(File Nos. 33-39659 and 811-6292)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
PAINEWEBBER INVESTMENT TRUST
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
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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):
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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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PAINEWEBBER INVESTMENT TRUST-
PAINEWEBBER GLOBAL EQUITY FUND
AUGUST 14, 1998
Dear Fellow Shareholder:
The enclosed proxy materials relate to a special meeting of the
shareholders of PaineWebber Global Equity Fund ("Fund"), a series of PaineWebber
Investment Trust, to be held on September 24, 1998. The Board of Trustees
("Board") has called this meeting to request shareholder approval to change
certain investment advisory arrangements: (a) an amended Investment Advisory and
Administration Agreement between the Fund and Mitchell Hutchins Asset Management
Inc. ("Mitchell Hutchins") and (b) a new Sub-Advisory Contract under which
Invista Capital Management, Inc. ("Invista") would become the Fund's investment
sub-adviser.
Your Board of Trustees has approved these new advisory arrangements,
including the appointment of Invista as the Fund's sub-adviser for foreign
securities and the enhanced role of Mitchell Hutchins as allocator of assets
between U.S. and foreign securities markets and as adviser for the U.S.
securities markets. The Board recommends that you vote for these proposals.
The Board is also requesting approval of a policy to permit the Board in
the future to approve the appointment of a new sub-adviser to the Fund or a
change to the Fund's sub-advisory agreement without further shareholder
approval. The Board believes that Mitchell Hutchins is especially qualified to
select and recommend sub-advisers to provide portfolio management services to
the Fund and that the additional delay and expense associated with seeking
further shareholder approval would result in unnecessary expense to the Fund.
The Board recommends that you vote for this proposal.
Please take the time to review the enclosed proxy statement and vote your
shares today by signing and returning the enclosed proxy. We have retained an
outside firm that specializes in proxy solicitation to assist us with any
necessary follow-up. If we have not received your vote as the meeting date
approaches, you may receive a telephone call from Shareholder Communications
Corporation to ask for your vote. We hope that their telephone call does not
inconvenience you.
Thank you for your attention to this matter and for your continuing
investment in the Fund.
Very truly yours,
MARGO N. ALEXANDER
President
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PAINEWEBBER INVESTMENT TRUST -
PAINEWEBBER GLOBAL EQUITY FUND
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NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 24, 1998
TO THE SHAREHOLDERS:
A special meeting of the holders of shares of beneficial interest
("Shares") of PaineWebber Global Equity Fund ("Fund"), a series of PaineWebber
Investment Trust, will be held on September 24, 1998 at 10 a.m., Eastern time,
at 1285 Avenue of the Americas, 14th Floor, New York, New York 10019, for the
following purposes:
1. (a) To consider an amended Investment Advisory and
Administration Agreement between the Fund and Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins").
(b) To consider a new Sub-Advisory Contract between
Mitchell Hutchins and Invista Capital Management, Inc.
("Invista").
2. To consider a policy to permit the Board of Trustees to
appoint sub-advisers and to approve amendments to subadvisory
agreements.
3. To transact such other business as may properly come before
the meeting or any adjournments thereof.
You are entitled to vote at the meeting and any adjournments thereof if
you owned Shares of the Fund at the close of business on August 7, 1998. If you
attend the meeting, you may vote your Shares in person. If you do not expect to
attend the meeting, please complete, date, sign and return the enclosed proxy
card in the enclosed postage paid envelope.
By order of the Board of Trustees,
DIANNE E. O'DONNELL
Secretary
August 14, 1998
1285 Avenue of the Americas
New York, New York 10019
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE
AND SIGN THE CARD, AND RETURN THE CARD 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 PROPOSALS NOTICED ABOVE. IN ORDER TO AVOID THE ADDITIONAL
EXPENSE OF FURTHER SOLICITATION, WE ASK YOUR COOPERAtION IN MAILING YOUR PROXY
CARD PROMPTLY.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general guidelines for signing proxy cards may be of
assistance to you and avoid the time and expense to the Fund 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:
REGISTRATION VALID SIGNATURE
Corporate Accounts
(1) ABC Corp...............................ABC Corp.
John Doe, Treasurer
(2) ABC Corp...............................John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer......John Doe
(4) ABC Corp. Profit Sharing Plan..........John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership....................Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership...Jane B. Smith, General
Partner
Trust Accounts
(1) ABC Trust Account......................Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78....Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o John B.
Smith, Jr. UGMA/UTMA...................John B. Smith
(2) Estate of John B. Smith................John B. Smith, Jr.
Executor
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PAINEWEBBER INVESTMENT TRUST-
PAINEWEBBER GLOBAL EQUITY FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 24, 1998
This is a proxy statement for PaineWebber Global Equity Fund ("Fund"), a
series of PaineWebber Investment Trust ("Trust"), in connection with the
solicitation of proxies made by, and on behalf of, the Trust's Board of Trustees
("Board of Trustees" or "Board") to be used at the special meeting of
Shareholders of the Fund and at any adjournments thereof ("Meeting"). This proxy
is being first mailed to Shareholders on or about August 17, 1998.
The presence, in person or by proxy, of 30% of the shares of beneficial
interest of the Fund ("Shares") outstanding on August 7, 1998 ("Record Date")
will constitute a quorum for the transaction of business at the Meeting. In the
absence of a quorum or in the event that a quorum is present at the Meeting, but
votes sufficient to approve the proposals are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those Shares represented at the Meeting in person or by proxy.
The persons named as proxies will vote those proxies which they are entitled to
vote "FOR" any such proposal in favor of such an adjournment and will vote those
proxies required to be voted "AGAINST" any such proposal against such
adjournment. A Shareholder vote may be taken on one or more of the proposals in
this proxy statement prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
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 the broker does not have discretionary
voting authority. Abstentions and broker non-votes will be counted as Shares
present for purposes of determining whether a quorum is present but will not be
voted for or against any adjournment or proposal. Accordingly, abstentions and
broker non-votes effectively will be a vote against adjournment and against
Proposals 1 and 2, for which the required vote is a percentage of the Shares
present or outstanding.
The individuals named as proxies in the enclosed proxy card will vote in
accordance with your directions, as indicated thereon, if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you give no voting instructions, your Shares will be voted
"FOR" the proposals described in this proxy statement. You may revoke your proxy
card by giving another proxy or by revoking your proxy via letter or telegram.
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To be effective, your revocation must be received by the Trust prior to the
Meeting and must indicate your name and account number. In addition, if you
attend the Meeting in person, you may, if you wish, vote by ballot at the
Meeting, thereby canceling any proxy previously given.
As of the Record Date, the Fund had [ ] Shares issued and outstanding,
consisting of [ ] Class A Shares, [ ] Class B Shares, [ ] Class C shares, and
[ ] Class Y Shares. All costs associated with the Meeting, including the
solicitation of proxies, will be borne by the Fund. Solicitations will be made
primarily by mail but also may include telephone communications by regular
employees of PaineWebber Incorporated ("PaineWebber") and Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), who will not receive any
compensation for doing so from the Fund, or by professional proxy solicitors
retained by the Fund, who will be paid fees and expenses of approximately
$30,000 by the Fund.
COPIES OF THE FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS MAY REQUEST COPIES OF THE FUND'S ANNUAL AND SEMI-ANNUAL REPORTS,
WITHOUT CHARGE, BY WRITING THE TRUST AT 1285 AVENUE OF THE AMERICAS, NEW YORK,
NEW YORK 10019, OR BY CALLING 1-800-647-1568.
Each full Share of the Fund is entitled to one vote and each fractional
Share is entitled to a proportionate share of one vote with respect to each
matter voted upon by Shareholders of the Fund. Information about the vote
necessary with respect to each proposal is discussed below in connection with
the proposal.
PROPOSAL 1
The Board of Trustees has approved a proposal by Mitchell Hutchins (the
Fund's investment adviser and administrator) to change the manner in which the
Fund's assets are managed. Under the proposal, Mitchell Hutchins would become
responsible for allocating the Fund's assets between U.S. investments and
foreign investments. Mitchell Hutchins would manage the assets allocated to U.S.
investments. A new sub-adviser, Invista Capital Management, Inc. ("Invista"),
would manage the assets allocated to foreign investments. Implementation of this
proposal requires shareholder approval of an amended Investment Advisory and
Administration Agreement between the Fund and Mitchell Hutchins (Proposal 1(a))
and a new Sub-Advisory Contract between Mitchell Hutchins and Invista (Proposal
1(b)).
The proposal would not change the Fund's investment objective of long-term
growth of capital or the Fund's investment policy of investing primarily in the
equity securities of U.S. and foreign companies. It would change only the
process by which the Fund allocates its investments between U.S. and foreign
securities and the identity of the advisers that manage its investment
portfolio. At present, the Fund's assets are managed by a sub-adviser, GE
Investment Management Incorporated ("GEIM"), who allocates the Fund's assets
among the U.S. and foreign markets and determines which securities the Fund
purchases and sells.
At its July 9, 1998 meeting, the Board approved Mitchell Hutchins'
recommendation that Mitchell Hutchins assume the role of allocating the Fund's
assets between U.S. and foreign securities markets and also become responsible
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for the day-to-day management of the U.S. securities segment of the Fund's
portfolio. At the same meeting, the Board also approved Invista's appointment as
sub-adviser responsible for the day-to-day management of the Fund's investment
portfolio of foreign securities. The Board believes that Mitchell Hutchins'
expertise in U.S. equity securities and Invista's expertise in foreign equity
securities provide an opportunity to enhance the Fund's performance.
At the same time, the Board also approved Mitchell Hutchins'
recommendation that the existing Sub-Advisory Agreement with GEIM ("GEIM
Contract") be terminated. The termination of the GEIM Contract is expected to
become effective at the same time that Mitchell Hutchins and Invista assume
their new roles, assuming that the required shareholder approvals are received.
The termination of the GEIM Contract does not require shareholder approval.
If the proposed advisory arrangements are approved, Mitchell Hutchins will
be responsible for allocating the Fund's assets between U.S. and foreign
investments. It is currently expected that, in determining the portion of the
Fund's assets allocated between these two segments, Mitchell Hutchins will
consider the expected performance of the U.S. equity markets versus that of
certain developed foreign countries included in the Morgan Stanley Capital
International Europe, Australia and Far East Index ("EAFE Index"). The EAFE
Index is a well-known index that reflects most major equity markets outside the
United States. Mitchell Hutchins will utilize this analysis in determining the
relative attractiveness of the U.S. and foreign market segments. If Mitchell
Hutchins believes that a segment shows greater potential for higher returns on a
risk-weighted basis, Mitchell Hutchins may allocate a higher portion of Fund
assets to that segment.
Mitchell Hutchins currently expects to reevaluate the allocation of the
Fund's assets monthly. Mitchell Hutchins does not expect to reallocate the
Fund's assets to reflect relatively minor changes (that is, less than 5%) to the
asset allocation model used by Mitchell Hutchins. When Mitchell Hutchins
determines that a reallocation of the Fund's assets is appropriate, the Fund may
effect the reallocation by using cash flows from the purchase or redemption of
its securities in addition to selling portfolio securities from the applicable
segment. The Fund also may use futures contracts to adjust its exposure to U.S.
and foreign equity markets in connection with a reallocation. Mitchell Hutchins
will determine the extent to which the Fund uses futures contracts for this
purpose and will be responsible for implementing its decisions using these
futures contracts.
For the U.S. portion of the Fund's portfolio, Mitchell Hutchins expects to
follow a disciplined investment process that relies on the Mitchell Hutchins
Equity Research Team and the Mitchell Hutchins Factor Valuation Model. The Model
screens a universe of over 3500 companies to identify undervalued companies with
relatively strong earnings momentum that rank well
in three measures:
o VALUE: projected dividends, cash flow, earnings and book values;
o MOMENTUM: earnings and prices to identify companies that could
surprise on the upside; and
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o ECONOMIC SENSITIVITY: to forecast how different equity securities and
industries may perform under various economic scenarios.
The Equity Research Team then applies traditional fundamental analysis and
may speak to the management of these companies, as well as their competitors.
Based on the Team's evaluations, Mitchell Hutchins selects securities for
purchase and sale for the Fund.
Invista will make a qualitative analysis of a company's fundamental
business prospects and then analyze the long term ability of the company to
generate free cash flow. Invista will consider factors such as competitive
position, market share, competitive strengths, industry supply and demand
trends, economic conditions, balance sheet strength, earnings, book value,
return on equity, revenue growth and margin development in analyzing the quality
of the company. Invista will also make a quantitative assessment of country
risk, which it considers in assessing the companies under analysis, and will
analyze a large universe of companies to determine the most appropriate
investments for the Fund. Invista may make changes in investments as
opportunities or prospects change for particular countries, industries, or
companies.
Under normal circumstances, the Fund will invest at least 80% of its total
assets in securities of issuers in the United States and countries represented
in the EAFE Index. The Fund may invest up to 20% of its assets in securities of
issuers located in other countries, for example, in Canada and in emerging
markets. Mitchell Hutchins may also invest, as part of the U.S. portion of the
Fund's portfolio, up to 10 % of the Fund's total assets in U.S.
dollar-denominated equity securities and bonds of foreign issuers that are
traded on recognized U.S. exchanges or in the U.S. over-the-counter ("OTC")
market.
If this Proposal 1 is not approved by Shareholders, the Board of Trustees
will then consider what measures are necessary or appropriate to ensure the
continuation of advisory services to the Fund.
PROPOSAL 1(a)
Mitchell Hutchins proposed to the Board, and the Board approved at its
meeting on July 9, 1998, an amended Investment Advisory and Administration
Agreement ("Proposed Advisory Contract") between the Trust and Mitchell Hutchins
applicable to the Fund. The Amended Advisory Contract is substantially similar
to the current Investment Advisory and Administration Agreement ("Current
Advisory Contract"). Under the Amended Advisory Contract, Mitchell Hutchins will
have the same duties and responsibilities and will receive the same compensation
as under the Current Advisory Contract.
Under both the Proposed and Current Advisory Contracts, Mitchell Hutchins
will provide a continuous investment program for the Fund, including investment
research and management with respect to all securities, investments and cash
equivalents in the Fund, and may allocate the Fund's portfolio investments
between countries, regions or types of investments. Mitchell Hutchins will
determine from time to time what securities and other investments will be
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purchased, retained or sold by the Fund. Mitchell Hutchins may delegate to a
sub-adviser, in whole or in part, Mitchell Hutchins' duty to provide a
continuous investment management program. Mitchell Hutchins will supervise all
aspects of the operations of the Trust and the Fund, including oversight of the
transfer agency, custodial and accounting services, except as set forth in the
Proposed Advisory Contract; provided, however, that nothing in the Proposed
Advisory Contract shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Trust and
the Fund.
As Administrator, Mitchell Hutchins will manage the affairs of the Trust
and the Fund subject to the supervision of the Board. Mitchell Hutchins will
provide the Trust and the Fund with such corporate, administrative and clerical
personnel (including officers of the Trust) and services as are deemed
reasonably necessary or advisable by the Board, including the maintenance of
certain books and records of the Trust and the Fund. Mitchell Hutchins will
arrange, but not pay, for the periodic preparation, updating, filing and
dissemination (as applicable) of the Trust's Registration Statement, proxy
material, tax returns and required reports to the Fund's shareholders and the
Securities and Exchange Commission and other appropriate federal or state
regulatory authorities. Mitchell Hutchins will provide the Trust and the Fund
with, or obtain for it, adequate office space and all necessary office equipment
and services, including telephone service, heat, utilities, stationery supplies
and similar items. Mitchell Hutchins will provide the Board on a regular basis
with economic and investment analyses and reports and make available to the
Board, upon request, any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
For both the services provided, and the expenses assumed, with respect to
the Fund, the Trust will pay to Mitchell Hutchins a fee, computed daily and paid
monthly, at an annual rate of 0.85% of the average daily net assets of the Fund
up to and including $500 million, 0.83% of the average daily net assets in
excess of $500 million up to and including $1 billion, and 0.805% of the average
daily net assets in excess of $1 billion.
Under both the Proposed and Current Advisory Contracts, Mitchell Hutchins
will not be liable for any error in judgment or mistake of law or for any loss
suffered by the Fund, or its Shareholders, in connection with the matters to
which the relevant contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Mitchell Hutchins in
the performance of its duties or from reckless disregard by it of its
obligations and duties under the Contract.
In the Proposed Advisory Contract, paragraphs 2(a) and 5 have been amended
explicitly to permit Mitchell Hutchins to allocate the Fund's portfolio
investments between countries, regions or types of investments and to delegate
to a sub-adviser or sub-advisers, in whole or in part, Mitchell Hutchins' duty
to provide a continuous investment management program with respect to the Fund,
including the provision of investment management services with respect to a
portion of its assets. These changes would permit Mitchell Hutchins to enter
into the proposed Sub-Advisory Contract with Invista, whereby Invista will
manage the foreign portion of the Fund's portfolio and Mitchell Hutchins will
manage the U.S. portion and allocate investments between the U.S. and foreign
segments of the portfolio.
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Furthermore, paragraph 5 would be amended to acknowledge that Mitchell
Hutchins could engage a sub-adviser thereunder subject only to approval of the
Sub-Advisory Contract by the Board of Trustees and to any requirements of the
securities laws pertaining thereto. As described in Proposal 2, Mitchell
Hutchins and the Trust intend to request an order permitting the engagement of a
sub-adviser by the Board of Trustees acting alone and without the need for
approval by vote of the holders of a majority of the outstanding shares of the
Trust or the Fund. See Proposal 2 for more information.
The Current Advisory Contract is dated August 25, 1995 and was last
submitted to a vote of shareholders of the Fund on March 31, 1995.
BOARD CONSIDERATION
In determining to approve the Proposed Advisory Contract, the Board of
Trustees analyzed the following factors, among others, the ability of Mitchell
Hutchins to perform the services contemplated under the Contract, the change in
net compensation to Mitchell Hutchins under the Contract, its personnel and
experience in providing similar services, its financial condition and
alternative arrangements. The Board also considered the revisions to the Current
Advisory Contract and the benefits and possible costs of such revisions. After
full consideration of these and other factors, the Board of Trustees, including
a majority of those trustees who are not "interested persons" as defined by the
1940 Act of the Trust, Mitchell Hutchins or Invista, approved the Proposed
Advisory Contract and recommended that it be submitted to the Shareholders for
approval.
VOTE REQUIRED
Approval of Proposal 1(a) requires the affirmative vote of the LESSER of
(i) 67% or more of the Shares present at the Meeting, if more than 50% of the
outstanding Shares are represented at the Meeting in person or by proxy, or (ii)
more than 50% of the outstanding Shares entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 1(A).
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PROPOSAL 1(b)
Currently, Mitchell Hutchins has a contract with GE Investment Management
Incorporated ("GEIM") pursuant to which GEIM acts as sub-adviser to the Fund
("GEIM Contract," and with the Proposed Invista Contract, collectively, the
"Contracts"). The provisions of the Contracts are substantively the same, except
for the identity of the sub-adviser appointed thereunder, the commencement date,
certain provisions relating to notice, provisions relating to the services to be
provided, compensation paid and termination by Mitchell Hutchins, which
provisions are described below.
Under the Contracts, the sub-adviser is responsible, subject to the
supervision of the Board and Mitchell Hutchins, for the actual investment
management of the Fund's assets allocated to the sub-adviser, including placing
purchase and sell orders for investments and for other related transactions, and
agrees to provide a continuous investment program for the Fund, including
investment research and management. Both Contracts recognize that the
sub-adviser may, under certain circumstances, pay higher brokerage commissions
by executing portfolio transactions with brokers which provide the sub-adviser
with research, analysis, advice or similar services.
Under the Proposed Invista Contract, the duties of the sub-adviser have
been amended and clarified. The Proposed Invista Contract will provide that the
sub-adviser will: (1) maintain all books and records required by the Sub-Adviser
pursuant to the 1940 Act and the rules and regulations promulgated thereunder
with respect to transactions on behalf of the Fund, and will furnish the Board
and Mitchell Hutchins with such periodic and special reports as the Board or
Mitchell Hutchins may reasonably request; (2) provide the Board or Mitchell
Hutchins with economic and investment analyses and reports, as well as quarterly
reports, setting forth the Fund's performance with respect to its investments
and make available to the Board and Mitchell Hutchins any economic, statistical
and investment services that Invista normally makes available to its
institutional investors or other customers; and (3) provide assistance in the
fair valuation of, and use reasonable efforts to arrange for the provision of a
price(s) from a party(ies) independent of the sub-adviser for each portfolio
security for which the custodian does not obtain prices in the ordinary course
of business from an automated pricing service.
The Contracts provide that the sub-adviser will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund, its
Shareholders or Mitchell Hutchins in connection with the matters to which the
Contracts relate, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the sub-adviser in the performance of its duties
or from reckless disregard by it of its obligations and duties under the
respective Contracts.
Under the Proposed Invista Contract, Invista would receive a sub-advisory
fee, paid by Mitchell Hutchins, not the Fund, computed daily and paid monthly,
at an annual rate of 0.40% of the Fund's average daily net assets allocated to
its management up to and including $100 million, 0.29% of the Fund's average
daily net assets allocated to its management in excess of $100 million up to and
including $300 million, and 0.26% of the Fund's average daily net assets
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allocated to its management in excess of $300 million. Under this fee
arrangement, Invista will receive fees based on the value of portfolio assets
under its management as these assets have been allocated to it by Mitchell
Hutchins.
Under the GEIM Contract, Mitchell Hutchins pays GEIM a sub-advisory fee at
an annual rate of 0.31% of the Fund's average daily net assets allocated to its
management up to and including $500 million, 0.29% of the Fund's average daily
net assets allocated to its management over $500 billion up to and including $1
billion, and 0.265% of the Fund's average daily net assets allocated to its
management over $1 billion. A table comparing the sub-advisory fees paid by
Mitchell Hutchins under the GEIM Contract during the Fund's fiscal year ended
August 31, 1996, two month period ended October 31, 1996, and fiscal year ended
October 31, 1997, and the amounts that would have been paid during the same
periods under the Proposed Invista Contract are set forth in Exhibit A. As noted
above, GEIM manages the entire Fund while it is proposed that Invista manage
only the foreign securities segment of the Fund.
The GEIM Contract is terminable by the Trust with no more than 60 nor less
than 30 days' notice to Mitchell Hutchins and GEIM; or by a vote of the majority
of the Fund's outstanding voting shares; or by Mitchell Hutchins or GEIM on not
more than 60 nor less than 30 days' notice to the Trust. The Proposed Invista
Contract provides that the Trust may terminate the Contract on 60 days' written
notice to Invista. The Proposed Invista Contract also permits Mitchell Hutchins
to terminate the contract: (1) on 120 days' written notice to Invista; (2) upon
material breach by Invista of representations and warranties contained in the
Proposed Invista Contract, if such breach has not been cured within a 20 day
period after notice of such breach; or (3) immediately, if, in the reasonable
judgment of Mitchell Hutchins, Invista becomes unable to discharge its duties
and obligations under the Proposed Invista Contract, including circumstances
such as financial insolvency of Invista or other circumstances that could
adversely affect the Fund. In addition, Invista may terminate the Contract,
without payment of penalty, on 120 days' written notice to Mitchell Hutchins.
Mitchell Hutchins and the Trust have requested an order of exemption from
the U.S. Securities and Exchange Commission that would permit Mitchell Hutchins
not only to terminate the Proposed Invista Contract, but also to appoint a new
sub-adviser, subject to the approval by the Board of the Trust, but not by the
holders of a majority of the outstanding shares of the Trust or the Fund. See
Proposal 2 for more information.
If approved by Shareholders, the Proposed Invista Contract will become
effective on or shortly after the date of approval and will remain in effect for
an initial two-year term. Thereafter, the Proposed Invista Contract will
continue in effect if it is approved at least annually by a vote of the
Shareholders or by the Board, provided that in either event continuance is
approved by the vote of a majority of the Independent Trustees, which vote must
be cast in person at a meeting called for the purpose of voting on such
approval.
BOARD CONSIDERATIONS
In determining to approve the Proposed Invista Contract, the Board of
Trustees analyzed the factors they deemed relevant, particularly the performance
of comparable Invista accounts and the sub-advisory fees that would be payable
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to Invista. The Board reviewed the services provided by Invista to its other
investment company clients, the ability of Invista to provide its services to
the Fund, including its personnel, operations and financial condition, and other
factors that would affect positively or negatively the provision of those
services. After full consideration of these and other factors, the Board of
Trustees, including a majority of those trustees who are not "interested
persons, " as defined by the Investment Company Act of 1940 ("1940 Act"), of the
Trust, Mitchell Hutchins or Invista, approved the Proposed Invista Contract and
recommended that it be submitted to the Shareholders for approval.
Further information about Invista and the Invista Contract is set forth
below under "Additional Information." The form of the Invista Contract is set
forth in Annex 2.
VOTE REQUIRED
The effectiveness of the Proposed Invista Contract is conditioned both
upon the approval of Proposal 1(a) by the Shareholders, and upon the approval of
Proposal 1(b). Approval of Proposal 1(b) requires the affirmative vote of the
LESSER of (i) 67% or more of the Shares present at the Meeting, if more than 50%
of the outstanding Shares are represented at the Meeting in person or by proxy,
or (ii) more than 50% of the outstanding Shares entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 1(B).
11
<PAGE>
PROPOSAL 2
SUMMARY
At the Board of Trustees' meeting on July 9, 1998, the Board approved, and
recommended that shareholders of the Fund approve, a policy to permit Mitchell
Hutchins, subject to the approval of the Board of Trustees, to appoint and
terminate sub-advisers, to enter into sub-advisory contracts and to amend
existing sub-advisory contracts, on behalf of the Fund without further
shareholder approval (the "Sub-Adviser Approval Policy"). The implementation of
the Sub-Adviser Approval Policy is subject to the receipt of an exemptive order
from the Securities and Exchange Commission (the "SEC").
THE SECTION 15 EXEMPTIVE ORDER
An application to exempt the Trust from the provisions of Section 15(a) of
the 1940 Act and Rule 18f-2 thereunder (the "Exemptive Application") has been
filed with the SEC. The provisions of the 1940 Act require that shareholders of
a mutual fund approve a sub-advisory contract with the sub-adviser and material
amendments to an existing sub-advisory contract. If the Exemptive Application is
granted by the SEC, and shareholders approve this proposal, Mitchell Hutchins
will be authorized, subject to approval by the Board of Trustees, to evaluate,
select and retain new sub-advisers for the Fund or modify the Fund's existing
Sub-Advisory Contracts (including termination) without obtaining further
approval of the Fund's shareholders whenever Mitchell Hutchins and the Board
believe these actions will benefit the Fund and its shareholders. As explained
below, shareholders would receive detailed information regarding any change in
sub-advisers or a material change to the sub-advisory contract. There can be no
assurance that the SEC will grant the relief requested in the Exemptive
Application.
CURRENT SUB-ADVISER APPROVAL PROCESS
Currently, Mitchell Hutchins enters into sub-advisory contracts pursuant
to which the selected sub-adviser has authority to provide the Fund with advice
concerning the investment management of all (or a portion) of the Fund's assets.
The sub-adviser determines what securities shall be purchased, what securities
shall be sold and what portion of the Fund's assets shall remain uninvested. For
these sub-advisory services to the Fund, Mitchell Hutchins pays the sub-adviser
a monthly fee as specified in the sub-advisory contract. The sub-adviser bears
its own expenses of providing sub-advisory services to the Fund. Neither the
Trust nor the Fund has any responsibility to pay sub-advisory fees to the
sub-adviser. The Fund's sub-advisory contracts are subject to approval by the
Board of Trustees, including the independent Trustees, and in the absence of
exemptive relief from the SEC, each sub-advisory contract is subject to the
approval of the Fund's shareholders.
PROPOSED SUB-ADVISER APPROVAL POLICY
Approval of the Sub-Adviser Approval Policy will not affect any of the
requirements under the federal securities laws that govern the Trust, the Fund,
Mitchell Hutchins, any sub-adviser, or any sub-advisory contract, other than the
12
<PAGE>
requirement to call a meeting of the Fund's shareholders. The Board of Trustees,
including the independent Trustees, will continue to evaluate and approve all
new sub-advisory contracts between Mitchell Hutchins and any sub-adviser as well
as all changes to existing sub-advisory contracts. In addition, if the requested
relief is granted by the SEC, the Trust and Mitchell Hutchins will be subject to
several conditions imposed by the SEC to ensure that the interests of the Fund's
shareholders are adequately protected whenever Mitchell Hutchins acts under the
Sub-Adviser Approval Policy. Furthermore, within 90 days of any change in
sub-advisers or a material change to a sub-advisory contract, the trust will
provide the Fund's shareholders with an information statement that contains
substantially the same relevant information about the sub-adviser, the
sub-advisory contract and the sub-advisory fee that would be required to be sent
to the Fund's shareholders in a proxy statement. This information will advise
the Fund's shareholders of the new sub-advisory arrangements. If not satisfied,
shareholders would be able to exchange or redeem their shares.
Shareholder approval of this Proposal 2 will not result in an increase or
decrease in the total amount of investment advisory fees paid by the Fund to
Mitchell Hutchins. If the Trust implements the Sub-Adviser Approval Policy,
Mitchell Hutchins, pursuant to the Fund's Investment Advisory and Administration
Agreement, will continue to provide the same level of management and
administrative services to the Fund as it has always provided.
If the Exemptive Application is granted, the relief would permit Mitchell
Hutchins to change sub-advisors in the following types of situations: (i) the
sub-adviser has a record of substandard performance; (ii) the individual
employees responsible for portfolio management of the Fund move from the
sub-adviser to another investment advisory firm; (iii) there is a change of
control of the sub-adviser; (iv) Mitchell Hutchins decides to diversify the
Fund's management by adding another sub-adviser; (v) there is a change in
investment style of the Fund; and (vi) Mitchell Hutchins negotiates a reduction
(or the sub-adviser negotiates an increase) in the portion of the advisory fee
that Mitchell Hutchins pays to the sub-adviser. Furthermore, where there is a
decrease in a sub-adviser's compensation paid by Mitchell Hutchins, the
concomitant increase in the compensation available for retention by Mitchell
Hutchins would not be deemed to be an increase in advisory compensation that
requires a shareholder meeting. The Sub-Adviser Approval Policy will not be used
to approve any sub-adviser that is affiliated with Mitchell Hutchins as that
term is used in the 1940 Act or to materially amend any sub-advisory contract
with an affiliated sub-adviser.
REASONS FOR REQUESTING SECTION 15 EXEMPTIVE RELIEF
The Board of Trustees believes that providing Mitchell Hutchins with
maximum flexibility to perform those duties that shareholders expect Mitchell
Hutchins to perform - selecting, supervising and evaluating sub-advisers without
incurring the unnecessary delay or expense of obtaining further shareholder
approval is in the best interests of the Fund's shareholders because it will
allow the Fund to operate more efficiently. Currently, in order for Mitchell
Hutchins to appoint a sub-adviser or materially modify a sub-advisory contract,
the Trust must call and hold a shareholder meeting of the Fund, create and
distribute proxy materials, and solicit votes from the Fund's shareholders. This
process is time-intensive, costly and slow and generally is borne entirely by
the Fund. Without the delay inherent in holding shareholder meetings, the Board
13
<PAGE>
would be able to act more quickly and with less expense to appoint a sub-adviser
when the Board and Mitchell Hutchins feel that the appointment would benefit the
Fund.
Also, the Board believes that it is appropriate to vest the selection,
supervision and evaluation of the sub-advisers in Mitchell Hutchins (subject to
review by the Board) in light of Mitchell Hutchins' significant experience and
expertise in selecting sub-advisers and shareholders' expectation that Mitchell
Hutchins will utilize that expertise to select the most competent sub-advisers.
Mitchell Hutchins has demonstrated that it has the requisite expertise to
evaluate, select and supervise sub-advisers. The Board believes that many
investors choose to invest in the Fund because of Mitchell Hutchins' experience
in this respect.
Finally, the Board will provide sufficient oversight of the sub-adviser
selection process to ensure that shareholders' interests are protected whenever
Mitchell Hutchins selects a sub-adviser or modifies a sub-advisory contract. The
Board, including a majority of the independent Trustees, will continue to
evaluate and approve all new sub-advisory contracts as well as any modification
to existing sub-advisory contracts. In its review, the Board will analyze all
factors that it considers to be relevant to the determination, including the
nature, quality and scope of services provided by the sub-advisers. The Board
will compare the investment performance of the assets managed by the sub-adviser
with other accounts with similar investment objectives managed by other advisers
and will review the sub-adviser's compliance with federal securities laws and
regulations. The Board believes that its comprehensive review will ensure that
Mitchell Hutchins continues to act in the best interests of the Fund and its
shareholders. Each Sub-Advisory Contract will continue to be subject to all
provisions of the 1940 Act, except for the specific provisions of the 1940 Act
for which relief is granted by the SEC.
REQUIRED VOTE
Approval of Proposal 2 requires the affirmative vote of the LESSER of (i)
67% or more of the Shares present at the Meeting, if more than 50% of the
outstanding Shares are represented at the Meeting in person or by proxy, or (ii)
more than 50% of the outstanding Shares entitled to vote at the Meeting.
Adoption of the Sub-Adviser Approval Policy is also conditioned upon receipt of
the requested exemptive relief from the SEC. If the SEC declines to grant the
relief requested by the Trust and Mitchell Hutchins, the Sub-Adviser Approval
Policy will not be adopted for the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" PROPOSAL 2.
14
<PAGE>
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION aBOUT MITCHELL HUTCHINS
Mitchell Hutchins, a Delaware corporation and the Fund's investment
adviser and administrator, is a wholly owned subsidiary of PaineWebber, a wholly
owned subsidiary of Paine Webber Group Inc. ("PW Group"), a publicly held
corporation. The principal offices of Mitchell Hutchins, PaineWebber and PW
Group are located at 1285 Avenue of the Americas, New York, New York 10019.
As of June 30, 1998, Mitchell Hutchins served as adviser or sub-adviser to
31 investment companies with an aggregate of 69 separate portfolios and
aggregate assets of approximately $40.3 billion. Information concerning advisory
fees paid by other investment companies advised by Mitchell Hutchins with
investment objectives similar to the Fund is attached as Exhibit B.
Mitchell Hutchins also acts as the distributor of the Shares under
separate distribution contracts with respect to each class of the Fund's Shares
that require Mitchell Hutchins to use its best efforts, consistent with its
other businesses, to sell Shares. PaineWebber and its Correspondent firms sell
Shares under exclusive dealer agreements between Mitchell Hutchins and
PaineWebber. Under the distribution contract for the Class A Shares, during the
Fund's fiscal year ended October 31, 1997, Mitchell Hutchins earned a sales
charge of approximately $132,728, and retained approximately $8,400, net of
concessions to PaineWebber as exclusive dealer. Under the distribution contracts
for the Class B Shares and Class C Shares, during the same fiscal period,
Mitchell Hutchins earned contingent deferred sales charges paid upon certain
redemptions of $249,534 for Class B Shares and $2,641 for Class C Shares, all of
which it retained.
Under separate plans of distribution pertaining to the Class A, Class B
and Class C Shares, the Fund pays Mitchell Hutchins a service fee at an annual
rate of 0.25% of the average daily net assets of each class of Shares and a
distribution fee at an annual rate of 0.75% of the average daily net assets of
Class B and Class C Shares. Under the plans of distribution, during its fiscal
year ended October 31, 1997, the Fund paid or accrued fees to Mitchell Hutchins
of $789,664 for Class A Shares, $1,070,444 for Class B Shares and $650,447 for
Class C Shares.
The names, addresses and principal occupations of the principal executive
officer and directors of Mitchell Hutchins are set forth in Exhibit D. Each
officer of the Fund is an officer, employee or director of Mitchell Hutchins or
PaineWebber, as indicated under "Information about Certain Trustees and Officers
of the Fund," below. The Fund did not pay brokerage commissions to affiliated
brokers during the fiscal year ended October 31, 1997.
ADDITIONAL INFORMAtION ABOUT INVISTA
Invista is located at 1800 Hub Tower, 699 Walnut, Des Moines, Iowa 50309
and is an indirectly wholly-owned subsidiary of Principal Life Insurance
Company. Invista is a registered investment adviser. As of June 30, 1998,
Invista had over $30 billion in assets under management.
15
<PAGE>
INFORMATION ABOUT CERTAIN TRUSTEES AND OFFICERS OF THE FUND
Officers are appointed by the trustees and serve at the pleasure of the
board. Information regarding officers and trustees of the Fund who are employees
or directors of Mitchell Hutchins, PaineWebber or PaineWebber Group Inc. is
provided below:
MARGO N. ALEXANDER, age [51], president and trustee of the
Trust. Mrs. Alexander is president, chief executive officer and a
director of Mitchell Hutchins (since January 1995) and an executive
vice president and a director of PaineWebber (since March 1984). Mrs.
Alexander is president and a director or trustee of 31 investment
companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
T. KIRKHAM BARNEBY, age 52, vice president of the Trust. Mr. Barneby
is a managing director and chief investment officer - quantitative
investments of Mitchell Hutchins. Prior to September 1994, he was a senior
vice president at Vantage Global Management. Prior to June 1993, he was a
senior vice president at Mitchell Hutchins. Mr. Barneby is a vice
president of six investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
E. GARRETT BEWKES, JR., age 71, trustee and chairman of the Board of
Trustees. Mr. Bewkes is a director of Paine Webber Group Inc. ("PW Group")
(holding company of PaineWebber and Mitchell Hutchins). Prior to December
1995, he was a consultant to PW Group. Prior to 1988, he was chairman of
the board, president and chief executive officer of American Bakeries
Company. Mr. Bewkes is a director of Interstate Bakeries Corporation and
NaPro BioTherapeutics, Inc. Mr. Bewkes is a director of trustee of 30
investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
MARY C. FARRELL, age 48, trustee of the Trust. Ms. Farrell is a
managing director, senior investment strategist and member of the
Investment Policy Committee of PaineWebber. Ms. Farrell joined PaineWebber
in 1982. She is a member of the Financial Women's Association and Women's
Economic Roundtable and appears as a regular panelist on Wall $treet Week
with Louis Rukeyser. She also serves on the Board of Overseers of New York
University's Stern School of Business. Ms. Farrell is a director or
trustee of 29 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
JOHN J. LEE, age 29, vice president and assistant treasurer of the
Trust. Mr. Lee is a vice president and a manager of the mutual fund
finance department of Mitchell Hutchins. Prior to September 1997, he was
an audit manager in the financial services practice of Ernst & Young LLP.
Mr. Lee is a vice president and assistant treasurer of 30 investment
companies for which Mitchell Hutchins or PaineWebber serves as investment
adviser.
16
<PAGE>
ANN E. MORAN, age [40], vice president and assistant treasurer of
the Trust. Ms. Moran is a vice president and a manager of the mutual
fund finance department of Mitchell Hutchins. Ms. Moran is a vice
president and assistant treasurer of 31 investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
DIANNE E. O'DONNELL, age [45], vice president and secretary of
the Trust. Ms. O'Donnell is a senior vice president and deputy general
counsel of Mitchell Hutchins. Ms. O'Donnell is a vice president and
secretary of 30 investment companies and a vice president and assistant
secretary of one investment company for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
EMIL POLITO, age [37], vice president of the Trust. Mr. Polito is a
senior vice president and director of operations and control for Mitchell
Hutchins. From March 1991 to September 1993, he was director of the mutual
funds sales support and service center for Mitchell Hutchins and
PaineWebber. Mr. Polito is a vice president for 31 investment companies
for which Mitchell Hutchins or PaineWebber serves as investment adviser.
VICTORIA E. SCHONFELD, age [47], vice president of the Trust.
Ms. Schonfeld is a managing director and general counsel of Mitchell
Hutchins. Prior to May 1994, she was a partner in the law firm of
Arnold & Porter. Ms. Schonfeld is a vice president of 30 investment
companies and a vice president and secretary of one investment company
for which Mitchell Hutchins or PaineWebber serves as investment adviser.
PAUL H. SCHUBERT, age [31], vice president and treasurer of the
Trust. Mr. Schubert is a senior vice president and director of the
mutual fund finance division of Mitchell Hutchins. From August 1992 to
August 1994, he was a vice president at BlackRock Financial Management,
Inc. Mr. Schubert is a vice president and treasurer of 30 investment
companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
BARNEY TAGLIALATELA, age 36, vice president and assistant treasurer
of the Trust. Mr. Taglialatela is a vice president and a manager of the
mutual fund finance department of Mitchell Hutchins. Prior to February
1995, he was a manager of the mutual fund finance division of Kidder
Peabody Asset Management, Inc. Mr. Taglialatela is a vice president and
assistant treasurer of 31 investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
MARK A. TINCHER, age [42], vice president of the Trust. Mr.
Tincher is a managing director and chief investment officer - equities
of Mitchell Hutchins. Prior to March 1995, he was a vice president and
directed the U S. funds management and equity research areas of Chase
Manhattan Private Bank. Mr. Tincher is a vice president of 13
investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
KEITH A. WELLER, age [37], vice president and assistant secretary
of the Trust. Mr. Weller is a first vice president and associate
17
<PAGE>
general counsel of Mitchell Hutchins. Prior to joining Mitchell
Hutchins in June 1995, he was an attorney with the law firm of Brown &
Wood. Mr. Weller is a vice president and assistant secretary of 30
investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
OTHER INFORMATION
BENEFICIAL OWNERSHIP OF SHARES
To the best knowledge of the Fund's management, the executive officers and
Board members of the Fund, as a group, own less than 1% of the Fund's
outstanding Shares. The following Shareholders are shown on the Fund's records
as owning more than 5% of its Shares:
Number and Percentage
of Shares Beneficially
Name and Address Owned as of [ ]%
---------------- ----------------
....................................
Each Shareholder may be contacted c/o Mitchell Hutchins Asset Management
Inc., 1285 Avenue of the Americas, New York, NY 10019.
SHAREHOLDER PROPOSALS
As a general matter, the Trust does not hold regular annual or other
meetings of Shareholders. Any Shareholder who wishes to submit proposals to be
considered at a special meeting of the Fund's shareholders should send such
proposals to the Fund at 1285 Avenue of the Americas, New York, New York 10019,
attn: Dianne E. O'Donnell, Secretary. They must be received a reasonable period
of time prior to any meeting to be included in the proxy materials. Moreover,
inclusion of such proposals is subject to limitations under the federal
securities laws.
OTHER BUSINESS
Management knows of no business to be presented to the Meeting other than
the matters set forth in this statement, but should any other matter requiring a
vote of Shareholders arise, the proxies will vote thereon according to their
best judgment in the interests of the Fund.
By order of the Board of Trustees,
DIANNE E. O'DONNELL
Secretary
--------------------------------------------------------
It is important that you execute and return your proxy promptly.
--------------------------------------------------------
18
<PAGE>
EXHIBIT A
COMPARISON OF INVESTMENT ADVISORY AND SUB-ADVISORY FEES
1. SUB-ADVISORY FEES PAID AND PAYABLE BY MITCHELL HUTCHINS
The following table compares the sub-advisory fees, expressed both in
dollars and as a percentage of the Fund's average daily net assets, paid to GEIM
by Mitchell Hutchins to the sub-advisory fees that would have been payable to
Invista by Mitchell Hutchins if the Invista Contract had been in effect during
the same periods indicated below:
Fees Paid Under Fees Payable1 Under
GEIM Contract Invista Contract
------------- ----------------
Fiscal Year Ended 8/31/96...............$1,808,760 0.31% $900,094 0.15%
Two Months Ended 10/31/96.................$287,688 0.31% $138,713 0.15%
Fiscal Year Ended 10/31/97..............$1,704,393 0.31% $1,124,324 0.20%
- ----------
1 The differences between the aggregate fees paid under the GEIM Contract and
the aggregate fees payable under the Invista Contract reflect an assumed
allocation of the Fund's average daily net assets by Mitchell Hutchins to
Invista during the indicated periods as follows: fiscal year ended 8/31/96, 46%;
two months ended 10/31/96, 45%; and fiscal year ended 10/31/97, 64%. This
assumption is for illustration purposes only as it is not possible to determine
retroactively with precision the exact percentage of the assets that would have
been allocated to Invista on a monthly basis had the proposed arrangements been
in effect during the periods indicated.
19
<PAGE>
EXHIBIT B
ADVISORY FEES PAYABLE TO MITCHELL HUTCHINS
BY INVESTMENT COMPANIES OR SERIES THEREOF
WITH INVESTMENT OBJECTIVES SIMILAR TO THE FUND
Annual Investment Advisory
and Administration Fee Rate
Net Assets as Expressed as a Percentage of
of 6/30/98 Average Daily Net Assets,
Fund ($ Millions) as of 6/30/98
- ---- ------------ -------------
PaineWebber Investment Trust II $10.8 0.00%(1)
- PaineWebber Emerging
Markets Equity Fund
PaineWebber Managed $33.1 Up to $100 million: 1.20%
Investments Trust - Over $100 million: 1.10%
PaineWebber Asia Pacific
Growth Fund
Global Small Cap Fund Inc. $73.7 1.00%
Mitchell Hutchins Series $21.3 0.75%
Trust -- Global Growth
Portfolio
PaineWebber PACE Select $58.6 0.85%(2)
Advisors Trust -- PACE
International Emerging
Markets Equity Investments
PaineWebber PACE Select $156.9 0.90%
Advisors Trust -- PACE
International Equity
Investments
- ----------
1 Without giving effect to fee waivers and/or expense reimbursements, advisory
fees would have been 1.20%
2 Without giving effect to fee waivers and/or expense reimbursements, advisory
fees would have been 1.10%
20
<PAGE>
EXHIBIT C
ADVISORY FEES PAYABLE TO INVISTA
BY INVESTMENT COMPANIES OR SERIES THEREOF
WITH INVESTMENT OBJECTIVES SIMILAR TO THE FUND
- --------------------------------------------------------------------------------
Fund Net Assets as Annual Sub-Investment Advisory
of 6/30/98 Fee Rate, as of
($ Millions) 6/30/98
- --------------------------------------------------------------------------------
PRINCIPAL
SPECIAL
MARKETS
FUND, INC.*
- --------------------------------------------------------------------------------
International 86.6 First $250 million - 1.15%
Emerging Next $250 million - 1.05%
Markets Over $500 million - 0.95%
Portfolio
- --------------------------------------------------------------------------------
International 49.8 Entire Portfolio - 0.90%
Securities
Portfolio
- --------------------------------------------------------------------------------
International 91.9 First $250 million - 1.00%
SmallCap Next $250 million - 0.90%
Portfolio Over $500 million - 0.80%
- --------------------------------------------------------------------------------
PRINCIPAL
VARIABLE
CONTRACTS
FUND, INC.**
- --------------------------------------------------------------------------------
International 151.8 First $100 million - 0.75%
Account Next $100 million - 0.70%
Next $100 million - 0.65%
Next $100 million - 0.60%
Over $400 million - 0.55%
- --------------------------------------------------------------------------------
- ----------
* Fees for the following three funds indicate what each portfolio pays the
fund's manager, Principal Management Corporation. Principal Management
Corporation passes this entire fee through to Invista. Fees paid represent a
percentage of Average Daily Net Assets, as of 6/30/98.
** Fees for the following five funds indicate what each portfolio pays the
fund's manager, Principal Management Corporation. Principal Management
Corporation reimburses Invista for expenses incurred in rendering sub-advisory
services to each portfolio.
21
<PAGE>
- --------------------------------------------------------------------------------
International 11.0 First $100 million - 1.20%
SmallCap Next $100 million - 1.15%
Account Next $100 million - 1.10%
Next $100 million - 1.05%
Over $400 million - 1.00%
- --------------------------------------------------------------------------------
13.1 First $100 million - 1.25%
PRINCIPAL Next $100 million - 1.20%
INTERNATIONAL Next $100 million - 1.15%
EMERGING Next $100 million - 1.10%
MARKETS Over $400 million - 1.05%
FUND, INC.
- --------------------------------------------------------------------------------
PRINCIPAL 24.2 First $100 million - 1.20%
INTERNATIONAL Next $100 million - 1.15%
SMALLCAP Next $100 million - 1.10%
FUND, INC. Next $100 million - 1.05%
Over $400 million - 1.00%
- --------------------------------------------------------------------------------
PRINCIPAL 400.4 First $100 million - 0.75%
INTERNATIONAL Next $100 million - 0.70%
FUND, INC. Next $100 million - 0.65%
Next $100 million - 0.60%
Over $400 million - 0.55%
- --------------------------------------------------------------------------------
Rodney 21.1 Monthly fee at Annual
Square (Invista managed) rate of 0.50% of
Strategic 64.2 average daily net assets
Equity Fund - (Full Portfolio)
International
Equity
Portfolio***
- --------------------------------------------------------------------------------
- ----------
*** Fees payable to Invista are based solely on the percentage of the portfolio
to which Invista serves as sub-advisor. Fees payable to Invista are calculated
monthly at an Annual Rate of 0.50% of Average Daily Net Assets.
22
<PAGE>
EXHIBIT D
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF MITCHELL HUTCHINS
Name Principal Occupation Address
---- -------------------- -------
Margo N. Alexander President, Chief Executive 1285 Avenue of the
Officer and Director of Americas
Mitchell Hutchins and New York, NY 10019
Executive Vice President
and Director of PaineWebber
Jonathan R. Baum Managing Director and 1285 Avenue of the
Director of Sales and Americas
Marketing of Mitchell New York, NY 10019
Hutchins
Julian F. Sluyters Senior Vice President and 1285 Avenue of the
Chief Administrative Americas
Officer of Mitchell New York, NY 10019
Hutchins
23
<PAGE>
EXHIBIT E
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF INVISTA
NAME PRINCIPAL OCCUPATION ADDRESS
Craig Barnes President - Invista Capital 1900 Hub Tower,
Management, Inc. Des Moines, Iowa
Ron Keller Executive Vice President - 801 Grand Avenue,
Principal Life Insurance Des Moines, Iowa
Company
Greg Hauser Vice President - Principal Life 801 Grand Avenue,
Insurance Company Des Moines, Iowa
Stephan Jones President - Princor Financial 801 Grand Avenue,
Services Corporation Des Moines, Iowa
Scott Opsal Executive Vice President - 1900 Hub Tower,
Invista Capital Management, Des Moines, Iowa
Inc.
Larry Zimpleman Vice President - Principal Life 711 High Street,
Insurance Company Des Moines, Iowa
Dennis Francis Senior Vice President - 801 Grand Avenue,
Principal Life Insurance Des Moines, Iowa
Company
Richard Prey Senior Vice President - 711 High Street,
Principal Life Insurance Des Moines, Iowa
Company
24
<PAGE>
ANNEX 1
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of , 1998 between PAINEWEBBER INVESTMENT TRUST, a
Massachusetts business trust ("Trust"), and MITCHELL HUTCHINS ASSET MANAGEMENT
INC. ("Mitchell Hutchins"), a Delaware corporation registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and as an
investment adviser under the Investment Advisers Act of 1940, as amended,
WHEREAS the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and
offers for public sale two distinct series of shares of beneficial interest,
which correspond to distinct portfolios, one of which has been designated as
PaineWebber Global Equity Fund; 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 PaineWebber
Global Equity Fund and any other Series as hereafter may be established (each a
"Series"), and Mitchell Hutchins is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints Mitchell Hutchins as investment
adviser and administrator of the Trust and each Series for the period and on the
terms set forth in this Contract. Mitchell Hutchins accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. DUTIES AS INVESTMENT ADVISER.
(a) Subject to the supervision of the Trust's Board of Trustees ("Board"),
Mitchell Hutchins will provide a continuous investment program for a Series,
including investment research and management with respect to all securities and
investments and cash equivalents in the Series, and may allocate the Series'
portfolio investments between countries, regions or types of investments.
Mitchell Hutchins will determine from time to time what securities and other
investments will be purchased, retained or sold by the Series. Mitchell Hutchins
may delegate to a sub-adviser, in whole or in part, Mitchell Hutchins' duty to
provide a continuous investment management program with respect to any Series,
including the provision of investment management services with respect to a
portion of the Series' assets, in accordance with paragraph 5 of this Agreement.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution; provided
that, on behalf of any Series, Mitchell Hutchins may, in its discretion, use
brokers who provide the Series with research, analysis, advice and similar
services to execute portfolio transactions on behalf of the Series, and Mitchell
Hutchins may pay to those brokers in return for brokerage and research services
a higher commission than may be charged by other brokers, subject to Mitchell
Hutchins' determining in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of
Mitchell Hutchins to such Series and its other clients and that the total
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commissions paid by such Series will be reasonable in relation to the benefits
to the Series over the long term. In no instance will portfolio securities be
purchased from or sold to Mitchell Hutchins, or any affiliated person thereof,
except in accordance with the federal securities laws and the rules and
regulations thereunder, or any applicable exemptive orders . Whenever Mitchell
Hutchins simultaneously places orders to purchase or sell the same security on
behalf of a Series and one or more other accounts advised by Mitchell Hutchins,
such orders will be allocated as to price and amount among all such accounts in
a manner believed to be equitable to each account. The Trust recognizes that in
some cases this procedure may adversely affect the results obtained for the
Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series, and will
furnish the Board with such periodic and special reports as the Board reasonably
may request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Mitchell Hutchins hereby agrees that all records which it maintains for the
Trust are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Trust and which are required to be maintained by Rule 31a-l under the 1940
Act and further agrees to surrender promptly to the Trust any records which it
maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset value
and the net income of each Series as described in the currently effective
registration statement of the Trust under the Securities Act of 1933, as
amended, and the 1940 Act and any supplements thereto ("Registration Statement)
or as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or person
associated with Mitchell Hutchins which is a member of a national securities
exchange to effect any transaction on such exchange for the account of any
Series, which transaction is permitted by Section 11(a) of the 1934 Act and the
rules thereunder, and the Trust hereby consents to the retention of compensation
by Mitchell Hutchins or any person or entity associated with Mitchell Hutchins
for such transaction.
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the affairs
of the Trust and each Series subject to the supervision of the Board and the
following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of the
Trust and each Series, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Trust and
each Series.
(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.
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(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Declaration of
Trust, By-Laws, and Registration Statement of the Trust and with the
instructions and directions of the Board and will comply with the requirements
of the 1940 Act, the rules thereunder, and all other applicable federal and
state laws and regulations.
5. DELEGATION OF MITCHELL HUTCHINS' DUTIES AS INVESTMENT ADVISER AND
ADMINISTRATOR. With respect to any or all Series, Mitchell Hutchins may enter
into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
one or more sub-advisers or sub-administrators in which Mitchell Hutchins
delegates to such sub-advisers or sub-administrators any or all of its duties
specified in Paragraphs 2 and 3 of this Contract, provided that each
Sub-Advisory or Sub-Administration Contract imposes on the sub-adviser or
sub-administrator bound thereby all the corresponding duties and conditions to
which Mitchell Hutchins is subject by Paragraphs 2 and 3, and further provided
that each Sub-Advisory or Sub-Administration Contract imposes on the sub-adviser
or sub-administrator bound thereby all the duties and conditions of paragraph 4
of this Contract, and further provided that each Sub-Advisory or
Sub-Administration Contract meets all requirements of the 1940 Act and rules
thereunder. Furthermore, to the extent consistent with the regulations and
orders of the Securities and Exchange Commission, the appointment and engagement
of any sub-advisor and delegation to it of duties hereunder by Mitchell Hutchins
shall be subject only to the approval of the Board of Trustees of the Trust.
6. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. 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 registrations and qualification of the Series'
shares and the Trust under federal and/or securities laws and maintaining such
registration and qualifications; (v) fees and salaries payable to the Trust's
Trustees and officers who are not interested persons of the Trust or Mitchell
Hutchins; (vi) all expenses incurred in connection with the Trustees' services,
including travel expenses; (vii) taxes (including any income or franchise taxes)
and governmental fees; (viii) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (ix) any costs, expenses or
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losses arising out of a liability of or claim for damages or other relief
asserted against the Trust or Series for violation of any law; (x) legal,
accounting and auditing expenses, including legal fees of special counsel for
those Trustees of the Trust who are not interested persons of the Trust; (xi)
charges of custodians, transfer agents and other agents; (xii) costs of
preparing share certificates; (xiii) expenses of setting in type and printing
prospectuses and supplements thereto, statements of additional information and
supplements thereto, reports and proxy materials for existing shareholders;
(xiv) costs of mailing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials to
existing shareholders; (xv) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which the
Trust is a party and the expenses the Trust may incur as a result of its legal
obligation to provide indemnification to its officers, Trustees, agents and
shareholders) incurred by the Trust or Series; (xvi) fees, voluntary assessments
and other expenses incurred in connection with membership in investment company
organizations; (xvii) cost of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xviii) the cost
of investment company literature and other publications provided by the Trust to
its Trustees and officers; (xix) costs of mailing, stationery and communications
equipment; (xx) expenses incident to any dividend, withdrawal or redemption
options; (xxi) charges and expenses of any outside pricing service used to value
portfolio securities; and (xxii) interest on borrowings of the Fund.
(c) The Trust or a Series may pay directly any expenses incurred by it in
its normal operations and, if any such payment is consented to by Mitchell
Hutchins and acknowledged as otherwise payable by Mitchell Hutchins pursuant to
this Contract, the Series may reduce the fee payable to Mitchell Hutchins
pursuant to Paragraph 8 thereof by such amount. To the extent that such
deductions exceed the fee payable to Mitchell Hutchins on any monthly payment
date, such excess shall be carried forward and deducted in the same manner from
the fee payable on succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those Trustees who are interested persons of the Trust.
(e) The payment or assumption by Mitchell Hutchins of any expenses of the
Trust or a Series that Mitchell Hutchins is not required by this Contract to pay
or assume shall not obligate Mitchell Hutchins to pay or assume the same or any
similar expense of the Trust or a Series on any subsequent occasion.
8. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to Global Equity Fund, the Trust will pay to Mitchell
Hutchins a fee, computed daily and paid monthly, at an annual rate of 0.85% of
the average daily net assets of such Series up to and including $500 million and
0.83% of the average daily net assets of such Series in excess of $500 million
up to an including $1 billion and 0.805% of the average daily net assets of such
Series in excess of $1 billion.
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any Series hereafter established, 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.
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(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. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE TRUST.
No Trustee, shareholder, officer, employee or agent of any Series shall not be
liable for any obligations of any Series or the Trust under this Contract, and
Mitchell Hutchins agrees that, in asserting any rights or claims under this
Contract, it shall look only to the assets and property of the Trust in
settlement of such right or claim, and not to such Trustees, shareholder,
officer, employee or agent. The Trust represents that a copy of its Declaration
of Trust is on file with the Secretary of the Commonwealth of Massachusetts and
the Boston City Clerk.
11. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove written
provided that, with respect to any Series, this Contract shall not take effect
unless it has first been approved (i) by a vote of a majority of those Trustees
of the Trust who are not parties to this Contract or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by vote of a majority of that Series' outstanding voting
securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of those Trustees of the Trust who
are not parties to this Contract or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or with respect to any given Series by vote of a majority of
the outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the board or by a vote of a majority of the outstanding voting
securities of such Series on sixty days' written notice to Mitchell Hutchins or
by Mitchell Hutchins at any time, without the payment of any penalty, on sixty
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days' written notice to the Trust. Termination of this Contract with respect to
any given Series shall in no way affect the continued validity of this Contract
or the performance thereunder with respect to any other Series. This Contract
will automatically terminate in the event of its assignment.
12. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this contract as to any
given Series shall be effective until approved by vote of a majority of such
Series' outstanding voting securities.
13. GOVERNING LAW. This Contract shall be construed in accordance with the
laws of the State of Delaware, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. 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, subject to such
exemption as may be granted by the Securities and Exchange Commission by any
rule, regulation or order. Where the effect of a requirement of the 1940 Act
reflected in any provision of this contract is relaxed by a rule, regulation or
order of the Securities and Exchange Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: By
------------------------ -----------------------------------
PAINEWEBBER INVESTMENT TRUST
Attest: By
------------------------ -----------------------------------
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ANNEX 2
SUB-ADVISORY CONTRACT
Agreement made as of _____________, 1998 ("Contract") between MITCHELL
HUTCHINS ASSET MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"),
and INVISTA CAPITAL MANAGEMENT, INC., an Iowa corporation ("Sub-Adviser").
RECITALS
(1) Mitchell Hutchins has entered into an Investment Advisory and
Administration Agreement, dated , 1998 ("Management Agreement"), with
PaineWebber Investment Trust ("Trust"), an open-end management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act");
(2) The Trust offers for public sale distinct series of shares of
beneficial interest, including a series of shares of the Trust known as
PaineWebber Global Equity Fund ("Fund");
(3) Under the Management Agreement, Mitchell Hutchins has agreed to
provide certain investment advisory and administrative services to the Fund;
(4) The Management Agreement permits Mitchell Hutchins to delegate certain
of its duties as investment adviser thereunder to a sub-adviser;
(5) Mitchell Hutchins desires to allocate the portfolio investments of the
Fund between an international segment and a domestic segment, and to retain the
Sub-Adviser to furnish certain investment advisory services with respect to the
international segment of the investments of the Fund, and
(6) The Sub-Adviser is willing to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, Mitchell Hutchins and the Sub-Adviser agree as follows:
1. APPOINTMENT. Mitchell Hutchins hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the international segment of the Fund's
investments for the period and on the terms set forth in this Contract. The
Sub-Adviser accepts that appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the supervision and direction of the Trust's Board of
Trustees ("Board") and review by Mitchell Hutchins, and any written guidelines
adopted by the Board or Mitchell Hutchins, the Sub-Adviser will provide a
continuous investment program with respect to the international segment of the
Fund's investments, including investment research and management to all
securities and investments and cash equivalents in the Fund allocated by
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Mitchell Hutchins to the international segment of the Fund's investments. The
Sub-Adviser will determine from time to time what investments will be purchased,
retained or sold by the Fund in the international segment of the Fund's
investments. The Sub-Adviser will be responsible for placing purchase and sell
orders for investments and for other related transactions with respect to the
international segment of the Fund's investments. The Sub-Adviser will provide
services under this Contract in accordance with the Fund's investment objective,
policies and restrictions as stated in the Trust's currently effective
registration statement under the 1940 Act, and any amendments or supplements
thereto ("Registration Statement").
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
obtain the best net result in terms of price and execution; provided that, on
behalf of the Fund, the Sub-Adviser may, in its discretion, use brokers who
provide the Sub-Adviser with research, analysis, advice and similar services to
execute portfolio transactions, and the Sub-Adviser may pay to those brokers in
return for brokerage and research services a higher commission than may be
charged by other brokers, subject to the Sub-Adviser's determining in good faith
that such commission is reasonable in terms either of the particular transaction
or of the overall responsibility of the Sub-Adviser to the Fund and its other
clients and that the total commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long term. In no instance will
portfolio securities be purchased from or sold to the Sub-Adviser, or any
affiliated person thereof, except in accordance with the federal securities laws
and the rules and regulations thereunder. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Fund and one or more other accounts advised by the Sub-Adviser, the orders
will be allocated as to price and amount among all such accounts in a manner
believed to be equitable over time to each account. Mitchell Hutchins recognizes
that in some cases this procedure may adversely affect the results obtained for
the Fund.
(c) The Sub-Adviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to actions by the Sub-Adviser on behalf of the Fund, and
will furnish the Board and Mitchell Hutchins with such periodic and special
reports as the Board or Mitchell Hutchins reasonably may request. In compliance
with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby
agrees that all records that it maintains for the Fund are the property of the
Trust, agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any records that it maintains for the Trust and that are required to be
maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender
promptly to the Trust any records that it maintains for the Fund upon request by
the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the performance of the international segment of the Fund's
investments and make available to the Board and Mitchell Hutchins any economic,
statistical and investment services that the Sub-Adviser normally makes
available to its institutional or other customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities and will use its reasonable efforts to arrange for
the provision of a price(s) from a party(ies) independent of the Sub-Adviser for
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each portfolio security for which the custodian does not obtain prices in the
ordinary course of business from an automated pricing service.
3. FURTHER DUTIES. In all matters relating to the performance of this
Contract, the Sub-Adviser will act in conformity with the Trust's Declaration of
Trust, By-Laws and Registration Statement and with the written instructions and
written directions of the Board and Mitchell Hutchins; and will comply with the
requirements of the 1940 Act and the Investment Advisers Act of 1940, as amended
("Advisers Act") and the rules under each, and all other federal and state laws
and regulations applicable to the Trust and the Fund. Mitchell Hutchins agrees
to provide to the Sub-Adviser copies of the Trust's Declaration of Trust,
By-Laws, Registration Statement, written instructions and directions of the
Board and Mitchell Hutchins, and any amendments or supplements to any of these
materials as soon as practicable after such materials become available; and
further agrees to identify to the Sub-Adviser in writing any broker-dealers that
are affiliated with Mitchell Hutchins (other than PaineWebber Incorporated and
Mitchell Hutchins itself).
4. EXPENSES. During the term of this Contract, the Sub-Adviser will bear
all expenses incurred by it in connection with its services under this Contract.
5. COMPENSATION.
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Contract, Mitchell Hutchins, not the Fund, will pay Invista a
sub-advisory fee, computed daily and paid monthly, at an annual rate of 0.40% of
the Fund's average daily net assets allocated to its management up to and
including $100 million, 0.29% of the Fund's average daily net assets allocated
to its management in excess of $100 million up to and including $300 million,
and 0.26% of the Fund's average daily net assets allocated to its management in
excess of $300 million. Under this fee arrangement, Invista will receive fees
based on the value of portfolio assets under its management as these assets have
been allocated to it by Mitchell Hutchins.
(b) The fee shall be accrued daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) If this Contract becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be pro-rated according to the proportion that such period bears to the
full month in which such effectiveness or termination occurs.
6. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund, the
Trust, its shareholders or by Mitchell Hutchins in connection with the matters
to which this Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Contract. Nothing in this paragraph shall be deemed a limitation or waiver of
any obligation or duty that may not by law be limited or waived.
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7. REPRESENTATIONS OF SUB-ADVISER. The Sub-Adviser represents, warrants
and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Contract
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Contract; (iii) has met and
will seek to continue to meet for so long as this Contract remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency necessary to
be met in order to perform the services contemplated by this Contract; (iv) has
the authority to enter into and perform the services contemplated by this
Contract; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Mitchell
Hutchins and the Board with a copy of such code of ethics, together with
evidence of its adoption. Within forty-five days of the end of the last calendar
quarter of each year that this Contract is in effect, the president or a
vice-president of the Sub-Adviser shall certify to Mitchell Hutchins that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Sub-Adviser's code of ethics
or, if such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents to
examine the reports required to be made to the Sub-Adviser by Rule 17j-1(c)(1)
and all other records relevant to the Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV, which as of the date of this Agreement is its Form ADV as most recently
filed with the Securities and Exchange Commission ("SEC") and promptly will
furnish a copy of all amendments to Mitchell Hutchins at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel who are either
the portfolio manager(s) of the Fund or senior management of the Sub-Adviser, in
each case prior to, or promptly after, such change.
(e) The Sub-Adviser agrees that neither it, nor any of its affiliates,
will in any way refer directly or indirectly to its relationship with the Trust,
the Fund, Mitchell Hutchins or any of their respective affiliates in offering,
marketing or other promotional materials without the express written consent of
Mitchell Hutchins.
8. SERVICES NOT EXCLUSIVE. The Sub-Adviser may act as an investment
adviser to any other person, firm or corporation, and may perform management and
any other services for any other person, association, corporation, firm or other
entity pursuant to any contract or otherwise, and take any action or do anything
in connection therewith or related thereto, except as prohibited by applicable
law or agreed upon in writing between the Sub-Adviser and Mitchell Hutchins; and
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no such performance of management or other services or taking of any such action
or doing of any such thing shall be in any manner restricted or otherwise
affected by any aspect of any relationship of the Sub-Adviser to or with the
Trust, the Fund or Mitchell Hutchins or deemed to violate or give rise to any
duty or obligation of the Sub-Adviser to the Trust, the Fund or Mitchell
Hutchins, except as otherwise imposed by law or agreed upon in writing between
the Sub-Adviser and Mitchell Hutchins, the Trust or the Fund.
9. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date first above
written, provided that this Contract shall not take effect unless it has first
been approved: (i) by a vote of a majority of those trustees of the Trust who
are not parties to this Contract or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by vote of a majority of the Fund's outstanding securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually: (i) by a vote of a majority of those trustees of the Trust who
are not parties to this Contract or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or by vote of a majority of the outstanding voting securities
of the Fund.
(c) Notwithstanding the foregoing, this Contract may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Sub-Adviser. This Contract may also be terminated, without the
payment of any penalty, by Mitchell Hutchins: (i) upon 120 days' written notice
to the Sub-Adviser; (ii) upon material breach by the Sub-Adviser of any
representations and warranties set forth in Paragraph 7 of this Contract, if
such breach has not been cured within a 20 day period after notice of such
breach; or (iii) immediately if, in the reasonable judgment of Mitchell
Hutchins, the Sub-Adviser becomes unable to discharge its duties and obligations
under this Contract, including circumstances such as financial insolvency of the
Sub-Adviser or other circumstances that could adversely affect the Fund. The
Sub-Adviser may terminate this Contract at any time, without the payment of any
penalty, on 120 days written notice to Mitchell Hutchins. This Contract will
terminate automatically in the event of its assignment or upon termination of
the Advisory Contract as it relates to the Fund.
10. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Contract shall be
effective until approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Contract or interested persons of any such
party, and (ii) by a vote of a majority of the Fund's outstanding voting
securities (unless in the case of (ii), the Trust receives an SEC order or
no-action letter permitting it to modify the Contract without such vote).
35
<PAGE>
11. GOVERNING LAW. This Contract shall be construed in accordance with the
1940 Act and the laws of the State of Delaware, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of Delaware conflict with the applicable provisions of the 1940 Act,
the latter shall control.
12. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act, subject to such exemption as may be granted by the SEC by any
rule, regulation or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Contract is made less
restrictive by a rule, regulation or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. This Contract may be signed in counterpart.
13. NOTICES. Any notice herein required is to be in writing and is deemed
to have been given to the Sub-Adviser or Mitchell Hutchins upon receipt of the
same at their respective addresses set forth below. All written notices required
or permitted to be given under this Contract will be delivered by personal
service, by postage mail - return receipt requested or by facsimile machine or a
similar means of same day delivery which provides evidence of receipt (with a
confirming copy by mail as set forth herein). All notices provided to Mitchell
Hutchins will be sent to the attention of Victoria E. Schonfeld, General
Counsel. All notices provided to the Sub-Adviser will be sent to the attention
of Dennis W. Cameron, Compliance Officer.
[rest of page left intentionally blank]
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
1285 Avenue of the Americas
New York, New York 10019
Attest:
By:_____________________ By:______________________
Name: Name:
Title: Title:
INVISTA CAPITAL MANAGEMENT, INC.
1900 Hub Tower
699 Walnut Street
Des Moines, Iowa 50309
Attest:
By:_______________________ By:_____________________________
Name: Name:
Title: Title:
<PAGE>
FORM OF FRONT OF PROXY CARD
PaineWebber Global Equity Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS - SEPTEMBER 24, 1998
This proxy is solicited on behalf of the Board of Trustees of PaineWebber
Investment Trust II - PaineWebber Emerging Markets Equity Fund ("Fund"). The
undersigned hereby appoints as proxies Keith A. Weller and Teresa Ritchie, and
each of them (with the power of substitution), to vote for the undersigned all
shares of beneficial interest of the undersigned 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. Please indicate your vote on the reverse side of this card. Unless
indicated to the contrary, this proxy shall be deemed to grant authority to vote
"FOR" all proposals.
YOUR VOTE IS IMPORTANT. Please date and sign this proxy and return it in
the enclosed postage paid envelope.
The Board of Trustees recommends that you vote FOR each of the following
proposals:
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
1. Approve amended Investment FOR /_/ AGAINST /_/ ABSTAIN /_/
Advisory and Administration
Agreement between the Fund and
Mitchell Hutchins Asset
Management Inc. ("Mitchell
Hutchins")
2. Approve new Sub-Advisory FOR /_/ AGAINST /_/ ABSTAIN /_/
Contract between Mitchell
Hutchins and Invista Capital
Management, Inc. ("Invista")
3. Approve a policy permitting FOR /_/ AGAINST /_/ ABSTAIN /_/
the Board of Trustees to
appoint sub-advisers and
approve amendments to subadvisory
agreements without further
shareholder approval;
CONTINUED AND TO BE SIGNED ON REVERSE SIDE.
<PAGE>
FORM OF REVERSE OF PROXY CARD
This proxy will not be voted unless it is dated and signed exactly as instructed
below.
If shares are held by an individual,
sign your name exactly as it appears
on this card. If shares are held
jointly, either party may sign, but
the name of the party signing should
conform exactly to the name shown on
this proxy card. If shares are held
by a corporation, partnership or
similar account, the name and the
capacity of the individual signing
the proxy card should be indicated -
for example: "ABC Corp., John Doe,
Treasurer."
Sign exactly as name appears
hereon.
________________________(L.S.)
________________________(L.S.)
Dated___________________, 1998
