<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
THE INFINITY MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
CORRESPONDENT CASH RESERVES
MONEY MARKET PORTFOLIO
CORRESPONDENT CASH RESERVES
TAX FREE MONEY MARKET PORTFOLIO
3435 STELZER ROAD
COLUMBUS, OH 43219-8020
September 29, 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 LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund, respectively (each a "Premier Fund"), two
new series of Mitchell Hutchins LIR Money Series. 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 affect 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 AGGREGATE OPERATING
EXPENSES AS A PERCENTAGE OF NET ASSETS FOR AT LEAST THE FIRST FISCAL 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,
[SIGNATURE]
WILLIAM B. BLUNDIN
PRESIDENT
THE INFINITY MUTUAL FUNDS, INC.
<PAGE>
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
NOVEMBER 12, 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 November 12, 1999, at 10 a.m., Eastern time, at 1285 Avenue of the
Americas, 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,
[SIGNATURE]
JEFFREY C. CUSICK
VICE PRESIDENT AND ASSISTANT SECRETARY
September 29, 1999
Columbus, Ohio
<PAGE>
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 14-digit
"control" number(s) that appear on your proxy card(s).
To vote via the Internet, please access http://vote.proxy-direct.com on
the World Wide Web and follow the on-screen instructions.
You may also call 1-800-603-1741 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.
2
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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:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
- ------------------------------------------------ -----------------------
<S> <C>
Corporate Accounts
(1) ABC Corp.................................. ABC Corp.
John Doe, Treasurer
(2) ABC Corp.................................. John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer......... John Doe
(4) ABC Corp. Profit Sharing Plan............. John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership....................... Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership...... Jane B. Smith, General
Partner
Trust Accounts
(1) ABC Trust Account......................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78....... Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr.,
UGMA/UTMA.................................. John B. Smith
(2) Estate of John B. Smith................... John B. Smith, Jr.,
Executor
</TABLE>
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<PAGE>
CORRESPONDENT CASH RESERVES
MONEY MARKET PORTFOLIO
CORRESPONDENT CASH RESERVES
TAX FREE MONEY MARKET PORTFOLIO
(SERIES OF THE INFINITY MUTUAL FUNDS, INC.)
---------------
PROXY STATEMENT
---------------
SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 12, 1999
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 November
12, 1999 ("Meeting"), and at any adjournment of the Meeting. This proxy
statement will first be mailed to shareholders on or about September 29, 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
in this proxy statement for 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" the proposal in favor of such an adjournment and will vote those
proxies required to be voted "AGAINST" the proposal against such adjournment. A
shareholder vote may be taken on the proposal 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 approval of the
<PAGE>
Agreement and Plan of Conversion and Termination (the "Reorganization Plan").
Accordingly, abstentions and broker non-votes effectively will be a vote against
approval of 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" 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 street address and zip code have been combined. The proxy cards will be
sent so that a shareholder's votes will be counted for each such account.
Shareholders holding their shares in more than one capacity may receive a
separate proxy card for each such capacity, but will receive only one copy of
the proxy statement accompanying those proxy cards in order to save on postage
and printing costs. Such shareholders should sign, date and return each proxy
card that they receive.
As of the record date, August 17, 1999, CCR Money Market Portfolio had
1,704,917,406.37 shares of common stock outstanding and CCR Tax Free Money
Market Portfolio had 117,788,245.86 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.
2
<PAGE>
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 the votes of the Portfolio
entitled to be cast on the matter. Each outstanding full share of a Portfolio 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 to 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; and
(2) CCR Tax Free Money Market Portfolio will be converted to Premier
Tax-Free Fund.
Neither Premier Fund has yet commenced business operations, and each (a) was
established solely for the purpose of effecting a Reorganization,
3
<PAGE>
(b) will carry on the business of its corresponding Portfolio following its
Reorganization and (c) has an investment objective and investment policies and
restrictions effectively 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 of 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 through
their fiscal year ending December 31, 2000, 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.
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<PAGE>
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" 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
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.
5
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ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
PREMIER MONEY MARKET FUND
<TABLE>
<CAPTION>
PRO FORMA EXPENSES AFTER
PROPOSED REORGANIZATION
FISCAL YEAR 1998 EXPENSES (FISCAL YEAR 2000 OF THE
FOR THE PORTFOLIO PREMIER FUND)
-------------------------- -------------------------
<S> <C> <C>
Management Fees............... 0.20% 0.20%
Distribution and/or Service
(12b-1) Fees................ 0.60% 0.60%
Other Expenses................ 0.24% 0.24%
--- ---
Total Annual Fund Operating
Expenses.................... 1.04%* 1.04%
Expense Reimbursements........ --* 0.14%
--- ---
--- ---
Net Expenses.................. -- 0.90%
</TABLE>
- ------------------------
* A portion of the fees and expenses noted above were waived or reimbursed
during fiscal year 1998, which reduced the Portfolio's Net Expenses to 0.93%.
The expense reimbursement amounted to 0.11%. This fee waiver and expense
reimbursement arrangement was voluntary and could have been terminated at any
time.
PREMIER TAX-FREE FUND
<TABLE>
<CAPTION>
PRO FORMA EXPENSES AFTER
PROPOSED REORGANIZATION
FISCAL YEAR 1998 EXPENSES (FISCAL YEAR 2000 OF THE
FOR THE PORTFOLIO PREMIER FUND)
-------------------------- -------------------------
<S> <C> <C>
Management Fees............... 0.20% 0.20%
Distribution and/or Service
(12b-1) Fees................ 0.60% 0.60%
Other Expenses................ 0.22% 0.39%
--- ---
Total Annual Fund Operating
Expenses.................... 1.02%+ 1.19%
Expense Reimbursements/ Fee
Waiver...................... --+ 0.51%
--- ---
--- ---
Net Expenses.................. -- 0.68%
</TABLE>
- ------------------------
+ A portion of the fees and expenses noted above were waived or reimbursed
during fiscal year 1998, which reduced the Portfolio's Net Expenses to 0.71%.
The expense reimbursement amounted to 0.31%. This fee waiver and expense
reimbursement arrangement was voluntary and could have been terminated at any
time.
6
<PAGE>
As part of the Reorganizations, Mitchell Hutchins and the Trust will enter
into an agreement that obligates Mitchell Hutchins to reimburse the Premier
Funds' expenses in excess of these expense caps for their fiscal year ending
December 31, 2000. The expense caps will result in expenses that are three basis
points lower than the expense levels of each Portfolio during its last completed
fiscal year (after voluntary waivers and reimbursements). As money market funds
reduce their expenses, their net returns increase by an equal amount. Therefore,
approval of the Reorganizations will lead to increased net 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 its assets
to the corresponding Premier Fund in exchange solely for shares of that Premier
Fund ("Premier Fund Shares"). That Premier Fund will assume all the liabilities
of that Portfolio. Immediately thereafter, that Portfolio will distribute those
Premier Fund Shares to its shareholders on a one-for-one basis. 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 shares of that
Portfolio outstanding on the Closing Date ("Portfolio Shares").
The Reorganizations are anticipated to occur by the close of business on
January 28, 2000, or at another date when the Reorganizations are approved and
all contingencies specified in the Reorganization Plan have been met ("Closing
Date").
On or prior to the Closing Date, the Trust will (i) adopt a distribution and
service plan pursuant to Rule 12b-1 under the 1940 Act (the "New Rule 12b-1
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<PAGE>
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 Premier Fund. The Trust also will enter into transfer agent
and fund accounting agreements with BISYS, and a custodian agreement with The
Bank of New York ("BONY"). The Trust will take the foregoing actions on behalf
of each Premier Fund. 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 the Infinity Funds on behalf of the Portfolios
immediately prior to the Closing Date.
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
Mitchell Hutchins as each Premier Fund's 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 the other party of any representation, warranty or agreement contained in the
Reorganization Plan to be performed at or prior to the Closing Date, (ii) it
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<PAGE>
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
March 31, 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
they 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 if there is any claim
for breach of the Reorganization Plan, no recovery will be sought or payable out
of the assets of any other series of Infinity Funds or from any shareholder of
Infinity Funds. In addition, Mitchell Hutchins has agreed to indemnify the
Infinity Funds' directors against liabilities, damages and expenses associated
with claims by the Premier Funds or Portfolio shareholders that arise from the
conduct of Mitchell Hutchins related to the Reorganizations and if certain other
conditions are satisfied. Such indemnification will occur only to the extent
that the liabilities, damages and expenses are not otherwise paid under any
applicable contract, agreement or insurance policy of the Portfolios and did not
arise from misfeasance, bad faith, negligence, reckless disregard or misconduct
on the part of any such director.
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 is not required to concentrate in the banking
industry. However, it will treat domestic and foreign banking as separate
industries, as other Mitchell Hutchins advised or sub-advised funds do. Mitchell
Hutchins does not anticipate any immediate changes in portfolio management as a
result of this difference. They are both
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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
Infinity Funds and the Trust will receive an opinion of Kirkpatrick &
Lockhart LLP substantially to the effect that each Reorganization will qualify
as a tax-free reorganization under section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended. Accordingly, no Portfolio, Premier Fund or Portfolio
shareholder will recognize any gain or loss on the Reorganization.
The tax opinion also will provide that (1) a Portfolio shareholder's
aggregate basis for federal income tax purposes 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 constructively exchanged for those Premier Fund Shares,
and (2) a Portfolio shareholder's holding period for those Premier Fund Shares
generally will include its holding period for those Portfolio Shares.
The tax opinion may state that, notwithstanding the foregoing, no opinion is
expressed as to the effect of the Reorganizations on the Portfolios, Premier
Funds or any shareholder regarding any unrealized gain or loss that may be
required to be recognized for federal income tax purposes 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
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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 management
investment 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 U.S.
government securities (as defined in the 1940 Act). Neither Premier Fund is
required to (nor will it) hold annual shareholder meetings.
The change from a Maryland corporation to a Delaware business trust is not
expected to alter the business operations of the Portfolios or materially affect
the rights of their shareholders. In fact, Delaware law generally should give
the Premier Funds more legal flexibility. Delaware business trust law permits
the issuance of an unlimited number of shares of beneficial interest and
generally provides greater flexibility in the adoption and amendment of an
investment company's governing instruments. However, Delaware business trust law
has not been extensively tested in court. Maryland corporate law provides that a
shareholder is not obligated to a fund with respect to the stock held therein,
except to the extent that (1) the subscription price or other agreed upon
consideration for the stock has not been paid (subject to limited exceptions);
(2) the shareholder knowingly accepted an illegal distribution; or (3) the
shareholder is subject to any liability imposed by law upon the dissolution,
voluntary or involuntary, of a fund. Delaware law provides that a shareholder of
a Delaware business trust is entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under Delaware law. Notwithstanding current laws, courts in other states may
decline to apply Delaware law on this point. As a result, there is a risk that
such courts might not apply Delaware law and could thereby subject a Premier
Fund's shareholders to liability. The management of the Premier Funds believes
that this risk is remote.
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.
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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 OF A PORTFOLIO
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 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 OF A PORTFOLIO
AUTHORIZE MITCHELL HUTCHINS TO VOTE ONE INITIAL SHARE OF EACH PREMIER FUND IN
FAVOR OF SELECTING MITCHELL HUTCHINS TO SERVE AS THAT 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, and revised November 18, 1998,
(the "Current Investment Advisory Agreement") and an administration agreement
between the Portfolios and BISYS dated February 11, 1997
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("Current Administration Agreement") (collectively the "Current Agreements"). If
the Reorganization is approved by shareholders of a Portfolio, the Current
Agreements will be terminated and Mitchell Hutchins will provide advisory and
administrative services to the corresponding Premier Fund under the new
Investment Advisory and Administration Agreement between the Trust and Mitchell
Hutchins upon the Closing Date.
The new 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, and the wording of its
provisions is different from the Current Investment Advisory Agreement. 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, as of the date of this
proxy statement, Mitchell Hutchins does not plan 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. Shareholders will not bear any new expenses as a
result of this difference in contractual language. Fifth, the governing law of
the Investment Advisory and Administration Agreement will be Delaware, while the
Current Investment Advisory Agreement is governed by New York law. Finally,
under the Investment Advisory and Administration Agreement, Mitchell Hutchins
must give 60 days'
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notice of termination of the agreement, unlike the 90 day notice requirement
under the Current Investment Advisory Agreement.
The fee under the new Investment Advisory and Administration Agreement will
effectively remain the same as the combined fee under the Current Agreements,
namely 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;
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(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 Trust Board, 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 with respect to a Premier Fund on 60 days' written notice by a vote of
the majority of the outstanding voting securities of that Premier Fund, 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).
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INFORMATION ABOUT MITCHELL HUTCHINS ASSET MANAGEMENT INC.
Under the new Investment Advisory and Administration Agreement, Mitchell
Hutchins, a Delaware corporation with principal offices at 51 West 52nd Street,
New York, NY 10019, acts 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 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. Mitchell Hutchins is the
investment adviser or sub-adviser for 33 investment companies with 75 separate
portfolios. As of August 31, 1999, Mitchell Hutchins was the administrator or
sub-administrator of 73 portfolios within the Mitchell Hutchins fund complex,
and Mitchell Hutchins was the distributor for 40 funds in the Mitchell Hutchins
fund complex.
Certain information regarding the directors and principal executive officers
of Mitchell Hutchins is set forth below:
<TABLE>
<CAPTION>
POSITION WITH
NAME AND ADDRESS MITCHELL HUTCHINS PRINCIPAL OCCUPATION
- ----------------------- ---------------------------- ----------------------------
<S> <C> <C>
Margo N. Alexander Chairman, Chief Executive Please see Appendix F for
Officer and Director detailed biographical
information.
Brian Storms President, Chief Operating Please see Appendix F for
Officer and Director detailed biographical
information.
Julian Sluyters Chief Administrative Senior Vice President, Chief
Officer, Senior Vice Administrative Officer and
President and Director Operating Committee Member
of PaineWebber
</TABLE>
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The following trustees and officers of the Trust are directors, officers or
employees of Mitchell Hutchins: Margo N. Alexander, Brian Storms, 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. Please see Appendix F for
their biographical information.
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
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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 the 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 $1,328,616, and for the six-month period ended June 30, 1999, was $801,927.
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
$66,199, and for the six month period ended June 30, 1999, was $33,592. Mitchell
Hutchins would have received approximately the same amount from the Portfolios
as both Mitchell Hutchins and BISYS did in the aggregate 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.
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INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT -- ADOPTION
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 A PORTFOLIO'S
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 BONY to serve as custodian
for the Funds. The Premier Funds have also approved arrangements with BISYS to
serve as transfer agent for the Funds. These arrangements are similar to
transfer agency and custodian arrangements already in place for the Portfolios.
However, the new transfer agency agreement permits either party to terminate the
agreement on at least 60 days' written notice to the other party that the
agreement will terminate on a specified date, which must fall after the
expiration of an initial six month term unless the agreement is terminated for
cause. The old transfer agency agreement did not include a termination provision
and automatically renewed each year for additional one year periods, but it
provided that either party could refuse to renew the agreement after its initial
one year term on written notice at least 60 days before the expiration of the
current year's term; it also provided for certain termination penalties. In
addition, the Premier Funds will bear higher fees under the new transfer agency
agreement. During each Premier Fund's fiscal year 2000, Mitchell Hutchins has
agreed to waive or reimburse certain expenses, as described above. Therefore,
shareholders will not bear any added transfer agency expenses during that year.
DIFFERENCES IN DISTRIBUTOR
BY APPROVING THE REORGANIZATION PLAN, THE SHAREHOLDERS OF A PORTFOLIO
AUTHORIZE MITCHELL HUTCHINS TO VOTE IN FAVOR OF RATIFYING THE NEW DISTRIBUTION
AGREEMENT WITH MITCHELL HUTCHINS. The New Distribution Agreement generally
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. The provisions of the New Distribution
Agreement differ from the standard Mitchell Hutchins fund complex contract in
order to address the distribution of the Premier Funds through brokerage firms
that clear their securities through CSC and to address the specific provisions
of the Premier Funds' New Rule 12b-1 Plan.
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NEW RULE 12B-1 PLAN AND RELATED PLAN AGREEMENT
The Trust Board has adopted the New Rule 12b-1 Plan and a related Plan
Agreement. The provisions of the New Rule 12b-1 Plan and related Plan Agreement
are substantially similar to the existing Rule 12b-1 Plan of the Infinity Funds
with respect to the Portfolios.
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 of 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, as of the date of this proxy
statement, Mitchell Hutchins does not plan 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 does not have an industry concentration policy unlike
CCR Money Market Portfolio. 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 and considers domestic and foreign banks to be part
of the same industry. 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
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<PAGE>
would need to dispose of any securities received from CCR Money Market Portfolio
if the Reorganizations are approved. Neither fund may purchase a security if, as
a result, more than 25% of its total assets would be invested in securities of
issuers having their principal business activities in the same industry other
than the banking industry as described above.
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 against concentration than do the Portfolios', which exempt only
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
DESCRIPTION OF DIFFERENCES BETWEEN THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF
THE PORTFOLIOS AND THE PREMIER FUNDS
IF THE REORGANIZATIONS ARE APPROVED, THE SHAREHOLDERS OF A PORTFOLIO WILL
BECOME SHAREHOLDERS OF THE CORRESPONDING PREMIER FUND, WHICH HAS FUNDAMENTAL AND
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS THAT DIFFER FROM THOSE OF THE PORTFOLIO,
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 Portfolios should note that each of the Portfolios and
the Premier Funds must comply with Rule 2a-7 under the 1940 Act. Rule 2a-7
imposes stringent and detailed requirements concerning portfolio
diversification, quality and maturity on 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. Each Portfolio has different fundamental restrictions. The
fundamental and non-fundamental restrictions of the Premier Funds are identical
to each other and are attached as Appendix C. The Premier Funds' fundamental
restrictions are also identical to those of most other mutual funds in the
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<PAGE>
Mitchell Hutchins fund complex. 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 fund complex facilitates
compliance monitoring. The notable substantive differences are described below.
CONCENTRATION POLICY. As described above, 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 and considers domestic and foreign banks to
be part of the same industry. Premier Money Market Fund does not have a
corresponding concentration requirement. 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
Reorganizations are approved. Neither fund may purchase a security if, as a
result, more than 25% of its total assets would be invested in securities of
issuers having their principal business activities in the same industry other
than the banking industry as described above.
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 against concentration than do the Portfolios', which exempt only
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
FUNDAMENTAL RESTRICTION ON INVESTING IN CERTAIN TYPES OF SECURITIES. Each
Portfolio has a fundamental restriction that prohibits investments in certain
types of securities, but the language of each Portfolio's fundamental
restriction is different. 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 fundamental limitation comparable to those of the
Portfolios. Nevertheless, 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
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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.
FUNDAMENTAL RESTRICTION ON BORROWING AND SENIOR SECURITIES. Each Portfolio
has a fundamental restriction relating to borrowing and senior securities, but
the language of the Portfolios' restrictions differs somewhat. Each Portfolio's
fundamental restriction governing borrowing and senior securities is
significantly more restrictive than required by the 1940 Act, in that it limits
bank borrowings to 15% of a Portfolio's total assets. 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. In addition, the fundamental restriction for CCR Money
Market Portfolio limits senior securities to certain reverse repurchase
agreements while that for CCR Tax Free Money Market Portfolio prohibits all
senior securities.
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 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. Each Portfolio has a fundamental restriction
limiting the pledging, hypothecating, mortgaging or encumbering of portfolio
securities. 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.
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
23
<PAGE>
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. 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. Each Portfolio has a fundamental
restriction prohibiting the making of loans. There are differences between these
fundamental restrictions 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, while CCR Money Market Portfolio's
restriction excepts the lending of portfolio securities.
The Premier Funds also have a fundamental restriction that prohibits making
loans but, for both Premier Funds, expressly excepts 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
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<PAGE>
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. Consistent with Rule 2a-7, 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 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. Both Portfolios have
fundamental restrictions prohibiting them from acting as underwriter of
securities for other issuers. The fundamental restriction for CCR Tax Free Money
Market Portfolio provides an exception permitting it to bid for the purchase of
municipal securities directly from an issuer.
Each Premier Fund also has a fundamental restriction prohibiting it from
engaging in the business of underwriting securities. The restriction for the
Premier Funds provides an exception 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 the
fundamental restrictions for the Portfolios and the Premier Funds are
substantially similar notwithstanding the language differences.
FUNDAMENTAL RESTRICTION ON REAL ESTATE INVESTMENTS. Each Portfolio has a
fundamental restriction prohibiting investment in real estate. The Portfolios'
investment restrictions also prohibit investment in real estate investment
trusts. 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 also have fundamental restrictions that prohibit
investment in real estate, but 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' limitations
also permit a Premier Fund to exercise its rights in connection with the holding
of such securities, including enforcing security interests and holding real
estate
25
<PAGE>
acquired due to such enforcement. Notwithstanding the differences in the
language of the fundamental restrictions of the Portfolios and the Premier
Funds, 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. In the event that the SEC amends
Rule 2a-7 and the Premier Funds change their operating policies to permit
investment in options, futures or other financial contracts or derivative
instruments, then the risk characteristics of the Premier Funds could change as
a result of entering into such transactions.
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 a 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
these investments would be 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
26
<PAGE>
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 have 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 effectively permit a Premier Fund to
purchase the securities of other investment companies if, immediately
thereafter, (i) not more than 3% of the total outstanding voting stock of such
company is owned by the Fund, (ii) not more than 5% of the Fund's total assets,
taken at market value, would be invested in any one such company, (iii) not more
than 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
27
<PAGE>
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 or any exemptive order thereunder.
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. The shares of other money market funds are subject to
management fees and other expenses of these funds. At the same time, the Fund
would continue to pay its own management fees and expenses with respect to all
its investments, including shares of other money market funds.
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 SEC staff's interpretations of the 1940 Act and the rules and
policies 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 the Premier Funds 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 or its staff changes the limit
for investments in illiquid securities and the Trust Board believes the change
otherwise is appropriate for the Premier Funds.
FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION FOR DIVERSIFIED FUNDS.
CCR Money Market Portfolio is a "diversified" fund under the 1940 Act and,
accordingly, has fundamental restrictions or policies limiting the amount of
total assets it may invest in any one issuer to meet the 1940 Act requirements
for a diversified fund. The relevant fundamental restrictions for a
"diversified"
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<PAGE>
fund provide that, with respect to 75% of its total assets, it generally will
not invest more than 5% of total assets in the securities of any single issuer.
The restriction for CCR Money Market Portfolio also limits the amount of assets
that may be invested in securities issued or guaranteed by a single guarantor of
obligations held by the Portfolio. 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.
Both Premier Funds are diversified and have fundamental restrictions
providing 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.
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.
A money market fund may only exceed this limit with respect to 25% of its assets
for a single issuer for a maximum of three business days at a time. 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
Portfolio, 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 members of the Trust
Board will hold office without a term limit 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 addition, each trustee will be
subject to mandatory retirement at the end of the year in which he or she
becomes 72 years old. The Trust Board has waived this retirement policy with
respect to Mr. Bewkes for 1999 and 2000. In case a vacancy shall for any reason
exist, a majority of the remaining trustees will vote to fill such vacancy
between shareholder meetings by appointing another trustee, so long as,
immediately after such appointment, at least two-thirds of the trustees then
29
<PAGE>
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 a standing audit and contract review 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. 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. The Trust
has no standing nominating or compensation committee.
Each Independent Trustee receives an annual retainer of $1,000 per series
for his or her services to the Trust. Additionally, each Independent Trustee
receives up to $150 per series for in-person attendance at each board 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 for
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 includes certain information relating to the
compensation of the current Trust Board members who held offices with the Trust
during the fiscal period from August 10, 1998 to April 30, 1999, for their
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services to the sole other series of the Trust and the compensation of those
board members from PaineWebber funds during the 1998 calendar year:
COMPENSATION TABLE+
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM THE TRUST AND
NAME OF PERSON, POSITION FROM THE TRUST* THE FUND COMPLEX**
- ---------------------------------------------- --------------- -------------------
<S> <C> <C>
Richard Q. Armstrong, Trustee................. $ 1,160 $ 101,372
Richard R. Burt, Trustee...................... $ 1,130 $ 101,372
Meyer Feldberg, Trustee....................... $ 1,160 $ 116,222
George W. Gowen, Trustee...................... $ 1,474 $ 108,272
Frederic V. Malek, Trustee.................... $ 1,160 $ 101,372
Carl W. Schafer, Trustee...................... $ 1,160 $ 101,372
</TABLE>
- ------------------------
+ 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 period of another
series (August 10, 1998, commencement of operations to April 30, 1999).
During the one-year period August 31, 1998 through August 31, 1999, the fees
paid to each board member were as follows: Richard Q. Armstrong, $1,560;
Richard R. Burt, $1,530; Meyer Feldberg, $1,560; George W. Gowen, $1,972.35;
Frederick V. Malek, $1,560; and Carl W. Schafer, $1,560.
** Represents total compensation paid during the calendar year ended December
31, 1998, to each board member by 31 investment companies (33 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 Premier Funds. These expenses are estimated to be $115,000
in the aggregate. To the extent that charges are identified by a third party as
relating to a particular Premier Fund, that Premier Fund will pay the expense.
To the extent that charges are not identified on a third party's invoice as
relating to a particular Premier Fund, Mitchell Hutchins will allocate the
charges on the basis of the number of shareholder accounts of each Premier Fund.
However, because Mitchell Hutchins has agreed to waive a portion of the Premier
Funds' expenses, to the extent that they exceed the expense cap,
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<PAGE>
Mitchell Hutchins will effectively bear the cost of the Reorganizations. 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 by a Portfolio's shareholders encompasses (1) approval of the
Reorganization of the Portfolio into the corresponding Premier Fund and (2)
approval of the temporary waiver of certain investment restrictions 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.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF 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.
32
<PAGE>
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, 51 West 52nd Street, 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
---------------------
JEFFREY C. CUSICK
VICE PRESIDENT AND ASSISTANT SECRETARY
September 29, 1999
33
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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 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.
A-1
<PAGE>
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
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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 by January 28,
2000, 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
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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;
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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;
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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.
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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 a 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
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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
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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
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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).
Old Fund shall not be liable for the breach of any representations and
warranties contained in subparagraphs 3.2.4, 3.2.7, 3.2.10, 3.2.16, and
3.2.18 to the extent such breach arises from actions or omissions of
Mitchell Hutchins other than those based on the latter's reliance on
information provided by Old Fund's officers, Old Fund's service providers
other than Mitchell Hutchins, and/or their agents.
3.3. Each Fund represents and warrants as follows:
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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 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 that such excepted
assets, together with the amount of all redemptions (other than redemptions
in the ordinary course of Old Fund's business as a series of an open-end
investment company required by section 22(e) of the 1940 Act pursuant to
demands of shareholders that are unrelated to the Reorganization and
motivated by reasons separate and independent from the reasons motivating
the Reorganization) 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;
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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
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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
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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;
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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
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<PAGE>
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 the
Shareholder holds them as capital assets 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,
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<PAGE>
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 investment advisory and administration agreement
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. Mitchell Hutchins, as the sole shareholder of New Fund,
shall have approved such investment advisory and administration agreement, and
each such agreement and plan shall have been approved by 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.
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 a
Fund (other than those paid or reimbursed by Mitchell Hutchins) shall be borne
by that Fund.
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<PAGE>
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 March 31, 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
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<PAGE>
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 series of Corporation other
than Old Fund or from any shareholder of Corporation, even if 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 with respect to any such
liabilities, damages, and expenses only to the extent the same are not otherwise
paid after such directors have reasonably and in good faith pursued such payment
from each indemnitor, insurer, and/or other person who has agreed to make any
similar payment, 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.
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<PAGE>
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.
<TABLE>
<S> <C>
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: ---------------------------
Vice President
- -------------------------------
Secretary
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: ---------------------------
Vice President
- -------------------------------
Secretary
ATTEST: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
By: ---------------------------
Vice President
- -------------------------------
Secretary
</TABLE>
A-20
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
OLD FUNDS NEW FUNDS
(SERIES OF CORPORATION) (SERIES OF TRUST)
<S> <C>
Correspondent Cash Reserves Money LIR Premier Money Market Fund
Market Portfolio
Correspondent Cash Reserves Tax LIR Premier Tax-Free Money Market
Free Money Market Portfolio Fund
</TABLE>
A-21
<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.
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<PAGE>
(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 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
B-2
<PAGE>
borrowing is made (while borrowings exceed 5% of the value of the Portfolio's
total assets, the Portfolio 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."
* * *
B-3
<PAGE>
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.
B-4
<PAGE>
APPENDIX C
FUNDAMENTAL AND NON-FUNDAMENTAL INVESTMENT
RESTRICTIONS OF THE PREMIER FUNDS
FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations
cannot be changed for a Premier Fund without the affirmative vote of the lesser
of (a) more than 50% of the outstanding shares of the Fund or (b) 67% or more of
the shares of the Fund 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.
With respect to Premier Tax-Free Fund, the following interpretation applies
to, but is not a part of, fundamental limitation (1): Each state, territory and
possession of the United States (including the District of Columbia and Puerto
Rico), each political subdivision, agency, instrumentality and authority
thereof, and each multi-state agency of which a state is a member is a separate
"issuer." When the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from the government creating the
subdivision and the security is backed only by the assets and revenues of the
subdivision, such subdivision would be deemed to be the sole issuer. Similarly,
in the case of an Industrial Development Bond or Private Activity Bond, if that
bond is backed only by the assets and revenues of the non-governmental user,
then that non-governmental user would be deemed to be the sole issuer. However,
if the creating government or another entity guarantees a security,
C-1
<PAGE>
then to the extent that the value of all securities issued or guaranteed by that
government or entity and owned by the fund exceeds 10% of the fund's total
assets, the guarantee would be considered a separate security and would be
treated as issued by that government or entity.
(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
C-2
<PAGE>
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.
(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.
* * *
C-3
<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 with respect to 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
D-1
<PAGE>
services to execute portfolio transactions on behalf of the Series, and Mitchell
Hutchins, pursuant to Board authorization, 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:
D-2
<PAGE>
(a) Mitchell Hutchins will supervise all aspects of the operations of the
Trust with respect to 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
D-3
<PAGE>
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
D-4
<PAGE>
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.
D-5
<PAGE>
(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.
D-6
<PAGE>
(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,
D-7
<PAGE>
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation, order or other action.
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.
<TABLE>
<S> <C>
Attest: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
By ----------------------------
- -------------------------------
Attest: MITCHELL HUTCHINS LIR MONEY
SERIES
By ----------------------------
- -------------------------------
</TABLE>
D-8
<PAGE>
APPENDIX E
SIMILAR INVESTMENT COMPANIES MANAGED
BY MITCHELL HUTCHINS
<TABLE>
<CAPTION>
CONTRACTUAL ANNUAL FEE RATE AS A
MONEY MARKET PORTFOLIOS OF OPEN-END APPROX. PERCENTAGE OF AVERAGE DAILY NET
MANAGEMENT INVESTMENT COMPANIES NET ASSETS ASSETS (PAYABLE TO MITCHELL
(ADVISED AND ADMINISTRATED OR AS OF HUTCHINS--ADVISORY/ADMINISTRATION
SUB-ADVISED AND SUB-ADMINISTERED 8/31/99 OR SUB-ADVISORY/SUB-
BY MITCHELL HUTCHINS) (IN 000'S) ADMINISTRATION)
- ------------------------------------- ---------- --------------------------------
<S> <C> <C>
PaineWebber Money Market Fund........ $40,247 0.50%
Mitchell Hutchins Series Trust: Money
Market Portfolio................... $6,273 0.50%
PaineWebber Cashfund, Inc. (as
sub-adviser)....................... $5,833,294 20% of the following investment
advisory and administration fee:
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 over $4.5 billion to
$5 billion
0.290% from over $5 billion to
$5.5 billion
0.280% over $5.5 billion
PaineWebber Retirement Money Fund (as
sub-adviser)....................... $5,074,667 20% of the following advisory
and administration fee:
0.50% up to $1 billion
0.44% from over $1 billion to
$1.5 billion
0.36% over $1.5 billion
PaineWebber RMA California Municipal
Money Fund (as sub-adviser)........ $583,033 20% of the following advisory
and administration fee:
0.50% up to $300 million
0.44% from over $300 million to
$750 million
0.36% over $750 million
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
CONTRACTUAL ANNUAL FEE RATE AS A
MONEY MARKET PORTFOLIOS OF OPEN-END APPROX. PERCENTAGE OF AVERAGE DAILY NET
MANAGEMENT INVESTMENT COMPANIES NET ASSETS ASSETS (PAYABLE TO MITCHELL
(ADVISED AND ADMINISTRATED OR AS OF HUTCHINS--ADVISORY/ADMINISTRATION
SUB-ADVISED AND SUB-ADMINISTERED 8/31/99 OR SUB-ADVISORY/SUB-
BY MITCHELL HUTCHINS) (IN 000'S) ADMINISTRATION)
- ------------------------------------- ---------- --------------------------------
<S> <C> <C>
PaineWebber RMA Money Market
Portfolio (as sub-adviser)......... $14,159,776 20% of the following advisory
and administration fee: 0.50%
PaineWebber RMA New York Municipal
Money Fund (as sub-adviser)........ $394,357 20% of the following advisory
and administration fee:
0.50% up to $300 million
0.44% from over $300 million to
$750 million
0.36% over $750 million
PaineWebber RMA Tax-Free Fund (as
sub-adviser)....................... $2,563,718 20% of the following advisory
and administration fee:
0.50% up to $1 billion
0.44% from over $1 billion to
$1.5 billion
0.36% over $1.5 billion
PaineWebber RMA U.S. Government
Portfolio (as sub-adviser)......... $1,455,274 20% of the following advisory
and administration fee:
0.50% up to $300 million
0.44% from over $300 million to
$750 million
0.36% over $750 million
PaineWebber RMA New Jersey Municipal
Money Fund (as sub-adviser)........ $69,562 20% of the following advisory
and administration fee: 0.50%
Liquid Institutional Reserves - Money
Market Fund (as sub-adviser)....... $1,622,177 50% of the following advisory
and administration fee: 0.25%
(With a 0.28% expense cap on
total fund expenses for
Institutional Shares and a 0.53%
expense cap on total fund
expenses on Financial
Intermediary Shares during its
fiscal year ending April 30,
2000)
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
CONTRACTUAL ANNUAL FEE RATE AS A
MONEY MARKET PORTFOLIOS OF OPEN-END APPROX. PERCENTAGE OF AVERAGE DAILY NET
MANAGEMENT INVESTMENT COMPANIES NET ASSETS ASSETS (PAYABLE TO MITCHELL
(ADVISED AND ADMINISTRATED OR AS OF HUTCHINS--ADVISORY/ADMINISTRATION
SUB-ADVISED AND SUB-ADMINISTERED 8/31/99 OR SUB-ADVISORY/SUB-
BY MITCHELL HUTCHINS) (IN 000'S) ADMINISTRATION)
- ------------------------------------- ---------- --------------------------------
<S> <C> <C>
Liquid Institutional Reserves -
Government Securities Fund (as
sub-adviser)....................... $136,529 50% of the following advisory
and administration fee: 0.25%
(With a 0.29% expense cap on
total fund expenses for
Institutional Shares and a 0.54%
expense cap on total fund
expenses for Financial
Intermediary Shares during its
fiscal year ending April 30,
2000)
Liquid Institutional Reserves -
Treasury Securities Fund (as
sub-adviser)....................... $144,696 50% of the following advisory
and administration fee: 0.25%
(With a 0.29% expense cap on
total fund expenses for
Institutional Shares and a 0.54%
expense cap on total fund
expenses for Financial
Intermediary Shares during its
fiscal year ending April 30,
2000)
Mitchell Hutchins LIR Select Money
Fund............................... $1,427,016 0.18%
(With a 0.03% fee waiver through
January 31, 2000)
PACE Money Market Investments........ $50,906 0.15% advisory fee
0.20% administration fee
(With a 0.50% overall expense
cap on total fund expenses
through July 31, 2001)
</TABLE>
E-3
<PAGE>
APPENDIX F
TRUSTEES AND OFFICERS OF THE PREMIER FUNDS
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE TRUST DIRECTORSHIPS
- ------------------------- ----------------- -------------------------------------
<S> <C> <C>
Margo N. Alexander **+; Trustee and Mrs. Alexander is chairman (since
52 President March 1999), chief 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
R.Q.A. Enterprises principal of RQA Enterprises
One Old Church Road - (management consulting firm) (since
Unit #6 April 1991 and principal occupation
Greenwich, CT 06830 since March 1995). Mr. Armstrong was
chairman of the board, chief
executive officer and co-owner of
Adirondack Beverages (producer and
distributor of soft drinks and
sparkling/still waters) (October
1993-March 1995). He was a partner of
The New England Consulting Group
(management consulting firm)
(December 1992-September 1993). He
was managing director of LVMH U.S.
Corporation (U.S. subsidiary of the
French luxury goods conglomerate,
Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman
of its wine and spirits subsidiary,
Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a
director or trustee of 31 investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE TRUST DIRECTORSHIPS
- ------------------------- ----------------- -------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.*+; Trustee and Mr. Bewkes is a director of Paine
73 Chairman of the Webber Group Inc. (holding company of
Board of Trustees PaineWebber and Mitchell Hutchins).
Prior to December 1995, he was a
consultant to PW Group. Prior to
1988, he was chairman of the board,
president and chief executive officer
of American Bakeries Company (baker
and distributor of bakery products).
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,
1275 Pennsylvania Ave., Inc. (international investments and
N.W. consulting firm) (since March 1994)
Washington, D.C. 20004 and a partner of McKinsey & Company
(management consulting firm) (since
1991). He is also a director of
Archer-Daniels-Midland Co.
(agricultural commodities), Hollinger
International Co. (publishing),
Homestake Mining Corp. (gold mining),
Powerhouse Technologies Inc.
(provides technology to the gaming
and wagering industries) and Weirton
Steel Corp. (steel fabrication and
finished steel products). 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.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE TRUST DIRECTORSHIPS
- ------------------------- ----------------- -------------------------------------
<S> <C> <C>
Meyer Feldberg; 57 Trustee Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of
101 Uris Hall Business, Columbia University. Prior
New York, New York 10027 to 1989, he was president of the
Illinois Institute of Technology.
Dean Feldberg is also a director of
Primedia Inc. (publishing), Federated
Department Stores Inc. (operator of
department stores) and Revlon, Inc.
(cosmetics). 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
666 Third Avenue firm of Dunnington, Bartholow &
New York, New York 10017 Miller. Prior to May 1994, he was a
partner in the law firm of Fryer,
Ross & 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
1455 Pennsylvania Avenue, Capital Partners (merchant bank).
N.W. From January 1992 to November 1992,
Suite 350 he was campaign manager of
Washington, D.C. 20004 Bush-Quayle '92. From 1990 to 1992,
he was vice chairman and, from 1989
to 1990, he was president of
Northwest Airlines Inc., NWA Inc.
(holding company of Northwest
Airlines Inc.) and Wings Holdings
Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by the
Marriott Corporation (hotels,
restaurants, airline catering and
contract feeding), where he most
recently was an executive vice
president and president of Marriott
Hotels and Resorts. Mr. Malek is also
a director of Aegis Communications,
Inc. (tele-services), American
Management Systems, Inc. (management
consulting and computer-related
services), Automatic Data Processing,
Inc. (computing services), CB
Commercial Group, Inc. (real estate
services), Choice Hotels
International (hotel and hotel
franchising), FPL Group, Inc.
(electric services), HCR/ 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.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE TRUST DIRECTORSHIPS
- ------------------------- ----------------- -------------------------------------
<S> <C> <C>
Carl W. Schafer; 63 Trustee Mr. Schafer is president of the
66 Witherspoon Street Atlantic Foundation (charitable
#1100 foundation supporting mainly
Princeton, NJ 08542 oceanographic exploration and
research). He is a 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 M. 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.
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**; Vice President Mr. Gerry is a senior vice president
42 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.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE TRUST DIRECTORSHIPS
- ------------------------- ----------------- -------------------------------------
<S> <C> <C>
John J. Lee*; 31 Vice President Mr. Lee is a vice president and a
and Assistant manager of the mutual fund finance
Treasurer department of Mitchell Hutchins.
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*; 34 Vice President Mr. Mahoney is a first vice president
and Assistant and a senior manager of the mutual
Treasurer fund finance department of Mitchell
Hutchins. From August 1996 through
March 1999, he was the manager of the
mutual fund internal control group of
Salomon Smith Barney. Prior to August
1996, he was an associate and
assistant treasurer of BlackRock
Financial Management L.P. Mr. Mahoney
is a vice president and assistant
treasurer of 32 investment companies
for which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
Michael H. Markowitz**; Vice President Mr. Markowitz is a first vice
33 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**; 33 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.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE TRUST DIRECTORSHIPS
- ------------------------- ----------------- -------------------------------------
<S> <C> <C>
Ann E. Moran*; 42 Vice President Ms. Moran is a vice-president and a
and Assistant manager of the mutual fund finance
Treasurer department of Mitchell Hutchins. 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
and Secretary president and deputy general counsel
of Mitchell Hutchins. Ms. O'Donnell
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*; Vice President Ms. Schonfeld is a managing director
48 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 Mr. Schubert is a senior vice
and Treasurer president and director of 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.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE TRUST DIRECTORSHIPS
- ------------------------- ----------------- -------------------------------------
<S> <C> <C>
Barney A. Taglialatela*; Vice President Mr. Taglialatela is a vice president
38 and Assistant and a manager of the mutual fund
Treasurer finance department of Mitchell
Hutchins. Prior to February 1995, he
was a manager of the mutual fund
finance division of Kidder Peabody
Asset Management, Inc. Mr.
Taglialatela is a vice president and
assistant treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment
adviser.
Debbie Vermann**; 41 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 Mr. Weller is a first vice president
and Assistant and associate general counsel of
Secretary 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.
</TABLE>
- ------------------------------
* This person's business address is 1285 Avenue of the Americas, New York, New
York 10019.
** This person's business address is 51 West 52nd Street, 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.
F-7
<PAGE>
- ------------------------------
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES
- MONEY MARKET PORTFOLIO
- TAX FREE
MONEY MARKET PORTFOLIO
- -------------------------------------
PROXY
STATEMENT
- -------------------------------------
THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES
- MONEY MARKET PORTFOLIO
- TAX FREE
MONEY MARKET PORTFOLIO
- -------------------------------------
-------------------------------------
NOTICE OF
SPECIAL MEETING
TO BE HELD ON
NOVEMBER 12, 1999
AND
PROXY STATEMENT
-----------------------------
<PAGE>
CORRESPONDENT CASH RESERVES MONEY MARKET
PORTFOLIO
(A SERIES OF THE INFINITY MUTUAL FUNDS,
PROXY INC.) PROXY
SPECIAL MEETING OF SHAREHOLDERS NOVEMBER
12, 1999
THIS PROXY IS BEING 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 Anthony Fischer 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 on the reverse of this card. UNLESS INDICATED TO THE CONTRARY,
THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE "FOR" THE PROPOSAL
RELATING TO THE PORTFOLIO.
YOUR VOTE IS IMPORTANT. Please date and sign this proxy below and return it
promptly in the enclosed envelope. If you vote by telephone or on the internet,
there is no need to return your proxy card.
VOTE VIA THE INTERNET:
http://vote.proxy-direct.com
VOTE BY TELEPHONE: 1-800-603-1741
CONTROL NUMBER: 999 9999 9999 999
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."
_____________________________________
Signature
_____________________________________
Signature (if held jointly)
_____________________________________
Dated 10069 A
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL. PLEASE INDICATE
YOUR VOTE BY FILLING IN THE BOX COMPLETELY.
EXAMPLE: / /
PROPOSAL: FOR AGAINST ABSTAIN
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.
PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
A
<PAGE>
CORRESPONDENT CASH RESERVES TAX FREE
MONEY MARKET PORTFOLIO
(A SERIES OF THE INFINITY MUTUAL FUNDS,
PROXY INC.) PROXY
SPECIAL MEETING OF SHAREHOLDERS NOVEMBER
12, 1999
THIS PROXY IS BEING 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 Anthony Fischer 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 on the reverse of this card. UNLESS INDICATED TO THE CONTRARY,
THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE "FOR" THE PROPOSAL
RELATING TO THE PORTFOLIO.
YOUR VOTE IS IMPORTANT. Please date and sign this proxy below and return it
promptly in the enclosed envelope. If you vote by telephone or on the internet,
there is no need to return your proxy card.
VOTE VIA THE INTERNET:
HTTP://VOTE.PROXY-DIRECT.COM
VOTE BY TELEPHONE: 1-800-603-1741
CONTROL NUMBER: 999 9999 9999 999
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."
_____________________________________
Signature
_____________________________________
Signature (if held jointly)
_____________________________________
Dated 10069 B
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL. PLEASE INDICATE
YOUR VOTE BY FILLING IN THE BOX COMPLETELY.
EXAMPLE: / /
PROPOSAL: FOR AGAINST ABSTAIN
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.
PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
B
