<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities and Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check 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 Section 240.14a-11(c) or Section
240.14a-12
Investment Grade Municipal Income Fund Inc.
PaineWebber Premier Insured Municipal Income Fund Inc.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
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:
________________________________________________________________________
5) Total fee paid:
________________________________________________________________________
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
3) Filing Party:
________________________________________________________________________
4) Date Filed:
________________________________________________________________________
<PAGE>
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
PAINEWEBBER PREMIER INSURED MUNICIPAL INCOME FUND INC.
(DOING BUSINESS AS INSURED MUNICIPAL INCOME FUND)
1285 Avenue of the Americas
New York, New York 10019
February , 1996
Dear Shareholder:
Enclosed is a proxy statement asking you to vote in favor of several
proposals relating to the management and operation of your Fund.
After we acquired the Kidder, Peabody mutual funds last February, our
enlarged menu of funds was confusing -- too many had overlapping objectives or
were too narrowly focused. During 1995, we consolidated many of our funds by
focusing on those types of funds most investors want. This consolidation allowed
us to lower expense ratios (in most cases) and to clarify fund names. These
votes are the final phase of that fund consolidation.
Special meetings of Investment Grade Municipal Income Fund Inc. and
PaineWebber Premier Insured Municipal Income Fund Inc. (doing business as
Insured Municipal Income Fund) are being held on April 11, 1996 to consider
these proposals and to transact any other business that may properly come before
the meetings. In the past, when we have solicited proxies for your Fund, we have
enclosed a proxy statement directed solely to the shareholders of your Fund.
This time, however, shareholders of both Funds are being asked to approve some
of the same proposals, so most of the information that must be included in a
proxy statement for your Fund needs to be included in a proxy statement for the
other Fund as well. Therefore, in order to save money, one proxy statement has
been prepared for both Funds. This proxy statement contains detailed information
about each of the proposals relating to your Fund, and we recommend that you
read it carefully. However, we have also attached some Questions and Answers
that we hope will assist you in evaluating the proposals.
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 Funds.
Very truly yours,
Margo N. Alexander
PRESIDENT
PROXY CARDS FOR EACH OF YOUR FUNDS ARE ENCLOSED ALONG WITH THE PROXY
STATEMENT. PLEASE VOTE YOUR SHARES TODAY BY SIGNING AND RETURNING EACH
ENCLOSED PROXY CARD IN THE POSTAGE PREPAID ENVELOPE PROVIDED. THE BOARD OF
YOUR FUND RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
<PAGE>
QUESTIONS AND ANSWERS
Q: WHAT IS THE PURPOSE OF THIS PROXY SOLICITATION?
A: The purpose of this proxy is to ask you to vote on two primary issues:
-to elect eleven Board members, and
-to approve changes to your Fund's fundamental investment restrictions.
In addition, shareholders of PaineWebber Premier Insured Municipal Income
Fund Inc. are being asked to approve an amendment to the Fund's Articles of
Incorporation that would change the formal name of the Fund to "Insured
Municipal Income Fund Inc." The Fund has been doing business under the name
"Insured Municipal Income Fund" since August, 1995.
Q: WHY AM I RECEIVING PROXY INFORMATION ON A FUND THAT I DO NOT OWN?
A: In the past, when we have solicited proxies for your Fund, we have enclosed a
proxy statement directed solely to the shareholders of your Fund. This time,
however, shareholders of both of these Funds are being asked to approve some
of the same proposals, so most of the information that must be included in a
proxy statement for your Fund needs to be included in a proxy statement for
the other Fund as well. Therefore, in order to save money, one proxy
statement has been prepared for both Funds.
Q: WHY ARE YOU RECOMMENDING A UNIFIED BOARD FOR THE FUNDS?
A: A Corporate Governance Task Force, comprised of a number of the Funds'
existing Board Members, assisted by Mitchell Hutchins representatives,
recommended to the Fund Boards, and they agreed, that PaineWebber funds
should be governed by larger Boards composed of the same members. The Task
Force concluded that this "unified" Board structure benefits the Funds by
creating a diverse, experienced group of Board Members who understand the
operations of the PaineWebber funds and are exposed to the wide variety of
issues that arise from overseeing different types of funds.
Q: WHY HAS THE BOARD BEEN EXPANDED TO ELEVEN MEMBERS?
A: At the recommendation of the Corporate Governance Task Force, each Fund's
Board has been expanded to include eleven members, eight of whom would be
independent. As before, two of each Fund's Board Members would be elected by
the holders of the Fund's Auction Preferred Shares, and the remainder of the
Board Members would be elected by all of the Fund's shareholders, voting
together.
The Task Force considered issues relating to the management and long-term
welfare of the Funds. It recommended, and the Boards agreed to adopt, an
expanded Board as part of an overall plan to coordinate and enhance the
efficiency of the governance of the Funds. Expanding the size of the Boards
is intended to facilitate the increased use of Board committees for
different purposes, including the periodic review of the Funds' contractual
and audit arrangements. The Fund Boards approved the Task Force
recommendations and nominated eleven individuals drawn primarily from the
existing Boards.
Q: WILL THE PROPOSED CHANGES RESULT IN HIGHER ADVISORY FEES?
A: No. The advisory and administrative fees charged to each Fund will remain the
same.
Q: WHAT ARE "FUNDAMENTAL" INVESTMENT RESTRICTIONS, AND WHY ARE THEY BEING
CHANGED?
A: A Fund's "fundamental" investment restrictions are limitations placed on a
Fund's investment policies that can be changed only by a shareholder vote --
EVEN IF THE CHANGES ARE MINOR. The law requires certain investment policies
to be designated as fundamental. Each Fund adopted a number of fundamental
investment restrictions when the Fund was created, and many of those
<PAGE>
fundamental restrictions reflect regulatory, business or industry
conditions, practices or requirements that are no longer in effect. Others
reflect regulatory requirements that, while still in effect, do not need to
be classified as fundamental restrictions.
The Funds' Boards believe that fundamental investment restrictions that are
not legally required should be eliminated and that the remaining fundamental
restrictions should be modernized and made more uniform. The Boards believe
that the proposed changes to the Funds' fundamental investment restrictions
will provide greater flexibility. The proposed changes also will eliminate
minor differences in wording that may give rise to unintended differences in
interpretation.
Q: DO THE PROPOSED CHANGES TO FUNDAMENTAL INVESTMENT RESTRICTIONS MEAN THAT MY
FUND'S INVESTMENT OBJECTIVE IS BEING CHANGED?
A: No. None of the proposals would change the investment objective of either
Fund.
Q: WHAT WILL BE THE EFFECT OF THE PROPOSED CHANGES TO MY FUND'S FUNDAMENTAL
RESTRICTIONS?
A: The Boards do not believe that the proposed changes to fundamental investment
restrictions will result at this time in a material change in the level of
investment risk for either Fund. However, the changes will allow each Fund
greater flexibility to respond to future investment opportunities by making
changes in non-fundamental investment policies that, at a future time, its
Board considers desirable. A shareholder vote will not be necessary for
future changes to non-fundamental investment policies or restrictions.
Q: WHAT ARE MY BOARD'S RECOMMENDATIONS?
A: The Board of each Fund has recommended that you vote "FOR" the nominees for
Board Member and "FOR" each Proposal that applies to your Fund.
THE ATTACHED PROXY STATEMENT CONTAINS MORE DETAILED INFORMATION ABOUT EACH
OF THE PROPOSALS RELATING TO YOUR FUND. PLEASE READ IT CAREFULLY.
<PAGE>
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
PAINEWEBBER PREMIER INSURED MUNICIPAL INCOME FUND INC.
(DOING BUSINESS AS "INSURED MUNICIPAL INCOME FUND")
------------------------
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON APRIL 11, 1996
------------------------
TO THE SHAREHOLDERS:
Special meetings of the shareholders of each of Investment Grade Municipal
Income Fund Inc. and PaineWebber Premier Insured Municipal Income Fund Inc.
(doing business as "Insured Municipal Income Fund") ("Funds") will be held at
1285 Avenue of the Americas, 38th Floor, New York, New York, on April 11, 1996
at 2:00 p.m., Eastern time, for the purpose of considering the following
proposals with respect to the Funds:
(1) For each Fund, for all of its shareholders to elect nine members of its
Board of Directors to serve until the next annual meeting or until their
successors are duly elected and qualified;
(2) For each Fund, for the holders of the Fund's auction preferred shares to
elect two members of its Board of Directors to serve until the next
annual meeting or until their successors are duly elected and qualified;
(3) For each Fund, to approve certain changes to its fundamental investment
restrictions and policies;
(4) For PaineWebber Premier Insured Municipal Income Fund Inc., to amend its
Articles of Incorporation to change its name to "Insured Municipal Income
Fund Inc."; and
(5) For each Fund, to transact such other business as may properly come
before the meetings and any adjournments thereof.
You are entitled to vote at the meetings, and at any adjournments thereof,
of each Fund in which you owned shares at the close of business on February 16,
1996. If you attend the meetings, you may vote your shares in person. IF YOU DO
NOT EXPECT TO ATTEND THE MEETINGS, PLEASE COMPLETE, DATE, SIGN AND RETURN EACH
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Boards,
DIANNE E. O'DONNELL
SECRETARY
February , 1996
1285 Avenue of the Americas
New York, New York 10019
<PAGE>
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
ENCLOSED YOU WILL FIND ONE OR MORE PROXY CARDS RELATING TO EACH OF THE FUNDS
FOR WHICH YOU ARE ENTITLED TO VOTE. PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON
EACH OF THE ENCLOSED PROXY CARDS, DATE AND SIGN THEM, AND RETURN THEM IN THE
ENVELOPE PROVIDED. IF YOU SIGN, DATE AND RETURN A PROXY CARD BUT GIVE NO VOTING
INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTOR NAMED IN
THE ATTACHED PROXY STATEMENT AND "FOR" ALL OTHER PROPOSALS INDICATED ON THE
CARDS. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO THE FUNDS OF FURTHER
SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY CARDS PROMPTLY.
UNLESS PROXY CARDS ARE SIGNED BY THE APPROPRIATE PERSONS AS INDICATED IN THE
INSTRUCTIONS BELOW, THEY WILL NOT BE VOTED.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Fund involved in validating your vote
if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on the
proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
- - - - --------------------------------------------------------------------------- -------------------------------------
<S> <C>
Corporate Accounts
(1) ABC Corp........................................................... ABC Corp.
John Doe, Treasurer
(2) ABC Corp........................................................... John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer.................................. John Doe
(4) ABC Corp. Profit Sharing Plan...................................... John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership................................................ Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership............................... Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account.................................................. Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78................................ Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA/ UTMA......................................................... John B. Smith
(2) Estate of John B. Smith............................................ John B. Smith, Jr.
Executor
</TABLE>
<PAGE>
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
PAINEWEBBER PREMIER INSURED MUNICIPAL INCOME FUND INC.
(DOING BUSINESS AS "INSURED MUNICIPAL INCOME FUND")
1285 Avenue of the Americas
New York, New York 10019
------------------------
PROXY STATEMENT
SPECIAL MEETINGS OF SHAREHOLDERS TO BE HELD ON APRIL 11, 1996
------------------------
This proxy statement is being furnished to holders of Shares of Investment
Grade Municipal Income Fund Inc. and PaineWebber Premier Insured Municipal
Income Fund Inc. (doing business as "Insured Municipal Income Fund") ("Funds")
in connection with the solicitation by their respective Boards of proxies to be
used at special meetings ("Meetings") of Shareholders to be held on April 11,
1996 at 2:00 p.m., Eastern time, or any adjournment or adjournments thereof.
This proxy statement is being first mailed to Shareholders on or about February
, 1996.
Each Fund is a registered, management investment company under the
Investment Company Act of 1940, as amended ("1940 Act"), organized as a Maryland
corporation. Shares of the common stock ("Common Stock") and the auction
preferred shares ("APS") of each Fund are referred to, collectively, as
"Shares," and the holders of the Shares are "Shareholders." Each Fund's board of
directors is referred to as a "Board," and the directors are "Board Members." A
listing of the formal name for each Fund and the shorthand name for each Fund
that is used in this proxy statement is set forth below.
<TABLE>
<CAPTION>
PROPOSALS
NAME AS USED IN THIS APPLICABLE TO
FUND NAME PROXY STATEMENT FUND
- - - - ------------------------------------------------------------ ---------------------- ---------------
<S> <C> <C>
Investment Grade Municipal Income Fund Inc.................. Investment Grade 1, 2 and 3
Income Fund
PaineWebber Premier Insured Municipal Income Fund Inc....... Insured Municipal 1, 2, 3 and 4
Income Fund
</TABLE>
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") is the
investment adviser and administrator for each Fund. Mitchell Hutchins is a
wholly owned subsidiary of PaineWebber Incorporated ("PaineWebber"), which, in
turn, is a wholly owned subsidiary of Paine Webber Group Inc. ("PW Group"), a
publicly held financial services holding company. PaineWebber has, from time to
time, acted as a dealer and secondary market-maker in connection with
over-the-counter secondary market sales of each Fund's Shares. The principal
business address of each of Mitchell Hutchins, PaineWebber and PW Group is 1285
Avenue of the Americas, New York, New York 10019.
1
<PAGE>
VOTING INFORMATION
For each Fund, the presence, in person or by proxy, of a majority of the
Shares of the Fund outstanding and entitled to vote will constitute a quorum for
the transaction of business at the Meetings.
In the event that a quorum (including a quorum of a Fund's APS with respect
to the election of the two Board Members who are to be elected by the APS) is
not present at a Meeting, or if a quorum is present at that Meeting but
sufficient votes to approve any of 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 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 proposal in favor of the adjournment and will vote
those proxies required to be voted AGAINST any proposal against the 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.
The solicitation of proxies, the cost of which will be borne by the Funds
(and by the other funds within the PaineWebber fund complex that currently are
soliciting proxies on substantially the same matters), will be made primarily by
mail but also may include telephone or oral communications by regular employees
of Mitchell Hutchins or PaineWebber, who will not receive any compensation
therefor from the participating funds, or by Shareholder Communications
Corporation, professional proxy solicitors retained by the participating funds,
who will be paid aggregate fees and expenses of approximately $ for
soliciting services.
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 will have no effect on Proposals 1 and 2, for which the
required vote is a plurality or majority of the votes cast, but effectively will
be a vote against adjournment and against Proposals 3 and 4 for which the
required vote is a percentage of the Shares present or outstanding.
The individuals named as proxies on the enclosed proxy cards will vote in
accordance with your direction as indicated thereon, if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you give no voting instructions and are a holder of Shares
of a Fund's Common Stock, those Shares will be voted FOR the nine nominees for
the Board Memberships for which the holders of Common Stock are entitled to
vote, as discussed in connection with Proposal 1; if you give no voting
instructions and you are a holder of a Fund's APS, those Shares will be voted
FOR all eleven Board nominees named herein. Also, if you give no voting
instructions, your Shares of both Common Stock and APS will be voted FOR the
remaining proposals described in this proxy statement and relating to your Fund.
If any nominee for the Boards should withdraw or otherwise become unavailable
for election, your Shares will be voted in favor of such other nominee or
nominees as management may recommend. You may revoke any proxy card by giving
another proxy or by letter or telegram revoking the initial proxy. To be
effective, your revocation must be received by the Fund prior to the related
Meeting and must indicate your name and account number. In addition, if you
attend a Meeting in person you may, if you wish, vote by ballot at that Meeting,
thereby canceling any proxy previously given.
2
<PAGE>
Information as to the number of outstanding Shares of each Fund as of the
record date, February 16, 1996 ("Record Date"), is set forth below:
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF
OF COMMON STOCK SHARES OF
NAME OF FUND OUTSTANDING APS OUTSTANDING
- - - - ----------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Investment Grade Income Fund.....................................
Insured Municipal Income Fund....................................
</TABLE>
A listing of the owners of more than 5% of the shares of any Fund as of
January 31, 1996 is set forth in Exhibit A.
COPIES OF EACH FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS OF EITHER FUND MAY REQUEST COPIES OF THAT FUND'S ANNUAL AND
SEMI-ANNUAL REPORTS BY WRITING THE FUND AT 1285 AVENUE OF THE AMERICAS, NEW
YORK, NEW YORK 10019, OR BY CALLING 1-800-647-1568.
Except as otherwise indicated herein, all of the outstanding Shares of a
Fund's Common Stock and APS will vote together as a single class with respect to
each matter proposed to be voted upon by the Fund's Shareholders at the
Meetings. However, as described below in connection with Proposals 1 and 2, the
holders of each Fund's APS, voting as a separate class, are entitled to elect
two of their respective Fund's Board Members. Each full Share of each Fund
outstanding is entitled to one vote and each fractional Share of each Fund
outstanding is entitled to a proportionate share of one vote with respect to
each matter to be voted upon by the holders of the Common Stock or APS of that
Fund. Information about the vote necessary with respect to each proposal is
discussed below in connection with the proposal.
------------------------
PROPOSALS 1 AND 2 -- ELECTION OF BOARD MEMBERS
RELEVANT FUNDS. Both Funds.
DISCUSSION. The Board of each Fund has acted to expand its membership to
eleven members and has nominated the eleven individuals identified below for
election to the related Fund's Board at its Meeting. Under Proposals 1 and 2,
Shareholders of each Fund are being asked to vote on those nominees. For each
Fund, holders of the Fund's APS, voting as a separate class, are entitled to
elect two of that Fund's Board Members. Margo N. Alexander and Meyer Feldberg,
each of whom currently is a member of each Fund's Board and has been elected by
the holders of that Fund's APS, have been nominated by the current Boards to be
elected to the Boards by the APS holders under Proposal 2. The other nine Board
Members for each Fund will be elected by the holders of that Fund's Common Stock
and APS, voting together as a single class. Those nine nominees are listed below
and have been nominated by the current Boards to be elected to the Boards by the
Common Stock and APS holders under Proposal 1. Pertinent information about each
nominee is set forth in the listing below and in Exhibits B through D. Each
nominee has indicated a willingness to serve if elected. If elected, each
nominee will hold office until the next annual meeting of Shareholders or until
his or her successor is duly elected and qualified, or until he or she resigns
or is otherwise removed.
The increase in the size of the Boards and the nomination of a single group
of nominees to serve as the Board Members for each Fund reflect an overall plan
to coordinate and enhance the efficiency of the governance of the Funds and of
certain other investment companies that are part of the PaineWebber fund
complex. This plan was developed by a Corporate Governance Task Force comprised
of a number of current Board Members who are not "interested persons" of the
Funds, as defined in the 1940 Act ("independent" Board Members), with the advice
of their counsel, and assisted by representatives of Mitchell Hutchins and Fund
counsel. The Corporate Governance Task Force considered
3
<PAGE>
various matters related to the management and long-term welfare of the Funds and
made recommendations to the Boards, including proposals concerning the size and
composition of the Boards, committee structures, fees and related matters. These
proposals, the substance of which is summarized below, were adopted by the
Boards at meetings in November, 1995. The nominees for independent Board
memberships were selected by the Board of each Fund. With the exception of the
nominations for Board membership, which are the subject of Proposals 1 and 2, no
Shareholder action is required with respect to the Corporate Governance Task
Force recommendations.
Consistent with the recommendations of the Corporate Governance Task Force,
and concurrently with this proxy solicitation, shareholders of other funds
within the PaineWebber fund complex are also being asked to elect the
below-listed nominees to the boards of their funds. However, the election of the
nominees for the Board of either of the Funds is not conditioned upon their
election to the Board of the other Fund or of any other fund within the
PaineWebber fund complex.
The Boards believe that coordinated governance through a unified group of
Board Members will benefit each of the Funds. Despite some recent
consolidations, the PaineWebber fund complex has grown substantially in size in
the years since the current Board structures were created. This growth has been
due to the creation of new funds intended to serve a wide variety of investment
needs and the recent acquisition of the asset management business of Kidder,
Peabody Asset Management Inc. The PaineWebber fund complex currently includes
[66] portfolios of open-end and closed-end funds having a wide variety of
investment objectives and policies. These include money market funds; bond funds
that invest in corporate and other bonds with varying maturities and risk
characteristics; municipal bond funds; balanced funds that invest in
combinations of debt and equity securities; growth funds that invest in a wide
variety of domestic equity securities; and global funds that invest in debt or
equity securities from around the world. The Boards believe that the Funds will
benefit from the experience that each nominee will gain by serving on the Boards
of such a diverse group of funds. Coordinated governance within the PaineWebber
fund complex also will reduce the possibility that the separate Boards might
arrive at conflicting decisions regarding the operations and management of the
Funds and any resulting costs.
The Boards also believe that the Funds will benefit from the diversity and
experience of the nominees that would comprise the expanded Boards. These
nominees have had distinguished careers in government, finance, law, marketing
and other areas and will bring a wide range of expertise to the Boards. Eight of
the eleven nominees have no affiliation or business connection with PaineWebber
or Mitchell Hutchins and would be independent Board Members. Independent Board
Members are charged with special responsibilities to provide an independent
check on management and to approve advisory, distribution and similar agreements
between the Funds and management. They also constitute the members of the
Boards' audit committees. In the course of their duties, Board Members must
review and understand large amounts of financial and technical material and must
be willing to devote substantial amounts of time. Due to the demands of service
on the Boards, independent nominees may need to reject other attractive
opportunities. With the exception of [ ], each of the independent
nominees already serves as an independent Board Member for one or more funds
within the PaineWebber fund complex and understands the operations of the
complex.
The proposed unified Board structure will require a greater expenditure of
time by each Board Member. Election of the eleven nominees will permit the
Boards to enhance their supervision of the Funds by increased use of a committee
structure. Under the Board structure envisioned by the Corporate Governance Task
Force and adopted by the Boards, each Board's audit committee is being divided
into two sub-committees, each comprised of four of the independent Board
Members. Each sub-committee will function as an audit and contract review
committee that periodically will review the contractual and audit arrangements
for Funds having similar characteristics and will report and make
recommendations to the full Board. The sub-committee structure will enable Board
members both to develop expertise about particular Funds, while still benefiting
from the experience and knowledge of the full Boards. Other committees may be
used in the future. It is anticipated that the full Boards will have five
regularly scheduled meetings per year.
4
<PAGE>
As recommended by the Corporate Governance Task Force, the compensation paid
to independent Board Members will change. Under the new structure, each
independent Board Member will be paid annual fees of $1,000 (compared to $1,500
currently) per Fund and will receive an attendance fee of $150 (compared to $250
currently) for each Board meeting and for each committee meeting (other than
committee meetings held on the same date as a Board meeting). The chairman of
the audit committee, and the chairman of the audit and contract review
subcommittee of which the audit committee is not a member, will receive
additional annual compensation from the PaineWebber funds of $15,000. Interested
Board Members will continue to receive no compensation from any Fund. Board
Members will continue to be reimbursed for any expenses incurred in attending
meetings. A table setting forth information relating to the compensation paid to
Board Members during the past fiscal and calendar years is attached as Exhibit
C. Pursuant to the recommendations of the Corporate Governance Task Force, each
Board Member will be subject to mandatory retirement at the end of the year in
which he or she becomes 72 years old.
The nominees for election as Board Members, their ages, and a description of
their principal occupations are listed in the table below. A table indicating
the stock ownership of each nominee as of January 31, 1996 is attached as
Exhibit D.
<TABLE>
<CAPTION>
NOMINEE; AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- - - - -------------------------------- ----------------------------------------------------------------------
<S> <C>
Margo N. Alexander;* 48 Mrs. Alexander is president, chief executive officer and a director of
Mitchell Hutchins (since January, 1995). Mrs. Alexander is an
executive vice president and director of PaineWebber. Mrs. Alexander
also is a director or trustee of 3 investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
Richard Q. Armstrong; 60 Mr. Armstrong is chairman and principal of RQA Enterprises (management
consulting firm) (since April 1991 and principal occupation since
March 1995). Mr. Armstrong is also a director of Hi Lo Automotive,
Inc. He was chairman of the board, chief executive officer and
co-owner of Adirondack Beverages (producer and distributor of soft
drinks and sparkling/still waters) (October 1993-March 1995). He was a
partner of the New England Consulting Group (management consulting
firm) (December 1992-September 1993). He was managing director of LVMH
U.S. Corporation (U.S. subsidiary of the French luxury goods
conglomerate, Louis Vuitton Moet Hennessey Corporation) (1987-1991)
and chairman of its wine and spirits subsidiary, Schieffelin &
Somerset Company (1987-1991). Mr. Armstrong also is a director or
trustee of 6 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
E. Garrett Bewkes, Jr.;* 69 Mr. Bewkes is a director of, and 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 also a director of
Interstate Bakeries Corporation and NaPro Bio-Therapeutics, Inc. Mr.
Bewkes also is a director or trustee of 24 investment companies for
which Mitchell Hutchins or PaineWebber serves as investment adviser.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NOMINEE; AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- - - - -------------------------------- ----------------------------------------------------------------------
<S> <C>
Richard Burt; 47 Mr. Burt is chairman of International Equity Partners (international
investments and consulting firm) (since March 1994) and a partner of
McKinsey & Company (management consulting firm) (since 1991). He is
also a director of American Publishing Company. He was the chief
negotiator in the Strategic Arms Reduction Talks with the former
Soviet Union (1989-1991) and the U.S. Ambassador to the Federal
Republic of Germany (1985-1989). Mr. Burt also is a director or
trustee of 7 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Mary C. Farrell;* 46 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 is employed as a
regular panelist on Wall $treet Week with Louis Rukeyser. She serves
on the Board of Overseers of New York University's Stern School of
Business.
Meyer Feldberg; 53 Mr. Feldberg is Dean and Professor of Management of the Graduate
School of Business, Columbia University. Prior to 1989, he was
president of the Illinois Institute of Technology. Dean Feldberg is
also a director of AMSCO International Inc., Federated Department
Stores, Inc. and New World Communications Group Incorporated. Mr.
Feldberg also is a director or trustee of 19 investment companies for
which Mitchell Hutchins or PaineWebber serves as investment adviser.
George W. Gowen; 66 Mr. Gowen is a partner in the law firm of Dunnington, Bartholow &
Miller. Prior to May 1994, he was partner in the law firm of Fryer,
Ross & Gowen. Mr. Gowen is also a director of Columbia Real Estate
Investments, Inc. Mr. Gowen also is a director or trustee of 17
investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Frederic V. Malek; 59 Mr. Malek is chairman of Thayer Capital Partners (investment bank) and
a co-chairman and director of CB Commercial Group Inc. (real estate).
From January 1992 to November 1992, he was campaign manager of
Bush-Quayle '92. From 1990 to 1992, he was vice chairman and, from
1989 to 1990, he was president of Northwest Airlines Inc., NWA Inc.
(holding company of Northwest Airlines Inc.) and Wings Holdings Inc.
(holding company of NWA Inc.). Prior to 1989, he was employed by the
Marriott Corporation (hotels, restaurants, airline catering and
contract feeding), where he most recently was an executive vice
president and president of Marriott Hotels and Resorts. Mr. Malek is
also a director of American Management Systems, Inc., Automatic Data
Processing, Inc., Avis, Inc., FPL Group, Inc., National Education Cor-
poration and Northwest Airlines Inc. Mr. Malek also is a director or
trustee of 17 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NOMINEE; AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- - - - -------------------------------- ----------------------------------------------------------------------
<S> <C>
Carl W. Schafer; 60 Mr. Schafer is president of the Atlantic Foundation (charitable
foundation supporting mainly oceanographic exploration and research).
He also is a director of Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Evans Systems, Inc. (a motor fuels,
convenience store and diversified company), Hidden Lake Gold Mines
Ltd. (gold mining), Electronic Clearing House, Inc. (financial
transactions processing), Wainoco Oil Corporation and Nutraceutix Inc.
(biotechnology). Prior to January 1993, Mr. Schafer was chairman of
the Investment Advisory Committee of the Howard Hughes Medical
Institute. Mr. Schafer also is a director or trustee of 7 investment
companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
[NAME, AGE AND BIOGRAPHY OF
ELEVENTH NOMINEE TO BE INSERTED]
John R. Torell III; 56 Mr. Torell is chairman of Torell Management, Inc. (financial advisory
firm), partner of Zilkha & Company (merchant banking and private
investment company) and chairman of Telesphere Corporation (electronic
provider of financial information). He is the former chairman and
chief executive officer of Fortune Bancorp (1990-1991 and 1990-1994,
respectively). He is the former chairman, president and chief
executive officer of CalFed, Inc. (savings association) (1988 to 1989)
and former president of Manufacturers Hanover Corp. (bank) (prior to
1988). Mr. Torell is also a director of American Home Products Corp.,
Volt Information Sciences Inc., and New Colt Inc. (armament
manufacturer). Mr. Torell also is a director or trustee of 7
investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
</TABLE>
- - - - ------------------------
*Indicates "interested person" of the Funds as defined by the 1940 Act, by
reason of his or her position with Mitchell Hutchins, PaineWebber or PW Group
and/or share ownership in PW Group.
The Board of Insured Municipal Income Fund met seven times during its most
recently completed fiscal year. The Board of Investment Grade Income Fund met
six times during its most recently completed fiscal year. Each Board has an
audit committee consisting of its independent Board Members (currently, Richard
Q. Armstrong, Meyer Feldberg, Richard Burt, John R. Torell III and William D.
White). Each of the members attended 75% or more of Board meetings during each
Fund's most recently completed fiscal year, with the exception of Mr. Burt and
Mr. White with respect to Insured Municipal Income Fund. Each of the members of
the audit committee attended 75% or more of that committee's meetings during
each Fund's most recently completed fiscal year. The duties of the audit
committee are (a) to review reports prepared by the Company's independent
auditors, including reports on the Company's internal accounting control
procedures; (b) to review and recommend approval or disapproval of audit and
non-audit services and the fees charged for such services; (c) to evaluate the
independence of the independent auditors and to recommend whether to retain such
independent auditors for the next fiscal year; and (d) to report to the Board
and make such recommendations as it deems necessary. The Boards do not have
standing nominating or compensation committees. Information concerning Fund
officers is set forth in Exhibit E.
7
<PAGE>
REQUIRED VOTE. For each Fund, and provided a quorum is present: the
candidates for the two Board Memberships to be elected by the APS holders
receiving the affirmative vote of a plurality of the votes cast for the election
of Board Members by APS holders will be elected to those Board Memberships; and
the candidates for the remaining Board Memberships receiving the affirmative
vote of a plurality of the votes cast for the election of Board Members by all
Shareholders will be elected to the remaining Board Memberships.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" EACH OF THE NOMINEES UNDER PROPOSALS 1 AND 2.
------------------------
PROPOSAL 3 -- APPROVAL OF CHANGES TO FUNDAMENTAL INVESTMENT
RESTRICTIONS AND POLICIES OF EACH FUND
RELEVANT FUNDS. Both Funds.
REASONS FOR THE PROPOSED CHANGES. Pursuant to the 1940 Act, each of the
Funds has adopted certain fundamental investment restrictions and policies
("fundamental restrictions"), which are set forth in the Fund's prospectus or
statement of additional information, and which may be changed only with
Shareholder approval. Restrictions and policies that a Fund has not specifically
designated as being fundamental are considered to be "non-fundamental" and may
be changed by the Fund's Board without Shareholder approval.
Certain of the fundamental restrictions that the Funds have adopted in the
past reflect regulatory, business or industry conditions, practices or
requirements that are no longer in effect. Other fundamental restrictions
reflect regulatory requirements which remain in effect but which are not
required to be stated as fundamental, or in some cases even as non-fundamental,
restrictions. Also, as new funds have been created within the PaineWebber fund
complex over a period of years, substantially similar fundamental restrictions
often have been phrased in slightly different ways, sometimes resulting in minor
but unintended differences in effect or potentially giving rise to unintended
differences in interpretation.
Accordingly, the Boards have approved revisions to their respective Funds'
fundamental restrictions in order to simplify, modernize and make more uniform
within the PaineWebber fund complex those investment restrictions that are
required to be fundamental, and to eliminate those fundamental restrictions that
are not legally required. Existing fundamental restrictions that are eliminated
because they are not required to be fundamental would be re-classified as
non-fundamental restrictions. Notwithstanding the changes to the Funds'
fundamental investment restrictions proposed under Proposal 3, the Funds'
investment policies would continue to be subject to the guidelines and other
restrictions with which the Funds agreed to comply in connection with the rating
of the APS by Standard & Poor's, a division of The McGraw Hill Companies, Inc.,
or Moody's Investors Service, Inc.
The Boards believe that the proposed changes to the Funds' fundamental
restrictions will enhance management's ability efficiently and effectively to
manage the Funds' assets in changing regulatory and investment environments. In
addition, by reducing to a minimum those policies that can be changed only by
Shareholder vote, each Fund will more often be able to avoid the costs and
delays associated with a Shareholder meeting when making changes to its
investment policies that, at a future time, its Board considers desirable.
Although the proposed changes in fundamental restrictions will allow the Funds
greater investment flexibility to respond to future investment opportunities,
the Boards do not anticipate that the changes, individually or in the aggregate,
will result at this time in a material change in the level of investment risk
associated with an investment in any Fund.
The text and a summary description of each proposed change to the Funds'
fundamental restrictions are set forth below. Shareholders should refer to
Exhibit FR to this proxy statement for the text of the Funds' existing
fundamental restrictions.
8
<PAGE>
The text below also describes those non-fundamental restrictions that would
be adopted by the Boards in conjunction with the elimination of fundamental
restrictions under Proposal 3. Any non-fundamental restriction may be modified
or eliminated by the appropriate Board at any future date without any further
approval of Shareholders.
If the proposed changes are approved by Shareholders of the respective Funds
at the Meeting, the Funds' statements of additional information will be revised
to reflect those changes. This will occur as soon as practicable following the
Meetings. Proposal 3 will not result in a change to any Fund's investment
objective, even though it also constitutes a fundamental policy.
If approved by the Shareholders, these revisions must be filed with the
Securities and Exchange Commission ("SEC") and are subject to a comment and
review process. To the extent necessary to comply with regulatory comments or to
conform with the definitions and other terminology used in a Fund's prospectus
or statement of additional information, the language of these provisions may be
subject to further modification. However, any material change would require
Shareholder approval.
PROPOSED CHANGES. The following is the text and a summary description of
the proposed changes to the Funds' fundamental restrictions, together with the
text of those non-fundamental restrictions that would be adopted in connection
with the elimination of certain of the Funds' current fundamental restrictions.
Also set forth is a restatement of the Fund's fundamental restriction on senior
securities and borrowing, which is not being changed. With respect to each Fund
and each proposed fundamental restriction, if a percentage restriction is
adhered to at the time of an investment or transaction, a later increase or
decrease in percentage resulting from a change in the values of the Fund's
portfolio securities or the amount of its total assets will not be considered a
violation of the fundamental restriction.
1. MODIFICATION OF FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION FOR
DIVERSIFIED FUNDS.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Fund will not purchase securities of any one issuer if, as a
result, more than 5% of the Fund's total assets would be invested in
securities of that issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
Fund's total assets may be invested without regard to this limitation, and
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities or to
securities issued by other investment companies."
The following interpretation applies to, but is not a part of, this
fundamental restriction: "Each state (including the District of Columbia and
Puerto Rico), territory and possession of the United States, each political
subdivision, agency, instrumentality and authority thereof, and each multi-state
agency of which a state is a member is a separate issuer. When the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from the government creating the subdivision and the security is
backed only by the assets and revenues of the subdivision, such subdivision
would be deemed to be the sole issuer. Similarly, in the case of an Industrial
Development Bond or Private Activity Bond, if that bond is backed only by the
assets and revenues of the non-governmental user, then that non-governmental
user would be deemed to be the sole issuer. However, if the creating government
or another entity guarantees a security, then to the extent that the value of
all securities issued or guaranteed by that government or entity and owned by
the Fund exceeds 10% of the Fund's total assets, the guarantee would be
considered a separate security and would be treated as issued by that government
or entity."
With respect to Insured Municipal Income Fund, the foregoing interpretation
includes the following: "This restriction does not limit the percentage of the
Fund's assets that may be invested in Municipal Obligations insured by any given
insurer."
DISCUSSION: The Funds are "diversified" investment companies under the 1940
Act and, accordingly, must have fundamental restrictions or policies
establishing the percentage limitations with
9
<PAGE>
respect to investments in individual issuers that they will follow in order to
qualify as "diversified" for that purpose. The Funds' current restrictions are
somewhat more limiting than is necessary in order to qualify as "diversified"
funds. For example, the Funds' restrictions do not reflect exceptions to the
legally required restriction for investments in securities of other investment
companies. The Funds' current restrictions also do not refer to the required
limitation on holding more than 10% of an issuer's voting securities. The
proposed language would conform to language being proposed for use by other
funds within the PaineWebber fund complex.
Proposal 3 would not change the affirmative fundamental policy of Insured
Municipal Income Fund, as stated in its prospectus, of normally investing at
least 80% of its total assets in insured municipal obligations.
2. MODIFICATION OF FUNDAMENTAL RESTRICTION ON CONCENTRATION.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Fund will not purchase any security if, as a result of that
purchase, 25% or more of the Fund's total assets would be invested in
securities of issuers having their principal business activities in the same
industry, except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities or to
municipal securities."
DISCUSSION: The proposed changes to the Funds' fundamental concentration
policy would conform the language of the Funds' fundamental restriction on this
subject to language being proposed for use by other funds within the PaineWebber
fund complex. The Boards believe that conforming the language in this manner
will help avoid unintended differences in interpretation or effect.
3. MODIFICATION OF FUNDAMENTAL RESTRICTION ON SENIOR SECURITIES AND
BORROWING (UNCHANGED).
TEXT OF FUNDAMENTAL RESTRICTION: No change is proposed for this
restriction. The current restriction, which would remain in effect under
Proposal 3, is as follows:
"The Fund will not issue senior securities (including borrowing money
from banks and other entities and through reverse repurchase agreements),
except (a) the Fund may borrow in an amount not in excess of 33 1/3% of
total assets (including the amount of senior securities issued, but reduced
by any liabilities and indebtedness not constituting senior securities), (b)
the Fund may issue preferred stock having a liquidation preference in an
amount which, combined with the amount of any liabilities or indebtedness
constituting senior securities, is not in excess of 50% of its total assets
(computed as provided in clause (a) above) and (c) the Fund may borrow up to
an additional 5% of its total assets (not including the amount borrowed) for
temporary or emergency purposes."
DISCUSSION: As indicated above, Proposal 3 would make no change to this
fundamental restriction.
4. MODIFICATION OF FUNDAMENTAL RESTRICTION ON MAKING LOANS.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Fund will not make loans, except through loans of portfolio
securities or through repurchase agreements, provided that for purposes of
this restriction, the acquisition of bonds, debentures or other debt
securities and investments in government obligations, commercial paper,
certificates of deposit, bankers' acceptances or similar instruments will
not be considered the making of a loan."
DISCUSSION: The proposed changes would conform the language of the Funds'
fundamental restriction on this subject to language being proposed for use by
other funds within the PaineWebber fund complex. The Boards believe that
conforming the language in this manner will help avoid unintended differences in
interpretation or effect.
10
<PAGE>
The proposed change also clarifies that loans of portfolio securities will
be excluded from the general fundamental restriction on making loans. This does
not represent any change in the Fund's existing fundamental policy. The Boards
believe that the Funds should not be subject to a fundamental restriction on
securities lending and that each Board should be able to govern the extent of
securities lending through a non-fundamental policy.
The Boards have authorized the adoption of non-fundamental policies that
would allow each Fund to lend portfolio securities in an amount up to 33 1/3% of
its total assets, which is the maximum level permitted under the 1940 Act.
Neither of the Funds currently lends any portfolio securities, and the Funds
will not do so unless and until specific securities lending programs are
considered and approved by their respective Boards. Mitchell Hutchins currently
is considering proposals for securities lending programs for the Funds, and it
anticipates presenting a recommendation for such a program to the Boards in the
near future. Any such program would be subject to a determination that engaging
in securities lending would not have an adverse affect on the rating of the
Funds' APS.
Lending securities would enable a Fund to earn additional income but could
result in a loss or delay in recovering the securities. Under any securities
lending program that may be approved by the Boards, a Fund would lend portfolio
securities to broker-dealers or institutional investors that Mitchell Hutchins
(or, where applicable, a Fund's sub-adviser) deems qualified, but only when the
borrower maintains acceptable collateral with the Fund's custodian in an amount
at least equal to the market value of the securities loaned, plus accrued
interest and dividends. The Fund would pay reasonable administrative and
custodial fees in connection with any loan and might pay a negotiated portion of
the interest earned on the cash or instruments held as collateral to the
borrower or to the placing broker. The Fund would retain the authority to
terminate any loans at any time. A Fund would regain record ownership of loaned
securities to exercise beneficial rights, such as voting rights, when doing so
is considered to be in the Fund's interest.
5. MODIFICATION OF FUNDAMENTAL RESTRICTION ON UNDERWRITING SECURITIES.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Fund will not engage in the business of underwriting securities of
other issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities."
DISCUSSION: The proposed changes would conform the language of the Funds'
fundamental restriction on this subject to language being proposed for use by
other funds within the PaineWebber fund complex. The Boards believe that
conforming the language in this manner will help avoid unintended differences in
interpretation or effect.
6. MODIFICATION OF FUNDAMENTAL RESTRICTION ON REAL ESTATE INVESTMENTS.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Fund will not purchase or sell real estate, except that investments
in securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner."
DISCUSSION: The proposed changes to this investment restriction more
completely describe the types of real estate-related securities that are
permissible and conform the language of the Funds' fundamental restriction on
this subject to language being proposed for use by other funds within the
PaineWebber fund complex. The Boards believe that conforming the language in
this manner will help avoid unintended differences in interpretation or effect.
11
<PAGE>
7. MODIFICATION OF FUNDAMENTAL RESTRICTION ON INVESTING IN COMMODITIES.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Fund will not purchase or sell physical commodities unless acquired
as a result of owning securities or other instruments, but the Fund may
purchase, sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments."
DISCUSSION: The proposed changes to this investment restriction are
intended to ensure that each Fund will have the maximum flexibility to enter
into hedging or other transactions utilizing financial contracts and derivative
products when doing so is permitted by operating policies established for the
Fund by its Board. The Boards believe that this flexibility is necessary for the
Funds to respond to the rapid and continuing development of derivative products.
The proposed changes also allow flexibility in the event of changes in
regulatory standards or limitations. The Funds' existing fundamental
restrictions already permit the Boards to establish investment policies using
most or all of these types of financial contracts. However, each Fund's use of
financial contracts is limited by the requirements of the rating agencies that
rate the APS.
8. ELIMINATION OF FUNDAMENTAL RESTRICTION ON MARGIN TRANSACTIONS.
PROPOSED CHANGE; TEXT OF RELATED NON-FUNDAMENTAL RESTRICTION:
Upon the approval of Proposal 3, the existing fundamental restrictions
on engaging in margin transactions would be eliminated, and the Funds would
become subject to the following non-fundamental restriction:
"The Fund will not purchase securities on margin, except for short-term
credit necessary for clearance of portfolio transactions and except that the
Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments."
DISCUSSION: The Funds are not required to have a fundamental restriction on
a Fund's ability to engage in margin transactions. In order to maximize the
Funds' flexibility, the Boards believe that the Funds' restrictions on margin
transactions should be made non-fundamental.
The non-fundamental restriction will conform to language being proposed for
use by other funds within the PaineWebber fund complex. The language includes an
exception for margin deposits in connection with financial contracts or
derivative instruments that conforms with the exception contained in the
proposed change to the Funds' fundamental restriction on investing in
commodities.
9. ELIMINATION OF FUNDAMENTAL RESTRICTION ON SHORT SALES.
PROPOSED CHANGE; TEXT OF RELATED NON-FUNDAMENTAL RESTRICTION:
Upon the approval of Proposal 3, the existing fundamental restrictions
on engaging in short sales would be eliminated, and the Funds would become
subject to the following non-fundamental restriction:
"The Fund will not engage in short sales of securities or maintain a
short position, except that the Fund may (a) sell short "against the box"
and (b) maintain short positions in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments."
DISCUSSION: Under the 1940 Act, the SEC is authorized to limit the ability
of the Funds to engage in short sales, except in connection with an underwriting
in which the Fund is a participant. One type of short sale transaction that is
permitted under SEC policies is a short sale "against the box," in which a Fund
engages in a short sale of a security that it already owns or has the right to
own. These transactions generally are entered into in order to defer realization
of gains or losses for tax or other purposes.
12
<PAGE>
Although the Funds may be limited in their ability to engage in short sales,
the Funds are not required to establish a fundamental restriction on short
sales. Consistent with the Boards' determination to promote flexibility and
efficiency in the event of future changes in the law, the Boards believe that
the Funds' fundamental restriction on this subject should be removed and
replaced by a non-fundamental restriction. That non-fundamental restriction will
conform to language being proposed for use by other funds within the PaineWebber
fund complex. The language will contain an exception for short positions in
connection with financial contracts or derivative instruments that conforms with
the exception contained in the proposed change to the Funds' fundamental
restriction on investing in commodities.
10. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTMENTS IN OIL, GAS AND
MINERAL LEASES AND PROGRAMS.
PROPOSED CHANGE; TEXT OF RELATED NON-FUNDAMENTAL RESTRICTION:
Upon the approval of Proposal 3, the Funds' existing fundamental
restrictions on investments in oil, gas or minerals would be eliminated, and
the Funds would become subject to the following non-fundamental restriction:
"The Fund will not invest in oil, gas or mineral exploration or
development programs or leases, except that investments in securities of
issuers that invest in such programs or leases and investments in
asset-backed securities supported by receivables generated from such
programs or leases are not subject to this prohibition."
DISCUSSION: The Funds are not required to have a fundamental restriction
with respect to oil, gas or mineral investments. In order to maximize the Funds'
flexibility, the Boards believe that the Funds' restrictions on oil, gas and
mineral investments should be made non-fundamental.
The non-fundamental restriction adopted by the Boards will conform to
language being proposed for use by other funds within the PaineWebber fund
complex and will establish uniform exceptions that serve to clarify the limited
scope of the restriction. The non-fundamental restriction applies only to oil,
gas and mineral leases and development programs and not to other investments
relating to oil, gas or minerals.
REQUIRED VOTE. Approval of Proposal 3 with respect to a Fund requires the
affirmative vote of a "majority of the outstanding voting securities" of that
Fund, which for this purpose means the affirmative vote of the lesser of (1)
more than 50% of the outstanding Shares of the Fund or (2) 67% or more of the
Shares of the Fund present at the Meeting if more than 50% of the outstanding
Shares of the Fund are represented at the Meeting in person or by proxy. With
respect to Proposal 3, the Shares of a Fund's Common Stock and APS will vote
together as a single class.
IF PROPOSAL 3 IS NOT APPROVED BY SHAREHOLDERS OF A FUND, THE EXISTING
FUNDAMENTAL RESTRICTIONS OF THE FUND WILL CONTINUE IN EFFECT FOR THAT FUND, BUT
DISAPPROVAL OF PROPOSAL 3 BY THE SHAREHOLDERS OF ONE FUND WILL NOT AFFECT ANY
APPROVALS OF PROPOSAL 3 THAT ARE OBTAINED WITH RESPECT TO ANY OTHER FUND.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 3.
------------------------
PROPOSAL 4 -- AMENDMENT OF ARTICLES OF INCORPORATION
RELEVANT FUND. Insured Municipal Income Fund.
DISCUSSION. Proposal 4 is to amend the Articles of Incorporation of Insured
Municipal Income Fund to change the formal name of the Fund from "PaineWebber
Premier Insured Municipal Income Fund Inc." to "Insured Municipal Income Fund
Inc."
On June 2, 1995, the Fund's Board, acting upon the recommendation of
Mitchell Hutchins, determined to recommend this name change to the Fund's
Shareholders. At the same time, the Board
13
<PAGE>
approved the Fund's use of "Insured Municipal Income Fund" as a trade name
pending a Shareholders' meeting at which a vote on a formal name change could be
taken. The Fund has been doing business as "Insured Municipal Income Fund" since
August, 1995, when necessary approvals relating to the Fund's listing under that
name on the New York Stock Exchange, Inc. were obtained.
The proposed name change, like the use of "Insured Municipal Income Fund" as
a trade name, is intended to facilitate broadened secondary market trading of
the Fund's Common Stock within the general brokerage community. Mitchell
Hutchins advised the Fund's Board that discounts from net asset value
experienced in secondary market trading of Shares of the Fund's Common Stock may
be due in part to a reluctance by many brokerage firms to actively follow and
trade closed-end investment companies that are closely associated with a
particular retail brokerage firm. Mitchell Hutchins and the Fund's Board believe
that the proposed name change will remove that obstacle to more active trading,
while accurately describing the Fund's investment objective and policies and,
therefore, should benefit holders of the Fund's Common Stock.
REQUIRED VOTE. Approval of this proposal requires the affirmative vote of a
majority of the Shares of the Fund's Common Stock and APS, voting together as a
single class.
THE INSURED MUNICIPAL INCOME FUND BOARD, INCLUDING ITS INDEPENDENT BOARD
MEMBERS, RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 4.
------------------------
SHAREHOLDER PROPOSALS
Any Shareholder who wishes to submit proposals to be considered at a Fund's
next annual meeting of Shareholders should send the proposals to that Fund at
1285 Avenue of the Americas, New York, New York 10019, so as to be received by
the following dates, which have been determined on the basis of SEC rules:
<TABLE>
<CAPTION>
FUND DATE
- - - - ----------------------------------------------------------------------------------- -------------------
<S> <C>
Investment Grade Income Fund....................................................... August 3, 1996
Insured Municipal Income Fund...................................................... March 29, 1996
</TABLE>
Shareholder proposals that are submitted in a timely manner will not necessarily
be included in the Fund's proxy materials. Inclusion of such proposals is
subject to limitations under the federal securities laws.
OTHER BUSINESS
Management knows of no business to be presented at the Meetings other than
the matters set forth in this proxy statement, but should any other matter
requiring a vote of Shareholders arise, the proxies will vote thereon according
to their best judgment in the interest of the Funds.
By order of the Boards,
DIANNE E. O'DONNELL
SECRETARY
February , 1996
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN ALL OF YOUR PROXIES
PROMPTLY.
14
<PAGE>
INDEX TO EXHIBITS TO PROXY STATEMENT
<TABLE>
<S> <C> <C>
Exhibit A -- Beneficial Ownership of Greater Than 5% of Fund Shares.................. A-1
Exhibit B -- Year in Which Nominees Became Board Members............................. B-1
Exhibit C -- Compensation Table...................................................... C-1
Exhibit D -- Stock Ownership of Nominees and Current Board Members................... D-1
Exhibit E -- Officer Information..................................................... E-1
Exhibit FR -- Existing Fundamental Restrictions....................................... FR-1
</TABLE>
15
<PAGE>
EXHIBIT A
BENEFICIAL OWNERSHIP OF GREATER THAN 5% OF FUND SHARES
<TABLE>
<CAPTION>
NUMBER AND
PERCENTAGE OF SHARES
BENEFICIALLY OWNED AS
NAME AND ADDRESS* NAME OF FUND OF JANUARY 31, 1996
- - - - ------------------------------------------ ------------------------------------------ ----------------------
<S> <C> <C>
</TABLE>
- - - - ------------------------
*Each of the Shareholders listed in this Exhibit may be contacted c/o Mitchell
Hutchins Asset Management Inc., 1285 Avenue of the Americas, New York, NY
10019.
A-1
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
YEAR IN WHICH NOMINEES BECAME BOARD MEMBERS*
----------------------------------------------------------------------------------------
MARGO N. RICHARD Q. E. GARRETT JOHN R.
FUND NAME ALEXANDER ARMSTRONG BEWKES** MEYER FELDBERG RICHARD BURT TORELL III
- - - - ------------------------------------ ----------- ------------- ----------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Income Fund........ 1996 1995 1992 1992 1995 1992
Insured Municipal Income Fund....... 1995 1995 1993 1993 1995 1992
</TABLE>
- - - - ------------------------
*Excludes Mary C. Farrell, George W. Gowen, Frederic V. Malek and Carl W.
Schafer and , who are not presently members of these Boards.
**Mr. Bewkes resigned from each Board and was reappointed during 1993.
B-1
<PAGE>
EXHIBIT C
COMPENSATION TABLE
<TABLE>
<CAPTION>
COMPENSATION PAID TO BOARD MEMBERS
FROM THE COMPANIES FOR THE TOTAL COMPENSATION FROM COMPANY
MOST RECENT FISCAL YEAR AND FUND COMPLEX PAID TO BOARD
------------------------------------ MEMBERS FOR THE
INDEPENDENT BOARD MEMBER (1) INVESTMENT GRADE INSURED MUNICIPAL YEAR ENDED DECEMBER 31, 1995(2)
- - - - ------------------------------------------- ----------------- ----------------- -------------------------------
<S> <C> <C> <C>
Richard Q. Armstrong....................... $ 1,250 [ ] $ 9,000
Richard Burt............................... $ 1,250 $ 1,875 $ 7,750
Meyer Feldberg............................. $ 3,250 $ 3,500 $ 106,325
George W. Gowen............................ -- -- $ 99,750
Frederic V. Malek.......................... -- -- $ 99,750
Carl W. Schafer............................ -- -- $ 118,175
John R. Torell............................. $ 3,250 $ 2,875 $ 28,125
William D. White*.......................... [ ] [ ] $ 33,125
</TABLE>
- - - - ------------------------
* Indicates Board Member who is not standing for re-election.
(1) Board Members who were not independent did not receive compensation from the
Companies.
(2) No fund within the PaineWebber Fund complex has a bonus, pension, profit
sharing or retirement plan.
C-1
<PAGE>
EXHIBIT D
STOCK OWNERSHIP OF NOMINEES OR BOARD MEMBERS
<TABLE>
<CAPTION>
NO. OF SHARES
HELD AS OF
NOMINEE OR CURRENT BOARD MEMBERS JANUARY 31,
WHO ARE STANDING FOR RE-ELECTION FUND 1996
- - - - ---------------------------------------------- ---------------------------------------------- ---------------
<S> <C> <C>
Margo N. Alexander............................
Richard Q. Armstrong..........................
E. Garrett Bewkes, Jr.........................
Richard Burt..................................
Mary C. Farrell...............................
Meyer Feldberg................................
George W. Gowen...............................
Frederic V. Malek.............................
Carl W. Schafer...............................
John R. Torell III............................
</TABLE>
<TABLE>
<CAPTION>
NO. OF SHARES
HELD AS OF
CURRENT BOARD MEMBERS JANUARY 31,
WHO ARE STANDING FOR RE-ELECTION FUND 1996
- - - - ----------------------------------------------- ----------------------------------------------- ---------------
<S> <C> <C>
William D. White...............................
</TABLE>
D-1
<PAGE>
EXHIBIT E
OFFICER INFORMATION
<TABLE>
<CAPTION>
OFFICER SINCE
NO. OF INVESTMENT -------------------
COMPANIES ON WHICH INVESTMENT GRADE
NAME; PRINCIPAL BUSINESS OCCUPATION SERVES AS AN MUNICIPAL INCOME
FOR THE PAST FIVE YEARS AGE OFFICE OFFICER (1) FUND
- - - - --------------------------------------------- --- -------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Margo N. Alexander; Mrs. Alexander is presi- 48 President 30 5/95
dent, chief executive officer and a director
of Mitchell Hutchins (since January 1995).
Mrs. Alexander is an executive vice
president and director of PaineWebber.
Teresa M. Boyle; Ms. Boyle is a first vice 37 Vice President 30 12/93
president and manager -- advisory
administration of Mitchell Hutchins. Prior
to November 1993, she was compliance manager
of Hyperion Capital Management, Inc., an
investment advisory firm. Prior to April
1993, Ms. Boyle was a vice president and
manager -- legal administration of Mitchell
Hutchins.
Gigi Capes; Ms. Capes is a vice president and 31 Vice President 30 11/95
the tax manager of the mutual fund finance and Assistant
division of Mitchell Hutchins. Prior to Treasurer
1992, she was a tax senior consultant with
KPMG Peat Marwick.
Joan L. Cohen; Ms. Cohen is a vice president 31 Vice President 25 2/94
and attorney of Mitchell Hutchins. Prior to and Assistant
December 1993, she was an associate at the Secretary
law firm of Seward & Kissel.
C. William Maher; Mr. Maher is a first vice 34 Vice President 30 6/95
president and a senior manager of the mutual and Assistant
fund finance division of Mitchell Hutchins. Treasurer
Dennis McCauley; Mr. McCauley is a managing 49 Vice President 18 9/95
director and chief investment officer --
fixed income of Mitchell Hutchins. Prior to
December 1994, he was director of fixed
income investments of IBM Corporation.
Ann E. Moran; Ms. Moran is a vice president 38 Vice President 30 6/93
of Mitchell Hutchins. and Assistant
Treasurer
Dianne E. O'Donnell; Ms. O'Donnell is a 43 Vice President 30 8/92
senior vice president and deputy general and Secretary
counsel of Mitchell Hutchins.
Victoria E. Schonfeld; Ms. Schonfeld is a 45 Vice President 30 5/94
managing director and general counsel of
Mitchell Hutchins. From April 1990 to May
1994, she was a partner in the law firm of
Arnold & Porter. Prior to April 1990, she
was a partner in the law firm of Shereff,
Friedman, Hoffman & Goodman.
Paul H. Schubert; Mr. Schubert is a first 33 Vice President 30 9/94
vice president and a senior manager of the and Assistant
mutual fund finance division of Mitchell Treasurer
Hutchins. From August 1992 to August 1994,
he was a vice president at BlackRock
Financial Management, L.P. Prior to August
1992, he was an audit manager with Ernst &
Young LLP.
<CAPTION>
NAME; PRINCIPAL BUSINESS OCCUPATION INSURED MUNICIPAL
FOR THE PAST FIVE YEARS INCOME FUND
- - - - --------------------------------------------- -------------------
<S> <C>
Margo N. Alexander; Mrs. Alexander is presi- 5/95
dent, chief executive officer and a director
of Mitchell Hutchins (since January 1995).
Mrs. Alexander is an executive vice
president and director of PaineWebber.
Teresa M. Boyle; Ms. Boyle is a first vice 12/93
president and manager -- advisory
administration of Mitchell Hutchins. Prior
to November 1993, she was compliance manager
of Hyperion Capital Management, Inc., an
investment advisory firm. Prior to April
1993, Ms. Boyle was a vice president and
manager -- legal administration of Mitchell
Hutchins.
Gigi Capes; Ms. Capes is a vice president and 11/95
the tax manager of the mutual fund finance
division of Mitchell Hutchins. Prior to
1992, she was a tax senior consultant with
KPMG Peat Marwick.
Joan L. Cohen; Ms. Cohen is a vice president 2/94
and attorney of Mitchell Hutchins. Prior to
December 1993, she was an associate at the
law firm of Seward & Kissel.
C. William Maher; Mr. Maher is a first vice 6/95
president and a senior manager of the mutual
fund finance division of Mitchell Hutchins.
Dennis McCauley; Mr. McCauley is a managing 9/95
director and chief investment officer --
fixed income of Mitchell Hutchins. Prior to
December 1994, he was director of fixed
income investments of IBM Corporation.
Ann E. Moran; Ms. Moran is a vice president 6/93
of Mitchell Hutchins.
Dianne E. O'Donnell; Ms. O'Donnell is a 2/93
senior vice president and deputy general
counsel of Mitchell Hutchins.
Victoria E. Schonfeld; Ms. Schonfeld is a 5/94
managing director and general counsel of
Mitchell Hutchins. From April 1990 to May
1994, she was a partner in the law firm of
Arnold & Porter. Prior to April 1990, she
was a partner in the law firm of Shereff,
Friedman, Hoffman & Goodman.
Paul H. Schubert; Mr. Schubert is a first 9/94
vice president and a senior manager of the
mutual fund finance division of Mitchell
Hutchins. From August 1992 to August 1994,
he was a vice president at BlackRock
Financial Management, L.P. Prior to August
1992, he was an audit manager with Ernst &
Young LLP.
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
OFFICER SINCE
NO. OF INVESTMENT -------------------
COMPANIES ON WHICH INVESTMENT GRADE
NAME; PRINCIPAL BUSINESS OCCUPATION SERVES AS AN MUNICIPAL INCOME
FOR THE PAST FIVE YEARS AGE OFFICE OFFICER (1) FUND
- - - - --------------------------------------------- --- -------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Julian F. Sluyters; Mr. Sluyters is a senior 35 Vice President 30 8/92
vice president and the director of the and Treasur-
mutual fund finance division of Mitchell er
Hutchins. Prior to 1991, he was an audit
senior manager with Ernst & Young LLP.
Gregory K. Todd; Mr. Todd is a first vice 39 Vice President 30 6/93
president and associate general counsel of and Assistant
Mitchell Hutchins. Prior to 1993, he was a Secretary
partner in the law firm of Shereff,
Friedman, Hoffman & Goodman.
Keith A. Weller; Mr. Weller is a first vice 34 Vice President [24] 9/95
president and associate general counsel of and Assistant
Mitchell Hutchins. From September 1987 to Secretary
May 1995, he was an attorney in private
practice.
<CAPTION>
NAME; PRINCIPAL BUSINESS OCCUPATION INSURED MUNICIPAL
FOR THE PAST FIVE YEARS INCOME FUND
- - - - --------------------------------------------- -------------------
<S> <C>
Julian F. Sluyters; Mr. Sluyters is a senior 2/93
vice president and the director of the
mutual fund finance division of Mitchell
Hutchins. Prior to 1991, he was an audit
senior manager with Ernst & Young LLP.
Gregory K. Todd; Mr. Todd is a first vice 6/93
president and associate general counsel of
Mitchell Hutchins. Prior to 1993, he was a
partner in the law firm of Shereff,
Friedman, Hoffman & Goodman.
Keith A. Weller; Mr. Weller is a first vice 9/95
president and associate general counsel of
Mitchell Hutchins. From September 1987 to
May 1995, he was an attorney in private
practice.
</TABLE>
- - - - ------------------------------
(1) indicates only investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser; each officer serves in the same
capacity for each separate investment company.
E-2
<PAGE>
EXHIBIT FR
EXISTING FUNDAMENTAL RESTRICTIONS
The existing fundamental restrictions of each Fund will be found on the
following pages of this exhibit.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Investment Grade Income Fund......................................................... FR-2
Insured Municipal Income Fund........................................................ FR-3
</TABLE>
FR-1
<PAGE>
INVESTMENT GRADE INCOME FUND
The Fund may not:
(1) issue senior securities (including borrowing money from banks and other
entities and through reverse repurchase agreements), except (a) the Fund may
borrow in an amount not in excess of 33 1/3% of total assets (including the
amount of senior securities issued, but reduced by any liabilities and
indebtedness not constituting senior securities), (b) the Fund may issue
preferred stock having a liquidation preference in an amount which, combined
with the amount of any liabilities or indebtedness constituting senior
securities, is not in excess of 50% of its total assets (computed as provided in
clause (a) above) and (c) the Fund may borrow up to an additional 5% of its
total assets (not including the amount borrowed) for temporary or emergency
purposes;
(2) purchase the securities of any one issuer if as a result more than 5%
of its total assets would be invested in the securities of that issuer, provided
that securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities are not subject to this limitation and further provided that
up to 25% of the value of the Fund's total assets may be invested without regard
to this 5% limitation;
(3) make an investment in any one industry if the investment would cause
the aggregate value of all the Fund's investments in such industry to equal 25%
or more of the Fund's total assets; provided that this limitation shall not
apply to investments in securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities, and provided further that this limitation
does not apply to Municipal Obligations other than those backed only by the
assets and revenues of a non-governmental entity;
(4) purchase securities on margin, except for short-term credits necessary
for clearance of portfolio transactions, and except that the Fund may make
margin deposits in connection with its use of options, futures contracts and
options on futures contracts;
(5) engage in the business of underwriting securities of other issuers,
except to the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under federal securities laws
and except that the Fund may write options;
(6) make short sales of securities or maintain a short position, except
that the Fund may maintain short positions in connection with its use of
options, futures contracts and options on futures contracts and sell short
"against the box;"
(7) purchase or sell real estate (including real estate limited partnership
interests), provided that the Fund may invest in securities secured by real
estate or interests therein or issued by entities that invest in real estate or
interests therein, and provided further that the Fund may exercise rights under
agreements relating to such securities, including the right to enforce security
interests and liquidate real estate acquired as a result of such enforcement;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell financial futures contracts and options thereon;
(9) invest in oil, gas or mineral-related programs or leases; or
(10) make loans, except through loans of portfolio instruments and
repurchase agreements, provided that for purposes of this restriction the
acquisition of bonds, debentures or other debt instruments or interests therein
and investment in government obligations, short-term commercial paper,
certificates of deposit and bankers' acceptances shall not be deemed to be the
making of a loan.
For purposes of limitation (2), each state (including the District of
Columbia), territory and possession of the United States, each public
subdivision, agency, instrumentality and authority thereof, and each multi-state
agency of which a state is a member is a separate "issuer." When the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from the government creating the subdivision and the security is
backed only by the assets and
FR-2
<PAGE>
revenues of the subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case of an IDB or PAB, if that bond is backed only by
the assets and revenues of the non-governmental user, then such non-governmental
user would be deemed to be the sole issuer. However, if the creating government
or another entity guarantees a security, then to the extent that the value of
all securities issued or guaranteed by such government or entity and owned by
the Fund exceeds 10% of the Fund's total assets, such a guarantee would be
considered a separate security and would be treated as issued by such government
or entity. The foregoing restrictions do not limit the percentage of the Fund's
assets that may be invested in Municipal Obligations insured by any given
insurer.
INSURED MUNICIPAL INCOME FUND
The Fund may not:
(1) issue senior securities (including borrowing money from banks and other
entities and through reverse repurchase agreements), except (a) the Fund may
borrow in an amount not in excess of 33 1/3% of total assets (including the
amount of senior securities issued, but reduced by any liabilities and
indebtedness not constituting senior securities), (b) the Fund may issue
preferred stock having a liquidation preference in an amount which, combined
with the amount of any liabilities or indebtedness constituting senior
securities, is not in excess of 50% of its total assets (computed as provided in
clause (a) above) and (c) the Fund may borrow up to an additional 5% of its
total assets (not including the amount borrowed) for temporary or emergency
purposes;
(2) purchase the securities of any one issuer if as a result more than 5%
of its total assets would be invested in the securities of that issuer, provided
that securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities are not subject to this limitation and further provided that
up to 25% of the value of the Fund's total assets may be invested without regard
to this 5% limitation;
(3) make an investment in any one industry if the investment would cause
the aggregate value of all the Fund's investments in such industry to equal 25%
or more of the Fund's total assets; provided that this limitation shall not
apply to investments in securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities, and provided further that this limitation
does not apply to Municipal Obligations other than those backed only by the
assets and revenues of a non-governmental entity;
(4) purchase securities on margin, except for short-term credits necessary
for clearance of portfolio transactions, and except that the Fund may make
margin deposits in connection with its use of options, futures contracts and
options on futures contracts;
(5) engage in the business of underwriting securities of other issuers,
except to the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under federal securities laws
and except that the Fund may write options;
(6) make short sales of securities or maintain a short position, except
that the Fund may maintain short positions in connection with its use of
options, futures contracts and options on futures contracts and sell short
"against the box;"
(7) purchase or sell real estate (including real estate limited partnership
interests), provided that the Fund may invest in securities secured by real
estate or interests therein or issued by entities that invest in real estate or
interests therein, and provided further that the Fund may exercise rights under
agreements relating to such securities, including the right to enforce security
interests and liquidate real estate acquired as a result of such enforcement;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell financial futures contracts and options thereon;
(9) invest in oil, gas or mineral-related programs or leases; or
FR-3
<PAGE>
(10) make loans, except through loans of portfolio instruments and
repurchase agreements, provided that for purposes of this restriction the
acquisition of bonds, debentures or other debt instruments or interests therein
and investment in government obligations, short-term commercial paper,
certificates of deposit and bankers' acceptances shall not be deemed to be the
making of a loan.
For purposes of limitation (2), each state (including the District of
Columbia), territory and possession of the United States, each public
subdivision, agency, instrumentality and authority thereof, and each multi-state
agency of which a state is a member is a separate "issuer." When the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from the government creating the subdivision and the security is
backed only by the assets and revenues of the subdivision, such subdivision
would be deemed to be the sole issuer. Similarly, in the case of an industrial
development bond ("IDB") or private activity bond ("PAB"), if that bond is
backed only by the assets and revenues of the non-governmental user, then such
nongovernmental user would be deemed to be the sole issuer. However, if the
creating government or another entity guarantees a security, then to the extent
that the value of all securities issued or guaranteed by such government or
entity and owned by the Fund exceeds 10% of the Fund's total assets, such a
guarantee would be considered a separate security and would be treated as issued
by such government or entity. The foregoing restrictions do not limit the
percentage of the Fund's assets that may be invested in Municipal Obligations
insured by any given insurer.
FR-4
<PAGE>
Common Stock
and APS
PROXY
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
PAINEWEBBER PREMIER INSURED MUNICIPAL INCOME FUND INC.
Special Meetings of Shareholders-______________, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARDS OF DIRECTORS OF EACH OF THE
ABOVE LISTED COMPANIES. The undersigned hereby appoints as proxies ___________
and ________________ and each of them (with power of substitution) to vote for
the undersigned all shares of common stock and auction preferred shares ("APS")
of the undersigned in the Company specified on the mailing label on this proxy
card at the above referenced meetings and any adjournment thereof, with all the
power the undersigned would have if personally present. The shares represented
by this proxy will be voted as instructed. UNLESS INDICATED TO THE CONTRARY,
THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE "FOR" ALL PROPOSALS
RELATING TO THE RELEVANT COMPANY.
YOUR VOTE IS IMPORTANT
Please date and sign this proxy on the reverse side and return it in the
enclosed envelope to Alamo Direct Mail Services, Inc., 10 Lucon Drive, Deer
Park, NY 11729.
PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
1. FOR ALL SHAREHOLDERS (COMMON AND APS) OF EACH COMPANY:
Election of nine members of its Board of Directors to serve until the next
annual meeting or until their successors are duly elected and qualified;
____ FOR all nominees listed below ____ WITHHOLD AUTHORITY to vote for
(except as marked to the all nominees listed below
contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
through the nominees's name in the list below.)
Richard Q. Armstrong, E. Garrett Bewkes, Jr., Richard Burt, Mary C. Farrell,
George W. Gowen, Frederic V. Malek, Carl W. Schafer, John R. Torell III,
[_____________]
2. ONLY FOR APS HOLDERS OF EACH COMPANY:
Election of two members of its Board of Directors to serve until the
next annual meeting or until their successors are duly elected and
qualified;
____ FOR all nominees listed below ____ WITHHOLD AUTHORITY to vote for
(except as marked to the all nominees listed below
contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
through the nominee's name in the list below.)
Margo N. Alexander, Meyer Feldberg
FOR AGAINST ABSTAIN
3. FOR ALL SHAREHOLDERS (COMMON AND APS) OF EACH COMPANY:
Approval of certain changes to the
Company's fundamental investment restrictions ____ ____ ____
4. FOR ALL SHAREHOLDERS (COMMON AND APS) OF PAINEWEBBER PREMIER
INSURED MUNICIPAL INCOME FUND INC. ONLY:
Approval of amendment to its Articles of
Incorporation to change its name ____ ____ ____
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
This proxy will not be voted unless it is dated and signed exactly as instructed
below.
If shares are held by an individual, sign your name exactly as it appears on
this proxy 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.)
------------------------
Date , 1996
--------------------
