPROVAL.
At its meeting on November 8, 2000, the Board approved, and recommended
that shareholders of the Fund also be asked to approve, a policy to permit
Mitchell Hutchins, subject to the approval of the Board, to appoint and replace
sub-advisers for the Fund and to enter into and amend their sub-advisory
contracts without seeking further shareholder approval ("Sub-Adviser Approval
Policy"). Shareholders are being asked to approve this policy at the Meeting to
permit Mitchell Hutchins to make changes in the sub-advisory arrangements for
the Fund in the future without having to incur the expense of another
shareholder meeting. The policy, if approved by the Fund's shareholders, would
apply only to sub-advisers that are not affiliated with Mitchell Hutchins, and
thus would not permit Mitchell Hutchins and the Board to appoint any Mitchell
Hutchins affiliate to serve as sub-adviser to the Fund without shareholder
approval.
CURRENT SUB-ADVISER APPROVAL PROCESS
Currently, the holders of a majority of the Fund's outstanding shares must
approve any sub-advisory contract between Mitchell Hutchins and another
investment adviser pursuant to which the other adviser provides the Fund with
investment management services. Shareholder approval is required in addition to
approval by the Board and by a majority of the Independent Trustees.
PROPOSED SUB-ADVISER APPROVAL POLICY
The proposed Sub-Adviser Approval Policy would permit Mitchell Hutchins,
subject to the approval of the Board, including a majority of the Independent
Trustees, to appoint and replace one or more sub-advisers and to enter into and
amend their sub-advisory contracts without obtaining shareholder approval. The
Sub-Adviser Approval Policy thus would permit Mitchell Hutchins to change
sub-advisers or sub-advisory arrangements in the following types of situations:
(1) the sub-adviser has a record of substandard performance; (2) the individual
employees responsible for portfolio management of the Fund move from the
sub-adviser to another investment advisory firm; (3) there is a change of
control of the sub-adviser; (4) Mitchell Hutchins decides to diversify the
8
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Fund's management by adding another sub-adviser; and (5) there is a change in
investment style of the Fund. The sub-advisory fee paid by Mitchell Hutchins
(not the Fund) to any new sub-adviser may be lower or higher than the fee
payable to the Fund's current sub-adviser, thereby allowing Mitchell Hutchins to
retain a greater or smaller portion of the fees paid by the Fund to Mitchell
Hutchins. The Sub-Adviser Approval Policy will not be used to appoint any
sub-adviser that is affiliated with Mitchell Hutchins as that term is used in
the 1940 Act or to amend materially any sub-advisory contract with an affiliated
sub-adviser.
Approval of the Sub-Adviser Approval Policy will not affect any of the
requirements under the federal securities laws that govern the Fund, Mitchell
Hutchins, any sub-adviser, or any sub-advisory contract, other than the
requirement to call and hold a meeting of the Fund's shareholders for the
purpose of approving a sub-advisory contract. The Board, including the
Independent Trustees, will continue to evaluate and approve all new sub-advisory
contracts between Mitchell Hutchins and any sub-adviser as well as all changes
to existing sub-advisory contracts. In addition, the Fund and Mitchell Hutchins
will be subject to several conditions imposed by the SEC to ensure that the
interests of the Fund's shareholders (and Contract Owners) are adequately
protected whenever Mitchell Hutchins acts under the Sub-Adviser Approval Policy.
Finally, within 90 days of the appointment of a new sub-adviser, the Fund will
provide its shareholders with an information statement that contains
substantially the same information about the sub-adviser, the sub-advisory
contract and the sub-advisory fee that the Fund's shareholders would receive in
a proxy statement. If the Fund's shareholders are not satisfied with the
sub-advisory arrangements that Mitchell Hutchins and the Board implement under
the Sub-Adviser Approval Policy, they would of course be able to exchange or
sell their shares. The Company 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 Contracts invested in the Fund to another investment.
Shareholder approval of this Proposal 3 will not change the total amount
of management fees paid by the Fund to Mitchell Hutchins or Mitchell Hutchins'
duties and responsibilities toward the Fund under the Proposed Management
Contract.
BENEFITS OF THE SUB-ADVISER APPROVAL POLICY
The Board believes that it is in the best interests of the Fund's
shareholders to give Mitchell Hutchins the maximum flexibility to select,
supervise and evaluate sub-advisers without incurring the expense and potential
delay of seeking specific shareholder approval. While Rule 15a-4 under the 1940
Act provides a limited exception to the shareholder approval requirements for an
interim advisory contract (pursuant to which the Fund's Interim Management
Contract and Interim Sub-Advisory Contract were adopted), a fund's current
advisory contract must be terminated before the Rule can apply and the Fund's
shareholders still must approve the new advisory and sub-advisory contracts no
later than 150 days after the effective dates of the interim contracts. Thus,
even when a change in investment management arrangements involving one or more
sub-advisers can be put into place promptly on a temporary basis, the Fund must
still call and hold a meeting of the Fund's shareholders, create and distribute
proxy materials, and arrange for the solicitation of voting instructions from
shareholders. This process is time-intensive, slow and costly. These costs are
generally borne entirely by the Fund (although in the case of this solicitation,
they are being borne by Mitchell Hutchins). If Mitchell Hutchins and the Board
can rely on the Sub-Adviser Approval Policy, the Board would be able to act more
quickly and with less expense to appoint an unaffiliated sub-adviser when the
Board and Mitchell Hutchins believe that the appointment would benefit the Fund
and its shareholders.
Also, the Board believes that it is appropriate to vest the selection,
supervision and evaluation of the sub-advisers in Mitchell Hutchins, subject to
review by the Board, in light of Mitchell Hutchins' significant experience and
expertise in this area. The Board believes that investors may choose to invest
in the Fund because of Mitchell Hutchins' experience in this respect.
Finally, the Board believes that the interests of shareholders (and
Contract Owners) will be protected under the Sub-Adviser Approval Policy because
the Board will oversee the sub-adviser selection process whenever Mitchell
Hutchins selects a sub-adviser or modifies a sub-advisory contract. The Board,
including a majority of the Independent Trustees, will continue to evaluate and
approve all new sub-advisory contracts as well as any modification to existing
sub-advisory contracts. In each review, the Board will analyze all factors that
it considers to be relevant to the determination, including the nature, quality
9
<PAGE>
and scope of services provided by the sub-adviser. The Board will compare the
investment performance of the assets managed by the sub-adviser with other
accounts with similar investment objectives managed by other advisers and will
review the sub-adviser's compliance with federal securities laws and
regulations. The Board believes that its review will ensure that Mitchell
Hutchins continues to act in the best interests of the Fund, its shareholders
and the Contract Owners.
REQUIRED VOTE
Approval of Proposal 3 requires the vote of a "majority of the outstanding
voting securities" of the Fund, as defined in the 1940 Act, which means the vote
of 67% or more of the voting securities of the Fund present at the Meeting, if
the holders of more than 50% of the outstanding Shares of the Fund are present
or represented by proxy, or the vote of more than 50% of the outstanding voting
securities of the Fund, whichever is less.
If the Fund's shareholders do not approve the Sub-Adviser Approval Policy,
the Fund will continue to be required to call a special meeting to obtain
shareholder approval of changes in the Fund's sub-advisory arrangements.
THE BOARD RECOMMENDS THAT CONTRACT OWNERS
GIVE INSTRUCTIONS TO
VOTE "FOR" PROPOSAL 3.
INFORMATION ABOUT CERTAIN TRUSTEES AND OFFICERS OF THE TRUST
Officers are appointed by the Board and serve at its pleasure. Information
regarding officers and trustees of the Trust who are employees or directors of
Mitchell Hutchins or PaineWebber Incorporated ("PaineWebber") is provided below.
MARGO N. ALEXANDER: age 53, trustee. Mrs. Alexander is chairman (since
March 1999) and a director (since January 1995) of Mitchell Hutchins, and an
executive vice president and a director of PaineWebber (since March 1984). She
was chief executive officer of Mitchell Hutchins from January 1995 to October
2000. Mrs. Alexander is a director or trustee of 30 investment companies for
which Mitchell Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
E. GARRETT BEWKES, JR.: age 74, trustee and chairman of the Board of
Trustees. Mr. Bewkes serves as a consultant to PaineWebber (since May 1999).
Prior to November 2000, he was a director of Paine Webber Group Inc. ("PW
Group," formerly the holding company of PaineWebber and Mitchell Hutchins), and
prior to 1988, he was chairman of the board, president and chief executive
officer of American Bakeries Company. Mr. Bewkes is a director of Interstate
Bakeries Corporation. Mr. Bewkes is a director or trustee of 40 investment
companies for which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
BRIAN M. STORMS: age 46, president and trustee. Mr. Storms is chief
executive officer (since October 2000) and president (since March 1999) of
Mitchell Hutchins. He was president of Prudential Investments (1996-1999). Prior
to joining Prudential, he was a managing director at Fidelity Investments. Mr.
Storms is president and a director or trustee of 30 investment companies for
which Mitchell Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
T. KIRKHAM BARNEBY: age 54, vice president. Mr. Barneby is a managing
director and chief investment officer--quantitative investments of Mitchell
Hutchins. Mr. Barneby is a vice president of 14 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates services as investment
adviser.
THOMAS DISBROW: age 34, vice president and assistant treasurer. Mr.
Disbrow is a first vice president and a senior manager of the mutual fund
finance department of Mitchell Hutchins. Prior to November 1999, he was a vice
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president of Zweig/Glaser Advisers. Mr. Disbrow is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
AMY R. DOBERMAN: age 38, vice president. Ms. Doberman is a senior vice
president and general counsel of Mitchell Hutchins. From December 1996 through
July 2000, she was general counsel of Aeltus Investment Management, Inc. Prior
to working at Aeltus, Ms. Doberman was a Division of Investment Management
Assistant Chief Counsel at the SEC. Ms. Doberman is a vice president of 29
investment companies and a vice president and secretary of one investment
company for which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
ELBRIDGE T. GERRY III: age 43, vice president. Mr. Gerry is a managing
director and chief investment officer - short-term strategies and municipals
of Mitchell Hutchins. Prior to January 1996, he was with J.P. Morgan Private
Banking where he was responsible for managing municipal assets, including
several municipal bond funds. Mr. Gerry is a vice president of 20 investment
companies for which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
JOHN J. LEE: age 32, vice president and assistant treasurer. Mr. Lee is a
vice president and a manager of the mutual fund finance department of Mitchell
Hutchins. Prior to September 1997, he was an audit manager in the financial
services practice of Ernst & Young LLP. Mr. Lee is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
KEVIN J. MAHONEY: age 35, vice president and assistant treasurer. Mr.
Mahoney is a first vice president and a senior manager of the mutual fund
finance department of Mitchell Hutchins. From August 1996 through March 1999, he
was the manager of the mutual fund internal control group of Salomon Smith
Barney. Prior to August 1996, he was an associate and assistant treasurer of
BlackRock Financial Management L.P. Mr. Mahoney is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
ANN E. MORAN: age 43, vice president and assistant treasurer. Ms. Moran is
a vice president and a manager of the mutual fund finance department of Mitchell
Hutchins. Ms. Moran is a vice president and assistant treasurer of 30 investment
companies for which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
DIANNE E. O'DONNELL: age 48, vice president and secretary. Ms. O'Donnell
is a senior vice president and deputy general counsel of Mitchell Hutchins. Ms.
O'Donnell is a vice president and secretary of 29 investment companies and vice
president and assistant secretary of one investment company for which Mitchell
Hutchins, PaineWebber or one of their affiliates serves as investment adviser.
SUSAN P. RYAN: age 40, vice president. Ms. Ryan is a senior vice president
and a portfolio manager of Mitchell Hutchins. Ms. Ryan is a vice president of
six investment companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
PAUL H. SCHUBERT: age 37, vice president and treasurer. Mr. Schubert is a
senior vice president and the director of the mutual fund finance department of
Mitchell Hutchins. Mr. Schubert is a vice president and treasurer of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
BARNEY A. TAGLIALATELA: age 39, vice president and assistant
treasurer. Mr. Taglialatela is a vice president and a manager of the mutual
fund finance department of Mitchell Hutchins. Mr. Taglialatela is a vice
president and assistant treasurer of 30 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
11
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KEITH A. WELLER: age 39, vice president and assistant secretary. Mr.
Weller is a first vice president and senior associate general counsel of
Mitchell Hutchins. Mr. Weller is a vice president and assistant secretary of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
OTHER BUSINESS
Management does not know of any matters to be presented at the Meeting
other than those set forth in this proxy statement. If other business should
properly come before the Meeting, the proxies will vote thereon in accordance
with their best judgment in the interests of the Fund.
PROXY SOLICITATION
The costs of the Meeting, including the costs of preparing solicitation
materials, will be borne by Mitchell Hutchins. The principal solicitation will
be by mail, but proxies also may be solicited by telephone, telegraph, the
Internet or personal interview by regular employees of PaineWebber and Mitchell
Hutchins, who will not receive any compensation from the Fund for doing so. MIS
Corporation has been retained to assist with solicitation activities and will be
paid fees and expenses of approximately $[_____]. The Trust will forward to
record owners proxy materials for any beneficial owners that such record owners
may represent.
SHAREHOLDER PROPOSALS
As a general matter, the Trust does not hold annual or other regular
meetings of shareholders. Any shareholder who wishes to submit proposals to be
considered at a special meeting of the Fund's shareholders should send such
proposals to the Fund at 51 West 52nd Street, New York, New York 10019-6114.
Proposals must be received a reasonable period of time prior to any meeting to
be included in the proxy materials or otherwise considered at the meeting.
Moreover, inclusion of such proposals is subject to limitations under the
federal securities laws. Persons named as proxies for any subsequent
shareholders' meeting will vote in their discretion with respect to proposals
submitted on an untimely basis.
TO ENSURE THE PRESENCE OF A QUORUM AT THE MEETING, PROMPT EXECUTION AND
RETURN OF THE ENCLOSED VOTING INSTRUCTION CARD IS REQUESTED. A SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Trustees,
Dianne E. O'Donnell
Secretary
January , 2001
--------
51 West 52nd Street
New York, NY 10019-6114
12
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APPENDIX A
----------
OWNERSHIP OF SHARES
To the knowledge of the Trust's management, as of the Record Date, there
were no Contract Owners with the ability to provide voting instructions with
respect to more than 5% of a class of the Fund's Shares. However, the
proportionate voting by the Company 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 of a class.
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
Fund. The following insurance company separate accounts are shown on the Fund's
records as owning 5% or more of a class of the Fund's Shares as of the Record
Date.
PERCENTAGE OF SHARES OWNED OF RECORD AS OF
NAME AND ADDRESS JANUARY 23, 2001
---------------- ----------------
PaineWebber Capital Inc.
[address] [ ___%]
AIG Life Paradigm Variable Annuity
[address] [ ___%]
A-1
<PAGE>
APPENDIX B
----------
FORM OF INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENT
Contract made as of __________, 2001, between MITCHELL HUTCHINS SERIES
TRUST, a Massachusetts business trust ("Fund"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered as an
investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act"), and as a broker-dealer under the Securities Exchange Act of
1934, as amended ("1934 Act");
WHEREAS the Fund is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and is
authorized to offer for public sale distinct series of shares of beneficial
interest; and
WHEREAS the Fund desires and intends to have one or more investment
advisers ("Sub-Advisers") provide investment advisory and portfolio management
services with respect to the series of shares of beneficial interest of the Fund
designated as High Income Portfolio and each such other series as to which this
Contract may apply (each a "Series"); and
WHEREAS the Fund desires to retain Mitchell Hutchins as investment manager
and administrator to furnish certain administrative and portfolio management
services to the Fund with respect to the Series, and Mitchell Hutchins is
willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints Mitchell Hutchins as
investment manager and administrator of the Fund and each Series for the period
and on the terms set forth in this Contract. Mitchell Hutchins accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. DUTIES AS INVESTMENT MANAGER; APPOINTMENT OF SUB-ADVISERS
(a) Subject to the oversight and direction of the Fund's Board of
Trustees ("Board"), Mitchell Hutchins will provide to the Fund investment
management evaluation services principally by performing initial reviews of
prospective Sub-Advisers for each Series and overseeing and monitoring
performance of the Sub-Advisers thereafter. Mitchell Hutchins agrees to report
to the Fund the results of its evaluation, oversight and monitoring functions
and to keep books and records of the Fund in connection therewith. Upon the
request of the Board, Mitchell Hutchins will provide portfolio management
services with respect to any portion of Series' assets for which no Sub-Adviser
is responsible. Mitchell Hutchins further agrees to communicate performance
expectations and evaluations to the Sub-Advisers, and to recommend to the Fund
whether agreements with Sub-Advisers should be renewed, modified or terminated.
(b) Mitchell Hutchins is responsible for informing the Sub-Advisers of
the investment objective(s), policies and restrictions of the Series for which
the Sub-Adviser is responsible, for informing or ascertaining that it is aware
of other legal and regulatory responsibilities applicable to the Sub-Adviser
with respect to the Series for which the Sub-Adviser is responsible, and for
monitoring the Sub-Advisers' discharge of their duties; but Mitchell Hutchins is
not responsible for the specific actions (or inactions) of a Sub-Adviser in the
performance of the duties assigned to it.
(c) With respect to each Sub-Adviser for a Series, Mitchell Hutchins
shall enter into an agreement ("Sub-Advisory Agreement") with the Sub-Adviser in
B-1
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substantially the form previously approved by the Board and shall seek approval
of the Board or a Series' shareholders in a manner consistent with the 1940 Act,
the rules thereunder or any applicable exemptive order.
(d) Mitchell Hutchins shall be responsible for the fees payable to and
shall pay the Sub-Adviser of a Series the fee as specified in the Sub-Advisory
Agreement relating thereto.
(e) In the event that the Board shall request that Mitchell Hutchins
provide any portfolio management services to one or more Series, Mitchell
Hutchins shall comply with this paragraph 2(e). Mitchell Hutchins agrees that in
placing orders with brokers, it will attempt to obtain the best net result in
terms of price and execution; provided that, on behalf of any Series, Mitchell
Hutchins may, in its discretion, use brokers who provide the Series with
research, analysis, advice and similar services to execute portfolio
transactions on behalf of the Series, and Mitchell Hutchins may pay to those
brokers in return for brokerage and research services a higher commission than
may be charged by other brokers, subject to Mitchell Hutchins' determining in
good faith that such commission is reasonable in terms either of the particular
transaction or of the overall responsibility of Mitchell Hutchins to such Series
and its other clients and that the total commissions paid by such Series will be
reasonable in relation to the benefits to the Series over the long term. In no
instance will portfolio securities be purchased from or sold to Mitchell
Hutchins, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder. Mitchell
Hutchins may aggregate sales and purchase orders with respect to the assets of
the Series with similar orders being made simultaneously for other accounts
advised by Mitchell Hutchins or its affiliates. Whenever Mitchell Hutchins
simultaneously places orders to purchase or sell the same security on behalf of
a Series and one or more other accounts advised by Mitchell Hutchins, such
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account. The Fund recognizes
that in some cases this procedure may adversely affect the results obtained for
the Series. In providing any portfolio management services, Mitchell Hutchins
will oversee the maintenance of all books and records with respect to the
securities transactions of each Series, and will furnish the Board with such
periodic and special reports as the Board reasonably may request. In compliance
with the requirements of Rule 31a-3 under the 1940 Act, Mitchell Hutchins hereby
agrees that all records which it maintains for the Fund are the property of the
Fund, agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act any records which it maintains for the Fund and which are required to be
maintained by Rule 31a-1 under the 1940 Act and further agrees to surrender
promptly to the Fund any records which it maintains for the Fund upon request by
the Fund. In providing any portfolio management services, Mitchell Hutchins will
oversee the computation of the net asset value and the net income of each Series
as described in the currently effective registration statement of the Fund under
the Securities Act of 1933, as amended, and the 1940 Act and any supplements
thereto ("Registration Statement") or as more frequently requested by the Board.
The Fund hereby authorizes Mitchell Hutchins and any entity or persons
associated with Mitchell Hutchins which is a member of a national securities
exchange to effect any transaction on such exchange for the account of the Fund,
which transaction is permitted by Section 11(a) of the 1934 Act and Rule
11a2-2(T) thereunder, and the Fund hereby consents to the retention of
compensation by Mitchell Hutchins or any entity or persons associated with
Mitchell Hutchins for such transactions.
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the
affairs of the Fund and Series subject to the oversight and direction of the
Board and the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of
the Fund and the Series, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of any
of its responsibilities with respect to the conduct of the affairs of the Fund
and the Series.
(b) Mitchell Hutchins will provide the Fund and each Series with such
corporate, administrative and clerical personnel (including officers of the
Fund) and services as are reasonably deemed necessary or advisable by the Board,
including the maintenance of certain books and records of the Fund and Series in
connection with the administration of the Fund.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Fund's
Registration Statement, proxy material, tax returns and required reports to
B-2
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shareholders of each Series and the Securities and Exchange Commission ("SEC")
and other appropriate federal or state regulatory authorities.
(d) Mitchell Hutchins will provide the Fund and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Declaration of
Trust, By-Laws and the currently effective Registration Statement of the Fund
and with the instructions and directions of the Board and will comply with the
requirements of the 1940 Act, the Advisers Act, and the rules under each, and
all other applicable federal and state laws and regulations.
5. DELEGATION OF MITCHELL HUTCHINS' DUTIES AS INVESTMENT MANAGER AND
ADMINISTRATOR. With respect to any or all Series, Mitchell Hutchins may enter
into one or more contracts ("Sub-Investment Management or Sub-Administration
Contract") with one or more sub-investment managers or sub-administrators in
which Mitchell Hutchins delegates to such sub-investment managers or
sub-administrators any or all of its duties specified in Paragraphs 2 and 3 of
this Contract, provided that each Sub-Investment Management or
Sub-Administration Contract imposes on the sub-investment manager or
sub-administrator bound thereby all the corresponding duties and conditions to
which Mitchell Hutchins is subject under Paragraphs 2 and 3 of this Contract,
and further provided that each Sub-Investment Management or Sub-Administration
Contract meets all requirements of the 1940 Act and rules thereunder.
6. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a Trustee, officer or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar 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 the Series' proportionate share of the following): (i) the cost
(including brokerage commissions) of securities purchased or sold by the Series
and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Series by Mitchell Hutchins under this
Contract; (iii) expenses of organizing the Series; (iv) filing fees and expenses
relating to the registrations and qualification of the Series' shares and the
Fund under federal and/or state securities laws and maintaining such
registration and qualifications; (v) fees and salaries payable to the Fund's
Trustees and officers who are not interested persons of the Fund 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 Fund or the Series for violation of any law; (x) legal,
accounting and auditing expenses, including legal fees of special counsel for
those Trustees of the Fund who are not interested persons of the Fund; (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
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existing shareholders; (xv) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which the
Fund is a party and the expenses the Fund may incur as a result of its legal
obligation to provide indemnification to its officers, Trustees, agents and
shareholders) incurred by the Fund or the Series; (xvi) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations; (xvii) costs of mailing and tabulating proxies
and costs of meetings of shareholders, the Board and any committees thereof;
(xviii) the cost of investment company literature and other publications
provided by the Fund to its Trustees and officers; (xix) costs of mailing,
stationery and communications equipment; (xx) expenses incident to any dividend,
withdrawal or redemption options; (xxi) charges and expenses of any outside
pricing service used to value portfolio securities; (xxii) interest on
borrowings of the Fund; and (xxiii) any fees or expenses related to license
agreements with respect to securities indices.
(c) The Fund or a Series may pay directly any expenses incurred by it in
its normal operations and, if any such payment is consented to by Mitchell
Hutchins and acknowledged as otherwise payable by Mitchell Hutchins pursuant to
this Contract, a Series may reduce the fee payable to Mitchell Hutchins pursuant
to Paragraph 8 thereof by such amount. To the extent that such deductions exceed
the fee payable to Mitchell Hutchins on any monthly payment date, such excess
shall be carried forward and deducted in the same manner from the fee payable on
succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Fund received by the officers of the Fund and by those
Trustees who are interested persons of the Fund.
(e) The payment or assumption by Mitchell Hutchins of any expenses of
the Fund 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 Fund or a Series on any subsequent occasion.
8. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to this
Contract, the Fund will pay to Mitchell Hutchins the annual fee set forth below
with respect to the indicated Series, such fee stated as a percentage of average
daily net assets, to be computed daily and paid monthly.
High Income Portfolio 0.50%
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any Series hereafter established, the Fund 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 Fund on behalf
of such Series and by Mitchell Hutchins. All such Fee Agreements shall provide
that they are subject to all terms and conditions of this Contract.
(c) The fee shall be computed daily and paid monthly to Mitchell
Hutchins on or before the last business day of the next succeeding calendar
month.
(d) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective day to the end of the month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
9. LIMITATION OF LIABILITY OF MITCHELL HUTCHINS. Mitchell Hutchins and
its officers, directors, employees and delegates, including any Sub-Adviser,
Sub-Investment Manager or Sub-Administrator to a Series, shall not be liable for
any error of judgment or mistake of law or for any loss suffered by any Series,
the Fund 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
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<PAGE>
officer, Trustee, employee or agent of the Fund, shall be deemed, when rendering
services to a Series or the Fund or acting with respect to any business of such
Series or the Fund, to be rendering such service to or acting solely for the
Series or the Fund and not as an officer, director, employee, or agent or one
under the control or direction of Mitchell Hutchins even though paid by it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE
FUND. The Trustees, officers, employees or agents of the Fund and the
shareholders of any Series shall not be liable for any obligations of any Series
or the Fund under this Agreement and Mitchell Hutchins agrees that, in asserting
any rights or claims under this Agreement, it shall look only to the assets and
property of the Fund in settlement of such right or claim, and not to such
Trustees, officers, employees, agents or shareholders.
11. DURATION AND TERMINATION.
(a) This Contract shall become effective for each Series upon the day
and year first written above, provided that, with respect to any Series, this
Contract shall not take effect unless it has first been approved (i) by a vote
of a majority of those Trustees of the Fund 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 Fund who are
not parties to this Contract or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or, with respect to any given Series, by vote of a majority of the
outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to a Series, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Series on sixty days' written notice to Mitchell Hutchins and
may be terminated by Mitchell Hutchins at any time, without the payment of any
penalty, on sixty days' written notice to the Fund. Termination of this Contract
with respect to a Series shall in no way affect the continued validity of this
Contract or the performance thereunder with respect to any other Series. This
Contract will terminate automatically in the event of its assignment.
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 a
Series shall be effective until approved by vote of a majority of the Series'
outstanding voting securities.
13. GOVERNING LAW. This Contract shall be construed in accordance with
the laws of the State of New York, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act, provided, however,
that Paragraph 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 New York or the Commonwealth of Massachusetts conflict with the
applicable provisions of the 1940 Act, the latter shall control.
14. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "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 SEC by any rule, regulation or order. Where
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<PAGE>
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 SEC, 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.
[Signature block omitted.]
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<PAGE>
APPENDIX C
MORE INFORMATION ABOUT MITCHELL HUTCHINS
Mitchell Hutchins serves as the Fund's manager and administrator. Mitchell
Hutchins, a Delaware corporation, is a wholly owned asset management subsidiary
of PaineWebber Incorporated, a wholly owned indirect subsidiary of UBS AG. UBS
AG, with headquarters in Zurich, Switzerland, is an internationally diversified
organization with operations in many areas of the financial services industry.
Mitchell Hutchins is located at 51 West 52nd Street, New York, New York
10019-6114. The principal business offices of PaineWebber are located at 1285
Avenue of the Americas, New York, New York 10019-6028. The principal business
offices of UBS AG are located at Bahnhofstrasse 45, Zurich, Switzerland. As of
November 30, 2000, Mitchell Hutchins was the adviser or sub-adviser of 31
investment companies with 75 separate portfolios and aggregate assets of
approximately $59.5 billion.
Since January 1, 2000 (the beginning of the Fund's most recently completed
fiscal year), purchases and sales of the securities of Paine Webber Group Inc.
(the ultimate parent company of PaineWebber and Mitchell Hutchins prior to
November 3, 2000), UBS AG, or Alliance Capital by the trustees of the Fund did
not exceed 1% of the outstanding securities of any class of securities of such
entities.
Mitchell Hutchins also serves as the distributor for the Fund's Class I
shares under a distribution contract that requires Mitchell Hutchins to use its
best efforts to sell those shares. [During its fiscal year ended December 31,
2000, the Fund paid no brokerage commissions to PaineWebber or any other
affiliated broker-dealer.]
The following is a list of the directors and principal executive officer
of Mitchell Hutchins. The business address of each individual listed below is 51
West 52nd Street, New York, New York 10019-6114.
NAME POSITION WITH MITCHELL HUTCHINS PRINCIPAL OCCUPATION
---- ------------------------------- --------------------
Margo N. Alexander Chairman and a director Same
Julian F. Sluyters Director and a managing Same
director
Brian M. Storms Chief executive officer and Same
president
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<PAGE>
OTHER INVESTMENT COMPANY CLIENTS
Mitchell Hutchins also serves as investment adviser to the following
investment companies, which have investment objectives similar to the Fund's, at
the fee rates set forth below. These investment companies had the indicated net
assets as of December 31, 2000.
<TABLE>
<CAPTION>
ANNUAL
NAME OF FUND MANAGEMENT/ADVISORY FEE RATE APPROXIMATE ASSETS
------------ ---------------------------- ------------------
<S> <C> <C>
PaineWebber High Income Fund (a series of 0.50% of average daily net assests
PaineWebber Managed Investments Trust) computed daily and payable monthly [$ ___________]
Managed High Yield Plus Fund 0.70% of average weekly total assets
Inc. minus liabilities other than the [$ ___________]
aggregate indebtedness constituting
leverage
</TABLE>
C-2
<PAGE>
APPENDIX D
----------
FORM OF SUB-ADVISORY CONTRACT
Agreement made as of [ ] 2001 ("Contract") between MITCHELL HUTCHINS
ASSET MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and
ALLIANCE CAPITAL MANAGEMENT L.P., a Delaware limited partnership
("Sub-Adviser").
RECITALS
--------
(1) Mitchell Hutchins has entered into an Investment Management and
Administration Agreement, dated [ ], 2001 ("Management Agreement"), with
Mitchell Hutchins Series Trust ("Fund"), an open-end management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act"), with respect to the series of the Trust designated as High Income
Portfolio and to each such other series as to which this Contract may apply
(each a "Series");
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services to Mitchell Hutchins and each of the
above-referenced Series; and
(3) The Sub-Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, Mitchell Hutchins and the Sub-Adviser agree as follows with
respect to each Series:
1. APPOINTMENT. Mitchell Hutchins hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the Series for the period and on the
terms set forth in this Contract. The Sub-Adviser accepts that appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the supervision and direction of the Fund'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 for all or a designated portion of the assets
("Segment") of the Series, including investment research and discretionary
management with respect to all securities and investments and cash equivalents
in the Series or Segment. The Sub-Adviser will determine from time to time what
investments will be purchased, retained or sold by the Series or Segment. The
Sub-Adviser will be responsible for placing purchase and sell orders for
investments and for other related transactions for the Series or Segment. The
Sub-Adviser will be responsible for voting proxies of issuers of securities held
by the Series or Segment. The Sub-Adviser understands that the Series' assets
need to be managed so as to permit it to (i) qualify or to continue to qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code, as amended ("Code") and (ii) continue to comply with the diversification
requirements imposed by Section 817(h) of the Code and the regulations
thereunder. The Sub-Adviser will provide services under this Contract in
accordance with the Series' investment objective, policies and restrictions as
stated in the Fund'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 Series, the Sub-Adviser may, in its discretion, use brokers that
provide the Sub-Adviser with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Series or Segment, and the
Sub-Adviser may pay to those brokers in return for brokerage and research
services a higher commission than may be charged by other brokers, subject to
the Sub-Adviser's determining in good faith that such commission is reasonable
in terms either of the particular transaction or of the overall responsibility
of the Sub-Adviser to the Series and its other clients and that the total
commissions paid by the Series or Segment will be reasonable in relation to the
benefits to the Series over the long term. In no instance will portfolio
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<PAGE>
securities be purchased from or sold to Mitchell Hutchins or the Sub-Adviser, or
any affiliated person thereof, except in accordance with the federal securities
laws and the rules and regulations thereunder. The Sub-Adviser may aggregate
sales and purchase orders with respect to the assets of the Series or Segment
with similar orders being made simultaneously for other accounts advised by the
Sub-Adviser or its affiliates. Whenever the Sub-Adviser simultaneously places
orders to purchase or sell the same security on behalf of the Series and one or
more other accounts advised by the Sub-Adviser, the orders will be allocated as
to price and amount among all such accounts in a manner believed to be equitable
over time to each account. Mitchell Hutchins recognizes that in some cases this
procedure may adversely affect the results obtained for the Series or Segment.
Subject to the Sub-Adviser's obligations to seek best execution,
Mitchell Hutchins agrees that the Sub-Adviser, in its sole discretion, may place
transactions on behalf of the Series and the Fund with Sanford C. Bernstein &
Co., LLC ("SCB LLC"), an affiliate of the Sub-Adviser, or any other
broker-dealer deemed to be an affiliate of the Sub-Adviser (together with SCB
LLC, the "Affiliated Broker-Dealers") so long as such transactions are effected
in conformity with the requirements (including any applicable exemptions and
administrative interpretations set forth in Part II of the Sub-Adviser's Form
ADV Registration Statement on file with the Securities and Exchange Commission
("Form ADV")) of Section 11(a)(1)(H) of the Securities Exchange Act of 1934. In
all such dealings, the Affiliated Broker-Dealers shall be authorized and
entitled to retain any commissions, remuneration or profits which may be made in
such transactions and shall not be liable to account for the same to Mitchell
Hutchins, the Series or the Fund.
Mitchell Hutchins further authorizes the Sub-Adviser and its
Affiliated Broker-Dealers to execute agency cross transactions (the "Cross
Transactions") on behalf of the Series and the Fund. Cross Transactions are
transactions which may be effected by the Affiliated Broker-Dealers acting for
both the Series or the Fund and the counterparty to the transaction. Cross
Transactions enable the Sub-Adviser to purchase or sell a block of securities
for the Series or the Fund at a set price and possibly avoid an unfavorable
price movement that may be created through entrance into the market with such
purchase or sale order. As such, the Sub-Adviser believes that Cross
Transactions can provide meaningful benefits for the Series and the Fund and its
clients generally. Mitchell Hutchins, the Series and the Fund should be aware,
however, that in a Cross Transaction an Affiliated Broker-Dealer will be
receiving commissions from both sides of the trade and, therefore, there is a
potentially conflicting division of loyalties and responsibilities.
(c) The Sub-Adviser will maintain all books and records required to be
maintained pursuant to Rule 31a-1(b)(ii)(3), (5), (6), (7), (9) and (10) under
the 1940 Act and the rules and regulations promulgated thereunder with respect
to transactions by the Sub-Adviser on behalf of the Series or Segment, and will
furnish the Board and Mitchell Hutchins with such periodic and special reports
as the Board or Mitchell Hutchins reasonably may request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees
that all records that it maintains for the Series are the property of the Fund,
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any records that it maintains for the Fund and that are required to be
maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender
promptly to the Fund any records that it maintains for the Series upon request
by the Fund.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the performance of the Series or Segment and make available to the
Board and Mitchell Hutchins any economic, statistical and investment services
that the Sub-Adviser normally makes available to its institutional or other
customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities in the Series or Segment and will use its reasonable
efforts to arrange for the provision of a price from one or more parties
independent of the Sub-Adviser for each portfolio security for which the
custodian does not obtain prices in the ordinary course of business from an
automated pricing service.
3. FURTHER DUTIES. In all matters relating to the performance of this
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<PAGE>
Contract, the Sub-Adviser will act in conformity with the Fund'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; Subchapter M of the Code, as
applicable to regulated investment companies; and all other federal and state
laws and regulations applicable to the Fund and the Series. Mitchell Hutchins
agrees to provide to the Sub-Adviser copies of the Fund's Declaration of Trust,
By-Laws, Registration Statement, written instructions and directions of the
Board and Mitchell Hutchins, and any amendments or supplements to any of these
materials as soon as practicable after such materials become available; and
further agrees to identify to the Sub-Adviser in writing any broker-dealers that
are affiliated with Mitchell Hutchins (other than PaineWebber Incorporated and
Mitchell Hutchins itself).
4. EXPENSES. During the term of this Contract, the Sub-Adviser will
bear all expenses incurred by it in connection with its services under this
Contract. The Sub-Adviser shall not be responsible for any expenses incurred by
the Fund, the Series or Mitchell Hutchins.
5. COMPENSATION.
(a) For the services provided and the expenses assumed by the
Sub-Adviser pursuant to this Contract, Mitchell Hutchins, not the Series, will
pay to the Sub-Adviser a sub-advisory fee, computed daily and paid monthly, at
an annual rate as set forth in Schedule A hereto of the average daily net assets
of the Series or Segment (computed in the manner specified in the Management
Agreement) and will provide the Sub-Adviser with a schedule showing the manner
in which the fee was computed. If the Sub-Adviser is managing a Segment, its
fees will be based on the value of assets of the Series within the Sub-Adviser's
Segment.
(b) The fee shall be accrued daily and payable monthly to the
Sub-Adviser on or before the 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.
6. LIMITATION OF LIABILITY.
(a) The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Series, the Fund, its
shareholders or by Mitchell Hutchins in connection with the matters to which
this Contract relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Contract.
(b) In no event will the Sub-Adviser have any responsibilities for any
other series of the Fund, for any portion of the Series' investments not managed
by the Sub-Adviser or for the acts or omissions of any other sub-adviser to the
Fund or Series.
In particular, in the event the Sub-Adviser shall manage only a
portion of the Series' investments, the Sub-Adviser shall have no responsibility
for the Series' being in violation of any applicable law or regulation or
investment policy or restriction applicable to the Series as a whole or for the
Series' failing to qualify as a regulated investment company under the Code or
failing to comply with the diversification requirements imposed by Section
817(h) and the regulations thereunder, if the securities and other holdings of
the Segment managed by the Sub-Adviser are such that such Segment would not be
in such violation or fail to so qualify or comply if such segment were deemed a
separate series of the Fund or a separate "regulated investment company" under
the Code.
Nothing in this section shall be deemed a limitation or waiver of
any obligation or duty that may not by law be limited or waived.
7. REPRESENTATIONS OF SUB-ADVISER. The Sub-Adviser represents, warrants
and agrees as follows:
D-3
<PAGE>
(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 and appropriate
procedures 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 fifteen days of the end of the
last calendar quarter of each year that this Contract is in effect, a duly
authorized officer of the Sub-Adviser shall certify to Mitchell Hutchins that
the Sub-Adviser has complied with the requirements of Rule 17j-1 during the
previous year and that there has been no material violation of the Sub-Adviser's
code of ethics or, if such a violation has occurred, that appropriate action was
taken in response to such violation. Upon the written request of Mitchell
Hutchins, the Sub-Adviser shall permit Mitchell Hutchins, its employees or its
agents to examine the reports required to be made by the Sub-Adviser pursuant to
Rule 17j-1 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, 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 or 25% limited partners, as applicable, and any changes in the key
personnel who are either the portfolio manager(s) of the Series or senior
management of the Sub-Adviser, in each case prior to, or promptly after, such
change.
(e) Mitchell Hutchins and the Sub-Adviser agree that neither of them,
nor any of their affiliates, will in any way refer directly or indirectly to
their relationship with one another or any of their respective affiliates in
offering, marketing or other promotional materials without the prior express
written consent of the other, which consent will be promptly provided and not
unreasonably withheld.
8. SERVICES NOT EXCLUSIVE. The services furnished by the Sub-Adviser
hereunder are not to be deemed exclusive and the Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby or unless otherwise agreed to by the parties hereunder
in writing. Nothing in this Contract shall limit or restrict the right of any
trustee, director, officer or employee of the Sub-Adviser, who may also be a
Trustee, officer or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar nature or a dissimilar nature.
9. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the day and year first
written above, provided that this Contract has been approved for the Series by a
vote of (i) a majority of those Trustees of the Fund who are not parties to this
Contract or interested persons of any such party ("Independent Trustees") cast
at a meeting called for the purpose of voting on such approval and (ii) a
majority of the Series' outstanding voting securities unless, in the case of
(ii), the Fund complies with the terms of any SEC exemptive order or rule
permitting it to enter into the Contract without such vote.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually: (i) by a vote of a majority of Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Series.
D-4
<PAGE>
(c) Notwithstanding the foregoing, with respect to the Series, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Series on sixty days' written notice to the Sub-Adviser and
may be terminated by the Sub-Adviser at any time, without the payment of any
penalty, on sixty days' written notice to Mitchell Hutchins. The Contract may
also be terminated, without payment of penalty, by Mitchell Hutchins (i) upon
material breach by the Sub-Adviser of any of the representations and warranties
set forth in Paragraph 7 of this Contract, if such breach shall not have been
cured within a 20-day period after notice of such breach or (ii) if, in the
reasonable judgment of Mitchell Hutchins, the Sub-Adviser becomes unable to
discharge its duties and obligations under this Contract, including
circumstances such as financial insolvency of the Sub-Adviser or other
circumstances that could adversely affect the Series. This Contract will
terminate automatically in the event of its assignment or upon termination of
the Management Agreement as it relates to the Series.
10. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Contract as to the
Series shall be effective until approved by vote of (i) the Independent Trustees
and (ii) a majority of the Series' outstanding voting securities unless, in the
case of (ii), the Fund complies with the terms of any SEC exemptive order or
rule 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 New York, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of New York conflict with the applicable provisions of the 1940 Act,
the latter shall control.
12. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act, subject to such exemption as may be granted by the SEC by any
rule, regulation or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Contract is made less
restrictive by a rule, regulation or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. This Contract may be signed in counterpart.
13. NOTICES. Any notice herein required is to be in writing and is
deemed to have been given to the Sub-Adviser or Mitchell Hutchins upon receipt
of the same at their respective addresses set forth below. All written notices
required or permitted to be given under this Contract will be delivered by
personal service, by postage mail - return receipt requested or by facsimile
machine or a similar means of same day delivery which provides evidence of
receipt (with a confirming copy by mail as set forth herein). All notices
provided to Mitchell Hutchins will be sent to the attention of Dianne E.
O'Donnell, Deputy General Counsel. All notices provided to the Sub-Adviser will
be sent to the attention of Mark R. Manley, Senior Vice President and Counsel.
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.
[Signature block omitted.]
D-5
<PAGE>
SCHEDULE A
----------
ANNUAL RATE OF SUB-ADVISORY FEE AS A
SERIES PERCENTAGE OF AVERAGE DAILY NET ASSETS
------ --------------------------------------
High Income Portfolio 0.25%
D-6
<PAGE>
APPENDIX E
----------
INFORMATION ABOUT ALLIANCE CAPITAL
Alliance Capital is a leading global investment adviser supervising client
accounts with assets as of October 2, 2000, totaling approximately $474 billion.
Alliance Capital manages retirement accounts for many of the largest U.S. public
and private employee benefit plans, foundations, banks, insurance companies and
high net worth individuals worldwide. Alliance Capital is also one of the
largest mutual fund sponsors, with a diverse family of globally distributed
mutual fund portfolios.
Alliance Capital, an investment adviser registered under the Investment
Advisers Act of 1940, as amended ("Advisers Act"), is a Delaware limited
partnership, of which Alliance Capital Management Corporation ("ACMC"), an
indirect wholly owned subsidiary of AXA Financial, Inc. ("AXA Financial"), is
the general partner. As of October 2, 2000, Alliance Capital Management Holding
L.P. ("Alliance Holding") owned approximately 30% of the outstanding units of
limited partnership interest in Alliance Capital ("Alliance Units"). ACMC is the
general partner of Alliance Holding, whose equity interests are traded on the
New York Stock Exchange, Inc. ("NYSE") in the form of units ("Alliance Holding
Units"). As of October 2, 2000, AXA Financial, together with ACMC and certain of
its other wholly owned subsidiaries, beneficially owned approximately 2% of the
outstanding Alliance Holding Units and 53% of the outstanding Alliance Units.
AXA Financial is a Delaware corporation whose shares are traded on the NYSE. As
of September 30, 2000, AXA, a French insurance holding company, directly and
indirectly owned approximately 60.1% of the issued and outstanding shares of the
common stock of AXA Financial.
Sanford C. Bernstein & Co., LLC ("Bernstein"), a registered
broker-dealer and investment adviser, is a Delaware limited liability company
located at 767 Fifth Avenue, New York, New York 10153, and an indirect wholly
owned subsidiary of Alliance Capital Management L.P. ("Alliance Capital").
In addition, Bernstein manages value oriented investment portfolios through
and with the assistance of the Bernstein Investment Research and Management
Unit (the "Bernstein Unit') of Alliance Capital. The Bernstein Unit services
the former investment research and management business of Sanford C.
Bernstein & Co., Inc., which was acquired by Alliance Capital in October 2000.
Gregory R. Dube, a senior vice president and head of the global high yield
group at Alliance Capital, is primarily responsible for the day-to-day
management of the Fund's investments and has held his Fund responsibilities
since October 10, 2000. Mr. Dube joined Alliance Capital in 1998 to head the
global high yield group. Mr. Dube, a former partner of Donaldson, Lufkin &
Jenrette, has an extensive background in credit securities markets and 24 years
of investment experience. He has traded and sold credit instruments including
corporate, high-yield, private placement, mortgage, Euro and distressed debt and
derivatives. Mr. Dube has been responsible for research, risk management and
marketing functions in his management capacity at Donaldson, Lufkin & Jenrette,
as an executive director of Lehman Brothers International, and as national sales
manager of taxable fixed income at Lehman Brothers.
Alliance Capital's principal executive officer and directors are shown
below. Except as otherwise noted, the address of each, as it relates to his or
her duties at ACMC, the General Partner of the sub-adviser, is 1345 Avenue of
the Americas, New York, New York 10105.
<TABLE>
<CAPTION>
NAME POSITIONS WITH ALLIANCE CAPITAL OTHER PRINCIPAL EMPLOYMENT
---- ------------------------------- --------------------------
<S> <C> <C>
Dave Harrell Williams* Chairman of the Board of Directors Director, AXA Financial
of ACMC Director, The Equitable Life
Assurance Society of America
("ELAS")
Bruce William Calvert* Vice Chairman, Chief Executive Officer None
& Director of ACMC
E-1
<PAGE>
NAME POSITIONS WITH ALLIANCE CAPITAL OTHER PRINCIPAL EMPLOYMENT
---- ------------------------------- --------------------------
<S> <C> <C>
Alfred Harrison* Vice Chairman and Director None
of ACMC
John Donato Carifa* President, Chief Operating Officer & Director, Bernstein
Director of ACMC
Lewis A. Sanders** Vice Chairman, Chief Investment Officer Chairman & Director, Bernstein
767 Fifth Avenue & Director of ACMC
New York, NY
Roger Hertog*** Vice Chairman & Director of None
ACMC
Benjamin Duke Holloway* Director of ACMC Financial Consultant
Robert Bruce Zoellick* Director of ACMC Resident Fellow and
Member of the Board of
Directors, The German
Marshall Fund of the
U.S. Senior
International Adviser,
Goldman Sachs & Company
Donald Hood Brydon* Director of ACMC Chairman and Chief
Executive Officer, AXA
Investment Managers, S.A.
20 Lincoln's Inn Fields
London, England
Henri de la Croix de Director of ACMC Vice Chairman, Management
Castries* Board, AXA,
23 Avenue Matignon
Paris, France
Chairman of the Board of
Directors, AXA Financial, Inc.
Kevin Claude Dolan* Director of ACMC Senior Executive Vice
President, AXA
Investment Managers,
S.A.
20 Lincoln's Inn Fields
London, England
Denis Durvene* Director of ACMC Group Executive Vice
President, Finance, AXA
Control and Strategy,
23 Avenue Matignon
Paris, France
Director, ELAS
Herve Hatt* Director of ACMC Senior Vice President--
Asset Management
Activities and Group
Strategic Planning
23 Avenue Matignon
Paris, France
Michael Hegarty* Director of ACMC Senior Vice Chairman
and Chief Operating
Officer, AXA Financial
Director, President &
Chief Operating
Officer, ELAS
E-2
<PAGE>
NAME POSITIONS WITH ALLIANCE CAPITAL OTHER PRINCIPAL EMPLOYMENT
---- ------------------------------- --------------------------
<S> <C> <C>
Edward Daniel Miller* Director of ACMC Director, President and
Chief Executive Officer,
AXA Financial
Chairman & Chief
Executive Officer, ELAS
Peter Dana Norris* Director of ACMC Executive Vice
President, Chief
Investment Officer, AXA
Financial
Executive Vice
President, Chief
Investment Officer, ELAS
Stanley Bernard Tulin* Director of ACMC Vice Chairman & Chief
Financial Officer, AXA
Financial Vice Chairman
and Chief Financial
Officer, ELAS
Reba White Williams* Director, Director of None
Special Projects of ACMC
Frank Savage* Director of ACMC Chairman, Alliance
Capital Management
International
W. William Jarmain Director of ACMC President, Jarmain
Group, Inc.
121 King Street
W. Toronto, Ontario
J. Tobin Peter Director of ACMC Dean, St. John's
University Business
School
800 Utopia Parkway
Jamaica, New York
Robert Henry Joseph, Jr.* Sr. Vice President & Chief None
Financial Officer of General
Partner
David Remson Brewer, Sr. Vice President, General None
Jr.* Counsel and Secretary of
General Partner
</TABLE>
-------------------
* Previously held position with General Partner of Alliance Capital
Management Holding L.P., the predecessor of Alliance Capital.
** Previously, Chairman of the Board, Chief Executive Officer and
Director, Sanford C. Bernstein & Co., Inc., 767 Fifth Avenue, New York,
New York.
*** Previously, Chief Operating Officer and Director, Sanford C. Bernstein
& Co., Inc., 767 Fifth Avenue, New York, New York.
E-3
<PAGE>
OTHER INVESTMENT COMPANY CLIENTS
Listed below is information concerning other mutual funds, all or a
portion of which is managed or sub-advised by Alliance Capital, that have
similar investment objectives and policies to those of High Income Portfolio.
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT/SUB-
ADVISORY FEE RATE BASED
FUND ASSETS ON AVERAGE NET ASSETS
---- ------ ---------------------
<S> <C> <C> <C>
Alliance Variable Products Series Fund - $22,342,147 0.75%
High Yield Portfolio
Alliance High Yield Fund $480,046,825 0.75%
E-4
</TABLE>
<PAGE>
HIGH INCOME PORTFOLIO
(A SERIES OF MITCHELL HUTCHINS SERIES TRUST)
SPECIAL MEETING OF SHAREHOLDERS
March 1, 2001
THIS VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
("BOARD") OF MITCHELL HUTCHINS SERIES TRUST AND RELATES TO THE PROPOSALS WITH
RESPECT TO HIGH INCOME PORTFOLIO ("FUND") INDICATED BELOW. The undersigned
hereby appoints as proxies Dianne E. O'Donnell and Jeanne Louther 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 in the Fund at the
Special Meeting of Shareholders to be held at [ ________ a.m./p.m.], Eastern
time, on March 1, 2001, at 1285 Avenue of the Americas, 14th Floor, New York,
New York 10019-6028, 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 FUND WITH DISCRETIONARY POWER TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
YOUR VOTE IS IMPORTANT.
Please date and sign the reverse side and return it promptly in the
enclosed envelope. This proxy will not be voted unless the voting instruction
card is dated and signed exactly as instructed.
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 recommends that you vote "FOR" each of the following proposals:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Approval of a new Investment Management and
Administration Contract between Mitchell
Hutchins Series Trust and Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins")
with respect to the Fund.
2. Approval of a new Sub-Advisory Contract
between Mitchell Hutchins and Alliance Capital
Management L.P. with respect to the Fund.
3. Approval of a policy to permit the Board and Mitchell Hutchins to
appoint and replace sub-advisers for the Fund and to enter into and
amend sub-advisory contracts without further shareholder approval.
</TABLE>
PLEASE DATE AND SIGN THE BACK OF THIS CARD
<PAGE>
For individual Contract Owners, 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 the capacity of the individual signing
should be indicated, unless it is reflected in the form of registration.
Sign exactly as name appears hereon.
_____________________________________
Signature
_____________________________________
Signature (Joint)
_____________________________________
Date
