MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
(a series of Mitchell Hutchins/Kidder, Peabody Investment Trust)
September 6, 1995
Dear Shareholder:
The attached proxy materials describe a proposal that Mitchell
Hutchins/Kidder, Peabody Global Fixed Income Fund ("MH/KP Fund") reorganize and
become part of PaineWebber Global Income Fund ("PW Fund"). If the proposal is
approved and implemented, each shareholder of MH/KP Fund automatically would
become a shareholder of PW Fund.
YOUR BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE REORGANIZATION PROPOSAL.
The board believes that combining the two Funds will benefit MH/KP Fund's
shareholders by providing them with a portfolio that has an investment objective
similar to the investment objective of MH/KP Fund and that will have lower
operating expenses as a percentage of net assets. The attached proxy materials
provide more information about the proposed reorganization and the two Funds.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. Voting your shares
--------------------------------------------------------
early will permit MH/KP Fund to avoid costly follow-up mail and telephone
solicitation. After reviewing the attached materials, please complete, date and
sign your proxy card and mail it in the enclosed return envelope today.
Very truly yours,
/s/Margo N. Alexander
MARGO N. ALEXANDER
President, Mitchell Hutchins/Kidder,
Peabody
Investment Trust
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
(a series of Mitchell Hutchins/Kidder, Peabody Investment Trust)
-------------------
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 5, 1995
-------------------
To The Shareholders:
A special meeting of shareholders ("Meeting") of Mitchell Hutchins/Kidder,
Peabody Global Fixed Income Fund ("MH/KP Fund"), a series of Mitchell
Hutchins/Kidder, Peabody Investment Trust, will be held on October 5, 1995 at
10:00 a.m., Eastern time, at 1285 Avenue of the Americas, 38th Floor, New York,
New York 10019, for the following purposes:
(1) To consider an Amended and Restated Agreement and Plan of
Reorganization and Termination under which PaineWebber Global Income Fund
("PW Fund"), a series of PaineWebber Investment Series, would acquire the
assets of MH/KP Fund in exchange solely for shares of beneficial interest in
PW Fund and the assumption by PW Fund of MH/KP Fund's liabilities, followed
by the distribution of those shares to the shareholders of MH/KP Fund, all
as described in the accompanying Prospectus/Proxy Statement; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
You are entitled to vote at the Meeting and any adjournment thereof if you
owned shares of MH/KP Fund at the close of business on August 25, 1995. IF YOU
ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON. IF YOU DO NOT EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the board of trustees,
DIANNE E. O'DONNELL
Secretary
September 6, 1995
1285 Avenue of the Americas
New York, New York 10019
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE
ENCLOSED PROXY CARD, DATE AND SIGN THE CARD, AND RETURN
IT IN THE ENVELOPE PROVIDED. IF YOU SIGN, DATE AND
RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS,
YOUR SHARES WILL BE VOTED "FOR" THE PROPOSAL NOTICED
ABOVE. IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF
FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING
IN YOUR PROXY CARD PROMPTLY. UNLESS PROXY CARDS
SUBMITTED BY CORPORATIONS AND PARTNERSHIPS ARE SIGNED BY
THE APPROPRIATE PERSONS AS INDICATED IN THE VOTING
INSTRUCTIONS ON THE PROXY CARD, THEY WILL NOT BE VOTED.
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
(a series of PaineWebber Investment Series)
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
(a series of Mitchell Hutchins/Kidder, Peabody Investment Trust)
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(TOLL FREE) 1-800-647-1568
-------------------
PROSPECTUS/PROXY STATEMENT
SEPTEMBER 6, 1995
-------------------
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of Mitchell Hutchins/Kidder, Peabody Global Fixed Income Fund
("MH/KP Fund"), a series of Mitchell Hutchins/Kidder, Peabody Investment Trust
("MH/KP Trust"), in connection with the solicitation of proxies by MH/KP Trust's
board of trustees for use at a special meeting of MH/KP Fund shareholders to be
held on October 5, 1995, at 10:00 a.m., Eastern time, and at any adjournment
thereof ("Meeting").
As more fully described in this Proxy Statement, the primary purpose of the
Meeting is to vote on a proposed reorganization ("Reorganization"). Under the
Reorganization, PaineWebber Global Income Fund ("PW Fund"), a series of
PaineWebber Investment Series ("PW Trust"), would acquire the assets of MH/KP
Fund, in exchange solely for shares of beneficial interest in PW Fund and the
assumption by PW Fund of MH/KP Fund's liabilities. Those PW Fund shares then
would be distributed to the shareholders of MH/KP Fund, by class, so that each
shareholder of MH/KP Fund would receive a number of full and fractional shares
of the applicable class of PW Fund having an aggregate value that, on the
effective date of the Reorganization, is equal to the aggregate net asset value
of the shareholder's shares of the corresponding class in MH/KP Fund. Following
the distribution, MH/KP Fund will be terminated as soon as practicable.
PW Fund is a non-diversified series of PW Trust, which is an open-end
management investment company. PW Fund's primary investment objective is high
current income consistent with prudent investment risk, with capital
appreciation as a secondary objective. PW Fund seeks to achieve its investment
objectives by investing principally in high quality foreign and domestic debt
securities.
This Proxy Statement, which should be retained for future reference, sets
forth concisely the information about the Reorganization and PW Fund that a
shareholder should know before voting. This Proxy Statement is accompanied by
the Prospectus of PW Fund dated March 1, 1995 (as supplemented August 3, 1995),
and by its Annual Report to Shareholders for the fiscal year ended October 31,
1994, which are incorporated by this reference into this Proxy Statement. A
Statement of Additional Information dated September 6, 1995, including
historical financial statements, has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated herein by this reference. A Prospectus
for MH/KP Fund dated December 29, 1994 (as supplemented June 22, 1995, June 30,
1995 and August 3, 1995), a Statement of Additional Information for MH/KP Fund
dated December 29, 1994, and a Statement of Additional Information for PW Fund,
dated March 1, 1995, have been filed with the SEC and also are incorporated
herein by this reference. Copies of these documents, as well as MH/KP Fund's
annual report and each Fund's semi-annual report, if applicable, may be obtained
without charge and further inquiries may be made by contacting your PaineWebber
Incorporated ("PaineWebber") investment executive or PaineWebber's correspondent
firms or by calling toll-free 1-800-647-1568.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
VOTING INFORMATION............................................... 1
SYNOPSIS......................................................... 2
COMPARISON OF PRINCIPAL RISK FACTORS............................. 11
THE PROPOSED TRANSACTION......................................... 14
ADDITIONAL INFORMATION ABOUT PW FUND............................. 19
MISCELLANEOUS.................................................... 22
APPENDIX A--AMENDED AND RESTATED AGREEMENT AND
PLAN OF REORGANIZATION AND TERMINATION.......................... A-1
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
(a series of Mitchell Hutchins/Kidder, Peabody Investment Trust)
-------------------
PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
OCTOBER 5, 1995
-------------------
VOTING INFORMATION
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of Mitchell Hutchins/Kidder, Peabody Global Fixed Income Fund
("MH/KP Fund"), a series of Mitchell Hutchins/Kidder, Peabody Investment Trust
("MH/KP Trust"), in connection with the solicitation of proxies by its board of
trustees for use at a special meeting of shareholders to be held on October 5,
1995, and at any adjournment thereof ("Meeting"). This Proxy Statement will
first be mailed to shareholders on or about September 6, 1995.
At least thirty percent of MH/KP Fund's outstanding shares on August 25,
1995, represented in person or by proxy, must be present for the transaction of
business at the Meeting. If a quorum is not present at the Meeting or a quorum
is present but sufficient votes to approve the proposal are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote FOR the proposal in favor of such an adjournment and
will vote those proxies required to be voted AGAINST the proposal against such
adjournment. A shareholder vote may be taken on the proposal in this Proxy
Statement prior to any such adjournment if sufficient votes have been received
and it is otherwise appropriate.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present for purposes of determining whether a quorum is present but
will not be voted for or against any adjournment or proposal. Accordingly,
abstentions and broker non-votes effectively will be a vote against adjournment
or against the proposal where the required vote is a percentage of the shares
present or outstanding. Abstentions and broker non-votes will not be counted,
however, as votes cast for purposes of determining whether sufficient votes have
been received to approve the proposal.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you sign, date and return the proxy card, but give no
voting instructions, your shares will be voted in favor of approval of the
Amended and Restated Agreement and Plan of Reorganization and Termination dated
as of July 25, 1995 ("Reorganization Plan"), which is attached to this Proxy
Statement as Appendix A. Under the Reorganization Plan, PaineWebber Global
Income Fund ("PW Fund"), a series of PaineWebber Investment Series ("PW Trust"),
would acquire the assets of MH/KP Fund in exchange solely for shares of
beneficial interest in PW Fund and the assumption by PW Fund of MH/KP Fund's
liabilities; those PW Fund shares then would be distributed to MH/KP Fund's
shareholders. (These transactions are collectively referred to herein as the
"Reorganization," and MH/KP Fund and PW Fund may be referred to herein
individually as a "Fund" or collectively as "Funds".) After completion of the
Reorganization, MH/KP Fund will be terminated.
<PAGE>
In addition, if you sign, date and return the enclosed proxy card, but give
no voting instructions, the duly appointed proxies may vote your shares, in
their discretion, upon such other matters as may come before the Meeting. The
proxy card may be revoked by giving another proxy or by letter or telegram
revoking the initial proxy. To be effective, such revocation must be received by
MH/KP Trust prior to the Meeting and must indicate your name and account number.
If you attend the Meeting in person you may, if you wish, vote by ballot at the
Meeting, thereby canceling any proxy previously given.
As of the record date, August 25, 1995 ("Record Date"), MH/KP Fund had
6,058,532 shares of beneficial interest outstanding. The solicitation of
proxies, the cost of which will be borne by the Funds in proportion to their
respective net assets, will be made primarily by mail but also may include
telephone or oral communications by representatives of Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), who will not receive any compensation
therefor from the Funds, or by Shareholder Communications Corporation,
professional proxy solicitors retained by MH/KP Fund, who will be paid fees and
expenses of up to approximately $8,000 for soliciting services. Management does
not know of any single shareholder or "group" (as that term is used in Section
13(d) of the Securities Exchange Act of 1934) who owns beneficially 5% or more
of the shares of either Fund. Trustees and officers of PW Trust own in the
aggregate less than 1% of the shares of PW Fund.
Approval of the Reorganization Plan requires the affirmative vote of a
"majority of the outstanding voting securities" of MH/KP Fund. As defined in the
Investment Company Act of 1940 ("1940 Act"), "majority of the outstanding voting
securities" means the lesser of (1) 67% of MH/KP Fund's shares present at a
meeting of shareholders if the owners of more than 50% of MH/KP Fund's shares
then outstanding are present in person or by proxy or (2) more than 50% of MH/KP
Fund's outstanding shares. Each outstanding full share of MH/KP Fund is entitled
to one vote, and each outstanding fractional share thereof is entitled to a
proportionate fractional share of one vote. If the Reorganization Plan is not
approved by the requisite vote of shareholders of MH/KP Fund, the persons named
as proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Although the shareholders of MH/KP Fund may exchange or
redeem out of the Fund, they do not have appraisal rights which may be accorded
to shareholders of corporations that propose similar reorganizations under the
laws of some states.
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, the prospectus ("Prospectus") for each Fund, which are
incorporated herein by reference, and the Reorganization Plan. Shareholders
should read this Proxy Statement and the Prospectus of PW Fund carefully. As
discussed more fully below, MH/KP Trust's board of trustees believes that the
Reorganization will benefit MH/KP Fund's shareholders. PW Fund has investment
objectives generally similar to the investment objective of MH/KP Fund, although
its investment strategy may differ from the investment strategy of MH/KP Fund in
some material respects. It is anticipated that, following the Reorganization,
the former shareholders of MH/KP Fund will, as shareholders of PW Fund, be
subject to lower total operating expenses as a percentage of net assets.
THE REORGANIZATION
MH/KP Trust's board of trustees approved a reorganization plan at a meeting
held on April 26, 1995. The Reorganization Plan, in its final form as revised to
include certain changes, was considered and approved by MH/KP Trust's board of
trustees at a meeting held on July 20, 1995. The Reorganization Plan provides
for the acquisition of the assets of MH/KP Fund by PW Fund, in exchange solely
for shares of PW Fund and the assumption by PW Fund of the liabilities of MH/KP
Fund. MH/KP Fund will then distribute those shares of PW Fund to its
shareholders, by class, so that each MH/KP Fund shareholder will receive the
number of full and fractional shares of the class of PW
2
<PAGE>
Fund that corresponds most closely in terms of fees and other characteristics
("Corresponding Class") and that equals in value such shareholder's holdings in
MH/KP Fund as of the Closing Date (defined below). MH/KP Fund then will be
terminated as soon as practicable thereafter.
The exchange of MH/KP Fund's assets for PW Fund shares and PW Fund's
assumption of its liabilities will occur as of 4:00 p.m., Eastern time, on
October 27, 1995 or such later date as the conditions to the closing are
satisfied ("Closing Date").
PW Fund currently offers for sale four classes of shares (each a "Class" and
collectively, "Classes"), designated as Class A, Class B, Class C and Class D
shares. In the Reorganization, PW Fund will issue only Class A, Class C and
Class D shares in exchange for MH/KP Fund's assets. Class B shares of PW Fund
will not be issued. MH/KP Fund has three classes of shares, designated as Class
A, Class B and Class C shares. Holders of Class A shares of MH/KP Fund will
receive Class A shares of PW Fund, holders of Class B shares of MH/KP Fund will
receive Class D shares of PW Fund, and holders of Class C shares of MH/KP Fund
will receive Class C shares of PW Fund.
For the reasons set forth below under "The Proposed Transaction--Reasons for
the Reorganization," MH/KP Trust's board of trustees, including the trustees who
are not "interested persons" of MH/KP Trust or PW Trust as that term is defined
in the 1940 Act ("Independent Trustees"), has determined that the Reorganization
is in the best interests of MH/KP Fund, that the terms of the Reorganization are
fair and reasonable and that the interests of MH/KP Fund's shareholders will not
be diluted as a result of the Reorganization. Accordingly, MH/KP Trust's board
of trustees recommends approval of the transaction. In addition, PW Trust's
board of trustees, including its Independent Trustees, has determined that the
Reorganization is in the best interests of PW Fund, that the terms of the
Reorganization are fair and reasonable, and that the interests of PW Fund's
shareholders will not be diluted as a result of the Reorganization.
COMPARATIVE FEE TABLE
Certain fees and expenses that MH/KP Fund's shareholders pay, directly or
indirectly, are different from those incurred by PW Fund shareholders. MH/KP
Fund's Class A shares are sold with a maximum initial sales charge of 2.25% of
the public offering price. PW Fund's Class A shares normally are sold with a
maximum sales charge of 4% of the public offering price. The Class A shares of
PW Fund that will be distributed to shareholders of MH/KP Fund as part of the
Reorganization will not be subject to an initial sales charge. However,
following the Reorganization, new purchases of Class A shares of PW Fund will be
subject to an initial sales charge of up to 4%. Shareholders of MH/KP Fund are
not charged a fee for each exchange of shares for shares of a corresponding
class of other PaineWebber Incorporated ("PaineWebber") or Mitchell
Hutchins/Kidder, Peabody mutual funds. PW Fund shareholders pay a $5.00 fee for
each exchange.
Mitchell Hutchins, the investment adviser and administrator of MH/KP Fund,
is currently paid a management fee at the annual rate of 0.70% of average daily
net assets of that Fund. PW Fund pays Mitchell Hutchins an annual investment
advisory and administration fee, computed daily and paid monthly, at a rate of
0.750% of average daily net assets up to $500 million, 0.725% of average daily
net assets in excess of $500 million up to $1 billion, 0.700% of average daily
net assets in excess of $1 billion up to $1.5 billion, 0.675% of average daily
net assets in excess of $1.5 billion up to $2.0 billion, and 0.650% of average
daily net assets over $2.0 billion. Based on PW Fund's net assets of
$1,204,496,732, as of April 30, 1995, PW Fund paid an investment advisory and
administrative fee at the effective annual rate of 0.73% of average daily net
assets, which is higher than the current fee paid by MH/KP Fund. On June 30,
1995, PW Fund acquired the assets of Global Income Plus Fund, Inc. As a result,
PW Fund's assets increased by approximately $231 million on that date. The
effective annual rate on that date of the management fee paid by PW Fund was
0.73% of average daily net assets. The acquisition of the assets of Global
Income Plus Fund, Inc., however, would have an effect on other
3
<PAGE>
expenses of the combined Fund. Thus, the "Annual Fund Operating Expense" table
below gives expense information with respect to the combined Fund, including the
assets of Global Income Plus Fund, Inc.
The Class A and Class B shares of MH/KP Fund pay 12b-1 fees that are
identical to those paid by the Class A and Class D shares, respectively, of PW
Fund. No 12b-1 fees are paid by the Class C shareholders of either Fund, but
Class C shareholders of either Fund who hold their Class C shares through the
INSIGHT Investment Advisory ProgramSM ("INSIGHT Program") must pay a maximum
annual investment advisory fee of 1.50% of the assets held through the INSIGHT
Program.
The following tables show (1) shareholder transaction expenses currently
incurred by Class A, Class B and Class C shares of MH/KP Fund, and shareholder
transaction expenses that each Class issued in the Reorganization will incur
after giving effect to the Reorganization; (2) the current fees and expenses
incurred by the Class A, Class B and Class C shares of MH/KP Fund and Class A,
Class C and Class D shares of PW Fund for the twelve months ended April 30,
1995; and (3) pro forma fees for PW Fund's Class A, Class C and Class D shares
after giving effect to the Reorganization.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE><CAPTION>
MH/KP FUND COMBINED FUND
---------------------------- ----------------------------
CLASS A CLASS B CLASS C CLASS A CLASS D CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Maximum sales charge (as a percentage of public
offering price).............................. 2.25% None None 4.00% None None
Exchange fee................................... None None None $5.00 $5.00 N/A*
Maximum contingent deferred sales charge (as a
percentage of redemption proceeds)........... None None None None None None
</TABLE>
- ------------
* Class C shares are not exchangeable.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE><CAPTION>
MH/KP FUND PW FUND
(TWELVE MONTHS ENDED (TWELVE MONTHS ENDED COMBINED FUND
APRIL 30, 1995) APRIL 30, 1995)(6) (PRO FORMA)(1)
---------------------------------- ------------------------- -------------------------
CLASS A(3) CLASS B(4) CLASS C(5) CLASS A CLASS D CLASS C CLASS A CLASS D CLASS C
---------- ---------- ---------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees..................... 0.70% 0.70% 0.70% 0.73% 0.73% 0.73% 0.72% 0.72% 0.72%
12b-1 Fees(2)....................... 0.25% 0.75% 0.00% 0.25% 0.75% 0.00% 0.25% 0.75% 0.00%
Other Expenses...................... 0.24% 0.27% 0.22% 0.20% 0.20% 0.16% 0.18% 0.19% 0.15%
----- ----- ----- ------- ------- ------- ------- ------- -------
Total Fund Operating Expenses(7).... 1.19% 1.72% 0.92% 1.18% 1.68% 0.89% 1.15% 1.66% 0.87%
----- ----- ----- ------- ------- ------- ------- ------- -------
----- ----- ----- ------- ------- ------- ------- ------- -------
</TABLE>
- ------------
(1) Reflects consummation of the reorganization with Global Income Plus Fund,
Inc. on June 30, 1995.
(2) 12b-1 fees have two components, as follows:
<TABLE><CAPTION>
BOTH FUNDS MH/KP FUND PW FUND
CLASS A CLASS B CLASS D
---------- ---------- -------
<S> <C> <C> <C>
12b-1 service fee........................... 0.25% 0.25% 0.25%
12b-1 distribution fee...................... 0.00% 0.50% 0.50%
</TABLE>
(3) Class A shares of MH/KP Fund will be exchanged for Class A shares of PW
Fund.
(4) Class B shares of MH/KP Fund will be exchanged for Class D shares of PW
Fund.
(5) Class C shares of MH/KP Fund will be exchanged for Class C shares of PW
Fund.
(6) PW Fund offers Class A, B, C and D shares; however, Class B shares are not
involved in the Reorganization.
(7) The ratios of total operating expenses as a percentage of average
net assets were 1.19%, 1.68% and 0.94% for Class A, Class B and Class C,
respectively, of MH/KP Fund for the fiscal year ended August 31, 1994. The
ratios of total operating expenses as a percentage of average net
assets were 1.17%, 1.68% and 0.88%, respectively, for Class A, Class D and
Class C, respectively, of PW Fund for the fiscal year ended October
31, 1994.
4
<PAGE>
EXAMPLE OF EFFECT ON FUND EXPENSES
The following illustrates the expenses on a $1,000 investment under the
existing and estimated fees and the expenses stated above, assuming a 5% annual
return. The fees shown below reflect a maximum initial sales charge of 2.25% of
the public offering price that normally is charged in connection with the sale
of MH/KP Fund's Class A shares and a maximum initial sales charge of 4.0% of the
public offering price that normally is charged in connection with the sale of PW
Fund's Class A shares. Amounts shown for PW Fund and Combined Fund Class A
shares are higher than for MH/KP Fund Class A shares due to the higher initial
sales charge normally charged on PW Fund Class A shares. However, no initial
sales charge will be charged in connection with Class A shares of PW Fund
distributed to Class A shareholders of MH/KP Fund as part of the Reorganization.
<TABLE><CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
MH/KP FUND
Class A shares(1)...................... $ 34 $59 $ 86 $ 164
Class B shares......................... $ 17 $54 $ 93 $ 203
Class C shares......................... $ 9 $29 $ 51 $ 113
PW FUND
Class A shares(2)...................... $ 52 $76 $102 $ 177
Class D shares......................... $ 17 $53 $ 91 $ 199
Class C shares......................... $ 9 $28 $ 49 $ 110
COMBINED FUND(3)
Class A shares(2)...................... $ 51 $75 $101 $ 174
Class D shares......................... $ 17 $52 $ 90 $ 197
Class C shares......................... $ 9 $28 $ 48 $ 107
</TABLE>
- ------------
(1) Assumes deduction at the time of purchase of the maximum 2.25% initial sales
charge.
(2) Assumes deduction at the time of purchase of the maximum 4% initial sales
charge.
(3) Reflects consummation of reorganization with Global Income Plus Fund, Inc.
on June 30, 1995.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc. rules regarding investment companies. This Example
assumes that all dividends and other distributions are reinvested and that the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in the years shown. The above tables and the assumption in the Example of a 5%
annual return are required by regulations of the Securities and Exchange
Commission ("SEC") applicable to all mutual funds; the assumed 5% annual return
is not a prediction of, and does not represent, the projected or actual
performance of any Class of the Funds' shares.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND A FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The
actual expenses attributable to each Class of a Fund's shares will depend upon,
among other things, the level of average net assets and the extent to which a
Fund incurs variable expenses, such as transfer agency costs.
FORMS OF ORGANIZATION
PW Trust and MH/KP Trust (each a "Trust" and collectively, "Trusts") are
open-end management investment companies organized as Massachusetts business
trusts. Each Trust's Declaration of Trust authorizes its trustees to create
separate series and, within each series, separate Classes, of an unlimited
number of shares of beneficial interest, par value of $.001 per share. PW Fund,
a non-diversified series of PW Trust, commenced operations on March 20, 1987.
MH/KP Fund, a non-diversified series of MH/KP Trust, commenced operations on
December 24, 1992. The Trusts are not required to (and do not) hold annual
shareholder meetings.
5
<PAGE>
Shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust of each Trust expressly disclaims, and provides
indemnification against, such liability. Accordingly, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund itself would be unable to meet its
obligations, a possibility that Mitchell Hutchins, the investment adviser of
each Fund, believes is remote and thus does not pose a material risk.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Fund are set forth below. PW
Fund has investment objectives generally similar to the investment objective of
MH/KP Fund, although its investment strategy may differ from the investment
strategy of MH/KP Fund in some material respects. There can be no assurance that
either Fund will achieve its investment objective(s), and each Fund's net asset
value fluctuates based upon changes in the value of its portfolio securities.
PW FUND. The primary investment objective of PW Fund is high current income
consistent with prudent investment risk; capital appreciation is a secondary
objective. In seeking to achieve these objectives, PW Fund normally invests 65%
of its total assets in the following types of debt securities rated in the two
highest grades assigned by Standard & Poor's ("S&P"), Moody's Investors Service,
Inc. ("Moody's") or another nationally recognized statistical rating
organization ("NRSRO") or, if unrated, determined by Mitchell Hutchins to be of
comparable quality: (1) debt securities issued or guaranteed by U.S. or foreign
governments or their agencies, instrumentalities or political subdivisions, (2)
debt securities issued or guaranteed by supranational organizations such as the
International Bank for Reconstruction and Development, (3) U.S. or foreign
corporate debt securities, including commercial paper, (4) high quality debt
obligations of banks and bank holding companies and (5) repurchase agreements
involving these securities. PW Fund may invest up to 35% of its assets in debt
securities rated below the two highest grades assigned by an NRSRO but rated BBB
or better by S&P, Baa or better by Moody's or comparably rated by another NRSRO
or, if unrated, determined by Mitchell Hutchins to be of comparable quality.
Within this 35% limitation, PW Fund may invest up to 20% of its total assets in
sovereign debt securities rated below BBB by S&P, Baa by Moody's or comparably
rated by another NRSRO, but no lower than BB by S&P, Ba by Moody's or comparably
rated by another NRSRO or, in the case of such securities assigned a commercial
paper rating, no lower than B by S&P or comparably rated by another NRSRO or, if
not so rated, determined by Mitchell Hutchins to be of comparable quality.
Normally, at least 65% of PW Fund's total assets are invested in high
quality debt securities, denominated in foreign currencies or U.S. dollars, of
issuers located in at least three of the following countries: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, Thailand, the United Kingdom and the United States. No more
than 40% of PW Fund's assets normally are invested in securities of issuers
located in any one country.
PW Fund may invest up to 5% of its total assets in debt securities
convertible into equity securities, but it is not otherwise authorized to invest
in preferred stock or other equity securities. Mitchell Hutchins expects that
normally more than 50% of PW Fund's assets will be invested in U.S. and foreign
government securities in order to minimize credit risk and to take advantage of
opportunities that historically have been presented by, and are perceived to
exist today with respect to, such instruments. PW Fund may invest up to 10% of
its net assets in illiquid securities and is authorized to lend up to 10% of the
total value of its portfolio securities to broker-dealers or other institutional
investors that Mitchell Hutchins deems qualified. PW Fund may engage in reverse
repurchase agreements with banks and broker-dealers up to an aggregate value of
not more than 10% of its total assets.
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MH/KP FUND. MH/KP Fund's investment objective is total return, consisting of
current income and capital appreciation. MH/KP Fund seeks to achieve its
investment objective through an actively managed portfolio consisting of a wide
range of fixed income securities issued primarily by government authorities,
foreign government related issuers and supranational organizations that are
listed primarily on foreign securities exchanges or traded in foreign
over-the-counter markets. MH/KP Fund invests at least 65% of its net assets in
securities rated in the two highest rating categories of recognized rating
agencies, but it may invest up to 35% of its net assets in securities rated in
the third highest rating category and, within this 35% limitation, may invest up
to 10% of its net assets in securities rated in the fourth highest rating
category. Under normal conditions, MH/KP Fund invests at least 65% of its total
assets in fixed income obligations (including debentures, bonds, notes and
paper) issued or guaranteed by (1) governments, including the U.S. government,
or by any of their political subdivisions, authorities, agencies or
instrumentalities, (2) foreign government related issuers and (3) supranational
organizations. MH/KP Fund may, under normal market conditions, invest up to 35%
of its assets in corporate debt obligations, such as debentures, bonds and
notes, and in money market instruments. Under normal circumstances, at least 65%
of MH/KP Fund's assets are invested in no fewer than three different countries
and at least 80% of its assets are invested in developed countries.
MH/KP Fund is subject to no restriction on the maturities of the obligations
it holds; those maturities may range from overnight to 30 years or more. MH/KP
Fund generally invests in intermediate fixed income securities with the result
that, under normal market conditions, the weighted average life of its portfolio
will be between three and ten years. MH/KP Fund may invest up to 15% of its net
assets in illiquid securities and may lend up to 33-1/3% of the total value of
its portfolio securities to well-known and recognized U.S. and foreign brokers,
dealers and banks. MH/KP Fund also may engage in short sales (that is, sell
securities that it does not own).
OTHER POLICIES OF BOTH FUNDS. Each Fund may engage in certain options,
futures contracts, forward currency contracts and interest rate protection
transactions to attempt to hedge against the overall level of risk associated
with their respective investments.
OPERATIONS OF PW FUND FOLLOWING THE REORGANIZATION
There are differences in the investment objectives and some of the
investment policies of the Funds. It is not expected, however, that PW Fund will
revise its investment objectives or policies following the Reorganization to
reflect those of MH/KP Fund. Mitchell Hutchins believes that most, if not all,
of the assets held by MH/KP Fund will be consistent with the investment policies
of PW Fund and thus could be transferred to and held by PW Fund if the
Reorganization is approved. If the Reorganization is approved, MH/KP Fund will
sell any assets that are inconsistent with the investment policies of PW Fund
prior to the effective time of the Reorganization, and the proceeds thereof will
be held in temporary investments or reinvested in assets that qualify to be held
by PW Fund. The necessity for MH/KP Fund to dispose of assets prior to the
effective time of the Reorganization may result in selling securities at a
disadvantageous time and could result in MH/KP Fund's realizing losses that
would not otherwise have been realized.
After the Reorganization, the trustees and officers of PW Trust and PW
Fund's investment adviser, distributor, exclusive dealer and other outside
agents will continue to serve PW Fund in their current capacities. Stuart Waugh,
who currently is the portfolio manager for both PW Fund and MH/KP Fund and who
has been primarily responsible for the day-to-day portfolio management of PW
Fund since its inception, will continue as the portfolio manager of PW Fund. Mr.
Waugh is a vice president of PW Trust and is a managing director of Mitchell
Hutchins for global fixed income investments. Mr. Waugh has been employed by
Mitchell Hutchins as a portfolio manager for the last eight years.
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Effective on or about November 1, 1995, PW Fund's Class C and Class D shares
will be renamed Class Y and Class C shares, respectively. In addition, Class A
shares purchased after that date which are purchased without an initial sales
charge due to a sales charge waiver for purchases of $1 million or more, and
held less than one year, and Class D shares that are held for less than one
year, will be subject to a contingent deferred sales charge ("CDSC") of 0.75% of
the lower of (1) the NAV of the shares at the time of purchase, or (2) the NAV
of the shares at the time of redemption.
PURCHASES
Shares of PW Fund are available through PaineWebber and its correspondent
firms or, for investors who are not clients of PaineWebber, through PFPC Inc.,
each Fund's transfer agent ("Transfer Agent"). The minimum initial investment in
PW Fund Class A, B or D shares is $1,000; each additional investment must be
$100 or more. PW Fund's Class A shares normally are sold with a maximum initial
sales charge of up to 4% of the public offering price. The PW Fund Class A
shares that will be distributed to shareholders of MH/KP Fund as part of the
Reorganization will not be subject to an initial sales charge. However,
following the Reorganization, new purchases of Class A shares of PW Fund will be
subject to an initial sales charge up to 4%, and any Class B or Class D shares
of PW Fund that are purchased by former MH/KP Fund shareholders will be subject
to their respective terms.
PW Fund's Class B shares are sold subject to a maximum CDSC of 5% of
redemption proceeds, which declines to zero after six years, when those Class B
shares automatically convert into Class A shares. Class D shares of PW Fund are
sold without an initial sales charge or CDSC. No initial sales charge or CDSC is
imposed with respect to Class A or Class B shares, respectively, of PW Fund that
are purchased with reinvested dividends or other distributions on those Classes
of shares. MH/KP Fund's Class A shares normally are sold with a maximum initial
sales charge of 2.25% of the public offering price. MH/KP Fund's Class B and
Class C shares are sold without an initial sales charge or CDSC.
Class C shares of PW Fund are sold to eligible investors at the net asset
value next determined after the purchase order is received. No initial or
contingent deferred sales charge is imposed, nor are Class C shares subject to
Rule 12b-1 distribution or service fees. PW Fund and Mitchell Hutchins reserve
the right to reject any purchase order and to suspend the offering of the Class
C shares for a period of time.
The Class C shares currently are offered for sale only to the trustee of the
PaineWebber Savings Investment Plan ("PW SIP"), a defined contribution plan
sponsored by Paine Webber Group Inc. The trustee of the PW SIP purchases Class C
shares to implement the investment choices of individual plan participants with
respect to their PW SIP contributions. Class C shares also may be acquired by
present holders of the Class C shares of MH/KP Fund when those shares are issued
in connection with the Reorganization. This category includes participants in
the INSIGHT Program, former employees of Kidder, Peabody & Co., Incorporated
("Kidder Peabody"), their associated accounts, and present and former directors
and trustees of the Mitchell Hutchins/Kidder, Peabody mutual funds. Effective
November 1, 1995, PW Fund's Class C shares (renamed Class Y shares) will be
available for purchase by INSIGHT Program participants when purchased through
that program.
INSIGHT PROGRAM. An investor who purchases $50,000 or more of shares of
mutual funds that are available to INSIGHT participants may take part in the
INSIGHT Program, a total portfolio asset allocation program sponsored by
PaineWebber, and thus become eligible to purchase Class C shares. The INSIGHT
Program offers comprehensive investment services, including a personalized asset
allocation investment strategy using an appropriate combination of funds,
monitoring of investment performance and comprehensive quarterly reports that
cover market trends, portfolio summaries and personalized account information.
Participation in the INSIGHT Program is subject to payment of an advisory fee to
PaineWebber at the maximum annual rate of 1.50% of assets held through the
program
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(generally charged quarterly in advance), which covers all INSIGHT Program
investment advisory services and program administration fees. Employees of
PaineWebber and its affiliates are entitled to a 50% reduction in the fee
otherwise payable for participation in the INSIGHT Program. INSIGHT Program
clients may elect to have their INSIGHT Program fees charged to their
PaineWebber accounts (by the automatic redemption of money market fund shares)
or, for qualified plans, invoiced.
REDEMPTIONS
Shareholders of each Fund may submit redemption requests to their investment
executives or correspondent firms in person or by telephone, mail or wire. As
each Fund's agent, PaineWebber may honor a redemption request by repurchasing
shares from a redeeming shareholder at the shares' net asset value next
determined after receipt of the request by PaineWebber's New York City offices.
Within three Business Days after receipt of the request, repurchase proceeds
(less any applicable CDSC) will be paid by check or credited to the
shareholder's brokerage account at the election of the shareholder. PaineWebber
investment executives and correspondent firms are responsible for promptly
forwarding redemption requests to PaineWebber's New York City offices.
PaineWebber reserves the right not to honor any redemption request, in which
case PaineWebber promptly will forward the request to the Transfer Agent for
treatment as described below.
Shareholders of each Fund also may redeem shares through the Transfer Agent.
Shareholders should mail redemption requests directly to the Transfer Agent:
PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington, Delaware
19899. A redemption request will be executed at the net asset value next
computed after it is received in "good order," and redemption proceeds will be
paid within seven days of the receipt of the request. Shareholders are
responsible for ensuring that a request for redemption is received in "good
order." "Good order" means that the request must be accompanied by the
following: (1) a letter of instruction or a stock assignment specifying the
number of shares or amount of investment to be redeemed (or that all shares
credited to the Fund account be redeemed), signed by all registered owners of
the shares in the exact names in which they are registered, (2) a guarantee of
the signature of each registered owner by an eligible institution acceptable to
the Transfer Agent and in accordance with SEC rules, such as a commercial bank,
trust company or member of a recognized stock exchange, (3) other supporting
legal documents for estates, trusts, guardianships, custodianships, partnerships
and corporations and (4) duly endorsed share certificates, if any.
A shareholder may have redemption proceeds of $1 million or more wired to
the shareholder's PaineWebber brokerage account or a commercial bank account
designated by the shareholder. Questions about this option, or redemption
requirements generally, should be referred to the shareholder's PaineWebber
investment executive or correspondent firm. If a shareholder requests redemption
of shares which were purchased recently, the Fund may delay payment until it is
assured that good payment has been received. In the case of purchases by check,
this can take up to 15 days.
Because the Funds incur certain fixed costs in maintaining shareholder
accounts, each Fund reserves the right to redeem all Fund shares in any
shareholder account having a net asset value below the lesser of $500 or the
current minimum for initial purchasers. If the Fund elects to do so, it will
notify the shareholder and provide the shareholder the opportunity to increase
the amount invested to the minimum required level or more within 60 days of the
notice. The Fund will not redeem accounts that fall below the minimum required
level solely as a result of a reduction in net asset value per share.
If the Reorganization is approved, shares of MH/KP Fund will cease to be
offered on October 20, 1995, so that shares of MH/KP Fund will no longer be
available for purchase or exchange starting on October 23, 1995, (the next
Business Day). If the Meeting is adjourned and the Reorganization is approved on
a later date, MH/KP Fund shares will no longer be available for purchase or
exchange on the Business Day following the date on which the Reorganization is
approved and all contingencies have
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been met. Redemptions of MH/KP Fund shares and exchanges of such shares for
shares of any other PaineWebber or Mitchell Hutchins/Kidder, Peabody mutual fund
may be effected through the Closing Date.
EXCHANGES
Class A, B and D shares of PW Fund and Class A and B shares of MH/KP Fund
may be exchanged for shares of the Corresponding Class of other PaineWebber and
Mitchell Hutchins/Kidder, Peabody mutual fund, and may be acquired through an
exchange of shares of the Corresponding Class of such mutual funds, as provided
in each Fund's prospectus. No initial sales charge is imposed on the shares
being acquired, and no CDSC is imposed on the shares being disposed of, through
an exchange. However, a CDSC may apply to redemptions of a PaineWebber fund's
Class B shares acquired through an exchange. Exchanges may be subject to minimum
investment and other requirements of the fund into which exchanges are made. As
noted above, the $5.00 service fee currently imposed on each exchange of shares
of PW Fund for shares of any other PaineWebber or Mitchell Hutchins/Kidder,
Peabody mutual funds will continue to be imposed following the Reorganization.
DIVIDENDS AND OTHER DISTRIBUTIONS
PW Fund distributes substantially all of its net investment income and
realized net gains to shareholders each year. Dividends are declared monthly,
and monthly dividends may be accompanied by distributions of net realized
short-term capital gains and net realized gains from foreign currency
transactions. PW Fund also distributes, at least annually, substantially all of
its net capital gain (the excess of net long-term capital gain over net
short-term capital loss) and any undistributed net short-term capital gain and
net gains from foreign currency transactions. Dividends from net investment
income of MH/KP Fund are declared daily and distributed monthly, and
distributions of any net realized capital gains of that Fund are distributed
annually after the close of the fiscal year in which they are earned. Both Funds
may make additional distributions if necessary to avoid a 4% excise tax on
certain undistributed income and capital gain.
PW Fund's dividends and other distributions on its shares are paid in
additional shares of the applicable Class at net asset value unless the
shareholder has requested cash payments. Shareholders who wish to receive
dividends and/or other distributions in cash, either mailed to the shareholder
by check or credited to the shareholder's PaineWebber account, should contact
their PaineWebber investment executives or correspondent firms. For PW SIP
participants, PW Fund's Class C dividends and other distributions are paid in
additional Class C shares at net asset value unless the Transfer Agent is
instructed otherwise.
On or before the Closing Date, MH/KP Fund will declare as a distribution
substantially all of its net investment income, net capital gain, net short-term
capital gain and net realized foreign currency gains in order to continue to
maintain its tax status as a regulated investment company. MH/KP Fund will pay
this distribution only in cash. On or before the Closing Date, PW Fund also may
declare and distribute as a dividend substantially all of any previously
undistributed net investment income.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
PW Trust has received an opinion of Kirkpatrick & Lockhart LLP, its counsel,
and MH/KP Trust has received an opinion of Willkie Farr & Gallagher, its
counsel, each to the effect that the Reorganization will constitute a tax-free
reorganization within the meaning of section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended ("Code"). Accordingly, no gain or loss will be
recognized to either
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Fund or its shareholders as a result of the Reorganization. See "The Proposed
Transaction--Federal Income Tax Considerations," page 17.
COMPARISON OF PRINCIPAL RISK FACTORS
Because PW Fund's investment objectives and investment policies are
generally similar to those of MH/KP Fund, the investment risks of the two Funds
are generally similar. These risks are those typically associated with investing
in a global fixed income fund. Certain differences are identified below. See the
Prospectus of PW Fund, which accompanies this Proxy Statement, for a more
detailed discussion of the investment risks of PW Fund.
FOREIGN SECURITIES. Each Fund, under normal circumstances, invests a
substantial portion of its assets in foreign securities. MH/KP Fund emphasizes
investments in developed countries and maintains at all times at least 80% of
its assets invested in those countries. PW Fund normally invests at least 65% of
its total assets in high quality debt securities of issuers located in at least
three of the following countries: Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Thailand, the
United Kingdom and the United States. PW Fund thus may invest a higher portion
of its assets in securities of issuers located in emerging market countries.
Investing in foreign securities involves special risks, which include
possible adverse political and economic developments abroad, differing
regulatory systems and differing characteristics of foreign economies and
markets, as well as the fact that there is often less information publicly
available about foreign issuers. Many of the securities held by each Fund may be
denominated in foreign currencies, and the value of each Fund's investment can
be adversely affected by fluctuations in foreign currency values. Some foreign
currencies can be volatile and may be subject to governmental controls or
intervention.
The foreign securities in which the Funds may invest include securities of
issuers located in emerging market countries. PW Fund may invest a larger
portion of its assets in these securities than MH/KP Fund. The risks of
investing in foreign securities may be greater with respect to securities of
issuers in, or denominated in the currencies of, emerging market countries. The
securities markets of emerging market countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other developed countries. Disclosure and regulatory standards
in many respects are less stringent in emerging market countries than in the
United States and other major markets. Investing in local markets, particularly
in emerging market countries, may require a Fund to adopt special procedures,
seek local government approvals or take other actions, each of which may involve
additional costs to the Fund. Certain emerging market countries may also
restrict investment opportunities in issuers in industries deemed important to
national interests.
Because foreign securities ordinarily are denominated in currencies other
than the U.S. dollar (as are some securities of U.S. issuers), changes in
foreign currency exchange rates may affect each Fund's net asset value, the
value of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and capital gains, if any, to be
distributed to shareholders by a Fund. If the value of a foreign currency rises
against the U.S. dollar, the value of Fund assets denominated in that currency
will increase; correspondingly, if the value of a foreign currency declines
against the U.S. dollar, the value of Fund assets denominated in that currency
will decrease. The exchange rates between the U.S. dollar and other currencies
are determined by supply and demand in the currency exchange markets,
international balances of payments, speculation and other economic and political
conditions. In addition, some foreign currency values may be volatile and there
is the
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possibility of governmental controls on currency exchange or governmental
intervention in currency markets. Any of these factors could adversely affect a
Fund.
DEBT SECURITIES. Each Fund is permitted to purchase investment grade debt
securities. PW Fund may invest in lower rated debt securities and accordingly
may be subject to greater investment risk than MH/KP Fund. Each Fund is
permitted to invest up to 35% of its assets in securities rated below the two
highest rating categories by an NRSRO. MH/KP Fund, however, may not invest more
than 10% of its net assets in securities rated in the fourth highest rating
category, while PW Fund may invest up to 35% of its total assets in such
securities. The fourth highest rating category includes securities rated BBB by
S&P, Baa by Moody's or comparably rated by another NRSRO. These securities are
investment grade, although Moody's considers securities rated Baa to have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity for these
securities to make principal and interest payments than is the case for higher
rated securities. MH/KP Fund is not authorized to purchase securities rated
below investment grade. In contrast, the 35% of total assets that PW Fund may
invest in securities rated below the two highest rating categories of an NRSRO
may include up to 20% of its total assets in sovereign debt securities rated as
low as BB by S&P, Ba by Moody's or comparably rated by another NRSRO or, in the
case of such securities assigned a commercial paper rating, B by S&P or
comparably rated by another NRSRO. Both Funds are also permitted to purchase
debt securities that are not rated by an NRSRO but which Mitchell Hutchins
determines to be of comparable quality to that of rated securities in which the
Funds may invest. Such securities are included in the computation of any
percentage limitations applicable to the comparably rated securities. Securities
rated below investment grade are considered by the rating NRSRO to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal and may involve major risk exposure to adverse conditions.
These securities are commonly referred to as "junk bonds."
The market value of debt securities generally varies inversely with interest
rate changes. Ratings of debt securities represent the NRSRO's opinion regarding
their quality, are not a guarantee of quality and may be reduced after a Fund
has acquired the security. In the event that, due to a downgrade of one or more
debt securities, an amount in excess of 20% of PW Fund's total assets is held in
securities rated below investment grade and comparable unrated securities,
Mitchell Hutchins will engage in an orderly disposition of these securities to
the extent necessary to ensure that PW Fund's holdings of these securities do
not exceed 20% of its total assets.
Lower rated debt securities generally offer a higher current yield than that
available from higher grade issues, but they involve higher risks, in that they
are especially subject to adverse changes in general economic conditions and in
the industries in which the issuers are engaged, to changes in the financial
condition of the issuers and to price fluctuations in response to changes in
interest rates. During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress, which could adversely
affect their ability to make payments of interest and principal and increase the
possibility of default. In addition, such issuers may not have more traditional
methods of financing available to them and may be unable to repay debt at
maturity by refinancing. The risk of loss due to default by such issuers is
significantly greater because such securities are frequently unsecured and
subordinated to the prior payment of senior indebtedness.
The market for lower rated debt securities has expanded rapidly in recent
years, and its growth paralleled a long economic expansion. In the past, the
prices of many lower rated debt securities declined substantially, reflecting an
expectation that many issuers of such securities might experience financial
difficulties. As a result, the yields on such securities rose dramatically.
However, such higher yields did not reflect the value of the income stream that
holders of such securities expected, but rather the risk that holders of such
securities could lose a substantial portion of their value as a result of the
issuer's financial restructuring or default. There can be no assurance that such
declines will not recur.
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The market for lower rated debt securities generally is thinner and less active
than that for higher quality securities, which may limit a Fund's ability to
sell such securities at their fair value in response to changes in the economy
or the financial markets. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, may also decrease the value and liquidity of
lower rated securities, especially in a thinly traded market.
HEDGING STRATEGIES. Each Fund may use options, futures contracts, forward
currency contracts and interest rate protection transactions. There can be no
assurance, however, that any strategy utilizing these instruments will succeed.
If Mitchell Hutchins incorrectly forecasts interest rates, market values or
other economic factors in utilizing a hedging strategy for a Fund, the Fund
might have been in a better position had the Fund not hedged at all. The use of
these instruments involves certain special risks, including (1) the fact that
skills needed to use hedging instruments are different from those needed to
select the Funds' securities, (2) possible imperfect correlation, or even no
correlation, between price movements of hedging instruments and price movements
of the investments being hedged, (3) the fact that, while hedging strategies can
reduce the risk of loss, they can also reduce the opportunity for gain, or even
result in losses, by offsetting favorable price movements in hedged investments
and (4) the possible inability of a Fund to purchase or sell a portfolio
security at a time that otherwise would be favorable for it to do so, or the
possible need for a Fund to sell a portfolio security at a disadvantageous time,
due to the need for the Fund to maintain "cover" or to segregate securities in
connection with hedging transactions and the possible inability of a Fund to
close out or to liquidate its hedged position.
OTHER INVESTMENT POLICIES AND STRATEGIES. There are several other
differences between the two Funds' investment policies and strategies. MH/KP
Fund may lend up to 33 1/3% of the value of its portfolio securities to U.S. and
foreign brokers, dealers and banks, which exposes MH/KP Fund to the risks
associated with any extension of credit, including possible loss of rights in
the collateral should the borrower fail financially. In contrast, PW Fund is
authorized to lend only up to 10% of the value of its portfolio securities to
broker-dealers and other institutional investors. MH/KP Fund also is authorized
to enter into short sales, transactions in which MH/KP Fund sells securities it
does not own (but has borrowed) in anticipation of a decline in the market price
of the securities. PW Fund is not authorized to enter into short sales except
for short sales "against the box"--i.e., PW Fund must own the securities being
sold short, or securities convertible into such securities.
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THE PROPOSED TRANSACTION
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Reorganization Plan. Significant provisions of
the Reorganization Plan are summarized below; however, this summary is qualified
in its entirety by reference to the Reorganization Plan, which is attached as
Appendix A to this Proxy Statement.
The Reorganization Plan contemplates (1) PW Fund's acquiring on the Closing
Date the assets of MH/KP Fund in exchange solely for PW Fund shares and the
assumption by PW Fund of MH/KP Fund's liabilities and (2) the constructive
distribution of such shares to the shareholders of MH/KP Fund, by Class.
The assets of MH/KP Fund to be acquired by PW Fund include all cash, cash
equivalents, securities, receivables and other property owned by MH/KP Fund. PW
Fund will assume from MH/KP Fund all debts, liabilities, obligations and duties
of MH/KP Fund of whatever kind or nature; provided, however, that MH/KP Fund
will use its best efforts, to the extent practicable, to discharge all of its
known debts, liabilities, obligations and duties prior to the Closing Date. PW
Fund also will deliver to MH/KP Fund shares of PW Fund, which then will be
constructively distributed to MH/KP Fund's shareholders.
The value of MH/KP Fund's assets to be acquired, and the amount of MH/KP
Fund's liabilities to be assumed, by PW Fund and the net asset value of a Class
A, a Class C and a Class D share of PW Fund will be determined as of the close
of regular trading on the New York Stock Exchange, Inc. ("NYSE") on the Closing
Date. Where market quotations are readily available, portfolio securities will
be valued based upon such market quotations, provided such quotations adequately
reflect, in Mitchell Hutchins' judgment, fair value of the security. Where such
market quotations are not readily available, such securities will be valued
based upon appraisals received from a pricing service using a computerized
matrix system or based upon appraisals derived from information concerning the
security or similar securities received from recognized dealers in those
securities. The amortized cost method of valuation generally will be used to
value debt instruments with 60 days or less remaining to maturity, unless MH/KP
Trust's board of trustees (with respect to MH/KP Fund) or PW Trust's board of
trustees (with respect to PW Fund) determines that this does not represent fair
value. All other securities and assets will be valued at fair value as
determined in good faith by or under the direction of each Trust's board of
trustees, as applicable. All investments quoted in foreign currencies will be
valued in U.S. dollars on the basis of the foreign currency exchange rates
prevailing at the time such valuation is determined by each Fund's custodian.
On, or as soon as practicable after, the Closing Date, MH/KP Fund will
distribute to its shareholders of record the shares of PW Fund it received, by
Class, so that each shareholder of MH/KP Fund will receive a number of full and
fractional shares of the Corresponding Class or Classes of PW Fund equal in
value to the shareholder's holdings in MH/KP Fund; MH/KP Fund will be terminated
as soon as practicable thereafter. Such distribution will be accomplished by
opening accounts on the books of PW Fund in the names of MH/KP Fund shareholders
and by transferring thereto the shares of each Class previously credited to the
account of MH/KP Fund on those books. Fractional shares in each Class of PW Fund
will be rounded to the third decimal place.
Accordingly, immediately after the Reorganization, each former shareholder
of MH/KP Fund will own shares of the Class of PW Fund that will equal the value
of that shareholder's shares of the Corresponding Class of MH/KP Fund
immediately prior to the Reorganization. Moreover, because shares of each Class
of PW Fund will be issued at net asset value in exchange for the net assets
applicable to the Corresponding Class of MH/KP Fund, the aggregate value of
shares of each Class of PW Fund so issued will equal the aggregate value of
shares of the Corresponding Class of MH/KP
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Fund. The net asset value per share of PW Fund will be unchanged by the
transaction. Thus, the Reorganization will not result in a dilution of any
shareholder interest.
Any transfer taxes payable upon issuance of shares of PW Fund in a name
other than that of the registered holder of the shares on the books of MH/KP
Fund shall be paid by the person to whom such shares are to be issued as a
condition of such transfer. Any reporting responsibility of MH/KP Fund will
continue to be its responsibility up to and including the Closing Date and such
later date on which MH/KP Fund is terminated.
The cost of the Reorganization, including professional fees and the cost of
soliciting proxies for the Meeting, consisting principally of printing and
mailing expenses, together with the cost of any supplementary solicitation, will
be borne by both Funds in proportion to their respective net assets. Mitchell
Hutchins recommended this method of expense allocation to the trustees of the
Trusts. Mitchell Hutchins based its recommendations on its belief that this
method is fair because, for the reasons discussed under "Reasons for the
Reorganization," the Reorganization has the potential to benefit both Funds. The
trustees of each Trust considered this expense allocation method in approving
the Reorganization and in finding that the Reorganization is in the best
interests of their respective Funds.
The consummation of the Reorganization is subject to a number of conditions
set forth in the Reorganization Plan, some of which may be waived by each Trust.
In addition, the Reorganization Plan may be amended in any mutually agreeable
manner, except that no amendment may be made subsequent to the Meeting that has
a material adverse effect on the shareholders' interests.
REASONS FOR THE REORGANIZATION
MH/KP Trust's board of trustees, including a majority of its Independent
Trustees, has determined that the Reorganization is in the best interests of
MH/KP Fund, that the terms of the Reorganization are fair and reasonable and
that the interests of the shareholders of MH/KP Fund will not be diluted as a
result of the Reorganization. PW Trust's board of trustees, including a majority
of its Independent Trustees, has determined that the Reorganization is in the
best interests of PW Fund, that the terms of the Reorganization are fair and
reasonable and that the interests of the shareholders of PW Fund will not be
diluted as a result of the Reorganization.
In considering the Reorganization, the boards of trustees made an extensive
inquiry into a number of factors, including the following:
(1) the compatibility of the investment objectives, policies and
restrictions of the Funds;
(2) the effect of the Reorganization on expected investment performance;
(3) the effect of the Reorganization on the expense ratio of PW Fund
relative to each Fund's current expense ratio;
(4) the costs to be incurred by each Fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) possible alternatives to the Reorganization, including continuing to
operate on a stand-alone basis or liquidation; and
(7) the potential benefits of the Reorganization to other persons,
including Mitchell Hutchins and PaineWebber.
The Reorganization was recommended to the trustees by Mitchell Hutchins at
meetings of the boards of trustees of MH/KP Trust and PW Trust held on April 26,
1995 and April 28, 1995, respectively. Subsequently, amendments to the
Reorganization Plan were approved at meetings held on July 20, 1995. In
recommending the Reorganization, Mitchell Hutchins advised the boards of
trustees that the proposed total operating expenses for the combined Fund
following the Reorganization would
15
<PAGE>
be approximately the same as that currently in effect for PW Fund and lower than
that currently in effect for MH/KP Fund. Mitchell Hutchins also noted that the
investment advisory and administration fee for PW Fund has breakpoints and will
decrease if its assets increase, as is expected following the Reorganization.
The trustees also considered the fact that former MH/KP Fund shareholders would
benefit by the opportunity to continue investing in a fund that invests
primarily in global fixed income securities.
The trustees were advised by Mitchell Hutchins that the Funds have generally
similar investment objectives and policies, with the material differences noted.
Mitchell Hutchins also noted its belief that there is no reason to maintain and
market two substantially similar funds. In approving the proposed transaction,
the trustees noted that PW Fund's overall objective of high current income
consistent with prudent investment risk, and capital appreciation as a secondary
objective, remains an appropriate one to offer to investors as part of an
overall investment strategy. In considering the proposed transaction, the
trustees of MH/KP Trust were advised by Mitchell Hutchins that, because PW Fund
has greater net assets than MH/KP Fund, combining the two Funds would reduce the
expenses borne by the shareholders of MH/KP Fund as a percentage of net assets.
THE BOARD OF TRUSTEES
RECOMMENDS THAT THE SHAREHOLDERS OF
MH/KP FUND VOTE "FOR" THE REORGANIZATION.
DESCRIPTION OF SECURITIES TO BE ISSUED
PW Trust is registered with the SEC as an open-end management investment
company. Its trustees are authorized to issue an unlimited number of shares of
beneficial interest of separate series (par value $.001 per share). The trustees
have established PW Fund as one of PW Trust's four series and have authorized
the public offering of four Classes of shares of PW Fund. Each share in a Class
represents an equal proportionate interest in PW Fund with each other share in
that Class. Shares of PW Fund entitle their holders to one vote per full share
and fractional votes for fractional shares held, except that each Class of
shares has exclusive voting rights on matters pertaining to its plan of
distribution.
On the Closing Date, PW Fund will have outstanding four Classes of shares,
designated as Class A, Class B, Class C and Class D shares. Only Class A, Class
C and Class D shares will be issued as part of the Reorganization. Each Class
represents interests in the same assets of the Fund. The Classes differ as
follows: (1) Class A, Class B and Class D have exclusive voting rights on
matters pertaining to their plans of distribution; (2) Class A shares are
subject to an initial sales charge; (3) Class B shares bear ongoing distribution
fees, are subject to a CDSC upon certain redemptions and automatically convert
to Class A shares approximately six years after issuance; (4) Class C shares
have no sales charge, and bear no service or distribution fees, but may be
purchased only by certain categories of purchasers; (5) Class D shares are
subject to neither an initial sales charge nor a CDSC, bear ongoing distribution
fees and do not convert into another Class; and (6) each Class may bear
differing amounts of certain Class-specific expenses. Each share of each Class
of PW Fund is entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation, except that because of the
higher expenses resulting from the distribution fees borne by the PW Fund Class
B and Class D shares, dividends on those shares are expected to be lower than
those for its Class A and Class C shares. For the same reason, dividends on
Class B shares of PW Fund are expected to be lower than those on its Class D
shares. Dividends on each Class also might be affected differently by the
allocation of other Class-specific expenses.
PW Trust does not hold annual meetings of shareholders.There normally will
be no meetings of shareholders for the purpose of electing trustees unless fewer
than a majority of the trustees holding office has been elected by shareholders,
at which time the trustees then in office will call a shareholders' meeting for
the election of trustees. Under the 1940 Act, shareholders of record of at least
two-thirds of
16
<PAGE>
the outstanding shares of an investment company may remove a trustee by votes
cast in person or by proxy at a meeting called for that purpose. The trustees
are required to call a meeting of shareholders for the purpose of voting upon
the question of removal of any trustee when requested in writing to do so by the
shareholders of record holding at least 10% of PW Trust's outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of MH/KP Fund's assets for PW Fund shares and PW Fund's
assumption of MH/KP Fund's liabilities is intended to qualify for federal income
tax purposes as a tax-free reorganization under section 368(a)(1)(C) of the
Code. PW Trust has received an opinion of Kirkpatrick & Lockhart LLP, its
counsel, and MH/KP Trust has received an opinion of Willkie Farr & Gallagher,
its counsel, each substantially to the effect that--
(i) PW Fund's acquisition of MH/KP Fund's assets in exchange solely for
PW Fund shares and PW Fund's assumption of MH/KP Fund's liabilities,
followed by MH/KP Fund's distribution of those shares to its shareholders
constructively in exchange for their MH/KP Fund shares, will constitute a
"reorganization" within the meaning of section 368(a)(1)(C) of the Code, and
each Fund will be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
(ii) No gain or loss will be recognized to MH/KP Fund on the transfer to
PW Fund of its assets in exchange solely for PW Fund shares and PW Fund's
assumption of MH/KP Fund's liabilities or on the subsequent distribution of
those shares to MH/KP Fund's shareholders in constructive exchange for their
MH/KP Fund shares;
(iii) No gain or loss will be recognized to PW Fund on its receipt of
the transferred assets in exchange solely for PW Fund shares and its
assumption of MH/KP Fund's liabilities;
(iv) PW Fund's basis for the transferred assets will be the same as the
basis thereof in MH/KP Fund's hands immediately prior to the Reorganization,
and PW Fund's holding period for those assets will include MH/KP Fund's
holding period therefor;
(v) An MH/KP Fund shareholder will recognize no gain or loss on the
constructive exchange of all its MH/KP Fund shares solely for PW Fund shares
pursuant to the Reorganization; and
(vi) An MH/KP Fund shareholder's basis for the PW Fund shares to be
received by it in the Reorganization will be the same as the basis for its
MH/KP Fund shares to be constructively surrendered in exchange for those PW
Fund shares, and its holding period for those PW Fund shares will include
its holding period for those MH/KP Fund shares, provided they are held as
capital assets by the shareholder on the Closing Date.
Each such opinion may state that no opinion is expressed as to the effect of
the Reorganization on the Funds or any shareholder (regarding the recognition of
gain or loss and/or the determination of the basis or holding period) with
respect to any asset (including certain options, futures and forward contracts)
as to which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Utilization by PW Fund after the Reorganization of pre-Reorganization
capital losses realized by MH/KP Fund could be subject to limitation in future
years under the Code.
Shareholders of MH/KP Fund should consult their tax advisers regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
17
<PAGE>
CAPITALIZATION
The following table shows the capitalization of each Fund as of the twelve
months ended April 30, 1995 and on a pro forma combined basis (unaudited)
giving effect to the Reorganization:
<TABLE><CAPTION>
PRO FORMA
PW FUND(1) MH/KP FUND COMBINED(1)
------------ ------------ ------------
Net Assets
<S> <C> <C> <C>
Class A....................................... $777,503,341 $100,916,270 $878,419,611
Class B(2).................................... 575,409,083 20,095,961 575,409,083
Class C....................................... 12,477,569 17,277,541 29,755,110
Class D....................................... 70,413,147 -- 90,509,108
Net Asset Value Per Share
Class A....................................... $ 10.23 $ 12.82 $ 10.23
Class B(2).................................... 10.20 12.82 10.20
Class C....................................... 10.24 12.84 10.24
Class D....................................... 10.22 -- 10.22
Shares Outstanding
Class A....................................... 75,985,276 7,869,230 85,846,813
Class B(2).................................... 56,410,220 1,567,213 56,410,220
Class C....................................... 1,218,507 878,642 2,320,242
Class D....................................... 6,889,670 -- 8,855,587
</TABLE>
- ------------
(1) Reflects reorganization with Global Income Plus Fund, Inc., which was
consummated on June 30, 1995.
(2) Class B shares of MH/KP Fund will be exchanged for Class D shares of PW
Fund.
18
<PAGE>
ADDITIONAL INFORMATION ABOUT PW FUND
FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income
and capital charges for one Class A, one Class C and one Class D share of PW
Fund for the periods shown. (No Class B shares of PW Fund will be issued in
connection with the Reorganization.) This information is supplemented by the
financial statements and accompanying notes appearing in PW Fund's Annual Report
to Shareholders for the fiscal year ended October 31, 1994, and the unaudited
financial statements and accompanying notes in PW Fund's Semi-Annual Report to
Shareholders for the six months ended April 30, 1995, which are incorporated
herein by this reference. The financial statements and notes for the period
ended October 31, 1994 and the financial information in the table below, insofar
as it relates to the periods ended October 31, 1994, have been audited by Price
Waterhouse LLP, independent accountants, whose report thereon is included in the
Annual Report to Shareholders that accompanies this Proxy Statement.
Selected data for a Class A, a Class C and a Class D share of beneficial
interest of PW Fund outstanding throughout each period is presented below:
<TABLE><CAPTION>
CLASS A
----------------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEARS ENDED OCTOBER 31, JULY 1, 1991(3)
APRIL 30, 1995 ------------------------------------ TO OCTOBER 31,
(UNAUDITED) 1994 1993 1992 1991
-------------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 9.99 $ 10.97 $ 10.64 $ 10.75 $ 10.40
-------------- -------- -------- -------- -------
Income (loss) from investment
operations:
Net investment income.......... 0.39 0.72 0.59 0.83 0.20
Net realized and unrealized
gains (losses) from
investment and foreign
currency transactions........ 0.17 (1.05) 0.68 (0.12) 0.40
-------------- -------- -------- -------- -------
Total income (loss) from
investment operations.......... 0.56 (0.33) 1.27 0.71 0.60
-------------- -------- -------- -------- -------
Less dividends and other
distributions from:
Net investment income.......... (0.32) (0.33) (0.80) (0.64) (0.23)
Net realized gains on
investments and foreign
currency transactions........ -- -- (0.14) (0.18) (0.02)
Paid in capital................ -- (0.32) -- -- --
-------------- -------- -------- -------- -------
Total dividends and other
distributions................. (0.32) (0.65) (0.94) (0.82) (0.25)
-------------- -------- -------- -------- -------
Net asset value, end of
period........................ $ 10.23 $ 9.99 $ 10.97 $ 10.64 $ 10.75
-------------- -------- -------- -------- -------
-------------- -------- -------- -------- -------
Total investment return (4)..... 5.71% (3.10)% 12.41% 6.70% 5.79%
-------------- -------- -------- -------- -------
-------------- -------- -------- -------- -------
Ratios/Supplemental Data:
Net assets, end of period
(000's)....................... $546,197 $611,855 $648,853 $107,033 $16,501
Ratio of expenses to average
net assets................... 1.20%(1) 1.17% 1.32%(2) 1.21% 1.35%(1)
Ratio of net investment income
to average net assets........ 7.57%(1) 6.94% 6.82%(2) 7.84% 8.59%(1)
Portfolio turnover rate........ 92% 108% 90% 92% 53%
</TABLE>
- ------------
(1) Annualized.
(2) Includes 0.15% of interest expense related to reverse repurchase agreement
transactions entered into during the fiscal year.
(3) Commencement of operations.
(4) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A shares would be lower if sales
charges were included. Total investment returns for periods of less than one
year have not been annualized.
19
<PAGE>
<TABLE><CAPTION>
CLASS C
--------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS ENDED AUGUST 26,
APRIL 30, FOR THE YEARS ENDED OCTOBER 31, 1991(3)
1995 -------------------------------- TO OCTOBER 31,
(UNAUDITED) 1994 1993 1992 1991
------------ ------- ------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period..................... $ 9.99 $ 10.97 $ 10.64 $10.76 $ 10.53
------------ ------- ------- ------ -------
Income (loss) from investment
operations:
Net investment income...... 0.41 0.75 0.71 0.81 0.17
Net realized and unrealized
gains (losses) from
investment and foreign
currency transactions.... 0.18 (1.06) 0.58 (0.08) 0.32
------------ ------- ------- ------ -------
Total income (loss) from
investment operations...... 0.59 (0.31) 1.29 0.73 0.49
------------ ------- ------- ------ -------
Less dividends and other
distributions from:
Net investment income...... (0.34) (0.34) (0.82) (0.67) (0.24)
Net realized gains on
investments and foreign
currency transactions.... -- -- (0.14) (0.18) (0.02)
Paid in capital............ -- (0.33) -- -- --
------------ ------- ------- ------ -------
Total dividends and other
distributions.............. (0.34) (0.67) (0.96) (0.85) (0.26)
------------ ------- ------- ------ -------
Net asset value, end of
period..................... $ 10.24 $ 9.99 $ 10.97 $10.64 $ 10.76
------------ ------- ------- ------ -------
------------ ------- ------- ------ -------
Total investment return
(4)........................ 5.84% (2.86)% 12.60% 6.98% 4.63%
------------ ------- ------- ------ -------
------------ ------- ------- ------ -------
Ratios/Supplemental Data:
Net assets, end of period
(000's).................. $ 12,478 $12,975 $12,043 $7,252 $ 2,565
Ratio of expenses to
average net assets....... 0.91%(1) 0.88% 1.06%(2) 0.94% 1.09%(1)
Ratio of net investment
income to average net
assets................... 7.86%(1) 7.23% 7.00%(2) 8.15% 8.79%(1)
Portfolio turnover rate.... 92% 108% 90% 92% 53%
</TABLE>
- ------------
(1) Annualized.
(2) Includes 0.15% of interest expense related to reverse repurchase agreement
transactions entered into during the fiscal year.
(3) Commencement of operations.
(4) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A shares would be lower if sales
charges were included. Total investment returns for periods of less than one
year have not been annualized.
20
<PAGE>
<TABLE><CAPTION>
CLASS D
---------------------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED FOR THE PERIOD
APRIL 30, OCTOBER 31, JULY 2, 1992(3)
1995 ---------------------- TO OCTOBER 31,
(UNAUDITED) 1994 1993 1992
------------ ------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 9.98 $ 10.96 $ 10.64 $ 10.94
------------ ------- -------- ---------------
Income (loss) from investment
operations:
Net investment income.......... 0.40 0.70 0.68 0.20
Net realized and unrealized
gains (losses) from nvestment
and foreign currency
transactions................. 0.14 (1.09) 0.52 (0.13)
------------ ------- -------- ---------------
Total income (loss) from
investment operations.......... 0.54 (0.39) 1.20 0.07
------------ ------- -------- ---------------
Less dividends and other
distributions from:
Net investment income.......... (0.30) (0.30) (0.74) (0.21)
Net realized gains on
investments and foreign
currency transactions...... -- -- (0.14) (0.16)
Paid in capital................ -- (0.29) -- --
------------ ------- -------- ---------------
Total dividends and other
distributions.................. (0.30) (0.59) (0.88) (0.37)
------------ ------- -------- ---------------
Net asset value, end of period... $ 10.22 $ 9.98 $ 10.96 $ 10.64
------------ ------- -------- ---------------
------------ ------- -------- ---------------
Total investment return (4)...... 5.49% (3.56)% 11.64% 0.61%
------------ ------- -------- ---------------
------------ ------- -------- ---------------
Ratios/Supplemental Data:
Net assets, end of period
(000's)...................... $ 70,413 $92,480 $135,847 $36,598
Ratio of expenses to average
net assets................... 1.70%(1) 1.68% 1.83%(2) 1.75%(1)
Ratio of net investment income
to average net assets........ 7.05%(1) 6.34% 6.17%(2) 7.02%(1)
Portfolio turnover rate........ 92% 108% 90% 92%
</TABLE>
- ------------
(1) Annualized.
(2) Includes 0.15% of interest expense related to reverse repurchase agreement
transactions entered into during the fiscal year.
(3) Commencement of operations.
(4) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, investment of all dividends and other
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A shares would be lower if sales
charges were included. Total investment returns for periods of less than one
year have not been annualized.
21
<PAGE>
MISCELLANEOUS
AVAILABLE INFORMATION
Each Trust is subject to the information requirements of the Securities
Exchange Act of 1934 and the 1940 Act and in accordance therewith files reports,
proxy material and other information with the SEC. Such reports, proxy material
and other information can be inspected and copied at the Public Reference Room
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies
of such material can also be obtained from the Public Reference Branch, Office
of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20459 at prescribed rates.
LEGAL MATTERS
Certain legal matters in connection with the issuance of PW Fund shares will
be passed upon by Kirkpatrick & Lockhart LLP, counsel to PW Trust.
EXPERTS
The audited financial statements of PW Fund and MH/KP Fund, incorporated
herein by reference or included in their respective Statements of Additional
Information, have been audited by Price Waterhouse LLP and Deloitte & Touche
LLP, independent accountants, respectively, whose reports thereon are included
in the Funds' Annual Reports to Shareholders for the fiscal years ended October
31, 1994 and August 31, 1994, respectively, and in the MH/KP Fund's Semi-Annual
Report to Shareholders for the six-month period ended February 28, 1995. The
financial statements audited by Price Waterhouse LLP and Deloitte & Touche LLP
have been incorporated herein by reference in reliance on the reports given on
their authority as experts in auditing and accounting.
22
<PAGE>
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND
TERMINATION ("Agreement") is made as of July 25, 1995, between PaineWebber
Investment Series, a Massachusetts business trust ("PW Trust"), on behalf of
PaineWebber Global Income Fund, a segregated portfolio of assets ("series")
thereof ("Acquiring Fund"), and Mitchell Hutchins/Kidder, Peabody Investment
Trust, a Massachusetts business trust ("MHKP Trust"), on behalf of its Mitchell
Hutchins/Kidder, Peabody Global Fixed Income Fund series ("Target"). (Acquiring
Fund and Target are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds," and PW Trust and MHKP Trust are sometimes referred
to herein collectively as the "Investment Companies.")
RECITAL
The parties entered into an Agreement and Plan of Reorganization and
Termination dated as of May 19, 1995 ("Original Agreement"), which provided,
inter alia, for Target shareholders to receive Acquiring Fund shares pursuant to
the transactions contemplated thereby. The parties now desire to amend and
restate the Original Agreement to reflect a change in the class of Acquiring
Fund shares to be distributed to holders of Class C Target Shares (as defined
below). Therefore, the Original Agreement is hereby amended and restated to read
in its entirety as follows:
AMENDED AND RESTATED PROVISIONS
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets solely in exchange for voting shares of
beneficial interest in Acquiring Fund ("Acquiring Fund Shares") and the
assumption by Acquiring Fund of Target's liabilities, followed by the
constructive distribution of the Acquiring Fund Shares to the holders of shares
of beneficial interest in Target ("Target Shares") in exchange therefor, all
upon the terms and conditions set forth herein. The foregoing transactions are
referred to herein as the "Reorganization." All agreements, representations,
actions, and obligations described herein made or to be taken or undertaken by
either Fund are made and shall be taken or undertaken by PW Trust on behalf of
Acquiring Fund and by MHKP Trust on behalf of Target.
Acquiring Fund's shares are divided into four classes, designated Class A,
Class B, Class C, and Class D shares ("Class A Acquiring Fund Shares," "Class B
Acquiring Fund Shares," "Class C Acquiring Fund Shares," and "Class D Acquiring
Fund Shares," respectively). Except as noted in the following sentence, these
classes differ only with respect to the sales charges imposed on the purchase of
shares and the fees ("12b-1 fees") payable by each class pursuant to plans
adopted under Rule 12b-1 promulgated under the Investment Company Act of 1940
("1940 Act"), as follows: (1) Class A Acquiring Fund Shares are offered at net
asset value ("NAV") plus a sales charge, if applicable, and are subject to a
12b-1 service fee at the annual rate of 0.25% of the average daily net assets
attributable to the class ("class assets"); (2) Class B Acquiring Fund Shares
are offered at NAV without imposition of any sales charge and are subject to a
contingent deferred sales charge and 12b-1 service and distribution fees at the
respective annual rates of 0.25% and 0.75% of class assets; (3) Class C
Acquiring Fund Shares are offered, currently only to the trustee of the
PaineWebber Savings Investment Plan on behalf of that plan, at NAV without
imposition of any sales charge and are not subject to any 12b-1 fee; and (4)
Class D Acquiring Fund Shares are offered at NAV without imposition of any sales
charge and are
A-1
<PAGE>
subject to 12b-1 service and distribution fees at the respective annual rates of
0.25% and 0.50% of class assets. These classes also may differ from one another
with respect to the allocation of certain class-specific expenses other than
12b-1 fees. Only Classes A, C and D Acquiring Fund Shares are involved in the
Reorganization.
Target's shares are divided into three classes, designated Class A, Class B,
and Class C shares ("Class A Target Shares," "Class B Target Shares," and "Class
C Target Shares," respectively). Apart from differences in certain ancillary
class-specific expenses, these classes differ only with respect to the sales
charges imposed on the purchase of shares and the 12b-1 fees, as follows: (1)
Class A Target Shares are offered at NAV plus a sales charge, if applicable, and
are subject to a 12b-1 service fee at the annual rate of 0.25% of class assets;
(2) Class B Target Shares are offered at NAV without imposition of any sales
charge and are subject to 12b-1 service and distribution fees at the respective
annual rates of 0.25% and 0.50% of class assets; and (3) Class C Target Shares
are offered, currently to a limited group of investors (consisting of former
employees of Kidder, Peabody & Co. Incorporated ("Kidder") and their associated
accounts, directors and trustees of mutual funds formerly distributed by Kidder
(now known as Mitchell Hutchins/Kidder, Peabody Funds and PaineWebber/Kidder,
Peabody Funds), Kidder's employee benefit plans, and participants in a certain
portfolio asset allocation program), at NAV without imposition of any sales
charge and are not subject to any 12b-1 fee.
In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of its
assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring Fund
agrees in exchange therefor--
(a) to issue and deliver to Target the number of full and fractional (i)
Class A Acquiring Fund Shares determined by dividing the net value of Target
(computed as set forth in paragraph 2.1) ("Target Value") attributable to
the Class A Target Shares by the NAV (computed as set forth in paragraph
2.2) of a Class A Acquiring Fund Share, (ii) Class D Acquiring Fund Shares
determined by dividing the Target Value attributable to the Class B Target
Shares by the NAV (as so computed) of a Class D Acquiring Fund Share, and
(iii) Class C Acquiring Fund Shares determined by dividing the Target Value
attributable to the Class C Target Shares by the NAV (as so computed) of a
Class C Acquiring Fund Share; and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein) all
of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement,
including without limitation Target's share of the expenses described in
paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income
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(computed without regard to any deduction for dividends paid) and realized net
capital gain, if any, for the current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ("Transfer
Agent") opening accounts on Acquiring Fund's share transfer books in the
Shareholders' names and transferring such Acquiring Fund Shares thereto. Each
Shareholder's account shall be credited with the respective pro rata number of
full and fractional (rounded to the third decimal place) Acquiring Fund Shares
due that Shareholder, by class (i.e., the account for a Shareholder of Class A
Target Shares shall be credited with the respective pro rata number of Class A
Acquiring Fund Shares due that Shareholder, the account for a Shareholder of
Class B Target Shares shall be credited with the respective pro rata number of
Class D Acquiring Fund Shares due that Shareholder, and the account for a
Shareholder of Class C Target Shares shall be credited with the respective pro
rata number of Class C Acquiring Fund Shares due that Shareholder). All
outstanding Target Shares, including any represented by certificates, shall
simultaneously be canceled on Target's share transfer records. Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a series of
MHKP Trust and any further actions shall be taken in connection therewith as
required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange, Inc. ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Target's then-current prospectus and
statement of additional information less (b) the amount of the Liabilities as of
the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of a Class A Acquiring Fund
Share, a Class C Acquiring Fund Share, and a Class D Acquiring Fund Share shall
be computed as of the Valuation Time, using the valuation procedures set forth
in Acquiring Fund's then-current prospectus and statement of additional
information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or
under the direction of Mitchell Hutchins Asset Management Inc.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on October 27,
1995, or at such other place and/or on such other date as the parties may agree.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the date thereof or at such other
time as the parties may agree ("Effective Time"). If, immediately before the
Valuation Time, (a) the NYSE is closed to
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trading or trading thereon is restricted or (b) trading or the reporting of
trading on the NYSE or elsewhere is disrupted, so that accurate appraisal of the
net value of Target and the NAV per Acquiring Fund Share is impracticable, the
Effective Time shall be postponed until the first business day after the day
when such trading shall have been fully resumed and such reporting shall have
been restored.
3.2. MHKP Trust shall deliver to PW Trust at the Closing a schedule of the
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
Target's custodian shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets held by the custodian will be transferred to
Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made.
3.3. MHKP Trust shall deliver to PW Trust at the Closing a list of the names
and addresses of the Shareholders and the number (by class) of outstanding
Target Shares owned by each Shareholder, all as of the Effective Time, certified
by the Secretary or Assistant Secretary of Target. The Transfer Agent shall
deliver at the Closing a certificate as to the opening on Acquiring Fund's share
transfer books of accounts in the Shareholders' names. PW Trust shall issue and
deliver a confirmation to MHKP Trust evidencing the Acquiring Fund Shares (by
class) to be credited to Target at the Effective Time or provide evidence
satisfactory to MHKP Trust that such Acquiring Fund Shares have been credited to
Target's account on Acquiring Fund's books. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, stock
certificates, receipts, or other documents as the other party or its counsel may
reasonably request.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. MHKP Trust is an unincorporated voluntary association with
transferable shares organized as a business trust under a written instrument
("Business Trust"); it is duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts; and a copy of
its Declaration of Trust is on file with the Secretary of the Commonwealth
of Massachusetts;
4.1.2. MHKP Trust is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in full
force and effect at the Effective Time;
4.1.3. Target is a duly established and designated series of MHKP Trust;
4.1.4. At the Closing, Target will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.5. Target's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the Securities Act of 1933 ("1933 Act") and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
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4.1.6. Target is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby will
not conflict with or violate, Massachusetts law or any provision of MHKP
Trust's Declaration of Trust or By-Laws or of any agreement, instrument,
lease, or other undertaking to which Target is a party or by which it is
bound or result in the acceleration of any obligation, or the imposition of
any penalty, under any agreement, judgment, or decree to which Target is a
party or by which it is bound, except as previously disclosed in writing to
and accepted by PW Trust;
4.1.7. Except as disclosed in writing to and accepted by PW Trust, all
material contracts and other commitments of or applicable to Target (other
than this Agreement and investment contracts, including options, futures,
and forward contracts) will be terminated, or provision for discharge of any
liabilities of Target thereunder will be made, at or prior to the Effective
Time, without either Fund's incurring any liability or penalty with respect
thereto and without diminishing or releasing any rights Target may have had
with respect to actions taken or omitted to be taken by any other party
thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by PW
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target's
knowledge) threatened against MHKP Trust with respect to Target or any of
its properties or assets that, if adversely determined, would materially and
adversely affect Target's financial condition or the conduct of its
business; Target knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is not
a party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially or adversely affects its
business or its ability to consummate the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of MHKP Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders and receipt of any necessary exemptive relief or
no-action assurances requested from the Securities and Exchange Commission
("SEC") or its staff with respect to sections 17(a) and 17(d) of the 1940
Act, this Agreement will constitute a valid and legally binding obligation
of Target, enforceable in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and
by general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.11. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the Securities Exchange Act of 1934 ("1934
Act"), or the 1940 Act for the execution or performance of this Agreement by
MHKP Trust, except for (a) the filing with the SEC of a registration
statement by PW Trust on Form N-14 relating to the Acquiring Fund Shares
issuable hereunder, and any supplement or amendment thereto ("Registration
Statement"), including therein a prospectus/proxy statement ("Proxy
Statement"), (b) receipt of the exemptive relief referenced in subparagraph
4.1.9, and (c) such consents, approvals, authorizations, and filings as have
been made or received or as may be required subsequent to the Effective
Time;
4.1.12. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material respects
with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940
Act and the regulations thereunder and (b) not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not
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misleading; provided that the foregoing shall not apply to statements in or
omissions from the Proxy Statement made in reliance on and in conformity
with information furnished by PW Trust for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business;
4.1.14. Target is a "fund" as defined in section 851(h)(2) of the Code;
it qualified for treatment as a regulated investment company ("RIC") under
Subchapter M of the Code for each past taxable year since it commenced
operations and will continue to meet all the requirements for such
qualification for its current taxable year; and it has no earnings and
profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it. The Assets shall be invested at all times
through the Effective Time in a manner that ensures compliance with the
foregoing;
4.1.15. Target is not under the jurisdiction of a court in a proceeding
under Title 11 of the United States Code or similar case within the meaning
of section 368(a)(3)(A) of the Code;
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock or securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock or securities of five or fewer
issuers; and
4.1.17. Target will be terminated as soon as reasonably practicable
after the Reorganization, but in all events within six months after the
Effective Time.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. PW Trust is a Business Trust; it is duly organized, validly
existing, and in good standing under the laws of the Commonwealth of
Massachusetts; and a copy of its Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts;
4.2.2. PW Trust is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of PW
Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued and
outstanding shares of Acquiring Fund, fully paid and non-assessable, except
to the extent that under Massachusetts law shareholders of a Business Trust
may, under certain circumstances, be held personally liable for its
obligations. Except as contemplated by this Agreement, Acquiring Fund does
not have outstanding any options, warrants, or other rights to subscribe for
or purchase any of its shares, nor is there outstanding any security
convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby will not conflict with or violate,
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Massachusetts law or any provision of PW Trust's Declaration of Trust or
By-Laws or of any provision of any agreement, instrument, lease, or other
undertaking to which Acquiring Fund is a party or by which it is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Acquiring Fund is
a party or by which it is bound, except as previously disclosed in writing
to and accepted by MHKP Trust;
4.2.8. Except as otherwise disclosed in writing to and accepted by MHKP
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Acquiring
Fund's knowledge) threatened against PW Trust with respect to Acquiring Fund
or any of its properties or assets that, if adversely determined, would
materially and adversely affect Acquiring Fund's financial condition or the
conduct of its business; Acquiring Fund knows of no facts that might form
the basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially
or adversely affects its business or its ability to consummate the
transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of PW Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to receipt of any
necessary exemptive relief or no-action assurances requested from the SEC or
its staff with respect to sections 17(a) and 17(d) of the 1940 Act, this
Agreement will constitute a valid and legally binding obligation of
Acquiring Fund, enforceable in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for the
execution or performance of this Agreement by PW Trust, except for (a) the
filing with the SEC of the Registration Statement, (b) the filing with the
SEC of a post-effective amendment to the registration statement of PW Trust
("PEA"), (c) receipt of the exemptive relief referenced in subparagraph
4.2.9, and (d) such consents, approvals, authorizations, and filings as have
been made or received or as may be required subsequent to the Effective
Time;
4.2.11. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material respects
with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940
Act and the regulations thereunder and (b) not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by MHKP Trust for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(h)(2) of
the Code; it qualified for treatment as a RIC under Subchapter M of the Code
for each past taxable year since it commenced operations and will continue
to meet all the requirements for such qualification for its current taxable
year; Acquiring Fund intends to continue to meet all such requirements for
the next taxable year; and it has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end investment
company; nor does Acquiring Fund have any plan or intention to
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redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, other than through redemptions
arising in the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's business in
substantially the same manner that Target conducted that business
immediately before the Reorganization, (b) has no plan or intention to sell
or otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to maintain
its status as a RIC under Subchapter M of the Code, and (c) expects to
retain substantially all the Assets in the same form as it receives them in
the Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be dissolved
or merged into another corporation or business trust or any "fund" thereof
(within the meaning of section 851(h)(2) of the Code) following the
Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock or securities of
any one issuer and (b) not more than 50% of the value of such assets will be
invested in the stock or securities of five or fewer issuers; and
4.2.17. Acquiring Fund does not own, directly or indirectly, nor at the
Effective Time will it own, directly or indirectly, nor has it owned,
directly or indirectly, at any time during the past five years, any shares
of Target.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares, when received
by the Shareholders, will be approximately equal to the fair market value of
their Target Shares constructively surrendered in exchange therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the Acquiring
Fund Shares to be received by them in the Reorganization and (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as a series of an open-end investment
company. Consequently, its management expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or at
the time of the Reorganization will be de minimis. Nor does its management
anticipate that there will be extraordinary redemptions of Acquiring Fund
Shares immediately following the Reorganiza-tion;
4.3.3. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the parties
incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the Assets will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those to
which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
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4.3.7. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market value
of the net assets, and at least 70% of the fair market value of the gross
assets, held by Target immediately before the Reorganization. For the
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and redemptions and distributions made by it
immediately before the Reorganization (except for (a) distributions made to
conform to its policy of distributing all or substantially all of its income
and gains to avoid the obligation to pay federal income tax and/or the
excise tax under section 4982 of the Code and (b) redemptions not made as
part of the Reorganization) will be included as assets thereof held
immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder who is an
employee of Target will be separate consideration for, or allocable to, any
of the Target Shares held by such Shareholder-employee; none of the
Acquiring Fund Shares received by any such Shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the consideration paid to any such Shareholder-employee will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services; and
4.3.9. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" of Acquiring Fund within the meaning of
section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that (a)
such ordinary course will include declaring and paying customary dividends and
other distributions and such changes in operations as are contemplated by each
Fund's normal business activities and (b) each Fund will retain exclusive
control of the composition of its portfolio until the Closing; provided that
Target shall not dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior consent.
5.2. Target covenants to call a shareholders' meeting to consider and act
upon this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist PW Trust in obtaining such
information as PW Trust reasonably requests concerning the beneficial ownership
of Target Shares.
5.5. Target covenants that Target's books and records (including all books
and records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to PW Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
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5.8. PW Trust covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by the
other Fund of all the obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have been
duly adopted and approved by MHKP Trust's board of trustees and shall have been
approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement and the PEA shall
have become effective under the 1933 Act, no stop orders suspending the
effectiveness thereof shall have been issued, and the SEC shall not have issued
an unfavorable report with respect to the Reorganization under section 25(b) of
the 1940 Act nor instituted any proceedings seeking to enjoin consummation of
the transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. MHKP Trust shall have received an opinion of Kirkpatrick & Lockhart
LLP, counsel to PW Trust, substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of PW Trust, a
Business Trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under its Declaration of Trust to
own all of its properties and assets and, to the knowledge of such counsel,
to carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by PW Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by MHKP Trust on
behalf of Target, is a valid and legally binding obligation of PW Trust with
respect to Acquiring Fund, enforceable in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
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6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable, except to the extent that
under Massachusetts law shareholders of a Business Trust may, under certain
circumstances, be held personally liable for its obligations, and no
shareholder of Acquiring Fund has any preemptive right to subscribe for or
purchase such shares;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate PW Trust's Declaration of Trust or By-Laws or any provision of any
agreement (known to such counsel, without any independent inquiry or
investigation) to which PW Trust (with respect to Acquiring Fund) is a party
or by which it is bound or (to the knowledge of such counsel, without any
independent inquiry or investigation) result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement, judgment,
or decree to which PW Trust (with respect to Acquiring Fund) is a party or
by which it is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by MHKP Trust;
6.4.5. To the knowledge of such counsel (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by PW Trust
on behalf of Acquiring Fund of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act, and the 1940
Act and such as may be required under state securities laws;
6.4.6. PW Trust is registered with the SEC as an investment company, and
to the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to PW Trust (with respect to Acquiring Fund) or any of its
properties or assets attributable or allocable to Acquiring Fund and (b) PW
Trust (with respect to Acquiring Fund) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects Acquiring Fund's business, except
as set forth in such opinion or as otherwise disclosed in writing to and
accepted by MHKP Trust.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (ii) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to applicable federal
and state law, and (iv) define the word "knowledge" and related terms to mean
the knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.5. PW Trust shall have received an opinion of Willkie Farr & Gallagher,
counsel to MHKP Trust, substantially to the effect that:
6.5.1. Target is a duly established series of MHKP Trust, a Business
Trust duly organized and validly existing under the laws of the Commonwealth
of Massachusetts with power under its Declaration of Trust to own all of its
properties and assets and, to the knowledge of such counsel, to carry on its
business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by MHKP Trust on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by PW Trust on
behalf of Acquiring Fund, is a valid and legally binding obligation of MHKP
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Trust with respect to Target, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate MHKP Trust's Declaration of Trust or By-Laws or any provision of any
agreement (known to such counsel, without any independent inquiry or
investigation) to which MHKP Trust (with respect to Target) is a party or by
which it is bound or (to the knowledge of such counsel, without any
independent inquiry or investigation) result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement, judgment,
or decree to which MHKP Trust (with respect to Target) is a party or by
which it is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by PW Trust;
6.5.4. To the knowledge of such counsel (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by MHKP
Trust on behalf of Target of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act, and the 1940
Act and such as may be required under state securities laws;
6.5.5. MHKP Trust is registered with the SEC as an investment company,
and to the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to MHKP Trust (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) MHKP Trust
(with respect to Target) is not a party to or subject to the provisions of
any order, decree, or judgment of any court or governmental body that
materially and adversely affects its business, except as set forth in such
opinion or as otherwise disclosed in writing to and accepted by PW Trust.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (ii) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to applicable federal
and state law, and (iv) define the word "knowledge" and related terms to mean
the knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.6. MHKP Trust shall have received an opinion of Willkie Farr & Gallagher,
its counsel, addressed to and in form and substance satisfactory to MHKP Trust,
and PW Trust shall have received an opinion of Kirkpatrick & Lockhart LLP, its
counsel, addressed to and in form and substance satisfactory to PW Trust, each
as to the federal income tax consequences mentioned below (each a "Tax
Opinion"). In rendering its Tax Opinion, each such counsel may rely as to
factual matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters addressed to such
counsel) and the certificates delivered pursuant to paragraph 3.4. Each Tax
Opinion shall be substantially to the effect that, based on the facts and
assumptions stated therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities,
followed by Target's distribution of those shares to the Shareholders
constructively in exchange for the Shareholders' Target Shares,
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will constitute a reorganization within the meaning of section 368(a)(1)(C)
of the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's holding
period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares pursuant
to the Reorganization; and
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for its
Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
they are held as capital assets by the Shareholder at the Effective Time.
Notwithstanding paragraphs 6.6.2 and 6.6.4, each Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder (regarding the recognition of gain or loss and/or the determination
of the basis or holding period) with respect to any asset (including certain
options, futures, and forward contracts included in the Assets) as to which any
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
At any time before the Closing, (a) Acquiring Fund may waive any of the
foregoing conditions if, in the judgment of PW Trust's board of trustees, such
waiver will not have a material adverse effect on its shareholders' interests,
and (b) Target may waive any of the foregoing conditions if, in the judgment of
MHKP Trust's board of trustees, such waiver will not have a material adverse
effect on the Shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that there
are no brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by the Funds proportionately, as follows:
each such expense will be borne by the Funds in proportion to their respective
net assets as of the close of business on the last business day of the month in
which such expense was incurred. Such expenses include: (a) expenses incurred in
connection with entering into and carrying out the provisions of this Agreement;
(b) expenses associated with the preparation and filing of the Registration
Statement; (c) registration or qualification fees and expenses of preparing and
filing such forms as are necessary under applicable state securities laws to
qualify the Acquiring Fund Shares to be issued in connection herewith in each
state in which Target's shareholders are resident as of the date of the mailing
of the Proxy Statement to such shareholders; (d) printing and postage expenses;
(e) legal and accounting fees; and (f) solicitation costs.
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<PAGE>
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before December 31, 1995; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees or officers of
either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts; provided that, in the
case of any conflict between such laws and the federal securities laws, the
latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3. The parties acknowledge that each Investment Company is a Business
Trust. Notice is hereby given that this instrument is executed on behalf of each
Investment Company's trustees solely in their capacity as trustees, and not
individually, and that each Investment Company's obligations under this
instrument are not binding on or enforceable against any of its trustees,
officers, or shareholders, but are only binding on and enforceable against the
respective Funds' assets and property. Each Fund agrees that, in asserting any
rights or claims under this Agreement, it shall look only to the other Fund's
assets and property in settlement of such rights or claims and not to such
trustees or shareholders.
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<PAGE>
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST:
PAINEWEBBER INVESTMENT SERIES,
on behalf of its series,
PAINEWEBBER GLOBAL INCOME
FUND
By: /s/ ILENE SHORE /s/ DIANNE E. O'DONNELL
................................ ...............................
Assistant Secretary Vice President
ATTEST:
MITCHELL HUTCHINS/KIDDER,
PEABODY INVESTMENT TRUST,
on behalf of its series,
MITCHELL HUTCHINS/KIDDER,
PEABODY GLOBAL FIXED INCOME
FUND
By: /s/ STEPHANIE HEMPHILL-JOHNSON /s/ SCOTT H. GRIFF
................................ ...............................
Assistant Secretary Vice President
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PROXY
-----
Mitchell Hutchins/Kidder Peabody Investment Trust -
Mitchell Hutchins/Kidder Peabody Global Fixed Income Fund
Special Meeting of Shareholders - October 5, 1995
The undersigned hereby appoints as proxies Dianne E. O'Donnell and Rita Barnett
and each of them (with power of substitution) to vote for the undersigned
all shares of beneficial interest of the undersigned at the aforesaid meeting
and any adjournment thereof with all the power the undersigned would have if
personally present. The shares represented by this proxy will be voted as
instructed. Unless indicated to the contrary, this proxy shall be deemed to
grant authority to vote "FOR" all proposals. This proxy is solicited on behalf
of the Board of Trustees of Mitchell Hutchins/Kidder Peabody Investment Trust.
YOUR VOTE IS IMPORTANT
Please date and sign this proxy on the reverse side and return it in the
enclosed envelope to Alamo Direct Mail Services, Inc., 10 Lucon Drive,
Deer Park, NY 11729.
Please indicate your vote by an "X" in the appropriate box below. The Board
of Trustees recommends a vote "FOR"
FOR AGAINST ABSTAIN
1. Approval of an Agreement and Plan of
Reorganization and Termination between
PaineWebber Global Income Fund and Mitchell
Hutchins/Kidder Peabody Global Fixed
Income Fund. [ ] [ ] [ ]
Continued and to be signed on reverse side
<PAGE>
This proxy will not be voted unless it is dated and signed exactly as
instructed below
Is shares are held jointly, each Shareholder named should sign. If only one
signs, his or her signature will be binding. If the Shareholder is a
corporation, the President or a Vice President should sign in his or her own
name, indicating title. If the Shareholder is a partnership, a partner should
sign in his or her own name, indicating that he or she is a "Partner."
Sign exactly as name appears hereon.
______________________________(L.S.)
______________________________(L.S.)
Date _________________________, 1995
