<PAGE>
Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[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
2002 Target Term Trust Inc.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(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>
2002 TARGET TERM TRUST INC.
----------------
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
MARCH 22, 2001
----------------
TO THE SHAREHOLDERS:
The annual meeting of shareholders of 2002 Target Term Trust Inc. ('Fund')
will be held on March 22, 2001 at 10:00 a.m., Eastern time, at 1285 Avenue of
the Americas, 14th Floor, New York, New York 10019 for the following purposes:
(1) To elect nine (9) directors to serve until the annual meeting of
shareholders in 2002, or until their successors are elected and qualified;
(2) To ratify the selection of Ernst & Young LLP as the Fund's
independent auditors for the fiscal year ending November 30, 2001;
(3) To approve a new sub-adviser approval policy for the Fund; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
You are entitled to vote at the meeting and any adjournments thereof if you
owned Fund shares at the close of business on January 18, 2001. If you attend
the meeting, you may vote your shares in person. IF YOU DO NOT EXPECT TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the board of directors,
DIANNE E. O'DONNELL
Secretary
January 31, 2001
51 West 52nd Street
New York, New York 10019-6114
--------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE
AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED. If you sign, date and
return the proxy card but give no voting instructions, your shares will be
voted 'FOR' the nominees for director named in the attached proxy statement
and 'FOR' all other proposals noticed above. IN ORDER TO AVOID THE ADDITIONAL
EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN
MAILING IN YOUR PROXY CARD PROMPTLY.
If we do not receive your completed proxy cards after several weeks, our
proxy solicitor, Shareholder Communications Corporation, may contact you. Our
proxy solicitor will remind you to vote your shares or will record your vote
over the phone if you choose to vote in that manner.
--------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general guidelines for signing proxy cards may be of
assistance to you and avoid the time and expense to the Fund in validating your
vote if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of registration. For
example:
<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>
2002 TARGET TERM TRUST INC.
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 22, 2001
This statement is furnished to the shareholders of 2002 Target Term Trust
Inc. ('Fund') in connection with the board of directors' solicitation of proxies
to be used at the annual meeting of shareholders of the Fund to be held on March
22, 2001, or any adjournment or adjournments thereof. This proxy statement and
the related proxy card will first be mailed to shareholders on or about
January 31, 2001.
A majority of the shares outstanding on January 18, 2001, represented in
person or by proxy, must be present for the transaction of business at the
meeting. In the event that a quorum is not present at the annual meeting, or if
such a quorum is present at the annual 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 annual meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a majority of
those shares represented at the annual meeting in person or by proxy. The
persons named as proxies will vote those proxies which they are entitled to vote
FOR any such proposal in favor of such an adjournment and will vote those
proxies required to be voted AGAINST any such proposal against such adjournment.
A shareholder vote may be taken on one or more of the proposals in this proxy
statement prior to any such adjournment if sufficient votes have been received
and it is otherwise appropriate.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present for purposes of determining whether a quorum is present but
will not be voted for or against any adjournment or proposal. Accordingly,
abstentions and broker non-votes effectively will be a vote against adjournment
and Proposal 3, for which the required vote is a specified majority of the
outstanding shares of the Fund, but will have no effect on Proposals 1 and 2,
for which the required vote is a plurality and majority, respectively, of the
votes cast.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon if your proxy card is
received properly executed by you or your duly appointed agent or
attorney-in-fact. If you give no voting instructions, your shares will be voted
FOR the nine nominees for directors named herein, FOR the remaining proposals
described in this proxy statement and, in the proxies' discretion, either FOR or
AGAINST any other business that may properly arise at the meeting. 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 meeting and must indicate your name and account number. In
addition, if you attend the annual meeting in person you may, if you wish, vote
by ballot at the meeting, thereby cancelling any proxy previously given.
As of the record date, January 18, 2001, the Fund had outstanding
shares of common stock. The solicitation of proxies, the cost of which will be
borne by the Fund, will be made primarily by mail but also may include telephone
or oral communications by regular employees of Mitchell Hutchins Asset
Management Inc. ('Mitchell Hutchins') or PaineWebber Incorporated
('PaineWebber'), who will not receive any compensation therefor from the Fund.
In addition, the Fund has engaged the services of
<PAGE>
Shareholder Communications Corporation to assist it in the solicitation of
proxies for the meeting. Shareholder Communications Corporation will be paid
approximately for proxy solicitation services. Each full share of the Fund
outstanding is entitled to one vote and each fractional share of the Fund
outstanding is entitled to a proportionate share of one vote for such purposes.
Mitchell Hutchins serves as the Fund's investment adviser and administrator.
Mitchell Hutchins is a wholly owned asset management subsidiary of PaineWebber,
which is a wholly owned indirect subsidiary of UBS AG. UBS AG, with headquarters
in Zurich, Switzerland, is an internationally diversified organization with
operations in many areas of the financial services industry. The principal
business address of Mitchell Hutchins is 51 West 52nd Street, New York, New
York 10019-6114. The principal business address of PaineWebber is 1285 Avenue of
the Americas, New York, New York 10019-6028. The principal business address of
UBS AG is Bahnhofstrasse 45, Zurich, Switzerland.
Goldman Sachs Funds Management, L.P. ('Sub-Adviser'), 85 Broad Street, New
York, New York 10004, serves as the Fund's investment sub-adviser. The
Sub-Adviser is a limited partnership indirectly controlled by Goldman Sachs
Group, Inc., 85 Broad Street, New York, New York 10004.
The Fund's annual report containing financial statements for the fiscal year
ended November 30, 2000, is being mailed to shareholders concurrently with this
proxy statement.
PROPOSAL 1. ELECTION OF DIRECTORS
Proposal 1 relates to the election of directors of the Fund. Management
proposes the election of the nine nominees named in the table below. Each
nominee, including those who are not 'interested persons' of the Fund as that
term is defined by the Investment Company Act of 1940 ('1940 Act') ('Independent
Directors'), has indicated his or her 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 elected and qualified. Unless you
give contrary instructions on the enclosed proxy card, your shares will be voted
FOR the election of the nine nominees. If any of the nominees should withdraw or
otherwise become unavailable for election, your shares will be voted FOR such
other nominee or nominees as management may recommend.
Mr. Bewkes has served as a director from the Fund's inception except for a
brief period in 1993. Messrs. Armstrong and Burt have served as directors of the
Fund since March 16, 1995. Other than Mr. Storms, each of the other remaining
directors was first elected to the board on April 11, 1996. Mr. Storms has
served as a director since May 13, 1999. Effective September 8, 2000,
Ms. Farrell resigned her position as a director. A nominee has not yet been
selected to fill the vacancy created by her resignation. If each of the nine
nominees is elected, one vacancy will remain on the board of directors of the
Fund. Proxies cannot be voted for a greater number of persons than the number of
nominees named. None of the current directors and executive officers
(19 persons) beneficially owned any shares of the Fund on December 31, 2000.
<TABLE>
<CAPTION>
PRESENT POSITION WITH THE SHARES OWNED
FUND; BUSINESS EXPERIENCE DURING BENEFICIALLY ON
NOMINEE; AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS DECEMBER 31, 2000**
------------ ------------------------------------ -------------------
<S> <C> <C>
Margo N. Alexander*; 53 Director. Mrs. Alexander is Chairman (since --
March 1999) and a director of Mitchell Hutchins
(since January 1995) and an executive vice
president and director of PaineWebber (since
March 1984). She was chief executive officer of
Mitchell Hutchins from January 1995 to October
2000. Mrs. Alexander is a director or trustee of
30 investment companies for which Mitchell
Hutchins,
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRESENT POSITION WITH THE SHARES OWNED
FUND; BUSINESS EXPERIENCE DURING BENEFICIALLY ON
NOMINEE; AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS DECEMBER 31, 2000**
------------ ------------------------------------ -------------------
<S> <C> <C>
PaineWebber or one of their affiliates serves as
investment adviser.
Richard Q. Armstrong; 65 Director. Mr. Armstrong is chairman and --
principal of R.Q.A. Enterprises (management
consulting firm) (since April 1991 and principal
occupation since March 1995). He is also a
director of AlFresh Beverages Canada, Inc. (a
Canadian Beverage subsidiary of AlFresh Foods
Inc.) (since October 2000). Mr. Armstrong was
chairman of the board, chief executive officer
and co-owner of Adirondack Beverages (producer
and distributor of soft drinks and
sparkling/still waters) (October 1993-March
1995). He was a partner of The New England
Consulting Group (management consulting firm)
(December 1992-September 1993). He was managing
director of LVMH U.S. Corporation (U.S.
subsidiary of the French luxury goods
conglomerate, Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman of its
wine and spirits subsidiary, Schieffelin &
Somerset Company (1987-1991). Mr. Armstrong is a
director or trustee of 29 investment companies
for which Mitchell Hutchins, PaineWebber or one
of their affiliates serves as investment
adviser.
E. Garrett Bewkes, Jr.*; 74 Director and Chairman of the board of directors. --
Mr. Bewkes serves as a consultant to PaineWebber
(since May 1999). Prior to November 2000, he was
a director of Paine Webber Group Inc. ('PW
Group,' formerly the holding company of
PaineWebber and Mitchell Hutchins) and prior to
1996, he was a consultant to PW Group. Prior to
1988, he was chairman of the board, president
and chief executive officer of American Bakeries
Company. Mr. Bewkes is a director of Inter-
state Bakeries Corporation. Mr. Bewkes is a
director or trustee of 40 investment companies
for which Mitchell Hutchins, PaineWebber or one
of their affiliates serves as investment
adviser.
Richard R. Burt; 53 Director. Mr. Burt is chairman of IEP Advisors, --
LLP (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
Archer-Daniels-Midland Co. (agricultural
commodities), Hollinger International Co.
(publishing), Homestake Mining Corp., (gold
mining), six investment companies in the
Deutsche Bank family of funds, nine investment
companies in the Flag Investors family of funds,
The Central European Fund, Inc. and The Germany
Fund, Inc., vice chairman of Anchor Gaming
(provides technology to gaming and wagering
industry) (since July 1999) and chairman of
Weirton Steel Corp. (makes and finishes steel
products) (since April 1996). He was the chief
negotiator in the Strategic Arms Reduction Talks
with the former Soviet Union (1989-1991) and the
U.S. Ambassador to the Federal Republic of
Germany (1985-1989). Mr. Burt is a director or
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRESENT POSITION WITH THE SHARES OWNED
FUND; BUSINESS EXPERIENCE DURING BENEFICIALLY ON
NOMINEE; AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS DECEMBER 31, 2000**
------------ ------------------------------------ -------------------
<S> <C> <C>
trustee of 29 investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Meyer Feldberg; 58 Director. 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
Primedia Inc. (publishing), Federated Department
Stores, Inc. (operator of department stores) and
Revlon, Inc. (cosmetics). Dean Feldberg is a
director or trustee of 37 investment companies
for which Mitchell Hutchins, PaineWebber or one
of their affiliates serves as investment
adviser.
George W. Gowen; 71 Director. Mr. Gowen is a partner in the law firm --
of Dunnington, Bartholow & Miller. Prior to May
1994, he was a partner in the law firm of Fryer,
Ross & Gowen. Mr. Gowen is a director or trustee
of 37 investment companies for which Mitchell
Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
Frederic V. Malek; 64 Director. Mr. Malek is chairman of Thayer --
Capital Partners (merchant bank) and chairman of
Thayer Hotel Investors II and Lodging
Opportunities Fund (hotel investment
partnerships). 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. and NWA Inc. (holding
company of Northwest Airlines Inc.). Prior to
1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline
catering and contract feeding), where he most
recently was an executive vice president and
president of Marriott Hotels and Resorts. Mr.
Malek is also a director of Aegis
Communications, Inc. (tele-services), American
Management Systems, Inc. (management consulting
and computer related services), Automatic Data
Processing, Inc. (computing services), CB
Richard Ellis, Inc. (real estate services), FPL
Group, Inc. (electric services), Global Vacation
Group (packaged vacations), HCR/Manor Care, Inc.
(health care), SAGA Systems, Inc. (software
company) and Northwest Airlines Inc. Mr. Malek
is a director or trustee of 29 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as
investment adviser.
Carl W. Schafer; 65 Director. Mr. Schafer is president of the --
Atlantic Foundation (charitable foundation
supporting mainly oceanographic exploration and
research). He is a director of Labor Ready, Inc.
(temporary employment), Roadway Express, Inc.
(trucking), The Guardian Group of Mutual Funds,
the Harding, Loevner Funds, E.I.I. Realty Trust
(investment company), Evans Systems, Inc. (motor
fuels, convenience store and diversified compa-
ny), Electronic Clearing House, Inc. (financial
transac-
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRESENT POSITION WITH THE SHARES OWNED
FUND; BUSINESS EXPERIENCE DURING BENEFICIALLY ON
NOMINEE; AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS DECEMBER 31, 2000**
------------ ------------------------------------ -------------------
<S> <C> <C>
tions processing), Frontier Oil Corporation and
Nutraceutix, Inc. (biotechnology company). Prior
to January 1993, he was chairman of the
Investment Advisory Committee of the Howard
Hughes Medical Institute. Mr. Schafer is a
director or trustee of 29 investment companies
for which Mitchell Hutchins, PaineWebber or one
of their affiliates serves as an investment
adviser.
Brian M. Storms*; 46 Director and President. Mr. Storms is chief --
executive officer (since October 2000) and
president of Mitchell Hutchins (since March
1999). Mr. Storms was president of Prudential
Investments (1996-1999). Prior to joining
Prudential he was a managing director at
Fidelity Investments. Mr. Storms is a director
or trustee of 30 investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>
---------
* Mrs. Alexander, Mr. Bewkes and Mr. Storms are 'interested persons' of the
Fund, as defined by the 1940 Act, by virtue of their positions with Mitchell
Hutchins and/or PaineWebber.
** Unless otherwise stated, as of the date indicated, each director had sole
voting and investment power of any shares owned.
The board of directors of the Fund met seven times during the fiscal year
ended November 30, 2000. Each director attended 75% or more of the board
meetings during the last fiscal year. The board has established an Audit
Committee that acts pursuant to a written charter and is responsible for
overseeing the Fund's accounting and financial reporting policies, practices and
internal controls. A copy of the charter is attached as Exhibit A. In fulfilling
its duties, the Audit Committee has: (a) reviewed and discussed the Fund's
audited financial statements with management; (b) discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61; (c) received certain written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1 and
discussed with the independent auditors the independent auditors' independence;
and (d) based upon its review of the above, recommended to the board that the
audited financial statements be included in the Fund's annual report to
shareholders. The Audit Committee currently consists of Messrs. Armstrong, Burt,
Feldberg, Gowen, Malek and Schafer, none of whom have any relationship to the
Fund that may interfere with the exercise of their independence from management
or the Fund. The Audit Committee members are independent as defined under
listing standards of the New York Stock Exchange. Each member of the Fund's
Audit Committee is also a member of a similar committee established by the
boards of other investment companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser. The Audit Committee met once during the fiscal
year ended November 30, 2000 and each member attended that meeting.
The board does not have a standing nominating or compensation committee. The
Fund pays the Independent Directors $1,000 annually and up to $150 for each
board meeting and for each separate meeting of a board committee. The chairmen
of the Audit Committees and the audit and contract review committees of
individual funds within the PaineWebber fund complex receive additional
compensation aggregating $15,000 annually each from the relevant funds.
Directors of the Fund who are 'interested persons' as defined by the 1940 Act
receive no compensation from the Fund. Directors are reimbursed for
5
<PAGE>
any expenses incurred in attending meetings. Each director will be subject to
mandatory retirement at the end of the year in which he or she becomes 72 years
old. The board has waived this requirement with respect to Mr. Bewkes for the
next year. The table below includes certain information relating to the
compensation of the Fund's directors.
COMPENSATION TABLE'D'
<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM THE
NAME OF FROM FUND AND THE
PERSON, POSITION THE FUND* FUND COMPLEX**
------------------------------------------------------------ ------------ --------------
<S> <C> <C>
Richard Q. Armstrong, Director.............................. $1,780 $108,232
Richard R. Burt, Director................................... $1,780 $108,232
Meyer Feldberg, Director.................................... $2,480 $173,982
George W. Gowen, Director................................... $1,780 $173,982
Frederic V. Malek, Director................................. $1,780 $108,232
Carl W. Schafer, Director................................... $1,750 $106,372
</TABLE>
---------
'D' Only independent members of the board are compensated by the Fund and
identified above; directors who are 'interested persons,' as defined by the
1940 Act, do not receive compensation.
* Represents fees paid to each director during the fiscal year ended November
30, 2000.
** Represents total compensation paid to each director by 33 investment
companies (37 in the case of Mr. Feldberg and Gowen) for which Mitchell
Hutchins, PaineWebber or one of their affiliates served as investment
adviser during the twelve months ended December 31, 2000; no fund within
the complex has a bonus, pension, profit sharing or retirement plan.
REQUIRED VOTE
The election of each Director requires approval by a plurality of the votes
cast at the meeting on the matter, provided a quorum is present.
PROPOSAL 2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Fund's financial statements for the fiscal year ended November 30, 2000
were audited by Ernst & Young LLP, independent auditors. In addition, Ernst &
Young LLP prepares the Fund's federal and state annual income tax returns.
The board of directors of the Fund has selected Ernst & Young LLP as the
independent auditors for the Fund for the fiscal year ending November 30, 2001,
subject to ratification by shareholders of the Fund at the annual meeting. Ernst
& Young LLP has been the Fund's independent auditors since its inception in
December 1992. The ratification of Ernst & Young LLP as independent auditors is
to be voted upon at the annual meeting, and it is intended that the persons
named in the accompanying proxy will vote FOR such ratification unless contrary
instructions are given. Ernst & Young LLP has informed the Fund that it has no
material direct or indirect financial interest in the Fund.
Representatives of Ernst & Young LLP are not expected to be present at the
meeting but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their presence.
6
<PAGE>
REQUIRED VOTE
The ratification of Ernst & Young LLP as the Fund's independent auditors for
the fiscal year ending November 30, 2001 requires the approval of a majority of
the votes cast at the meeting on the matter, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE 'FOR' PROPOSAL 2.
PROPOSAL 3. TO APPROVE A NEW SUB-ADVISER APPROVAL POLICY FOR THE FUND
At its meeting on November 8, 2000, the board approved, and recommended that
the shareholders of the Fund also be asked to approve, a policy to permit
Mitchell Hutchins, subject to the approval of the board, to appoint and replace
sub-advisers, to enter into sub-advisory contracts and to amend sub-advisory
contracts on behalf of the Fund subject to ratification and approval by the
Fund's shareholders at the Fund's next regularly scheduled annual meeting
('Sub-Adviser Approval Policy'). Shareholders are being asked to approve this
policy at the Meeting to permit Mitchell Hutchins to make changes in the
sub-advisory arrangements for the Fund in the future without having to incur the
expense of a special shareholder meeting. If approved by the Fund's
shareholders, the policy would apply only to sub-advisers that are not
affiliated with Mitchell Hutchins and thus would not permit Mitchell Hutchins
and the board to appoint any Mitchell Hutchins affiliate to serve as sub-adviser
to the Fund without shareholder approval within the more narrow time constraints
imposed by the 1940 Act. Implementation of the Sub-Adviser Approval Policy is
subject to the receipt of an exemptive order that has been requested from the
SEC.
THE REQUESTED EXEMPTIVE ORDER
On June 30, 2000, the Fund filed an application ('Exemptive Application')
with the SEC seeking an exemption from provisions of the 1940 Act that, subject
to certain exceptions, prohibit any party from serving as a sub-adviser to the
Fund except pursuant to a contract that has been approved by the Fund's
shareholders. If the Exemptive Application is granted by the SEC, and if the
shareholders approve this proposal, Mitchell Hutchins will be authorized,
subject to approval by the board, including a majority of the Independent
Directors, to evaluate, select and retain unaffiliated sub-advisers for the Fund
and to modify the sub-advisory contracts without obtaining immediate shareholder
approval. The Fund would announce the appointment of any new sub-advisers by
press release promptly following any such board action. Moreover, the Exemptive
Application would require the Fund to obtain shareholder ratification and
approval of the new sub-advisory contracts at its next regularly scheduled
annual meeting. Deferring shareholder approval until the next annual meeting
would allow the Fund to avoid the cost of having a special shareholder meeting
for that purpose. There can be no assurance that the SEC will grant the relief
requested in the Exemptive Application.
CURRENT SUB-ADVISER APPROVAL PROCESS
Currently, any sub-advisory contract relating to the Fund between Mitchell
Hutchins and another investment adviser must be approved by the holders of a
majority of the Fund's outstanding shares before it can take effect (other than
on an interim basis). Such shareholder approval is in addition to approval by
the board, including a majority of the Independent Directors.
7
<PAGE>
PROPOSED SUB-ADVISER APPROVAL POLICY
The proposed Sub-Adviser Approval Policy would permit Mitchell Hutchins,
subject to the approval of the board, including a majority of the Independent
Directors, to appoint and replace sub-advisers and to amend sub-advisory
contracts without obtaining shareholder approval until the next regularly
scheduled annual meeting. The Sub-Adviser Approval Policy thus would permit
Mitchell Hutchins to change sub-advisers or sub-advisory arrangements if, among
other things: (1) the sub-adviser has a record of substandard performance;
(2) the individual employees responsible for portfolio management of the Fund
move from the sub-adviser to another investment advisory firm; (3) there is a
change of control of the sub-adviser; (4) Mitchell Hutchins decides to diversify
the Fund's management by adding another sub-adviser; or (5) there is a change in
the investment style of the Fund. The sub-advisory fee paid by Mitchell Hutchins
(not the Fund) to any new sub-adviser might be lower or higher than the fee
payable to the Fund's current sub-adviser, thereby allowing Mitchell Hutchins to
retain a greater or only a smaller portion of the fees paid by the Fund to
Mitchell Hutchins. The Sub-Adviser Approval Policy will not be used to approve
any sub-adviser that is affiliated with Mitchell Hutchins, as that term is used
in the 1940 Act, or materially amend any sub-advisory contract with an
affiliated sub-adviser.
Approval of the Sub-Adviser Approval Policy will not affect any of the
requirements under the federal securities laws that govern the Fund, Mitchell
Hutchins, any sub-adviser or any sub-advisory contract, other than the
requirement to call and hold a special meeting of the Fund's shareholders for
the purpose of approving a sub-advisory contract. The board, including the
Independent Directors, will continue to evaluate and approve all new
sub-advisory contracts between Mitchell Hutchins and any sub-adviser as well as
all changes to existing sub-advisory contracts. In addition, if the SEC grants
the requested relief, the Fund and Mitchell Hutchins will be subject to
conditions designed to ensure that the interests of the Fund's shareholders are
adequately protected whenever Mitchell Hutchins acts under the Sub-Adviser
Approval Policy. Finally, the Fund will be required to announce the appointment
of a new sub-adviser by press release promptly following the board's action, and
notice of the new sub-advisory contract, together with a description of the new
sub-adviser, will be included in the Fund's next report to shareholders.
Shareholders who are not satisfied with any sub-advisory arrangements that
Mitchell Hutchins and the board implement under the Sub-Adviser Approval Policy
would be able to vote against the new sub-advisory contract at the next annual
meeting of shareholders or, of course, sell their shares.
Shareholder approval of this Proposal 3 will not change the management fees
paid by the Fund to Mitchell Hutchins or by Mitchell Hutchins to the
Sub-Adviser, nor will it change the duties and responsibilities of either
Mitchell Hutchins or the Sub-Adviser under their respective management or sub-
advisory contracts relating to the Fund.
BENEFITS OF THE SUB-ADVISER APPROVAL POLICY
The board believes that it is in the best interests of the Fund's
shareholders to give Mitchell Hutchins the maximum flexibility to select,
supervise and evaluate sub-advisers without incurring the expense and potential
delay of seeking shareholder approval within a narrow window of time through a
special meeting of Fund shareholders. While Rule 15a-4 under the 1940 Act
provides a limited exception to the shareholder approval requirements for an
interim advisory contract, the Fund's current advisory contract must be
terminated before the Rule can apply, and the Fund's shareholders still must
approve both the resulting interim advisory and sub-advisory contracts no later
than 150 days after their effective date. Thus, even when a change in investment
management arrangements involving one or more sub-advisers can be put into place
on a temporary basis, the Fund must promptly call and hold a special meeting of
the Fund's shareholders,
8
<PAGE>
create and distribute proxy materials, and arrange for the solicitation of
voting instructions from shareholders. This process is time-intensive, slow and
costly. These costs generally are borne entirely by the Fund. If Mitchell
Hutchins and the board can rely on the Sub-Adviser Approval Policy, the board
would be able to act more quickly and with less expense to appoint an
unaffiliated sub-adviser when the board and Mitchell Hutchins believe that the
appointment would benefit the Fund and its shareholders.
Also, the board believes that it is appropriate to vest the selection,
supervision and evaluation of sub-advisers in Mitchell Hutchins, subject to
review by the board, in light of Mitchell Hutchins' significant experience and
expertise in this area. The board believes that investors may choose to invest
in the Fund because of Mitchell Hutchins' experience in this respect.
Finally, the board will oversee the sub-adviser selection process to ensure
that shareholders' interests are protected whenever Mitchell Hutchins selects a
sub-adviser or modifies a sub-advisory contract. The board, including a majority
of the Independent Directors, will continue to evaluate and approve all new
sub-advisory contracts as well as any modification to existing sub-advisory
contracts. In each review, the board will analyze all factors that it considers
to be relevant to the determination, including the nature, quality and scope of
services provided by the sub-advisers. The board will compare the investment
performance of the assets managed by the sub-adviser with other accounts with
similar investment objectives managed by other advisers and will review the
sub-adviser's compliance with federal securities laws and regulations. The board
believes that its review will ensure that Mitchell Hutchins continues to act in
the best interests of the Fund and its shareholders.
REQUIRED VOTE
Approval of Proposal 3 requires the affirmative vote of the holders of the
lesser of (1) 67% or more of the shares of the Fund present at the Meeting, if
more than 50% of the outstanding shares are represented at the Meeting in person
or by proxy, or (2) more than 50% of the outstanding shares entitled to vote at
the Meeting. If the Fund's shareholders do not approve the proposed Sub-Adviser
Approval Policy, the Fund will continue to be required to call a special meeting
whenever necessary to obtain prompt shareholder approval of any changes in the
Fund's sub-advisory arrangements. Implementation of the Sub-Adviser Approval
Policy is also conditioned upon receipt of the requested exemptive relief from
the SEC.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE 'FOR' PROPOSAL 3.
EXECUTIVE OFFICERS
Officers of the Fund are appointed by the directors and serve at the
pleasure of the board. None of the Fund's officers currently receives any
compensation from the Fund. The executive officers of the Fund, in addition to
Mr. Storms (about whom information is given previously), are:
T. KIRKHAM BARNEBY, age 54, vice president of the Fund (appointed
September 1995). Mr. Barneby is a managing director and chief investment
officer -- quantitative investments of Mitchell Hutchins. Mr. Barneby is a
vice president of 14 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
THOMAS DISBROW, age 34, vice president and assistant treasurer of the
Fund (appointed February 2000). Mr. Disbrow is a first vice president and a
senior manager of the mutual fund finance department of Mitchell Hutchins.
Prior to November 1999, he was a vice president of Zweig/Glaser Advisers.
Mr.
9
<PAGE>
Disbrow is a vice president and assistant treasurer of 30 investment
companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
AMY R. DOBERMAN, age 38, vice president of the Fund (appointed September
2000). Ms. Doberman is a senior vice president and general counsel of
Mitchell Hutchins. From December 1996 through July 2000, she was general
counsel of Aeltus Investment Management, Inc. Prior to working at Aeltus,
Ms. Doberman was a Division of Investment Management Chief Counsel at the
Securities and Exchange Commission. Ms. Doberman is a vice president of
29 investment companies and vice president and secretary of one investment
company for which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
JOHN J. LEE, age 32, vice president and assistant treasurer of the Fund
(appointed May 1998). Mr. Lee is a vice president and a manager of the
mutual fund finance department of Mitchell Hutchins. Prior to September
1997, he was an audit manager in the financial services practice of Ernst &
Young LLP. Mr. Lee is a vice president and assistant treasurer of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
KEVIN J. MAHONEY, age 35, vice president and assistant treasurer of the
Fund (appointed May 1999). Mr. Mahoney is a first vice president and a
senior manager of the mutual fund finance department of Mitchell Hutchins.
From August 1996 through March 1999, he was the manager of the mutual fund
internal control group of Salomon Smith Barney. Prior to August 1996, he was
an associate and assistant treasurer for BlackRock Financial Management L.P.
Mr. Mahoney is a vice president and assistant treasurer of 30 investment
companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
ANN E. MORAN, age 43, vice president and assistant treasurer of the Fund
(appointed June 1993). Ms. Moran is a vice president and a manager of the
mutual fund finance department of Mitchell Hutchins. Ms. Moran is also a
vice president and assistant treasurer of 30 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
DIANNE E. O'DONNELL, age 48, vice president and secretary of the Fund
(appointed November 1992). Ms. O'Donnell is a senior vice president and
deputy general counsel of Mitchell Hutchins. Ms. O'Donnell is a vice
president and secretary of 29 investment companies and a vice president and
assistant secretary of one investment company for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
PAUL H. SCHUBERT, age 38, vice president (appointed September 1994) and
treasurer (appointed May 1997) of the Fund. Mr. Schubert is a senior vice
president and the director of the mutual fund finance department of Mitchell
Hutchins. Mr. Schubert is a vice president and treasurer of 30 investment
companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
BARNEY A. TAGLIALATELA, age 39, vice president and assistant treasurer
of the Fund (appointed May 1997). Mr. Taglialatela is a vice president and a
manager of the mutual fund finance department of Mitchell Hutchins. Mr.
Taglialatela is a vice president and assistant treasurer of 30 investment
companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
KEITH A. WELLER, age 39, vice president and assistant secretary of the
Fund (appointed September 1995). Mr. Weller is a first vice president and
senior associate general counsel of Mitchell Hutchins. Mr. Weller is a vice
president and assistant secretary of 29 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates serves as an
investment adviser.
10
<PAGE>
OTHER INFORMATION
BENEFICIAL OWNERSHIP OF SHARES
Based on a Schedule 13D submitted to the Fund and filed with the Securities
and Exchange Commission, the following shareholder owned more than 5% of the
Fund's shares as of the date indicated:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF SHARES
BENEFICIALLY OWNED AS OF
NAME AND ADDRESS JANUARY 8, 2001
---------------- -----------------------------------------
<S> <C> <C>
Karpus Management, Inc. .................................. 587,705 7.53%
</TABLE>
The shareholder may be contacted c/o Mitchell Hutchins Asset Management
Inc., 51 West 52nd Street, New York, NY 10019-6114. Management does not know of
any other person who owns beneficially 5% or more of the shares of the Fund.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
An initial report under Section 16(a) of the Securities Exchange Act of 1934
was not timely filed for Ms. Doberman. This delayed report did not involve any
transaction in the Fund's common stock but rather related to her election as an
officer. The Fund is not aware of any outstanding report required to be filed by
any board member.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit proposals to be considered at the
Fund's 2002 annual meeting of shareholders should send such proposals to the
Fund at 51 West 52nd Street, New York, New York 10019-6114. In order to be
considered at that meeting, shareholder proposals must be received by the Fund
no later than October 3, 2001 and must satisfy other requirements of the federal
securities laws.
OTHER BUSINESS
Management knows of no business to be presented at the meeting 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 Fund.
By order of the board of directors,
DIANNE E. O'DONNELL
Secretary
January 31, 2001
--------------------------------------------------------------------
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN YOUR PROXY PROMPTLY.
--------------------------------------------------------------------
11
<PAGE>
EXHIBIT A
PAINEWEBBER CLOSED-END FUNDS
AUDIT COMMITTEE CHARTER
ESTABLISHMENT AND PURPOSE
The Audit Committee (the 'Committee') of the Board of Directors of each of
the closed-end PaineWebber Funds (collectively the 'Funds' and, individually, a
'Fund') is hereby established on this the 11th day of May, 2000. The primary
purpose of the Audit Committee is to oversee each Fund's accounting and
financial reporting policies, practices and internal controls, as required by
the statutes and regulations administered by the Securities and Exchange
Commission, including the Investment Company Act of 1940 (the 'Act'), and by the
rules of the New York Stock Exchange, Inc. or other relevant securities exchange
on which shares of the Fund are listed.
The Committee will endeavor to assure the quality and objectivity of each
Fund's independent audit and the Fund's financial statements, act as a liaison
between the Board of Directors and each Fund's independent auditors and
periodically report to the Board of Directors. In performing its duties, the
Committee shall have unrestricted access to each Fund's Directors, the
independent auditors, and the executive and financial management of the Fund.
COMPOSITION
The Committee, which will have at least three members at all times, shall be
composed of all the non-interested Directors (as defined in the Act) of each
Fund's Board of Directors, other than those who are not qualified to serve or
who choose not to serve.
Each member of the Committee must meet the independence and experience
requirements set forth in Appendix A. At least one member of each Sub-Committee
must also meet the financial expertise requirements set forth in Appendix A.
The Committee shall elect a chairman, who shall preside over Committee
meetings (the 'Chairman'), and may elect a deputy chairman to preside in the
absence of the Chairman.
SUB-COMMITTEES
The Committee shall have two Audit Sub-Committees (the 'Sub-Committees' or,
individually, a 'Sub-Committee'). Each member of the Committee shall serve on
one of the two Sub-Committees. Each Sub-Committee shall be assigned the
responsibility of initially performing the Committee's duties with respect to
specific Funds as determined from time to time by the Committee. Each
Sub-Committee shall report its findings and recommendations to the full
Committee, which will retain ultimate responsibility for audit oversight.
Each Sub-Committee shall have a Chairman, one of whom shall also be the
Chairman of the Committee. The other Sub-Committee Chairman shall be elected by
all members of the Committee.
MEETINGS
The Committee and each Sub-Committee shall meet on a regular basis, but not
less frequently than annually. An Agenda shall be established for each meeting.
Special meetings shall be called as circumstances
12
<PAGE>
require. The Chairman of the Committee and each Sub-Committee may invite Fund
officers and other interested parties to participate in meetings. The Committee
and each Sub-Committee may, in its discretion, meet in executive session outside
the presence of Fund officers and other parties.
A majority of the Committee's and each Sub-Committee's members shall
constitute a quorum. However, if either Sub-Committee does not have a quorum but
a quorum of the Committee as a whole is present, the committee as a whole may
act in the Sub-Committee's place. At any meeting of the Committee or a Sub-
Committee, the decision of a majority of the members present and voting shall be
determinative as to any matter submitted to a vote. Members may attend
telephonically or otherwise whereby they can hear and be heard by all other
attendees.
REPORTING
The Committee Chairman (and, as necessary, the Chairman of any
Sub-Committee) shall report to the Board of Directors on the result of its
reviews and make such recommendations as deemed appropriate. The Committee and
each Sub-Committee will keep minutes of its meetings and will make such minutes
available as requested to the full Board for its review.
DUTIES AND RESPONSIBILITIES
As a general rule, each Fund's independent auditors are ultimately
accountable to the Board of Directors of the Fund and the Committee, and the
Committee and the Board of Directors have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
independent auditors of each Fund, subject to the requirements of the Act. In
addition, the Committee and each designated Sub-Committee shall have the
following specific duties and responsibilities:
AUDIT OVERSIGHT
In connection with the organization of each Fund and annually thereafter,
recommend to the Board of Directors the selection of an independent public
accounting firm.
Review the scope of each Fund's proposed audit each year, including the
extent of audit and non-audit services provided to each Fund by the
independent auditors, and the audit procedures to be utilized. At the
conclusion of each audit, the Committee will review the audit, including
any comments or recommendations, with the independent auditors.
Ensure that the independent auditors for each Fund submit on a periodic
basis to the Committee a formal written statement delineating all
relationships between the auditors and each Fund consistent with
Independence Standards Board Standard No. 1.
Discuss with the independent auditors any disclosed relationships or
services that may impact the objectivity and independence of the
independent auditors.
Recommend that the Board of Directors of each Fund take appropriate action
in response to the independent auditors' report to satisfy itself of, and
oversee, the independence of the independent auditors.
Discuss with Management the performance of the independent auditors,
Management's recommendation with respect to the reasonableness of their
fees and the recommendation to the Board of Directors regarding the
retention of the independent auditors.
13
<PAGE>
Review and discuss with independent auditors and Management each Fund's
annual report to shareholders and significant accounting policies
underlying the reports and their presentation to the public.
Discuss with each Fund's independent auditors any matters required to be
discussed pursuant to Statement of Auditing Standards No. 61, as modified
or supplemented.
Discuss with each Fund's independent auditors, to the extent required by
Statement of Auditing Standards No. 71, any adjustments which were made to
previously reported financial information.
Review with each Fund's independent auditors the adequacy and effectiveness
of relevant internal controls and procedures and the quality of the staff
implementing these controls and procedures.
As necessary, review with the independent auditors and Management any
'illegal acts,' as defined in Section 10A of the Securities Exchange Act of
1934 and required by that statute to be reported to the Committee, or other
significant issues that could have a material effect on a Fund's financial
statements.
Make recommendations to the Board of Directors of each Fund, based on the
Committee's review and discussions with each Fund's independent auditors
and Management, with respect to each Fund's financial statements as to
whether the financial statements should be included in each Fund's annual
report for the previous fiscal year.
OTHER
Review with each Fund's Management, investment adviser and, if applicable,
sub-adviser:
(a) such compliance matters as are appropriate to be brought to the
attention of the Committee; and
(b) any comments or criticisms from the staff of the Securities and
Exchange Commission or any other regulators as are appropriate to be
brought to the attention of the Committee.
ANNUAL REVIEW
The Committee shall review and reassess the adequacy of this charter on an
annual basis.
AMENDMENTS
This charter may be amended by a vote of the Board.
LIMITS ON COMMITTEE LIABILITY
Except under extraordinary circumstances, actions taken by the Committee as
a whole shall not subject the Committee members to any personal liability.
The Committee is not responsible for either the preparation of the financial
statements or the auditing of the financial statements. Management of the Fund
has the responsibility for preparing the financial statements and implementing
internal controls and the independent auditors have the responsibility for
auditing the financial statements and monitoring the effectiveness of the
internal controls. The review of the financial statements by the Committee is
not of the same quality as the audit performed by the independent auditors. In
carrying out its responsibilities, the Committee believes its policies and
procedures should remain flexible in order to best react to a changing
environment.
14
<PAGE>
APPENDIX A
INDEPENDENCE REQUIREMENTS
In order to be deemed independent, each member of the Committee must be free
of any relationships that may interfere with the exercise of his or her
independent judgment. To ensure the independence of each Committee member, the
following restrictions shall apply to each Committee member:
A Director who is an employee (including non-employee executive officers)
of a Fund or any of its affiliates may not serve on the Committee until
three years following the termination of his or her employment. In the
event the employment relationship is with a former parent or predecessor of
a Fund, the Director could serve on the Committee after three years
following the termination of the relationship between the Fund and the
former parent or predecessor.
A Director: (a) who is a partner, controlling shareholder, or executive
officer of an organization that has a business relationship with a Fund, or
(b) who has a direct business relationship with a Fund (e.g., a consultant)
may serve on the Committee only if the Board of Directors of that Fund
determines in its business judgment that the relationship does not
interfere with the Director's exercise of independent judgment. In making a
determination regarding the independence of a Director pursuant to this
paragraph, the Board of Directors of the Fund should consider, among other
things, the materiality of the relationship to the Fund, to the Director,
and, if applicable, to the organization with which the Director is
affiliated.
'Business relationship' can include commercial, industrial, banking,
consulting, legal, accounting and other relationships. A Director can have
this relationship directly with the Fund, or the Director can be a partner,
officer or employee of an organization that has such a relationship. The
Director may serve on the Committee without the above-referenced Board of
Directors' determination after three years following the termination of, as
applicable, either: (a) the relationship between the organization with
which the Director is affiliated and the Fund, (b) the relationship between
the Director and his or her partnership status, shareholder interest or
executive officer position, or (c) the direct business relationship between
the Director and the Fund.
A Director who is employed as an executive of another corporation where a
Fund's executives serve on that corporation's compensation committee may
not serve on the Committee.
A Director who is an 'Immediate Family' member (as this term is defined in
Rule 303.02(A) of the NYSE Listed Company Manual) of an individual who is
an executive officer of a Fund or any of its affiliates cannot serve on the
Committee until three years following the termination of such employment
relationship.
EXCEPTIONS
One Independent Director who does not meet the independence requirements
above, and is not a current employee or an immediate family member of such an
employee, may be appointed as a member of the Committee, if the Boards of
Directors of the PaineWebber Funds, under exceptional and limited circumstances,
determines that his or her membership on the Committee is required by the best
interests of the Funds and their shareholders, and the Boards disclose, in the
next annual proxy statement for each closed-end Fund subsequent to the person's
appointment, the nature of the relationship and the reasons why the person was
appointed to the Committee.
15
<PAGE>
EXPERIENCE REQUIREMENTS
Each member of the Committee must be 'financially literate.' A member of the
Committee will be deemed to be 'financially literate' if he or she is able to
read and understand financial statements, including, but not limited to, the
Funds' balance sheets, income statements, and cash flow statements, or will
become able to do so within a reasonable time after becoming a member of the
Committee.
FINANCIAL EXPERTISE REQUIREMENTS
At least one member of each Sub-Committee must have past employment
experience in finance or accounting, requisite professional certification in
accounting, or any comparable experience or background which would result in the
individual's financial sophistication, including being or having been a chief
executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
16
<PAGE>
---------------------------------
2002 TARGET
TERM TRUST INC.
---------------------------------
-----------------------------------
2002 TARGET
TERM TRUST INC.
-----------------------------------
-----------------------------
NOTICE OF
ANNUAL MEETING
TO BE HELD ON
MARCH 22, 2001
AND
PROXY STATEMENT
-----------------------------
PROXY
STATEMENT
<PAGE>
APPENDIX I
PROXY
2002 TARGET TERM TRUST INC.
ANNUAL MEETING OF SHAREHOLDERS - MARCH 22, 2001
The undersigned hereby appoints as proxies Scott Griff and Victoria
Drake and each of them (with power of substitution) to vote for the undersigned
all shares of common stock of the undersigned at the aforesaid meeting and any
adjournment thereof with all the power the undersigned would have if personally
present. The shares represented by this proxy will be voted as instructed.
UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY
TO VOTE "FOR" ALL PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF 2002 TARGET TERM TRUST INC.
YOUR VOTE IS IMPORTANT
Please date and sign this proxy on the reverse side and return it in
the enclosed envelope to: PFPC Inc., P.O. Box 9388, Boston, MA 02205-9966. PFPC
Inc. has been engaged to forward the enclosed proxy material and to tabulate
proxies returned by mail.
SEE REVERSE SEE REVERSE
SIDE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
--- Please mark
X votes as in
--- this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
<TABLE>
<S> <C> <C> <C> <C>
1. To elect as directors: 2. To ratify the selection FOR AGAINST ABSTAIN
(01) Margo N. Alexander, (02) Richard Q. of Ernst & Young LLP
Armstrong, (03) E. Garrett Bewkes, Jr., as the Fund's [ ] [ ] [ ]
(04) Richard R. Burt, (05) Meyer Feldberg, independent auditors
(06) George W. Gowen, (07) Frederic V. for the fiscal year
Malek, (08) Carl W. Schafer, (09) Brian M. ending November 30,
Storms. 2001.
FOR ALL [ ] [ ] WITHHELD 3. To approve a new FOR AGAINST ABSTAIN
NOMINEES FROM ALL sub-adviser approval
NOMINEES policy for the Fund. [ ] [ ] [ ]
FOR ALL NOMINEES EXCEPT:
[ ] --------------------------------------
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
This proxy will not be voted unless it is dated and signed
exactly as instructed below:
If shares are held by an individual, sign your name exactly
as it appears on this card. If shares are held jointly,
either party may sign, but the name of the party signing
should conform exactly to the name shown on this proxy card.
If shares are held by a corporation, partnership or similar
account, the name and the capacity of the individual signing
the proxy card should be indicated unless it is reflected in
the form of registration. For example: "ABC Corp., John Doe,
Treasurer."
Sign exactly as name appears hereon.
------------------------------------- ---------------------------------------
Signature Date Signature Date
</TABLE>
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as .............................. 'D'
