(File Nos. 33-64496 and 811-7352)
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 ss.240.14a-11(c) or ss.240.14a-12
ALL-AMERICAN 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)(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:
_______________________
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ALL-AMERICAN TERM TRUST INC.
December __, 2000
Dear Shareholder,
The enclosed proxy materials relate to a special meeting of the
shareholders of All-American Term Trust Inc. ("Trust") to be held on February 8,
2001. The Trust's Board of Directors ("Board") has called this meeting to
request shareholder approval of new investment management and investment
sub-advisory agreements and a new sub-adviser approval policy for the Trust.
The proposed investment management and investment sub-advisory agreements
would allow the Trust to implement, on a long-term basis, a restructuring of the
Trust's investment management arrangements that was approved by the Board and
implemented on an interim basis in October, 2000. Under the restructuring, the
primary investment advisory role of the Trust's investment manager, Mitchell
Hutchins Asset Management Inc., is to oversee the management of the Trust's
portfolio by Wellington Management Company, LLP, which serves as the Trust's
sub-adviser. Mitchell Hutchins would continue to provide administrative services
to the Trust, as it has in the past.
The proposed sub-adviser approval policy would permit Mitchell Hutchins
and the Board to change the Trust's sub-advisory arrangements from time to time,
subject to ratification and approval by the Trust's shareholders at the next,
regularly scheduled annual meeting. Implementation of this policy would be
subject to the issuance of an exemptive order that has been requested from the
Securities and Exchange Commission.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THESE PROPOSALS.
YOUR VOTE IS VERY IMPORTANT. Please take the time to review the enclosed
proxy statement and vote your shares today by signing and returning the enclosed
proxy card. 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 Trust.
Very truly yours,
Brian M. Storms
President
<PAGE>
ALL-AMERICAN TERM TRUST INC.
51 West 52nd Street
New York, New York 10019-6114
_____________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 8, 2001
____________________
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Meeting")
of All-American Term Trust Inc. ("Trust") will be held on February 8, 2001, at
1285 Avenue of the Americas, 14th Floor, New York, New York, 10019-6028, at
11:00 a.m., Eastern time, for the following purposes:
1. To approve a new Investment Management and Administration Contract
between Mitchell Hutchins Asset Management Inc. and the Trust;
2. To approve a new Sub-Advisory Contract between Mitchell Hutchins
Asset Management Inc. and Wellington Management Company, LLP; and
3. To approve a new sub-adviser approval policy for the Trust.
Shareholders of record as of the close of business on November 30, 2000,
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
Please execute and return promptly in the enclosed envelope the
accompanying proxy, which is being solicited by the Trust's Board of Directors.
Returning your proxy promptly is important to ensure a quorum at the Meeting.
You may revoke your proxy at any time before it is exercised by the subsequent
execution and submission of a revised proxy, by giving written notice of
revocation to the Trust at any time before the proxy is exercised or by voting
in person at the Meeting.
By Order of the Board of Directors,
Dianne E. O'Donnell
Secretary
December __, 2000
51 West 52nd Street
New York, New York 10019-6114
<PAGE>
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
Please indicate your voting instructions on the enclosed proxy card, sign
and date the card and return it in the envelope provided. IF YOU SIGN, DATE AND
RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED
"FOR" THE NEW INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT, THE NEW
SUB-ADVISORY CONTRACT, AND THE SUB-ADVISER APPROVAL POLICY, AND "FOR" OR
"AGAINST" ANY OTHER BUSINESS WHICH MAY PROPERLY ARISE AT THE MEETING, IN THE
PROXIES' DISCRETION. In order to avoid the additional expense of further
solicitation, we ask your cooperation in mailing 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.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and avoid the time and expense 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> <C>
Corporate Accounts
(1) ABC Corp..................................ABC Corp.
John Doe, Treasurer
(2) ABC Corp..................................John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer.........John Doe
(4) ABC Corp. Profit Sharing Plan.............John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership.......................Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership......Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account.........................Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78.......Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr.,
UGMA/UTMA.................................John B. Smith
(2) Estate of John B. Smith...................John B. Smith, Jr., Executor
</TABLE>
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ALL-AMERICAN TERM TRUST INC.
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568
--------------------------
PROXY STATEMENT
--------------------------
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 8, 2001
This Proxy Statement is furnished to the shareholders of All-American Term
Trust Inc. ("Trust") in connection with the solicitation by the Trust's Board of
Directors ("Board") of proxies to be used at the special meeting of shareholders
to be held on February 8, 2001, at 1285 Avenue of the Americas, 14th Floor, New
York, New York, 10019-6028, at 11:00 a.m., Eastern time or any adjournments
thereof ("Meeting"). This Proxy Statement and the accompanying proxy card are
first being mailed to shareholders on or about December __, 2000.
The presence, in person or by proxy of a majority of the shares of the
Trust outstanding as of the close of business on November 30, 2000 ("Record
Date") will constitute a quorum for the transaction of business at the Meeting.
If a quorum is not present at the Meeting, or if a quorum is present 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 such adjournment will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote "FOR" 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 votes against Proposals 1,
2 and 3, which require the affirmative vote of a specified majority of the
Trust's outstanding shares.
All properly executed and unrevoked proxies received in time for the
Meeting will be voted as instructed by shareholders. Approval of each proposal
requires the affirmative vote of the lesser of (1) 67% or more of the shares of
the Trust 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 you execute your proxy
<PAGE>
but give no voting instructions, your shares will be voted "FOR" each of the
proposals described in this Proxy Statement and, in the proxies' discretion,
either "FOR" or "AGAINST" any other business which may properly arise at the
Meeting. You may revoke any proxy at any time prior to its exercise by executing
a superseding proxy or by submitting a written notice of revocation to the
Secretary of the Trust ("Secretary"). To be effective, your revocation must be
received by the Secretary prior to the Meeting and must indicate your name and
account number. In addition, if you attend the Meeting in person, you may, if
you wish, vote by ballot at the Meeting, thereby canceling any proxy that you
have previously given.
As of the Record Date, the Trust had 12,943,167 shares of common stock
outstanding. Shareholders are entitled to one vote for each full share held and
a fractional vote for each fractional share held. As of the Record Date,
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), the investment
manager and administrator of the Trust, does not know of any person who owns
beneficially or of record more than 5% of the outstanding shares of the Trust.
As of that same date, the Directors and officers, as a group, owned less than 1%
of the Trust's outstanding shares.
The solicitation of proxies, the cost of which will be borne by Mitchell
Hutchins, will be made by mail, telephone and via the Internet. The Trust's
officers and employees of Mitchell Hutchins who assist in the proxy solicitation
will not receive any additional or special compensation for any such efforts.
The Trust has engaged the services of Shareholder Communications Corporation to
assist it in the solicitation of proxies for the Meeting. Shareholder
Communications Corporation will be paid approximately $14,000 for proxy
solicitation services. The Trust will request broker/dealer firms, custodians,
nominees and fiduciaries to forward proxy materials to the beneficial owners of
the shares held of record by such persons. Mitchell Hutchins may reimburse such
broker/dealer firms, custodians, nominees and fiduciaries for their reasonable
expenses incurred in connection with such proxy solicitation.
COPIES OF THE TRUST'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS,
INCLUDING FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS MAY REQUEST COPIES OF THE TRUST'S ANNUAL AND SEMI-ANNUAL REPORTS BY
WRITING THE TRUST AT 51 WEST 52ND STREET, NEW YORK, NEW YORK 10019-6114, OR BY
CALLING 1-800-647-1568.
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INTRODUCTION
In October, the Board approved and implemented, on an interim basis,
recommendations by Mitchell Hutchins to restructure the management of the
Trust's assets and to appoint Wellington Management Company, LLP ("Wellington
Management"), an investment management company that is not affiliated with
Mitchell Hutchins, as the Trust's investment sub-adviser. Under the revised
structure, Mitchell Hutchins' primary investment management role was changed
from direct responsibility for portfolio management to oversight of the
investment sub-advisory services provided to the Trust. Mitchell Hutchins also
provides administrative services to the Trust, as it has in the past.
Effective October 10, 2000, the Board terminated the Trust's then-existing
investment advisory and administration contract with Mitchell Hutchins ("Old
Advisory Contract") and approved a new, interim investment management and
administration contract ("Interim Management Contract") between the Trust and
Mitchell Hutchins that reflects the revised structure. The Board also approved
an interim sub-advisory contract ("Interim Sub-Advisory Contract") that was
entered into as of October 10, 2000 between Mitchell Hutchins and Wellington
Management.
Under the Interim Management Contract, Mitchell Hutchins serves as
investment manager for the Trust and oversees the portfolio management services
performed by Wellington Management. The Trust pays Mitchell Hutchins the same
annual fee, 0.90% of the Trust's average weekly net assets, under the Interim
Management Contract that it paid under the Old Advisory Contract. Under the
Interim Sub-Advisory Contract, Wellington Management provides the Trust with a
continuous investment program for which Mitchell Hutchins, not the Trust, pays
Wellington Management at an annual rate of 0.30% of the first $50 million of
average weekly net assets of the Trust, 0.25% of the next $50 million of average
weekly net assets of the Trust and 0.15% of all average weekly net assets of the
Trust at the level of $100 million and above. The Interim Management Contract
and the Interim Sub-Advisory Contract each will terminate automatically on the
earlier of 150 days from its effective date or the date on which new investment
management and sub-advisory contracts, respectively, are approved by the Trust's
shareholders as recommended by the Board under Proposals 1 and 2 below.
In Proposal 3 below, the Board is asking shareholders to approve a policy
allowing Mitchell Hutchins and the Board to change the Trust's sub-advisory
arrangements from time to time by appointing or replacing one or more
sub-advisers, or by amending their sub-advisory contracts, in each case subject
to later ratification and approval by the Trust's shareholders.
PROPOSAL 1 - APPROVAL OF A NEW INVESTMENT MANAGEMENT
AND ADMINISTRATION CONTRACT WITH MITCHELL HUTCHINS.
At its meeting on November 8, 2000, the Board approved a new Investment
Management and Administration Contract ("New Management Contract") between the
Trust and Mitchell Hutchins. The New Management Contract is substantially the
same as the Interim Management Contract and will implement, on a long-term
basis, the restructuring contemplated by that interim contract. Under the New
Management Contract, Mitchell Hutchins will receive the same compensation as
under the Interim Management Contract and the Old Advisory Contract.
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<PAGE>
The form of the New Management Contract is attached as Appendix B. Further
information about Mitchell Hutchins is set forth in Appendix C.
COMPARISON BETWEEN THE OLD ADVISORY CONTRACT AND THE NEW MANAGEMENT CONTRACT
The main difference between the Old Advisory Contract and the New
Management Contract is the change of Mitchell Hutchins' investment advisory
role. Under the Old Advisory Contract, Mitchell Hutchins was required to provide
a continuous investment program for the Trust, including investment research and
management with respect to all securities, investments and cash equivalents in
the Trust, and it determined what securities and other investments would be
purchased, retained or sold by the Trust. As under the Interim Management
Contract, the primary investment advisory role of Mitchell Hutchins under the
New Management Contract will be to oversee the management of the Trust's
portfolio by one or more investment sub-advisers. Mitchell Hutchins will provide
initial reviews of prospective sub-advisers and will oversee and monitor the
performance of those sub-advisers that are selected. Mitchell Hutchins also will
report to the Board the results of its evaluation, supervision, and monitoring
duties, keep related books and records of the Trust in connection therewith and
make recommendations to the Board concerning renewals, modifications or
termination of the Trust's sub-advisory arrangements. The New Management
Contract differs from the Interim Management Contract in that it provides that,
if so requested by the Board, Mitchell Hutchins will also perform direct
portfolio management with respect to any portion of the Trust's assets for which
no sub-advisory arrangements are in effect.
While the Old Advisory Contract permitted Mitchell Hutchins to delegate
some or all of its duties to a sub-adviser, the New Management Contract
specifically contemplates that portfolio management duties normally will be
performed by one or more sub-advisers. Each sub-advisory agreement entered into
between Mitchell Hutchins and a sub-adviser is required to be in substantially
the form previously approved by the Board. As described in Proposal 3, Mitchell
Hutchins and the Trust have filed an exemptive application with the Securities
and Exchange Commission ("SEC") that would permit a sub-adviser to be appointed
upon the approval of the Board, subject to shareholder ratification and approval
at the Trust's next, regularly scheduled annual meeting. See Proposal 3 for more
information.
Mitchell Hutchins' duties as the Trust's administrator under the New
Management Contract will be substantially identical to its duties as
administrator under the Old Advisory Contract. Mitchell Hutchins will administer
the affairs of the Trust, subject to the supervision of the Board, and will
provide the Trust with such corporate, administrative and clerical personnel
(including officers of the Trust) and services as are deemed reasonably
necessary or advisable by the Board, including the maintenance of certain books
and records of the Trust. Mitchell Hutchins will arrange, but not pay, for the
periodic preparation, updating, filing and dissemination (as applicable) of
reports to the Trust's shareholders and the SEC and other appropriate federal or
state regulatory authorities. Mitchell Hutchins will provide the Trust with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items. Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board,
upon request, any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
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Both the Old Advisory Contract and the New Management Contract provide
that Mitchell Hutchins will not be liable for any error in judgment or mistake
of law or for any loss suffered by the Trust or its shareholders in connection
with the matters to which the Contracts relate, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Mitchell
Hutchins in the performance of its duties or from reckless disregard by it of
its obligations and duties under the Contracts. The New Management Contract
expressly extends this limitation of liability to any sub-advisers or
sub-administrators to the Trust and specifies that Mitchell Hutchins is not
responsible for the actions or inactions of any sub-adviser in the performance
of the duties assigned to it.
The New Management Contract provides that, for the services provided and
the expenses assumed by Mitchell Hutchins, the Trust will pay to Mitchell
Hutchins a fee, computed weekly and paid monthly, at an annual rate of 0.90% of
the average weekly net assets of the Trust. This fee is identical to the fee
payable to Mitchell Hutchins under the Old Advisory Contract.
As under the Old Advisory Contract, the New Management Contract will
terminate automatically upon assignment and is terminable at any time without
penalty by the Board or by vote of the holders of a majority of the Trust's
outstanding voting securities on sixty days' written notice to Mitchell
Hutchins, or by Mitchell Hutchins on sixty days' written notice to the Trust.
If approved by the Trust's shareholders, the New Management Contract will
become effective on the date of approval and will remain in effect for an
initial two-year term. Thereafter, the New Management Contract will continue in
effect if it is approved at least annually by a vote of the Trust's shareholders
or by the Board, provided that, in either event, continuance is approved by the
vote of a majority of the Board who are not "interested persons," as defined by
the Investment Company Act of 1940, as amended ("1940 Act"), of the Trust or
Mitchell Hutchins ("Independent Directors"), which vote must be cast in person
at a meeting called for the purpose of voting on such approval.
The Old Advisory Contract was dated February 12, 1993, and was last
submitted to a vote of the sole initial shareholder of the Trust on that date in
connection with the Trust's commencement of operations. The Interim Management
Contract is dated October 10, 2000 and has not been submitted to the
shareholders for approval. The Trust paid or accrued investment advisory and
administrative fees to Mitchell Hutchins under the Old Advisory Contract in the
amount of $1,650,611 during the fiscal year ended January 31, 2000.
EVALUATION BY THE BOARD
In approving the New Management Contract, the Board reviewed and analyzed
the factors its members deemed relevant, including: (1) the services previously
and now being provided by Mitchell Hutchins; (2) the nature, quality, and scope
of such services as well as the Trust's investment performance; (3) the nature
and scope of the services to be provided to the Trust by Mitchell Hutchins under
the New Management Contract; (4) the ability of Mitchell Hutchins to provide
such services; and (5) the potential effect of the New Management Contract on
shareholders. The Board reviewed the proposed fees payable to Mitchell Hutchins
under the New Management Contract and considered the management, advisory and/or
administration fees paid by other investment companies with similar objectives
and characteristics.
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After full consideration of the above listed and other factors, the Board,
including the Independent Directors, approved the New Management Contract and
authorized the submission of the New Management Contract to the Trust's
shareholders for their approval at the Meeting.
REQUIRED VOTE
Approval of Proposal 1 requires the affirmative vote of the lesser of (1)
67% or more of the shares of the Trust 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 Proposal 1 is not approved by shareholders, the Interim Management Contract
will continue in effect for the remainder of its original 150-day term, and the
Board will consider what measures are necessary or appropriate to ensure the
continuation of advisory services to the Trust.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 1.
----------------------------
PROPOSAL 2 - APPROVAL OF A NEW SUB-ADVISORY CONTRACT
BETWEEN MITCHELL HUTCHINS AND WELLINGTON MANAGEMENT.
At the November 8, 2000 meeting of the Board, Mitchell Hutchins proposed,
and the Board approved, a sub-advisory contract between Mitchell Hutchins and
Wellington Management ("New Sub-Advisory Contract"). The New Sub-Advisory
Contract is substantially identical to the Interim Sub-Advisory Contract, except
that it is for a longer term and it can be terminated by the Trust or Mitchell
Hutchins on sixty days' notice to Wellington Management. The New Sub-Advisory
Contract provides for Mitchell Hutchins (not the Trust) to pay Wellington
Management sub-advisory fees at the same rate as under the Interim Sub-Advisory
Contract.
The form of the New Sub-Advisory Contract is attached as Appendix D.
Further information about Wellington Management is set forth in Appendix E. New
Sub-Advisory Contract
NEW SUB-ADVISORY CONTRACT
Under the New Sub-Advisory Contract, Wellington Management will be
responsible, subject to the supervision of the Board and Mitchell Hutchins, for
the actual investment management of the Trust's assets or, if Mitchell Hutchins
so specifies at a subsequent time, a designated portion of those assets,
including placing purchase and sell orders for investments and for other related
transactions. Wellington Management will provide a continuous investment program
for the Trust's assets, including investment research and management. The New
Sub-Advisory Contract recognizes that Wellington Management may, under certain
circumstances, pay higher brokerage commissions by executing portfolio
transactions with brokers that provide the sub-adviser with research, analysis,
advice or similar services. The New Sub-Advisory Contract also provides that
Wellington Management will (1) maintain all books and records required to be
maintained by it pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions the sub-adviser effects on
behalf of the Trust, and will furnish the Board and Mitchell Hutchins with such
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periodic and special reports as the Board or Mitchell Hutchins may reasonably
request; (2) provide the Board or Mitchell Hutchins with economic and investment
analyses and reports, as well as quarterly reports, setting forth the Trust's
performance with respect to its investments and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services that
Wellington Management normally makes available to its other sub-advisory
clients; and (3) provide assistance in the fair valuation of, and use reasonable
efforts to assist the custodian with obtaining a price from one or more parties
independent of Wellington Management, for each portfolio security for which the
Trust's custodian does not obtain prices in the ordinary course of business from
an automated pricing service.
The New Sub-Advisory Contract provides that Wellington Management will not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Trust, its shareholders or Mitchell Hutchins in connection with the
matters to which the New Sub-Advisory Contract relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of
Wellington Management in the performance of its duties or from reckless
disregard by it of its obligations and duties under the New Sub-Advisory
Contract. In addition, Wellington Management will not have any responsibilities
for any portion of the Trust's assets that it does not manage or for the acts or
omissions of any other sub-adviser for the Trust. If at any time Wellington
Management only manages a portion of the Trust's assets, Wellington Management
will have no responsibility for the Trust's being in violation of any law or
regulation or Trust policy or restriction or for the Trust's failure to qualify
as a "regulated investment company" for federal tax purposes, if the portion of
the Trust's portfolio managed by Wellington Management would not be in such
violation or fail to so qualify if such portion were deemed a separate
"regulated investment company."
The New Sub-Advisory Contract provides that the Trust, by the vote of a
majority of the Board of Directors or a majority of its outstanding voting
securities, may terminate the New Sub-Advisory Contract, without penalty, on
sixty days' written notice to Wellington Management and Wellington Management
may terminate the New Sub-Advisory Contract, without penalty, on sixty days'
written notice to Mitchell Hutchins. The New Sub-Advisory Contract also permits
Mitchell Hutchins to terminate the New Sub-Advisory Contract, without penalty:
(1) upon sixty days' written notice to Wellington Management; (2) upon material
breach by Wellington Management of any of the representations and warranties in
paragraph 7 of the New Sub-Advisory Contract (E.G., registration as an
investment adviser, adoption of a code of ethics, notification of changes in
control, prohibition on referring to the relationship between Wellington
Management and the Trust or Mitchell Hutchins in promotional materials without
prior consent), if such breach is not cured within a twenty day period after
notice of such breach or (3) if, in the reasonable judgment of Mitchell
Hutchins, Wellington Management becomes unable to discharge its duties and
obligations under the New Sub-Advisory Contract, including circumstances such as
financial insolvency of Wellington Management or any other circumstances which
could adversely affect the Trust. In addition, the New Sub-Advisory Contract
automatically terminates upon its assignment.
Under the New Sub-Advisory Contract, for the services it performs and the
expenses it assumes, Wellington Management will receive a sub-advisory fee paid
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by Mitchell Hutchins (not the Trust), computed weekly and paid monthly, at an
annual rate of 0.30% of the first $50 million of average weekly net assets of
the Trust, 0.25% of the next $50 million of average weekly net assets of the
Trust and 0.15% of all average weekly net assets of the Trust at the level of
$100 million and above.
If approved by the Trust's shareholders, the New Sub-Advisory Contract
will become effective on the date of approval and will remain in effect for an
initial two-year term. Thereafter, the New Sub-Advisory Contract will continue
in effect if it is approved at least annually by a vote of the Trust's
shareholders or by the Board, provided that, in either event, continuance is
approved by the vote of a majority of the Independent Directors, which vote must
be cast in person at a meeting called for the purpose of voting on such
approval.
EVALUATION BY BOARD
At its October and November meetings, the Board determined that it would
be in the best interest of the Trust's shareholders to retain Wellington
Management as the Trust's sub-adviser and to approve the New Sub-Advisory
Contract. In making these determinations, the Board analyzed the factors it
deemed relevant, including the following: (1) Wellington Management's experience
in managing low-volatility, fixed income assets, including its risk controls,
and its sector, industry and company credit analysis, its reputation, the past
performance of other low-volatility income funds managed by Wellington
Management, its overall capabilities to perform the services under the New
Sub-Advisory Contract and its willingness to perform those services for the
Trust; (2) the sub-advisory fees that would be payable to Wellington Management;
(3) the services provided by Wellington Management to its other investment
company clients; (4) the ability of Wellington Management to provide
sub-advisory services to the Trust, including the quality of its personnel,
operations and financial condition; and (5) other factors that would affect
positively or negatively the provision of those services. After full
consideration of these and other factors, the Board of Directors, including a
majority of the Independent Directors, approved the proposed New Sub-Advisory
Contract and recommended that it be submitted to Trust shareholders for
approval.
REQUIRED VOTE
Approval of Proposal 2 requires the affirmative vote of the lesser of (1)
67% or more of the shares of the Trust 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 Proposal 2 is not approved by shareholders, the Interim Sub-Advisory Contract
will continue in effect for the remainder of its original 150-day term, and the
Board and Mitchell Hutchins will consider what sub-advisory services should be
provided to the Trust.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 2.
----------------------------
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PROPOSAL 3 - TO APPROVE A NEW SUB-ADVISER APPROVAL POLICY FOR THE TRUST.
At its meeting on November 8, 2000, the Board approved, and recommended
that the shareholders of the Trust 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 Trust subject to ratification and approval by the
Trust's shareholders at the Trust'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 Trust in the future without having to incur
the expense of a special shareholder meeting. If approved by the Trust'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 Trust without immediate shareholder approval. 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 Trust filed an application ("Exemptive Application")
with the SEC seeking an exemption from provisions of the 1940 Act that, subject
to certain exceptions such as for the Interim Sub-Advisory Contract, prohibit
any party from serving as a sub-adviser to the Trust except pursuant to a
contract that has been approved by the Trust'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 Trust and to modify the
sub-advisory contracts without obtaining immediate shareholder approval. The
Trust 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 Trust 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
Trust 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 Trust between
Mitchell Hutchins and another investment adviser must be approved by the holders
of a majority of the Trust's outstanding shares before it can take effect (other
than on an interim basis, as for the Interim Sub-Advisory Contract). Such
shareholder approval is in addition to approval by the Board, including a
majority of the Independent Directors.
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
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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 Trust 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
Trust's management by adding another sub-adviser; or (5) there is a change in
the investment style of the Trust. 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 Trust, Mitchell
Hutchins, any sub-adviser or any sub-advisory contract, other than the
requirement to call and hold a special meeting of the Trust'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 Trust and Mitchell Hutchins will be subject to
conditions designed to ensure that the interests of the Trust's shareholders are
adequately protected whenever Mitchell Hutchins acts under the Sub-Adviser
Approval Policy. Finally, the Trust 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 Trust'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 Trust to Mitchell Hutchins or by Mitchell Hutchins to
Wellington Management, nor will it change the duties and responsibilities of
either Mitchell Hutchins or Wellington Management under their respective
management or sub-advisory contracts relating to the Trust.
BENEFITS OF THE SUB-ADVISER APPROVAL POLICY
The Board believes that it is in the best interests of the Trust'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 immediate shareholder approval through a special meeting of
Trust shareholders. While Rule 15a-4 under the 1940 Act provides a limited
exception to the shareholder approval requirements for an interim advisory
contract (pursuant to which the Trust's Interim Management Contract and Interim
Sub-Advisory Contract were adopted), the Trust's current advisory contract must
be terminated before the Rule can apply, and the Trust'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 Trust must immediately call and hold a special meeting
of the Trust's shareholders, create and distribute proxy materials, and arrange
for the solicitation of voting instructions from shareholders. This process is
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time-intensive, slow and costly. These costs generally are borne entirely by the
Trust, although in the case of this solicitation, they are being borne by
Mitchell Hutchins. 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 Trust and its
shareholders.
Also, the Board believes that it is appropriate to vest the selection,
supervision and evaluation of the sub-advisers in Mitchell Hutchins, subject to
review by the Board, in light of Mitchell Hutchins' significant experience and
expertise in this area. The Board believes that investors may choose to invest
in the Trust 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 Trust and its
shareholders.
REQUIRED VOTE
Approval of Proposal 3 requires the affirmative vote of the lesser of (1)
67% or more of the shares of the Trust 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 Trust's shareholders do not approve the proposed Sub-Adviser Approval
Policy, the Trust will continue to be required to call a special meeting
whenever necessary to obtain immediate 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 RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 3.
----------------------------
INFORMATION ABOUT CERTAIN DIRECTORS AND OFFICERS OF THE TRUST
Officers are appointed by the Board and serve at the pleasure of the
Board. Information regarding officers and Directors of the Trust who are
employees or directors of Mitchell Hutchins, PaineWebber or Wellington
Management is provided below.
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MARGO N. ALEXANDER: age 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, PaineWebber or one of their affiliates serves as investment
adviser.
E. GARRETT BEWKES JR.: age 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 Interstate 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.
BRIAN M. STORMS: age 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 president and a director or trustee of 30 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. 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. 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. 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
Assistant Chief Counsel at the SEC. Ms. Doberman is a vice president of 29
investment companies and a vice president and secretary of one investment
company for which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
JOHN J. LEE: age 32, vice president and assistant treasurer. 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. 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
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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. Ms. Moran is
a vice president and a manager of the mutual fund finance department of Mitchell
Hutchins. Ms. Moran is a vice president and assistant treasurer of 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. 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 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 37, vice president and treasurer. 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.
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. 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 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit proposals to be considered at the
Trust's 2002 annual meeting of shareholders should send such proposals to the
Trust 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 Trust
by approximately December 1, 2001 and must satisfy the other requirements of the
federal securities laws. In order to be considered at the Trust's 2001 annual
meeting, shareholder proposals had to have been received by the Trust no later
than December 1, 2000.
OTHER BUSINESS
Management knows of no other business to be presented to 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 interests of the Trust.
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By Order of the Board of Directors,
Dianne E. O'Donnell
SECRETARY
December __, 2000
It is important that you execute and return your proxy promptly.
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APPENDIX A
To the best knowledge of the Trust's management, the executive officers and
Directors of the Trust, as a group, own less than 1% of the Trust's outstanding
shares. As of November 30, 2000, no shareholder was shown on the Trust's
records as owning more than 5% of its outstanding shares.
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APPENDIX B
FORM OF NEW INVESTMENT MANAGEMENT AND
ADMINISTRATION CONTRACT
Contract made as of February __, 2001, between ALL-AMERICAN TERM TRUST
INC., a Maryland corporation ("Trust"), and MITCHELL HUTCHINS ASSET MANAGEMENT
INC. ("Mitchell Hutchins"), a Delaware corporation registered as an investment
adviser under the Investment Advisers Act of 1940, as amended ("Advisers Act"),
and as a broker-dealer under the Securities Exchange Act of 1934, as amended
("1934 Act").
WHEREAS the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as a closed-end, diversified management investment
company, and has registered shares of its common stock ("Shares") for sale to
the public under the Securities Act of 1933, as amended ("1933 Act"); and
WHEREAS the Trust desires and intends to have one or more investment
advisers ("Sub-Advisers") provide investment advisory and portfolio management
services to the Trust; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment
manager and administrator to furnish certain administrative and portfolio
management services to the Trust, and Mitchell Hutchins is willing to furnish
such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints Mitchell Hutchins as invest-
investment manager and administrator of the Trust for the period and on the
terms set forth in this Contract. Mitchell Hutchins accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. DUTIES AS INVESTMENT MANAGER; APPOINTMENT OF SUB-ADVISERS
---------------------------------------------------------
(a) Subject to the oversight and direction of the Trust's Board of
Directors ("Board"), Mitchell Hutchins will provide to the Trust investment
management evaluation services principally by performing initial reviews of
prospective Sub-Advisers for the Trust and overseeing and monitoring performance
of the Sub-Advisers thereafter. Mitchell Hutchins agrees to report to the Trust
the results of its evaluation, oversight and monitoring functions and to keep
books and records of the Trust in connection therewith. Upon the request of the
Board, Mitchell Hutchins will provide portfolio management services with respect
to any portion of the Trust's assets for which no Sub-Adviser is responsible.
Mitchell Hutchins further agrees to communicate performance expectations and
evaluations to the Sub-Advisers, and to recommend to the Trust whether
agreements with the Sub-Advisers should be renewed, modified or terminated.
(b) Mitchell Hutchins is responsible for informing the Sub-Advisers
of the investment objective(s), policies and restrictions of the Trust, for
informing or ascertaining that it is aware of other legal and regulatory
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responsibilities applicable to the Sub-Advisers with respect to the Trust, and
for monitoring the Sub-Advisers' discharge of their duties; but Mitchell
Hutchins is not responsible for the specific actions (or inactions) of any
Sub-Adviser in the performance of the duties assigned to it.
(c) With respect to each Sub-Adviser for the Trust, Mitchell
Hutchins shall enter into an agreement ("Sub-Advisory Agreement") with the
Sub-Adviser in substantially the form previously approved by the Board and shall
seek approval of the Board or the Trust's shareholders in a manner consistent
with the 1940 Act, the rules thereunder or any applicable exemptive order.
(d) Mitchell Hutchins shall be responsible for the fees payable to
and shall pay the Sub-Advisers of the Trust the fee as specified in the
Sub-Advisory Agreement relating thereto.
(e) In the event that the Board shall request that Mitchell Hutchins
provide portfolio management services to the Trust, Mitchell Hutchins shall
comply with this paragraph 2(e). Mitchell Hutchins agrees that in placing orders
with brokers, it will attempt to obtain the best net result in terms of price
and execution; provided that Mitchell Hutchins may, in its discretion, use
brokers who provide the Trust with research, analysis, advice and similar
services to execute portfolio transactions on behalf of the Trust, and Mitchell
Hutchins may pay to those brokers in return for brokerage and research services
a higher commission than may be charged by other brokers, subject to Mitchell
Hutchins' determining in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of
Mitchell Hutchins to the Trust and its other clients and that the total
commissions paid by the Trust will be reasonable in relation to the benefits to
the Trust over the long term. In no instance will portfolio securities be
purchased from or sold to Mitchell Hutchins, or any affiliated person thereof,
except in accordance with the federal securities laws and the rules and
regulations thereunder. Mitchell Hutchins may aggregate sales and purchase
orders with respect to the assets of the Trust with similar orders being made
simultaneously for other accounts advised by Mitchell Hutchins or its
affiliates. Whenever Mitchell Hutchins simultaneously places orders to purchase
or sell the same security on behalf of the Trust and one or more other accounts
advised by Mitchell Hutchins, such orders will be allocated as to price and
amount among all such accounts in a manner believed to be equitable over time to
each account. The Trust recognizes that in some cases this procedure may
adversely affect the results obtained for the Trust. In providing any portfolio
management services, Mitchell Hutchins will oversee the maintenance of all books
and records with respect to the securities transactions of the Trust, and will
furnish the Board with such periodic and special reports as the Board reasonably
may request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Mitchell Hutchins hereby agrees that all records that it maintains for the
Trust are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records that it maintains for
the Trust and that are required to be maintained by Rule 31a-1 under the 1940
Act and further agrees to surrender promptly to the Trust any records that it
maintains for the Trust upon request by the Trust. In providing any portfolio
management services, Mitchell Hutchins will oversee the computation of the net
asset value and the net income of the Trust as described in the currently
effective registration statement of the Trust under the 1933 Act and the 1940
Act and any supplements thereto ("Registration Statement") or as more frequently
requested by the Board. The Trust hereby authorizes Mitchell Hutchins and any
entity or persons associated with Mitchell Hutchins which is a member of a
national securities exchange to effect any transaction on such exchange for the
account of the Trust, which transaction is permitted by Section 11(a) of the
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1934 Act and Rule 11a2-2(T) thereunder, and the Trust hereby consents to the
retention of compensation by Mitchell Hutchins or any entity or persons
associated with Mitchell Hutchins for such transactions in accordance with Rule
11a2-2(T)(a)(2)(iv).
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the
affairs of the Trust subject to the oversight and direction of the Board and the
following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations
of the Trust, including oversight of transfer agency, custodial and accounting
services, except as hereinafter set forth; provided, however, that nothing
herein contained shall be deemed to relieve or deprive the Board of any of its
responsibilities with respect to the conduct of the affairs of the Trust.
(b) Mitchell Hutchins will provide the Trust with such corporate,
administrative and clerical personnel (including officers of the Trust) and
services as are reasonably deemed necessary or advisable by the Board, including
the maintenance of books and records of the Trust in connection with the
administration of the Trust.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Trust's
Registration Statement, proxy material, tax returns and required reports to the
Trust's shareholders and the Securities and Exchange Commission ("Commission")
and other appropriate federal or state regulatory authorities.
(d) Mitchell Hutchins will provide the Trust with, or obtain for it,
adequate office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Articles of
Incorporation, By-Laws and the Registration Statement of the Trust and with the
instructions and directions of the Board and will comply with the requirements
of the 1940 Act, the Advisers Act, and the rules under each, and all other
applicable federal and state laws and regulations.
5. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a director, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
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6. EXPENSES.
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(a) During the term of this Contract, the Trust will bear all
expenses, not specifically assumed by Mitchell Hutchins, incurred in its
operations and the offering of its shares.
(b) Expenses borne by the Trust will include but not be limited to
the following (which shall be in addition to the fees payable to and expenses
incurred on behalf of the Trust by Mitchell Hutchins under this contract): (i)
the cost (including brokerage commissions) of securities purchased or sold by
the Trust and any losses incurred in connection therewith; (ii) fees payable to
and expenses incurred on behalf of the Trust by Mitchell Hutchins under this
Contract; (iii) organizational and offering expenses of the Trust, whether or
not advanced by Mitchell Hutchins; (iv) filing fees and expenses relating to the
registration and qualification of the Trust's Shares under the federal and state
securities laws; (v) fees and salaries payable to the Trust's directors and
officers who are not interested persons of the Trust or Mitchell Hutchins; (vi)
all expenses incurred in connection with the directors' services, including
travel expenses; (vii) taxes (including any income or franchise taxes) and
governmental fees; (viii) costs of any liability, uncollectible items of deposit
and any other insurance and fidelity bonds; (ix) any costs, expenses or losses
arising out of a liability of or claim for damages or other relief asserted
against the Trust for violation of any law; (x) legal, accounting and auditing
expenses, including legal fees of special counsel for those directors of the
Trust who are not interested persons of the Trust; (xi) charges of custodians,
transfer agents and other agents; (xii) costs of preparing share certificates;
(xiii) costs of setting in type, printing and mailing reports and proxy
materials to shareholders; (xiv) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which the
Trust is a party and the expenses the Trust may incur as a result of its legal
obligation to provide indemnification to its officers, directors and agents)
incurred by the Trust; (xv) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations;
(xvi) costs of mailing and tabulating proxies and costs of meetings of
shareholders, the Board and any committees thereof; (xvii) the costs of
investment company literature and other publications provided by the Trust to
its directors and officers; (xviii) costs of mailing, stationery and
communications equipment; (xix) charges and expenses of any outside pricing
service used to value portfolio securities; (xx) interest on borrowings of the
Trust; and (xxi) fees and expenses of listing and maintaining any listing of the
Trust's Shares on any national securities exchange.
(c) The Trust may pay directly any expenses incurred by it in its
normal operations and, if any such payment is consented to by Mitchell Hutchins
and acknowledged as otherwise payable by Mitchell Hutchins pursuant to this
Contract, the Trust may reduce the fee payable to Mitchell Hutchins pursuant to
Paragraph 7 thereof by such amount. To the extent that such deductions exceed
the fee payable to Mitchell Hutchins on any monthly payment date, such excess
shall be carried forward and deducted in the same manner from the fee payable on
succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those directors who are interested persons of the Trust.
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(e) The payment or assumption by Mitchell Hutchins of any expenses
of the Trust that Mitchell Hutchins is not required by this Contract to pay or
assume shall not obligate Mitchell Hutchins to pay or assume the same or any
similar expense of the Trust on any subsequent occasion.
7. COMPENSATION.
------------
(a) For the services provided and the expenses assumed pursuant to
this Contract, the Trust will pay to Mitchell Hutchins a fee, computed weekly
and payable monthly, at an annual rate of 0.90%, expressed as a percentage of
average weekly net assets of the Trust.
(b) The fee shall be accrued weekly and payable monthly to Mitchell
Hutchins on or before the last business day of the next succeeding calendar
month.
(c) If this Contract becomes effective or terminates before the end
of any month, the fee for the period from the effective day to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
8. LIMITATION OF LIABILITY OF MITCHELL HUTCHINS. Mitchell Hutchins and its
officers, directors, employees and delegates, including any Sub-Adviser or
sub-administrator to the Trust, shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust or any of its shareholders,
in connection with the matters to which this Contract relates, except to the
extent that such a loss results from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Contract. Any person,
even though also an officer, director, employee, or agent of Mitchell Hutchins,
who may be or become an officer, director, employee or agent of the Trust, shall
be deemed, when rendering services to the Trust or acting with respect to any
business of the Trust, to be rendering such service to or acting solely for the
Trust and not as an officer, director, employee, or agent or one under the
control or direction of Mitchell Hutchins even though paid by it.
9. DURATION AND TERMINATION.
------------------------
(a) This Contract shall become effective upon the day and year first
written above, provided that this Contract shall not take effect unless it has
first been approved (i) by a vote of a majority of those directors of the Trust
who are not parties to this Contract or interested persons of any such party
("Independent Directors"), cast in person at a meeting called for the purpose of
voting on such approval and (ii) by vote of a majority of the Trust's
outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the date first above written. Thereafter,
if not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Independent
Directors of the Trust, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board or by vote of a majority of the
outstanding voting securities of the Trust.
B-5
<PAGE>
(c) Notwithstanding the foregoing, this Contract may be terminated
at any time, without the payment of any penalty, by vote of the Board or by a
vote of a majority of the outstanding voting securities of the Trust on sixty
days' written notice to Mitchell Hutchins and may be terminated by Mitchell
Hutchins at any time, without the payment of any penalty, on sixty days' written
notice to the Trust. Termination of this Contract shall in no way affect the
continued validity of this Contract. This contract will terminate automatically
in the event of its assignment.
10. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this contract shall be
effective until approved by vote of the Independent Directors or a majority of
the Trust's outstanding voting securities.
11. GOVERNING LAW. This Contract shall be construed in accordance with the
laws of the State of New York, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of New York conflict with the applicable provisions
of the 1940 Act, the latter shall control.
12. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "national
securities exchange," "net assets," "prospectus," "sale," "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act, subject to such
exemption as may be granted by the Commission by any rule, regulation or order.
Where the effect of a requirement of the 1940 Act reflected in any provision of
this contract is relaxed by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
B-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
ALL-AMERICAN TERM TRUST INC.
Attest: By
--------------------- --------------------------
Name:
Title:
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: By
--------------------- --------------------------
Name: Keith A. Weller Name: Dianne E. O'Donnell
Title: First Vice President Title: Senior Vice President and
Deputy General Counsel
B-7
<PAGE>
APPENDIX C
MORE INFORMATION ABOUT MITCHELL HUTCHINS
Mitchell Hutchins, a Delaware corporation, is a wholly owned asset management
subsidiary of PaineWebber Incorporated, which is a wholly owned indirect
subsidiary of UBS AG, an internationally diversified organization with
headquarters in Zurich, Switzerland and operations in many areas of the
financial services industry. Mitchell Hutchins is located at 51 West 52nd
Street, New York, New York 10019-6114. The principal business offices of
PaineWebber are located at 1285 Avenue of the Americas, New York, New York
10019-6028. The principal business offices of UBS AG are located at
Bahnhofstrasse 45, Zurich, Switzerland. As of October 31, 2000, Mitchell
Hutchins was the adviser or sub-adviser of 31 investment companies with 75
separate portfolios and aggregate assets of approximately $58.3 billion.
Since February 1, 1999 (the beginning of the Trust's most recently
completed fiscal year), purchases and sales of the securities of PW Group (the
ultimate parent company of PaineWebber and Mitchell Hutchins prior to November
3, 2000) or UBS AG by the directors of the Trust did not exceed 1% of the
outstanding securities of any class of PW Group or UBS AG. During its fiscal
year ended January 31, 2000, the Trust paid no brokerage commissions to
PaineWebber.
The following is a list of the directors and principal executive officers
of Mitchell Hutchins. The business address of each individual listed below is 51
West 52nd Street, New York, New York 10019-6114.
--------------------------------------------------------------------------------
POSITION(S) WITH MITCHELL PRINCIPAL
NAME HUTCHINS OCCUPATION
---- -------- ----------
--------------------------------------------------------------------------------
Margo N. Alexander Chairman and Director Same
--------------------------------------------------------------------------------
Brian M. Storms President and Chief Same
Executive Officer
--------------------------------------------------------------------------------
Julian Sluyters Director Same
--------------------------------------------------------------------------------
C-1
<PAGE>
OTHER INVESTMENT COMPANY CLIENTS
Mitchell Hutchins also serves as investment adviser to the following
investment companies, which have investment objectives similar to the Trust's,
at the fee rates set forth below.
APPROXIMATE NET
ASSETS AS OF
OCTOBER 31, 2000 ANNUAL INVESTMENT
FUND (IN MILLIONS) ADVISORY FEE
---- ------------- ------------
2002 Target Term Trust Inc. $109.9 0.50% of average weekly
net assets
Global High Income Dollar Fund Inc. $282.0 1.25% of average weekly
net assets
Insured Municipal Income Fund Inc. $455.3 0.90% of average weekly
net assets
Investment Grade Municipal Income $244.9 0.90% of average weekly
Fund Inc. net assets
Managed High Yield Plus Fund Inc. $311.8 0.70% of average weekly
net assets
Strategic Global Income Fund, Inc. $220.4 1.00% of average weekly
net assets
Mitchell Hutchins Series Trust-- $6.2 0.75% of average daily
Global Income Portfololio net assets
Mitchell Hutchins Series Trust-- $2.5 0.50% of average daily
High Grade Fixed Income Portfolio net assets
Mitchell Hutchins Series Trust-- $10.7 0.50% of average daily
High Income Portfolio net assets
Mitchell Hutchins Series Trust-- $13.4 0.75% of average daily
Strategic Income Portfolio net assets
Mitchell Hutchins Series Trust-- $4.3 0.50% of average daily
Strategic Fixed Income Portfolio net assets
PACE Global Fixed Income $96.7 0.60% of average daily
Investments net assets (subject to
a waiver of the
advisory fee and/or a
reimbursement to the
extent the Fund's "Net
Expenses" exceed 0.95%)
PACE Government Securities Fixed $202.6 0.50% of average daily
Income Investments net assets (subject to
a waiver of the
advisory fee and/or a
reimbursement to the
extent the Fund's "Net
Expenses" exceed 0.87%)
C-2
<PAGE>
APPROXIMATE NET
ASSETS AS OF
OCTOBER 31, 2000 ANNUAL INVESTMENT
FUND (IN MILLIONS) ADVISORY FEE
---- ------------- ------------
PACE Intermediate Fixed Income $134.2 0.40% of average daily
Investments net assets
PACE Municipal Fixed Income $53.1 0.40% of average daily
Investments net assets (subject to
a waiver of the
advisory fee and/or a
reimbursement to the
extent the Fund's "Net
Expenses" exceed 0.85%)
PACE Strategic Fixed Income $238.6 0.50% of average daily
Investments net assets (subject to
a waiver of the
advisory fee and/or a
reimbursement to the
extent the Fund's "Net
Expenses" exceed 0.85%)
PaineWebber California Tax-Free $123.0 0.50% of average daily
Income Fund net assets (subject to
a waiver of 0.20%)
PaineWebber Global Income Fund $253.3 0.75% of average daily
net assets
PaineWebber Investment Grade $219.0 0.50% of average daily
Income Fund net assets
PaineWebber Municipal High $83.5 0.60% of average daily
Income Fund net assets
PaineWebber National Tax-Free $239.5 0.50% of average daily
Income Fund net assets
PaineWebber New York Tax-Free $35.6 0.60% of average daily
Income Fund net
PaineWebber Low Duration U.S. $164.1 0.50% of average daily
Government Income Fund net assets
PaineWebber Strategic Income Fund $77.7 0.75% of average daily
net assets
PaineWebber U.S. Government $231.2 0.50% of average daily
Income Fund net assets
C-3
<PAGE>
APPENDIX D
FORM OF NEW SUB-ADVISORY CONTRACT.
Agreement made as of February __, 2001 ("Contract") between MITCHELL
HUTCHINS ASSET MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"),
and WELLINGTON MANAGEMENT COMPANY, LLP, a Massachusetts limited liability
partnership ("Sub-Adviser").
RECITALS
--------
(1) Mitchell Hutchins has entered into an Investment Management and
Administration Agreement, dated February __, 2001 ("Management Agreement"), with
All-American Term Trust Inc., a closed-end management investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act")
("Trust");
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services to Mitchell Hutchins and the Trust; and
(3) The Sub-Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, Mitchell Hutchins and the Sub-Adviser agree as follows:
1. APPOINTMENT. Mitchell Hutchins hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the Trust for the period and on the terms
set forth in this Contract. The Sub-Adviser accepts that appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. DUTIES AS SUB-ADVISER.
---------------------
(a) Subject to the supervision and direction of the Trust's Board of
Directors ("Board") and review by Mitchell Hutchins, and any written guidelines
adopted by the Board or Mitchell Hutchins, the Sub-Adviser will provide a
continuous investment program for all or, if subsequently so specified by
Mitchell Hutchins, a designated portion ("Segment") of the assets of the Trust,
including investment research and discretionary management with respect to all
securities and investments and cash equivalents in the Trust or Segment. The
Sub-Adviser will determine from time to time what investments will be purchased,
retained or sold by the Trust or Segment and what portion of the Trust or
Segment will be invested or held uninvested in cash. The Sub-Adviser will be
responsible for placing purchase and sell orders for investments and for other
related transactions for the Trust or Segment. The Sub-Adviser will be
responsible for voting proxies of issuers of securities held by the Trust or
Segment. The Sub-Adviser understands that the Trust's assets need to be managed
so as to permit it to qualify or to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, as amended
("Code"). The Sub-Adviser will provide services under this Contract in
accordance with the Trust's investment objective, policies and restrictions as
stated in the Trust's currently effective registration statement under the 1940
Act, and any amendments or supplements thereto ("Registration Statement").
D-1
<PAGE>
(b) The Sub-Adviser shall have full and complete discretion to establish
brokerage accounts with one or more brokers, dealers or other financial
intermediaries as Sub-Adviser may select, including those which from time to
time may furnish to Sub-Adviser or its affiliates statistical and investment
research information and other services. The Sub-Adviser agrees that, in placing
orders with brokers, it will obtain the best net result in terms of price and
execution; provided that, on behalf of the Trust, the Sub-Adviser may, in its
discretion, use brokers that provide the Sub-Adviser with research, analysis,
advice and similar services to execute portfolio transactions on behalf of the
Trust or Segment, and the Sub-Adviser may pay to those brokers in return for
brokerage and research services a higher commission than may be charged by other
brokers, subject to the Sub-Adviser's determining in good faith that such
commission is reasonable in terms either of the particular transaction or of the
overall responsibility of the Sub-Adviser to the Trust and its other clients and
that the total commissions paid by the Trust or Segment will be reasonable in
relation to the benefits to the Trust over the long term. In no instance will
portfolio securities be purchased from or sold to Mitchell Hutchins or the
Sub-Adviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder. The
Sub-Adviser may aggregate sales and purchase orders with respect to the assets
of the Trust or Segment with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Trust and one or more other accounts advised by the Sub-Adviser, the orders
will be allocated as to price and amount among all such accounts in a manner
believed to be equitable over time to each account. Mitchell Hutchins recognizes
that in some cases this procedure may adversely affect the results obtained for
the Trust or Segment.
(c) The Sub-Adviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to transactions by the Sub-Adviser on behalf of the
Trust or Segment, and will furnish the Board and Mitchell Hutchins with such
periodic and special reports as the Board or Mitchell Hutchins reasonably may
request. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Sub-Adviser hereby agrees that all records that it maintains for the Trust
are the property of the Trust, agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records that it maintains for the Trust and
that are required to be maintained by Rule 31a-1 under the 1940 Act, and further
agrees to surrender promptly to the Trust any records that it maintains for the
Trust upon request by the Trust. The Sub-Adviser will be entitled to retain
originals or copies of records pursuant to the requirements of applicable laws
or regulations; provided that the Sub-Adviser will surrender original records to
the Trust if the 1940 Act requires that the Trust have or maintain such original
records.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the performance of the Trust or Segment and make available to the
Board and Mitchell Hutchins any economic, statistical and investment services
that the Sub-Adviser normally makes available to its other sub-advisory clients.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities in the Trust or Segment and will use its reasonable
efforts to assist the custodian with obtaining a price from one or more parties
D-2
<PAGE>
independent of the Sub-Adviser for each portfolio security for which the
custodian does not obtain prices in the ordinary course of business from an
automated pricing service.
3. FURTHER DUTIES. In all matters relating to the performance of this
Contract, the Sub-Adviser will act in conformity with the Trust's Articles of
Incorporation, By-Laws and Registration Statement and with the written
instructions and written directions of the Board and Mitchell Hutchins; and will
comply with the requirements of the 1940 Act and the Investment Advisers Act of
1940, as amended ("Advisers Act") and the rules under each; Subchapter M of the
Internal Revenue Code ("Code"), as applicable to regulated investment companies;
and all other federal and state laws and regulations applicable to the Trust.
Mitchell Hutchins agrees to provide to the Sub-Adviser copies of the Trust's
Articles of Incorporation, By-Laws, Registration Statement, Prospectus and
Statement of Additional Information, written instructions, directions and
guidelines of the Board and Mitchell Hutchins, and any amendments or supplements
to any of these materials as soon as practicable after such materials become
available; and further agrees to identify to the Sub-Adviser in writing any
broker-dealers that are affiliated with Mitchell Hutchins (other than
PaineWebber Incorporated and Mitchell Hutchins itself).
During the term of this Contract, Mitchell Hutchins agrees to
furnish the Sub-Adviser at its principal office all Prospectuses, Statements of
Additional Information, proxy statements, reports to shareholders, advertising
and sales literature or other materials prepared for distribution to
shareholders of the Trust or the public that refer to the Sub-Adviser or its
clients in any way, prior to the use thereof, and the Adviser shall not use any
such materials if the Sub-Adviser reasonably objects in writing within five
business days (two business days if Wellington acknowledges receipt of the
materials), or such other period as may be mutually agreed, after receipt
thereof. The Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser, its
services and its clients. Mitchell Hutchins agrees to use its reasonable best
efforts to ensure that materials prepared by its employees or agents or its
affiliates that refer to the Sub-Adviser or its clients in any way are
consistent with those materials previously approved by the Sub-Adviser as
referenced in the first sentence of this paragraph. Material submitted for the
Sub-Adviser's review may be furnished to the Sub-Adviser by first class or
overnight mail, by facsimile or by electronic delivery.
4. EXPENSES. During the term of this Contract, the Sub-Adviser will
bear all expenses incurred by it in connection with its services under this
Contract. The Sub-Adviser shall not be responsible for any expenses incurred by
the Trust or Mitchell Hutchins.
5. COMPENSATION.
-------------
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Contract, Mitchell Hutchins, not the Trust, will pay to the
Sub-Adviser a sub-advisory fee, computed weekly and paid monthly, at an annual
rate of 0.30% of the first $50 million of average weekly net assets of the Trust
or Segment, 0.25% of the next $50 million of average weekly net assets of the
Trust or Segment and 0.15% of all average weekly net assets of the Trust or
Segment at the level of $100 million and above (all computed in the manner
specified in the Management Agreement). Mitchell Hutchins will provide the
Sub-Adviser with a schedule showing the manner in which the fee was computed. If
the Sub-Adviser is managing a Segment, its fees will be based on the value of
assets of the Trust within the Sub-Adviser's Segment.
D-3
<PAGE>
(b) The fee shall be accrued weekly and payable monthly to the Sub-Adviser on or
before the last business day of the next succeeding calendar month.
(c) If this Contract becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be pro-rated according to the proportion that such period bears to the
full month in which such effectiveness or termination occurs.
6. LIMITATION OF LIABILITY.
------------------------
(a) The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust, its shareholders or by
Mitchell Hutchins in connection with the matters to which this Contract relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract.
(b) In no event will the Sub-Adviser have any responsibilities for any
portion of the Trust's investments not managed by the Sub-Adviser or for the
acts or omissions of any other sub-adviser to the Trust.
In particular, in the event the Sub-Adviser shall manage only a
portion of the Trust's investments, the Sub-Adviser shall have no responsibility
for the Trust's being in violation of any applicable law or regulation or
investment policy or restriction applicable to the Trust as a whole or for the
Trust's failing to qualify as a regulated investment company under the Code, if
the securities and other holdings of the Segment managed by the Sub-Adviser are
such that such Segment would not be in such violation or fail to so qualify if
such segment were deemed a separate "regulated investment company" under the
Code.
Nothing in this section shall be deemed a limitation or waiver of
any obligation or duty that may not by law be limited or waived.
7. REPRESENTATIONS OF SUB-ADVISER. The Sub-Adviser represents, warrants
and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Contract
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Contract; (iii) has met and
will seek to continue to meet for so long as this Contract remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency necessary to
be met in order to perform the services contemplated by this Contract; (iv) has
the authority to enter into and perform the services contemplated by this
Contract; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics and appropriate
procedures complying with the requirements of Rule 17j-1 under the 1940 Act and
will provide Mitchell Hutchins and the Board with a copy of such code of ethics,
D-4
<PAGE>
together with evidence of its adoption. Within fifteen days of the end of the
last calendar quarter of each year that this Contract is in effect, the
Sub-Adviser shall certify to Mitchell Hutchins that the Sub-Adviser has complied
with the requirements of Rule 17j-1 during the previous year and that there has
been no material violation of the Sub-Adviser's code of ethics or, if such a
violation has occurred, that appropriate action was taken in response to such
violation. Mitchell Hutchins may request, and the Sub-Adviser shall provide,
non-confidential information which has been reported to the Sub-Adviser by
personnel performing services for the Trust as required by Rule 17j-1(c)(1).
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its Form
ADV, as most recently filed with the Securities and Exchange Commission ("SEC"),
and promptly will furnish a copy of all amendments to Mitchell Hutchins at least
annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of control
of the Sub-Adviser, including any change of its general partners or 25%
shareholders or 25% limited partners, as applicable, and any changes in the key
personnel who are either the portfolio manager(s) of the Trust or senior
management of the Sub-Adviser, in each case prior to, or promptly after, such
change.
(e) The Sub-Adviser agrees that neither it, nor any of its affiliates,
will in any way refer directly or indirectly to its relationship with the Trust,
Mitchell Hutchins or any of their respective affiliates in offering, marketing
or other promotional materials without the prior express written consent of
Mitchell Hutchins.
8. SERVICES NOT EXCLUSIVE. The services furnished by the Sub-Adviser
hereunder are not to be deemed exclusive and the Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby or unless otherwise agreed to by the parties hereunder
in writing. The services to be furnished by the Sub-Adviser under this Contract
may be furnished through the medium of any of the Sub-Adviser's partners,
officers or employees. Nothing in this Contract shall limit or restrict the
right of any partner, officer or employee of the Sub-Adviser, who may also be a
director, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
9. DURATION AND TERMINATION.
-------------------------
(a) This Contract shall become effective upon the day and year first
written above, provided that this Contract shall not take effect unless it has
first been approved (i) by a vote of a majority of those directors of the Trust
who are not parties to this Contract or interested persons of any such party
("Independent Directors"), cast in person at a meeting called for the purpose of
voting on such approval and (ii) by vote of a majority of the Trust's
outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the date first above written. Thereafter,
if not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
D-5
<PAGE>
approved at least annually (i) by a vote of a majority of the Independent
Directors of the Trust, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board or by vote of a majority of the
outstanding voting securities of the Trust.
(c) Notwithstanding the foregoing, with respect to the Trust, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Trust on sixty days' written notice to the Sub-Adviser and may
be terminated by the Sub-Adviser at any time, without the payment of any
penalty, on sixty days' written notice to Mitchell Hutchins. The Contract may
also be terminated, without payment of penalty, by Mitchell Hutchins (i) upon
sixty days written notice to the Sub-Adviser, (ii) upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Contract, if such breach shall not have been cured within a 20 day
period after notice of such breach or (iii) if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Contract, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Trust. This contract will terminate automatically in the event of its
assignment.
10. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Contract as to the
Trust shall be effective until approved by vote of the Independent Directors or
a majority of the Trust's outstanding voting securities.
11. GOVERNING LAW. This Contract shall be construed in accordance with the
1940 Act and the laws of the State of New York, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of New York conflict with the applicable provisions of the 1940 Act,
the latter shall control.
12. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act, subject to such exemption as may be granted by the SEC by any
rule, regulation or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Contract is made less
restrictive by a rule, regulation or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. This Contract may be signed in counterpart.
13. NOTICES. Any notice herein required is to be in writing and is deemed
to have been given to the Sub-Adviser or Mitchell Hutchins upon receipt of the
same at their respective addresses set forth below. All written notices required
or permitted to be given under this Contract will be delivered by personal
service, by postage mail - return receipt requested or by facsimile machine or a
D-6
<PAGE>
similar means of same day delivery which provides evidence of receipt (with a
confirming copy by mail as set forth herein). All notices provided to Mitchell
Hutchins will be sent to the attention of Dianne E. O'Donnell, Deputy General
Counsel. All notices provided to the Sub-Adviser will be sent to the attention
of Regulatory Affairs.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
51 West 52nd Street
Attest: New York, New York 10019-6114
By: By:
------------------------ -------------------------------
Name: Keith A. Weller Name: Dianne E. O'Donnell
Title: First Vice President Title: Senior Vice President and
Deputy General Counsel
WELLINGTON MANAGEMENT
COMPANY, LLP
75 State Street
Attest: Boston, Massachusetts 02109
By: By:
------------------------ -------------------------------
Name: Name:
Title: Title:
D-7
<PAGE>
APPENDIX E
MORE INFORMATION ABOUT WELLINGTON MANAGEMENT
Wellington Management, a Massachusetts limited liability partnership, is
one the nation's oldest and largest independent investment management firms,
having been founded in 1928. As of September 30, 2000, Wellington Management had
approximately $266 billion of assets under management. Wellington Management is
located at 75 State Street, Boston, Massachusetts 02109.
Since February 1, 1999 (the beginning of the Trust's most recently
completed fiscal year), purchases and sales of the securities of Wellington
Management by the directors of the Trust did not exceed 1% of the outstanding
securities of any class of Wellington Management. During its fiscal year ended
January 31, 2000, the Trust paid no brokerage commissions to Wellington
Management or any of its affiliates.
The following is a list of the general partners and principal executive
officer of Wellington Management. The business address of each individual listed
below is 75 State Street, Boston, Massachusetts 02109.
Wellington Management is managed by its active partners. The managing
partners of Wellington Management are Laurie A. Gabriel, Duncan M. McFarland and
John R. Ryan. Thomas L. Pappas, Senior Vice President and Partner of Wellington
Management, has significant management responsibilities for the Trust. Timothy
E. Smith, a Vice President of Wellington Management, also has significant
management responsibility for the Trust.
The following are the general partners of Wellington Management, each of
whom may be reached at the firm's principal offices, 75 State Street, Boston,
Massachusetts 02109:
Kenneth L. Abrams Matthew E. Megargel
Nicholas C. Adams James N. Mordy
Rand L. Alexander Diane C. Nordin
Deborah L. Allinson Stephen T. O'Brien
James H. Averill Edward P. Owens
Karl E. Bandtel Saul J. Pannell
Mark J. Beckwith Thomas L. Pappas
Marie-Claude Bernal Jonathan M. Payson
William N. Booth Philip H. Perelmuter
Paul Braverman Robert D. Rands
Robert A. Bruno Eugene E. Record, Jr.
Maryann E. Carroll James A. Rullo
Pamela Dippel John R. Ryan
Robert L. Evans Joseph H. Schwartz
Lisa d. Finkel Theodore E. Shasta
Charles T. Freeman Binkley C. Shorts
Laurie A. Gabriel Trond Skramstad
John H. Gooch Catherine A. Smith
Nicholas P. Greville Stephen A. Soderberg
E-1
<PAGE>
Paul Hamel Eric Stromquist
Lucius T. Hill, III Brendan J. Swords
Paul D. Kaplan Harriett Tee Taggart
John C. Keogh Perry M. Traquina
George C. Lodge, Jr. Gene R. Tremblay
Nancy T. Lukitsh Michael A. Tyler
Mark T. Lynch Mary Ann Tynan
Christine S. Manfredi Clare Villari
Patrick J. McCloskey Ernst H. von Metzsch
Earl E. McEvoy James L. Walters
Duncan M. McFarland Kim Williams
Paul M. Mecray III Francis V. Wisneski
OTHER INVESTMENT COMPANY CLIENTS
Wellington Management also serves as investment adviser or sub-adviser to
the following investment companies, which have similar investment objectives to
the Trust's, at the fee rates set forth below.
--------------------------------------------------------------------------------
APPROXIMATE NET ASSETS AS
OF
NOVEMBER 30, 2000 ANNUAL INVESTMENT
FUND (IN MILLIONS) ADVISORY FEE
---- ------------- -------------
--------------------------------------------------------------------------------
Seasons Growth Porfolio $25.4(1) (2)
--------------------------------------------------------------------------------
Seasons Conservative
Growth Porfolio $43.0(1) (2)
--------------------------------------------------------------------------------
Seasons Balanced Growth
Porfolio $45.0(1) (2)
--------------------------------------------------------------------------------
Seasons Moderate Growth
Porfolio $46.5(1) (2)
--------------------------------------------------------------------------------
(1) These asset levels reflect the fixed income portions of the Portfolios that
are managed by Wellington Management.
(2) Wellington Management receives one advisory fee from the Portfolios based
on the aggregate assets of all four Portfolios. The combined fee rate is as
follows: 0.225% of average daily net assets on the first $100 million;
0.125% of average daily net assets on the next $100 million; and
0.100% of average daily net assets over $200 million.
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<PAGE>
PROXY PROXY
ALL-AMERICAN TERM TRUST INC.
SPECIAL MEETING OF SHAREHOLDERS - FEBRUARY 8, 2001
THIS PROXY IS BEING SOLICITED FOR THE BOARD OF DIRECTORS OF ALL-AMERICAN TERM
TRUST INC. ("TRUST") AND RELATES TO THE PROPOSALS INDICATED BELOW. The
undersigned hereby appoints as proxies SCOTT H. GRIFF and JEANNE LOUTHER and
each of them (with the power of substitution) to vote for the undersigned all
shares of common stock of the undersigned in the Trust at the Special Meeting of
Shareholders to be held at 11:00 a.m., Eastern time, on February 8, 2001 at 1285
Avenue of the Americas, 14th Floor, New York, New York 10019, and any
adjournment thereof ("Meeting"), with all the power the undersigned would have
if personally present. THE SHARES REPRESENTED BY THIS CARD WILL BE VOTED AS
INSTRUCTED. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO
GRANT AUTHORITY TO VOTE "FOR" ALL PROPOSALS INDICATED BELOW, WITH DISCRETIONARY
POWER TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
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 card.
If shares are held by a
corporation, partnership or
similar account, the name and
the capacity of the individual
signing should be indicated,
unless it is reflected in the
form of registration. For
example: "ABC Corp., John Doe,
Treasurer."
________________________________
Signature
________________________________
Signature (If Held Jointly)
___________________________,2001
Date
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD.
<PAGE>
Please date and sign the reverse side of this proxy and return it promptly in
the enclosed envelope. This proxy will not be voted unless it is dated and
signed exactly as instructed.
When properly signed, the proxy will be voted as instructed below. If no
instruction is given for a proposal, voting will be made "FOR" that proposal.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS.
PLEASE INDICATE YOUR VOTE BY FILLING IN THE BOX COMPLETELY. EXAMPLE: / /
FOR AGAINST ABSTAIN
1. Approve a New Investment Advisory and / / / / / /
Administration Contract between Mitchell
Hutchins Asset Management Inc. ("Mitchell
Hutchins") and the Trust.
2. Approve a new Sub-Advisory Contract / / / / / /
between Mitchell Hutchins and Wellington
Management Company, LLP.
3. Approve a New Sub-Advisory Approval Policy / / / / / /
for the Trust.
PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
