PAINEWEBBER FUNDS
1285 Avenue of the Americas
New York, New York 10019
February 28, 1996
Dear Shareholder:
Enclosed is a proxy statement asking you to vote in favor of several
proposals relating to the management and operation of your Fund.
As I wrote to you in my letter of January 22, after we acquired the Kidder,
Peabody mutual funds last February, our enlarged menu of funds was
confusing--too many had overlapping objectives or were too narrowly focused. We
consolidated 33 long-term, open-end funds into 21 by focusing on those types of
funds most investors want. This consolidation allowed us to lower expense ratios
(in most cases) and to clarify fund names. These votes are the final phase of
that fund consolidation.
Special meetings of your Fund and of other Funds within the PaineWebber fund
complex are being held on April 10, 1996 to consider these proposals and to
transact any other business that may properly come before the meetings. In the
past, when we have solicited proxies for your Fund, we usually have enclosed a
proxy statement directed solely to the shareholders of your Fund. This time,
however, shareholders of several Funds are being asked to approve many of the
same proposals, so most of the information that must be included in a proxy
statement for your Fund needs to be included in a proxy statement for the other
Funds as well. Therefore, in order to save money, one proxy statement has been
prepared for these Funds. This proxy statement contains detailed information
about each of the proposals relating to your Fund, and we recommend that you
read it carefully. However, we have also attached some Questions and Answers
that we hope will assist you in evaluating the proposals that apply to all of
the Funds.
We have retained an outside firm that specializes in proxy solicitation to
assist us with any necessary follow-up. If we have not received your vote as the
meeting date approaches, you may receive a telephone call from Shareholder
Communications Corporation to ask for your vote. We hope that their telephone
call does not inconvenience you.
Thank you for your attention to this matter and for your continuing
investment in the Funds.
Very truly yours,
/s/ Margo N. Alexander
Margo N. Alexander
President
Proxy cards for each of your Funds are enclosed along with the proxy
statement. Please vote your shares today by signing and returning each
enclosed proxy card in the postage prepaid envelope provided. The Board of
your Fund recommends that you vote "FOR" each proposal.
QUESTIONS AND ANSWERS
Q: WHAT IS THE PURPOSE OF THIS PROXY SOLICITATION?
A: The purpose of this proxy is to ask you to vote on several primary issues:
. to elect ten Board members,
. to approve changes to your Fund's fundamental investment restrictions, and
. for PaineWebber High Income Fund, to approve a change to its investment objective.
In addition, you are being asked to ratify the selection of your Fund's independent
auditors.
Q: WHY AM I RECEIVING PROXY INFORMATION ON FUNDS THAT I DO NOT OWN?
A: In the past, when we have solicited proxies for your Fund, we have usually enclosed a
proxy statement directed solely to the shareholders of one Fund. This time, however,
shareholders of several Funds are being asked to approve many of the same proposals,
so most of the information that must be included in a proxy statement for your Fund
needs to be included in a proxy statement for the other Funds as well. Therefore, in
order to save money, one proxy statement has been prepared for these Funds.
Q: WHY ARE YOU RECOMMENDING A UNIFIED BOARD FOR THE FUNDS?
A: A Corporate Governance Task Force, comprised of a number of the Funds' existing Board
Members, assisted by Mitchell Hutchins representatives, recommended to the Fund
Boards, and they agreed, that PaineWebber funds should be governed by larger Boards
composed of the same members. The Task Force concluded that this "unified" Board
structure benefits the Funds by creating a diverse, experienced group of Board
members who understand the operations of the PaineWebber funds and are exposed to the
wide variety of issues that arise from overseeing different types of funds.
Q: WHY HAS THE BOARD BEEN EXPANDED TO TEN MEMBERS?
A: At the recommendation of the Corporate Governance Task Force, each Fund's Board has
been expanded to include ten members, seven of whom would be independent. The Task
Force considered issues relating to the management and long-term welfare of the
Funds. It recommended, and the Boards agreed to adopt, an expanded Board as part of
an overall plan to coordinate and enhance the efficiency of the governance of the
Funds. Expanding the size of the Boards is intended to facilitate the increased use
of Board committees for different purposes, including the periodic review of the
Funds' contractual and audit arrangements. The Fund Boards approved the Task Force
recommendations and nominated ten individuals drawn primarily from the existing
Boards.
Q: WILL THE PROPOSED CHANGES RESULT IN HIGHER ADVISORY FEES?
A: No. The advisory and administrative fees charged to each Fund will remain the same.
Q: WHAT ARE "FUNDAMENTAL" INVESTMENT RESTRICTIONS, AND WHY ARE THEY BEING CHANGED?
A: A Fund's "fundamental" investment restrictions are limitations placed on a Fund's
investment policies that can be changed only by a shareholder vote--even if the
changes are minor. The law requires certain investment policies to be designated as
fundamental. Each Fund adopted a number of fundamental investment restrictions when
the Fund was created, and many of those fundamental restrictions reflect regulatory,
business or industry conditions, practices or requirements that are no longer in
effect. Others reflect regulatory requirements that, while still in effect, do not
need to be classified as fundamental restrictions.
The Funds' Boards believe that fundamental investment restrictions that are not
legally required should be eliminated and that the remaining fundamental restrictions
should be modernized and made more uniform. The Boards believe that the proposed
changes to the Funds' fundamental investment restrictions will provide greater
flexibility. The proposed changes also will eliminate minor differences in wording
that may give rise to unintended differences in effect or interpretation among funds
in the PaineWebber fund complex.
Q: DO THE PROPOSED CHANGES TO FUNDAMENTAL INVESTMENT RESTRICTIONS MEAN THAT MY FUND'S
INVESTMENT OBJECTIVE IS BEING CHANGED?
A: No. PaineWebber High Income Fund is the only Fund for which a change in an investment
objective is being proposed.
Q: WHAT WILL BE THE EFFECT OF THE PROPOSED CHANGES TO MY FUND'S FUNDAMENTAL
RESTRICTIONS?
A: The Boards do not believe that the proposed changes to fundamental investment
restrictions will result at this time in a material change in the level of investment
risk for any Fund. However, the changes will allow each Fund greater flexibility to
respond to future investment opportunities by making changes in non-fundamental
investment policies that, at a future time, its Board considers desirable. A
shareholder vote will not be necessary for future changes to non-fundamental
investment policies or restrictions.
Q: WHY ARE SHAREHOLDERS BEING ASKED TO RATIFY THE SELECTION OF THEIR FUND'S INDEPENDENT
AUDITORS?
A: The law requires that shareholders be asked to ratify the selection of their Fund's
independent auditors at the meetings at which Board members are elected. The Funds do
not hold regular annual meetings and, therefore, are asking for your ratification at
this time. Each year, a Fund's independent auditors audit the Fund's financial
statements and prepare the Fund's federal and state income tax returns.
Q: WHAT ARE MY BOARD'S RECOMMENDATIONS?
A: The Board of each Fund has recommended that you vote "FOR" the nominees for Board
member and "FOR" each Proposal that applies to your Fund.
THE ATTACHED PROXY STATEMENT CONTAINS MORE DETAILED INFORMATION ABOUT EACH
OF THE PROPOSALS RELATING TO YOUR FUND. PLEASE READ IT CAREFULLY.
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST II
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST III
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
-------------------
NOTICE OF
SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON
APRIL 10, 1996
-------------------
TO THE SHAREHOLDERS:
Special meetings of the holders of shares of beneficial interest or common
stock of each of the above-listed investment companies ("Companies") will be
held at 1285 Avenue of the Americas, 38th Floor, New York, New York, on April
10, 1996, at 2:00 p.m., Eastern time, for the purpose of considering the
following proposals with respect to the Companies or with respect to one or more
of their respective series or portfolios ("Funds"):
(1) For each Company, to elect ten members of its Board of Trustees or
Directors to serve indefinite terms until their successors are duly elected and
qualified;
(2) For each Fund, to ratify the selection of independent auditors for its
current fiscal year;
(3) For each Fund, to approve certain changes to its fundamental investment
restrictions;
(4) For PaineWebber High Income Fund (a series of PaineWebber Managed
Investments Trust), to approve a change to its investment objective; and
(5) For each Fund, to transact such other business as may properly come
before the meetings and any adjournments thereof.
You are entitled to vote at the meetings, and at any adjournments thereof,
of each Company in which you owned shares at the close of business on February
9, 1996. If you attend the meetings, you may vote your shares in person. IF YOU
DO NOT EXPECT TO ATTEND THE MEETINGS, PLEASE COMPLETE, DATE, SIGN AND RETURN
EACH ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Boards,
DIANNE E. O'DONNELL
Secretary
February 28, 1996
1285 Avenue of the Americas
New York, New York 10019
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
ENCLOSED YOU WILL FIND ONE OR MORE PROXY CARDS RELATING TO EACH OF THE
FUNDS FOR WHICH YOU ARE ENTITLED TO VOTE. PLEASE INDICATE YOUR VOTING
INSTRUCTIONS ON EACH OF THE ENCLOSED PROXY CARDS, DATE AND SIGN THEM, AND
RETURN THEM IN THE ENVELOPE PROVIDED. IF YOU SIGN, DATE AND RETURN A PROXY
CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE
NOMINEES FOR TRUSTEE OR DIRECTOR NAMED IN THE ATTACHED PROXY STATEMENT AND
"FOR" ALL OTHER PROPOSALS INDICATED ON THE CARDS. IN ORDER TO AVOID THE
ADDITIONAL EXPENSE TO THE FUNDS OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY CARDS PROMPTLY. UNLESS PROXY CARDS ARE
SIGNED BY THE APPROPRIATE PERSONS AS INDICATED IN THE INSTRUCTIONS BELOW, THEY
WILL NOT BE VOTED.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Fund involved in validating your vote
if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of registration. For
example:
REGISTRATION VALID SIGNATURE
------------ ---------------
Corporate Accounts
(1) ABC Corp.............................................. ABC Corp.
John Doe, Treasurer
(2) ABC Corp.............................................. John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer..................... John Doe
(4) ABC Corp. Profit Sharing Plan......................... John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership................................... Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership.................. Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account..................................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78................... Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA/UTMA..................................................... John B. Smith
(2) Estate of John B. Smith............................... John B. Smith, Jr.,
Executor
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST II
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST III
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
1285 Avenue of the Americas
New York, New York 10019
-------------------
PROXY STATEMENT
SPECIAL MEETINGS OF SHAREHOLDERS TO BE HELD ON APRIL 10, 1996
-------------------
This proxy statement is being furnished to holders of Shares of each of the
above-listed investment companies ("Companies") in connection with the
solicitation by their respective Boards of proxies to be used at special
meetings ("Meetings") of Shareholders to be held on April 10, 1996, at 2:00
p.m., Eastern time, or any adjournment or adjournments thereof. This proxy
statement is being first mailed to Shareholders on or about March 4, 1996.
Each Company (other than PaineWebber Financial Services Growth Fund Inc.) is
composed of one or more separate series or portfolios, each of which is referred
to herein as a "Fund." When the context makes it appropriate, each Company that
does not have separate series or portfolios is also referred to herein as a
"Fund." Each Company is a registered, management investment company under the
Investment Company Act of 1940, as amended ("1940 Act"), and is organized either
as a Massachusetts business trust or as a Maryland corporation as described on
Exhibit A. The terminology used by the Companies varies, but for simplicity and
clarity each Company's shares of beneficial interest or common stock are
referred to as "Shares" and the holders of the Shares are "Shareholders"; each
Company's board of trustees or directors is referred to as a "Board" and the
trustees and directors are "Board Members"; and each Company's declaration of
trust or articles of incorporation is referred to as its "Charter." A listing of
the formal name for each Fund, and of the shorthand name for each Company and
Fund that is used in this proxy statement, is set forth below. The names of
Funds that are series or portfolios of a Company are indented under the name of
the relevant Company.
NAME PROPOSALS
AS USED IN THIS PROXY APPLICABLE TO
COMPANY/FUND NAME STATEMENT COMPANY OR FUND
----------------- --------------------------- ---------------
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT
TRUST............................................ Investment Trust
PaineWebber Tactical Allocation Fund........... Tactical Fund 1, 2 and 3
PaineWebber Global Equity Fund................. Global Equity Fund 1, 2 and 3
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT
TRUST II....................................... Investment Trust II
PaineWebber Emerging Markets Equity Fund....... Emerging Markets Fund 1, 2 and 3
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT
TRUST III...................................... Investment Trust III
PaineWebber Small Cap Growth Fund.............. Small Cap Growth Fund 1, 2 and 3
PAINEWEBBER AMERICA FUND......................... America Fund
PaineWebber Growth and Income Fund............. Growth and Income Fund 1, 2 and 3
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND
INC.............................................. Financial Services Fund 1, 2 and 3
PAINEWEBBER INVESTMENT SERIES.................... Investment Series
PaineWebber Global Income Fund................. Global Income Fund 1, 2 and 3
PAINEWEBBER MANAGED ASSETS TRUST................. Managed Assets Trust
PaineWebber Capital Appreciation Fund.......... Capital Appreciation Fund 1, 2 and 3
PAINEWEBBER MANAGED INVESTMENTS TRUST............ Managed Investments Trust
PaineWebber High Income Fund................... High Income Fund 1, 2, 3 and 4
PaineWebber Investment Grade Income Fund....... Investment Grade Fund 1, 2 and 3
PaineWebber Low Duration U.S. Government Income
Fund............................................. Low Duration Fund 1, 2 and 3
PaineWebber U.S. Government Income Fund........ U.S. Government Fund 1, 2 and 3
PaineWebber Utility Income Fund................ Utility Fund 1, 2 and 3
PAINEWEBBER MASTER SERIES, INC................... Master Series
PaineWebber Balanced Fund...................... Balanced Fund 1, 2 and 3
PaineWebber Money Market Fund.................. PW Money Market Fund 1, 2 and 3
PAINEWEBBER MUNICIPAL SERIES..................... Municipal Series
PaineWebber Municipal High Income Fund......... Municipal High Income Fund 1, 2 and 3
PaineWebber New York Tax-Free Income Fund...... New York Tax-Free Fund 1, 2 and 3
PAINEWEBBER MUTUAL FUND TRUST.................... Mutual Fund Trust
PaineWebber California Tax-Free Income Fund.... California Tax-Free Fund 1, 2 and 3
PaineWebber National Tax-Free Income Fund...... National Tax-Free Fund 1, 2 and 3
PAINEWEBBER OLYMPUS FUND......................... Olympus Fund
PaineWebber Growth Fund........................ Growth Fund 1, 2 and 3
PAINEWEBBER SECURITIES TRUST..................... Securities Trust
PaineWebber Small Cap Value Fund............... Small Cap Value Fund 1, 2 and 3
PaineWebber Strategic Income Fund.............. Strategic Income Fund 1, 2 and 3
2
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") is the
investment adviser and administrator for each Fund. Certain Funds have
sub-advisers other than Mitchell Hutchins. A listing of the investment advisers
and sub-advisers for each Fund is set forth in Exhibit A hereto. Mitchell
Hutchins is a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber"), which, in turn, is a wholly owned subsidiary of Paine Webber
Group Inc. ("PW Group"), a publicly held financial services holding company.
Mitchell Hutchins also is the principal distributor of each Fund's Shares. The
principal business address of each of Mitchell Hutchins, PaineWebber and PW
Group is 1285 Avenue of the Americas, New York, New York 10019.
VOTING INFORMATION
For each Company, other than those specified in the last two sentences of
this paragraph, the presence, in person or by proxy, of a majority of the Shares
of the Company outstanding and entitled to vote will constitute a quorum for the
transaction of business at the Meetings. For Investment Trust, Investment Trust
II and Investment Trust III, the presence of 30% of the Shares outstanding
constitutes a quorum. For Financial Services Fund, the presence of 33 1/3% of
the Shares outstanding constitutes a quorum.
In the event that a quorum is not present at a Meeting, or if a quorum is
present at that Meeting but sufficient votes to approve any of the proposals are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any adjournment will
require the affirmative vote of a majority of those Shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies which they are entitled to vote FOR any proposal in favor of the
adjournment and will vote those proxies required to be voted AGAINST any
proposal against the adjournment. A Shareholder vote may be taken on one or more
of the proposals in this proxy statement prior to any such adjournment if
sufficient votes have been received and it is otherwise appropriate.
Broker non-votes are Shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote, and the broker does not have discretionary
voting authority. Abstentions and broker non-votes will be counted as Shares
present for purposes of determining whether a quorum is present but will not be
voted for or against any adjournment or proposal. Accordingly, abstentions and
broker non-votes will have no effect on Proposals 1 and 2, for which the
required vote is a plurality or majority of the votes cast, but effectively will
be a vote against adjournment and against Proposals 3 and 4, for which the
required vote is a percentage of the Shares present or outstanding.
The individuals named as proxies on the enclosed proxy cards will vote in
accordance with your direction as indicated thereon, if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you give no voting instructions, your Shares will be voted
FOR the nominees named herein for the Board of the Company to which the proxy
card relates and FOR the remaining proposals described in this proxy statement
and relating to your Fund. If any nominee for the Boards should withdraw or
otherwise become unavailable for election, your Shares will be voted in favor of
such other nominee or nominees as management may recommend. You may revoke any
proxy card by giving another proxy or by
3
letter or telegram revoking the initial proxy. To be effective, your revocation
must be received by the Company prior to the related Meeting and must indicate
your name and account number. In addition, if you attend a Meeting in person you
may, if you wish, vote by ballot at that Meeting, thereby canceling any proxy
previously given.
Information as to the number of outstanding Shares of each Fund as of the
record date, February 9, 1996 ("Record Date"), is set forth in Exhibit A. A
listing of the owners of more than 5% of the Shares of any Fund as of January
31, 1996 is set forth in Exhibit B. To the knowledge of each Fund's management,
the executive officers and Board Members of each Fund, as a group, owned less
than 1% of the outstanding Shares of each Fund as of January 31, 1996.
COPIES OF EACH FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS OF ANY FUND MAY REQUEST COPIES OF THAT FUND'S ANNUAL AND
SEMI-ANNUAL REPORTS BY WRITING THE COMPANY AT 1285 AVENUE OF THE AMERICAS, NEW
YORK, NEW YORK 10019, OR BY CALLING 1-800-647-1568.
Each full Share of each Fund outstanding is entitled to one vote and each
fractional Share of each Fund outstanding is entitled to a proportionate share
of one vote with respect to each matter to be voted upon by the Shareholders of
that Fund. Information about the vote necessary with respect to each proposal is
discussed below in connection with the proposal.
-------------------
PROPOSAL 1--ELECTION OF BOARD MEMBERS
RELEVANT COMPANIES. All Companies.
DISCUSSION. The Board of each Company has acted to expand its membership and
has nominated the ten individuals identified below for election to the related
Company's Board at its Meeting. Under Proposal 1, Shareholders of each Company
are being asked to vote on those nominees. Pertinent information about each
nominee is set forth in the listing below and in Exhibits C through F hereto.
Each nominee has indicated a willingness to serve if elected. If elected, each
nominee will hold office for an indefinite term until his or her successor is
duly elected and qualified, or until he or she resigns or is otherwise removed.
The increase in the size of the Boards and the nomination of a single group
of nominees to serve as the Board Members for each Fund reflects an overall plan
to coordinate and enhance the efficiency of the governance of the Funds and of
certain other investment companies that are part of the PaineWebber fund
complex. This plan was developed by a Corporate Governance Task Force comprised
of a number of current Board Members who are not "interested persons" of the
Funds, as defined in the 1940 Act ("independent" Board Members), with the advice
of their counsel, and assisted by representatives of Mitchell Hutchins and Fund
counsel. The Corporate Governance Task Force considered various matters related
to the management and long-term welfare of the Funds and made recommendations to
the Boards, including proposals concerning the size and composition of the
Boards, committee structures, fees and related matters. These
4
proposals, the substance of which is summarized below, were adopted by the
Boards at meetings in November and December, 1995. The Boards acted in February
1996 to establish the size of the Boards at ten, following the untimely death of
a member of several of the PaineWebber fund boards, who had been expected to be
a nominee as an independent Board Member. For those Funds having nominating
committees, the nominees for independent Board memberships were selected by the
nominating committee of each Fund and then by the full Board of each Fund. For
each other Fund, the full Board selected the nominees. With the exception of the
nominations for Board membership, which are the subject of Proposal 1, no
Shareholder action is required with respect to the Corporate Governance Task
Force recommendations.
Consistent with the recommendations of the Corporate Governance Task Force,
and concurrently with this proxy solicitation, shareholders of other funds
within the PaineWebber fund complex are also being asked to elect the
below-listed nominees to the boards of their funds. However, the election of the
nominees for the Board of any Company is not conditioned upon their election to
the Board of any other Company or of any other fund within the PaineWebber fund
complex.
The Boards believe that coordinated governance through a unified group of
Board Members will benefit each of the Funds. Despite some recent
consolidations, the PaineWebber fund complex has grown substantially in size in
the years since the current Board structures were created. This growth has been
due to the creation of new Funds intended to serve a wide variety of investment
needs and the recent acquisition of the asset management business of Kidder
Peabody Asset Management, Inc. ("KPAM"). The PaineWebber fund complex currently
includes over 60 portfolios of open-end and closed-end funds having a wide
variety of investment objectives and policies. These include money market funds;
bond funds that invest in corporate and other bonds with varying maturities and
risk characteristics; municipal bond funds; balanced funds that invest in
combinations of debt and equity securities; growth funds that invest in a wide
variety of domestic equity securities; and global funds that invest in debt or
equity securities from around the world. The Boards believe that the Funds will
benefit from the experience that each nominee will gain by serving on the Boards
of such a diverse group of funds. Coordinated governance within the PaineWebber
fund complex also will reduce the possibility that the separate Boards of the
Companies might arrive at conflicting decisions regarding the operations and
management of the Funds and avoid costs resulting from conflicting decisions.
The Boards also believe that the Funds will benefit from the diversity and
experience of the nominees that would comprise the expanded Boards. These
nominees have had distinguished careers in government, finance, law, marketing
and other areas and will bring a wide range of expertise to the Boards. Seven of
the ten nominees have no affiliation with PaineWebber or Mitchell Hutchins and
would be independent Board Members. Independent Board Members are charged with
special responsibilities to provide an independent check on management and to
approve advisory, distribution and similar agreements between the Funds and
management. They also constitute the members of the Boards' audit and nominating
committees. In the course of their duties, Board Members must review and
understand large amounts of financial and technical material and must be willing
to devote substantial amounts of time. Due to the demands of service on the
Boards, independent nominees may need to reject other attractive opportunities.
Each of the independent nominees already serves as an independent Board Member
for one or more funds within the PaineWebber fund complex and understands the
operations of the complex.
5
The proposed unified Board structure will require a greater expenditure of
time by each Board Member. Election of the ten nominees will permit the Boards
to enhance their supervision of the Funds by increased use of a committee
structure. Under the Board structure envisioned by the Corporate Governance Task
Force and adopted by the Boards, each Board's audit committee will be divided
into two sub-committees, each comprised of independent Board Members. Each
sub-committee will function as an audit and contract review committee that
periodically will review the contractual and audit arrangements for Funds having
similar characteristics. The sub-committee structure will enable Board members
both to develop expertise about particular Funds, while still benefiting from
the experience and knowledge of the full Boards. Other committees may be used in
the future, and the Boards will review the sub-committee structure from time to
time to make necessary adjustments. It is anticipated that the full Boards will
have five regularly scheduled meetings per year.
As recommended by the Corporate Governance Task Force, the compensation paid
to independent Board Members will change. Under the new structure, each
independent Board Member will be paid annual fees of between $1,000 and $1,500
per Fund, depending on the Fund, and will receive an attendance fee of $150 for
each Board meeting and for each committee meeting (other than committee meetings
on the same date as a Board meeting). It is anticipated that the chairs of the
two audit and contract review sub-committees each will receive additional annual
compensation from the PaineWebber funds in the aggregate amount of $15,000.
Interested Board Members will continue to receive no compensation from any Fund.
Board Members will continue to be reimbursed for any expenses incurred in
attending meetings. Pursuant to the recommendations of the Corporate Governance
Task Force, each Board Member will be subject to mandatory retirement at the end
of the year in which he or she becomes 72 years old. The following table sets
forth information relating to the compensation paid to Board Members during the
past fiscal and calendar years:
6
COMPENSATION TABLE
AMOUNTS PAID DURING THE INDEPENDENT BOARD MEMBER(1)
MOST ----------------------------------------------------------------------------------------------------------
RECENT FISCAL YEAR FROM JUDITH
COMPANY RICHARD Q. DAVID J. RICHARD MEYER GEORGE W. WILLIAM W. FREDERIC V. DAVIDSON CARL W.
TO BOARD MEMBERS ARMSTRONG BEAUBIEN* BURT FELDBERG GOWEN HEWITT, JR.* MALEK MOYERS* SCHAFER
- ----------------------- ---------- --------- ------- -------- --------- ------------ ----------- -------- --------
America Fund........... -- -- -- $ 3,750 $ 3,750 -- $ 3,750 $ 3,750 --
Financial Services
Fund................... -- -- -- $ 3,625 $ 3,375 -- $ 3,625 $ 3,125 --
Investment Series...... -- -- -- $ 7,000 $ 7,000 -- $ 7,000 $ 7,000 --
Investment Trust....... -- $ 31,625 -- -- -- $ 31,625 -- -- $ 33,375
Investment Trust II.... -- $ 11,750 -- -- -- $ 11,750 -- -- $ 12,250
Investment Trust III... -- $ 5,125 -- -- -- $ 5,125 -- -- $ 5,375
Managed Assets Trust... -- -- -- $ 4,875 $ 4,625 -- $ 4,875 $ 4,375 --
Managed Investments
Trust.................. -- -- -- $ 7,250 $ 7,250 -- $ 7,250 $ 7,250 --
Master Series.......... -- -- -- $ 4,750 $ 4,500 -- $ 4,750 $ 4,250 --
Municipal Series....... -- -- -- $ 3,750 $ 3,500 -- $ 3,750 $ 3,250 --
Mutual Fund Trust...... -- -- -- $ 2,750 $ 2,500 -- $ 2,750 $ 2,500 --
Olympus Fund........... -- -- -- $ 4,250 $ 4,250 -- $ 4,250 $ 4,250 --
Securities Trust(2).... $1,563 -- $ 750 -- -- -- -- -- --
TOTAL COMPENSATION PAID
TO BOARD MEMBERS FROM
COMPANY AND FUND
COMPLEX FOR THE YEAR
ENDED
DECEMBER 31, 1995
(3).................... $9,000 $ 118,675 $ 7,750 $106,375 $99,750 $118,675 $99,750 $ 98,500 $118,175
AMOUNTS PAID DURING THE
MOST
RECENT FISCAL YEAR FROM
COMPANY JOHN R. WILLIAM D.
TO BOARD MEMBERS TORELL III WHITE*
- ----------------------- ---------- ----------
America Fund........... -- --
Financial Services
Fund................... -- --
Investment Series...... -- --
Investment Trust....... -- --
Investment Trust II.... -- --
Investment Trust III... -- --
Managed Assets Trust... -- --
Managed Investments
Trust.................. -- --
Master Series.......... -- --
Municipal Series....... -- --
Mutual Fund Trust...... -- --
Olympus Fund........... -- --
Securities Trust(2).... $ 2,563 $ 2,563
TOTAL COMPENSATION PAID
TO BOARD MEMBERS FROM
COMPANY AND FUND
COMPLEX FOR THE YEAR
ENDED
DECEMBER 31, 1995
(3).................... $ 28,125 $ 33,125
- ------------
* Indicates Board Members who are not standing for reelection.
(1) Board Members who were not independent did not receive compensation from the
Companies.
(2) Based on the fiscal year for Strategic Income Fund, during which there were
ten Board meetings. If based on the fiscal year for Small Cap Value Fund,
during which there were only eight meetings, compensation would be: Mr.
Armstrong-$563; Mr. Burt-$250; Mr. Torell-$2,812; and Mr. White-$2,812.
(3) No fund within the fund complex has a bonus, pension, profit sharing or
retirement plan.
The nominees for election as Board Members, their ages, and a description of
their principal occupations are listed in the table below. A table indicating
each nominee's ownership of Fund Shares is attached as Exhibit D.
NOMINEE AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- ----------- -------------------------------------------------------------------
Margo N. Alexander;* 48.............. Mrs. Alexander is president, chief executive officer
and a director of Mitchell Hutchins (since January
1995). Mrs. Alexander is an executive vice
president and director of PaineWebber. Mrs.
Alexander also is a director or trustee of 3
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
7
NOMINEE; AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- ------------ -------------------------------------------------------------------
Richard Q. Armstrong; 60............. Mr. Armstrong is chairman and principal of RQA
Enterprises (management consulting firm) (since
April 1991 and principal occupation since March
1995). Mr. Armstrong is also a director of Hi Lo
Automotive, Inc. He was chairman of the board,
chief executive officer and co-owner of Adirondack
Beverages (producer and distributor of soft drinks
and sparkling/still waters) (October 1993-March
1995). He was a partner of the New England
Consulting Group (management consulting firm)
(December 1992-September 1993). He was managing
director of LVMH U.S. Corporation (U.S. subsidiary
of the French luxury goods conglomerate, Louis
Vuitton Moet Hennessey Corporation) (1987-1991) and
chairman of its wine and spirits subsidiary,
Schieffelin & Somerset Company (1987-1991). Mr.
Armstrong also is a director or trustee of 6
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
E. Garrett Bewkes, Jr.;* 69.......... Mr. Bewkes is a director of, and a consultant to, PW
Group. Prior to 1988, he was chairman of the board,
president and chief executive officer of American
Bakeries Company. Mr. Bewkes is also a director of
Interstate Bakeries Corporation and NaPro
Bio-Therapeutics, Inc. Mr. Bewkes also is a
director or trustee of 24 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Richard Burt; 47..................... Mr. Burt is chairman of International Equity Partners
(international investments and consulting firm)
(since March 1994) and a partner of McKinsey &
Company (management consulting firm) (since 1991).
He is also a director of American Publishing
Company. He was the chief negotiator in the
Strategic Arms Reduction Talks with the former
Soviet Union (1989-1991) and the U.S. Ambassador to
the Federal Republic of Germany (1985-1989). Mr.
Burt also is a director or trustee of 7 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Mary C. Farrell;* 46................. Ms. Farrell is a managing director, senior investment
strategist, and member of the Investment Policy
Committee of PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a member of the
Financial
8
NOMINEE; AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- ------------ -------------------------------------------------------------------
Women's Association and Women's Economic Roundtable
and is employed as a regular panelist on Wall
$treet Week with Louis Rukeyser. She also serves on
the Board of Overseers of New York University's
Stern School of Business.
Meyer Feldberg; 53................... Mr. Feldberg is Dean and Professor of Management of
the Graduate School of Business, Columbia University.
Prior to 1989, he was president of the Illinois
Institute of Technology. Dean Feldberg is also a
director of AMSCO International Inc., Federated
Department Stores, Inc. and New World
Communications Group Incorporated. Dean Feldberg
also is a director or trustee of 19 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
George W. Gowen; 66.................. Mr. Gowen is a partner in the law firm of Dunnington,
Bartholow & Miller. Prior to May 1994, he was
partner in the law firm of Fryer, Ross & Gowen. Mr.
Gowen is also a director of Columbia Real Estate
Investments, Inc. Mr. Gowen also is a director or
trustee of 17 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Frederic V. Malek; 59................ Mr. Malek is chairman of Thayer Capital Partners
(investment bank) and a co-chairman and director of
CB Commercial Group Inc. (real estate). From
January 1992 to November 1992, he was campaign
manager of Bush-Quayle '92. From 1990 to 1992, he
was vice chairman and, from 1989 to 1990, he was
president of Northwest Airlines Inc., NWA Inc.
(holding company of Northwest Airlines Inc.) and
Wings Holdings Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline catering
and contract feeding), where he most recently was
an executive vice president and president of
Marriott Hotels and Resorts. Mr. Malek is also a
director of American Management Systems, Inc.,
Automatic Data Processing, Inc., Avis, Inc., FPL
Group, Inc., National Education Corporation and
Northwest Airlines Inc. Mr. Malek also is a
director or trustee of 17 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
9
NOMINEE; AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- ------------ -------------------------------------------------------------------
Carl W. Schafer; 60.................. Mr. Schafer is president of the Atlantic Foundation
(charitable foundation supporting mainly
oceanographic exploration and research). He also is
a director of Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Evans Systems, Inc.
(a motor fuels, convenience store and diversified
company), Hidden Lake Gold Mines Ltd. (gold
mining), Electronic Clearing House, Inc. (financial
transactions processing), Wainoco Oil Corporation
and Nutraceutix Inc. (biotechnology). Prior to
January 1993, Mr. Schafer was chairman of the
Investment Advisory Committee of the Howard Hughes
Medical Institute. Mr. Schafer also is a director
or trustee of 7 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
John R. Torell III; 56............... Mr. Torell is chairman of Torell Management, Inc.
(financial advisory firm), partner of Zilkha &
Company (merchant banking and private investment
company) and chairman of Telesphere Corporation
(electronic provider of financial information). He
is the former chairman and chief executive officer
of Fortune Bancorp (1990-1991 and 1990-1994,
respectively). He is the former chairman, president
and chief executive officer of CalFed, Inc.
(savings association) (1988 to 1989) and former
president of Manufacturers Hanover Corp. (bank)
(prior to 1988). Mr. Torell is also a director of
American Home Products Corp., Volt Information
Sciences Inc., and New Colt Inc. (armament
manufacturer). Mr. Torell also is a director or
trustee of 7 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
- ------------
* Indicates an "interested person" of the Funds, as defined by the 1940 Act, by
reason of his or her position with Mitchell Hutchins, PaineWebber or PW Group,
and/or share ownership in PW Group or General Electric Company (the parent
company of the sub-adviser to Global Equity Fund).
During its most recently completed fiscal year, each Board met the number of
times indicated in Exhibit E. Each Board has an audit committee consisting of
independent Board Members. Each of the Boards, with the exception of Investment
Trust, Investment Trust II and Investment Trust III, also has a nominating
committee consisting of its independent Board Members. Tables indicating the
membership of the audit and nominating committees for each Company, the number
of times such committees met during each Company's last fiscal year, the
attendance of Board Members at Board and committee meetings, and providing
additional information about the Boards and their committees are attached as
Exhibits E and F. The duties of the audit committee are (a) to review reports
prepared by the Company's independent auditors, including reports on the
Company's internal accounting control procedures; (b) to review and recommend
approval or disapproval of audit and non-audit services and the fees charged for
such services; (c) to evaluate the
10
independence of the independent auditors and to recommend whether to retain such
independent auditors for the next fiscal year; and (d) to report to the Board
and make such recommendations as it deems necessary. Except as indicated in
Exhibit F, each Board Member attended 75% or more of Board meetings and
committee meetings during each Company's most recently completed fiscal year.
Information concerning Fund officers is set forth in Exhibit G.
Each nominating committee selects and nominates individuals to serve as
independent Board Members; where a Board has not established a separate
nominating committee, the Board itself nominates individuals to serve as
independent Board Members. It is not expected that the nominating committees or
the Boards ordinarily will consider nominees recommended by Shareholders. The
Boards do not have standing compensation committees.
REQUIRED VOTE. For each Company, the candidates receiving the affirmative
vote of a plurality of the votes cast for the election of Board Members at the
Meeting will be elected, provided a quorum is present. Shares of all Funds of
each Company vote together as a single class for the Members of the Company's
Board.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" EACH OF THE NOMINEES UNDER PROPOSAL 1.
-------------------
PROPOSAL 2--RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS OF THE FUNDS
RELEVANT FUNDS. All Funds.
DISCUSSION. Under Proposal 2, Shareholders of each Fund are asked to ratify
their Board's selection of independent auditors ("Auditors") for their Fund. The
Auditors for each Fund audit the Fund's financial statements for each year and
prepare the Fund's federal and state annual income tax returns.
During the last fiscal year, Ernst & Young LLP, Price Waterhouse LLP and
Deloitte & Touche LLP served as Auditors for one or more of the Funds. The
Boards of those Funds for which Deloitte & Touche LLP served as Auditors during
the last fiscal year (Investment Trust, Investment Trust II and Investment Trust
III), in each case acting upon the recommendation of its audit committee (which
is comprised of independent Board Members), selected Ernst & Young LLP as
Auditor to replace Deloitte & Touche LLP, effective July 20, 1995. Currently,
Price Waterhouse LLP serves as Auditors for Global Income Fund, Balanced Fund,
PW Money Market Fund, Small Cap Value Fund and Strategic Income Fund and has
been selected by the Boards of those Funds to continue to serve in that capacity
for the current fiscal year. Ernst & Young LLP currently serves as Auditors for
each of the other Funds and has been selected by the Boards of those Funds to
continue to serve in that capacity for the current fiscal year. The Boards'
selections for Auditors for the current fiscal year are subject to ratification
by Shareholders of each of the Funds at the Meetings.
11
The selection of Ernst & Young LLP to replace Deloitte & Touche LLP
reflected the relevant Boards' view that using an independent auditing firm that
was already familiar with the PaineWebber fund complex would promote
efficiencies and cost savings for the relevant Funds and their Shareholders. The
reports of Deloitte & Touche LLP on the relevant Funds' financial statements for
their two most recent fiscal years prior to July 20, 1995 did not contain
adverse opinions, disclaimers, qualifications or modifications of opinion.
Deloitte & Touche LLP did not disagree during the two fiscal years and the
subsequent interim periods, prior to July 20, 1995, on any matter of accounting
principles or practices, financial statement disclosure, auditing scope or
procedure, which disagreements, if not resolved to its satisfaction, would have
caused it to make reference to the subject matter of the disagreements in
connection with its reports on those financial statements. The relevant Funds
are not aware of any "reportable events," as that term is used in the federal
securities laws, during their two most recent fiscal years or any subsequent
interim periods, prior to July 20, 1995.
Representatives of the Auditors are not expected to be present at the
Meetings but have been given the opportunity to make a statement if they so
desire, and will be available should any matters arise requiring their presence.
Ernst & Young LLP and Price Waterhouse LLP have informed the Funds for which
they will act as Auditors that they have no material direct or indirect
financial interest in those Funds.
The persons named in the accompanying proxy will vote FOR ratification of
the selection of each Fund's Auditors unless contrary instructions are given.
REQUIRED VOTE. For each Fund, approval of Proposal 2 requires a majority of
the votes cast with respect to Proposal 2 at the Meeting, provided a quorum is
present.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
-------------------
PROPOSAL 3--APPROVAL OF CHANGES TO FUNDAMENTAL INVESTMENT
RESTRICTIONS AND POLICIES OF EACH FUND
RELEVANT FUNDS. Changes are proposed for all Funds, but some of the proposed
changes apply only to certain Funds. See "Proposed Changes," below, for listings
of the Funds to which each specific change applies.
REASONS FOR THE PROPOSED CHANGES. Pursuant to the 1940 Act, each of the
Funds has adopted certain fundamental investment restrictions and policies
("fundamental restrictions"), which are set forth in the Fund's prospectus or
statement of additional information, and which may be changed only with
Shareholder approval. Restrictions and policies that a Fund has not specifically
designated as being fundamental are considered to be "non-fundamental" and may
be changed by the Fund's Board without Shareholder approval.
12
Certain of the fundamental restrictions that the Funds have adopted in the
past reflect regulatory, business or industry conditions, practices or
requirements that are no longer in effect. Other fundamental restrictions
reflect regulatory requirements which remain in effect, but which are not
required to be stated as fundamental, or in some cases even as non-fundamental,
restrictions. Also, as new Funds have been created over a period of years,
substantially similar fundamental restrictions often have been phrased in
slightly different ways, sometimes resulting in minor but unintended differences
in effect or potentially giving rise to unintended differences in
interpretation.
Accordingly, the Boards have approved revisions to their respective Funds'
fundamental restrictions in order to simplify, modernize and make more uniform
those investment restrictions that are required to be fundamental, and to
eliminate those fundamental restrictions that are not legally required. In most
instances, existing fundamental restrictions that are eliminated because they
are not required to be fundamental would be re-classified as non-fundamental
restrictions.
The Boards believe that eliminating the disparities among the Funds'
fundamental restrictions will enhance management's ability to manage efficiently
and effectively the Funds' assets in changing regulatory and investment
environments. In addition, by reducing to a minimum those policies that can be
changed only by Shareholder vote, each Fund will more often be able to avoid the
costs and delays associated with a Shareholder meeting when making changes to
its investment policies that, at a future time, its Board considers desirable.
Although the proposed changes in fundamental restrictions will allow the Funds
greater investment flexibility to respond to future investment opportunities,
the Boards do not anticipate that the changes, individually or in the aggregate,
will result at this time in a material change in the level of investment risk
associated with an investment in any Fund.
The text and a summary description of each proposed change to the Funds'
fundamental restrictions are set forth below. Shareholders should refer to
Exhibit FR to this proxy statement for the text of the Funds' existing
fundamental restrictions. Shareholders should note, however, that for some Funds
certain of the fundamental restrictions that are treated separately below
currently are combined within a single existing fundamental restriction.
The text below also describes those non-fundamental restrictions that would
be adopted by the Boards in conjunction with the elimination of fundamental
restrictions under Proposal 3. Any non-fundamental restriction may be modified
or eliminated by the appropriate Board at any future date without any further
approval of Shareholders.
If the proposed changes are approved by Shareholders of the respective Funds
at the Meeting, the Funds' prospectuses and statements of additional information
will be revised, as appropriate, to reflect those changes. This will occur as
soon as practicable following the Meetings. In those cases in which a Fund's
practice has been to state its fundamental restrictions both in its prospectus
(as affirmative policies) and in its statement of additional information (as
restrictions), adoption of Proposal 3 will result in a change to both. Proposal
3 will not result in a change to any Fund's investment objective, even though it
also constitutes a fundamental policy.
13
PROPOSED CHANGES. The following is the text and a summary description of the
proposed changes to the Funds' fundamental restrictions, together with the text
of those non-fundamental restrictions that would be adopted in connection with
the elimination of certain of the Funds' current fundamental restrictions. With
respect to each Fund and each proposed fundamental restriction, if a percentage
restriction is adhered to at the time of an investment or transaction, a later
increase or decrease in percentage resulting from a change in the values of the
Fund's portfolio securities or the amount of its total assets will not be
considered a violation of the fundamental restriction.
1.A. MODIFICATION OF FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION
FOR DIVERSIFIED FUNDS.
Funds to Which This Change Applies: All Funds other than Global Income Fund,
Municipal High Income Fund, New York Tax-Free Fund, and Strategic Income Fund.
Proposed Text of Fundamental Restriction:
"The Fund will not purchase securities of any one issuer if, as a
result, more than 5% of the Fund's total assets would be invested in
securities of that issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
Fund's total assets may be invested without regard to this limitation, and
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities or to
securities issued by other investment companies."
With respect to Funds that may invest in municipal obligations, the
following interpretation applies to, but is not a part of, this fundamental
restriction:
"Each state (including the District of Columbia and Puerto Rico),
territory and possession of the United States, each political subdivision,
agency, instrumentality and authority thereof, and each multi-state agency
of which a state is a member is a separate 'issuer.' When the assets and
revenues of an agency, authority, instrumentality or other political
subdivision are separate from the government creating the subdivision and
the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the
case of an Industrial Development Bond or Private Activity Bond, if that
bond is backed only by the assets and revenues of the non-governmental user,
then that non-governmental user would be deemed to be the sole issuer.
However, if the creating government or another entity guarantees a security,
then to the extent that the value of all securities issued or guaranteed by
that government or entity and owned by the Fund exceeds 10% of the Fund's
total assets, the guarantee would be considered a separate security and
would be treated as issued by that government or entity."
Similarly, with respect to Funds that may invest in mortgage- and
asset-backed securities, the following interpretation applies to, but is not a
part of, this fundamental restriction:
"Mortgage- and asset-backed securities will not be considered to have been
issued by the same issuer by reason of the securities having the same
sponsor, and mortgage- and asset-backed securities issued by a
14
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company."
The issuers of these securities generally are trusts or special purpose
entities.
Discussion: All of the above referenced Funds are "diversified" funds under
the 1940 Act and, accordingly, must have fundamental restrictions or policies
establishing the percentage limitations with respect to investments in
individual issuers that they will follow in order to qualify as "diversified"
for that purpose. These Funds have stated their diversification restrictions in
several different ways, and in many instances their current restrictions are
somewhat more limiting than is necessary in order to qualify as "diversified"
funds. For example, some Funds' restrictions do not reflect exceptions for
investments in securities of government agencies or of other investment
companies. Other Funds state restrictions the substance of which is imposed by
regulation but which are not required to be part of the fundamental restrictions
for diversification purposes.
1.B. ELIMINATION OF FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION FOR
NON-DIVERSIFIED FUNDS.
Funds to Which This Change Applies: Global Income Fund.
Discussion: For the above-referenced Fund, the fundamental restriction on
diversification would be eliminated. This Fund is "non-diversified" for purposes
of the 1940 Act and, accordingly, is not required to establish any fundamental
investment restriction with respect to diversification. Unlike other
non-diversified funds in the PaineWebber fund complex, however, this Fund
currently has a fundamental restriction that, in substance, sets forth the
separate diversification requirements that even non-diversified Funds must
satisfy in order to qualify for advantageous treatment as a regulated investment
company under the federal tax laws. While this Fund intends to continue to
qualify for this tax treatment, there is no legal necessity for the Fund to have
a fundamental restriction that effectively restates the legal requirements for
doing so. Elimination of the fundamental restriction will provide flexibility in
the event that the applicable federal tax rules change in the future.
2. MODIFICATION OF FUNDAMENTAL RESTRICTION ON CONCENTRATION.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
Except as specified below, the following text will apply to all Funds:
"The Fund will not purchase any security if, as a result of that
purchase, 25% or more of the Fund's total assets would be invested in
securities of issuers having their principal business activities in the same
industry, except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities or to
municipal securities."
15
With respect to PW Money Market Fund, the following language will be added
at the end of the foregoing fundamental restriction:
"or to certificates of deposit and bankers' acceptances of U.S. banks."
With respect to Utility Fund, the following exception will be added at the
end of the foregoing fundamental restriction to conform with the Fund's existing
concentration policy:
"and except that the Fund, under normal circumstances, will invest 25%
or more of its total assets in the utility industries as a group. For this
purpose, utility industries consist of companies primarily engaged in the
ownership or operation of facilities used in the generation, transmission or
distribution of electricity, telecommunications, gas, or water."
With respect to Financial Services Fund, the following exception will be
added at the end of the foregoing fundamental restriction to conform with the
Fund's existing concentration policy:
"and except that the Fund, under normal circumstances, will invest 25%
or more of its total assets in the related group of industries consisting of
the financial services industries."
With respect to Low Duration Fund and U.S. Government Fund, the following
exception will be added at the end of the foregoing fundamental restriction to
conform with the Fund's existing concentration policy:
"and except that the Fund, under normal circumstances, will invest 25%
or more of its total assets in mortgage- and asset-backed securities, which
(whether or not issued or guaranteed by an agency or instrumentality of the
U.S. government) shall be considered a single industry for purposes of this
limitation."
Additionally, with respect to the PW Money Market Fund, the following
interpretation applies to, but is not a part of, the fundamental restriction on
concentration under Proposal 3:
"With respect to this limitation, domestic and foreign banking will be
considered to be different industries."
Discussion: The proposed changes to the Funds' fundamental concentration
policy would clarify that the limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities or to
municipal securities and would eliminate minor inconsistencies in the
phraseology of the Funds' existing restrictions. With respect to the PW Money
Market Fund, Proposal 3 reflects a change in the Fund's interpretation as to the
separateness of certain industry groups.
In the case of Balanced Fund, the effect of this change is to adopt, as a
fundamental restriction, an explicit statement of the Fund's current policy with
respect to concentration.
In the case of Financial Services Fund, Proposal 3 would effect a change to
the Fund's fundamental concentration policy by reducing the minimum percentage
of the Fund's total assets that normally must be invested in the financial
services industries from 65% to 25%. This change conforms the Fund's fundamental
restriction to industry norms by specifying a minimum percentage that is equal
to the level that is considered
16
to constitute "concentration" under Securities and Exchange Commission ("SEC")
policies. However, no change is being made in the Fund's non-fundamental
operating policy, which continues to require that the Fund normally invest at
least 65% of its total assets in the financial services industries.
3. MODIFICATION OF FUNDAMENTAL RESTRICTION ON SENIOR SECURITIES AND
BORROWING.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
"The Fund will not issue senior securities or borrow money, except as
permitted under the 1940 Act and then not in excess of 33 1/3% of the Fund's
total assets (including the amount of the senior securities issued but
reduced by any liabilities not constituting senior securities) at the time
of the issuance or borrowing, except that the Fund may borrow up to an
additional 5% of its total assets (not including the amount borrowed) for
temporary or emergency purposes."
Discussion: The 1940 Act establishes limits on the ability of the Funds to
engage in leverage through borrowings or the issuance of other "senior
securities," a term that is defined, generally, to refer to Fund obligations
that have a priority over the Fund's Shares with respect to the distribution of
Fund assets or the payment of dividends. Currently, the fundamental restrictions
for most of the Funds are significantly more limiting than the restrictions
imposed by the 1940 Act. Many of the current fundamental restrictions provide
that a Fund's borrowings are limited to those that are for temporary or
emergency purposes, and even then borrowings are often limited to 10% of the
Fund's assets. Many of the Funds' fundamental borrowing restrictions also
provide that the Funds may not purchase additional portfolio securities at a
time when borrowings exceed 5% of total assets. Shareholders should refer to
Exhibit FR for a statement of their Fund's current fundamental borrowing
restriction.
The proposed changes would relax these fundamental restrictions to make them
no more limiting than the limitations that are imposed under the 1940 Act. The
Boards believe that changing the Funds' fundamental restrictions in this manner
will provide flexibility for future contingencies. However, the Boards are not
at this time making any change to the Funds' operating policies with respect to
borrowings. Accordingly, each Fund that currently has a fundamental restriction
that establishes a limit on borrowings or senior securities that is less than
the limit that would be established under Proposal 3 or that imposes a limit on
the Fund's ability to purchase portfolio securities when borrowings exceed 5% of
total assets, will continue to be subject to those limitations as a matter of
non-fundamental operating policy. These non-fundamental operating policies for
any Fund may be changed by its Board without further Shareholder approval.
4. MODIFICATION OF FUNDAMENTAL RESTRICTION ON MAKING LOANS.
Funds to Which This Change Applies: All Funds.
17
Proposed Text of Fundamental Restriction:
"The Fund will not make loans, except through loans of portfolio
securities or through repurchase agreements, provided that for purposes of
this restriction, the acquisition of bonds, debentures, other debt
securities or instruments, or participations or other interests therein and
investments in government obligations, commercial paper, certificates of
deposit, bankers' acceptances or similar instruments will not be considered
the making of a loan."
Discussion: The proposed change to this fundamental restriction would
eliminate minor differences in the wording of the Funds' current restrictions
for greater uniformity and to avoid unintended limitations. For example, while
the Funds' current restrictions generally contain an exception for investments
in debt securities, some of the restrictions refer only to investments in
"publicly distributed" debt instruments. The Boards of these Funds wish to
clarify that investments in privately placed debt securities also do not
constitute the making of a loan. The language also clarifies that the
acquisition of loan participations and similar interests in debt instruments
does not constitute the making of a loan.
The proposed change also clarifies that loans of portfolio securities will
be excluded from the general fundamental restriction on making loans. The Funds'
current fundamental restrictions already permit securities lending, but for most
Funds Proposal 3 would eliminate a possible interpretation of those restrictions
that would limit the Fund to lending securities only up to 10% of the Fund's
assets. The Boards believe that the Funds should not be subject to a fundamental
restriction on securities lending and that each Board should be able to govern
the extent of securities lending through a non-fundamental policy.
Subject, where necessary, to approval of this Proposal 3 by the
Shareholders, the Boards have authorized the adoption of non-fundamental
policies that would allow each Fund to lend portfolio securities in an amount up
to 33 1/3% of its total assets, which is the maximum level permitted under the
1940 Act. None of the Funds currently lends any portfolio securities, and the
Funds will not do so unless and until specific securities lending programs are
considered and approved by their respective Boards. Mitchell Hutchins currently
is considering proposals for securities lending programs for the Funds, and it
anticipates presenting a recommendation for such a program to the Boards in the
near future.
Lending securities would enable a Fund to earn additional income but could
result in a loss or delay in recovering the securities. Under any securities
lending program that may be approved by the Boards, a Fund would lend portfolio
securities to broker-dealers or institutional investors that Mitchell Hutchins
(or, where applicable, a Fund's sub-adviser) deems qualified, but only when the
borrower maintains acceptable collateral with the Fund's custodian in an amount
at least equal to the market value of the securities loaned, plus accrued
interest and dividends. The Fund would pay reasonable administrative and
custodial fees in connection with any loan and might pay a negotiated portion of
the interest earned on the cash or instruments held as collateral to the
borrower or to the placing broker. The Fund would retain the authority to
terminate any loans at any time. A Fund would regain record ownership of loaned
securities to exercise beneficial rights, such as voting rights, when doing so
is considered to be in the Fund's interest.
18
5. MODIFICATION OF FUNDAMENTAL RESTRICTION ON UNDERWRITING SECURITIES.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
"The Fund will not engage in the business of underwriting securities of
other issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities."
Discussion: The proposed changes to this fundamental restriction clarify
that the prohibition applies only to engaging in "the business of" underwriting
securities and eliminate minor inconsistencies in the wording of the Funds'
current restrictions for greater uniformity.
6. MODIFICATION OF FUNDAMENTAL RESTRICTION ON REAL ESTATE INVESTMENTS.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
"The Fund will not purchase or sell real estate, except that investments
in securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner."
Discussion: The proposed changes to this investment restriction eliminate
minor inconsistencies in the wording of the Funds' current restrictions for
greater uniformity and more completely describe the types of real estate related
securities that are permissible.
7. MODIFICATION OF FUNDAMENTAL RESTRICTION ON INVESTING IN COMMODITIES.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
"The Fund will not purchase or sell physical commodities unless acquired
as a result of owning securities or other instruments, but the Fund may
purchase, sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments."
Discussion: The proposed changes to this investment restriction are intended
to ensure that each Fund will have the maximum flexibility to enter into hedging
or other transactions utilizing financial contracts and derivative products when
doing so is permitted by operating policies established for the Fund by its
Board. The Boards believe that this flexibility is necessary for the Funds to
respond to the rapid and continuing development of derivative products. The
proposed changes also allow flexibility in the event of changes in regulatory
standards or limitations.
19
The existing fundamental restrictions for most of the Funds already permit
the Boards to establish investment policies using most or all of these types of
financial contracts. This is not the case, however, for Balanced Fund.
Accordingly, the proposed changes to this fundamental restriction would have the
effect of enabling Balanced Fund's Board to permit the use of options, futures
and similar strategies.
The Balanced Fund Board intends to authorize such transactions subject to
regulatory and other limitations substantially similar to those currently in
effect for the other Funds. The use of options, futures and similar strategies
involves special risks. These include: (1) the fact that skills needed to use
these instruments are different from those needed to select the Fund's
securities; (2) possible imperfect correlation, or even no correlation, between
price movements of hedging instruments and price movements of the investments
being hedged; (3) the fact that, while hedging strategies can reduce the risk of
loss, they can also reduce the opportunity for gain, or even result in losses,
by offsetting favorable price movements in hedged investments; and (4) the
possible inability of the Fund to purchase or sell a portfolio security at a
time that otherwise would be favorable for it to do so, or the possible need for
the Fund to sell a portfolio security at a disadvantageous time, due to the need
for the Fund to maintain "cover" or to segregate securities in connection with
the transactions and the possible inability of the Fund to close out or to
liquidate a hedged position. If Mitchell Hutchins incorrectly forecasts interest
rates, market values or other economic factors in utilizing one of these
strategies, Balanced Fund might be in a better position if it had not entered
into a hedging or other transaction involving these financial contracts.
8. ELIMINATION OF FUNDAMENTAL RESTRICTION ON MARGIN TRANSACTIONS.
Funds to Which This Change Applies: All Funds.
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restrictions on
engaging in margin transactions would be eliminated, and the Funds would become
subject to the following non-fundamental restriction:
"The Fund will not purchase securities on margin, except for short-term
credit necessary for clearance of portfolio transactions and except that the
Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments."
Discussion: The Funds are not required to have a fundamental restriction on
a Fund's ability to engage in margin transactions. However, certain state
securities rules or policies require that Funds whose Shares are distributed in
those states provide at least a non-fundamental restriction on this subject. In
order to maximize the Funds' flexibility in the event of future changes in state
securities rules or policies, the Boards believe that the Funds' restrictions on
margin transactions should be made non-fundamental.
The non-fundamental restriction eliminates minor differences in wording
among existing fundamental restrictions and contains an exception for margin
deposits in connection with financial contracts or derivative instruments. The
language of that exception conforms with the exception contained in the proposed
change to the Funds' fundamental restriction on investing in commodities.
20
9. ELIMINATION OF FUNDAMENTAL RESTRICTION ON SHORT SALES.
Funds to Which This Change Applies: All Funds.
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restrictions on
engaging in short sales would be eliminated, and the Funds would become subject
to the following non-fundamental restriction:
"The Fund will not engage in short sales of securities or maintain a
short position, except that the Fund may (a) sell short 'against the box'
and (b) maintain short positions in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments."
Discussion: Under the 1940 Act, the SEC is authorized to limit the ability
of the Funds to engage in short sales, except in connection with an underwriting
in which the Fund is a participant. One type of short sale transaction that is
permitted under SEC policies is a short sale "against the box," in which a Fund
engages in a short sale of a security that it already owns or has the right to
own. These transactions generally are entered into in order to defer realization
of gains or losses for tax or other purposes.
Although the Funds may be limited in their ability to engage in short sales,
the Funds are not required to establish a fundamental restriction on short
sales. Consistent with the Boards' determination to promote flexibility and
efficiency in the event of future changes in the law, the Boards believe that
the Funds' fundamental restriction on this subject should be removed and
replaced by a non-fundamental restriction. That non-fundamental restriction will
eliminate minor differences in wording among existing fundamental restrictions
and will contain an exception for short positions in connection with financial
contracts or derivative instruments. The language of that exception conforms
with the exception contained in the proposed change to the Funds' fundamental
restriction on investing in commodities. Each non-fundamental restriction will
clarify that a Fund may engage in short sales "against the box."
10. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTMENTS IN OIL, GAS AND
MINERAL LEASES AND PROGRAMS.
Funds to Which This Change Applies: All Funds other than Tactical Fund and
Small Cap Growth Fund.
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restrictions on
investments in oil, gas or minerals would be eliminated, and those Funds that
currently have them would become subject to the following non-fundamental
restriction:
"The Fund will not invest in oil, gas or mineral exploration or
development programs or leases, except that investments in securities of
issuers that invest in such programs or leases and investments in
asset-backed securities supported by receivables generated from such
programs or leases are not subject to this prohibition."
21
Discussion: The Funds are not required to have a fundamental restriction
with respect to oil, gas or mineral investments, but certain state securities
rules require that Funds establish at least a non-fundamental restriction on
this subject. In order to maximize the Funds' flexibility in the event of future
changes in state securities rules or policies, the Boards believe that the
Funds' restrictions on oil, gas and mineral investments should be made
non-fundamental.
The non-fundamental restriction adopted by the Boards will eliminate minor
differences in wording among existing fundamental restrictions and will
establish uniform exceptions that serve to clarify the limited scope of the
restriction. Also, since the applicable state requirements relate only to oil,
gas and mineral leases and development programs, the non-fundamental restriction
applies only to them and not to other investments relating to oil, gas or
minerals.
11. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTMENTS IN OTHER
INVESTMENT COMPANIES.
Funds to Which This Change Applies: All Funds other than Strategic Income
Fund, Utility Income, Tactical Fund, Emerging Markets Fund and Small Cap Growth
Fund.
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restrictions on
investments in other investment companies would be eliminated, and those Funds
that currently have them would become subject to the following non-fundamental
restriction:
"The Fund will not purchase securities of other investment companies,
except to the extent permitted by the 1940 Act and except that this
limitation does not apply to securities received or acquired as dividends,
through offers of exchange, or as a result of reorganization, consolidation,
or merger."
Discussion: The ability of the Funds to invest in other investment companies
is limited under the 1940 Act, but the Funds are not required to have a
fundamental restriction on this subject. In order to maximize the Funds'
flexibility in the event of future changes in federal and state securities rules
or policies, the Boards believe that the Funds' restrictions on investments in
other investment companies should be made non-fundamental.
The non-fundamental restriction adopted by the Boards will allow investments
in other investment companies to the full extent permitted under the 1940 Act.
Under the 1940 Act, a Fund may purchase the securities of other investment
companies if immediately thereafter not more than (i) 3% of the total
outstanding voting stock of such company is owned by the Fund, (ii) 5% of the
Fund's total assets, taken at market value, would be invested in any one such
company, (iii) 10% of the Fund's total assets, taken at market value, would be
invested in such securities, and (iv) the Fund, together with other investment
companies having the same investment adviser and companies controlled by such
companies, owns not more than 10% of the total outstanding stock of any one
closed-end investment company. The fundamental restrictions for most of the
Funds that have restrictions on this subject are more limiting in that they
generally prohibit any investments in investment companies except for shares
acquired in reorganizations,
22
consolidations, or mergers. The Boards believe that investments in other
investment companies may be desirable under certain circumstances. For example,
temporary investments of cash reserves in money market funds or other pooled
investment vehicles may provide a combination of diversification and return that
otherwise would not be available. Also, for Funds that invest outside the United
States, certain equity securities are available to foreign investors only
through investments in local investment companies. The non-fundamental
restriction also will eliminate minor differences in wording among existing
fundamental restrictions.
12. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTING FOR THE PURPOSE OF
CONTROL.
Fund to Which This Change Applies: Global Equity Fund.
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restriction on
investing for the purpose of control would be eliminated, and Global Equity Fund
would become subject to the following non-fundamental restriction:
"The Fund will not invest in companies for the purpose of exercising
control or management."
Discussion: There is no legal requirement that a Fund have a fundamental
restriction on this subject, and the Board believes that it should be made
non-fundamental. Converting this fundamental restriction to a non-fundamental
restriction will enable the Global Equity Fund Board to change this policy in
the future if it concludes that doing so would be in the interest of the Fund
and its Shareholders.
13. ELIMINATION OF FUNDAMENTAL RESTRICTION RELATING TO PURCHASES OF
SECURITIES NOT PERMITTED UNDER INVESTMENT OBJECTIVE.
Funds to Which This Change Applies: Balanced Fund and Growth and Income
Fund.
Proposed Change:
Upon the approval of Proposal 3, the existing fundamental restrictions on
purchases of securities that are not permitted under a Fund's investment
objective or policies would be eliminated; the fundamental restriction would not
be replaced by a non-fundamental restriction.
Discussion: The above-referenced Funds have fundamental restrictions that in
substance prevent the Fund from investing in securities that are inconsistent
with its investment objective or, in some cases, with its investment policies.
The need for a Fund to limit its investments in that manner may be implicit in
the objectives and policies themselves, but there is no legal requirement that a
Fund have a fundamental restriction on the subject. Moreover, while the Funds'
investment objectives are fundamental policies, their other investment policies
generally are not fundamental and may be modified by the Boards without
shareholder action. The Boards for these Funds wish to eliminate any implication
that policies that are not specifically identified as fundamental are made
fundamental by the language of these fundamental restrictions.
23
Accordingly, the Boards have determined that this restriction should be
eliminated, both as a fundamental and as a non-fundamental restriction.
14. ELIMINATION OF FUNDAMENTAL RESTRICTION ON JOINT PARTICIPATION IN
SECURITIES TRADING ACCOUNTS.
Fund to Which This Change Applies: Global Equity Fund.
Proposed Change:
Upon the approval of Proposal 3, the existing fundamental restriction on
joint participation in securities trading accounts would be eliminated; the
fundamental restriction would not be replaced by a non-fundamental restriction.
Discussion: Global Equity Fund currently has a fundamental restriction
against participation on a joint or joint and several basis in any securities
trading account. Joint activities by an investment company are subject to
regulation under the 1940 Act, and there is no legal requirement for a Fund to
have a fundamental restriction on this subject. In certain circumstances,
participation in joint trading accounts may be beneficial to the Fund. Moreover,
the Funds currently have, and may from time to time seek to obtain, the benefit
of exemptive relief from the SEC with respect to certain joint activities.
Accordingly, the Board for Global Equity Fund wishes to ensure that the Fund
will not be more limited with respect to such transactions than is required by
law.
Accordingly, the Board has determined that this restriction should be
eliminated both as a fundamental and as a non-fundamental restriction.
REQUIRED VOTE. Approval of each of the numbered changes contemplated by
Proposal 3 with respect to a Fund requires the affirmative vote of a "majority
of the outstanding voting securities" of that Fund, which for this purpose means
the affirmative vote of the lesser of (1) more than 50% of the outstanding
Shares of the Fund or (2) 67% or more of the Shares of the Fund present at the
Meeting if more than 50% of the outstanding Shares of the Fund are represented
at the Meeting in person or by proxy. Shareholders of any Fund may vote against
the changes proposed with respect to specific fundamental restrictions
applicable to their Fund in the manner indicated on the proxy card.
IF ONE OR MORE OF THE NUMBERED CHANGES CONTEMPLATED BY PROPOSAL 3 IS NOT
APPROVED BY SHAREHOLDERS OF A FUND, THE RELATED EXISTING FUNDAMENTAL
RESTRICTION(S) OF THE FUND WILL CONTINUE IN EFFECT FOR THAT FUND, BUT
DISAPPROVAL OF ALL OR PART OF PROPOSAL 3 BY THE SHAREHOLDERS OF ONE FUND WILL
NOT AFFECT ANY APPROVALS OF PROPOSAL 3 THAT ARE OBTAINED WITH RESPECT TO ANY
OTHER FUND.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 3.
24
-------------------
PROPOSAL 4--APPROVAL OF CHANGE TO INVESTMENT OBJECTIVE OF
HIGH INCOME FUND
RELEVANT FUND. High Income Fund.
REASON FOR PROPOSED CHANGE. Proposal 4 is to approve the recommendation of
Mitchell Hutchins and of the High Income Fund Board to change the Fund's
investment objective from "to provide the highest level of current income
available without undue risk" to "to provide high income." This proposal is
intended to simplify High Income Fund's investment objective, making it more
comparable to those of other mutual funds with similar investment strategies.
The proposed change to the Fund's investment objective does not reflect any
current or contemplated change in the investment policies of the Fund, and it is
not intended to reflect any change in the level of risk associated with an
investment in the Fund.
Under the Fund's existing investment policy, at least 65% of its total
assets normally are invested in high risk, high yielding, income producing
corporate debt securities that at the time of purchase are rated B or better by
Standard & Poor's, a division of The McGraw-Hill Companies Inc. ("S&P"), or
Moody's Investors Service, Inc. ("Moody's"), are comparably rated by another
nationally recognized statistical rating organization ("NRSRO"), or are unrated
but are determined to be of comparable quality by Mitchell Hutchins. This
policy, which would not be changed under Proposal 4, means that the Fund invests
primarily in what are commonly referred to as "junk bonds," which are considered
by S&P and Moody's to be predominantly speculative and to involve major risk
exposure to adverse conditions.
The current investment objective reflects the fact that, in managing the
Fund's portfolio, Mitchell Hutchins seeks to minimize the speculative risks
associated with investments in junk bonds through diversification, credit
analysis and attention to current trends in interest rates and other factors.
Moreover, while the Fund invests primarily in junk bonds, at least 65% of its
assets must be at least B-rated or be of comparable quality. Thus, Mitchell
Hutchins seeks to balance the investment risks undertaken by the Fund against
the higher current yields that generally are available on junk bonds, in order
to achieve the best results for Shareholders. Mitchell Hutchins will continue to
seek this balance in its management of the Fund under the revised investment
objective.
Nevertheless, all junk bonds, even those rated B or better, carry higher
investment risk than investment grade bonds. The proposed revision to the Fund's
investment objective seeks to ensure that investors will not infer from the
Fund's investment objective that the Fund would not incur the risks attendant to
higher yielding bonds.
Junk bonds are especially subject to adverse changes in general economic
conditions and in the industries in which their issuers are engaged, to changes
in the financial condition of their issuers and to price fluctuation in response
to changes in interest rates. Moreover, the risk of loss due to default by these
issuers is significantly greater than for issuers of investment grade securities
because junk bonds are frequently unsecured and subordinated to the prior
payment of senior securities. To the extent that High Income Fund is
25
required to seek recovery upon a default in the payment of principal or interest
on its portfolio holdings, the Fund may incur additional expenses and may have
limited legal recourse in the event of a default.
Under its existing policies, High Income Fund may invest up to 35% of its
total assets in debt securities rated lower than B by S&P or Moody's or
comparably rated by another NRSRO, preferred stocks, securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, certain
equity securities and money market instruments. This portion of the Fund's
assets may include debt securities that are in default or that face the risk of
default with respect to the payment of principal or interest.
Concurrent Change in Investment Policy. Concurrently with the proposed
change in High Income Fund's investment objective, the Fund intends to change
its investment policy to reflect that the Fund may invest up to 25% of its total
assets in securities that are not currently providing income but that have the
potential for capital appreciation. This policy will reflect Mitchell Hutchins'
belief that the Fund should be able to take advantage of opportunities for
capital appreciation that become available in the market from time to time.
Mitchell Hutchins believes that the Fund can make limited investments in
non-income producing securities that present these opportunities while still
achieving its overall goal of providing high income to Shareholders. This new
policy will not be part of the Fund's investment objective but will be a non-
fundamental policy that may be changed by the Fund's Board. The securities in
which the Fund would be able to invest under this policy include debt securities
that are not currently paying income and equity securities such as common
stocks, warrants, rights and preferred stocks that are not paying current
income.
TEXT OF PROPOSED CHANGES TO INVESTMENT OBJECTIVE. The revised investment
objective for High Income Fund under Proposal 4 is:
"To provide high income."
REQUIRED VOTE. Approval of Proposal 4 requires the affirmative vote of a
"majority of the outstanding voting securities" of High Income Fund, which for
this purpose means the affirmative vote of the lesser of (1) more than 50% of
the outstanding Shares of the Fund or (2) 67% or more of the Shares of the Fund
present at the Meeting if more than 50% of the outstanding Shares of the Fund
are represented at the Meeting in person or by proxy. If Proposal 4 is not
approved by Shareholders of High Income Fund, the Fund's existing investment
objective will continue in effect.
THE HIGH INCOME FUND BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 4.
-------------------
26
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by the Funds,
will be made primarily by mail but also may include telephone or oral
communications by regular employees of Mitchell Hutchins or PaineWebber, who
will not receive any compensation therefor from the Funds, or by Shareholder
Communications Corporation, professional proxy solicitors retained by the Funds,
who will be paid the following approximate fees and expenses for soliciting
services set forth below. Soliciting fees and expenses payable to Shareholder
Communications by a particular Fund are a function of the number of Shareholders
in that Fund.
SOLICITING
FEES AND EXPENSES
FUND (APPROXIMATE)
---- -----------------
America Fund: --
Growth and Income Fund .................................................. $ 44,800
Financial Services Fund ................................................... $ 7,300
Investment Series: --
Global Income Fund ...................................................... $ 75,000
Investment Trust: --
Tactical Fund ........................................................... $ 2,200
Global Equity Fund ...................................................... $ 34,000
Investment Trust II: --
Emerging Markets Fund ................................................... $ 2,800
Investment Trust III: --
Small Cap Growth Fund ................................................... $ 2,400
Managed Assets Trust: --
Capital Appreciation Fund ............................................... $ 20,100
Managed Investments Trust: --
High Income Fund ........................................................ $ 30,500
Investment Grade Fund ................................................... $ 19,100
Low Duration Fund ....................................................... $ 11,400
U.S. Government Fund .................................................... $ 31,000
Utility Fund ............................................................ $ 4,600
Master Series: --
Balanced Fund ........................................................... $ 18,400
PW Money Market Fund .................................................... $ 3,200
Mutual Fund Trust: --
California Tax-Free Fund ................................................ $ 4,000
National Tax-Free Fund .................................................. $ 11,700
Municipal Series: --
Municipal High Income Fund .............................................. $ 3,200
New York Tax-Free Fund .................................................. $ 1,900
Olympus Fund: --
Growth Fund ............................................................. $ 30,000
Securities Trust: --
Small Cap Value Fund .................................................... $ 3,800
Strategic Income Fund ................................................... $ 4,100
27
In January and February, 1995, PW Group acquired the asset management
business of KPAM. For each of the investment companies formerly advised by KPAM,
advisory or administration services were provided on an interim basis until
April 13, 1995 by either Mitchell Hutchins or PaineWebber. On April 13, 1995,
shareholders of each of those Companies approved the selection of Mitchell
Hutchins or PaineWebber as investment adviser pursuant to an Investment Advisory
and Administration Contract. The Companies formerly advised by KPAM are:
Investment Trust, Investment Trust II and Investment Trust III. A change in
investment adviser is deemed a presumed change of control under the 1940 Act.
In December, 1995, a complaint purporting to assert derivative claims on
behalf of Investment Series was filed in the Supreme Court of the State of New
York for the County of New York against Mitchell Hutchins, PaineWebber and
certain of the present and former Board Members and officers of Investment
Series in connection with Global Income Fund. The complaint alleges that
defendants mismanaged Global Income Fund and breached their fiduciary duties to
Investment Series and to the Shareholders of Global Income Fund, and that
Mitchell Hutchins negligently and in breach of its investment advisory contract
allowed Global Income Fund to suffer investment losses, by failing to take
appropriate steps to "insulate the value" of Global Income Fund against
"anticipated changing global interest rates and against the falling dollar" and
by charging excessive fees, and that Mitchell Hutchins commingled Global Income
Fund's assets with those of other funds. Based on these allegations, the
complaint seeks disgorgement of any unjustified compensation, damages in an
unspecified amount and other relief. As of the date of this proxy statement, no
pleadings have been filed in the litigation subsequent to the complaint.
Mitchell Hutchins believes that the claims are without merit and intends to
vigorously defend against the action.
SHAREHOLDER PROPOSALS
As a general matter, the Companies do not hold regular annual or other
meetings of Shareholders. Any Shareholder who wishes to submit proposals to be
considered at a special meeting of any Company's Shareholders should send the
proposals to that Company at 1285 Avenue of the Americas, New York, New York
10019, so as to be received a reasonable time before the proxy solicitation for
that meeting is made. Shareholder proposals that are submitted in a timely
manner will not necessarily be included in the Company's proxy materials.
Inclusion of such proposals is subject to limitations under the federal
securities laws.
28
OTHER BUSINESS
Management knows of no business to be presented at the Meetings other than
the matters set forth in this proxy statement, but should any other matter
requiring a vote of Shareholders arise, the proxies will vote thereon according
to their best judgment in the interest of the Companies and the Funds.
By order of the Boards,
DIANNE E. O'DONNELL
Secretary
February 28, 1996
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN ALL OF YOUR PROXIES PROMPTLY.
29
INDEX TO EXHIBITS TO PROXY STATEMENT
Exhibit A -- General Information.................................................... A-1
Exhibit B -- Beneficial Ownership of Greater Than 5% of Fund Shares................. B-1
Exhibit C -- Year in Which Each Nominee or Current Board Member Standing for C-1
Reelection Became a Member of the Board................................
Exhibit D -- Fund Ownership of Nominees and Current Board Members................... D-1
Exhibit E -- Board and Committee Information........................................ E-1
Exhibit F -- Membership on Board Committees......................................... F-1
Exhibit G -- Officer Information.................................................... G-1
Exhibit FR -- Existing Fundamental Restrictions...................................... FR-1
30
EXHIBIT A
GENERAL INFORMATION
SHARES
STATE OF INVESTMENT SUB-ADVISER OUTSTANDING AS OF
COMPANY/FUND ORGANIZATION ADVISER AND ITS ADDRESS RECORD DATE
------------ -------------- ------------------ -------------------- -----------------
AMERICA FUND..................... Massachusetts
Growth and Income Fund.......... -- Mitchell Hutchins -- 25,211,962.626
FINANCIAL SERVICES FUND.......... Maryland Mitchell Hutchins -- 4,802,630.065
INVESTMENT SERIES................ Massachusetts
Global Income Fund.............. -- Mitchell Hutchins -- 109,339,289.430
MANAGED ASSETS TRUST............. Massachusetts
Capital Appreciation Fund....... -- Mitchell Hutchins Denver Investment 16,845,853.288
Advisors LLC
1225 17th Street
26th Floor
P.O. Box 17487
Denver, Colorado
80217
MANAGED INVESTMENTS TRUST........ Massachusetts
High Income Fund................ -- Mitchell Hutchins -- 77,278,265.548
Investment Grade Fund........... -- Mitchell Hutchins -- 33,836,346.269
Low Duration Fund............... -- Mitchell Hutchins Pacific Investment 125,258,699.400
Management Company
840 Newport Center
Drive
Suite 360
Newport Beach,
California 92260
U.S. Government Fund............ -- Mitchell Hutchins -- 60,668,091.715
Utility Fund.................... -- Mitchell Hutchins -- 5,917,058.382
MASTER SERIES.................... Maryland
Balanced Fund................... -- Mitchell Hutchins -- 19,209,418.356
PW Money Market Fund............ -- Mitchell Hutchins -- 47,521,664.064
MUNICIPAL SERIES................. Massachusetts
Municipal High Income Fund...... -- Mitchell Hutchins -- 9,948,637.630
New York Tax-Free Fund.......... -- Mitchell Hutchins -- 5,531,799.207
MUTUAL FUND TRUST................ Massachusetts
California Tax-Free Fund........ -- Mitchell Hutchins -- 18,404,989.167
National Tax-Free Fund.......... -- Mitchell Hutchins -- 38,954,335.821
OLYMPUS FUND..................... Massachusetts
Growth Fund..................... -- Mitchell Hutchins -- 17,449,690.114
SECURITIES TRUST................. Massachusetts
Small Cap Value Fund............ -- Mitchell Hutchins Quest Advisory 6,736,021.886
Corp.*
1414 Avenue of the
Americas
New York, New York
10019
Strategic Income Fund........... -- Mitchell Hutchins -- 7,694,995.119
INVESTMENT TRUST................. Massachusetts
Tactical Fund................... -- Mitchell Hutchins -- 4,417,134.924
Global Equity Fund.............. -- Mitchell Hutchins GE Investment 36,674,700.909
Management
Incorporated
3003 Summer Street
Stamford,
Connecticut 06904
A-1
SHARES
STATE OF INVESTMENT SUB-ADVISER OUTSTANDING AS OF
COMPANY/FUND ORGANIZATION ADVISER AND ITS ADDRESS RECORD DATE
------------ -------------- ------------------ -------------------- -----------------
INVESTMENT TRUST II.............. Massachusetts
Emerging Markets Fund........... -- Mitchell Hutchins Emerging Markets 5,121,090.508
Management
1001 Nineteenth
Street North
Arlington, Virginia
22209-1722
INVESTMENT TRUST III............. Massachusetts
Small Cap Growth Fund........... -- Mitchell Hutchins George D. Bjurman & 2,945,285.916
Associates*
10100 Santa Monica
Boulevard
Suite 1200
Los Angeles,
California 90067
- ------------
* The sub-advisory contract is being terminated as of April 1, 1996. Mitchell
Hutchins will assume day-to-day portfolio management as of that date.
A-2
EXHIBIT B
BENEFICIAL OWNERSHIP OF GREATER THAN 5% OF FUND SHARES
NUMBER AND PERCENTAGE OF
SHARES BENEFICIALLY
OWNED
NAME AND ADDRESS* NAME OF FUND AS OF JANUARY 31, 1996
- -------------------------- -------------------------- ------------------------
Subaru of New England Emerging Markets Fund 623,513.607 (12.4%)
Mr. Joseph Poltronetti Growth Fund 880,422.430 (5.0%)
Citibank, N.A.
Fiduciary Services
Hilton Hotels Corporation Low Duration Fund 9,100,500.000 (7.2%)
Kern County Treasurer Low Duration Fund 8,585,131.170 (6.8%)
- ------------
* Each of the Shareholders listed in this Exhibit may be contacted c/o Mitchell
Hutchins Asset Management Inc., 1285 Avenue of the Americas, New York, NY
10019.
B-1
EXHIBIT C
YEAR IN WHICH EACH NOMINEE OR CURRENT BOARD MEMBER STANDING FOR REELECTION
BECAME A MEMBER OF THE BOARD*
E. GARRETT FREDERIC JOHN R.
RICHARD Q. BEWKES, MEYER GEORGE W. V. RICHARD CARL W. TORELL
COMPANY/FUND NAME ARMSTRONG JR.** FELDBERG GOWEN MALEK BURT SCHAFER III
----------------- ---------- ---------- -------- --------- -------- ------- ------- -------
America Fund........................... -- 1983 1990 1987 1987 -- -- --
Financial Services Fund................ -- 1986 1990 1986 1987 -- -- --
Investment Series...................... -- 1987 1990 1987 1988 -- -- --
Managed Assets Trust................... -- 1992 1992 1992 1992 -- -- --
Managed Investments Trust.............. -- 1984 1990 1984 1987 -- -- --
Master Series.......................... -- 1986 1990 1986 1987 -- -- --
Municipal Series....................... -- 1990 1990 1987 1987 -- -- --
Mutual Fund Trust...................... -- 1984 1990 1985 1987 -- -- --
Olympus Fund........................... -- 1985 1990 1985 1987 -- -- --
Securities Trust....................... 1995 1993 -- -- -- 1995 -- 1993
Investment Trust....................... 1995 -- -- -- -- -- 1991 --
Investment Trust II.................... 1995 -- -- -- -- -- 1992 --
Investment Trust III................... 1995 -- -- -- -- -- 1993 --
- ------------
* Excludes Margo N. Alexander and Mary C. Farrell who are not presently members of these
Boards.
** Mr. Bewkes resigned from each Board on which he currently serves and was reappointed
during 1993. He resigned from the Boards of America Fund, Financial Services Fund, Master
Series, Managed Municipal Trust and Olympus Fund in 1986 and was reelected to each in
1990, except for the Board of Managed Municipal Trust, to which he was reelected in 1991.
C-1
EXHIBIT D
FUND OWNERSHIP OF NOMINEES AND CURRENT BOARD MEMBERS
NOMINEES WHO ARE NO. OF SHARES HELD AS OF
STANDING FOR REELECTION FUND FEBRUARY 21, 19961
----------------------- ---- ------------------------
Margo N. Alexander....................... Global Equity Fund 926.869
Tactical Fund 6,253.0002
Emerging Markets Fund 4,985.0002
Growth and Income Fund 12,581.1503
Richard Q. Armstrong..................... Global Equity Fund 6,235.791
Small Cap Growth Fund 1,774.045
E. Garrett Bewkes, Jr. .................. Global Equity Fund 2,879.773
Richard Burt............................. Investment Grade Fund 2,783.668
Financial Services Fund 749.251
Mary C. Farrell.......................... Growth and Income Fund 368.772
Global Equity Fund 4,938.7583
Growth and Income Fund 524.2153
Growth Fund 127.887
Growth Fund 8,153.5583
Meyer Feldberg........................... Growth and Income Fund 338.696
Growth Fund 341.588
Financial Services Fund 385.171
George W. Gowen.......................... Growth Fund 327.743
U.S. Government Fund 477.819
High Income Fund 776.552
Capital Appreciation Fund 2,608.514
Growth and Income Fund 531.206
Global Equity Fund 1,702.589
Municipal High Income Fund 175.578
National Tax-Free Fund 401.639
Balanced Fund 179.908
Global Income Fund 360.237
Investment Grade Fund 686.754
Financial Services Fund 303.800
Frederic V. Malek........................ High Income Fund 4,816.956
Investment Grade Fund 4,646.840
D-1
NOMINEES WHO ARE NO. OF SHARES HELD AS OF
STANDING FOR REELECTION FUND FEBRUARY 21, 19961
----------------------- ---- ------------------------
John R. Torell III....................... Global Equity Fund 100.000
Tactical Fund 100.000
Emerging Markets Fund 100.000
Small Cap Growth Fund 100.000
Balanced Fund 100.000
Capital Appreciation Fund 100.000
Global Income Fund 100.000
Growth and Income Fund 100.000
Growth Fund 100.000
High Income Fund 100.000
Investment Grade Fund 100.000
Low Duration Fund 100.000
Municipal High Income Fund 100.000
National Tax-Free Fund 100.000
New York Tax-Free Fund 100.000
Financial Services Fund 100.000
U.S. Government Fund 100.000
Utility Fund 100.000
Strategic Income Fund 100.000
Small Cap Value Fund 100.000
CURRENT BOARD MEMBERS WHO ARE NOT NO. OF SHARES HELD AS OF
STANDING FOR REELECTION FUND FEBRUARY 21, 19961
--------------------------------- ---- ------------------------
David J. Beaubien........................ Growth and Income Fund 4,232.049
- ------------
1 Unless otherwise stated, as of the date indicated, each Board Member had sole
voting and investment power of Shares owned.
2 Indicates Shares held in joint tenancy with spouse, with whom voting and
investment power are shared.
3 Indicates Shares held in a retirement plan; number of Shares indicated is as
of November 30, 1995, the most recent practicable date for this data.
D-2
EXHIBIT E
BOARD AND COMMITTEE INFORMATION
FINANCIAL MANAGED MANAGED MUTUAL
AMERICA SERVICES INVESTMENT ASSETS INVESTMENTS MASTER MUNICIPAL FUND OLYMPUS
FUND FUND SERIES TRUST TRUST SERIES SERIES TRUST FUND
------- --------- ---------- ------- ----------- ------ --------- ------ -------
Annual Fee (1)........... $ 1,500 $ 1,500 $3,000 $2,500 $ 5,000 $4,000 $ 3,000 $2,000 $2,000
Attendance Fee Per Board
Meeting(1)............... $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250
Attendance Fee Per
Committee
Meeting(1)(2)............ $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250
Number of Board Meetings
During
Last Fiscal Year........ 8 6 7 6 7 7 6 6 8
Number of Audit Committee
Meetings During Last
Fiscal Year.............. 1 1 1 1 (4) 1 1(4) 1(4) 1(4) 1
Number of Nominating
Committee
Meetings During Last
Fiscal Year.............. -- -- 1(5) -- 3(5) -- -- -- --
SECURITIES INVESTMENT INVESTMENT INVESTMENT
TRUST TRUST TRUST II TRUST III
---------- ---------- ---------- ----------
<C
Annual Fee (1)........... $1,500 $2,000 $1,000 $1,000
Attendance Fee Per Board
Meeting(1)............... $ 250 $ 750 $ 375 $ 375
Attendance Fee Per
Committee
Meeting(1)(2)............ $ 250 $ 750 $ 375 $ 375
Number of Board Meetings
During
Last Fiscal Year........ 10(3) 16 14 15
Number of Audit Committee
Meetings During Last
Fiscal Year.............. 1 2 0 1
Number of Nominating
Committee
Meetings During Last
Fiscal Year.............. 1 -- -- --
- ------------
(1) Reflects compensation rates in effect prior to changes described in proxy
statement. Board Members who were not independent did not receive
compensation from the Companies.
(2) The chair of the audit committees of the following Companies receives an
additional fee of $250 per meeting: Investment Trust, Investment Trust II
and Investment Trust III.
(3) Number provided in table is based on the fiscal year for Strategic Income
Fund; this number would be 8 if based on the fiscal year for Small Cap
Value Fund.
(4) Judith Davidson Moyers attended less than 75% of the meetings.
(5) Richard Burt attended less than 75% of the meetings.
E-1
EXHIBIT F
MEMBERSHIP ON BOARD COMMITTEES*
BOARD MEMBERS
NOT STANDING FOR
REELECTION
------------------------------
WILLIAM W. JUDITH
COMPANY/FUND RICHARD Q. MEYER GEORGE W. FREDERIC V. RICHARD CARL W. JOHN R. DAVID J. HEWITT, DAVIDSON
NAME ARMSTRONG FELDBERG GOWEN MALEK BURT SCHAFER TORELL III BEAUBIEN JR. MOYERS
- ------------ ---------- -------- --------- ----------- ------- ------- ---------- -------- ---------- --------
America Fund.... A, N A, N A, N A, N
Financial
Services
Fund............ A, N A, N A, N A, N
Investment
Series......... A, N A, N A, N A, N
Managed Assets
Trust........... A, N A, N A, N A, N
Managed
Investments
Trust........... A, N A, N A, N A, N
Master Series..... A, N A, N A, N A, N
Municipal
Series.......... A, N A, N A, N A, N
Mutual Fund
Trust........... A, N A, N A, N A, N
Olympus Fund...... A, N A, N A, N A, N
Securities
Trust........... A, N A, N A, N
Investment
Trust........... A A A
Investment Trust
II.............. A A A
Investment Trust
III............. A A A
COMPANY/FUND WILLIAM D.
NAME WHITE
- ---------------- ----------
America Fund......
Financial
Services
Fund............
Investment
Series..........
Managed Assets
Trust...........
Managed
Investments
Trust...........
Master Series.....
Municipal
Series..........
Mutual Fund
Trust...........
Olympus Fund......
Securities
Trust........... A, N
Investment
Trust...........
Investment Trust
II..............
Investment Trust
III.............
- ------------
* Only independent Board Members serve on Board audit or nominating committees.
A = Member of audit committee
N = Member of nominating committee
F-1
EXHIBIT G
OFFICER INFORMATION
NO. OF
INVESTMENT
NAME; PRINCIPAL COMPANIES OFFICER SINCE
BUSINESS ON WHICH -------------------------------------------------------------------------------
OCCUPATION FOR SERVES FINANCIAL MANAGED MANAGED MUTUAL
THE AS AN AMERICA SERVICES INVESTMENT ASSETS INVESTMENTS MASTER MUNICIPAL FUND
PAST FIVE YEARS AGE OFFICE OFFICER1 FUND FUND SERIES TRUST TRUST SERIES SERIES TRUST
- ----------------- ---- ------------ -------- ------- --------- ---------- ------- ------------ ------ --------- ------
Margo N. 48 President 30 5/95 5/95 5/95 5/95 5/95 5/95 5/95 5/95
Alexander; Mrs.
Alexander is
president, chief
executive
officer and a
director of
Mitchell
Hutchins. She is
an executive
vice president
and director of
PaineWebber.
T. Kirkham 49 Vice 5 9/95
Barneby; Mr. President
Barneby is a
managing
director and
chief investment
officer--
quantitative
investments of
Mitchell
Hutchins. Prior
to September
1994, he was a
senior vice
president at
Vantage Global
Management.
Prior to June
1993, he was a
senior vice
president at
Mitchell
Hutchins
Institutional
Investors, Inc.
Owen T. Barry 32 Senior Vice 1
III; Mr. Barry President
is a senior and Chief
executive vice Investment
president and Officer
director of
investments for
George D.
Bjurman &
Associates.
Julieanna Berry; 32 Vice 1 9/95
Ms. Berry is a President
vice president
and portfolio
manager of
Mitchell
Hutchins.
Cynthia N. Bow; 37 Vice 2 9/95
Ms. Bow is a President
vice president
and portfolio
manager of
Mitchell
Hutchins. Ms.
Bow has been
with Mitchell
Hutchins since
1982.
NAME; PRINCIPAL
BUSINESS
OCCUPATION FOR
THE OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
PAST FIVE YEARS FUND TRUST TRUST TRUST II TRUST III
- ----------------- -------- ---------- ---------- ---------- ----------
Margo N. 5/95 5/95 7/95 7/95 7/95
Alexander; Mrs.
Alexander is
president, chief
executive
officer and a
director of
Mitchell
Hutchins. She is
an executive
vice president
and director of
PaineWebber.
T. Kirkham 1/95
Barneby; Mr.
Barneby is a
managing
director and
chief investment
officer--
quantitative
investments of
Mitchell
Hutchins. Prior
to September
1994, he was a
senior vice
president at
Vantage Global
Management.
Prior to June
1993, he was a
senior vice
president at
Mitchell
Hutchins
Institutional
Investors, Inc.
Owen T. Barry 8/93
III; Mr. Barry
is a senior
executive vice
president and
director of
investments for
George D.
Bjurman &
Associates.
Julieanna Berry;
Ms. Berry is a
vice president
and portfolio
manager of
Mitchell
Hutchins.
Cynthia N. Bow;
Ms. Bow is a
vice president
and portfolio
manager of
Mitchell
Hutchins. Ms.
Bow has been
with Mitchell
Hutchins since
1982.
G-1
OFFICER INFORMATION--(CONTINUED)
NO. OF
INVESTMENT
NAME; PRINCIPAL COMPANIES OFFICER SINCE
BUSINESS ON WHICH -------------------------------------------------------------------------------
OCCUPATION FOR SERVES FINANCIAL MANAGED MANAGED MUTUAL
THE AS AN AMERICA SERVICES INVESTMENT ASSETS INVESTMENTS MASTER MUNICIPAL FUND
PAST FIVE YEARS AGE OFFICE OFFICER1 FUND FUND SERIES TRUST TRUST SERIES SERIES TRUST
- ----------------- ---- ------------ -------- ------- --------- ---------- ------- ------------ ------ --------- ------
Teresa M. Boyle; 37 Vice 30 12/93 12/93 12/93 12/93 12/93 12/93 12/93 12/93
Ms. Boyle is a President
first vice
president and
manager--
advisory
administration
of Mitchell
Hutchins. Prior
to November
1993, she was
compliance
manager of
Hyperion Capital
Management,
Inc., an
investment
advisory firm.
Prior to April
1993, Ms. Boyle
was a vice
president and
manager--legal
administration
of Mitchell
Hutchins.
Mary Claira 48 Senior 1
Choksi, Senior Vice
Vice President, President
Managing
Director of
Emerging Markets
Management,
Emerging Markets
Investors
Corporation,
Strategic
Investment
Partners, and
Strategic
Investment
partners, Inc.,
each a
registered
investment
adviser.
Joan L. Cohen; 31 Vice 23 2/94 2/94 2/94 2/94 2/94 2/94 2/94 2/94
Ms. Cohen is a President
vice president and
and attorney of Assistant
Mitchell Secretary
Hutchins. Prior
to December
1993, she was an
associate at the
law firm of
Seward & Kissel.
Neil G. Cumming; 41 Vice 1
Mr. Cumming is a President
senior vice and
president and Investment
portfolio Officer
manager/senior
research analyst
of George D.
Bjurman &
Associates.
NAME; PRINCIPAL
BUSINESS
OCCUPATION FOR
THE OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
PAST FIVE YEARS FUND TRUST TRUST TRUST II TRUST III
- ----------------- -------- ---------- ---------- ---------- ----------
Teresa M. Boyle; 12/93 12/95 3/95 3/95 3/95
Ms. Boyle is a
first vice
president and
manager--
advisory
administration
of Mitchell
Hutchins. Prior
to November
1993, she was
compliance
manager of
Hyperion Capital
Management,
Inc., an
investment
advisory firm.
Prior to April
1993, Ms. Boyle
was a vice
president and
manager--legal
administration
of Mitchell
Hutchins.
Mary Claira 11/93
Choksi, Senior
Vice President,
Managing
Director of
Emerging Markets
Management,
Emerging Markets
Investors
Corporation,
Strategic
Investment
Partners, and
Strategic
Investment
partners, Inc.,
each a
registered
investment
adviser.
Joan L. Cohen; 2/94
Ms. Cohen is a
vice president
and attorney of
Mitchell
Hutchins. Prior
to December
1993, she was an
associate at the
law firm of
Seward & Kissel.
Neil G. Cumming;
Mr. Cumming is a
senior vice
president and
portfolio
manager/senior
research analyst
of George D.
Bjurman &
Associates.
G-2
OFFICER INFORMATION--(CONTINUED)
NO. OF
INVESTMENT
NAME; PRINCIPAL COMPANIES OFFICER SINCE
BUSINESS ON WHICH -------------------------------------------------------------------------------
OCCUPATION FOR SERVES FINANCIAL MANAGED MANAGED MUTUAL
THE AS AN AMERICA SERVICES INVESTMENT ASSETS INVESTMENTS MASTER MUNICIPAL FUND
PAST FIVE YEARS AGE OFFICE OFFICER1 FUND FUND SERIES TRUST TRUST SERIES SERIES TRUST
- ----------------- ---- ------------ -------- ------- --------- ---------- ------- ------------ ------ --------- ------
Michael A. Duffy, 40 Senior 1
Senior Vice Vice
President and President
Investment
Officer,
Managing
Director of
Emerging Markets
Management,
Emerging Markets
Investors
Corporation,
Strategic
Investment
Partners, and
Strategic
Investment
Partners, Inc.
Karen L. Finkel; 38 Vice 2 9/92 9/95
Mrs. Finkel is a President
first vice
president and
portfolio
manager of
Mitchell
Hutchins.
Scott H. Griff; 29 Vice 5
Mr. Griff is a President
vice president and
and attorney of Assistant
Mitchell Secretary
Hutchins. Prior
to January 1995,
he was an
associate at the
law firm of
Cleary,
Gottlieb, Steen
& Hamilton.
Ellen R. Harris; 49 Vice 3 9/83
Ms. Harris is a President predecessor
managing corp.
director and
portfolio
manager of
Mitchell
Hutchins.
Mary B. King; 32 Vice 2 9/92
Mrs. King is a President
first vice
president and
manager of
Mitchell
Hutchins.
Ralph R. Layman; 40 Chief 1
Mr. Layman is an Investment
executive vice Officer
president of GE
Investment
Management and
General Electric
Investment
Corporation, a
registered
investment
adviser. From
1989 to July
1991, he was an
executive vice
president,
partner and
portfolio
manager of
Northern Capital
Management Co.
NAME; PRINCIPAL
BUSINESS
OCCUPATION FOR
THE OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
PAST FIVE YEARS FUND TRUST TRUST TRUST II TRUST III
- ----------------- -------- ---------- ---------- ---------- ----------
Michael A. Duffy, 11/93
Senior Vice
President and
Investment
Officer,
Managing
Director of
Emerging Markets
Management,
Emerging Markets
Investors
Corporation,
Strategic
Investment
Partners, and
Strategic
Investment
Partners, Inc.
Karen L. Finkel;
Mrs. Finkel is a
first vice
president and
portfolio
manager of
Mitchell
Hutchins.
Scott H. Griff; 7/95
Mr. Griff is a
vice president
and attorney of
Mitchell
Hutchins. Prior
to January 1995,
he was an
associate at the
law firm of
Cleary,
Gottlieb, Steen
& Hamilton.
Ellen R. Harris; 1/85
Ms. Harris is a predecessor
managing corp.
director and
portfolio
manager of
Mitchell
Hutchins.
Mary B. King;
Mrs. King is a
first vice
president and
manager of
Mitchell
Hutchins.
Ralph R. Layman; 8/91
Mr. Layman is an
executive vice
president of GE
Investment
Management and
General Electric
Investment
Corporation, a
registered
investment
adviser. From
1989 to July
1991, he was an
executive vice
president,
partner and
portfolio
manager of
Northern Capital
Management Co.
G-3
OFFICER INFORMATION--(CONTINUED)
NO. OF
INVESTMENT
NAME; PRINCIPAL COMPANIES OFFICER SINCE
BUSINESS ON WHICH -------------------------------------------------------------------------------
OCCUPATION FOR SERVES FINANCIAL MANAGED MANAGED MUTUAL
THE AS AN AMERICA SERVICES INVESTMENT ASSETS INVESTMENTS MASTER MUNICIPAL FUND
PAST FIVE YEARS AGE OFFICE OFFICER1 FUND FUND SERIES TRUST TRUST SERIES SERIES TRUST
- ----------------- ---- ------------ -------- ------- --------- ---------- ------- ------------ ------ --------- ------
Thomas J. 37 Vice 4 9/94
Libassi; Mr. President
Libassi is a
senior vice
president and
portfolio
manager of
Mitchell
Hutchins. Prior
to May 1994, he
was a vice
president of
Keystone
Custodian Funds
Inc. with
portfolio
management
responsibility.
C. William Maher; 34 Vice 30 6/95 6/95 6/95 6/95 6/95 6/95 6/95 6/95
Mr. Maher is a President
first vice and
president and a Assistant
senior manager Treasurer
of the mutual
fund finance
division of
Mitchell
Hutchins.
Dennis McCauley; 49 Vice 18 9/95 9/95 9/95 9/95 9/95
Mr. McCauley is President
a managing
director and
chief investment
officer--fixed
income of
Mitchell
Hutchins. Prior
to December
1994, he was
director of
fixed income
investments of
IBM Corporation.
Susan P. Messina; 35 Vice 5 9/95
Ms. Messina is a President
senior vice
president and
portfolio
manager for
Mitchell
Hutchins.
Ann E. Moran; Ms. 38 Vice 30 6/93 6/93 6/93 6/93 6/93 6/93 6/93 6/93
Moran is a vice President
president of and
Mitchell Assistant
Hutchins. Treasurer
Richard S. 41 Vice 1 9/95
Murphy; Mr. President
Murphy is a
senior vice
president of
Mitchell
Hutchins. Prior
to March 1994,
Mr. Murphy was a
vice president
at American
International
Group.
Dianne E. 43 Vice 30 10/86 8/86 12/86 8/91 11/86 8/86 1/87 11/86
O'Donnell; Ms. President
O'Donnell is a and
senior vice Secretary
president and
deputy general
counsel of
Mitchell
Hutchins.
NAME; PRINCIPAL
BUSINESS
OCCUPATION FOR
THE OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
PAST FIVE YEARS FUND TRUST TRUST TRUST II TRUST III
- ----------------- -------- ---------- ---------- ---------- ----------
Thomas J. 5/94
Libassi; Mr.
Libassi is a
senior vice
president and
portfolio
manager of
Mitchell
Hutchins. Prior
to May 1994, he
was a vice
president of
Keystone
Custodian Funds
Inc. with
portfolio
management
responsibility.
C. William Maher; 6/95 6/95 7/95 7/95 7/95
Mr. Maher is a
first vice
president and a
senior manager
of the mutual
fund finance
division of
Mitchell
Hutchins.
Dennis McCauley; 9/95
Mr. McCauley is
a managing
director and
chief investment
officer--fixed
income of
Mitchell
Hutchins. Prior
to December
1994, he was
director of
fixed income
investments of
IBM Corporation.
Susan P. Messina;
Ms. Messina is a
senior vice
president and
portfolio
manager for
Mitchell
Hutchins.
Ann E. Moran; Ms. 6/93 6/93 1/95 1/95 1/95
Moran is a vice
president of
Mitchell
Hutchins.
Richard S.
Murphy; Mr.
Murphy is a
senior vice
president of
Mitchell
Hutchins. Prior
to March 1994,
Mr. Murphy was a
vice president
at American
International
Group.
Dianne E. 10/86 12/92 1/95 1/95 1/95
O'Donnell; Ms.
O'Donnell is a
senior vice
president and
deputy general
counsel of
Mitchell
Hutchins.
G-4
OFFICER INFORMATION--(CONTINUED)
NO. OF
INVESTMENT
NAME; PRINCIPAL COMPANIES OFFICER SINCE
BUSINESS ON WHICH -------------------------------------------------------------------------------
OCCUPATION FOR SERVES FINANCIAL MANAGED MANAGED MUTUAL
THE AS AN AMERICA SERVICES INVESTMENT ASSETS INVESTMENTS MASTER MUNICIPAL FUND
PAST FIVE YEARS AGE OFFICE OFFICER1 FUND FUND SERIES TRUST TRUST SERIES SERIES TRUST
- ----------------- ---- ------------ -------- ------- --------- ---------- ------- ------------ ------ --------- ------
Victoria E. 45 Vice 30 5/94 5/94 5/94 5/94 5/94 5/94 5/94 5/94
Schonfeld; Ms. President
Schonfeld is a
managing
director and
general counsel
of Mitchell
Hutchins. From
April 1990 to
May 1994, she
was a partner in
the law firm of
Arnold & Porter.
Prior to April
1990, she was a
partner in the
law firm of
Shereff,
Friedman,
Hoffman &
Goodman.
Paul H. Schubert; 33 Vice 30 9/94 9/94 9/94 9/94 9/94 9/94 9/94 9/94
Mr. Schubert is President
a first vice and
president and a Assistant
senior manager Treasurer
of the mutual
fund finance
division of
Mitchell
Hutchins. From
August 1992 to
August 1994, he
was a vice
president at
BlackRock
Financial
Management Inc.
Prior to August
1992, he was an
audit manager
with Ernst &
Young LLP.
Nirmal Singh; Mr. 39 Vice 5 9/95 9/95
Singh is a first President
vice president
of Mitchell
Hutchins. Prior
to September
1993, he was a
member of the
portfolio
management team
at Merrill Lynch
Asset
Management, Inc.
Julian F. 35 Vice 30 2/92 2/92 2/92 2/92 2/92 2/92 2/92 2/92
Sluyters; Mr. President
Sluyters is a and
senior vice Treasurer
president and
the director of
the mutual fund
finance division
of Mitchell
Hutchins. Prior
to 1991, he was
an audit senior
manager with
Ernst & Young
LLP.
NAME; PRINCIPAL
BUSINESS
OCCUPATION FOR
THE OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
PAST FIVE YEARS FUND TRUST TRUST TRUST II TRUST III
- ----------------- -------- ---------- ---------- ---------- ----------
Victoria E. 5/94 5/94 1/95 1/95 1/95
Schonfeld; Ms.
Schonfeld is a
managing
director and
general counsel
of Mitchell
Hutchins. From
April 1990 to
May 1994, she
was a partner in
the law firm of
Arnold & Porter.
Prior to April
1990, she was a
partner in the
law firm of
Shereff,
Friedman,
Hoffman &
Goodman.
Paul H. Schubert; 9/94 9/94 1/95 1/95 1/95
Mr. Schubert is
a first vice
president and a
senior manager
of the mutual
fund finance
division of
Mitchell
Hutchins. From
August 1992 to
August 1994, he
was a vice
president at
BlackRock
Financial
Management Inc.
Prior to August
1992, he was an
audit manager
with Ernst &
Young LLP.
Nirmal Singh; Mr. 9/95
Singh is a first
vice president
of Mitchell
Hutchins. Prior
to September
1993, he was a
member of the
portfolio
management team
at Merrill Lynch
Asset
Management, Inc.
Julian F. 2/92 12/92 1/95 1/95 1/95
Sluyters; Mr.
Sluyters is a
senior vice
president and
the director of
the mutual fund
finance division
of Mitchell
Hutchins. Prior
to 1991, he was
an audit senior
manager with
Ernst & Young
LLP.
G-5
OFFICER INFORMATION--(CONTINUED)
NO. OF
INVESTMENT
NAME; PRINCIPAL COMPANIES OFFICER SINCE
BUSINESS ON WHICH -------------------------------------------------------------------------------
OCCUPATION FOR SERVES FINANCIAL MANAGED MANAGED MUTUAL
THE AS AN AMERICA SERVICES INVESTMENT ASSETS INVESTMENTS MASTER MUNICIPAL FUND
PAST FIVE YEARS AGE OFFICE OFFICER1 FUND FUND SERIES TRUST TRUST SERIES SERIES TRUST
- ----------------- ---- ------------ -------- ------- --------- ---------- ------- ------------ ------ --------- ------
Pamela J. Thomas; 31 Investment 1
Ms. Thomas is a Officer
vice president
of Global Equity
and
International
Equity analyst
for GEIC. Prior
to May 1992, she
was a graduate
student at the
Wharton School.
Mark A. Tincher; 40 Vice 11 9/95 9/95 9/95 9/95 9/95
Mr. Tincher is a President
managing
director and
chief investment
officer--U.S.
equity
investments of
Mitchell
Hutchins. Prior
to March 1995,
he was a vice
president and
directed the
U.S. funds
management and
equity research
areas of Chase
Manhattan
Private Bank.
Gregory K. Todd; 39 Vice 30 6/93 6/93 6/93 6/93 6/93 6/93 6/93 6/93
Mr. Todd is a President
first vice and
president and Assistant
associate Secretary
general counsel
of Mitchell
Hutchins. Prior
to 1993, he was
a partner in the
law firm of
Shereff,
Friedman,
Hoffman &
Goodman.
Antoine W. van 50 Chief 1
Agtmael, Investment
Executive Vice Officer and
President and Executive
Chief Investment Vice
Officer, President
President of
Emerging Markets
Management,
Managing
Director of
Strategic
Investment
Management,
Strategic
Investment
Managment
International,
Emerging Markets
Investors
Corporation,
Strategic
Investment
Partners, Inc.
and a Director
of India Growth
Fund.
Craig M. 37 Vice 4 9/95 9/95 9/95
Varrelman; Mr. President
Varrelman is a
first vice
president of
Mitchell
Hutchins.
NAME; PRINCIPAL
BUSINESS
OCCUPATION FOR
THE OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
PAST FIVE YEARS FUND TRUST TRUST TRUST II TRUST III
- ----------------- -------- ---------- ---------- ---------- ----------
Pamela J. Thomas; 12/93
Ms. Thomas is a
vice president
of Global Equity
and
International
Equity analyst
for GEIC. Prior
to May 1992, she
was a graduate
student at the
Wharton School.
Mark A. Tincher; 9/95 9/95
Mr. Tincher is a
managing
director and
chief investment
officer--U.S.
equity
investments of
Mitchell
Hutchins. Prior
to March 1995,
he was a vice
president and
directed the
U.S. funds
management and
equity research
areas of Chase
Manhattan
Private Bank.
Gregory K. Todd; 6/93 6/93 1/95 1/95 1/95
Mr. Todd is a
first vice
president and
associate
general counsel
of Mitchell
Hutchins. Prior
to 1993, he was
a partner in the
law firm of
Shereff,
Friedman,
Hoffman &
Goodman.
Antoine W. van 11/93
Agtmael,
Executive Vice
President and
Chief Investment
Officer,
President of
Emerging Markets
Management,
Managing
Director of
Strategic
Investment
Management,
Strategic
Investment
Managment
International,
Emerging Markets
Investors
Corporation,
Strategic
Investment
Partners, Inc.
and a Director
of India Growth
Fund.
Craig M. 9/95
Varrelman; Mr.
Varrelman is a
first vice
president of
Mitchell
Hutchins.
G-6
OFFICER INFORMATION--(CONTINUED)
NO. OF
INVESTMENT
NAME; PRINCIPAL COMPANIES OFFICER SINCE
BUSINESS ON WHICH -------------------------------------------------------------------------------
OCCUPATION FOR SERVES FINANCIAL MANAGED MANAGED MUTUAL
THE AS AN AMERICA SERVICES INVESTMENT ASSETS INVESTMENTS MASTER MUNICIPAL FUND
PAST FIVE YEARS AGE OFFICE OFFICER1 FUND FUND SERIES TRUST TRUST SERIES SERIES TRUST
- ----------------- ---- ------------ -------- ------- --------- ---------- ------- ------------ ------ --------- ------
William W. 49 Vice 1 9/95
Veronda; Mr. President
Veronda is a
senior vice
president of
Mitchell
Hutchins. Prior
to September
1995, he was a
senior vice
president and
general manager
at Invesco Funds
Group.
Stuart Waugh; Mr. 40 Vice 5 12/93 9/92
Waugh is a President
managing
director and
portfolio
manager of
Mitchell
Hutchins
responsible for
global fixed
income
investments and
currency
trading.
Keith A. Weller; 34 Vice 24 9/95 9/95 9/95 9/95 9/95 9/95 9/95 9/95
Mr. Weller is a President
first vice and
president and Assistant
associate Secretary
general counsel
of Mitchell
Hutchins. From
September 1987
to May 1995, he
was an attorney
in private
practice.
NAME; PRINCIPAL
BUSINESS
OCCUPATION FOR
THE OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
PAST FIVE YEARS FUND TRUST TRUST TRUST II TRUST III
- ----------------- -------- ---------- ---------- ---------- ----------
William W.
Veronda; Mr.
Veronda is a
senior vice
president of
Mitchell
Hutchins. Prior
to September
1995, he was a
senior vice
president and
general manager
at Invesco Funds
Group.
Stuart Waugh; Mr. 12/93
Waugh is a
managing
director and
portfolio
manager of
Mitchell
Hutchins
responsible for
global fixed
income
investments and
currency
trading.
Keith A. Weller; 9/95 9/95
Mr. Weller is a
first vice
president and
associate
general counsel
of Mitchell
Hutchins. From
September 1987
to May 1995, he
was an attorney
in private
practice.
- ------------
1 Includes only investment companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser; each officer serves in the same capacity for
each separate investment company.
G-7
EXHIBIT FR
EXISTING FUNDAMENTAL RESTRICTIONS
The existing fundamental restrictions of each Fund will be found on the
following pages of this exhibit.
TABLE OF CONTENTS:
AMERICA FUND
Growth and Income Fund............................................................ FR-2
FINANCIAL SERVICES FUND............................................................. FR-3
INVESTMENT SERIES
Global Income Fund................................................................ FR-5
INVESTMENT TRUST
Tactical Fund..................................................................... FR-7
Global Equity Fund................................................................ FR-9
INVESTMENT TRUST II
Emerging Markets Fund............................................................. FR-11
INVESTMENT TRUST III
Small Cap Growth Fund............................................................. FH-13
MANAGED ASSETS TRUST
Capital Appreciation Fund......................................................... FR-15
MANAGED INVESTMENTS TRUST
High Income Fund.................................................................. FR-16
Investment Grade Fund............................................................. FR-17
Low Duration Fund................................................................. FR-18
U.S. Government Fund.............................................................. FR-20
Utility Fund...................................................................... FR-22
MASTER SERIES
Balanced Fund..................................................................... FR-24
PW Money Market Fund.............................................................. FR-25
MUNICIPAL SERIES
Municipal High Income Fund........................................................ FR-26
New York Tax-Free Fund............................................................ FR-28
MUTUAL FUND TRUST
California Tax-Free Fund.......................................................... FR-30
National Tax-Free Fund............................................................ FR-32
OLYMPUS FUND
Growth Fund....................................................................... FR-34
SECURITIES TRUST
Small Cap Value Fund.............................................................. FR-36
Strategic Income Fund............................................................. FR-37
FR-1
AMERICA FUND
GROWTH AND INCOME FUND
The Fund may not:
(1) purchase any securities other than those its investment objective
permits it to purchase;
(2) purchase securities of any one issuer (except U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in such issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, provided, however, that up to
25% of the value of the Fund's total assets may be invested without regard
to these limitations;
(3) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts and options on futures contracts;
(4) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under the federal securities laws;
(5) make short sales of securities or maintain a short position, except
that the Fund may (a) make short sales and may maintain short positions in
connection with its use of options, futures contracts and options on futures
contracts and (b) sell short "against the box";
(6) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell stock index futures, interest rate futures and
options thereon;
(8) invest in oil, gas or mineral-related programs or leases;
(9) make loans, except through loans of portfolio securities as
described herein and except through repurchase agreements; provided that for
purposes of this restriction the acquisition of bonds, debentures, or other
corporate debt securities and investment in government obligations,
short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of loans;
(10) purchase any securities issued by any other investment company,
except in connection with the merger, consolidation or acquisition of all
the securities or assets of such an issuer;
(11) issue senior securities or borrow money, except from banks for
temporary purposes and except for reverse repurchase agreements, and then in
an aggregate amount not in excess of 10% of the Fund's total assets;
provided further that the Fund will not purchase securities while borrowings
in excess of 5% of the Fund's total assets are outstanding; or
(12) make an investment in any one industry if the investment would
cause the aggregate value of the Fund's investments in such industry to
exceed 25% of the Fund's total assets.
The Fund will continue to interpret fundamental investment limitation (6) to
prohibit investment in real estate limited partnerships.
FR-2
FINANCIAL SERVICES FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks or
through reverse repurchase agreements for emergency or temporary purposes,
and then in an aggregate amount not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing, provided that the Fund
will not purchase securities while borrowings (including reverse repurchase
agreements) in excess of 5% of the Fund's total assets are outstanding;
(2) make an investment in any one industry if doing so would cause the
value of investments in such industry or group of industries to equal or
exceed 25% of the total assets of the Fund taken at market value, except
that the Fund will invest, under normal circumstances, at least 25% of its
total assets, taken at market value, in the related group of industries
consisting of the financial services industries;
(3) purchase securities of any one issuer (other than U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in securities of such issuer or the Fund would own or hold 10% or
more of the outstanding voting securities of that issuer, except that up to
25% of the Fund's total assets may be invested without regard to these
limitations;
(4) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions, and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts and options on futures contracts;
(5) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal securities laws;
(6) make short sales of securities or maintain a short position, except
that the Fund may make short sales and maintain short positions in
connection with its use of options, futures contracts and options on futures
contracts and may sell short "against the box";
(7) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell stock index, interest rate and foreign currency
futures contracts and options thereon;
(9) invest in oil, gas or mineral-related programs or leases, provided
that the Fund may invest in securities issued by companies that engage in
such activities;
(10) make loans, except through loans of portfolio securities as
described in the Prospectus or this Statement of Additional Information and
except through repurchase agreements, provided that for purposes of this
limitation the acquisition of publicly distributed bonds, debentures or
other corporate debt securities and investment in government obligations,
short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of a loan; or
FR-3
(11) purchase any securities issued by any other investment company,
except by purchase in the open market where no commission or profit, other
than a customary brokers' commission, is earned by any sponsor or dealer
associated with the investment company whose shares are acquired as a result
of such purchase, provided that such securities in the aggregate do not
represent more than 10% of the total assets of the Fund, and except in
connection with the merger, consolidation or acquisition of all the
securities or assets of another investment company.
The Fund will continue to interpret fundamental investment limitation (7) to
prohibit investment in real estate limited partnerships.
* * * * *
In addition to the foregoing fundamental limitations, the Fund currently has
an affirmative policy of investing, under normal circumstances, at least 65% of
its total assets in equity securities of financial services companies, which may
not be changed without approval of its Shareholders.
FR-4
INVESTMENT SERIES
GLOBAL INCOME FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks or
through reverse repurchase agreements for emergency or temporary purposes,
and then in an aggregate amount not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing; provided that the Fund
will not purchase securities while borrowings (including reverse repurchase
agreements) in excess of 5% of the value of the Fund's total assets are
outstanding;
(2) purchase securities of any one issuer if as a result more than 5% of
the Fund's total assets would be invested in such issuer or the Fund would
own or hold more than 10% of the outstanding voting securities of that
issuer, except that up to 50% of the Fund's total assets may be invested
without regard to this limitation and provided that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities;
(3) make an investment in any one industry if the investment would cause
the value of such investments at the time of purchase in such industry to be
25% or more of the total assets of the Fund taken at market value;
(4) purchase securities on margin, except for short-term credits
necessary for clearance of portfolio transactions, and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts and options on futures contracts;
(5) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal securities laws;
(6) make short sales of securities or maintain a short position, except
that the Fund may (a) make short sales and maintain short positions in
connection with its use of options, futures contracts and options on futures
contracts and (b) sell short "against the box";
(7) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell interest rate and foreign currency futures
contracts and options thereon, may engage in transactions in foreign
currency and may purchase or sell options on foreign currencies for hedging
purposes;
(9) invest in oil, gas or mineral-related programs or leases;
(10) make loans, except through loans of portfolio securities as
described in the Statement of Additional Information and except through
repurchase agreements, provided that for purposes of this restriction the
acquisition of publicly distributed bonds, debentures or other corporate
debt securities and investment in government obligations, short-term
commercial paper, certificates of deposit and bankers' acceptances shall not
be deemed to be the making of a loan; or
FR-5
(11) purchase any securities issued by any other investment company,
except in connection with the merger, consolidation or acquisition of all
the securities or assets of such an issuer.
The Fund will continue to interpret fundamental investment limitation (7) to
prohibit investment in real estate limited partnerships.
FR-6
INVESTMENT TRUST
TACTICAL FUND
Under the investment restrictions adopted by the Trust with respect to the
Fund:
(1) The Fund will not purchase securities (other than Government
Securities) of any issuer if, as a result of the purchase, more than 5% of
the value of the Fund's total assets would be invested in the securities of
the issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation.
(2) The Fund will not purchase more than 10% of the voting securities of
any one issuer, or more than 10% of the securities of any class of any one
issuer, except that this limitation is not applicable to the Fund's
investments in Government Securities, and up to 25% of the Fund's assets may
be invested without regard to these 10% limitations.
(3) The Fund will not borrow money, except that the Fund may borrow from
banks for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests and cash payments of dividends and
distributions that might otherwise require the untimely disposition of
securities, in an amount not to exceed 20% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing is made.
Whenever borrowings exceed 5% of the value of the total assets of the Fund,
the Fund will not make any additional investments.
(4) The Fund will not lend money to other persons, except through
purchasing debt obligations, lending portfolio securities in an amount not
to exceed 30% of the Fund's assets taken at value and entering into
repurchase agreements.
(5) The Fund will invest no more than 25% of the value of its total
assets in securities of issuers in any one industry.
(6) The Fund will not purchase securities on margin, except that the
Fund may obtain any short-term credits necessary for the clearance of
purchases and sales of securities. For purposes of this restriction, the
deposit or payment of initial or variation margin in connection with futures
contracts or options on futures contracts will not be deemed to be a
purchase of securities on margin.
(7) The Fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open, the Fund owns
an equal amount of the securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities
of the same issue as, and equal in amount to, the securities sold short.
(8) The Fund will not purchase or sell real estate or real estate
limited partnership interests, except that the Fund may purchase and sell
securities of companies that deal in real estate or interests in real
estate.
(9) The Fund will not purchase or sell commodities or commodity
contracts (except futures contracts and related options and other similar
contracts).
FR-7
(10) The Fund will not act as an underwriter of securities, except that
the Fund may acquire securities under circumstances in which, if the
securities were sold, the Fund might be deemed to be an underwriter for
purposes of the 1933 Act.
FR-8
INVESTMENT TRUST
GLOBAL EQUITY FUND
The Fund may not:
(1) purchase securities (other than Government Securities) of any issuer
if, as a result of the purchase, more than 5% of the value of the Fund's
total assets would be invested in the securities of the issuer, except that
up to 25% of the value of the Fund's total assets may be invested without
regard to this 5% limitation;
(2) purchase more than 10% of the voting securities of any one issuer,
or more than 10% of the securities of any class of any one issuer, except
that this limitation is not applicable to the Fund's investments in
Government Securities, and up to 25% of the Fund's assets may be invested
without regard to these 10% limitations;
(3) borrow money, except that the Fund may borrow from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests and cash payment of dividends and distributions that
might otherwise require the untimely disposition of securities, provided
that such amounts shall not exceed 20% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing is made, and
(b) whenever borrowings exceed 5% of the value of the total asset of the
Fund, the Fund will not make any additional investments;
(4) lend money to other persons, except through purchasing debt
obligations, lending portfolio securities in an amount not to exceed 30% of
the Fund's assets taken at value and entering into repurchase agreements;
(5) invest more than 25% of the value of its total assets in securities
of issuers in any one industry, which term will be deemed to include (a) the
government of any country other than the United States, but not the United
States government and (b) any supranational organization;
(6) purchase securities on margin, except that (a) the Fund may obtain
any short-term credits necessary for the clearance of purchases and sales of
securities, and (b) the deposit or payment of initial or variation margin in
connection with futures contracts or options on futures contracts will not
be deemed to be a purchase of securities on margin;
(7) make short sales of securities or maintain a short position, unless
at all times when a short position is open, the Fund owns an equal amount of
the securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issue as, and
equal in amount to, the securities sold short;
(8) purchase or sell real estate or real estate limited partnership
interests, except that the Fund may purchase and sell securities of
companies that deal in real estate or interests in real estate;
FR-9
(9) purchase or sell commodities or commodity contracts (except
currencies, stock index, currency and interest rate futures contracts and
related options, forward foreign currency contracts and other similar
contracts);
(10) invest in oil, gas or other mineral leases or exploration or
development programs;
(11) act as an underwriter of securities, except that the Fund may
acquire securities under circumstances in which, if the securities were
sold, the Fund might be deemed to be an underwriter for purpose of the 1933
Act;
(12) purchase any security, other than a security acquired pursuant to a
plan of reorganization or an offer of exchange, if as a result of the
purchase (a) the Fund would own any securities of an open-end investment
company or more than 3% of the total outstanding voting stock of any
closed-end investment company or (b) more than 5% of the value of the Fund's
total assets would be invested in securities of any one or more closed-end
investment companies;
(13) participate on a joint or joint-and several basis in any securities
trading account; or
(14) make investments for the purpose of exercising control of
management.
FR-10
INVESTMENT TRUST II
EMERGING MARKETS FUND
Under the investment restrictions adopted by the Trust with respect to the
Fund:
(1) The Fund will not purchase securities (other than Government
Securities) of any issuer if, as a result of the purchase, more than 5% of
the value of the Fund's total assets would be invested in the securities of
the issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation.
(2) The Fund will not purchase more than 10% of the voting securities of
any one issuer, except that this limitation is not applicable to the Fund's
investments in Government Securities, and up to 25% of the Fund's assets may
be invested without regard to this 10% limitation.
(3) The Fund may borrow from banks for leveraging purposes, as well as
for temporary or emergency purposes such as the meeting of redemption
requests and cash payments of dividends and distributions that might
otherwise require the untimely disposition of securities, in an amount not
to exceed 33 1/3% of the value of the Fund's total assets (including the
amount borrowed) valued at market less liabilities (not including the amount
borrowed) at the time the borrowing is made. Whenever borrowings for
temporary or emergency purposes exceed 5% of the value of the Fund's total
assets, the Fund will not make any additional investments.
(4) The Fund will not lend money to other persons, except through
purchasing debt obligations, lending portfolio securities in an amount not
to exceed 33 1/3% of the value of the Fund's total assets and entering into
repurchase agreements.
(5) The Fund will invest no more than 25% of the value of its total
assets in securities of issuers in any one industry. For purposes of this
restriction, the term industry will be deemed to include (a) the government
of any country other than the United States, but not the United States
Government and (b) all supranational organizations.
(6) The Fund will not purchase securities on margin, except that the
Fund may engage in short sales of securities and obtain any short-term
credits necessary for the clearance of purchases and sales of securities.
For purposes of this restriction, the deposit or payment of initial or
variation margin in connection with futures contracts or options on futures
contracts will not be deemed to be a purchase of securities on margin.
(7) The Fund will not purchase or sell real estate or real estate
limited partnership interests, except that the Fund may purchase and sell
securities of companies that deal in real estate or interests in real
estate.
(8) The Fund will not purchase or sell commodities or commodity
contracts (except currencies, securities index and currency futures
contracts and related options, forward foreign currency contracts and other
similar contracts).
FR-11
(9) The Fund will not invest in oil, gas or other mineral leases or
exploration or development programs.
(10) The Fund will not act as an underwriter of securities, except that
the Fund may acquire securities under circumstances in which, if the
securities were sold, the Fund might be deemed to be an underwriter for
purposes of the 1933 Act.
FR-12
INVESTMENT TRUST III
SMALL CAP GROWTH FUND
Under the investment restrictions adopted by the Trust with respect to the
Fund:
(1) The Fund will not purchase securities (other than Government
Securities) of any issuer if, as a result of the purchase, more than 5% of
the value of the Fund's total assets would be invested in the securities of
the issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation.
(2) The Fund will not purchase more than 10% of the voting securities of
any one issuer, except that this limitation is not applicable to the Fund's
investments in Government Securities, and up to 25% of the Fund's assets may
be invested without regard to this 10% limitation.
(3) The Fund will not borrow money, except that the Fund may borrow from
banks for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests and cash payments of dividends and
distributions that might otherwise require the untimely disposition of
securities, in an amount not to exceed 20% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing is made.
Whenever borrowings exceed 5% of the value of the total assets of the Fund,
the Fund will not make any additional investments.
(4) The Fund will not lend money to other persons, except through
purchasing debt obligations, lending portfolio securities in an amount not
to exceed 30% of the Fund's assets taken at value and entering into
repurchase agreements.
(5) The Fund will invest no more than 25% of the value of its total
assets in securities of issuers in any one industry. For purposes of this
restriction, the term industry will be deemed to include the government of
any country other than the United States, but not the U.S. Government.
(6) The Fund will not purchase securities on margin, except that the
Fund may obtain any short-term credits necessary for the clearance of
purchases and sales of securities. For purposes of this restriction, the
deposit or payment of initial or variation margin in connection with futures
contracts or options on futures contracts will not be deemed to be a
purchase of securities on margin.
(7) The Fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open, the Fund owns
an equal amount of the securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities
of the same issue as, and equal in amount to, the securities sold short.
(8) The Fund will not purchase or sell real estate or real estate
limited partnership interests, except that the Fund may purchase and sell
securities of companies that deal in real estate or interests in real
estate.
(9) The Fund will not purchase or sell commodities or commodity
contracts, except futures contracts and related options and other similar
contracts.
FR-13
(10) The Fund will not act as an underwriter of securities, except that
the Fund may acquire securities under circumstances in which, if the
securities were sold, the Fund might be deemed to be an underwriter for
purposes of the Securities Act of 1933, as amended.
FR-14
MANAGED ASSETS TRUST
CAPITAL APPRECIATION FUND
The Fund may not:
(1) purchase securities of any one issuer (except U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in such issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, provided, however, that up to
25% of the value of the Fund's total assets may be invested without regard
to these limitations;
(2) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts and options on futures contracts;
(3) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under the federal securities laws;
(4) make short sales of securities or maintain a short position, except
that the Fund may (a) make short sales of securities it does not own in an
amount up to 25% of its net assets, (b) make short sales and maintain short
positions in connection with its use of options, futures contracts and
options on futures contracts and (c) sell short "against the box";
(5) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell financial futures contracts, such as stock index,
interest rate and bond index futures contracts and options thereon;
(7) invest in oil, gas or mineral-related programs or leases;
(8) make loans, except through loans of portfolio securities as
described in the Prospectus or the Statement of Additional Information and
except through repurchase agreements; provided that for purposes of this
restriction the acquisition of bonds, debentures, or other corporate debt
securities and investment in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed
to be the making of loans;
(9) purchase any securities issued by any other investment company,
except in connection with the merger, consolidation or acquisition of all
the securities or assets of such an issuer;
(10) issue senior securities or borrow money, except from banks for
temporary purposes and except for reverse repurchase agreements, and then in
an aggregate amount not in excess of 10% of the Fund's total assets;
provided further that the Fund will not purchase securities while borrowings
in excess of 5% of the Fund's total assets are outstanding; or
(11) make an investment in any one industry if the investment would
cause the aggregate value of the Fund's investments in such industry to
equal or exceed 25% of the Fund's total assets.
The Fund will interpret fundamental investment limitation (5) to prohibit
investment in real estate limited partnerships.
FR-15
MANAGED INVESTMENTS TRUST
HIGH INCOME FUND
The Fund may not:
(1) purchase the securities of any issuer if as a result more than 5% of
the total assets of the Fund would be invested in the securities of that
issuer; provided that securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities are not subject to this
limitation and further provided that up to 25% of the value of the Fund's
assets may be invested without regard to this limitation;
(2) issue senior securities or borrow money, except from banks or
through reverse repurchase agreements for temporary or emergency purposes,
and then in an aggregate amount not in excess of 10% of the Fund's total
assets at the time of such borrowings; provided that the Fund will not
purchase securities while borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding;
(3) purchase securities if, as a result of the purchase, the Fund would
have more than 25% of the value of its total assets invested in securities
of issuers in any one industry, except that this limitation does not apply
to obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities;
(4) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal securities laws;
(5) purchase or sell real estate, except that investments in Ginnie Mae
certificates and other debt securities secured by real estate or real estate
interests are not subject to this limitation;
(6) purchase securities on margin, make short sales of securities or
maintain a short position in any security, except that the Fund may (a) make
margin deposits, make short sales and maintain short positions in connection
with its use of options, futures contracts and options on utures contracts
and (b) sell short "against the box";
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell interest rate futures contracts and options
thereon;
(8) invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in issuers which invest in such programs;
(9) purchase securities of other open-end investment companies, except
in connection with a merger, consolidation or acquisition;
(10) make loans, except through repurchase agreements and except in
connection with the loan of securities as described herein; provided that
for purposes of this restriction the acquisition of bonds or other debt
obligations shall not be deemed to be the making of a loan; or
(11) hold more than 10% of the outstanding voting securities of any
issuer.
The Fund will continue to interpret fundamental investment limitation (5) to
prohibit investment in real estate limited partnerships. The Fund will continue
to interpret fundamental investment limitation (8) to prohibit investment in
oil, gas or mineral leases.
FR-16
MANAGED INVESTMENTS TRUST
INVESTMENT GRADE FUND
The Fund may not:
(1) purchase the securities of any issuer if as a result more than 5% of
the total assets of the Fund would be invested in the securities of that
issuer; provided that securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities are not subject to this
limitation and further provided that up to 25% of the value of the Fund's
assets may be invested without regard to this limitation;
(2) issue senior securities or borrow money, except from banks or
through reverse repurchase agreements for temporary or emergency purposes,
and then in an aggregate amount not in excess of 10% of the Fund's total
assets at the time of such borrowings; provided that the Fund will not
purchase securities while borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding;
(3) purchase securities if, as a result of the purchase, the Fund would
have more than 25% of the value of its total assets invested in securities
of issuers in any one industry, except that this limitation does not apply
to obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities;
(4) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal securities laws;
(5) purchase or sell real estate, except that investments in Ginnie Mae
certificates and other debt securities secured by real estate or real estate
interests are not subject to this limitation;
(6) purchase securities on margin, make short sales of securities or
maintain a short position in any security, except that a Fund may (a) make
margin deposits, make short sales and maintain short positions in connection
with its use of options, futures contracts and options on futures contracts
and (b) sell short "against the box";
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell interest rate futures contracts and options
thereon;
(8) invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in issuers which invest in such programs;
(9) purchase securities of other open-end investment companies, except
in connection with a merger, consolidation or acquisition;
(10) make loans, except through repurchase agreements and except in
connection with the loan of securities as described herein; provided that
for purposes of this restriction the acquisition of bonds or other debt
obligations shall not be deemed to be the making of a loan; or
(11) hold more than 10% of the outstanding voting securities of any
issuer.
The Fund will continue to interpret fundamental investment limitation (5) to
prohibit investment in real estate limited partnerships. The Fund will continue
to interpret fundamental investment limitation (8) to prohibit investment in
oil, gas or mineral leases.
FR-17
MANAGED INVESTMENTS TRUST
LOW DURATION FUND
The Fund may not:
(1) purchase the securities of any issuer if as a result more than 5% of
the total assets of the Fund would be invested in the securities of that
issuer; provided that securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities are not subject to this
limitation and further provided that up to 25% of the value of the Fund's
assets may be invested without regard to this limitation;
(2) issue senior securities or borrow money, except from banks or
through reverse repurchase agreements and mortgage dollar rolls, and then in
an aggregate amount not in excess of 33 1/3% of the Fund's total assets
(including the amount of the borrowings and senior securities issued but
reduced by any liabilities not constituting senior securities) at the time
of such borrowings, except that the Fund may borrow up to an additional 5%
of total assets (not including the amount borrowed) for temporary or
emergency purposes;
(3) purchase securities if, as a result of the purchase, the Fund would
have more than 25% of the value of its total assets invested in securities
of issuers in any one industry, except that this limitation does not apply
to (a) obligations issued or guaranteed by the U.S. government, its agencies
and instrumentalities and (b) investments in mortgage- and asset-backed
securities, which (whether or not issued or guaranteed by an agency or
instrumentality of the U.S. government) shall be considered a single
industry for purposes of this limitation;
(4) underwrite securities of other issuers, except to the extent that in
connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal securities laws;
(5) purchase or sell real estate (including real estate limited
partnerships), except that investments in mortgage-backed securities and
other debt securities secured by real estate or interests therein are not
subject to this limitation, and provided further that the Fund may exercise
rights under agreements relating to such securities, including the right to
enforce security interests and to liquidate real estate acquired as a result
of such enforcement;
(6) purchase securities on margin, make short sales of securities or
maintain a short position in any security, except that the Fund may (a) make
margin deposits, make short sales and maintain short positions in connection
with its use of options, futures contracts and options on futures contracts
and (b) sell short "against the box";
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell financial futures contracts, such as interest rate
and bond index futures contracts and options thereon;
(8) invest in oil, gas or mineral exploration or development programs or
leases, except that the Fund may invest in issuers which invest in such
programs;
FR-18
(9) purchase securities of other open-end investment companies, except
in connection with a merger, consolidation or acquisition; or
(10) make loans, except through repurchase agreements and except in
connection with the loan of securities as described herein or in the
Prospectus; provided that for purposes of this restriction the acquisition
of bonds or other debt instruments, or interests therein, shall not be
deemed to be the making of a loan.
For purposes of fundamental investment limitation (1), mortgage- and
asset-backed securities will not be considered to have been issued by the same
issuer by reason of such securities having the same sponsor, and mortgage- and
asset-backed securities issued by a finance subsidiary or other single purpose
subsidiary of a corporation that are not guaranteed by the parent corporation
will be considered to be issued by a separate issuer from its parent
corporation.
FR-19
MANAGED INVESTMENTS TRUST
U.S. GOVERNMENT FUND
The Fund may not:
(1) purchase the securities of any issuer if as a result more than 5% of
the total assets of the Fund would be invested in the securities of that
issuer; provided that securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities are not subject to this
limitation and further provided that up to 25% of the value of the Fund's
assets may be invested without regard to this limitation;
(2) issue senior securities or borrow money, except from banks or
through reverse repurchase agreements and dollar rolls, and then in an
aggregate amount not in excess of 33 1/3% of the Fund's total assets
(including the amount of the borrowings and senior securities issued but
reduced by any liabilities not constituting senior securities) at the time
of such borrowings, except that the Fund may borrow up to an additional 5%
of its total assets (not including the amount borrowed) for temporary or
emergency purposes;
(3) purchase securities if, as a result of the purchase, the Fund would
have more than 25% of the value of its total assets invested in securities
of issuers in any one industry, except that this limitation does not apply
to (a) obligations issued or guaranteed by the U.S. government, its agencies
and instrumentalities and (b) investments in mortgage-backed and
asset-backed securities, which (whether or not issued or guaranteed by an
agency or instrumentality of the U.S. government) shall be considered a
single industry for purposes of this limitation;
(4) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal securities laws;
(5) purchase or sell real estate, except that investments in Government
National Mortgage Association ("Ginnie Mae") certificates and other debt
securities secured by real estate or real estate interests are not subject
to this limitation;
(6) purchase securities on margin, make short sales of securities or
maintain a short position in any security, except that the Fund may (a) make
margin deposits, make short sales and maintain short positions in connection
with its use of options, futures contracts and options on futures contracts,
and (b) sell short "against the box";
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell interest rate futures contracts and options
thereon;
(8) invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in issuers which invest in such programs;
(9) purchase securities of other open-end investment companies, except
in connection with a merger, consolidation or acquisition;
FR-20
(10) make loans, except through repurchase agreements and except in
connection with the loan of securities as described herein; provided that
for purposes of this restriction the acquisition of bonds or other debt
obligations shall not be deemed to be the making of a loan; or
(11) hold more than 10% of the outstanding voting securities of any
issuer.
The Fund will continue to interpret fundamental investment limitation (5) to
prohibit investment in real estate limited partnerships. The Fund will continue
to interpret fundamental investment limitation (8) to prohibit investment in
oil, gas or mineral leases.
FR-21
MANAGED INVESTMENTS TRUST
UTILITY FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks or
through reverse repurchase agreements for emergency or temporary purposes,
and then in an aggregate amount not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing, provided that the Fund
will not purchase securities while borrowings (including reverse repurchase
agreements) in excess of 5% of the value of the Fund's total assets are
outstanding;
(2) purchase securities of any one issuer if as a result more than 5% of
the Fund's total assets would be invested in such issuer or the Fund would
own or hold 10% of the outstanding securities of that issuer, except that up
to 25% of the Fund's total assets may be invested without regard to this
limitation and provided that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities;
(3) make an investment in any one industry if the investment would cause
the aggregate value of the Fund's investments in such industry to exceed 25%
of the Fund's total assets, except that U.S. government securities are not
subject to this limitation and except that the Fund, under normal
circumstances, will invest 25% or more of its total assets in utility
industries as a group (utility industries for this purpose consist of
companies primarily engaged in the ownership or operation of facilities used
in the generation, transmission or distribution of electricity,
telecommunications, gas or water);
(4) purchase securities on margin, except for short-term credits
necessary for clearance of portfolio transactions, and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts and options on futures contracts;
(5) engage in the business of underwriting securities of other issuers,
except to the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under federal securities
laws and except that the Fund may write options;
(6) make short sales of securities or maintain a short position, except
that the Fund may (a) make short sales and maintain short positions in
connection with its use of options, futures contracts, options on futures
contracts and forward contracts and (b) sell short "against the box";
(7) Purchase or sell real estate (including real estate limited
partnership interests), provided that the Fund may invest in securities
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial futures contracts, such as interest
rate, stock index, bond index and foreign currency futures contracts and
options thereon, may engage in transactions in foreign currencies and may
purchase or sell options on foreign currencies;
FR-22
(9) invest in oil, gas or mineral-related programs or leases; or
(10) make loans, except through loans of portfolio securities and except
through repurchase agreements, provided that for purposes of this
restriction the acquisition of publicly distributed bonds, debentures or
other corporate debt securities and investment in government obligations,
short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of a loan.
FR-23
MASTER SERIES
BALANCED FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks or
through reverse repurchase agreements for emergency or temporary purposes,
and then in an aggregate amount not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing, provided that the Fund
will not purchase securities while borrowings (including reverse repurchase
agreements) in excess of 5% of the value of the Fund's total assets are
outstanding;
(2) purchase any securities other than those its investment objective
and policies permit it to purchase;
(3) purchase securities of any one issuer if as a result more than 5% of
the Fund's total assets would be invested in such issuer or the Fund would
own or hold 10% of the outstanding securities of that issuer, except that up
to 25% of the Fund's total assets may be invested without regard to this
limitation and provided that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities;
(4) purchase securities on margin except for short-term credit necessary
for clearance of portfolio transactions;
(5) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal securities laws;
(6) make short sales of securities or maintain a short position, except
that the Fund may sell short "against the box;"
(7) purchase or sell real estate, including interests in real estate
limited partnerships, provided that the Fund may invest in securities
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein;
(8) purchase or sell commodities or commodity contracts;
(9) invest in oil, gas or mineral-related programs or leases;
(10) make loans, except through loans of portfolio securities s
described in the Prospectus or Statement of Additional Information and
except through repurchase agreements, provided that for purposes of this
restriction the acquisition of publicly distributed bonds, debentures, or
other corporate debt securities and investment in government obligations,
short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of a loan; or
(11) purchase any securities issued by any other investment company,
except in connection with the merger, consolidation or acquisition of all
the securities or assets of such an issuer.
FR-24
MASTER SERIES
PW MONEY MARKET FUND
The Fund may not:
(1) borrow money, except from banks for temporary purposes and except
for reverse repurchase agreements if otherwise permitted and then in an
aggregate amount not in excess of 10% of the asset value of the Fund at the
time of such borrowing;
(2) make loans, except that the Fund may purchase or hold debt
instruments, including repurchase agreements, in accordance with its
investment policies and restrictions;
(3) purchase or sell real estate, provided that the Fund may purchase
commercial paper issued by companies, including real estate investment
trusts, which invest in real estate or interests therein;
(4) purchase securities on margin, make short sales of securities, or
maintain a short position;
(5) act as underwriter of securities;
(6) purchase or sell commodities or commodity contracts, or invest in
oil, gas or mineral exploration or development programs;
(7) acquire voting securities of any issuer or acquire securities of
other investment companies, except in connection with a merger,
consolidation or acquisition;
(8) purchase securities of any one issuer, other than the U.S.
government, its agencies and instrumentalities, if immediately after such
purchase more than 5% of the Fund's total asset value would be invested in
such issuer, except that up to 25% of the Fund's total assets may be
invested without regard to such 5% limitation; or
(9) purchase securities if immediately after such purchase more than 25%
of the value of its total assets would be invested in the securities of one
or more issuers conducting their principal business activities in the same
industry, provided that there is no limitation with respect to investments
in U.S. Treasury bills, other obligations issued or guaranteed by the U.S.
government, its agencies and instrumentalities, and certificates of deposit
and bankers' acceptances of domestic branches of U.S. banks. With respect to
this limitation, as to utility companies, gas, electric, water and telephone
companies will be considered separate industries. As to finance companies,
the following categories will be considered separate industries: (a) captive
automotive finance; (b) captive equipment finance; (c) retail finance; (d)
consumer loan companies; and (e) diversified finance companies.
FR-25
MUNICIPAL SERIES
MUNICIPAL HIGH INCOME FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for
temporary purposes, provided that the aggregate amount borrowed does not
exceed 10% of the total asset value of the Fund at the time of such
borrowing and further provided that the Fund will not purchase securities
while borrowings in excess of 5% of its total assets are outstanding;
(2) underwrite securities of other issuers, except to the extent that,
in connection with the purchase of municipal securities directly from an
issuer thereof in accordance with the Fund's investment objective, policies
and limitations or the disposition of portfolio securities, the Fund may be
deemed to be an underwriter;
(3) purchase or sell real estate, except that the Fund may invest in
municipal securities secured by real estate or interests therein;
(4) purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may (a) make margin
deposits, make short sales and maintain short positions in connection with
its use of options, futures contracts and options on futures contracts and
(b) sell short "against the box";
(5) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell futures contracts on municipal securities and on
indexes of municipal securities and options thereon;
(6) invest in oil, gas or mineral exploration or development programs;
(7) purchase voting securities of any issuer or acquire securities of
other investment companies, except in connection with a merger,
consolidation or acquisition and except to the extent permitted by Section
12 of the Investment Company Act of 1940 ("1940 Act") (currently, up to 10%
of the total assets of the Fund and no more than 5% of total assets in any
single investment company and no more than 3% of the total outstanding
voting stock of any one investment company);
(8) make loans, except through repurchase agreements; provided that for
purposes of this restriction the acquisition of publicly distributed
municipal securities and other publicly distributed debt obligations shall
not be deemed to be the making of a loan; and
(9) purchase any security if, as a result, 25% or more of the value of
the Fund's total assets would be invested in the securities of issuers
having their principal business activities in the same industry, except that
this limitation does not apply to municipal securities or securities issued
or guaranteed by the U.S. government, its agencies and instrumentalities.
For purposes of limitation (9), the District of Columbia, Puerto Rico, each
state or territory, each public subdivision, agency, instrumentality and
authority thereof, and each multi-state agency of which a state is a
FR-26
member is a separate "issuer." When the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from the
government creating the subdivision and the security is backed only by the
assets and revenues of the subdivision, such subdivision would be deemed to be
the sole issuer. Similarly, in the case of an industrial development bond
("IDB") or private activity bond ("PAB"), if that bond is backed only by the
assets and revenues of the nongovernmental user, then such nongovernmental user
would be deemed to be the sole issuer. However, if in either case the creating
government or some other agency guarantees a security, such a guarantee would be
considered a separate security and would be treated as an issuer of such
government or other agency. While limitation (4) permits the Fund to sell short
"against the box" and limitation (7) permits the Fund to invest up to 10% of its
total assets in the securities of other investment companies, the Fund does not
have any present intention of engaging in these practices.
It is possible that the Fund from time to time will invest more than 25% of
its total assets in a particular segment of the municipal securities market,
such as hospital revenue bonds, housing agency bonds, IDBs, PABs or airport
bonds or in securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic, business, political or
other changes affecting one bond might also affect other bonds in the same
segment, thereby potentially increasing market risk.
The Fund will continue to interpret fundamental investment limitation (3) to
prohibit investment in real estate limited partnerships.
* * * * *
In addition to the foregoing fundamental restrictions the Fund has an
affirmative fundamental policy to invest, except for temporary purposes, at
least 80% of its net assets in municipal obligations. The revisions to the
Funds' fundamental restrictions under Proposal 3 will not change that policy.
FR-27
MUNICIPAL SERIES
NEW YORK TAX-FREE FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for
temporary purposes, provided that the aggregate amount borrowed does not
exceed 10% of the total asset value of the Fund at the time of such
borrowing and further provided that the Fund will not purchase securities
while borrowings in excess of 5% of its total assets are outstanding;
(2) underwrite securities of other issuers, except to the extent that,
in connection with the purchase of municipal securities directly from an
issuer thereof in accordance with the Fund's investment objective, policies
and limitations or the disposition of portfolio securities, the Fund may be
deemed to be an underwriter;
(3) purchase or sell real estate, except that the Fund may invest in
municipal securities secured by real estate or interests therein;
(4) purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may (a) make margin
deposits, make short sales and maintain short positions in connection with
its use of options, futures contracts and options on futures contracts and
(b) sell short "against the box";
(5) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell futures contracts on municipal securities and on
indexes of municipal securities and options thereon;
(6) invest in oil, gas or mineral exploration or development programs;
(7) purchase voting securities of any issuer or acquire securities of
other investment companies, except in connection with a merger,
consolidation or acquisition and except to the extent permitted by Section
12 of the Investment Company Act of 1940 ("1940 Act") (currently, up to 10%
of the total assets of the Fund and no more than 5% of total assets in any
single investment company and no more than 3% of the total outstanding
voting stock of any one investment company);
(8) make loans, except through repurchase agreements; provided that for
purposes of this restriction the acquisition of publicly distributed
municipal securities and other publicly distributed debt obligations shall
not be deemed to be the making of a loan; and
(9) purchase any security if, as a result, 25% or more of the value of
the Fund's total assets would be invested in the securities of issuers
having their principal business activities in the same industry, except that
this limitation does not apply to municipal securities or securities issued
or guaranteed by the U.S. government, its agencies and instrumentalities.
For purposes of limitation (9), the District of Columbia, Puerto Rico, each
state or territory, each public subdivision, agency, instrumentality and
authority thereof, and each multi-state agency of which a state is a
FR-28
member is a separate "issuer." When the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from the
government creating the subdivision and the security is backed only by the
assets and revenues of the subdivision, such subdivision would be deemed to be
the sole issuer. Similarly, in the case of an industrial development bond
("IDB") or private activity bond ("PAB"), if that bond is backed only by the
assets and revenues of the nongovernmental user, then such nongovernmental user
would be deemed to be the sole issuer. However, if in either case the creating
government or some other agency guarantees a security, such a guarantee would be
considered a separate security and would be treated as an issuer of such
government or other agency. While limitation (4) permits the Fund to sell short
"against the box" and limitation (7) permits the Fund to invest up to 10% of its
total assets in the securities of other investment companies, the Fund does not
have any present intention of engaging in these practices.
It is possible that the Fund from time to time will invest more than 25% of
its total assets in a particular segment of the municipal securities market,
such as hospital revenue bonds, housing agency bonds, IDBs, PABs or airport
bonds or in securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic, business, political or
other changes affecting one bond might also affect other bonds in the same
segment, thereby potentially increasing market risk.
The Fund will continue to interpret fundamental investment limitation (3) to
prohibit investment in real estate limited partnerships.
* * * * *
In addition to the foregoing fundamental restrictions, the Fund currently
has an affirmative fundamental policy to invest, except under unusual market
conditions, at least 80% of its net assets in investment grade debt obligations
of varying maturities issued by the State of New York, its municipalities and
public authorities or by other issuers if such obligations pay interest that is
exempt from federal income tax as well as New York State and New York City
personal income taxes and is not an item of tax preference for purposes of the
federal alternative minimum tax. The revisions to the Fund's fundamental
restrictions under Proposal 3 will not change that policy.
FR-29
MUTUAL FUND TRUST
CALIFORNIA TAX-FREE FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for
temporary purposes, provided that the aggregate amount borrowed does not
exceed 10% of the total asset value of the Fund at the time of such
borrowing and further provided that the Fund will not purchase securities
while borrowings in excess of 5% of its total assets are outstanding;
(2) underwrite securities of other issuers, except to the extent that,
in connection with the purchase of municipal securities directly from an
issuer thereof in accordance with the Fund's investment objective, policies
and limitations or the disposition of portfolio securities, the Fund may be
deemed to be an underwriter;
(3) purchase or sell real estate, except that the Fund may invest in
municipal securities secured by real estate or interests therein;
(4) purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may (a) make margin
deposits, make short sales and maintain short positions in connection with
its use of options, futures contracts and options on futures contracts and
(b) sell short "against the box";
(5) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell futures contracts on municipal securities and on
indexes of municipal securities and options thereon;
(6) invest in oil, gas or mineral exploration or development programs;
(7) purchase voting securities of any issuer or acquire securities of
other investment companies, except in connection with a merger,
consolidation or acquisition and except to the extent permitted by Section
12 of the Investment Company Act of 1940 ("1940 Act") (currently, up to 10%
of the total assets of the Fund and no more than 5% of total assets in any
single investment company and no more than 3% of the total outstanding
voting stock of any one investment company);
(8) make loans, except through repurchase agreements; provided that for
purposes of this restriction the acquisition of publicly distributed
municipal securities and other publicly distributed debt obligations shall
not be deemed to be the making of a loan; and
(9) purchase any security if, as a result, 25% or more of the value of
the Fund's total assets would be invested in the securities of issuers
having their principal business activities in the same industry, except that
this limitation does not apply to municipal securities or securities issued
or guaranteed by the U.S. government, its agencies and instrumentalities.
For purposes of limitation (9), the District of Columbia, Puerto Rico, each
state or territory, each public subdivision, agency, instrumentality and
authority thereof, and each multi-state agency of which a state is a
FR-30
member is a separate "issuer." When the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from the
government creating the subdivision and the security is backed only by the
assets and revenues of the subdivision, such subdivision would be deemed to be
the sole issuer. Similarly, in the case of an industrial development bond
("IDB") or private activity bond ("PAB"), if that bond is backed only by the
assets and revenues of the nongovernmental user, then such nongovernmental user
would be deemed to be the sole issuer. However, if in either case the creating
government or some other agency guarantees a security, such a guarantee would be
considered a separate security and would be treated as an issuer of such
government or other agency. While limitation (4) permits the Fund to sell short
"against the box" and limitation (7) permits the Fund to invest up to 10% of its
total assets in the securities of other investment companies, the Fund does not
have any present intention of engaging in these practices.
It is possible that the Fund from time to time will invest more than 25% of
its total assets in a particular segment of the municipal securities market,
such as hospital revenue bonds, housing agency bonds, IDBs, PABs or airport
bonds or in securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic, business, political or
other changes affecting one bond might also affect other bonds in the same
segment, thereby potentially increasing market risk.
The Fund will continue to interpret fundamental investment limitation (3) to
prohibit investment in real estate limited partnerships.
* * * * *
In addition to the foregoing fundamental restrictions, the Fund currently
has an affirmative fundamental policy to invest, except under unusual market
conditions, at least 80% of its net assets in investment grade debt obligations
of varying maturities issued by the State of California, its municipalities and
public authorities or by other issuers if such obligations pay interest that is
exempt from federal income tax and California personal income tax and is not an
item of tax preference for purposes of the federal alternative minimum tax. The
revisions to the Fund's fundamental restrictions under Proposal 3 will not
change that policy.
FR-31
MUTUAL FUND TRUST
NATIONAL TAX-FREE FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for
temporary purposes, provided that the aggregate amount borrowed does not
exceed 10% of the total asset value of the Fund at the time of such
borrowing and further provided that the Fund will not purchase securities
while borrowings in excess of 5% of its total assets are outstanding;
(2) underwrite securities of other issuers, except to the extent that,
in connection with the purchase of municipal securities directly from an
issuer thereof in accordance with the Fund's investment objective, policies
and limitations or the disposition of portfolio securities, the Fund may be
deemed to be an underwriter;
(3) purchase or sell real estate, except that the Fund may invest in
municipal securities secured by real estate or interests therein;
(4) purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may (a) make margin
deposits, make short sales and maintain short positions in connection with
its use of options, futures contracts and options on futures contracts and
(b) sell short "against the box";
(5) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell futures contracts on municipal securities and on
indexes of municipal securities and options thereon;
(6) invest in oil, gas or mineral exploration or development programs;
(7) purchase voting securities of any issuer or acquire securities of
other investment companies, except in connection with a merger, onsolidation
or acquisition and except to the extent permitted by Section 12 of the
Investment Company Act of 1940 ("1940 Act") (currently, up to 10% of the
total assets of the Fund and no more than 5% of total assets in any single
investment company and no more than 3% of the total outstanding voting stock
of any one investment company);
(8) make loans, except through repurchase agreements; provided that for
purposes of this restriction the acquisition of publicly distributed
municipal securities and other publicly distributed debt obligations shall
not be deemed to be the making of a loan; and
(9) purchase any security if, as a result, 25% or more of the value of
the Fund's total assets would be invested in the securities of issuers
having their principal business activities in the same industry, except that
this limitation does not apply to municipal securities or securities issued
or guaranteed by the U.S. government, its agencies and instrumentalities.
For purposes of limitation (9), the District of Columbia, Puerto Rico, each
state or territory, each public subdivision, agency, instrumentality and
authority thereof, and each multi-state agency of which a state is a
FR-32
member is a separate "issuer." When the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from the
government creating the subdivision and the security is backed only by the
assets and revenues of the subdivision, such subdivision would be deemed to be
the sole issuer. Similarly, in the case of an industrial development bond
("IDB") or private activity bond ("PAB"), if that bond is backed only by the
assets and revenues of the nongovernmental user, then such nongovernmental user
would be deemed to be the sole issuer. However, if in either case the creating
government or some other agency guarantees a security, such a guarantee would be
considered a separate security and would be treated as an issuer of such
government or other agency. While limitation (4) permits the Fund to sell short
"against the box" and limitation (7) permits the Fund to invest up to 10% of its
total assets in the securities of other investment companies, the Fund does not
have any present intention of engaging in these practices.
It is possible that the Fund from time to time will invest more than 25% of
its total assets in a particular segment of the municipal securities market,
such as hospital revenue bonds, housing agency bonds, IDBs, PABs or airport
bonds or in securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic, business, political or
other changes affecting one bond might also affect other bonds in the same
segment, thereby potentially increasing market risk.
The Fund will continue to interpret fundamental investment limitation (3) to
prohibit investment in real estate limited partnerships.
* * * * *
In addition to the foregoing fundamental restrictions, the Fund has an
affirmative fundamental policy to invest, except for temporary purposes, at
least 80% of its net assets in municipal obligations that pay AMT exempt
interest. The revisions to the Fund's fundamental restrictions under Proposal 3
will not change that policy.
FR-33
OLYMPUS FUND
GROWTH FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for
temporary purposes and except for reverse repurchase agreements, and then in
an aggregate amount not in excess of 10% of the Fund's total assets;
provided further that the Fund will not purchase securities while borrowings
(including reverse repurchase agreements) in excess of 5% of the Fund's
total assets are outstanding;
(2) make an investment in any one industry if the investment would cause
the aggregate value of the Fund's investments in such industry to exceed 25%
of the Fund's total assets;
(3) purchase securities of any one issuer (except U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in such issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, provided, however, that up to
25% of the value of the Fund's total assets may be invested without regard
to these limitations;
(4) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts and options on futures contracts;
(5) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal securities laws;
(6) make short sales of securities or maintain a short position, except
that the Fund may (a) make short sales and may maintain short positions in
connection with its use of options, futures contracts and options on future
contracts and (b) sell short "against the box";
(7) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell stock index futures and interest rate futures and
options thereon;
(9) invest in oil, gas or mineral-related programs or leases;
(10) make loans, except through loans of portfolio securities as
described herein and except through repurchase agreements; provided that for
purposes of this restriction the acquisition of bonds, debentures or other
corporate debt securities and investments in government obligations,
short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of loans; or
(11) purchase any securities issued by any other investment company,
except by purchase in the open market where no commission or profit, other
than a customary brokers' commission, is earned by any sponsor or dealer
associated with the investment company whose shares are acquired as a result
of such purchase, provided that such securities in the aggregate do not
represent more than 10% of the
FR-34
Fund's total assets, and except in connection with the merger, consolidation
or acquisition of all the securities or assets of such an issuer.
The Fund will continue to interpret fundamental investment limitation (7) to
prohibit investment in real estate limited partnerships.
FR-35
SECURITIES TRUST
SMALL CAP VALUE FUND
The Fund may not:
(1) purchase securities of any one issuer (except U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in such issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, provided, however, that up to
25% of the value of the Fund's total assets may be invested without regard
to these limitations;
(2) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts and options on futures contracts;
(3) underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under the federal securities laws;
(4) make short sales of securities or maintain a short position, except
that the Fund may make short sales and maintain short positions in
connection with its use of options, futures contracts and options on futures
contracts;
(5) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell financial futures contracts, such as stock index,
interest rate and bond index futures contracts and options thereon;
(7) invest in oil, gas or mineral-related programs or leases;
(8) make loans, except through loans of portfolio securities as
described herein and except through repurchase agreements; provided that for
purposes of this restriction the acquisition of bonds, debentures, or other
corporate debt securities and investment in government obligations,
short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of loans;
(9) purchase any securities issued by any other investment company,
except in connection with the merger, consolidation or acquisition of all or
substantially all the securities or assets of such an issuer;
(10) issue senior securities or borrow money, except from banks for
temporary purposes and for reverse repurchase agreements, and then in an
aggregate amount not in excess of 10% of the Fund's total assets; provided
further that the Fund will not purchase securities while borrowings in
excess of 5% of the Fund's assets are outstanding; or
(11) make an investment in any one industry if the investment would
cause the aggregate value of the Fund's investments in such industry to
equal or exceed 25% of the Fund's total assets. The Fund will interpret
fundamental investment limitation (5) to prohibit investment in real estate
limited partnerships.
FR-36
SECURITIES TRUST
STRATEGIC INCOME FUND
The Fund may not:
(1) issue senior securities (including borrowing money from banks and
other entities and through reverse repurchase agreements) in excess of 33
1/3% of its total assets (including the amount of senior securities issued,
but reduced by any liabilities and indebtedness not constituting senior
securities), except that the Fund may borrow up to an additional 5% of its
total assets (not including the amount borrowed) for temporary or emergency
purposes;
(2) make an investment in any one industry if the investment would cause
the aggregate value of all investments in such industry to equal 25% or more
of the Fund's total assets; provided, that this limitation does not apply to
investments in securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities;
(3) purchase securities on margin, except for short-term credits
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts, options on futures contracts, forward currency contracts and
other financial instruments;
(4) engage in the business of underwriting securities of other issuers,
except to the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under federal securities
laws and except that the Fund may write options;
(5) make short sales of securities or maintain a short position, except
that the Fund may maintain short positions in connection with its use of
options, futures contracts, options on futures contracts and forward
currency contracts;
(6) purchase or sell real estate (including real estate limited
partnership interests), provided that the Fund may invest in securities
secured by real estate or interests therein or issued by entities that
invest in real estate or interests therein, and provided further that the
Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to liquidate real
estate acquired as a result of such enforcement;
(7) purchase or sell commodities or commodity contracts, except that the
Fund may sell commodities received upon the exercise of warrants, may
purchase or sell financial and currency futures contracts and options
thereon, may purchase and sell forward contracts, may engage in transactions
in foreign currencies and may purchase or sell options on foreign
currencies:
(8) invest in oil, gas or mineral-related programs or leases; or
(9) make loans, except through loans of portfolio instruments and
repurchase agreements, provided that for purposes of this restriction the
acquisition of bonds, debentures or other debt instruments or interests
therein and investment in loan assignments and participations, government
obligations, short-term commercial paper, certificates of deposit and
bankers' acceptances shall not be deemed to be the making of a loan.
FR-37
CODE B
PROXY Special Meetings of Shareholders - April 10, 1996 PROXY
- ----- -----
This proxy is solicited on behalf of the Board of Trustees/Directors of the
Company indicated above and relates to proposals with respect to the Company or
to the series or portfolio of the Company indicated above ("Fund"). The
undersigned hereby appoints as proxies Dianne E. O'Donnell and Keith A. Weller
and each of them (with power of substitution) to vote for the undersigned all
shares of beneficial interest/common stock of the undersigned in the Fund at the
above referenced meeting and any adjournment thereof, with all the power the
undersigned would have if personally present. The shares represented by this
proxy will be voted as instructed. Unless indicated to the contrary, this proxy
shall be deemed to grant authority to vote "FOR" all proposals relating to the
relevant Company or Fund.
YOUR VOTE IS IMPORTANT. Please date and sign this proxy below and return it in
the enclosed envelope to: Alamo Direct, 280 Oser Avenue, Hauppauge, NY 11788.
This proxy will not be voted unless it is dated and signed exactly as instructed
hereon.
If shares are held by an individual,
sign your name exactly as it appears on
this proxy card. If shares are held
jointly, either party may sign, but the
name of the party signing should conform
exactly to the name shown on this proxy
card. If shares are held by a
corporation, partnership or similar
account, the name and the capacity of
the individual signing the proxy card
should be indicated -- for example: "ABC
Corp., John Doe, Treasurer."
Sign exactly as name appears hereon.
______________________ (L.S.)
______________________ (L.S.)
Date __________________, 1996
B
[COMPANY-FUND NAME]
Please indicate your vote by an "X" in the appropriate box below. The Board of
Trustees/Directors recommends a vote "FOR"
1. Election of ten members of the Company's Board of Trustees/Directors to
serve indefinite terms until their successors are duly elected and qualified;
FOR ALL NOMINEES except [ ] WITHHOLD AUTHORITY [ ]
as marked to the contrary below FOR ALL NOMINEES
INSTRUCTION: To Withhold Authority to vote for any individual nominee strike
a line through the nominee's name in the list below
Margo N. Alexander, Richard Q. Armstrong, E. Garrett Bewkes, Jr., Richard
Burt, Marcy C. Farrell, Meyer Feldberg, George W. Gowen, Frederic V. Malek,
Carl W. Schafer, John R. Torell III.
FOR AGAINST ABSTAIN
2. Ratification of the selection of the Fund's
independent auditors for its current fiscal year. [ ] [ ] [ ]
3. Approval of the proposed changes to the Fund's
fundamental investment restrictions. [ ] [ ] [ ]
[ ] To vote against the proposed changes to one or
more of the specific fundamental investment
restrictions, but to approve the others, place an
"X" in the box at left AND indicate the number(s)
(as set forth in the proxy statement) of the
investment restriction(s) you do not want to
change on this line: ____________________
4. Only for PaineWebber Managed Investments Trust - [ ] [ ] [ ]
PaineWebber High Income Fund: Approval of a
proposed change to its investment objective.
PLEASE DATE AND SIGN THE FRONT SIDE OF THIS CARD.