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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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SIGNATURE PAUL SCHUBERT
TITLE TREASURER
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<OVERDISTRIB-NII-PRIOR> 145
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 406
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 820
<AVERAGE-NET-ASSETS> 50459
<PER-SHARE-NAV-BEGIN> 17.69
<PER-SHARE-NII> (0.11)
<PER-SHARE-GAIN-APPREC> 0.35
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2.48
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.45
<EXPENSE-RATIO> 2.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000873803
<NAME> PAINEWEBBER INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME> PAINEWEBBER GLOBAL EQUITY FUND CLASS Y
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 48916
<INVESTMENTS-AT-VALUE> 54102
<RECEIVABLES> 725
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 25
<TOTAL-ASSETS> 54853
<PAYABLE-FOR-SECURITIES> 3341
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 487
<TOTAL-LIABILITIES> 3828
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43408
<SHARES-COMMON-STOCK> 3075
<SHARES-COMMON-PRIOR> 3096
<ACCUMULATED-NII-CURRENT> 52
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1997
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5568
<NET-ASSETS> 51025
<DIVIDEND-INCOME> 105
<INTEREST-INCOME> 903
<OTHER-INCOME> 0
<EXPENSES-NET> 1018
<NET-INVESTMENT-INCOME> (10)
<REALIZED-GAINS-CURRENT> 2441
<APPREC-INCREASE-CURRENT> 497
<NET-CHANGE-FROM-OPS> 2928
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 7351
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1975
<NUMBER-OF-SHARES-REDEEMED> 2453
<SHARES-REINVESTED> 458
<NET-CHANGE-IN-ASSETS> (5408)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7182
<OVERDISTRIB-NII-PRIOR> 154
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 504
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1018
<AVERAGE-NET-ASSETS> 58260
<PER-SHARE-NAV-BEGIN> 18.63
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 0.35
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2.48
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.59
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
N-SAR Exhibits
Global Equity Fund
77-C Submission of matters to a vote of
security holders:
A special meeting of shareholders was held on
September 24, 1998, at which the following
proposals were approved by shareholders by
the vote indicated beneath each item:
PROPOSAL 1(a)
TO APPROVE OR DISAPPROVE AN AMENDED
INVESTMENT ADVISORY AND
ADMINISTRATION AGREEMENT BETWEEN
PAINEWEBBER INVESTMENT TRUST AND
MITCHELL HUTCHNS ASSET MANAGEMENT
INC. APPPLICABLE TO THE FUND.
Shares Shares Shares
Voted For Against Abstain
12,971,830 551,272 344,138
PROPOSAL 1(b)
TO APPROVE OR DISAPPROVE A NEW
SUB-ADVISORY CONTRACT BETWEEN
MITCHELL HUTCHINS AND INVISTA
CAPITAL MANAGEMENT, INC.
Shares Shares Shares
Voted For Against Abstain
12,955,103 352,459 559,678
PROPOSAL 2
TO APPROVE OR DISAPPROVE A POLICY
TO PERMIT THE BOARD OF TRUSTEES TO
APPOINT AND TERMINATE SUB-
ADVISERS, TO ENTER INTO SUB-
ADVISORY CONTRACTS AND TO
APPROVE AMENDMENTS TO SUB-
ADVISORY CONTRACTS, ON BEHALF OF
THE FUND WITHOUT FURTHER
SHAREHOLDER APPROVAL
Shares Shares Shares
Voted For Against Abstain
12,700,943 543,696 622,600
77-D - Policies with respect to security
investments:
Under a new Advisory Contract dated October 1,
1998, Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins") is responsible for allocating
the Fund's investments between U.S. and foreign
securities markets. Mitchell Hutchins is also
responsible for the management of the Fund's
U.S. investments.
Under a new Sub-Advisory Contract dated
October 1, 1998 between Mitchell Hutchins and
Invista Capital Management, Inc., Invista Capital
is responsible for the management of the Fund's
foreign investments.
Details of the new investment process and related
new investment policies are incorporated by
referenced to the Prospectus and SAI dated March
1, 1998, as revised October 2, 1998, for
PaineWebber Global Equity Fund which was filed
with the Securities and Exchange Commission as
part of an amendment to its registration statement
on Form N-1A on October 1, 1998, accession
number 000889812-98-002389.
INVESTMENT ADVISORY AND
ADMINISTRATION CONTRACT
Contract made as of October 1, 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 to which
this Contract may hereafter be made applicable (each
a "Series"), and Mitchell Hutchins is willing to
furnish such services;
NOW, THEREFORE, in consideration of
the premises and mutual covenants herein contained,
it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby
appoints Mitchell Hutchins as investment adviser
and administrator of the Trust and each Series for
the period and on the terms set forth in this
Contract. Mitchell Hutchins accepts such
appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. Duties as Investment Adviser.
(a) Subject to the supervision of the
Trust's Board of Trustees ("Board"), Mitchell
Hutchins will provide a continuous investment
program for 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 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.
(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 of this Contract and 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 or unless otherwise agreed to by the parties
hereunder in writing. 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 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 other 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.
(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 any Trustee,
shareholder, officer, employee or agent.
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 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, provided, however,
that Section 10 above will be construed in
accordance with the laws of the Commonwealth of
Massachusetts. To the extent that the applicable
laws of the State of Delaware or the Commonwealth
of Massachusetts conflict with the applicable
provisions of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this
Contract are included for convenience of reference
only and in no way define or delimit any of the
provisions hereof or otherwise affect their
construction or effect. If any provision of this
Contract shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of
this Contract shall not be affected thereby. This
Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors. As used in this Contract, the terms
"majority of the outstanding voting securities,"
"affiliated person," "interested person,"
"assignment," "broker," "investment adviser,"
"national securities exchange," "net assets,"
"prospectus," "sale," "sell" and "security" shall have
the same meaning as such terms have in the 1940
Act, subject to such exemption as may be granted by
the 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.
MITC
HELL
HUTCHINS
ASSET
MANAGEME
NT INC.
Attest: /s/ Scott Griff By: /s/
Diane E. O'Donnell
First Vice President
Senior Vice President
PAINEWEBBER INVESTMENT TRUST
Attest: /s/ Jennifer Farrell By: /s/
Keith A. Weller
Assistant Secretary
Vice President and Assistant Secretary
7
12
DC-258160.01
SUB-ADVISORY CONTRACT
Agreement made as of October 1, 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 October, 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 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 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.
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 services
furnished by the Sub-Adviser hereunder are not to be
deemed exclusive and the Sub-Adviser shall be free to
furnish similar services to others so long as its services
under this Contract are not impaired thereby or unless
otherwise agreed to by the parties hereunder in writing.
Nothing in this Contract shall limit or restrict the right
of any director, officer or employee of the Sub-
Adviser, 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.
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).
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
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: /s/ Keith A. Weller By: /s/
Dianne E. O'Donnell
Name: Keith A. Weller
Name: Dianne E. O'Donnell
Title: First Vice President
Title: Senior Vice President
INVISTA CAPITAL MANAGEMENT,
INC.
1900 Hub Tower
699 Walnut Street
Des Moines, Iowa 50309
Attest:
By: /s/ Michael Roughton
By: /s/ C. R. Barnes
Name: Michael Roughton
Name: C. R. Barnes
Title: Counsel
Title: President
7
11
DC-258129.01
Report of Independent Auditors
To the Shareholders and Board of Trustees
of PaineWebber Global Equity Fund
In planning and performing our audit of
the financial statements of PaineWebber
Global Equity Fund for the year ended
October 31, 1998, we considered its
internal control, including control
activities for safeguarding securities, in
order to determine our auditing procedures
for the purpose of expressing our opinion
on the financial statements and to comply
with the requirements of Form
N-SAR, and not to provide assurance on the
internal control.
The management of PaineWebber Global
Equity Fund is responsible for stablishing
and maintaining internal control. In
fulfilling this responsibility, estimates
and judgments by management are required
to assess the expected benefits and
related costs of controls. Generally,
controls that are relevant to an audit
pertain to the entity's objective of
preparing financial statements for
external purposes that are fairly
presented in conformity with
generally accepted accounting principles.
Those controls include the safeguarding of
assets against unauthorized
acquisition, use or disposition.
Because of inherent limitations in
internal control, errors or fraud may
occur and not be detected. Also,
projection of any evaluation of internal
control to future periods is subject to
the risk that it may become inadequate
because of changes in conditions or that
the effectiveness of the design and
operation may deteriorate. Our
consideration of the internal control
would not necessarily disclose all matters
in the internal control that might be
material weaknesses under standards
established by the American Institute of
Certified Public Accountants. A material
weakness is a condition in which the
design or operation of one or more of the
internal control components does not
reduce to a relatively low level the risk
that errors or fraud in amounts that would
be material in relation to the
financial statements being audited may
occur and not be detected within a timely
period by employees in the normal
course of performing their assigned
functions. However, we noted no matters
involving the internal control and its
operation, including controls for
safeguarding securities, that we consider
to be material weaknesses as defined
above at October 31, 1998.
This report is intended solely for the
information and use of the board of
trustees and management of PaineWebber
Global Equity Fund and the Securities and
Exchange Commission.
ERNST & YOUNG LLP
December 21, 1998
