SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (ss.)240.14a-11(c) or (ss.)240.14a-12
The Infinity Mutual Funds, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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statement number, or the Form or Schedule and the date of its filing.
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PRELIMINARY COPY
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
3435 STELZER ROAD
COLUMBUS, OH 43219-8020
September __, 1999
Dear Shareholder:
The attached proxy materials describe a proposal to reorganize
Correspondent Cash Reserves Money Market Portfolio ("CCR Money Market
Portfolio") and Correspondent Cash Reserves Tax Free Money Market Portfolio
("CCR Tax Free Money Market Portfolio") (each a "Portfolio"), two series of The
Infinity Mutual Funds, Inc. ("Infinity Funds"), into two new series of Mitchell
Hutchins LIR Money Series, LIR Premier Money Market Fund and LIR Premier
Tax-Free Money Market Fund, respectively (each a "Premier Fund"). If the
proposal is approved and implemented, each shareholder of CCR Money Market
Portfolio will become a shareholder of LIR Premier Money Market Fund, and each
shareholder of CCR Tax Free Money Market Portfolio will become a shareholder of
LIR Premier Tax-Free Money Market Fund. The proposal will not effect the value
of your shares, the overall goals or investment style of the Portfolio of which
you are a shareholder or your methods for buying and redeeming shares.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
PROPOSAL. The board believes that reorganizing into a Premier Fund will benefit
each Portfolio's shareholders by providing them with a fund that will be MANAGED
SUBSTANTIALLY IN THE SAME MANNER AS THE PORTFOLIO, THAT WILL OFFER ENHANCED
SHAREHOLDER SERVICES AND THAT CAN BE EXPECTED TO HAVE LOWER OPERATING EXPENSES
AS A PERCENTAGE OF NET ASSETS FOR AT LEAST THE FIRST YEAR AFTER THE
REORGANIZATION DUE TO VOLUNTARY FEE WAIVERS AND EXPENSE REIMBURSEMENTS. The
attached proxy materials provide more information about each proposed
reorganization into a Premier Fund. Please read the enclosed materials for a
full description of the matters on which you are being asked to vote.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. Voting your
shares early will permit the Portfolios 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.
As an alternative to using the paper proxy card to vote, you may vote by
telephone, by facsimile, through the Internet or in person.
Very truly yours,
/s/
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William B. Blundin
President
The Infinity Mutual Funds, Inc.
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PRELIMINARY COPY
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
(SERIES OF THE INFINITY MUTUAL FUNDS, INC.)
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 11, 1999
To the Shareholders:
A special meeting of shareholders ("Meeting") of Correspondent Cash
Reserves Money Market Portfolio ("CCR Money Market Portfolio") and Correspondent
Cash Reserves Tax Free Money Market Portfolio ("CCR Tax Free Money Market
Portfolio") (each a "Portfolio"), two series of The Infinity Mutual Funds, Inc.,
will be held on October 11, 1999, at 10 a.m., Eastern time, at 1285 Avenue of
the Americas, [14th] Floor, New York, New York 10019, for the following
purposes:
(1) To approve an Agreement and Plan of Conversion and Termination
providing for the conversions of CCR Money Market Portfolio and
CCR Tax Free Money Market Portfolio to LIR Premier Money Market
Fund and LIR Premier Tax-Free Money Market Fund, respectively,
two new series of Mitchell Hutchins LIR Money Series, all as
described more fully in the accompanying proxy statement.
(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 a Portfolio at the close of business on August 17, 1999. IF
YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON. IF YOU DO NOT EXPECT
TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE VIA TELEPHONE, FACSIMILE OR
THROUGH THE INTERNET AS DESCRIBED BELOW.
By order of the Board of Directors,
/s/
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Jeffrey C. Cusick
Vice President and Assistant Secretary
September, ___, 1999
Columbus, Ohio
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
Please indicate your voting instructions on the enclosed proxy card,
sign and date 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 DESCRIBED ABOVE. In order to avoid the additional
expense of further solicitation, we ask your cooperation in mailing your proxy
card promptly. As an alternative to using the paper proxy card to vote, you may
vote by telephone, by facsimile machine, through the Internet or in person.
Shares that are registered in your name, as well as shares held in "street name"
through a broker, may be voted via the Internet or by telephone. To vote in this
manner, you will need the 12-digit "control" number(s) that appear on your proxy
card(s).
To vote via the Internet, please access [http://www.proxyvote.com] on
the World Wide Web and follow the on-screen instructions.
You may also call [1-800-690-6903] and vote by phone.
In addition, shares that are registered in your name may be voted by
faxing your completed proxy card(s) to [1-800-733-1885].
If we do not receive your completed proxy cards after several weeks,
you may be contacted by our proxy solicitor, Shareholder Communications
Corporation. Our proxy solicitor will remind you to vote your shares or will
record your vote over the phone if you choose to vote in that manner.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to the Portfolios involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on the
proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the form of
registration. For example:
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REGISTRATION VALID SIGNATURE
Corporate Accounts
(1) ABC Corp................................ ABC Corp.
John Doe, Treasurer
(2) ABC Corp................................ John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer....... John Doe
(4) ABC Corp. Profit Sharing Plan........... John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership..................... Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership.... Jane B. Smith, General
Partner
Trust Accounts
(1) ABC Trust Account....................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78..... Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr.,
UGMA/UTMA.............................. John B. Smith
(2) Estate of John B. Smith.................. John B. Smith, Jr.,
Executor
<PAGE>
PRELIMINARY COPY
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
(SERIES OF THE INFINITY MUTUAL FUNDS, INC.)
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PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 11, 1999
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This proxy statement is being furnished to the shareholders of
Correspondent Cash Reserves Money Market Portfolio ("CCR Money Market
Portfolio") and Correspondent Cash Reserves Tax Free Money Market Portfolio
("CCR Tax Free Money Market Portfolio") (each a "Portfolio"), two series of The
Infinity Mutual Funds, Inc. ("Infinity Funds"), in connection with the
solicitation of proxies from Portfolio shareholders by the board of directors of
Infinity Funds ("Board") for use at a special meeting of shareholders to be held
on October 11, 1999 ("Meeting"), and at any adjournment of the Meeting. This
proxy statement will first be mailed to shareholders on or about September __,
1999.
For each Portfolio, one-third of its outstanding shares on August 17,
1999, represented in person or by proxy, shall constitute a quorum and 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 by either Portfolio 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" any proposal in favor of such an adjournment and will vote those
proxies required to be voted "AGAINST" any proposal against such adjournment. A
shareholder vote may be taken on the proposal by the shareholders of one
Portfolio prior to any such adjournment if sufficient votes have been received
and it is otherwise appropriate. The shareholders of the other Portfolio would
vote when the Meeting was reconvened.
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 the agreement and plan of
conversion and termination (the "Reorganization Plan"). Accordingly, abstentions
and broker non-votes effectively will be a vote against the Reorganization Plan
because an affirmative vote of a majority of the total shares outstanding is
required.
The individuals named as proxies on the enclosed proxy card will vote
in accordance with your directions as indicated on the proxy card, 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 "FOR" the approval of the
Reorganization Plan and "FOR" authorizing the persons serving as proxies to vote
on any other business that may come before the Meeting based on their
discretion. The proxy card may be revoked by giving another proxy or by letter
or telegram revoking the initial proxy. To be effective, revocation must be
received by Infinity Funds 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.
[In order to reduce costs, the notices to a shareholder having more
than one account in the Portfolios listed under the same Social Security number
at a single address have been combined.] The proxy cards have been coded so that
a shareholder's votes will be counted for each such account.
As of the record date, August 17, 1999, CCR Money Market Portfolio had
1,704,786,902.250 shares of common stock outstanding and CCR Tax Free Money
Market Portfolio had 117,784,661.200 shares of common stock outstanding. The
solicitation of proxies, the cost of which will be borne by Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), will be made primarily by mail but
also may be made by telephone or oral communications by Shareholder
Communications Corporation, professional proxy solicitors, who will be paid fees
and expenses of approximately $100,000 for soliciting services. If votes are
recorded by telephone, Shareholder Communications Corporation will use
procedures designed to authenticate shareholders' identities, to allow
shareholders to authorize the voting of their shares in accordance with their
instructions and to confirm that a shareholder's instructions have been properly
recorded. You may also vote by mail, by facsimile or through a secure Internet
site. Proxies voted by telephone, facsimile or Internet may be revoked at any
time before they are voted in the same manner that proxies voted by mail may be
revoked.
COPIES OF THE PORTFOLIOS' MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS,
INCLUDING FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS MAY REQUEST COPIES OF THESE REPORTS, WITHOUT CHARGE, BY WRITING TO
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIOS, P.O. BOX 163879, COLUMBUS,
OHIO 43216-3879, OR BY CALLING TOLL-FREE 1-800-442-3809.
Infinity Funds did not know of any person who owned beneficially 5% or
more of the shares of either Portfolio as of August 6, 1999. Directors and
officers of Infinity Funds own in the aggregate less than 1% of the shares of
either Portfolio.
VOTE REQUIRED. For each Portfolio, approval of the Reorganization Plan
requires the affirmative vote of a majority of all of the votes of the Portfolio
entitled to be cast on the matter. Each outstanding full share of the Portfolios
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 each Portfolio,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. If the Reorganization Plan is
approved by the requisite vote of shareholders of one Portfolio, but not the
other, the Reorganization Plan will be effected on behalf of the Portfolio that
approved it subject to the conditions thereof.
PROPOSAL: TO APPROVE THE REORGANIZATION PLAN
PROVIDING FOR THE CONVERSIONS OF CCR MONEY MARKET
PORTFOLIO AND CCR TAX FREE MONEY MARKET PORTFOLIO TO
LIR PREMIER MONEY MARKET FUND ("PREMIER MONEY
MARKET FUND") AND LIR PREMIER TAX-FREE FUND ("PREMIER
TAX-FREE FUND") (EACH A "PREMIER FUND"), RESPECTIVELY,
TWO NEW SERIES OF MITCHELL HUTCHINS LIR MONEY SERIES
(THE "TRUST")
The Portfolios are presently organized as series of Infinity Funds.
The Board has approved the Reorganization Plan in the form attached to this
proxy statement as Appendix A. The Reorganization Plan provides for the
conversions of the Portfolios into the Premier Funds, two newly established
series of the Trust (the "Reorganizations").
Under the Reorganization Plan:
(1) CCR Money Market Portfolio will be converted to Premier Money
Market Fund, a newly organized series of the Trust; and
(2) CCR Tax Free Money Market Portfolio will be converted to Premier
Tax-Free Fund, a newly organized series of the Trust.
Neither Premier Fund has yet commenced business operations, and each
(a) was established solely for the purpose of effecting a Reorganization, (b)
will carry on the business of its corresponding Portfolio following its
Reorganization and (c) has an investment objective and investment policies and
restrictions identical to those of its corresponding Portfolio, except as
described below. The consummation of one Reorganization is not contingent on the
consummation of the other Reorganization. Shareholder voting rights under both
Infinity Funds and the Trust are currently based on the number of shares owned.
Mitchell Hutchins, the Portfolios' current investment adviser, will
continue to provide advisory services and will also provide the Premier Funds
with various administrative services and supervise the Premier Funds' daily
business affairs, subject to the supervision of the board of trustees of the
Trust (the "Trust Board"), under a new investment advisory and administration
contract. Mitchell Hutchins will also distribute shares of the Premier Funds
under a distribution agreement that provides for services equivalent to those
provided under the contract in effect between BISYS Fund Services Limited
Partnership ("BISYS") and Infinity Funds immediately prior to the Closing Date
(as defined below), without any additional compensation.
BACKGROUND AND REASONS FOR PROPOSED REORGANIZATIONS
Since inception, shares of the Portfolios have been sold to customers
("Customers") of brokerage firms that clear their securities through
Correspondent Services Corporation ("CSC"), an affiliate of Mitchell Hutchins,
the Portfolios' investment adviser. The Board was advised, in late July 1999,
that Mitchell Hutchins believed that Customers would be better served by
investing in money market funds more closely identified with Mitchell Hutchins
and its fund complex. More particularly, the representatives of Mitchell
Hutchins stated their belief that, as shareholders of funds in the Mitchell
Hutchins fund complex, Customers would likely receive enhanced services and the
funds would likely benefit from Mitchell Hutchins' marketing resources. Mitchell
Hutchins committed to guarantee lower expenses for the Premier Funds for one
year and advised the Board that the Premier Funds' expenses thereafter would
likely be no higher than the current expenses of the Portfolios. The Board also
considered that the Premier Funds would be expected to be managed very similarly
to the Portfolios, particularly because (1) they have effectively identical
investment objectives, (2) the portfolio managers who are primarily responsible
for each Portfolio's investment decisions are expected to be the same as those
for the Premier Funds and (3) as money market funds subject to Rule 2a-7 under
the Investment Company Act of 1940, as amended (the "1940 Act"), each Premier
Fund will continue to be subject to detailed, strict investment parameters.
The Board was advised of other ways of accomplishing the further
integration of Customers into the Mitchell Hutchins fund complex, but was
advised of certain cost advantages that could be realized through
reorganizations.
Based on the representations it received from Mitchell Hutchins, the
Board, including a majority of directors who are not "interested persons," as
that term is defined in the 1940 Act, of Infinity Funds or the Trust, approved
the Reorganizations at meetings held on August 12, 1999, and on August 23, 1999.
The Board recommends that Portfolio shareholders vote "FOR" the approval of the
Reorganization Plan. Such a vote encompasses approval of both (1) the
Reorganizations of the Portfolios into the Premier Funds and (2) a temporary
waiver of certain investment limitations of the Portfolios to permit the
Reorganizations (see "Temporary Waiver of Investment Restrictions" below). If
shareholders of a Portfolio do not approve the Reorganization Plan, the
Portfolio will continue to operate as series of Infinity Funds. If the
shareholders of only one Portfolio approve the Reorganization Plan, the
Reorganization will be effected only for that Portfolio. The other Portfolio
will continue to operate as a series of Infinity Funds and the Board will
consider other options and alternatives for that Portfolio.
The charts below compare the expenses of each Portfolio (in the fiscal
year ended December 31, 1998) to the estimated expenses of the corresponding
Premier Fund. The expenses of the Premier Funds will not exceed the expenses
charged to the Portfolios because Mitchell Hutchins and the Trust have agreed
that, through the Premier Funds' fiscal year ending December 31, 2000, Mitchell
Hutchins will reimburse the expenses of each Premier Fund that are in excess of
the "Net Expenses" amounts listed below. All percentages shown in the following
charts are of average net assets.
<TABLE>
<CAPTION>
PREMIER MONEY MARKET FUND
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PRO FORMA Expenses After
FISCAL YEAR 1998 EXPENSES Proposed Reorganization
FOR THE PORTFOLIO (Fiscal Year 2000 of the
Premier Fund)
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<S> <C> <C>
Investment Advisory and 0.20% 0.20%
Administration Fees (under separate contracts) (under a combined
contract)
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Distribution and/or Service
(12b-1) Fees 0.60% 0.60%
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Other Expenses 0.24% 0.24%
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Total Annual Fund Operating
Expenses 1.04% 1.04%
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Expense Reimbursements 0.11% 0.14%
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Net Expenses 0.93% 0.90%
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PREMIER TAX-FREE MONEY MARKET FUND
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PRO FORMA Expenses After
FISCAL YEAR 1998 EXPENSES Proposed Reorganization
FOR THE PORTFOLIO (Fiscal Year 2000 of the
Premier Fund)
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Investment Advisory and 0.20% 0.20%
Administration Fees (under separate contracts) (under a combined
contract)
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Distribution and/or Service
(12b-1) Fees 0.60% 0.43%
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Other Expenses 0.32% 0.39%
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Total Annual Fund Operating
Expenses 1.12% 1.02%
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Expense Reimbursements 0.41% 0.34%
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Net Expenses 0.71% 0.68%
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</TABLE>
As part of the Reorganizations, Mitchell Hutchins and the Trust will
enter into an agreement obligating Mitchell Hutchins to reimburse expenses, as
necessary to maintain these expense caps for the Premier Funds for their fiscal
year ending December 31, 2000. The expense caps will result in expenses that are
three basis points lower than the current voluntary waivers and reimbursements
in place and three basis points lower than the expense levels of each
Portfolio's last completed fiscal year. As money market funds reduce their
expenses, their returns increase by an equal amount. Therefore, approval of the
Reorganizations will lead to increased returns for Premier Funds' shareholders
due to Mitchell Hutchins' guarantee of lower expenses through the Premier Funds'
fiscal year 2000.
Additionally, Mitchell Hutchins anticipates developing enhanced
shareholder services, including an automated voice response system available in
the year 2000.
SUMMARY OF THE REORGANIZATION PLAN
Infinity Funds, on behalf of the Portfolios, the Trust, on behalf of
the Premier Funds, and Mitchell Hutchins are parties to the Reorganization Plan.
The following discussion summarizes the important terms of the Reorganization
Plan. This summary is qualified in its entirety by reference to the
Reorganization Plan itself, which is attached as Appendix A to this proxy
statement.
If the Reorganization Plan is approved by a Portfolio's shareholders,
then on the Closing Date (defined below), that Portfolio will transfer all of
its assets to the corresponding Premier Fund in exchange solely for shares of
that Premier Fund ("Premier Fund Shares") equal to the number of that
Portfolio's shares outstanding on the Closing Date ("Portfolio Shares") and the
assumption by that Premier Fund of all of the liabilities of that Portfolio.
Immediately thereafter, that Portfolio will constructively distribute to each of
its shareholders one Premier Fund Share for each Portfolio Share held by the
shareholder on the Closing Date in liquidation of the Portfolio Shares. As soon
as is practicable after this distribution of the Premier Fund Shares, that
Portfolio will be terminated. Upon completion of each Reorganization, a
Portfolio's shareholders will own full and fractional shares of the
corresponding Premier Fund equal in number and aggregate net asset value to his
or her Portfolio Shares.
The Reorganizations are anticipated to occur as of the close of
business on October 22, 1999, or at another date when the Reorganizations are
approved and all contingencies have been met ("Closing Date").
On or prior to the Closing Date, the Trust, on behalf of the
participating Premier Fund, will (i) adopt a distribution and service plan
pursuant to Rule 12b-1 under the 1940 Act (the "New Rule 12b-1 Plan") and enter
into a related Plan Agreement with CSC; (ii) enter into a distribution contract
with Mitchell Hutchins ("New Distribution Agreement") and (iii) enter into an
investment advisory and administration contract with Mitchell Hutchins
("Investment Advisory and Administration Agreement"). The Trust will also retain
Ernst & Young LLP ("Ernst & Young") as independent auditors for each of the
Premier Funds. Approval of the Reorganization Plan will authorize Mitchell
Hutchins (which will be issued a single share of each Premier Fund on a
temporary basis) to approve the Investment Advisory and Administration Agreement
for that Premier Fund, to ratify the selection of Ernst & Young as its
independent auditors and to ratify the selection of other service providers.
Each new agreement with service providers, including the Investment Advisory and
Administration Agreement will be similar to the corresponding contract,
agreement or plan in effect with respect to the Portfolios immediately prior to
the Closing Date, except as described below.
The new agreements between the Trust and the Premier Funds' service
providers will take effect on the Closing Date. The New Rule 12b-1 Plan and the
related Plan Agreement will continue in effect only if approved annually by a
majority vote of the Premier Funds' trustees who are not "interested persons,"
as that term is defined in the 1940 Act, of the Trust ("Independent Trustees")
and who have no direct or indirect financial interest in the operation of the
New Rule 12b-1 Plan or in any agreements related thereto cast in person at a
meeting called for that purpose. The Investment Advisory and Administration
Agreement will remain in effect until two years after the date it is approved by
the Premier Funds' initial shareholder, which would occur before the Closing
Date, as explained in more detail below, but thereafter must be approved
annually by the Independent Trustees.
Assuming the Reorganization Plan is approved, it is currently
contemplated that the Reorganizations will occur on the Closing Date. However,
the Reorganizations may become effective at any other date as to which the
parties may agree in writing.
The obligations of Infinity Funds and the Trust under the
Reorganization Plan are subject to various conditions as stated therein.
Notwithstanding the approval of the Reorganization Plan by the shareholders of a
Portfolio, it may be terminated or amended with respect to that Portfolio at any
time prior to its Reorganization by Infinity Funds or the Trust: if (i) there is
a material breach by any party of any representation, warranty or agreement
contained in the Reorganization Plan to be performed at or prior to the Closing
Date, (ii) it reasonably appears that a party will not or cannot meet a
condition of the Reorganization Plan or (iii) the Reorganization has not
occurred on or before February 29, 2000. Infinity Funds or the Trust may at any
time waive compliance with any of the covenants and conditions contained in, or
upon mutual agreement may amend, the Reorganization Plan, provided that the
waiver or amendment does not materially adversely affect the interests of the
Portfolios' shareholders.
Under the Reorganization Plan, the Trust agrees that any claim for
breach of the Reorganization Plan on behalf of the Portfolios will only be made
against the Portfolios and their assets, and not against any shareholder or
other series of the Infinity Funds. In addition, Mitchell Hutchins has agreed to
indemnify the Board against liabilities, damages and expenses associated with
claims by the Premier Funds or Portfolio shareholders which arise from the
Reorganizations. Such indemnification will occur only to the extent that the
Board is not otherwise paid under any applicable contract or agreement or any
insurance policy of the Portfolios.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Premier Fund are set
forth below. Each Premier Fund has an investment objective that is effectively
identical to that of the corresponding Portfolio. Please see below for a
description of the differences between CCR Money Market Portfolio's and Premier
Money Market Fund's investment policies.
CCR MONEY MARKET PORTFOLIO AND PREMIER MONEY MARKET FUND
The investment objectives of CCR Money Market Portfolio and Premier
Money Market Fund are effectively identical. They both seek to provide investors
with as high a level of current income as is consistent with the preservation of
capital and the maintenance of liquidity. In addition, they seek to maintain a
stable price of $1.00 per share by investing primarily in a diversified
portfolio of high quality money market instruments of governmental and private
issuers. CCR Money Market Portfolio usually invests at least 25% of its total
assets in domestic and/or U.S. dollar-denominated foreign banking instruments.
Premier Money Market Fund will not concentrate in any one industry; however, it
will treat domestic and foreign banking as separate industries, as other
Mitchell Hutchins advised or sub-advised funds do, and does not anticipate any
portfolio changes as a result of this difference immediately after the
Reorganization. They are both subject to the same risks, such as credit risk,
interest rate risk and foreign securities risk.
CCR TAX FREE MONEY MARKET PORTFOLIO AND PREMIER TAX-FREE FUND
The investment objectives of CCR Tax Free Money Market Portfolio and
Premier Tax-Free Fund are effectively identical. They both seek to provide
investors with as high a level of current income exempt from federal income tax
as is consistent with the preservation of capital and the maintenance of
liquidity. In addition, they seek to maintain a stable price of $1.00 per share
by investing in a diversified portfolio of high quality municipal money market
instruments. They both invest substantially all their assets in short-term
municipal securities. They both may invest up to 20% of their net assets in
securities the interest on which is a tax preference item for purposes of the
federal alternative minimum tax. Both may temporarily invest more than 20% of
their net assets in cash or taxable money market instruments when market
conditions warrant. They are both subject to the same risks, such as credit risk
and interest rate risk.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The exchange of each Portfolio's assets for Premier Fund Shares and
the corresponding Premier Fund's assumption of the Portfolio's liabilities is
intended to qualify for federal income tax purposes as a tax-free reorganization
under section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the
"Code"). Infinity Funds and the Trust will receive an opinion of Kirkpatrick &
Lockhart LLP substantially to the effect that, with respect to each
Reorganization:
(1) The Premier Fund's acquisition of the Portfolio's assets in
exchange solely for Premier Fund Shares and the Premier Fund's
assumption of the Portfolio's liabilities, followed by the Portfolio's
distribution of those shares PRO RATA to its shareholders
constructively in exchange for their Portfolio Shares, will qualify as
a "reorganization" within the meaning of section 368(a)(1)(F) of the
Code, and the Portfolio and Premier Fund each will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(2) The Portfolio will recognize no gain or loss on the transfer of
its assets to the Premier Fund in exchange solely for Premier Fund
Shares and the Premier Fund's assumption of the Portfolio's
liabilities or on the subsequent distribution of those shares to the
Portfolio's shareholders in constructive exchange for their Portfolio
Shares;
(3) The Premier Fund will recognize no gain or loss on its receipt of
the transferred assets in exchange solely for Premier Fund Shares and
its assumption of the Portfolio's liabilities;
(4) The Premier Fund's basis for the transferred assets will be the
same as the Portfolio's basis therefor immediately before the
Reorganization, and the Premier Fund's holding period for those assets
will include the Portfolio's holding period therefor;
(5) A Portfolio shareholder will recognize no gain or loss on the
constructive exchange of all its Portfolio Shares solely for Premier
Fund Shares pursuant to the Reorganization; and
(6) A Portfolio shareholder's aggregate basis for the Premier Fund
Shares to be received by it in the Reorganization will be the same as
the aggregate basis for its Portfolio Shares to be constructively
surrendered in exchange for those Premier Fund Shares, and its holding
period for those Premier Fund Shares will include its holding period
for those Portfolio Shares, provided they are held as capital assets
by the shareholder on the Closing Date.
The tax opinion may state that no opinion is expressed as to the effect of the
Reorganizations on the Portfolios, Premier Funds or any shareholder with respect
to any asset as to which any unrealized gain or loss is required to be
recognized for federal income tax purposes on the termination or transfer
thereof under a mark-to-market system of accounting.
Shareholders of each Portfolio should consult their tax advisers
regarding the effect, if any, of the Reorganizations in light of their
individual circumstances. Because the foregoing discussion only relates to
federal income tax consequences of the Reorganizations, those shareholders also
should consult their tax advisers about state and local tax consequences, if
any, of the Reorganizations.
FORMS OF ORGANIZATION
The Portfolios are separate series of Infinity Funds, an open-end
management investment company that was organized as a Maryland corporation on
March 6, 1990. The Premier Funds are separate series of the Trust, an open-end
investment management company that was formed as a Delaware business trust on
April 29, 1998. Because all four funds are money market funds subject to the
requirements of Rule 2a-7 under the 1940 Act, they generally can invest no more
than 5% of their total assets in the securities of any single issuer other than
the U.S. government. Neither Premier Fund is required to (nor will it) hold
annual shareholder meetings.
CONTINUATION OF FUND SHAREHOLDER ACCOUNTS
The Premier Funds' transfer agent, BISYS, is also the Portfolios'
transfer agent and will establish accounts on each Premier Fund's books for the
shareholders containing the appropriate number of Premier Fund Shares to be
received by each holder of Portfolio Shares under the Reorganization Plan. Such
accounts will be identical in all material respects to the accounts currently
maintained by BISYS for the Portfolios' shareholders.
CHANGE IN INDEPENDENT AUDITORS
BY APPROVING THE REORGANIZATION PLAN, THE SHAREHOLDERS AUTHORIZE
MITCHELL HUTCHINS TO VOTE ONE INITIAL SHARE OF EACH PREMIER FUND IN FAVOR OF
RATIFYING THE TRUST BOARD'S SELECTION OF INDEPENDENT AUDITORS. The Trust Board,
including all of its Independent Trustees, has selected Ernst & Young to serve
as independent auditors of the Premier Funds. Ernst & Young has no direct
financial interest or material indirect financial interest in the Premier Funds.
Representatives of Ernst & Young are not expected to attend the Meeting but have
been given the opportunity to make a statement if they so desire and will be
available should any matter arise requiring their presence.
The independent auditors will examine annual financial statements for
the Premier Funds and will provide other audit and tax-related services. In
recommending the selection of Ernst & Young, the Trust Board reviewed the nature
and scope of the services to be provided (including non-audit services) and
whether the performance of those services would affect the auditors'
independence.
The retention of Ernst & Young instead of the Portfolios' current
independent auditors, KPMG LLP ("KPMG"), is not due to any known disagreements
with the Infinity Funds' management. KPMG has consistently provided unqualified
reports to the Portfolios. Ernst & Young is the independent auditors
predominantly used by other funds in the Mitchell Hutchins fund complex,
including the other series of the Trust. Representatives from KPMG are not
expected to attend the Meeting but have been given the opportunity to make a
statement if they so desire and will be available should any matter arise
requiring their presence.
SELECTION OF INVESTMENT ADVISER AND ADMINISTRATOR
BY APPROVING THE REORGANIZATION PLAN, THE SHAREHOLDERS AUTHORIZE
MITCHELL HUTCHINS TO VOTE ONE INITIAL SHARE OF EACH PREMIER FUND IN FAVOR OF
SELECTING MITCHELL HUTCHINS TO SERVE AS EACH PREMIER FUND'S INVESTMENT ADVISER,
THE SAME ROLE MITCHELL HUTCHINS HAS HELD SINCE THE PORTFOLIO COMMENCED
OPERATIONS, AS WELL AS ITS ADMINISTRATOR, IN ACCORDANCE WITH THE TERMS OF THE
PROPOSED INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT. Currently, the
Portfolios operate under an investment advisory agreement between the Portfolios
and Mitchell Hutchins dated October 30, 1990 (the "Current Investment Advisory
Agreement") and an administration agreement between the Portfolios and BISYS
dated February 11, 1997 ("Current Administration Agreement") (collectively the
"Current Agreements"). If a Reorganization, is approved by shareholders of a
Portfolio, the Current Agreements will be terminated and the new Investment
Advisory and Administration Agreement between the Trust and Mitchell Hutchins
will become effective upon the Closing Date for that Portfolio.
<PAGE>
The proposed Investment Advisory and Administration Agreement is
modeled upon the investment advisory and administration agreements between the
other funds in the Mitchell Hutchins fund complex and Mitchell Hutchins.
However, the provisions of the Current Agreements are not substantially
different from the proposed Investment Advisory and Administration Agreement.
Besides the new names and dates in the Investment Advisory and Administration
Agreement, there are six significant differences between the current and
proposed Agreements. First, the provisions of both Current Agreements will be
contained in one contract, the Investment Advisory and Administration Agreement
and Mitchell Hutchins will serve as administrator of the Premier Funds instead
of BISYS. Second, under the Investment Advisory and Administration Agreement,
Mitchell Hutchins is explicitly permitted to delegate any of its contractual
duties to a sub-adviser or sub-administrator, whereas the Current Agreements do
not mention such delegations. In addition, the Investment Advisory and
Administration Agreement permits a sub-adviser to be hired or terminated without
shareholder approval pursuant to an SEC exemptive order. However, Mitchell
Hutchins does not currently intend to retain a sub-adviser or sub-administrator
for either Premier Fund. (See "Future Imposition, Modification and Termination
of Sub-Advisers" below for more details.) Third, the Investment Advisory and
Administration Agreement specifically limits the ability of Mitchell Hutchins to
reach the assets of Premier Fund trustees or shareholders to settle any right or
claim. This provision does not alter the allocation of liabilities from that of
the Current Investment Advisory Agreement; it merely is an explicit statement of
such allocation that is a common provision in contracts governed by Delaware
business trust law. Fourth, the non-exclusive list of expenses to be borne by
the Premier Funds in the Investment Advisory and Administration Agreement
includes certain added expenses to conform the Investment Advisory and
Administration Agreement to the format used by the Mitchell Hutchins fund
complex. Fifth, the governing law of the Investment Advisory and
Administration Agreement will be Delaware, while the Current Agreement the
governing law is New York. Finally, under the Investment Advisory and
Administration Agreement, Mitchell Hutchins must give 60 days' notice of
termination of the agreement, unlike the 90 day notice requirement under the
Current Investment Advisory Agreement.
The fee under the Investment Advisory and Administration Agreement
will effectively remain the same as the combined fee under the Current
Agreements - 0.20% of each Premier Fund's average daily net assets. The terms of
both Agreements are described in more detail below and a copy of the Investment
Advisory and Administration Agreement with respect to the Premier Funds appears
as Appendix D to this proxy statement.
TERMS OF THE INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
Pursuant to the Investment Advisory and Administration Agreement,
subject to the supervision of the Trust Board, and in conformity with the stated
policies of the Premier Funds, Mitchell Hutchins would be responsible for
managing the investment operations of the Premier Funds and the composition of
their portfolios, including the purchase, retention and disposition of portfolio
securities. In this regard, Mitchell Hutchins would be responsible for
supervising the Premier Funds' investments, furnishing a continuous investment
program for the Funds' portfolios, and placing purchase and sale orders for
portfolio securities of the Funds and other investments. Under the Investment
Advisory and Administration Agreement, Mitchell Hutchins would also administer
the Premier Funds' corporate affairs, subject to the supervision of the Trust
Board and, in connection therewith, furnish the Premier Funds with office
facilities, together with those ordinary clerical and bookkeeping services which
are not being furnished by the Premier Funds' distributor, transfer and dividend
disbursing agent and custodian. Mitchell Hutchins would keep certain books and
records of the Premier Funds required to be maintained pursuant to the 1940 Act.
Under the Investment Advisory and Administration Agreement, Mitchell Hutchins is
not obligated to provide exclusive investment management services to the Premier
Funds, and Mitchell Hutchins is free to, and already does, render investment
management services to others. Mitchell Hutchins is permitted to delegate any or
all of its duties under the Investment Advisory and Administration Agreement to
a sub-adviser or sub-administrator according to a sub-advisory or
sub-administration contract.
All services furnished by Mitchell Hutchins under the Investment
Advisory and Administration Agreement may be furnished by its directors,
officers or employees. In connection with the administration of the corporate
affairs of the Premier Funds, Mitchell Hutchins would bear the following
expenses:
(a) the salaries and expenses of all of Mitchell Hutchins' personnel
involved with the Premier Funds and related overhead;
(b) the fees and salaries of the Premier Funds' trustees and officers,
if any, who are affiliated with Mitchell Hutchins (as defined in the 1940 Act);
and
(c) all expenses incurred by Mitchell Hutchins in connection with
managing the ordinary course of the Premier Funds' business, other than those
assumed by the Premier Funds, as described below.
Under the Investment Advisory and Administration Agreement, the
Premier Funds will pay Mitchell Hutchins a fee at the annual rate of 0.20% of
each Fund's average daily net assets. This fee will be computed daily and paid
monthly.
The Investment Advisory and Administration Agreement provides that
Mitchell Hutchins will not be liable to the Premier Funds or their shareholders
for any error of judgment or mistake of law by Mitchell Hutchins or for any loss
suffered by the Funds in connection with the matters to which the Investment
Advisory and Administration Agreement relates, except for liability resulting
from willful misfeasance, bad faith or gross negligence in the performance of
its duties or by reason of Mitchell Hutchins' reckless disregard of its duties
and obligations under the Investment Advisory and Administration Agreement.
Mitchell Hutchins is not entitled to any such indemnification with respect to
any liability to the Premier Funds or their shareholders resulting from willful
misfeasance, bad faith, gross negligence in the performance of its duties or its
reckless disregard of its duties and obligations under the Investment Advisory
and Administration Agreement.
If Mitchell Hutchins, as sole initial shareholder of the Premier Funds
approves the Investment Advisory and Administration Agreement, it will continue
in effect for two years after the date of such approval. The Investment Advisory
and Administration Agreement may be renewed from year-to-year after its initial
term, provided that any such renewals are specifically approved at least
annually by (i) the board of trustees, or by a vote of the majority of the
outstanding voting securities of each Premier Fund, and (ii) a majority of
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval.
The Investment Advisory and Administration Agreement is terminable
without penalty on 60 days' written notice by a vote of the majority of the
outstanding voting securities of the Premier Funds, by a vote of the majority of
the Trust Board, or by Mitchell Hutchins on 60 days' written notice, and will
automatically terminate in the event of its assignment (as defined in the 1940
Act).
INFORMATION ABOUT MITCHELL HUTCHINS ASSET MANAGEMENT INC.
It is proposed that Mitchell Hutchins, a Delaware corporation with
principal offices at 1285 Avenue of the Americas, New York, NY 10019, act as the
investment adviser and administrator for the Premier Funds. Mitchell Hutchins,
currently the Portfolio's investment adviser under the Current Investment
Advisory Agreement, is a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber"), which in turn is a wholly owned subsidiary of Paine Webber
Group Inc. ("PW Group"), a publicly owned financial services holding company.
The principal address of both PaineWebber and PW Group is also 1285 Avenue of
the Americas, New York, NY 10019. Mitchell Hutchins is actively engaged in
providing investment supervisory services to institutional and individual
clients.
Mitchell Hutchins is also the investment adviser and administrator or
sub-adviser and sub-administrator for a number of investment companies that have
similar investment objectives to the Premier Funds. A list of these investment
companies, their approximate net assets and Mitchell Hutchins annual management
fee with respect to each is located at Appendix E. In addition, Mitchell
Hutchins serves as distributor for the Premier Funds. As of ___________, 1999,
Mitchell Hutchins was the administrator or sub-administrator of [__] portfolios
within the Mitchell Hutchins fund complex, and Mitchell Hutchins was the
distributor for [___] funds in the Mitchell Hutchins fund complex.
Certain information regarding the directors and principal executive
officers of Mitchell Hutchins is set forth below:
POSITION WITH
NAME AND ADDRESS MITCHELL HUTCHINS PRINCIPAL OCCUPATION
Margo N. Alexander Chairman, Chief Please see Appendix F for
Executive Officer detailed biographical
and Director information.
Brian Storms President, Chief Please see Appendix F for
Operating Officer detailed biographical
and Director information.
Julian Sluyters Chief Administrative Senior Vice President, Chief
Officer, Senior Vice Administrative Officer and
President and Operating Committee Member of
Director PaineWebber
The following trustees and officers of the Premier Funds are
directors, officers or employees of Mitchell Hutchins: Margo N. Alexander, Brian
Storms, Anthony G. Balestrieri, Kris L. Dorr, Elbridge T. Gerry III, John J.
Lee, Kevin J. Mahoney, Michael H. Markowitz, Dennis McCauley, Kevin P. McIntyre,
Ann E. Moran, Dianne E. O'Donnell, Emil Polito, Susan Ryan, Victoria E.
Schonfeld, Paul H.Schubert, Barney A. Taglialatela, Debbie Vermann and Keith A.
Weller.
[None of the trustees of the Trust own securities of or have a direct
or indirect material interest in Mitchell Hutchins, PaineWebber or PW Group.]
[No trustee of the Trust had a material interest in a material
transaction during the fiscal year ended December 31, 1998 or has such an
interest in a proposed material transaction to which Mitchell Hutchins,
PaineWebber or PW Group, or any subsidiaries thereof were or will be parties.]
If the Reorganization Plan is not approved, the Current Investment
Advisory Agreement will remain in effect in accordance with its terms. The terms
of the Current Investment Advisory Agreement are discussed in the following
section.
TERMS OF THE CURRENT INVESTMENT ADVISORY AGREEMENT
The Current Investment Advisory Agreement between the Portfolios and
Mitchell Hutchins first took effect on October 30, 1990. Unless earlier
terminated, it will remain in effect until December 31, 1999. The last time the
Current Investment Advisory Agreement was approved by an affirmative vote of
shareholders was December 20, 1991, for CCR Money Market Portfolio and October
30, 1990, for CCR Tax Free Money Market Portfolio, when it was submitted to each
Portfolio's shareholders for initial approval as a new agreement.
As noted above, the Current Investment Advisory Agreement is similar
to the investment advisory portion of the proposed Investment Advisory and
Administration Agreement. Under the direction and control of the Board, Mitchell
Hutchins makes recommendations for purchases and sales of portfolio securities
by the Portfolios pursuant to their stated investment objectives, policies and
restrictions and reviews these purchase and sale recommendations for suitability
in accordance with such objectives, policies and restrictions. Upon determining
such suitability, Mitchell Hutchins is authorized to transmit purchase and sale
orders and select brokers and dealers to execute portfolio transactions on
behalf of the Portfolios. Mitchell Hutchins determines the timing of portfolio
transactions and other matters related to execution. The Current Investment
Advisory Agreement also contains provisions concerning renewals, terminations
and the non-exclusivity of Mitchell Hutchins' services that are substantially
similar to provisions in the proposed Investment Advisory and Administration
Agreement.
Additionally, pursuant to the Current Administration Agreement between
Infinity Funds and BISYS, BISYS is the administrator of the Portfolios. BISYS
renders to the Portfolios such administrative, accounting, internal auditing and
clerical services as are necessary to provide for effective operation of the
Portfolios, but the Portfolios must bear all of their own expenses. The
important differences between the Agreements are explained above.
The fee structure under the Current Investment Advisory Agreement and
Current Administration Agreement is substantially identical to the fee structure
under the proposed Investment Advisory and Administration Agreement except that
under the Current Investment Advisory Agreement the Portfolios each pay 0.10% of
their average daily net assets while under a separate Current Administration
Agreement each Portfolio pays an additional 0.10% of its average daily net
assets. Therefore, the combined fee of the Current Agreements, 0.20%, is equal
to the 0.20% fee payable under the Investment Advisory and Administration
Agreement, a combined agreement format that is more common for Mitchell Hutchins
advised or sub-advised funds.
The aggregate amount of investment advisory fees received by Mitchell
Hutchins from CCR Money Market Portfolio during the fiscal year ended December
31, 1998, was $1,328,616, and for the six-month period ended June 30, 1999, was
$801,927. The aggregate amount of investment advisory fees received by Mitchell
Hutchins from CCR Tax Free Money Market Portfolio during the fiscal year ended
December 31, 1998, was $113,647, and for the six month period ended June 30,
1999, was $55,988. The aggregate amount of administration fees received by BISYS
from CCR Money Market Portfolio during the fiscal year ended December 31, 1998,
was $1,328616, and for the six-month period ended June 30, 1999, was $113,647.
The aggregate amount of administration fees received by BISYS from CCR Tax Free
Money Market Portfolio during the fiscal year ended December 31, 1998, was
$113,647, and for the six month period ended June 30, 1999, was $55,988.
Mitchell Hutchins would have received approximately the same amount from the
Portfolios if the investment advisory and administration fees under the Premier
Funds' Investment Advisory and Administration Agreement had been charged during
the same periods, provided that similar fee waivers/ reimbursements had been in
effect.
PORTFOLIO TRANSACTIONS
Mitchell Hutchins, pursuant to the Current Investment Advisory
Agreement, has arranged for the execution of the Portfolios' portfolio
transactions and may allocate any brokerage. These arrangements would be
substantially similar if the Reorganizations are approved and Mitchell Hutchins
becomes the Premier Funds' investment adviser and administrator pursuant to the
Investment Advisory and Administration Agreement. For the fiscal year ended
December 31, 1998, the Portfolios paid no brokerage commissions to entities
affiliated with the Portfolios.
If the Portfolios' shareholders approve the Reorganizations, the
proposed Investment Advisory and Administration Agreement will be adopted by
Mitchell Hutchins as sole initial shareholder of the Premier Funds. IF THE
PORTFOLIOS' SHAREHOLDERS DO NOT APPROVE THE REORGANIZATION, THE CURRENT
INVESTMENT ADVISORY AGREEMENT WILL CONTINUE IN FORCE FOR THAT PORTFOLIO, AND THE
PORTFOLIO WILL REMAIN A SERIES OF THE INFINITY FUNDS AND CONTINUE TO OPERATE.
THE BOARD WILL THEN CONSIDER OTHER OPTIONS AND ALTERNATIVES FOR THAT PORTFOLIO.
CONTINUATION OF TRANSFER AGENT AND CUSTODIAN
The Premier Funds have approved arrangements with The Bank of New York
("BONY") to serve as custodian for the Funds. These arrangements are similar to
the Portfolios' existing custodian contract with BONY. The Premier Funds have
also approved arrangements with BISYS to serve as transfer agent for the Funds.
These arrangements are similar to the Portfolios' existing arrangements with
BISYS.
DIFFERENCES IN DISTRIBUTOR
BY APPROVING THE REORGANIZATION PLAN, MITCHELL HUTCHINS IS AUTHORIZED
TO ENTER INTO A NEW DISTRIBUTION AGREEMENT WITH MITCHELL HUTCHINS. The New
Distribution Agreement follows the standard distribution agreement form used by
the funds in the Mitchell Hutchins fund complex. The New Distribution Agreement
provides for distribution services that are substantially similar to those
currently in place between Infinity Funds and BISYS.
FUTURE IMPOSITION, MODIFICATION AND TERMINATION OF SUB-ADVISERS
Immediately after effecting the Reorganizations, the Premier Funds
will not be serviced by any sub-adviser, but directly by Mitchell Hutchins.
However, under the Investment Advisory and Administration Agreement, Mitchell
Hutchins may delegate any or all or its contractual duties to a sub-adviser with
respect to all or a portion of a Premier Fund's net assets. Normally, the 1940
Act requires shareholder approval of sub-advisory contracts and any material
changes thereto. However, an exemption from the provisions of Section 15(a) and
Rule 18f-2 of the 1940 Act has been granted by the SEC to Mitchell Hutchins and
the Trust to permit Mitchell Hutchins to select and retain new sub-advisers for
the Premier Funds without shareholder approval, but subject to approval by the
Trust Board. Mitchell Hutchins may also modify or terminate existing
sub-advisory agreements in the same manner. This exemption is subject to several
SEC imposed conditions to protect shareholders. One such protective measure is
that the Trust must send all Premier Fund shareholders an information statement
on the new or modified sub-adviser, sub-advisory contract or sub-advisory fees
that would be equivalent to the disclosure required under the proxy rules within
ninety days of a change in the Funds' sub-adviser or sub-advisory contract. The
Trust Board believes that this exemption will increase the Premier Funds'
flexibility without causing the delay and expense associated with holding
additional shareholder meetings. However, Mitchell Hutchins does not currently
intend to retain a sub-adviser for either Premier Fund.
DIFFERENCE IN CONCENTRATION POLICY
The investment policies of Premier Money Market Fund will be
substantially similar to the investment policies of CCR Money Market Portfolio.
However, Premier Money Market Fund has a different concentration policy than CCR
Money Market Portfolio. CCR Money Market Portfolio has an investment policy of
investing at least 25% of its total assets in domestic and/or U.S.
dollar-denominated foreign banking instruments. Premier Money Market Fund does
not concentrate its investments in what it considers to be a single industry.
However, Mitchell Hutchins does not anticipate any immediate changes in
portfolio management that will result from this difference.
DESCRIPTION OF DIFFERENCES BETWEEN THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF
THE PORTFOLIOS AND THE PREMIER FUNDS
IF THE REORGANIZATIONS ARE APPROVED, THE SHAREHOLDERS OF THE
PORTFOLIOS WILL BECOME SHAREHOLDERS OF THE PREMIER FUNDS, WHICH HAVE FUNDAMENTAL
AND NON-FUNDAMENTAL INVESTMENT RESTRICTIONS THAT DIFFER FROM THOSE OF THE
PORTFOLIOS, AS DESCRIBED BELOW. (Mitchell Hutchins has provided the information
concerning the Premier Funds.) As required by the 1940 Act, the Portfolios and
the Premier Funds have adopted certain fundamental investment restrictions
("fundamental restrictions"), which are set forth in their Statements of
Additional Information ("SAIs"). Fundamental restrictions may be changed only
with a shareholder vote. The Premier Funds also have other investment
restrictions and policies that they have not specifically designated as
fundamental. These investment restrictions and policies are considered to be
"non-fundamental" and may be changed by the Trust Board without shareholder
approval.
Shareholders of the Premier Funds should note that the Portfolios and
the Premier Funds must all comply with Rule 2a-7 under the 1940 Act. Rule 2a-7
imposes stringent and detailed requirements concerning portfolio
diversification, quality and maturity of money market funds. Because all the
funds must comply with Rule 2a-7's requirements, as a practical matter the
differences between the fundamental restrictions of the Portfolios and those of
the Premier Funds are not expected to result in significant differences in how
the Premier Funds are managed.
The current fundamental restrictions of the Portfolios are attached at
Appendix B. The fundamental and non-fundamental restrictions of the Premier
Funds, which are identical to each other and to those of most other mutual funds
in the Mitchell Hutchins complex, are attached as Appendix C. Mitchell Hutchins
believes that having the fundamental and non-fundamental restrictions of the
Premier Funds consistent with those of most other funds in the Mitchell Hutchins
complex facilitates compliance monitoring. The notable substantive differences
are described below.
CONCENTRATION POLICY. CCR Money Market Portfolio has a fundamental
restriction that requires it to invest at least 25% of its total assets in
securities issued by banks. Premier Money Market Fund does not have a
corresponding concentration requirement. With this exception, the concentration
policies of the Portfolios and the Premier Funds are substantially similar in
that no fund may purchase a security if, as a result, 25% or more of its total
assets would be invested in securities of issuers having their principal
business activities in the same industry. The Premier Funds' fundamental
restrictions exempt a broader range of securities -- obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities, municipal
securities and certificates of deposit and bankers' acceptances of domestic
branches of U.S. banks -- from the general prohibition.
While Premier Money Market Fund is not required to concentrate its
investments in securities issued by banks, the Fund considers domestic and
foreign banking to be different industries. As a result, Mitchell Hutchins does
not expect that Premier Money Market Fund would need to dispose of any
securities received from CCR Money Market Portfolio if the Reorganization is
approved.
PORTFOLIOS' FUNDAMENTAL RESTRICTION ON INVESTING IN CERTAIN TYPES OF
SECURITIES. CCR Money Market Portfolio has a fundamental limitation prohibiting
investments in common stocks, preferred stocks, warrants and other equity
securities. CCR Tax Free Money Market Portfolio has a fundamental restriction
against purchases of "securities other than Municipal Obligations and Taxable
Investments." (These terms are defined broadly to encompass all debt securities
in which a money market fund could invest.) Neither Premier Fund has a
comparable fundamental limitation, although each Premier Fund's investment
policies and the restrictions imposed on money market funds by Rule 2a-7
prohibit the Premier Funds from investing in any securities other than money
market instruments. Mitchell Hutchins does not believe that the absence of
comparable fundamental restrictions will result in any change in the Premier
Funds' investments as compared to those of the Portfolios.
RESTRICTIONS ON BORROWING AND SENIOR SECURITIES. The 1940 Act limits
an investment company's ability to engage in leverage through borrowings or the
issuance of other "senior securities," a term that is defined, generally, as
fund obligations that have priority over its shares with respect to the
distribution of fund assets or the payment of dividends. The Portfolios'
fundamental restrictions governing borrowing and senior securities are
significantly more restrictive than required by the 1940 Act, in that they limit
bank borrowings to 15% of a Portfolio's total assets. In addition, the
fundamental restrictions for CCR Money Market Portfolio limit senior securities
to certain reverse repurchase agreements while those for CCR Tax Free Money
Market Portfolio prohibit all senior securities. The Portfolios' fundamental
restrictions also state that a Portfolio will not make any additional
investments while borrowings exceed 5% of the value of the Portfolio's total
assets.
The comparable fundamental restrictions for the Premier Funds are no
more restrictive than required by the 1940 Act and thus permit the issuance of
senior securities and borrowing money, provided that these activities are not in
excess of up to 33-1/3% of a Premier Fund's total assets, plus an additional 5%
borrowing for temporary or emergency purposes. However, as a matter of
investment policy, each Premier Fund's borrowings may not exceed the 15% limit
imposed under the Portfolios' fundamental restrictions. In addition, the Premier
Funds have a non-fundamental restriction on purchasing additional portfolio
securities while borrowings in excess of 5% of total assets are outstanding.
Accordingly, the Premier Funds will be operated, with respect to borrowings, in
the same manner as the Portfolios, except that Premier Tax-Free Money Market
Fund would not be prohibited from entering into reverse repurchase agreements.
These non-fundamental investment policies could be changed for either Premier
Fund by the Trust Board without shareholder approval.
FUNDAMENTAL RESTRICTIONS ON PLEDGING, HYPOTHECATING, MORTGAGING OR
ENCUMBERING PORTFOLIO SECURITIES. Unlike the Portfolios, the Premier Funds do
not have fundamental restrictions on pledging portfolio securities because this
type of fundamental restriction is not required by the 1940 Act. Certain states
used to (but no longer) require this restriction as a condition for permitting
the sale of a fund's securities in those states. However, the Premier Funds'
investment policies do not contemplate the pledging of portfolio securities
except in connection with permitted borrowings or permissible investment
activities such as reverse repurchase agreements or forward purchase
commitments. The fundamental restriction for CCR Money Market Portfolio permits
pledging of portfolio securities in connection with both borrowings and these
investment activities; the fundamental restriction for CCR Tax Free Money Market
Portfolio only permits pledging portfolio securities in connection with
permissible borrowings. Mitchell Hutchins does not expect that the Premier Funds
would need to pledge portfolio securities other than in connection with
permissible borrowings or in circumstances where entering into permissible
investments (such as forward commitments) might be deemed to constitute a
pledge. However, the Trust Board could approve additional pledging transactions
without shareholder approval.
FUNDAMENTAL RESTRICTION ON MAKING LOANS. There are differences between
the fundamental restrictions of the two Portfolios regarding the making of loans
in that the fundamental restriction for CCR Tax Free Money Market Portfolio does
not expressly except the lending of portfolio securities from the overall
restriction. The Premier Funds also have a fundamental restriction that
prohibits making loans but, for both Premier Funds, expressly except loans of
portfolio securities from the prohibition. The Premier Funds' restriction also
has a more detailed listing of the types of debt obligations that a Fund may
acquire without being deemed to make a loan.
The Premier Funds have a non-fundamental policy permitting each of
them to lend portfolio securities in an amount up to 33 1/3% of its total
assets, which is the maximum level currently permitted under the 1940 Act and
the amount permitted for CCR Money Market Portfolio. Although the Premier Funds
may not lend portfolio securities in the immediate future, it is expected that
the Trust Board will approve their participation in a securities lending program
that includes other funds in the Mitchell Hutchins fund complex. Pursuant to SEC
exemptive orders, funds with Mitchell Hutchins as their adviser or sub-adviser
are permitted to use its parent, PaineWebber, as lending agent, and may lend
portfolio securities to PaineWebber as principal, subject to a number of SEC
imposed conditions intended to protect shareholder interests.
Lending portfolio securities would enable a Premier Fund to earn
additional income but could result in a loss or delay in recovering the
securities. Under any securities lending program that may be approved by the
Trust Board, a Premier Fund would lend portfolio securities to broker-dealers or
institutional investors that Mitchell Hutchins deems qualified, but only when
the borrower maintains acceptable collateral with the Fund's custodian in an
amount at least equal to the market value of the securities loaned, plus accrued
interest and dividends. A Premier Fund would pay reasonable administrative and
custodial fees in connection with any loan and might pay a negotiated portion of
the interest earned on the cash or instruments held as collateral to the
borrower or to the placing broker. A Premier Fund would retain the authority to
terminate any loans at any time. A Premier Fund would regain record ownership of
loaned securities to exercise beneficial rights, such as voting rights, when
doing so is considered to be in the Premier Fund's interest.
FUNDAMENTAL RESTRICTION ON WRITING OR PURCHASING PUT OR CALL OPTIONS
OR COMBINATIONS THEREOF. The Portfolios both have fundamental restrictions
prohibiting writing or purchasing put or call options or combinations thereof.
The Premier Funds have no similar fundamental restriction because it is not
required by the 1940 Act. The Premier Funds' current investment policies do not
permit them to invest in options, although these policies could be changed by
the Trust Board without shareholder approval. Mitchell Hutchins believes that
the flexibility for the Trust Board to permit these types of investments is
appropriate in the event changes in the types of money market instruments
available for investment and in the restrictions imposed on the money market
fund industry by Rule 2a-7 make use of options appropriate for the Premier
Funds.
FUNDAMENTAL RESTRICTION ON UNDERWRITING SECURITIES. The Portfolios'
fundamental restrictions prohibit them from acting as underwriter of securities
for other issuers, with an exception permitting CCR Tax Free Money Market
Portfolio to bid for the purchase of municipal securities directly from an
issuer. The Premier Funds' fundamental restrictions prohibit them from engaging
in the business of underwriting securities, except to the extent that a Premier
Fund may be considered an underwriter under the federal securities laws in
connection with its disposition of portfolio securities. Mitchell Hutchins
believes that these fundamental restrictions are substantially similar
notwithstanding the language differences and somewhat broader approach taken for
the Premier Funds.
FUNDAMENTAL RESTRICTION ON REAL ESTATE INVESTMENTS. The Portfolios and
the Premier Funds' all have fundamental restrictions prohibiting investment in
real estate. The Portfolios' investment restrictions also prohibit investment in
real estate investment trusts and (for CCR Tax Free Money Market Portfolio)
there is an exception for investments in municipal obligations secured by real
estate or interests therein. The Premier Funds' fundamental restrictions
prohibit only investment in real estate and make it clear that investments in
securities of issuers that invest in real estate and certain securities backed
by interests in real estate are not subject to the limitations. The Premier
Funds' limitation also permits a Premier Fund to exercise its rights in
connection with the holding of such securities, including enforcing security
interests and holding real estate acquired due to such enforcement. Mitchell
Hutchins does not anticipate that these differences would cause the Premier
Funds' operating policies governing investments in mortgage-backed securities or
other real estate related securities to be any different from those currently
followed by the Portfolios.
FUNDAMENTAL RESTRICTION ON INVESTING IN COMMODITIES. The Portfolios
have fundamental restrictions prohibiting them from buying or selling
commodities. The Premier Funds also have fundamental restrictions that prohibit
them from buying or selling physical commodities (unless acquired as a result of
owning securities or other instruments), but permit them to buy and sell
financial options and futures contracts and other financial contracts or
derivative instruments. Their current operating policies do not permit the
Premier Funds to use these instruments, but the Trust Board could authorize
their use in the future without shareholder approval. Mitchell Hutchins believes
that flexibility for the Trust Board to permit these types of investments is
appropriate in the event changes in the types of money market instruments
available for investment and in the restrictions imposed on the money market
fund industry by Rule 2a-7 make use of financial futures contracts and other
types of derivative instruments appropriate for the Premier Funds.
FUNDAMENTAL RESTRICTION ON SHORT SALES. The Portfolios have
fundamental restrictions prohibiting short sales. The 1940 Act does not require
that funds have a fundamental limitation governing short sales, but the Premier
Funds have a non-fundamental limitation prohibiting short sales other than short
sales "against the box" (the short sale of a security the Fund already owns or
has the right to own) and short positions in connection with financial contracts
or derivative instruments. Mitchell Hutchins believes it appropriate for the
Trust Board to have the flexibility to modify this policy in the future without
shareholder approval in the event available investments for money market funds
change to make engaging in short sales appropriate for the Premier Funds and
consistent with Rule 2a-7.
FUNDAMENTAL RESTRICTION ON MARGIN TRANSACTIONS. The Portfolios have
fundamental restrictions prohibiting the purchase of securities on margin. The
1940 Act does not require that funds have a fundamental limitation governing
margin transactions, but the Premier Funds have a non-fundamental limitation
prohibiting the purchase of securities on margin except for short-term credit
necessary for the clearance of portfolio transactions and except that a Fund may
make margin deposits in connection with its use of financial options or futures
or other derivative instruments. Mitchell Hutchins believes it appropriate for
the Trust Board to have the flexibility to modify this policy without
shareholder approval in the event available investments for money market funds
change to make engaging in margin purchases appropriate and consistent with Rule
2a-7.
FUNDAMENTAL RESTRICTION ON INVESTMENTS IN OIL OR GAS INTERESTS. Each
Portfolio has a fundamental restriction prohibiting investments in oil or gas
interests. The 1940 Act does not require this restriction, although certain
states used to require it as a condition for permitting the sale of a fund's
securities in those states. The Premier Funds have no comparable fundamental
restriction; however, the operating policies of the Premier Funds and the
requirements of Rule 2a-7 effectively prohibit these investments.
FUNDAMENTAL RESTRICTION ON INVESTING FOR THE PURPOSE OF CONTROL. The
Portfolios have fundamental restrictions on investing for the purpose of
control. The Premier Funds have no comparable fundamental or non-fundamental
restriction. The 1940 Act does not require this restriction. The Premier Funds
must limit their investments to money market instruments and are limited in the
amount of total assets they may invest in the securities of any one issuer.
These restrictions effectively prevent the Premier Funds from investing for the
purpose of control.
FUNDAMENTAL RESTRICTION ON INVESTMENTS IN OTHER INVESTMENT COMPANIES.
The Portfolios' have fundamental restrictions prohibiting the investment in
securities of other investment companies, except as part of a merger,
consolidation or acquisition of assets. The 1940 Act limits a fund's investment
in shares of other investment companies, but does not prohibit the investment or
require that a fund have a fundamental restriction on this subject.
The Premier Funds have non-fundamental investment restrictions that
permit them to invest in securities of other investment companies to the extent
permitted by the 1940 Act and has a slightly broader exception from the overall
limitation for securities received or acquired as dividends, through offers of
exchange or as a result of reorganization, consolidation or merger. The Premier
Funds' non-fundamental restrictions permit a Premier Fund to purchase the
securities of other investment companies if, immediately thereafter, not more
than (i) 3% of the total outstanding voting stock of such company is owned by
the Fund, (ii) 5% of the Fund's total assets, taken at market value, would be
invested in any one such company, (iii) 10% of the Fund's total assets, taken at
market value, would be invested in such securities and (iv) the Fund, together
with other investment companies having the same investment adviser and companies
controlled by such companies, own not more than 10% of the total outstanding
stock of any one closed-end investment company. The Trust Board could change
this non-fundamental restriction without shareholder approval, but any changed
restriction and the Premier Funds' operating policies would need to comply with
the limits imposed by the 1940 Act.
Mitchell Hutchins believes that investments by the Premier Funds in
the securities of other investment companies may be desirable from time to time
when the amounts to be invested are too small or are available too late in the
day to be invested effectively in other money market instruments, the shares of
other money market funds otherwise would provide a better return than direct
investment in other money market instruments or these investments would enhance
a Fund's liquidity.
FUNDAMENTAL RESTRICTION ON INVESTMENTS IN REPURCHASE AGREEMENTS
PROVIDING FOR SETTLEMENT IN MORE THAN SEVEN DAYS AND OTHER ILLIQUID SECURITIES.
The Portfolios' have fundamental restrictions that prohibit them from investing
in repurchase agreements providing for settlement in more than seven days or
purchasing other illiquid securities if, in the aggregate, more than 10% of its
net assets would be so invested. The 1940 Act does not require that a fund have
a fundamental restriction concerning its investments in illiquid securities;
however, the 1940 Act and the rules thereunder prohibit a money market fund from
investing more than 10% of its net assets in illiquid securities. The Premier
Funds have a non-fundamental investment restriction that prohibits them from
investing more than 10% of their net assets in illiquid securities and consider
repurchase agreements with maturities greater than seven days to be illiquid.
Mitchell Hutchins believes it appropriate for the Trust Board to have the
flexibility to modify this policy without shareholder approval in the event the
SEC changes the limit for investments in illiquid securities and the Trust Board
believes the change otherwise is appropriate for the Premier Funds.
<PAGE>
FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION FOR DIVERSIFIED
FUNDS. CCR Money Market Portfolio and both Premier Funds are "diversified" funds
under the 1940 Act and, accordingly, have fundamental restrictions or policies
limiting the amount of total assets they may invest in any one issuer to meet
the 1940 Act requirements for a diversified fund. The relevant fundamental
restrictions for these funds provide that with respect to 75% of their total
assets, they generally will not invest more than 5% of total assets in the
securities of any single issuer. CCR Tax Free Money Market Portfolio is
"nondiversified" as that term is defined in the 1940 Act; and, if it were not a
money market fund, could invest a larger portion of its assets in the securities
of a single issuer.
Rule 2a-7, however, imposes a higher diversification standard on all
the funds. Rule 2a-7 generally requires that all money market funds (other than
those that invest in municipal obligations of a single state), invest no more
than 5% of their total assets in the securities of a single issuer, other than
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. For this reason, there will be no practical difference in the
way the Premier Funds are operated as compared to the Portfolios.
While CCR Money Market Portfolio includes in its fundamental
restriction further limits concerning the amount of assets that may be invested
in securities issued or guaranteed by a single guarantor of obligations held by
the fund, these limits are derived from Rule 2a-7's requirements and are equally
applicable to Premier Money Market Fund. The Premier Funds, of course, intend to
comply with all the applicable requirements of Rule 2a-7.
DIFFERENT BOARD AND OFFICERS
BY APPROVING THE REORGANIZATION PLAN, SHAREHOLDERS OF A PORTFOLIO WILL
BECOME SHAREHOLDERS OF A PREMIER FUND, WHICH HAS A DIFFERENT BOARD (THE TRUST
BOARD) THAN THE INFINITY FUNDS' BOARD OF DIRECTORS. The Trust Board will hold
office without limit in time except that (i) any trustee may resign and (ii) any
trustee may be removed at any special meeting of the Premier Funds' shareholders
by the affirmative vote of a majority of the votes cast at the meeting, provided
a quorum is present. In case a vacancy shall for any reason exist, a majority of
the remaining trustees will vote to fill such vacancy by appointing another
trustee, so long as, immediately after such appointment, at least two-thirds of
the trustees then holding office have been elected by shareholders. If, at any
time, less than a majority of the trustees holding office have been elected by
shareholders, the trustees then in office will promptly call a shareholders'
meeting for the purpose of electing trustees. Otherwise, there need normally be
no meetings of shareholders for the purpose of electing trustees. Appendix F
lists the present trustees and officers of the Trust, their ages, business
addresses and a description of their principal occupations during the past five
years.
The Trust Board has an audit and contract review committee and a
nominating committee, each consisting of all of the Independent Trustees. The
audit and contract review committee meets at least [five] times a year and meets
at least annually with the Trust's independent auditors and executive officers
of the Trust. This committee reviews the accounting principles being applied by
the Trust in financial reporting, the scope and adequacy of internal controls,
the responsibilities and fees of the independent auditors and other matters. All
of the recommendations of the audit and contract review committee are reported
to the full Trust Board.
Each Independent Trustee receives an annual retainer of $1,000 per
series for his or her service to the Trust. Additionally, each Independent
Trustee receives up to $150 for in-person attendance at each board meeting and
up to $150 for in-person attendance at each committee meeting. The chairmen of
the audit and contract review sub-committees of each fund in the Mitchell
Hutchins fund complex receive an annual fee, aggregating to $15,000 annually,
for serving in such capacity. All Trust Board members are reimbursed for any
expenses incurred in attending meetings. No officer, director or employee of
Mitchell Hutchins or PaineWebber currently receives any compensation from the
Trust for acting as a board member or officer.
During the past twelve months, the Trust Board met seven times and the
audit and contract review committee met five times. [All of the trustees, except
Margo N. Alexander and Mary C. Farrell, attended 75% or more of the board
meetings and meetings of the committees of the board on which he or she served.]
The Trust Board ordinarily will not consider unsolicited trustee
nominations recommended by the Premier Funds' shareholders.
The following table sets forth information relating to the
compensation paid to trustees during the last fiscal year:
COMPENSATION TABLE
AMOUNTS PAID DURING THE MOST RECENT
FISCAL YEAR BY THE TRUST TO TRUSTEES
NAME OF PERSON, Aggregate Total Compensation
POSITION Compensation from the Trust and
from the Trust* the Fund Complex**
Richard Q. Armstrong, $101,372
TRUSTEE
RICHARD R. BURT, $101,372
TRUSTEE
MEYER FELDBERG, $116,222
TRUSTEE
GEORGE W. GOWEN, $108,272
TRUSTEE
FREDERIC V. MALEK, $101,372
TRUSTEE
CARL W. SCHAFER, $101,372
TRUSTEE
--------------- -------------------
TOTAL
AS A PERCENTAGE OF
NET ASSETS
- --------------------
Only independent board members are compensated by the Trust and
identified above; board members who are "interested persons," as defined by the
1940 Act, do not receive compensation from the Trust.
* Represents fees paid to each board member for the fiscal year ended
December 31, 1998.
** Represents total compensation paid during the calendar year ended
December 31, 1998, to each board member by 31 investment companies (34 in the
case of Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or
one of their affiliates served as investment adviser. No fund within the
Mitchell Hutchins fund complex has a bonus, pension, profit sharing or
retirement plan.
EXPENSES
The expenses of the Reorganizations, excluding proxy solicitation
costs, will be borne by the Portfolios. These expenses are estimated to be
[$________] in the aggregate. Proxy solicitation costs will be borne by Mitchell
Hutchins, and are estimated to be approximately $100,000 in the aggregate for
both Portfolios.
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS
Certain fundamental investment restrictions of the Portfolios, which
prohibit them from acquiring more than a stated percentage of ownership of
another company, might be construed as restricting their ability to carry out
the Reorganizations. By approving the Reorganization Plan, Portfolio
shareholders will be agreeing to waive, only for the purpose of the
Reorganizations, those fundamental investment restrictions that could prohibit
or otherwise impede the transaction.
CONCLUSION
The Board has concluded that the proposed Reorganization Plan is in
the best interests of the Portfolios' shareholders. A vote in favor of the
Reorganization Plan encompasses (1) approval of the Reorganization of the
Portfolio into the corresponding Premier Fund and (2) approval of the temporary
waiver of certain investment limitations of the Portfolio to permit the
Reorganization (see "Temporary Waiver of Investment Restrictions" above). If the
Reorganization Plan is approved by a Portfolio's shareholders, the
Reorganization involving that Portfolio will take effect on the Closing Date. If
the Reorganization Plan is not approved for a Portfolio, that Portfolio will
continue to operate as a series of Infinity Funds and the Board will then
consider other options and alternatives for that Portfolio.
REQUIRED VOTE. Approval of the Reorganization Plan with respect to a
Portfolio requires the affirmative vote of a majority of its outstanding voting
securities.
<PAGE>
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE REORGANIZATION PLAN.
-----------------------------------------------------------
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
If, however, any other matters properly come before the Meeting, it is the
intention that proxies that do not contain specific instructions to the contrary
will be voted on such matters in accordance with the judgment of the persons
designated in the proxies.
SHAREHOLDER PROPOSALS
The Portfolios do not hold annual meetings of shareholders. If the
Reorganizations are not approved, shareholders wishing to submit proposals for
inclusion in a proxy statement and form of proxy for a subsequent shareholders'
meeting of the Portfolios should send their written proposals to the Secretary
of Correspondent Cash Reserves Money Market Portfolios, P.O. Box 163879,
Columbus, Ohio 43216-3879. If the Reorganizations are approved, shareholders
wishing to submit such proposals should send them to the Secretary of the
Premier Funds, 1285 Avenue of the Americas, New York, New York 10019.
Shareholder proposals for a shareholders' meeting must be received a reasonable
time before the proxy solicitation for that meeting is made. The Portfolios have
not received any shareholder proposals to be presented at this Meeting.
By Order of the Board of Directors
/s/
-------------------------
[Jeffrey C. Cusick]
[Vice President and Assistant Secretary]
September ___, 1999
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF CONVERSION AND TERMINATION
This AGREEMENT AND PLAN OF CONVERSION AND TERMINATION ("Agreement") is made
as of this __ day of _______, 1999, AMONG The Infinity Mutual Funds, Inc., a
Maryland corporation ("Corporation"), on behalf of each segregated portfolio of
assets ("series") thereof listed on Schedule A to this Agreement ("Schedule A")
(each, an "Old Fund"), Mitchell Hutchins LIR Money Series, a Delaware business
trust ("Trust"), on behalf of each series thereof listed on Schedule A (each, a
"New Fund"), and Corporation's investment adviser with respect to each Old Fund,
Mitchell Hutchins Asset Management Inc., a Delaware Corporation ("Mitchell
Hutchins"). (Each Old Fund and New Fund is sometimes referred to herein
individually as a "Fund" and collectively as the "Funds"; Corporation and Trust
are sometimes referred to herein individually as an "Investment Company.") All
agreements, representations, actions, and obligations described herein made or
to be taken or undertaken by a Fund are made and shall be taken or undertaken by
Corporation on behalf of each Old Fund and by Trust on behalf of each New Fund.
Each Old Fund intends to change its identity, form, and place of
organization -- by converting from a series of a Maryland corporation to a
series of a Delaware business trust -- through a reorganization within the
meaning of section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
("Code"). Each Old Fund desires to accomplish such conversion by transferring
all its assets to the New Fund listed on Schedule A opposite its name (which is
being established solely for the purpose of acquiring such assets and continuing
such Old Fund's business) (each, a "corresponding New Fund") in exchange solely
for voting shares of beneficial interest in such New Fund ("New Fund Shares")
and such New Fund's assumption of such Old Fund's liabilities, followed by the
constructive distribution of the New Fund Shares PRO RATA to the holders of
shares of common stock of such Old Fund ("Old Fund Shares") in exchange
therefor, all on the terms and conditions set forth in this Agreement (which is
intended to be, and is adopted as, a "plan of reorganization" within the meaning
of the regulations under section 368 of the Code ("Regulations")). All such
transactions involving each Old Fund and its corresponding New Fund are referred
to herein as a "Reorganization." For convenience, the balance of this Agreement
will refer only to a single Reorganization, one Old Fund, and one New Fund, but
the terms and conditions of this Agreement shall apply separately to each
Reorganization. The consummation of one Reorganization shall not be contingent
on consummation of the other Reorganization.
In consideration of the mutual promises herein contained, the parties agree
as follows:
1. PLAN OF CONVERSION AND TERMINATION
1.1. Old Fund agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to New Fund. New Fund agrees in
exchange therefor --
(a) to issue and deliver to Old Fund the number of full and fractional
(rounded to the third decimal place) New Fund Shares equal to the number of
full and fractional Old Fund Shares then outstanding, and
(b) to assume all of Old Fund's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 2.1).
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 Old Fund's books, and other property owned by Old Fund at the
Effective Time (as defined in paragraph 2.1).
1.3. The Liabilities shall include all of Old Fund's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not determinable at the Effective Time, and
whether or not specifically referred to in this Agreement.
1.4. At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the New Fund Share issued pursuant to paragraph 4.6 shall be
redeemed by New Fund for $1.00 and (b) Old Fund shall distribute the New Fund
Shares it received pursuant to paragraph 1.1 to its shareholders of record,
determined as of the Effective Time (each a "Shareholder" and collectively,
"Shareholders"), in constructive exchange for their Old Fund Shares. Such
distribution shall be accomplished by New Fund's transfer agent's opening
accounts on New Fund's share transfer books in the Shareholders' names and
transferring such New 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) New Fund Shares due that Shareholder. All outstanding
Old Fund Shares, shall simultaneously be canceled on Old Fund's share transfer
books. New Fund shall not issue certificates representing the New Fund Shares in
connection with the Reorganization.
1.5. As soon as reasonably practicable after distribution of the New Fund
Shares pursuant to paragraph 1.4, but in all events within six months after the
Effective Time, Old Fund shall be terminated and any further actions shall be
taken in connection therewith as required by applicable law.
1.6. Any reporting responsibility of Old Fund to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.7. Any transfer taxes payable on issuance of New Fund Shares in a name
other than that of the registered holder on Old Fund's books of the Old Fund
Shares constructively exchanged therefor shall be paid by the person to whom
such New Fund Shares are to be issued, as a condition of such transfer.
2. CLOSING AND EFFECTIVE TIME
2.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at Trust's principal office on October 22,
1999, or at such other place and/or on such other date as to which 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 to which the parties may agree ("Effective Time").
2.2. Trust's fund accounting and pricing agent shall deliver at the Closing
a certificate of an authorized officer verifying that the information (including
adjusted basis and holding period, by lot) concerning the Assets, including all
portfolio securities, transferred by Old Fund to New Fund, as reflected on New
Fund's books immediately following the Closing, does or will conform to such
information on Old Fund's books immediately before the Closing. Corporation'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 New
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.
2.3. Corporation's transfer agent ("BISYS") shall deliver at the Closing
(A) a certified list showing the name, address, and taxpayer identification
number of, and number of full and fractional (rounded to the third decimal
place) Old Fund Shares held by, each Shareholder as of the Effective Time
("BISYS Certificate") and (B) a certificate as to the opening on New Fund's
share transfer books of accounts in the Shareholders' names. Trust shall issue
and deliver a confirmation to Corporation evidencing the New Fund Shares to be
credited to Old Fund at the Effective Time or provide evidence satisfactory to
Corporation that such shares have been credited to Old Fund's account on such
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.
2.4. 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.
3. REPRESENTATIONS AND WARRANTIES
3.1. NEW Fund represents and warrants as follows:
3.1.1. Trust is a business trust duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and its Certificate of
Trust has been duly filed with the Secretary of State thereof;
3.1.2. Trust is duly registered as an open-end management investment
company under the Investment Company Act of 1940 ACT, as amended ("1940 Act"),
and such registration will be in full force and effect at the Effective Time;
3.1.3. Before the Effective Time, New Fund will be a duly established and
designated series of Trust;
3.1.4. New Fund has not commenced operations and will not do so until after
the Closing;
3.1.5. Before the Effective Time, there will be no issued and outstanding
shares in New Fund or any other securities issued by New Fund, except as
provided in paragraph 4.6;
3.1.6. No consideration other than New Fund Shares (and New Fund's
assumption of the Liabilities) will be issued in exchange for the Assets in the
Reorganization;
3.1.7. The New Fund Shares to be issued and delivered to Old Fund hereunder
will have been duly authorized at the Effective Time and, when issued and
delivered as provided herein, will be duly and validly issued and outstanding
shares of New Fund, fully paid and non-assessable;
3.1.8. New Fund will be a "fund" as defined in section 851(g)(2) of the
Code and will meet all the requirements to qualify for treatment as a regulated
investment company under subchapter M of the Code ("RIC") for its taxable year
in which the Reorganization occurs;
3.1.9. New Fund has no plan or intention to issue additional New 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
New Fund have any plan or intention to redeem or otherwise reacquire any New
Fund Shares issued to the Shareholders pursuant to the Reorganization, except to
the extent it is required by the 1940 Act to redeem any of its shares presented
for redemption at net asset value in the ordinary course of its business;
3.1.10. Following the Reorganization, New Fund (a) will continue Old Fund's
"historic business" (within the meaning of section 1.368-1(d)(2) of the
Regulations), (b) use a significant portion of Old Fund's historic business
assets (within the meaning of section 1.368-1(d)(3) of the Regulations) in a
business, (c) 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, and (d) 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;
3.1.11. There is no plan or intention for New Fund to be dissolved or
merged into another business trust or a corporation or any "fund" thereof
(within the meaning of section 851(g)(2) of the Code) following the
Reorganization;
3.1.12. Immediately after the Reorganization, (a) not more than 25% of the
value of New Fund's total assets (excluding cash, cash items, and U.S.
government securities) will be invested in the stock and securities of any one
issuer and (b) not more than 50% of the value of such assets will be invested in
the stock and securities of five or fewer issuers;
3.1.13. New 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, Delaware law or any provision of Trust's Trust
Instrument or By-laws or any agreement, instrument, lease, or other undertaking
to which Trust (with respect to New 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 Trust (with respect to New
Fund) is a party or by which it is bound, except as previously disclosed in
writing to and accepted by Corporation;
3.1.14. Except as otherwise disclosed in writing to and accepted by
Corporation, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Trust's
knowledge) threatened against Trust with respect to New Fund or any of its
properties or assets that, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business; and New
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;
3.1.15. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the part
of Trust's board of trustees, which has made the determinations required by Rule
17a-8(a) under the 1940 Act; and, subject to receipt of any necessary exemptive
relief or no-action assurances requested from the 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 New 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;
3.1.16. No governmental consents, approvals, authorizations, or filings are
required under the Securities Act of 1933, as amended ("1933 Act"), the
Securities Exchange Act of 1934, as amended ("1934 Act"), or the 1940 Act
for the execution or performance of this Agreement by Trust, except for (a) the
filing with the SEC of a post-effective amendment to Trust's registration
statement on Form N-1A, (b) receipt of any exemptive relief referenced in
subparagraph 3.1.15, and (c) consents, approvals, authorizations, and filings
made or received or required subsequent to the Effective Time; and
3.1.17. To the best of New Fund's knowledge, all information provided by it
for inclusion in the proxy statement filed with the SEC ("Proxy Statement") on
behalf of Old Fund in connection with the Meeting of Old Fund's Shareholders
referred to in paragraph 4.1 ("Shareholders' Meeting") is accurate and does 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.
3.2. OLD FUND REPRESENTS AND WARRANTS AS FOLLOWS:
3.2.1. Corporation is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and its Amended
Articles of Incorporation ("Articles") are on file with that state's Department
of Assessments and Taxation;
3.2.2. CORPORATION is duly registered as an open-end management investment
company under the 1940 Act and such registration will be in full force and
effect at the Effective Time;
3.2.3. OLD FUND IS A DULY ESTABLISHED AND DESIGNATED SERIES OF CORPORATION;
3.2.4. Old Fund 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, New Fund will acquire good and marketable title thereto;
3.2.5. New Fund Shares are not being acquired for the purpose of making any
distribution thereof, other than in accordance with the terms hereof;
3.2.6. Old Fund is a "fund" as defined in section 851(g)(2) of the Code; it
qualified for treatment as RIC 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 the Assets will be invested at all times
through the Effective Time in a manner that ensures compliance with the
foregoing); it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M did not apply to it; and it has made all
distributions for each such past taxable year that are necessary to avoid the
imposition of federal excise tax or has paid or provided for the payment of any
excise tax imposed for any such year;
3.2.7. The Liabilities were incurred by Old Fund in the ordinary course of
its business and are associated with the Assets;
3.2.8. Old Fund 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;
3.2.9. All outstanding Old Fund Shares (a) have been duly authorized and
are duly and validly issued and outstanding shares of Old Fund, fully paid and
non-assessable, and (b) have been duly registered under the 1933 ACT, have been
duly registered or qualified or are exempt from registration or qualification
under the securities laws of each state in which such shares have been or are
being offered for sale, and no action has been taken by Corporation or any state
or federal regulatory authority to remove, withdraw, or rescind any such
registration or qualification; all outstanding Old Fund Shares as of the
Effective Time will be held by the persons and in the amounts set forth in the
BISYS Certificate; and Old Fund's books and records, including records
reflecting the purchase and sale of Old Fund Shares, the number of issued and
outstanding Old Fund Shares owned by each shareholder, and the state or other
jurisdiction in which such shares were offered and sold, are complete and
accurate in all material respects;
3.2.10. Old Fund's current Prospectus and Statement of Additional
Information ("P/SAI") 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; and the value of Old Fund's net assets has been determined and
is being determined using portfolio valuation methods that comply in all
material respects with the methods described in the P/SAI and the requirements
of the 1940 Act;
3.2.11. Old 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, Maryland law or any provision of the Articles,
Corporation's By-Laws, or any agreement, instrument, lease, or other undertaking
to which Corporation (with respect to Old 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 Corporation (with
respect to Old Fund) is a party or by which it is bound;
3.2.12. ALL material contracts and other commitments of Old Fund (other
than this Agreement and investment contracts) will be terminated, or provision
for discharge of any liabilities of Old Fund 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 Old
Fund may have had with respect to actions taken or omitted to be taken by any
other party thereto prior to the Closing;
3.2.13. No litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or threatened against
Corporation with respect to Old Fund or any of its properties or assets that, if
adversely determined, would materially and adversely affect its financial
condition or the conduct of its business; and Old 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;
3.2.14. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the part
of Corporation's board of directors, which has made the determinations required
by Rule 17a-8(a) under the 1940 Act; and, subject to approval by Old Fund's
shareholders and 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 Old 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;
3.2.15. 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 Corporation, except for (a) the filing with the
SEC of the proxy statement, (b) receipt of any exemptive relief referenced in
subparagraph 3.2.14, and (c) consents, approvals, authorizations, and filings
made or received or required subsequent to the Effective Time;
3.2.16. At the time of the Shareholders' Meeting and at the Effective Time,
the Proxy Statement will (a) comply in all material respects with the applicable
provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the regulations
thereunder and (b) not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading; provided that the foregoing shall not apply to
statements in or omissions from the Proxy Statement made in reliance on and in
conformity with information furnished by Trust for use therein;
3.2.17. Old Fund's financial statements (including the Statement of Assets
and Liabilities, Schedule of Portfolio Investments, Statement of Operations,
Statement of Changes in Net Assets, and Financial Highlights) ("collectively
"Financial Statements") for the fiscal years ended December 31, 1996, 1997, and
1998, (a) were audited by KPMG LLP, independent auditors, in accordance with
generally accepted auditing standards, (b) were prepared in accordance with
generally accepted accounting principles, consistently applied, and (c) fairly
reflect, in all material respects, Old Fund's financial condition as of and for
the periods ended on such dates; Old Fund's Financial Statements for the
semi-annual period ended June 30, 1999, fairly reflect, in all material
respects, its financial condition as of and for the period ended on such date;
and there are no liabilities of Old Fund as of any such date not disclosed in
such Financial Statements;
3.2.18. Since December 31, 1998, there has been no material adverse change
in Old Fund's financial condition, assets, liabilities, or business other than
changes occurring in the ordinary course of business, or any incurrence by Old
Fund of indebtedness maturing more than one year from the date such indebtedness
was incurred, except as otherwise disclosed in writing to and accepted by Trust.
For the purposes of this subparagraph, a decline in net asset value per Old Fund
Share or a decrease in the number of outstanding Old Fund Shares shall not
constitute a material adverse change;
3.2.19. As of the Effective Time, all federal and other tax returns and
reports of Old Fund required by law to have been filed by that time shall have
been filed, and all federal and other taxes shown as due on such returns and
reports shall have been paid, or provision shall have been made for the payment
thereof; and to the best of Corporation's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to any such return;
and
3.2.20. To the best of Old Fund's knowledge, based solely on statements of
its custodian and BISYS, their systems and software are expected to be "year
2000 compliant" (i.e., such systems and software are expected to be able to
perform in accordance with all terms of any transfer agency, custodial, fund
accounting, cash management, and/or related agreement with respect to Old Fund,
regardless of the date data is encountered thereby).
With respect to subparagraphs 3.2.4, 3.2.7, 3.2.10, 3.2.16 and 3.2.18, the
representations and warranties contained therein do not extend to any breach
thereof arising from actions or omissions of Mitchell Hutchins, except to the
extent any such action or omission was based on reliance upon information
provided by Old Fund's officers, Old Fund's service providers other than
Mitchell Hutchins, or their agents.
3.3. Each Fund represents and warrants as follows:
3.3.1. The fair market value of the New Fund Shares received by each
Shareholder will be approximately equal to the fair market value of the Old Fund
Shares constructively surrendered in exchange therefor;
3.3.2. Its management --
(a) is unaware of any plan or intention of Shareholders to redeem, sell, or
otherwise dispose of (i) any portion of their Old Fund Shares before the
Reorganization to any person related (within the meaning of section
1.368-1(e)(3) of the Regulations) to either Fund or (ii) any portion of the New
Fund Shares to be received by them in the Reorganization to any person related
(as so defined) to New Fund and
(b) Is unaware that (i) dispositions of those New Fund Shares at the time
of or soon after the Reorganization will exceed the usual rate and frequency of
dispositions of shares of Old Fund as a series of an open-end investment
company, (ii) the percentage of Shareholder interests, if any, that will be
disposed of as a result of or at the time of the Reorganization will NOT be DE
MINIMIS, and (iii) there will be extraordinary redemptions of New Fund Shares
immediately following the Reorganization;
3.3.3. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
3.3.4. Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares and will own such shares solely by
reason of their ownership of Old Fund Shares immediately before the
Reorganization;
3.3.5. Immediately following consummation of the Reorganization, New Fund
will hold the same assets -- except for assets distributed to shareholders in
the course of its business as a RIC and assets used to pay expenses incurred in
connection with the Reorganization -- and be subject to the same liabilities
that Old Fund held or was subject to immediately prior to the Reorganization,
plus any liabilities for expenses of the parties incurred in connection with the
Reorganization. [Old Fund anticipates such excepted assets, together with the
amount of all redemptions and distributions (other than regular, normal
dividends) made by Old Fund immediately preceding the Reorganization, will, in
the aggregate, constitute less than 1% of its net assets];
3.3.6. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount; and
3.3.7. Neither Fund will be reimbursed for any expenses incurred by it or
on its behalf in connection with the Reorganization unless those expenses are
solely and directly related to the Reorganization (determined in accordance with
the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187) ("Reorganization
Expenses").
4. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all its 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 further conditions that, at or before
the Effective Time:
4.1 This Agreement and the transactions contemplated hereby shall have been
duly adopted and approved by Corporation's board of directors and Trust's board
of trustees (each, a "board") and shall have been approved by Old Fund's
shareholders at a meeting duly held in accordance with applicable law;
4.2. 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. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state securities
authorities) deemed necessary by either Investment Company 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 Investment Company may for itself waive any of such
conditions;
4.3. Corporation shall have received an opinion of Kirkpatrick & Lockhart
LLP, counsel to Trust, substantially to the effect that:
4.3.1. At or before the Effective Time, New Fund will be a duly established
and designated series of Trust, which is a business trust duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
with power under its Trust Instrument to own all of its properties and assets
and, to the knowledge of such counsel, to carry on its business as presently
conducted;
4.3.2. This Agreement (a) has been duly authorized, executed, and delivered
by Trust on behalf of New Fund and (b) assuming due authorization, execution,
and delivery of this Agreement by Corporation on behalf of Old Fund, is a valid
and legally binding obligation of Trust with respect to New 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;
4.3.3. The New 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, and no shareholder of New Fund has any preemptive
right to subscribe for or purchase such shares;
4.3.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate any provision of Trust's Trust Instrument or By-laws or any agreement
(known to such counsel, without any independent inquiry or investigation) to
which Trust (with respect to New 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 Trust (with respect to New
Fund) is a party or by which it is bound, except as set forth in such opinion or
as otherwise disclosed in writing to and accepted by Corporation;
4.3.5. 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 Trust on behalf of
New Fund of the transactions contemplated hereby, except those obtained under
the 1933 Act, the 1934 Act, and the 1940 Act and those that may be required
under state securities laws;
4.3.6. Trust is registered with the SEC as an investment company, and to
the knowledge of such counsel no order has been issued or proceeding instituted
to suspend such registration; and
4.3.7. 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 Trust
(with respect to New Fund) or any of its properties or assets attributable or
allocable to New Fund and (b) Trust (with respect to New 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 its business, except as
set forth in such opinion or as otherwise disclosed in writing to and accepted
by Corporation.
In rendering such opinion, such counsel may (1) rely, as to matters
governed by the laws of the State of Delaware, on an opinion of competent
Delaware counsel, (2) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, (3) limit such opinion to applicable federal and state
law, and (4) 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;
4.4. Trust shall have received an opinion of Stroock & Stroock & Lavan LLP,
counsel to Corporation, substantially to the effect that:
4.4.1. Corporation is a Maryland corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland with
power under the Articles to own all of its properties and assets and, to the
knowledge of such counsel, to carry on its business as presently conducted;
4.4.2. This Agreement (a) has been duly authorized, executed, and delivered
by Corporation on behalf of Old Fund and (b) assuming due authorization,
execution, and delivery of this Agreement by Trust on behalf of New Fund, is a
valid and legally binding obligation of Corporation with respect to Old 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;
4.4.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate any provision of the Articles, Corporation's By-laws, or any agreement
(known to such counsel, without any independent inquiry or investigation) to
which Corporation (with respect to Old 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 Corporation
(with respect to Old Fund) is a party or by which it is bound, except as set
forth in such opinion or as otherwise disclosed in writing to and accepted by
Trust;
4.4.4. 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 Corporation on behalf
of Old Fund of the transactions contemplated hereby, except those obtained under
the 1933 Act, the 1934 Act, and the 1940 Act and those that may be required
under state securities laws;
4.4.5. All outstanding Old Fund Shares (a) have been duly authorized and
are duly and validly issued and outstanding shares of Old Fund, fully paid and
non-assessable, and (b) have been duly registered under the 1933 Act, and no
action has been taken by Corporation or any state or federal regulatory
authority to remove, withdraw, or rescind any such registration or
qualification;
4.4.6. Corporation is registered with the SEC as an investment company, and
to the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration;
4.4.7. Except as otherwise disclosed in writing to and accepted by Trust,
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 (i) as to
Corporation (with respect to Old Fund) or any of its properties or assets
attributable or allocable to Old Fund or (ii) that questions the right, power,
or capacity of Corporation to execute and deliver this Agreement or consummate
the transactions contemplated hereby, and (b) Corporation (with respect to Old
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
its business, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by Trust.
In rendering such opinion, such counsel may (1) rely, as to matters
governed by the laws of the State of Maryland, on an opinion of competent
Maryland counsel, (2) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, (3) limit such opinion to applicable federal and state
law, and (4) 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;
4.5. Each Investment Company shall have received an opinion of Kirkpatrick
& Lockhart LLP as to the federal income tax consequences mentioned below ("Tax
Opinion"). In rendering the Tax Opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters addressed to such
counsel) and the certificates delivered pursuant to paragraph 2.4. The Tax
Opinion shall be substantially to the effect that, based on the facts and
assumptions stated therein and conditioned on consummation of the Reorganization
in accordance with this Agreement, for federal income tax purposes:
4.5.1. New Fund's acquisition of the Assets in exchange solely for New Fund
Shares and New Fund's assumption of the Liabilities, followed by Old Fund's
distribution of those shares PRO RATA to the Shareholders constructively in
exchange for the Shareholders' Old Fund Shares, will qualify as a reorganization
within the meaning of section 368(a)(1)(F) of the Code, and each Fund will be "a
party to a reorganization" within the meaning of section 368(b) of the Code;
4.5.2. Old Fund will recognize no gain or loss on the transfer of the
Assets to New Fund in exchange solely for New Fund Shares and New Fund's
assumption of the Liabilities or on the subsequent distribution of those shares
to the Shareholders in constructive exchange for their Old Fund Shares;
4.5.3. New Fund will recognize no gain or loss on its receipt of the Assets
in exchange solely for New Fund Shares and its assumption of the Liabilities;
4.5.4. New Fund's basis for the Assets will be the same as the basis
therefor in Old Fund's hands immediately before the Reorganization, and New
Fund's holding period for the Assets will include Old Fund's holding period
therefor;
4.5.5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Old Fund Shares solely for New Fund Shares pursuant to the
Reorganization;
4.5.6. A Shareholder's aggregate basis for the New Fund Shares to be
received by it in the Reorganization will be the same as the aggregate basis for
its Old Fund Shares to be constructively surrendered in exchange for those New
Fund Shares, and its holding period for those New Fund Shares will include its
holding period for those Old Fund Shares, provided they are held as capital
assets by the Shareholder at the Effective Time; and
4.5.7. For purposes of section 381 of the Code, New Fund will be treated as
if there had been no Reorganization. Accordingly, the Reorganization will not
result in the termination of Old Fund's taxable year, Old Fund's tax attributes
enumerated in section 381(c) of the Code will be taken into account by New Fund
as if there had been no Reorganization, and the part of Old Fund's taxable year
before the Reorganization will be included in New Fund's taxable year after the
Reorganization.
Notwithstanding subparagraphs 4.5.2 and 4.5.4, the Tax Opinion may state
that no opinion is expressed as to the effect of the Reorganization on the Funds
or any Shareholder with respect to any Asset as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes on the
termination or transfer thereof under a mark-to-market system of accounting;
4.6. Before the Closing, Trust's trustees shall have authorized the
issuance of, and New Fund shall have issued, one New Fund Share to Mitchell
Hutchins in consideration of the payment of $1.00 for the purpose of enabling
Mitchell Hutchins to vote on the matters referred to in paragraph 4.7; and
4.7. Trust (on behalf of and with respect to New Fund) shall have entered
into an investment advisory and administration agreement, and a distribution
agreement with Mitchell Hutchins, a plan of distribution pursuant to Rule 12b-1
under the 1940 Act and related plan agreement, a transfer agency agreement, and
other agreements necessary for New Fund's operation as a series of an open-end
investment company. Each such agreement and plan shall have been approved by (a)
Trust's trustees, including, to the extent required by law, those trustees who
are not "interested persons" (as defined in the 1940 Act) of Trust or Mitchell
Hutchins and who do not have a material interest in such plan or any related
agreement, and (b) Mitchell Hutchins as the sole shareholder of New Fund.
At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 4.1) if, in its
board's judgment, such waiver will not have a material adverse effect on its
Fund's shareholders' interests.
5. BROKERAGE FEES AND EXPENSES
5.1. 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.
5.2. Except as otherwise provided herein, all Reorganization Expenses of
Old Fund (other than those paid or reimbursed by Mitchell Hutchins) shall be
borne by Old Fund. Except as otherwise provided herein, all Reorganization
Expenses of New Fund (other than those paid or reimbursed by Mitchell Hutchins)
shall be borne by New Fund.
6. ENTIRE AGREEMENT; SURVIVAL
No party has made any representation, warranty, or covenant not set forth
herein, and this Agreement constitutes the entire agreement among the parties.
The representations, warranties, and covenants contained herein or in any
document delivered pursuant hereto or in connection herewith shall survive the
Closing.
7. TERMINATION
This Agreement may be terminated at any time at or before the Effective
Time, whether before or after approval by Old Fund's shareholders:
7.1. 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 February 29, 2000;
or
7.2. By the parties' mutual agreement. In the event of termination under
paragraphs 7.1(c) or 7.2, there shall be no liability for damages on the part of
either Fund to the other Fund.
8. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Old Fund's shareholders, in any manner
mutually agreed upon by the parties; provided that following such approval, no
such amendment shall have a material adverse effect on the Shareholders'
interests.
9. MISCELLANEOUS
9.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
9.2. 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.
9.3. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each PARTY and delivered
to the other PARTIES hereto. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.4. The execution and delivery of this Agreement have been authorized by
Trust's trustees, and this Agreement has been executed and delivered by
authorized officers of Trust acting as such; neither such authorization by such
trustees nor such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any liability on any of
them or any shareholder of Trust personally, but shall bind only the assets and
property of New Fund, as provided in Trust's Trust Instrument.
9.5. Trust agrees that, in the event of a claim for breach of any
representation, warranty, or covenant, no recovery will be sought or payable,
under any circumstance, out of the assets of any other series of Corporation or
from any shareholder of Corporation, even though the assets of Old Fund are
insufficient to discharge any obligation owing in respect of any such claim.
9.6. Mitchell Hutchins agrees to indemnify the directors of Corporation
against, and hold them harmless from, any liabilities, damages, and expenses
(including reasonable attorneys' fees) associated with any claims brought by New
Fund or brought by shareholders of Old Fund against any or all of the directors,
but only to the extent such liabilities, damages, and expenses arise from the
conduct of Mitchell Hutchins and only if such liabilities, damages, and expenses
are definitively determined (1) by a court of competent jurisdiction to have
arisen from the conduct of Mitchell Hutchins or (2) through a court-approved
settlement and upon the written consent of Mitchell Hutchins, which consent may
not be unreasonably withheld. Notwithstanding the foregoing, Mitchell Hutchins
shall indemnify the directors of Corporation only to the extent that such
liabilities, damages, and expenses are not otherwise paid after the relevant
directors have reasonably and in good faith pursued such payment from the
obliged parties, including through the indemnification provisions of any
applicable contract or agreement or under any insurance policy; and provided
further that Mitchell Hutchins will not be liable for any indemnification under
this paragraph 9.6 to the extent the liability, damage, and/or expense sought to
be indemnified arises from misfeasance, bad faith, negligence, reckless
disregard, or misconduct on the part of any director of Corporation.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
ATTEST: THE INFINITY MUTUAL FUNDS, INC.,
on behalf of its series,
Correspondent Cash Reserves Money Market
Portfolio and
Correspondent Cash Reserves Tax Free
Money Market Portfolio
- ---------------------------- By:---------------------------------------
Secretary [Vice] President
ATTEST: MITCHELL HUTCHINS LIR MONEY SERIES,
on behalf of its series,
LIR Premier Money Market Fund and
LIR Premier Tax-Free Money Market Fund
- ---------------------------- By:---------------------------------------
Secretary [Vice] President
ATTEST: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
- ---------------------------- By:---------------------------------------
Secretary [Vice] President
<PAGE>
SCHEDULE A
OLD FUNDS(Series of Corporation) NEW FUNDS(Series of Trust)
Correspondent Cash Reserves Money
Market Portfolio LIR Premier Money Market Fund
Correspondent Cash Reserves Tax Free
Money Market Portfolio LIR Premier Tax-Free Money Market Fund
<PAGE>
<PAGE>
APPENDIX B
CURRENT FUNDAMENTAL RESTRICTIONS OF THE PORTFOLIOS
The following fundamental investment limitations cannot be changed for
a Portfolio without the affirmative vote of the lesser of (a) more than 50% of
the outstanding shares of the Portfolio or (b) 67% or more of the shares of the
Portfolio present at a shareholders' meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy. If a percentage
restriction is adhered to at the time of an investment or transaction, later
changes in percentage resulting from a change in values of portfolio securities
or in the amount of total assets will not be considered a violation of any of
the following limitations.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO will not:
(1) Purchase common stocks, preferred stocks, warrants or other
equity securities.
(2) Borrow money, except (i) from banks for temporary or emergency
(not leveraging) purposes in an amount up to 15% of the value of
the Portfolio's total assets (including the amount borrowed)
based on the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made
(while such borrowings exceed 5% of the value of the Portfolio's
total assets, it will not make any additional investments) and
(ii) in connection with the entry into reverse repurchase
agreements. At no time may total borrowings exceed 33-1/3% of the
value of the Portfolio's total assets.
(3) Pledge, hypothecate, mortgage or otherwise encumber its assets,
except (i) to secure borrowings for temporary or emergency
purposes and (ii) in connection with the purchase of securities
on a forward commitment basis and the entry into reverse
repurchase agreements.
(4) Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), other than in connection with the entry
into certain reverse repurchase agreements.
(5) Sell securities short or purchase securities on margin.
(6) Write or purchase put or call options or combinations thereof.
(7) Act as underwriter of securities of other issuers. The Portfolio
may not enter into repurchase agreements providing for settlement
in more than seven days after notice or purchase securities which
are illiquid, if, in the aggregate, more than 10% of its net
assets would be so invested.
(8) Purchase or sell real estate, real estate investment trust
securities, commodities, or oil and gas interests.
(9) Make loans to others, except through the purchase of debt
obligations and through repurchase agreements referred to in the
Portfolio's Prospectus, and except that the Portfolio may lend
its portfolio securities in an amount not to exceed 33-1/3% of
the value of its total assets. Any loans of portfolio securities
will be made according to guidelines established by the
Securities and Exchange Commission and the Fund's (INFINITY
FUNDS') board of directors.
(10) Invest in companies for the purpose of exercising control.
(11) Invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or
acquisition of assets.
(12) Invest more than 5% of its assets in the obligations of any one
issuer, except that up to 25% of the value of the Portfolio's
total assets may be invested without regard to any such
limitation (subject to provisions of Rule 2a-7), provided that
not more than 10% of its assets may be invested in securities
issued or guaranteed by any single guarantor of obligations held
by the Portfolio. Notwithstanding the foregoing, to the extent
required by the rules of the Securities and Exchange Commission,
the Portfolio will not invest more than 5% of its assets in the
obligations of any one bank.
(13) Invest less than 25% of its total assets in securities issued by
banks or invest more than 25% of its assets in the securities of
issuers in any other industry, provided that there shall be no
limitation on the purchase of obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
Notwithstanding the foregoing, for temporary defensive purposes
the Money Market Portfolio may invest less than 25% of its assets
in bank obligations.
For purposes of Investment Restriction No. 13, asset-backed
securities are grouped in industries based on their underlying
assets and are not treated as constituting a single, separate
industry.
* * *
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO will not:
(1) Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the
Portfolio's Prospectus.
(2) Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the
Portfolio's total assets (including the amount borrowed) based on
the lesser of cost or market, less liabilities (not including the
amount borrowed) at the time the borrowing is made (while
borrowings exceed 5% of the value of the Portfolio's total
assets, the fund will not make any additional investments).
(3) Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure borrowings for temporary or emergency purposes.
(4) Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act).
(5) Sell securities short or purchase securities on margin.
(6) Write or purchase put or call options or combinations thereof.
(7) The Portfolio may not enter into repurchase agreements providing
for settlement in more than seven days after notice or purchase
securities which are illiquid, if, in the aggregate, more than
10% of its net assets would be so invested.
(8) Purchase or sell real estate, real estate investment trust
securities, commodities, or oil and gas interests, but this shall
not prevent the Portfolio from investing in Municipal Obligations
secured by real estate or interests therein.
(9) Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements referred to
above and in the Portfolio's Prospectus.
(10) Invest in companies for the purpose of exercising control.
(11) Invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or
acquisition of assets.
(12) Underwrite the securities of other issuers, except that the
Portfolio may bid separately or as part of a group for the
purchase of Municipal Obligations directly from an issuer for its
own portfolio to take advantage of the lower purchase price
available.
(13) Invest more than 25% of its assets in the securities of issuers
in any single industry, provided that there shall be no
limitation on the purchase of tax exempt securities issued by
state or municipal governments or their political subdivisions
and, for temporary defensive purposes, securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities.
For purposes of Investment Restriction No. 13, industrial
development bonds, where the payment of principal and interest is
the ultimate responsibility of companies within the same
industry, are grouped together as an "industry."
* * *
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values or assets
will not constitute a violation of that restriction.
<PAGE>
APPENDIX C
FUNDAMENTAL AND NON-FUNDAMENTAL INVESTMENT
RESTRICTIONS OF THE PREMIER FUNDS
FUNDAMENTAL LIMITATIONS. The following fundamental investment
limitations cannot be changed for the Premier Funds without the affirmative vote
of the lesser of (a) more than 50% of the outstanding shares of the Funds or (b)
67% or more of the shares of the Funds present at a shareholders' meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy. If a percentage restriction is adhered to at the time of an
investment or transaction, later changes in percentage resulting from a change
in values of portfolio securities or amount of total assets will not be
considered a violation of any of the following limitations.
Each fund will not:
(1) purchase securities of any one issuer if, as a result, more than
5% of the fund's total assets would be invested in securities of that issuer or
the fund would own or hold more than 10% of the outstanding voting securities of
that issuer, except that up to 25% of the fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its agencies
and instrumentalities or to securities issued by other investment companies.
The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.
(2) purchase any security if, as a result of that purchase, 25% or
more of the fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry, except that
this limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to municipal securities or to
certificates of deposit and bankers' acceptances of domestic branches of U.S.
banks.
The following interpretations apply to, but are not a part of, this
fundamental restriction: (a) domestic and foreign banking will be considered to
be different industries; and (b) asset-backed securities will be grouped in
industries based upon their underlying assets and not treated as constituting a
single, separate industry.
(3) issue senior securities or borrow money, except as permitted under
the Investment Company Act and then not in excess of 33-1/3% of the fund's total
assets (including the amount of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the time of the issuance or
borrowing, except that the fund may borrow up to an additional 5% of its total
assets (not including the amount borrowed) for temporary or emergency purposes.
(4) make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this restriction,
the acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances or
similar instruments will not be considered the making of a loan.
The following interpretation applies to, but is not a part of, this
fundamental restriction: the fund's investments in master notes, funding
agreements and similar instruments will not be considered to be the making of a
loan.
(5) engage in the business of underwriting securities of other
issuers, except to the extent that the fund might be considered an underwriter
under the federal securities laws in connection with its disposition of
portfolio securities.
(6) purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation, and
except that the fund may exercise rights under agreements relating to such
securities, including the right to enforce security interests and to hold real
estate acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner.
(7)purchase or sell physical commodities unless acquired as a result
of owning securities or other instruments, but the fund may purchase, sell or
enter into financial options and futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative instruments.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without shareholder
approval.
Each fund will not:
(1) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the fund may
make margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(2) engage in short sales of securities or maintain a short position,
except that the fund may (a) sell short "against the box" and (b) maintain short
positions in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments.
(3) purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act and except that this limitation
does not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of reorganization, consolidation, or merger and
except that the fund will not purchase securities of registered open-end
investment companies or registered unit investment trusts in reliance on
Sections 12(d)(1)(F) or 12(d)(1)(G) of the Investment Company Act.
(4) purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding.
(5) invest more than 10% of its net assets in illiquid securities.
* * *
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of that restriction.
<PAGE>
APPENDIX D
PREMIER FUNDS' INVESTMENT ADVISORY
AND ADMINISTRATION CONTRACT
Contract made as of [____________], 1999 between MITCHELL HUTCHINS LIR
MONEY SERIES, a Delaware business trust ("Trust"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered as a
broker-dealer under the Securities Exchange Act of 1934, as amended ("1934
Act"), and as an investment adviser under the Investment Advisers Act of 1940,
as amended.
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end investment management company, and
intends to offer for public sale two distinct series of shares of beneficial
interest, LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market
Fund, each corresponding to a distinct portfolio; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment
adviser and administrator to furnish certain administrative, investment advisory
and portfolio management services to the Trust with respect to LIR Premier Money
Market Fund and LIR Premier Tax-Free Money Market Fund and any other Series to
which this contract may hereafter be made applicable (each, a "Series"), and
Mitchell Hutchins is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints Mitchell Hutchins as
investment adviser and administrator of the Trust and each Series for the period
and on the terms set forth in this Contract. Mitchell Hutchins accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. DUTIES AS INVESTMENT ADVISER.
(a) Subject to the supervision of the Trust's Board of Trustees
("Board"), Mitchell Hutchins will provide a continuous investment program for
each Series, including investment research and management with respect to all
securities and investments and cash equivalents in each Series. Mitchell
Hutchins will determine from time to time what securities and other investments
will be purchased, retained or sold by each Series.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it
will attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of any Series, Mitchell Hutchins may, in its
discretion, use brokers who provide the Series with research, analysis, advice
and similar services to execute portfolio transactions on behalf of the Series,
and Mitchell Hutchins, pursuant to Board approval, may pay to those brokers in
return for brokerage and research services a higher commission than may be
charged by other brokers, subject to Mitchell Hutchins' determining in good
faith that such commission is reasonable in terms either of the particular
transaction or of the overall responsibility of Mitchell Hutchins to such Series
and its other clients and that the total commissions paid by such Series will be
reasonable in relation to the benefits to the Series over the long term. In no
instance will portfolio securities be purchased from or sold to Mitchell
Hutchins, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder. Whenever
Mitchell Hutchins simultaneously places orders to purchase or sell the same
security on behalf of a Series and one or more other accounts advised by
Mitchell Hutchins, such orders will be allocated as to price and amount among
all such accounts in a manner believed to be equitable to each account. The
Trust recognizes that in some cases this procedure may adversely affect the
results obtained for the Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series, and will
furnish the Board with such periodic and special reports as the Board reasonably
may request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Mitchell Hutchins hereby agrees that all records which it maintains for the
Trust are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Trust and which are required to be maintained by Rule 31a-1 under the 1940
Act and further agrees to surrender promptly to the Trust any records which it
maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset
value and the net income of each Series as described in the currently effective
registration statement of the Trust under the Securities Act of 1933, as
amended, and the 1940 Act and any supplements thereto ("Registration Statement")
or as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or
person associated with Mitchell Hutchins which is a member of a national
securities exchange to effect any transaction on such exchange for the account
of any Series, which transaction is permitted by Section 11(a) of the 1934 Act,
and the Trust hereby consents to the retention of compensation by Mitchell
Hutchins or any person or entity associated with Mitchell Hutchins.
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the
affairs of the Trust and each Series subject to the supervision of the Board and
the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of
the Trust and each Series, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Trust and
each Series.
(b) Mitchell Hutchins will provide the Trust and each Series with such
corporate, administrative and clerical personnel (including officers of the
Trust) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Trust and
each Series.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Trust's
Registration Statement, proxy material, tax returns and required reports to each
Series' shareholders and the Securities and Exchange Commission and other
appropriate federal or state regulatory authorities.
(d) Mitchell Hutchins will provide the Trust and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Trust Instrument,
By-Laws and Registration Statement of the Trust and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
5. DELEGATION OF MITCHELL HUTCHINS' DUTIES AS INVESTMENT ADVISER AND
ADMINISTRATOR. With respect to any or all Series, Mitchell Hutchins may enter
into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
a sub-adviser or sub-administrator in which Mitchell Hutchins delegates to such
sub-adviser or sub-administrator any or all its duties specified in Paragraphs 2
and 3 of this Contract, provided that each Sub-Advisory or Sub-Administration
Contract imposes on the sub-adviser or sub-administrator bound thereby all
applicable duties and conditions to which Mitchell Hutchins is subject by
Paragraphs 2, 3 and 4 of this Contract, and further provided that each
Sub-Advisory or Sub-Administration Contract meets all requirements of the 1940
Act and rules thereunder.
6. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a Trustee, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
7. EXPENSES.
(a) During the term of this Contract, each Series will bear all
expenses, not specifically assumed by Mitchell Hutchins, incurred in its
operations and the offering of its shares.
(b) Expenses borne by each Series will include but not be limited to
the following (or each Series' proportionate share of the following): (i) the
cost (including brokerage commissions) of securities purchased or sold by the
Series and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Series by Mitchell Hutchins under this
Contract; (iii) expenses of organizing the Trust and the Series; (iv) filing
fees and expenses relating to the registration and qualification of the Series'
shares and the Trust under federal and/or state securities laws and maintaining
such registration and qualifications; (v) fees and salaries payable to the
Trust's Trustees and officers who are not interested persons of the Trust or
Mitchell Hutchins; (vi) all expenses incurred in connection with the Trustees'
services, including travel expenses; (vii) taxes (including any income or
franchise taxes) and governmental fees; (viii) costs of any liability,
uncollectible items of deposit and other insurance and fidelity bonds; (ix) any
costs, expenses or losses arising out of a liability of or claim for damages or
other relief asserted against the Trust or Series for violation of any law; (x)
legal, accounting and auditing expenses, including legal fees of special counsel
for those Trustees of the Trust who are not interested persons of the Trust;
(xi) charges of custodians, transfer agents and other agents (including any
lending agent); (xii) costs of preparing share certificates; (xiii) expenses of
setting in type and printing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials for
existing shareholders; (xiv) costs of mailing prospectuses and supplements
thereto, statements of additional information and supplements thereto, reports
and proxy materials to existing shareholders; (xv) any extraordinary expenses
(including fees and disbursements of counsel, costs of actions, suits or
proceedings to which the Trust is a party and the expenses the Trust may incur
as a result of its legal obligation to provide indemnification to its officers,
Trustees, agents and shareholders) incurred by the Trust or Series; (xvi) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (xvii) the cost of mailing and tabulating
proxies and costs of meetings of shareholders, the Board and any committees
thereof; (xviii) the cost of investment company literature and other
publications provided by the Trust to its Trustees and officers; (xix) costs of
mailing, stationery and communications equipment; (xx) expenses incident to any
dividend, withdrawal or redemption options; (xxi) charges and expenses of any
outside pricing service used to value portfolio securities; and (xxii) interest
on borrowings of the Series.
(c) The Trust or a Series may pay directly any expenses incurred by it
in its normal operations and, if any such payment is consented to by Mitchell
Hutchins and acknowledged as otherwise payable by Mitchell Hutchins pursuant to
this Contract, the Series may reduce the fee payable to Mitchell Hutchins
pursuant to paragraph 8 hereof by such amount. To the extent that such
deductions exceed the fee payable to Mitchell Hutchins on any monthly payment
date, such excess shall be carried forward and deducted in the same manner from
the fee payable on succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those Trustees who are interested persons of the Trust.
(e) The payment or assumption by Mitchell Hutchins of any expenses of
the Trust or a Series that Mitchell Hutchins is not required by this Contract to
pay or assume shall not obligate Mitchell Hutchins to pay or assume the same or
any similar expense of the Trust or a Series on any subsequent occasion.
8. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to
this Contract, with respect to LIR Premier Money Market Fund and LIR Premier
Tax-Free Money Market Fund, the Trust will pay to Mitchell Hutchins a fee,
computed daily and paid monthly, at an annual rate of 0.20% of each such Series'
average daily net assets.
(b) For the services provided and the expenses assumed pursuant to
this Contract with respect to any Series as to which this Contract hereafter is
made applicable, the Trust will pay to Mitchell Hutchins from the assets of such
Series a fee in an amount to be agreed upon in a written fee agreement ("Fee
Agreement") executed by the Trust on behalf of such Series and by Mitchell
Hutchins. All such Fee Agreements shall provide that they are subject to all
terms and conditions of this Contract.
(c) The fee shall be computed daily and paid monthly to Mitchell
Hutchins on or before the first business day of the next succeeding calendar
month.
(d) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective day to the end of the month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
9. LIMITATION OF LIABILITY OF MITCHELL HUTCHINS. Mitchell Hutchins and
its delegates, including any Sub-Adviser or Sub-Administrator to any Series or
the Trust, shall not be liable for any error of judgment or mistake of law or
for any loss suffered by any Series, the Trust or any of its shareholders, in
connection with the matters to which this Contract relates, except to the extent
that such a loss results from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract. Any person, even though also an
officer, director, employee, or agent of Mitchell Hutchins, who may be or become
an officer, Trustee, employee or agent of the Trust shall be deemed, when
rendering services to any Series or the Trust or acting with respect to any
business of such Series or the Trust, to be rendering such service to or acting
solely for the Series or the Trust and not as an officer, director, employee, or
agent or one under the control or direction of Mitchell Hutchins even though
paid by it.
10. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove
written provided that, with respect to any Series, this Contract shall not take
effect unless it has first been approved (i) by a vote of a majority of those
Trustees of the Trust who are not parties to this Contract or interested persons
of any such party cast in person at a meeting called for the purpose of voting
on such approval, and (ii) by vote of a majority of that Series' outstanding
voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of those Trustees of the Trust who
are not parties to this Contract or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or, with respect to any given Series, by vote of a majority of
the outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the board or by a vote of a majority of the outstanding voting
securities of such Series on sixty days' written notice to Mitchell Hutchins or
by Mitchell Hutchins at any time, without the payment of any penalty, on sixty
days' written notice to the Trust. Termination of this Contract with respect to
any given Series shall in no way affect the continued validity of this Contract
or the performance thereunder with respect to any other Series. This Contract
will automatically terminate in the event of its assignment.
11. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE
TRUST. The Trustees of the Trust and the shareholders of any Series shall not be
liable for any obligations of any Series or the Trust under this Contract, and
Mitchell Hutchins agrees that, in asserting any rights or claims under this
Contract, it shall look only to the assets and property of the Trust in
settlement of such right or claim, and not to such Trustees or shareholders.
12. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract as to any
given Series shall be effective until approved by vote of a majority of such
Series' outstanding voting securities.
13. GOVERNING LAW. This Contract shall be construed in accordance with
the laws of the State of Delaware, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act. To the extent that
the applicable laws of the State of Delaware conflict with the applicable
provisions of the 1940 Act, the latter shall control.
14. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities", "affiliated person",
"interested person", "assignment", "broker", "investment adviser", "national
securities exchange", "net assets", "prospectus", "sale", "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission. Where the effect of a requirement of the
1940 Act reflected in any provision of this Contract is relaxed by a rule,
regulation, order or other action of the Securities and Exchange Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation, order or other action.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers and delivered as of the day and year first above
written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
By
--------------------------------------
Attest: MITCHELL HUTCHINS LIR MONEY SERIES
By
---------------------------------------
<PAGE>
APPENDIX E
INVESTMENT COMPANIES MANAGED BY MITCHELL HUTCHINS
<PAGE>
APPROX.
Open-End Money Market Management NET ASSETS
INVESTMENT COMPANIES (ADVISED AND AS OF
ADMINISTRATED OR SUB-ADVISED AND SUB- 7/31/99 ANNUAL MANAGEMENT FEE
ADMINISTERED BY MITCHELL HUTCHINS) (IN 000'S) (AS A % OF NET ASSETS)
PaineWebber Money Market Fund 0.50%
Mitchell Hutchins Series Trust: 0.50%
Money Market Portfolio
Cashfund (as sub-adviser) 0.500% up to $500 million
0.425% from over $500
million
to $1 billion
0.390% from over $1
billion to $1.5 billion
0.380% from over $1.5
billion to $2 billion
0.350% from over $2
billion to $2.5 billion
0.345% from over $2.5
billion to $3.5 billion
0.325% from over $3.5
billion to $4 billion
0.315% from over $4
billion to $4.5 billion
0.300% from $4.5 billion
to $5 billion
0.290% from $5 billion to
$5.5 billion
0.280% over $5.5 billion
Retirement Money Fund (as sub-adviser) 20% of the following
investment advisory fee:
0.50% up to $1 billion
0.44% from over $1
billion to $1.5 billion
0.36% over $1.5 billion
RMA California Fund (as sub-adviser) 20% of the following
investment advisory fee:
0.50% up to $300 million
0.44% from over $300
million to $750 million
0.36% over $750 million
RMA Money Market Portfolio (as sub-adviser) 20% of the following
investment advisory fee:
0.50%
RMA New York Fund (as sub-adviser) 20% of the following
investment advisory fee:
0.50% up to $300 million
0.44% from over $300
million to $750 million
0.36% over $750 million
RMA Tax-Free Fund (as sub-adviser) 20% of the following
investment advisory fee:
0.50% up to $1 billion
0.44% from over $1
billion to $1.5 billion
0.36% over $1.5 billion
RMA U.S. Government Portfolio (as sub- 20% of the following
adviser) investment advisory fee:
0.50% up to $300 million
0.44% from over $300
million to $750 million
0.36% over $750 million
RMA New Jersey Fund (as sub-adviser) 20% of the following
investment advisory fee:
0.50%
LIR - Money Market Fund (as sub-adviser) 50% of the following
investment advisory fee:
0.25%
With a 0.28% expense cap
on Institutional Shares
and a 0.53%
expense cap on Financial
Intermediary Shares
LIR - Government Securities Fund (as sub- 50% of the following
adviser) investment advisory fee:
0.25%
With a 0.29% expense cap
on Institutional Shares
and a 0.54%
expense cap on Financial
Intermediary Shares
LIR - Treasury Securities Fund (as sub-adviser) 50% of the following
investment advisory fee:
0.25%
With a 0.29% expense cap
on Institutional Shares
and a 0.54%
expense cap on Financial
Intermediary Shares
LIR Select Money Fund 0.18%
[With a .06% fee waiver
through August 31, 1999]
PACE Money Market Investments 0.15%
With a 0.50% expense cap
Legends Fund Money Market Portfolio (as sub- 0.50%
adviser)
LIR Cash Reserves Fund(1) $0 0.29% with a [_]% fee
waiver through
[__________], 1999
LIR Liquid Assets Fund(1) $0 Direct Expenses Only
- ----------------------
(1) These funds currently have no net assets because they are involved in the
initial registration process.
<PAGE>
APPENDIX F
TRUSTEES AND OFFICERS OF THE PREMIER FUNDS
<TABLE>
<CAPTION>
Name and Address *; Age Position with Trust Business Experience; Other Directorships
- --------------------------------- --------------------------- ------------------------------------------------------------
<S> <C> <C>
Margo N. Alexander **; 52 Trustee and Mrs. Alexander is chairman (since March 1999), chief
President executive officer and a director of Mitchell Hutchins
(since January 1995), and an executive vice president
and director of PaineWebber Incorporated (since
March 1984). Mrs. Alexander is a vice president and
a director or trustee of 32 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Richard Q. Armstrong; 64 Trustee Mr. Armstrong is chairman and principal of RQA
R.Q.A. Enterprises Enterprises (management consulting firm) (since
One Old Church Road - Unit April 1991 and principal occupation since March
#6 1995). Mr. Armstrong was chairman of the board,
Greenwich, CT 06830 chief executive officer and co-owner of Adirondack
Beverages (producer and distributor of soft drinks and
sparkling/still waters) (October 1993-March 1995).
He was a partner of The New England Consulting
Group (management consulting firm) (December
1992-September 1993). He was managing director of
LVMH U.S. Corporation (U.S. subsidiary of the
French luxury goods conglomerate, Louis Vuitton
Moet Hennessey Corporation) (1987-1991) and
chairman of its wine and spirits subsidiary,
Schieffelin & Somerset Company (1987-1991). Mr.
Armstrong is a director or trustee of 31 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
E. Garrett Bewkes, Jr.**; 73 Trustee and Mr. Bewkes is a director of Paine Webber Group Inc.
Chairman of the (holding company of PaineWebber and Mitchell
Board of Trustees Hutchins). Prior to December 1995, he was a
consultant to PW Group. Prior to 1988, he was
chairman of the board, president and chief executive
officer of American Bakeries Company. Mr. Bewkes
is a director of Interstate Bakeries Corporation. Mr.
Bewkes is a director or trustee of 35 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Richard R. Burt; 52 Trustee Mr. Burt is chairman of IEP Advisors, Inc.
1275 Pennsylvania Ave., (international investments and consulting firm) (since
N.W. March 1994) and a partner of McKinsey & Company
Washington, D.C. 20004 (management consulting firm) (since 1991). He is
also a director of Archer-Daniels-Midland Co.
(agricultural commodities), Hollinger International
Co. (publishing), Homestake Mining Corp.,
Powerhouse Technologies Inc. and Weirton Steel
Corp. He was the chief negotiator in the Strategic
Arms Reduction Talks with the former Soviet Union
(1989-1991) and the U.S. Ambassador to the Federal
Republic of Germany (1985-1989). Mr. Burt is a
director or trustee of 31 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Mary C. Farrell**; 49 Trustee Ms. Farrell is a managing director, senior investment
strategist and member of the Investment Policy
Committee of PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a member of the
Financial Women's Association and Women's
Economic Roundtable and appears as a regular
panelist on Wall $treet Week with Louis Rukeyser.
She also serves on the Board of Overseers of New
York University's Stern School of Business. Ms.
Farrell is a director or trustee of 31 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Meyer Feldberg; 57 Trustee Mr. Feldberg is Dean and Professor of Management
Columbia University of the Graduate School of Business, Columbia
101 Uris Hall University. Prior to 1989, he was president of the
New York, New York Illinois Institute of Technology. Dean Feldberg is
10027 also a director of Primedia Inc., Federated
Department Stores Inc. and Revlon, Inc. Dean
Feldberg is a director or trustee of 34 investment
companies for which Mitchell Hutchins, PaineWebber
or their affiliates serves as investment adviser.
George W. Gowen; 70 Trustee Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to May 1994,
New York, New York he was a partner in the law firm of Fryer, Ross &
10017 Gowen. Mr. Gowen is a director or trustee of 34
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Frederic V. Malek; 62 Trustee Mr. Malek is chairman of Thayer Capital Partners
1455 Pennsylvania Avenue, (merchant bank). From January 1992 to November
N.W. 1992, he was campaign manager of Bush-Quayle '92.
Suite 350 From 1990 to 1992, he was vice chairman and, from
Washington, D.C. 20004 1989 to 1990, he was president of Northwest Airlines
Inc., NWA Inc. (holding company of Northwest
Airlines Inc.) and Wings Holdings Inc. (holding
company of NWA Inc.). Prior to 1989, he was
employed by the Marriott Corporation (hotels,
restaurants, airline catering and contract feeding),
where he most recently was an executive vice
president and president of Marriott Hotels and
Resorts. Mr. Malek is also a director of American
Management Systems, Inc. (management consulting
and computer-related services), Automatic Data
Processing, Inc., CB Commercial Group, Inc. (real
estate services), Choice Hotels International (hotel
and hotel franchising), FPL Group, Inc. (electric
services), Manor Care, Inc. (health care) and
Northwest Airlines Inc. Mr. Malek is a director or
trustee of 31 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Carl W. Schafer; 63 Trustee Mr. Schafer is president of the Atlantic Foundation
66 Witherspoon Street (charitable foundation supporting mainly
#1100 oceanographic exploration and research). He is a
Princeton, NJ 08542 director of Base Ten Systems, Inc. (software),
Roadway Express, Inc. (trucking), The Guardian
Group of Mutual Funds, Harding, Loevner Funds,
Evans Systems, Inc. (a motor fuels, convenience store
and diversified company), Electronic Clearing House,
Inc. (financial transactions processing), Frontier Oil
Corporation and Nutraceutix, Inc. (biotechnology
company). Prior to January 1993, he was chairman of
the Investment Advisory Committee of the Howard
Hughes Medical Institute. Mr. Schafer is a director or
trustee of 31 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Brian Storms**; 45 Trustee Mr. Storms is president and chief operating officer of
Mitchell Hutchins (since March 1999). Prior to
March 1999, he was president of Prudential
Investments (1996-1999). Prior to joining Prudential,
he was a managing director at Fidelity Investments.
Mr. Storms is a director or trustee of 31 investment
companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
Anthony G. Balestrieri; 36 Vice President Mr. Balestrieri is a senior vice president and a
portfolio manager in the short-term strategies group
of Mitchell Hutchins. Mr. Balestrieri is a vice
president of one investment company for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Kris L. Dorr; 35 Vice President Ms. Dorr is a first vice president and a portfolio
manager in the short-term strategies group of Mitchell
Hutchins. Ms. Dorr is a vice president of one
investment company for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as
investment adviser.
Elbridge T. Gerry III; 42 Vice President Mr. Gerry is a senior vice president and a portfolio
manager of Mitchell Hutchins. Prior to January 1996,
he was with J.P. Morgan Private Banking where he
was responsible for managing municipal assets,
including several municipal bond funds. Mr. Gerry is
a vice president of five investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
John J. Lee; 31 Vice President and Mr. Lee is a vice president and a manager of the
Assistant mutual fund finance department of Mitchell Hutchins.
Treasurer Prior to September 1997, he was audit manager in the
financial services practice of Ernst & Young LLP.
Mr. Lee is a vice president and assistant treasurer of
32 investment companies for which Mitchell
Hutchins, PaineWebber or one of their affiliates
serves as an investment adviser.
Kevin J. Mahoney; 33 Vice President Mr. Mahoney is a first vice president and a senior
and manager of the mutual fund finance department of
Assistant Mitchell Hutchins. From August 1996 through
Treasurer March 1999, he was the manager of the mutual fund
internal control group of Salomon Smith Barney.
Prior to August 1996, he was an associate and
assistant treasurer of BlackRock Financial
Management L.P. Mr. Mahoney is a vice president
and assistant treasurer of 32 investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
Michael H. Markowitz; 33 Vice President Mr. Markowitz is a first vice president and a portfolio
manager in the short-term strategies group of Mitchell
Hutchins. Mr. Markowitz is a vice president of one
investment company for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as
investment adviser.
Dennis McCauley; 52 Vice President Mr. McCauley is a managing director and chief
investment officer--fixed income of Mitchell
Hutchins. Prior to December 1994, he was director of
fixed income investments of IBM Corporation. Mr.
McCauley is a vice president of 22 investment
companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
Kevin P. McIntyre; 32 Vice President Mr. McIntyre is a vice president and a portfolio
manager of Mitchell Hutchins. Mr. McIntyre is a vice
president of one investment company for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Ann E. Moran; 42 Vice President and Ms. Moran is a vice-president and a manager of the
Assistant mutual fund finance department of Mitchell Hutchins.
Treasurer Ms. Moran is a vice-president and assistant treasurer
of 32 investment companies for which Mitchell
Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
Dianne E. O'Donnell; 47 Vice President Ms. O'Donnell is a senior vice president and deputy
and general counsel of Mitchell Hutchins. Ms. O'Donnell
Secretary is a vice president and secretary of 31 investment
companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
Emil Polito; 38 Vice President Mr. Polito is a senior vice president and director of
operations and control for Mitchell Hutchins. Mr.
Polito is vice-president of 32 investment companies
for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
Susan Ryan; 39 Vice President Ms. Ryan is a senior vice president and portfolio
manager of Mitchell Hutchins and has been with
Mitchell Hutchins since 1982. Ms. Ryan is a vice
president for five investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Victoria E. Schonfeld; 48 Vice President Ms. Schonfeld is a managing director and general
counsel of Mitchell Hutchins (since May 1994) and a
senior vice president of PaineWebber (since July
1995). Ms. Schonfeld is a vice president of 31
investment companies and a vice president and
secretary of one investment company for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Paul H. Schubert; 36 Vice President and Mr. Schubert is a senior vice president and director of
Treasurer the mutual fund finance department of Mitchell
Hutchins. Mr. Schubert is a vice president and
treasurer of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Barney A. Taglialatela; 38 Vice President Mr. Taglialatela is a vice president and a manager of
and the mutual fund finance department of Mitchell
Assistant Hutchins. Prior to February 1995, he was a manager
Treasurer of the mutual fund finance division of Kidder
Peabody Asset Management, Inc. Mr. Taglialatela is
a vice president and assistant treasurer of 32
investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as
investment adviser.
Debbie Vermann; 40 Vice President Ms. Vermann is a vice president and a portfolio
manager of Mitchell Hutchins. Ms. Vermann is a
vice president of three investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
Keith A. Weller; 38 Vice President and Mr. Weller is a first vice president and associate
Assistant Secretary general counsel of Mitchell Hutchins. Prior to May
1995, he was an attorney with Brown & Wood LLP
(New York City). Mr. Weller is a vice president and
assistant secretary of 31 investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
*Unless otherwise indicated, the business address of each listed person is 1285
Avenue of the Americas, New York, New York 10019.
**Mrs. Alexander, Mr. Bewkes, Mrs. Farrell and Mr. Storms are "interested
persons" of the Trust as defined in the 1940 Act by virtue of their positions
with PW Group, PaineWebber and/or Mitchell Hutchins.
</TABLE>
<PAGE>
PRELIMINARY COPY
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
(A SERIES OF THE INFINITY MUTUAL FUNDS, INC.)
SPECIAL MEETING OF SHAREHOLDERS---OCTOBER 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
INFINITY MUTUAL FUNDS, INC. AND RELATES TO A PROPOSAL WITH RESPECT TO THE
PORTFOLIO OF THE INFINITY MUTUAL FUNDS, INC. INDICATED ABOVE ("PORTFOLIO"). The
undersigned hereby appoints as proxies Tony Fisher and Keith A. Weller and each
of them (with power of substitution) to vote for the undersigned all shares of
common stock of the undersigned in the Portfolio at the above referenced 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" THE PROPOSAL RELATING TO THE PORTFOLIO.
PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL: Approval of the Agreement and Plan of Conversion and Termination
providing for the conversion of Correspondent Cash Reserves Money Market
Portfolio to LIR Premier Money Market Fund, a new series of Mitchell Hutchins
LIR Money Series.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
YOUR VOTE IS IMPORTANT. Please date and sign this proxy below and return it in
the enclosed envelope to: [_______________].
PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
<PAGE>
THIS PROXY WILL NOT BE VOTED UNLESS IT IS DATED AND SIGNED EXACTLY AS INSTRUCTED
HEREON.
If shares are held by an individual, sign your name exactly as it appears on
this card. If shares are held jointly, either party may sign, but the name of
the party signing should conform exactly to the name shown on this proxy card.
If shares are held by a corporation, partnership or similar account, the name
and the capacity of the individual signing the proxy card should be indicated---
for example: "ABC Corp., John Doe, Treasurer."
Sign exactly as name appears hereon.
-------------------------------
-------------------------------
Dated ______________, 1999
<PAGE>
PRELIMINARY COPY
CORRESPONDENT CASH RESERVES TAX FREE MONEY MARKET PORTFOLIO
(A SERIES OF THE INFINITY MUTUAL FUNDS, INC.)
SPECIAL MEETING OF SHAREHOLDERS---OCTOBER 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
INFINITY MUTUAL FUNDS, INC. AND RELATES TO A PROPOSAL WITH RESPECT TO THE
PORTFOLIO OF THE INFINITY MUTUAL FUNDS, INC. INDICATED ABOVE ("PORTFOLIO"). The
undersigned hereby appoints as proxies Tony Fisher and Keith A. Weller and each
of them (with power of substitution) to vote for the undersigned all shares of
common stock of the undersigned in the Portfolio at the above referenced 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" THE PROPOSAL RELATING TO THE PORTFOLIO.
PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL: Approval of the Agreement and Plan of Conversion and Termination
providing for the conversion of Correspondent Cash Reserves Tax Free Money
Market Portfolio to LIR Premier Tax-Free Money Market Fund, a new series of
Mitchell Hutchins LIR Money Series.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
YOUR VOTE IS IMPORTANT. Please date and sign this proxy below and return it in
the enclosed envelope to: [_______________].
PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
<PAGE>
THIS PROXY WILL NOT BE VOTED UNLESS IT IS DATED AND SIGNED EXACTLY AS INSTRUCTED
HEREON.
If shares are held by an individual, sign your name exactly as it appears on
this card. If shares are held jointly, either party may sign, but the name of
the party signing should conform exactly to the name shown on this proxy card.
If shares are held by a corporation, partnership or similar account, the name
and the capacity of the individual signing the proxy card should be indicated---
for example: "ABC Corp., John Doe, Treasurer."
Sign exactly as name appears hereon.
-------------------------------
-------------------------------
Dated _________________, 1999
