0000889812-95-000491.txt : 19950914 0000889812-95-000491.hdr.sgml : 19950914 ACCESSION NUMBER: 0000889812-95-000491 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19950911 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAINEWEBBER AMERICA FUND /NY/ CENTRAL INDEX KEY: 0000703887 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133175781 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-61455 FILM NUMBER: 95572351 BUSINESS ADDRESS: STREET 1: 1285 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127132421 MAIL ADDRESS: STREET 2: 1285 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: PAINE WEBBER GOVERNMENT FUND INC DATE OF NAME CHANGE: 19890402 497 1 DEFINITIVE MATERIALS PAINEWEBBER GLOBAL ENERGY FUND (a series of PaineWebber Investment Series) September 8, 1995 Dear Shareholder: The attached proxy materials describe a proposal that PaineWebber Global Energy Fund ("Global Energy Fund") reorganize and become part of PaineWebber Growth and Income Fund ("Growth and Income Fund"). If the proposal is approved and implemented, each shareholder of Global Energy Fund automatically would become a shareholder of Growth and Income Fund. Your board of trustees recommends a vote FOR the Reorganization Proposal. The board believes that combining the Funds will benefit Global Energy Fund's shareholders by providing them with a portfolio that has an investment objective similar to the investment objective of Global Energy Fund and that will have lower operating expenses as a percentage of net assets. The attached materials provide more information about the proposed reorganization and the Funds involved. Your vote is important no matter how many shares you own. Voting your shares early will permit Global Energy Fund to avoid costly follow-up mail and telephone solicitation. After reviewing the attached materials, please complete, date and sign your proxy card and mail it in the enclosed return envelope today. Very truly yours, MARGO N. ALEXANDER President, PaineWebber Investment Series MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY INCOME FUND, INC. September 8, 1995 Dear Shareholder: The attached proxy materials describe a proposal that Mitchell Hutchins/ Kidder, Peabody Equity Income Fund, Inc. ("Equity Income Fund") reorganize and become part of PaineWebber Growth and Income Fund ("Growth and Income Fund"). If the proposal is approved and implemented, each shareholder of Equity Income Fund automatically would become a shareholder of Growth and Income Fund. Your board of directors recommends a vote FOR the Reorganization Proposal. The board believes that combining the Funds will benefit Equity Income Fund's shareholders by providing them with a portfolio that has an investment objective similar to the investment objective of Equity Income Fund and that will have lower operating expenses as a percentage of net assets. The attached materials provide more information about the proposed reorganization and the Funds involved. Your vote is important no matter how many shares you own. Voting your shares early will permit Equity Income Fund to avoid costly follow-up mail and telephone solicitation. After reviewing the attached materials, please complete, date and sign your proxy card and mail it in the enclosed return envelope today. Very truly yours, MARGO N. ALEXANDER President, Mitchell Hutchins/Kidder, Peabody Equity Income Fund, Inc. MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY INCOME FUND, INC. ---------------- NOTICE OF SPECIAL MEETING OF SHAREHOLDERS October 6, 1995 ---------------- To The Shareholders: A special meeting of shareholders ("Meeting") of Mitchell Hutchins/Kidder, Peabody Equity Income Fund, Inc. ("Equity Income Fund") will be held on October 6, 1995, at 10:00 a.m., Eastern time, at 1285 Avenue of the Americas, 38th Floor, New York, New York 10019, for the following purposes: (1) To approve an Amended and Restated Agreement and Plan of Reorganization and Liquidation under which PaineWebber Growth and Income Fund ("Growth and Income Fund"), a series of PaineWebber America Fund, would acquire the assets of Equity Income Fund in exchange solely for shares of beneficial interest in Growth and Income Fund and the assumption by Growth and Income Fund of Equity Income Fund's liabilities followed by the distribution of those shares to the shareholders of Equity Income Fund as described in the accompanying Prospectus/Proxy Statement; and (2) To transact such other business as may properly come before the Meeting or any adjournment thereof. You are entitled to vote at the Meeting and any adjournment thereof if you owned shares of Equity Income Fund at the close of business on August 22, 1995. If you attend the Meeting, you may vote your shares in person. If you do not expect to attend the Meeting, please complete, date, sign and return the enclosed proxy card in the enclosed postage paid envelope. By order of the board of directors, DIANNE E. O'DONNELL Secretary September 8, 1995 1285 Avenue of the Americas New York, New York 10019 YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN Please indicate your voting instructions on the enclosed proxy card, date and sign the card, and return it in the envelope provided. IF YOU SIGN, DATE AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS NOTICED ABOVE. In order to avoid the additional expense of further solicitation, we ask your cooperation in mailing in your proxy card promptly. Unless proxy cards submitted by corporations and partnerships are signed by the appropriate persons as indicated in the voting instructions on the proxy card, they will not be voted. PAINEWEBBER GLOBAL ENERGY FUND (a series of PaineWebber Investment Series) ---------------- NOTICE OF SPECIAL MEETING OF SHAREHOLDERS October 6, 1995 ---------------- To The Shareholders: A special meeting of shareholders ("Meeting") of PaineWebber Global Energy Fund ("Global Energy Fund"), a series of PaineWebber Investment Series, will be held on October 6, 1995, at 10:00 a.m., Eastern time, at 1285 Avenue of the Americas, 38th Floor, New York, New York 10019, for the following purposes: (1) To approve an Amended and Restated Agreement and Plan of Reorganization and Termination under which PaineWebber Growth and Income Fund ("Growth and Income Fund"), a series of PaineWebber America Fund, would acquire the assets of Global Energy Fund in exchange solely for shares of beneficial interest in Growth and Income Fund and the assumption by Growth and Income Fund of Global Energy Fund's liabilities followed by the distribution of those shares to the shareholders of Global Energy Fund as described in the accompanying Prospectus/ Proxy Statement; and (2) To transact such other business as may properly come before the Meeting or any adjournment thereof. You are entitled to vote at the Meeting and any adjournment thereof if you owned shares of Global Energy Fund at the close of business on August 22, 1995. If you attend the Meeting, you may vote your shares in person. If you do not expect to attend the Meeting, please complete, date, sign and return the enclosed proxy card in the enclosed postage paid envelope. By order of the board of trustees, DIANNE E. O'DONNELL Secretary September 8, 1995 1285 Avenue of the Americas New York, New York 10019 YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN Please indicate your voting instructions on the enclosed proxy card, date and sign the card, and return it in the envelope provided. IF YOU SIGN, DATE AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS NOTICED ABOVE. In order to avoid the additional expense of further solicitation, we ask your cooperation in mailing in your proxy card promptly. Unless proxy cards submitted by corporations and partnerships are signed by the appropriate persons as indicated in the voting instructions on the proxy card, they will not be voted. PAINEWEBBER GROWTH AND INCOME FUND (a series of PaineWebber America Fund) PAINEWEBBER GLOBAL ENERGY FUND (a series of PaineWebber Investment Series) MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY INCOME FUND, INC. 1285 Avenue of the Americas New York, New York 10019 (Toll Free) 1-800-647-1568 Prospectus/Proxy Statement September 8, 1995 This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to shareholders of PaineWebber Global Energy Fund ("Global Energy Fund"), a series of PaineWebber Investment Series ("Investment Series"), and Mitchell Hutchins/ Kidder, Peabody Equity Income Fund, Inc. ("Equity Income Fund") (each an "Acquired Fund" and collectively, the "Acquired Funds"), in connection with the solicitation of proxies by Investment Series' board of trustees and Equity Income Fund's board of directors for use at a combined special meeting of shareholders of the Acquired Funds, to be held on October 6, 1995, at 10:00 a.m., Eastern time, and at any adjournment thereof ("Meeting"). As more fully described in this Proxy Statement, the purpose of the Meeting is to vote on two proposed reorganizations (each a "Reorganization" and collectively, the "Reorganizations"). In each Reorganization, PaineWebber Growth and Income Fund ("Growth and Income Fund"), a series of PaineWebber America Fund, would acquire the assets of an Acquired Fund in exchange solely for shares of beneficial interest in Growth and Income Fund and the assumption by Growth and Income Fund of that Acquired Fund's liabilities. Growth and Income Fund shares then would be distributed to that Acquired Fund's shareholders, by class, so that each such shareholder would receive a number of full and fractional shares of the applicable class of Growth and Income Fund having an aggregate value that, on the effective date of the Reorganization, is equal to the aggregate net asset value of the shareholder's shares of the corresponding class in the Acquired Fund. As soon as practicable following these distributions, Global Energy Fund will be terminated and Equity Income Fund will be liquidated. Growth and Income Fund is a diversified series of the PaineWebber America Fund, which is an open-end management investment company. Growth and Income Fund's investment objective is to achieve current income and capital growth. It seeks to achieve its investment objective by investing primarily in dividend-paying equity securities believed by Mitchell Hutchins Asset Management Inc. to have the potential for rapid earnings growth; stocks are selected through a disciplined methodology that utilizes quantitative measures of value, earnings and price momentum, as well as fundamental analysis. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This Proxy Statement, which should be retained for future reference, sets forth concisely the information about each Reorganization and Growth and Income Fund that a shareholder should know before voting. This Proxy Statement is accompanied by the Prospectus of Growth and Income Fund dated May 12, 1995, and by its Annual Report to Shareholders for the fiscal year ended August 31, 1994, which are incorporated by this reference into this Proxy Statement. A Statement of Additional Information dated August 31, 1995, including historical financial statements, has been filed with the Securities and Exchange Commission ("SEC") and is incorporated herein by this reference. Prospectuses of Global Energy Fund, dated March 1, 1995 (as supplemented August 11, 1995), and Equity Income Fund, dated June 1, 1995 (as supplemented August 3, 1995), and Statements of Additional Information also dated March 1, 1995 and June 1, 1995, respectively, have been filed with the SEC and are incorporated herein by this reference. Copies of these documents as well as each Fund's annual report or semi-annual report, if applicable, may be obtained without charge and further inquiries may be made by contacting your PaineWebber Incorporated ("PaineWebber") investment executive or PaineWebber's correspondent firms or by calling toll-free 1-800-647-1568. TABLE OF CONTENTS VOTING INFORMATION.................................................... 1 SYNOPSIS.............................................................. 2 COMPARISON OF PRINCIPAL RISK FACTORS.................................. 14 THE PROPOSED TRANSACTIONS............................................. 15 ADDITIONAL INFORMATION ABOUT GROWTH AND INCOME FUND................... 21 MISCELLANEOUS......................................................... 23 Appendix A - Amended and Restated Agreement and Plan of Reorganization and Termination Involving Global Energy Fund............. A-1 Appendix B - Amended and Restated Agreement and Plan of Reorganization and Liquidation Involving Equity Income Fund............. B-1 PAINEWEBBER GLOBAL ENERGY FUND (a series of PaineWebber Investment Series) MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY INCOME FUND, INC. ---------------- PROSPECTUS/PROXY STATEMENT Special Meeting of Shareholders To Be Held on October 6, 1995 ---------------- VOTING INFORMATION This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to shareholders of PaineWebber Global Energy Fund ("Global Energy Fund"), a series of PaineWebber Investment Series ("Investment Series"), and Mitchell Hutchins/ Kidder, Peabody Equity Income Fund, Inc. ("Equity Income Fund") (each an "Acquired Fund" and collectively, the "Acquired Funds"), in connection with the solicitation of proxies by the board of trustees of Investment Series and board of directors of Equity Income Fund for use at a combined special meeting of shareholders of the Acquired Funds to be held on October 6, 1995, at 10:00 a.m., Eastern time, and at any adjournment thereof ("Meeting"). This Proxy Statement will first be mailed to shareholders on or about September 8, 1995. At least one-third of the shares of Equity Income Fund and a majority of the shares of Global Energy Fund outstanding on August 22, 1995, represented in person or by proxy, must be present for the transaction of business by that Acquired Fund at the Meeting. If, with respect to either Acquired Fund, a quorum is not present at the Meeting or a quorum is present but sufficient votes to approve the proposal are not received, the persons named as proxies may propose one or more adjournments of the Meeting with respect to that Acquired Fund to permit further solicitation of proxies. Any such adjournment will require the affirmative vote of a majority of those shares of the Acquired Fund represented at the Meeting in person or by proxy. The persons named as proxies will vote those proxies that they are entitled to vote FOR any such proposal in favor of such an adjournment and will vote those proxies required to be voted AGAINST any such proposal against such adjournment. A shareholder vote may be taken on one or more of the proposals in this Proxy Statement prior to any such adjournment if sufficient votes have been received and it is otherwise appropriate. Broker non-votes are shares held in street name for which the broker indicates that instructions have not been received from the beneficial owners or other persons entitled to vote and the broker does not have discretionary voting authority. Abstentions and broker non-votes will be counted as shares present for purposes of determining whether a quorum is present but will not be voted for or against any adjournment or proposal. Accordingly, abstentions and broker non-votes effectively will be a vote against adjournment or against any proposal where the required vote is a percentage of the shares present or outstanding. Abstentions and broker non-votes will not be counted, however, as votes cast for purposes of determining whether sufficient votes have been received to approve a proposal. The individuals named as proxies on the enclosed proxy card will vote in accordance with your direction as indicated thereon if your proxy card is received properly executed by you or your duly appointed agent or attorney-in-fact. If you sign, date and return the proxy card, but give no voting instructions, your shares will be voted in favor of approval of whichever of the following applies to your Acquired Fund: the Amended and Restated Agreement and Plan of Reorganization and Termination dated as of July 25, 1995 (involving Global Energy Fund) or the Amended and Restated Agreement and Plan of Reorganization and Liquidation dated as of July 25, 1995 (involving Equity Income Fund) (each a "Reorganization Plan"), attached to this Proxy Statement as Appendices A and B, respectively. Under each Reorganization Plan, PaineWebber Growth and Income Fund ("Growth and Income Fund"), a series of PaineWebber America Fund ("America Fund"), would acquire the assets of an Acquired Fund in exchange solely for shares of beneficial interest in Growth and Income Fund and the assumption by Growth and Income Fund of that Acquired Fund's liabilities; those shares then would be distributed to that Acquired Fund's shareholders. (Each of these transactions is referred to herein as a "Reorganization.") After completion of a Reorganization, the participating Acquired Fund will be terminated (in the case of Global Energy Fund) or liquidated (in the case of Equity Income Fund). In addition, if you sign, date and return the proxy card, but give no voting instructions, the duly appointed proxies may, in their discretion, vote upon such other matters as may come before the Meeting. The proxy card may be revoked by giving another proxy or by letter or telegram revoking the initial proxy. To be effective, such revocation must be received by Investment Series or Equity Income Fund, as applicable, prior to the Meeting and must indicate your name and account number. In addition, if you attend the Meeting in person you may, if you wish, vote by ballot at the Meeting, thereby canceling any proxy previously given. As of the record date, August 22, 1995 ("Record Date"), Global Energy Fund had 1,722,469.368 shares of beneficial interest outstanding and Equity Income Fund had 2,719,640.263 shares outstanding. The solicitation of proxies, the cost of which will be borne by Growth and Income Fund, Global Energy Fund and Equity Income Fund (each a "Fund" and collectively, the "Funds") in proportion to their respective net assets, will be made primarily by mail but also may include telephone or oral communications by representatives of Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), who will not receive any compensation therefor from the Funds, or by Shareholder Communications Corporation, professional proxy solicitors retained by the Acquired Funds, who will be paid fees and expenses of up to approximately $10,000 for soliciting services. Management does not know of any single shareholder or "group" (as that term is used in Section 13(d) of the Securities Exchange Act of 1934) who owns beneficially 5% or more of the shares of Growth and Income Fund, Global Energy Fund or Equity Income Fund. Trustees and officers of America Fund own in the aggregate less than 1% of the shares of Growth and Income Fund. Summarized below are the proposals the shareholders of each Acquired Fund are being asked to consider: Fund Proposal ---- -------- Global Energy 1. To approve a Reorganization Plan. Equity Income 2. To approve a Reorganization Plan. For voting purposes, the shareholders of each Acquired Fund will vote only on the Reorganization Plan applicable to it. Approval of a Reorganization Plan and consummation of the transactions contemplated thereby for one Acquired Fund do not depend on the approval of the other Reorganization Plan by the other Acquired Fund's shareholders and consummation of the transactions contemplated thereby. With respect to Global Energy Fund, approval of the Reorganization Plan requires the affirmative vote of a "majority of the outstanding voting securities" thereof. As defined in the Investment Company Act of 1940 ("1940 Act"), "majority of the outstanding voting securities" means the lesser of (1) 67% of Global Energy Fund's shares present at a meeting of shareholders if the owners of more than 50% of that Acquired Fund's shares then outstanding are present in person or by proxy, or (2) more than 50% of that Acquired Fund's outstanding shares ("1940 Act Majority Vote"). Under Maryland law and Equity Income Fund's Amended and Restated Articles of Incorporation, the affirmative vote of a majority of its outstanding shares entitled to vote at the Meeting (which is considered a higher requirement than a 1940 Act Majority Vote) is required to approve the Reorganization Plan. Each outstanding full share of each Acquired Fund is entitled to one vote, and each outstanding fractional share of each Acquired Fund is entitled to a proportionate fractional share of one vote. If a Reorganization Plan is not approved by the requisite vote of the shareholders of the involved Acquired Fund, the persons named as proxies may propose one or more adjournments of the Meeting to permit further solicitation of proxies. Although the shareholders of the Acquired Funds may exchange or redeem out of a Fund, they do not have appraisal rights which may be accorded to shareholders of corporations that propose similar types of reorganizations under the laws of some states. 2 SYNOPSIS The following is a summary of certain information contained elsewhere in this Proxy Statement, the prospectuses of each Fund, which are incorporated herein by reference, and the Reorganization Plans. Shareholders should read this Proxy Statement and the prospectus of Growth and Income Fund carefully. As discussed more fully below, Investment Series' board of trustees and Equity Income Fund's board of directors believe that the Reorganizations will benefit their respective Acquired Fund's shareholders. Growth and Income Fund has an investment objective substantively identical to that of Equity Income Fund and generally similar to the investment objective of Global Energy Fund, although its investment strategy may differ from the Acquired Funds' investment strategies in some material respects. It is anticipated that, following the Reorganizations, the Acquired Funds' shareholders will, as shareholders of Growth and Income Fund, be subject to lower total operating expenses as a percentage of net assets. The Reorganizations Investment Series' board of trustees approved a Reorganization Plan with respect to Global Energy Fund at a meeting held on April 28, 1995. Equity Income Fund's board of directors approved a reorganization plan at a meeting held on April 26, 1995. The Reorganization Plan involving Global Energy Fund and the Reorganization Plan involving Equity Income Fund, in their final forms (see Appendices A and B) as revised to include certain changes, were considered and approved by each Fund's board of trustees/directors at meetings held on July 20, 1995. Each Reorganization Plan provides for the acquisition by Growth and Income Fund of the assets of an Acquired Fund in exchange solely for shares of Growth and Income Fund and the assumption by Growth and Income Fund of the liabilities of the Acquired Fund. Each Acquired Fund then will distribute the Growth and Income Fund shares to its shareholders, by class, so that each shareholder will receive the number of full and fractional shares of the class of Growth and Income Fund that corresponds most closely in terms of fees and other characteristics ("Corresponding Class") and that is equal in value to such shareholder's holdings in the Acquired Fund as of the Closing Date (defined below). Global Energy Fund then will be terminated, and Equity Income Fund then will be liquidated, as soon as practicable thereafter. The exchange of each Acquired Fund's assets for Growth and Income Fund shares and Growth and Income Fund's assumption of each Acquired Fund's liabilities will occur at or as of 4:00 p.m., eastern time, on October 13, 1995, or such later date as the conditions to any such closing are satisfied ("Closing Date"). Growth and Income Fund currently offers for sale four classes of shares (each a "Class" and collectively, "Classes"), designated as Class A, Class B, Class C and Class D shares. Global Energy Fund has three Classes of shares, designated as Class A, Class B and Class D shares; Equity Income Fund has three Classes of shares, designated as Class A, Class B and Class C shares. In connection with the Reorganizations, (1) shareholders of Class A, Class B and Class D shares of Global Energy Fund will receive Class A, Class B and Class D shares, respectively, of Growth and Income Fund, and (2) shareholders of Class A, Class B and Class C shares of Equity Income Fund will receive Class A, Class D and Class C shares, respectively, of Growth and Income Fund. The following table shows which Class of shares of Growth and Income Fund will be received by each Class of shares of an Acquired Fund: 3 Global Energy Fund Growth and Income Fund ------------------ ---------------------- Class A Class A Class B Class B Class D Class D Equity Income Fund Growth and Income Fund ------------------ ---------------------- Class A Class A Class B Class D Class C Class C For the reasons set forth below under "The Proposed Transactions -- Reasons for the Reorganizations," Investment Series' board of trustees (with respect to Global Energy Fund) and Equity Income Fund's board of directors, including the trustees or directors who are not "interested persons," as that term is defined in the 1940 Act, of Investment Series or Equity Income Fund, as applicable ("Independent Persons"), have determined, in each instance, that the Reorganization is in the best interests of the participating Acquired Fund, that the terms of the Reorganization are fair and reasonable and that the interests of such Acquired Fund's shareholders will not be diluted as a result of the Reorganization. Accordingly, each board recommends approval of the Reorganizations. In addition, the board of trustees of America Fund, including its Independent Persons, has determined that the Reorganizations are in the best interests of Growth and Income Fund, that the terms of the Reorganizations are fair and reasonable and that the interests of Growth and Income Fund's shareholders will not be diluted as a result of the Reorganizations. COMPARATIVE FEE TABLES Reorganization of Global Energy Fund into Growth and Income Fund The following tables show (1) shareholder transaction expenses currently incurred by the Class A, Class B and Class D shares of Global Energy Fund and shareholder transaction expenses that each such Class will incur after giving effect to the Reorganization; (2) the current fees and expenses incurred by the Class A, Class B and Class D shares of Global Energy Fund and Growth and Income Fund for the twelve months ended February 28, 1995; and (3) pro forma fees for Growth and Income Fund's Class A, Class B and Class D shares after giving effect to the Reorganization. 4 Shareholder Transaction Expenses Global Energy Fund Combined Fund ------------------------- ------------------------- Class A Class B Class D Class A Class B Class D ------- ------- ------- ------- ------- ------- Maximum sales charge (as a percentage of public offering price) 4.5% None None 4.5% None None Exchange fee $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 Maximum contin- gent deferred sales charge (as a percen- tage of redemption proceeds) None 5% None None 5% None Annual Fund Operating Expenses (as a percentage of average net assets)
Global Energy Fund Growth and Income Fund ----------------------------- ----------------------------- Combined Fund (Twelve Months Ended 2/28/95) (Twelve Months Ended 2/28/95) ------------------------- ----------------------------- ----------------------------- (Pro Forma) Class A Class B Class D Class A Class B Class D Class A Class B Class D ------- ------- ------- ------- ------- ------- ------- ------- ------- Management Fees 0.85% 0.85% 0.85% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 12b-1 Expenses1/ 0.25% 1.00% 1.00% 0.23% 1.00% 1.00% 0.23% 1.00% 1.00% Other Expenses 1.01% 1.02% 1.04% 0.27% 0.28% 0.29% 0.27% 0.28% 0.29% ---- ---- ---- ---- ---- ---- ---- ---- ---- Total Fund Operating Expenses2/ 2.11% 2.87% 2.89% 1.20% 1.98% 1.99% 1.20% 1.98% 1.99% ==== ==== ==== ==== ==== ==== ==== ==== ====
5 ------------ 1/ 12b-1 fees for Global Energy Fund have two components, as follows: Class A Class B Class D ------- ------- ------- 12b-1 service fee .... 0.25% 0.25% 0.25% 12b-1 distribution fee 0.00% 0.75% 0.75% 12b-1 fees for Growth and Income Fund have two components, as follows: Class A Class B Class D ------- ------- ------- 12b-1 service fee .... 0.23% 0.25% 0.25% 12b-1 distribution fee 0.00% 0.75% 0.75% The 12b-1 service fees for Class A shares of Growth and Income Fund reflect a blended annual rate of that Fund's average daily net assets of 0.25% with respect to shares sold on or after December 2, 1988 and 0.15% with respect to shares sold prior to that date. 12b-1 distribution fees are asset-based sales charges. Long-term Class B and Class D shareholders may pay more in direct and indirect sales charges (including distribution fees) than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc. ("NASD") rules regarding investment companies. 2/ For the fiscal year ended October 31, 1994, the ratios of total operating expenses as a percentage of average net assets for Global Energy Fund were 1.99%, 2.82% and 2.74% for Class A, Class B and Class D shares, respectively, and for Growth and Income Fund for the fiscal year ended August 31, 1994 were 1.20%, 1.97% and 1.94% for Class A, Class B and Class D shares, respectively. Example of Effect of Fund Expenses The following illustrates the expenses on a $1,000 investment under the existing and estimated fees and expenses stated above, assuming a 5% annual return. The fees shown below reflect a maximum initial sales charge of 4.5% of the public offering price that normally is charged in connection with the sale of each Fund's Class A shares. No initial sales charge will be charged in connection with Class A shares of Growth and Income Fund distributed to Class A shareholders of Global Energy Fund as part of the Reorganization. One Year Three Years Five Years Ten Years Global Energy Fund Class A shares .......... $65 $108 $153 $278 Class B shares: Assuming complete redemption at end of period ............ $79 $119 $171 $285 6 Assuming no redemption $29 $89 $151 $285 Class D shares .......... $29 $89 $152 $321 Growth and Income Fund Class A shares .......... $57 $81 $108 $184 Class B shares: Assuming complete redemption at end of period ............ $70 $92 $127 $192 Assuming no redemption $20 $62 $107 $192 Class D shares .......... $20 $62 $107 $232 Combined Fund Class A shares .......... $57 $81 $108 $184 Class B shares: Assuming complete redemption at end of period ............ $70 $92 $127 $192 Assuming no redemption $20 $62 $107 $192 Class D shares .......... $20 $62 $107 $232 This Example assumes that all dividends and other distributions are reinvested and that the percentage amounts listed under Annual Fund Operating Expenses remain the same in the years shown. The above tables and the assumption in the Example of a 5% annual return are required by regulations of the Securities and Exchange Commission ("SEC"); the assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of any Class of the Funds' shares. The Example should not be considered a representation of past or future expenses, and a Fund's actual expenses may be more or less than those shown. The actual expenses attributable to each Class of a Fund's shares will depend upon, among other things, the level of average net assets and the extent to which a Fund incurs variable expenses, such as transfer agency costs. Reorganization of Equity Income Fund into Growth and Income Fund The following tables show (1) shareholder transaction expenses currently incurred by Class A, Class B and Class C shares of Equity Income Fund and shareholder transaction expenses that the Corresponding Class of Growth and Income Fund will incur after giving effect to the Reorganization; (2) the current fees and expenses incurred by the Class A, Class B and Class C shares of Equity Income Fund and the Class A, Class D and Class C shares of Growth and Income Fund for the twelve months ended February 28, 1995; and (3) pro forma fees for Growth and Income Fund's Class A, Class D and Class C shares after giving effect to the Reorganization. 7 Shareholder Transaction Expenses Equity Income Fund Combined Fund1/ ------------------------- ------------------------- Class A Class B Class C Class A Class D Class C ------- ------- ------- ------- ------- ------- Maximum sales charge (as a percentage of public offering price) 4.5% None None 4.5% None None Exchange fee None None None $5.00 $5.00 N/A* Maximum con- tingent deferred sales charge (as a percentage of redemption proceeds) None None None None None None ------------ * Class C shares are not exchangeable. Annual Fund Operating Expenses (as a percentage of average net assets)
Equity Income Fund Growth and Income Fund1/ ------------------------- ------------------------- Combined Fund (Twelve Months Ended 2/28/95) (Twelve Months Ended 2/28/95) ------------------------ ----------------------------- ----------------------------- Pro Forma1/ Class A Class B Class C Class A Class D Class C Class A Class D Class C ------- ------- ------- ------- ------- ------- ------- ------- ------- Management Fees 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 12b-1 Expenses2/ 0.50% 1.00% 0.00% 0.23% 1.00% 0.00% 0.23% 1.00% 0.00% Other Expenses 0.43% 0.46% 0.35% 0.27% 0.29% 0.21% 0.25% 0.27% 0.18% ---- ---- ---- ---- ---- ---- ---- ---- ---- Total Fund Operating Expenses3/ 1.63% 2.16% 1.05% 1.20% 1.99% 0.91% 1.18% 1.97% 0.88% ==== ==== ==== ==== ==== ==== ==== ==== ====
8 ------------ 1/ Holders of Class A shares of Equity Income Fund will receive Class A shares of Growth and Income Fund; holders of Class B shares of Equity Income Fund will receive Class D shares of Growth and Income Fund; and holders of Class C shares of Equity Income Fund will receive Class C shares of Growth and Income Fund. As only Class A, Class C and Class D shares of Growth and Income Fund will be issued to Equity Income Fund shareholders in the Reorganization, only those classes are shown. 2/ 12b-1 fees for Equity Income Fund fees have two components, as follows: Class A Class B Class C ------- ------- ------- 12b-1 service fee .... 0.25% 0.25% 0.00% 12b-1 distribution fee 0.25% 0.75% 0.00% 12b-1 fees for Growth and Income Fund have two components, as follows: Class A Class D Class C ------- ------- ------- 12b-1 service fee .... 0.23% 0.25% 0.00% 12b-1 distribution fee 0.00% 0.75% 0.00% The 12b-1 service fees for Class A shares of Growth and Income Fund reflect a blended annual rate of that Fund's average daily net assets of 0.25% with respect to shares sold on or after December 2, 1988 and 0.15% with respect to shares sold prior to that date. 12b-1 distribution fees are asset-based sales charges. Long-term Class D shareholders may pay more in direct and indirect sales charges (including distribution fees) than the economic equivalent of the maximum front-end sales charges permitted by NASD rules regarding investment companies. 3/ For the fiscal years ended January 31, 1995 and August 31, 1994, respectively, the ratios of total operating expenses as a percentage of average net assets for Equity Income Fund were 1.63%, 2.13% and 1.13% for Class A, Class B and Class C shares, respectively, and for Growth and Income Fund were 1.20%, 1.94% and 0.90% for Class A, Class D and Class C shares, respectively. Example of Effect of Fund Expenses The following illustrates the expenses on a $1,000 investment under the existing and estimated fees and expenses stated above, assuming a 5% annual return. The fees shown below reflect a maximum initial sales charge of 4.5% of the public offering price that normally is charged in connection with the sale of Growth and Income Class A shares and a maximum initial sales charge of 4.5% of the public offering price that is normally charged in connection with the sale of Equity Income Fund Class A shares. No initial sales charge will be charged in connection with Class A shares of Growth and Income Fund distributed to Class A shareholders of Equity Income Fund as part of the Reorganization. One Year Three Years Five Years Ten Years -------- ----------- ---------- --------- Equity Income Fund Class A shares... $73 $106 $141 $240 Class B shares... $22 $68 $116 $249 Class C shares... $11 $33 $58 $128 9 Growth and Income Fund Class A shares... $57 $81 $108 $184 Class D shares... $20 $62 $107 $232 Class C shares... $9 $29 $50 $112 Combined Fund Class A shares... $56 $81 $107 $182 Class D shares... $20 $62 $106 $230 Class C shares... $9 $28 $49 $108 This Example assumes that all dividends and other distributions are reinvested and that the percentage amounts listed under Annual Fund Operating Expenses remain the same in the years shown. The above tables and the assumption in the Example of a 5% annual return are required by regulations of the SEC; the assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of any Class of the Funds' shares. The Example should not be considered a representation of past or future expenses, and a Fund's actual expenses may be more or less than those shown. The actual expenses attributable to each Class of a Fund's shares will depend upon, among other things, the level of average net assets and the extent to which a Fund incurs variable expenses, such as transfer agency costs. 10 Reorganizations of Global Energy Fund and Equity Income Fund into Growth and Income Fund The following table shows the current fees and expenses incurred by the Classes of shares of each Fund for the twelve months ended February 28, 1995, and pro forma fees for Growth and Income Fund's Class A, Class B, Class C and Class D shares after giving effect to the Reorganizations. Annual Fund Operating Expenses (as a percentage of average net assets)
Global Energy Fund Equity Income Fund Growth and Income Fund ------------------------- ------------------------- ---------------------------------- (Twelve Months (Twelve Months (Twelve Months Ended 2/28/95) Ended 2/28/95) Ended 2/28/95) ------------------------- ------------------------- ---------------------------------- Class A Class B Class D Class A Class B Class C Class A Class B Class C Class D ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Management Fees 0.85% 0.85% 0.85% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 12b-1 Expenses1/ 0.25% 1.00% 1.00% 0.50% 1.00% 0.00% 0.23% 1.00% 0.00% 1.00% Other Expenses 1.01% 1.02% 1.04% 0.43% 0.46% 0.35% 0.27% 0.28% 0.21% 0.29% ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Total Fund Operating Expenses2/ 2.11% 2.87% 2.89% 1.63% 2.16% 1.05% 1.20% 1.98% 0.91% 1.99% ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== Pro Forma Combined Fund ---------------------------------- Class A Class B Class C Class D ------- ------- ------- ------- Management Fees 0.70% 0.70% 0.70% 0.70% 12b-1 Expenses1/ 0.23% 1.00% 0.00% 1.00% Other Expenses 0.25% 0.28% 0.20% 0.28% ---- ---- ---- ---- Total Fund Operating Expenses2/ 1.18% 1.98% 0.90% 1.98% ==== ==== ==== ====
11 ------------ 1/ 12b-1 fees for Global Energy Fund have two components, as follows: Class A Class B Class D ------- ------- ------- 12b-1 service fee .... 0.25% 0.25% 0.25% 12b-1 distribution fee 0.00% 0.75% 0.75% 12b-1 fees for Equity Income Fund have two components as follows: Class A Class B Class C ------- ------- ------- 12b-1 service fee .... 0.25% 0.25% 0.00% 12b-1 distribution fee 0.25% 0.75% 0.00% 12b-1 fees for Growth and Income Fund have two components, as follows: Class A Class B Class C Class D ------- ------- ------- ------- 12b-1 service fee .... 0.23% 0.25% 0.00% 0.25% 12b-1 distribution fee 0.00% 0.75% 0.00% 0.75% The 12b-1 service fees for Class A shares of Growth and Income Fund reflect a blended annual rate of that Fund's average daily net assets of 0.25% with respect to shares sold on or after December 2, 1988 and 0.15% with respect to shares sold prior to that date. 12b-1 distribution fees are asset-based sales charges. Long-term Class B and Class D shareholders may pay more in direct and indirect sales charges (including distribution fees) than the economic equivalent of the maximum front-end sales charges permitted by NASD rules regarding investment companies. 2/ For the fiscal years ended October 31, 1994, January 1, 1995 and August 31, 1994, respectively, the ratios of total operating expenses as a percentage of average net assets for Global Energy Fund were 1.99%, 2.82% and 2.74% for Class A, Class B and Class D, respectively, for Equity Income Fund were 1.63%, 2.13% and 1.13% for Class A, Class B and Class C, respectively, and for Growth and Income Fund were 1.20%, 1.97%, 0.90% and 1.94% for Class A, Class B, Class C and Class D, respectively. Example of Effect of Fund Expenses The following illustrates the expenses on a $1,000 investment under the existing and estimated fees and expenses stated above, assuming a 5% annual return. The fees shown below reflect a maximum initial sales charge of 4.5% of the public offering price that normally is charged in connection with the sale of each Fund's Class A shares. No initial sales charge will be charged in connection with Class A Shares of Growth and Income Fund distributed to Class A shareholders of each Acquired Fund as part of the Reorganizations. 12 One Year Three Years Five Years Ten Years -------- ----------- ---------- --------- Global Energy Fund Class A shares .......... $65 $108 $153 $278 Class B shares: Assuming complete redemption at end of period ............ $79 $119 $171 $285 Assuming no redemption $29 $89 $151 $285 Class D shares .......... $29 $89 $152 $321 Equity Income Fund Class A shares .......... $73 $106 $141 $240 Class B shares .......... $22 $68 $116 $249 Class C shares .......... $11 $33 $58 $128 Growth and Income Fund Class A shares .......... $57 $81 $108 $184 Class B shares: Assuming complete redemption at end of period ............ $70 $92 $127 $192 Assuming no redemption $20 $62 $107 $192 Class C shares .......... $9 $29 $50 $112 Class D shares .......... $20 $62 $107 $232 Combined Fund Class A shares .......... $56 $81 $107 $182 Class B shares: Assuming complete redemption at end of period ............ $70 $92 $127 $191 Assuming no redemption $20 $62 $107 $191 Class C shares .......... $9 $29 $50 $111 Class D shares .......... $20 $62 $107 $231 13 This Example assumes that all dividends and other distributions are reinvested and that the percentage amounts listed under Annual Fund Operating Expenses remain the same in the years shown. The above tables and the assumption in the Example of a 5% annual return are required by regulations of the SEC; the assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of any Class of the Funds' shares. The Example should not be considered a representation of past or future expenses, and a Fund's actual expenses may be more or less than those shown. The actual expenses attributable to each Class of a Fund's shares will depend upon, among other things, the level of average net assets and the extent to which a Fund incurs variable expenses, such as transfer agency costs. Forms of Organization Equity Income Fund is an open-end management investment company organized as a Maryland corporation. It commenced operations on November 22, 1985. It is authorized to issue 500 million shares of common stock of par value $.01 per share. It does not currently issue share certificates. Equity Income Fund is not required to (and does not) hold annual meetings. Investment Series and America Fund are open-end management investment companies organized as Massachusetts business trusts. Growth and Income Fund commenced operations as a series of America Fund on December 20, 1983. Global Energy Fund commenced operations as a series of Investment Series on September 18, 1987. Each trust's Declaration of Trust authorizes its trustees to create separate series, and within each series separate classes, of an unlimited number of shares of beneficial interest, par value $.001 per share. The trusts are not required to (and do not) hold annual shareholder meetings. Shareholders of a Massachusetts business trust may, under certain circumstances, be held personally liable for its obligations. However, the Declaration of Trust of each trust expressly disclaims, and provides indemnification against, such liability. Accordingly, the risk of a shareholder's incurring financial loss on account of shareholder liability is limited to circumstances in which Global Energy Fund or Growth and Income Fund itself would be unable to meet its obligations, a possibility that Mitchell Hutchins believes is remote and, thus, does not pose a material risk. Investment Objectives and Policies The investment objective and policies of each Fund are set forth below. Growth and Income Fund has an investment objective substantively identical to that of Equity Income Fund and generally similar to the investment objective of Global Energy Fund, although its investment strategy may differ from the Acquired Funds' investment strategies in some material respects. There can be no assurance that any Fund will achieve its investment objective, and each Fund's net asset value ("NAV") fluctuates based upon changes in the value of its portfolio securities. Growth and Income Fund. The investment objective of Growth and Income Fund is to provide current income and capital growth. The Fund seeks to achieve its objective by investing primarily in dividend-paying equity securities (common and preferred stocks) believed by Mitchell Hutchins to have the potential for rapid earnings growth. Under normal circumstances, the Fund invests at least 65% of its total assets in such securities. In managing the Fund, Mitchell Hutchins follows a disciplined methodology under which stocks from a universe of approximately 2,000 medium- to large- capitalization companies are ranked utilizing quantitative measures of value, earnings and price momentum in the context of Mitchell Hutchins' economic forecast. Stocks are selected for the Fund based on fundamental analysis of the highest ranking stock. The Fund may invest up to 35% of its total assets in equity securities not meeting all the above criteria, as well as convertible securities (which may be rated below investment grade), U.S. government securities, investment grade corporate debt securities and money market instruments. 14 Equity Income Fund. The investment objective of Equity Income Fund is to provide reasonably high current dividend and interest income and to obtain long-term capital appreciation. Under normal market conditions, the Fund invests not less than 65% of its net assets in equity securities, limited to dividend-paying common stock, preferred stock, warrants, rights and securities convertible into common stock. The Fund's equity investments have tended to be in issuers with large market capitalizations, although the Fund is not limited by issuer size in selecting equity securities for investment. The Fund may also invest a lesser portion of its assets in fixed income securities and, as needed to provide liquidity in order to meet redemptions, money market instruments. The Fund's investments in fixed income securities are limited to direct obligations of the U.S. government (such as Treasury bills, notes or bonds) and corporate debt securities rated Aa or better by Moody's Investors Service, Inc. or AA or better by Standard & Poor's. For temporary defensive purposes, the Fund may invest its assets in all classes of securities, including equity and fixed income, in any proportions deemed prudent under existing market and economic conditions. It is the Fund's policy not to purchase and sell securities with a view toward obtaining short-term (less than six months) profits. Global Energy Fund. The investment objective of Global Energy Fund is to achieve high total return by investing principally in securities of foreign and domestic energy and energy service companies. Under normal market conditions, at least 65% of the Fund's net assets are invested in equity and debt securities of foreign and domestic energy and energy service companies based in at least three countries, including the United States. Energy companies are the primary producers of raw energy materials such as oil and gas. Energy service companies are companies that provide services, supplies and equipment to energy companies. The Fund may invest up to 35% of its assets in equity and debt securities of issuers in any industry, including the utility sector, although no more than 25% of the Fund's assets may be invested in any industry other than the energy or energy service industries. The Fund may invest up to 35% of its assets in non-investment grade securities. The policy of concentrating investments in the energy and energy service industries may cause the value of its shares to fluctuate more than if it invested in a broader number of industries. Other Policies of the Funds Additional Investment Techniques The Funds engage in certain options and futures contracts to attempt to hedge against the overall level of risk associated with their respective investments. Investment Restrictions Global Energy Fund and Growth and Income Fund are permitted to invest in securities rated below investment grade level. None of the Funds may invest more than 15% of its net assets in illiquid securities. While Global Energy Fund concentrates its investments in one industry, neither Growth and Income Fund nor Equity Income Fund may invest more than 25% of its total assets in any one industry. For additional discussion of these investment restrictions, see "Comparison of Principal Risk Factors." Operations of Growth and Income Fund Following the Reorganizations There are differences in some of the Funds' investment policies. It is not expected, however, that Growth and Income Fund will revise its investment policies following the Reorganizations to reflect those of either Acquired Fund. Since the Acquired Funds invest in securities having characteristics different from those of Growth and Income Fund, certain of the securities currently held in the Acquired Funds' portfolios may be sold, rather than transferred to Growth and Income Fund. If the Reorganizations are approved, the Acquired Funds will sell any assets that are inconsistent with the investment policies of Growth and Income Fund prior to the effective time of the Reorganizations, and the proceeds thereof will be held in temporary investments or reinvested in assets that qualify to be held by Growth and Income Fund. The necessity for the Acquired Funds to dispose of assets prior to the effective time of the Reorganizations may result in selling securities 15 at a disadvantageous time and could result in the Acquired Funds' realizing losses that would not otherwise have been realized. Following the Reorganizations, Mark A. Tincher, who currently is the portfolio manager for Growth and Income Fund and who has been primarily responsible for the day-to-day portfolio management of that Fund, will continue as its portfolio manager. Mr. Tincher joined Mitchell Hutchins in March 1995. Prior to joining Mitchell Hutchins, Mr. Tincher worked for Chase Manhattan Private Bank, where he was Vice President and directed the U.S. Funds Management and Equity Research Area. At Chase since 1988, Mr. Tincher oversaw the management of all Chase Equity Funds (the Vista Funds and Trust Investment Funds). Effective on or about November 1, 1995, PW Fund's Class C and Class D shares will be renamed Class Y and Class C shares, respectively. In addition, Class A shares purchased after that date which are purchased without an initial sales charge due to a sales charge waiver for purchases of $1 million or more, and held less than one year, and Class D shares that are held for less than one year, will be subject to a contingent deferred sales charge ("CDSC") of 1% of the lower of (1) the NAV of the shares at the time of purchase, or (2) the NAV of the shares at the time of redemption. Purchases Shares of each Fund are available through PaineWebber and its correspondent firms or, for investors who are not clients of PaineWebber, through each Fund's transfer agent, PFPC Inc. ("Transfer Agent"). The minimum initial investment in Growth and Income Fund Class A, B or D shares is $1,000; each additional investment must be $100 or more. These minimums may be waived or reduced for investments by employees of PaineWebber or its affiliates, certain pension plans and retirement accounts and participants in the Fund's automatic investment plan. The Class A shares of each Fund are all sold subject to a maximum initial sales charge of 4.5% of the public offering price. The Class A shares of Growth and Income Fund that will be distributed to Class A shareholders of the Acquired Funds in connection with the Reorganizations will not be subject to any initial sales charge. The Class B shares of Growth and Income Fund and Global Energy Fund are sold subject to a maximum CDSC of 5% of redemption proceeds, which declines to zero after six years, when such Class B shares automatically convert into Class A shares of those respective Funds. Following the Reorganizations, the Class B shareholders of Global Energy Fund would remain subject to the maximum 5% CDSC and six-year schedule of reducing CDSCs in effect prior to the Reorganizations. All Class B shareholders of Global Energy Fund will be credited for the period of time from the original date of purchase of their shares for purposes of determining the amount of their CDSC, if any. As is currently the case for Growth and Income Fund and Global Energy Fund, no CDSC will be applied to redemptions of Class B shares that represent reinvested dividends or capital gain distributions. Equity Income Fund's Class B and Class C shares are sold without an initial sales charge or CDSC. The Class D shares of Growth and Income Fund and Global Energy Fund are sold without initial sales charges or CDSCs. Class C shares of Growth and Income Fund are sold to eligible investors at the net asset value next determined after the purchase order is received. No initial or contingent deferred sales charge is imposed, nor are Class C shares subject to Rule 12b-1 distribution or service fees. Growth and Income Fund and Mitchell Hutchins reserve the right to reject any purchase order and to suspend the offering of the Class C shares for a period of time. The Class C shares currently are offered for sale only to the trustee of the PaineWebber Savings Investment Plan ("PW SIP"), a defined contribution plan sponsored by Paine Webber Group Inc. The trustee of the PW SIP purchases Class C shares to implement the investment choices of individual plan participants with respect to their PW SIP contributions. Class C shares also may be acquired by present holders of Class C shares of a Mitchell Hutchins/Kidder, Peabody ("MH/KP") mutual fund when those shares are issued in connection with a reorganization of that MH/KP mutual fund into Growth and Income Fund. This category includes participants in the INSIGHT Program, former employees of 16 Kidder, Peabody & Co., Incorporated ("Kidder, Peabody"), their associated accounts, and present and former directors and trustees of the MH/KP mutual funds. Effective on or about November 1, 1995, Growth and Income Fund's Class C shares (renamed Class Y shares) will be available for purchase by INSIGHT Program participants when purchased through that program. INSIGHT Investment Advisory Program(Service Mark) ("INSIGHT Program") An investor who purchases $50,000 or more of shares of participating funds may participate in the INSIGHT Program, a total portfolio asset allocation program sponsored by PaineWebber, and thus become eligible to purchase Class C shares. The INSIGHT Program offers comprehensive investment services, including a personalized asset allocation investment strategy using an appropriate combination of funds, monitoring of investment performance and comprehensive quarterly reports that cover market trends, portfolio summaries and personalized account information. Participation in the INSIGHT Program is subject to payment of an advisory fee to PaineWebber at the maximum annual rate of 1.50% of assets held through the program (generally charged quarterly in advance), which covers all the INSIGHT Program investment advisory services and program administration fees. Employees of PaineWebber and its affiliates are entitled to a 50% reduction in the fee otherwise payable for participation in the INSIGHT Program. INSIGHT Program clients may elect to have their INSIGHT Program fees charged to their PaineWebber accounts (by the automatic redemption of money market fund shares) or another of their PaineWebber accounts or, for qualified plans, invoiced. Redemptions Shareholders of each Fund may submit redemption requests to their investment executives or correspondent firms in person or by telephone, mail or wire. As each Fund's agent, PaineWebber may honor a redemption request by repurchasing shares from a redeeming shareholder at the shares' net asset value next determined after receipt of the request by PaineWebber's New York City offices. Within three Business Days after receipt of the request, repurchase proceeds (less any applicable contingent deferred sales charge) will be paid by check or credited to the shareholder's brokerage account at the election of the shareholder. PaineWebber investment executives and correspondent firms are responsible for promptly forwarding redemption requests to PaineWebber's New York City offices. PaineWebber reserves the right not to honor any redemption request, in which case PaineWebber promptly will forward the request to the Transfer Agent for treatment as described below. Shareholders of each Fund also may redeem shares through the Transfer Agent. Shareholders should mail redemption requests directly to the Transfer Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P. O. Box 8950, Wilmington, Delaware 19899. A redemption request will be executed at the net asset value next computed after it is received in "good order," and redemption proceeds will be paid within seven days of the receipt of the request. Shareholders are responsible for ensuring that a request for redemption is received in "good order." "Good order" means that the request must be accompanied by the following: (1) a letter of instruction or a stock assignment specifying the number of shares or amount of investment to be redeemed (or that all shares credited to the Fund account be redeemed), signed by all registered owners of the shares in the exact names in which they are registered, (2) a guarantee of the signature of each registered owner by an eligible institution acceptable to the Transfer Agent and in accordance with SEC rules, such as a commercial bank, trust company or member of a recognized stock exchange, (3) other supporting legal documents for estates, trusts, guardianships, custodianships, partnerships and corporations and (4) duly endorsed share certificates, if any. A shareholder (other than a participant in the PW SIP) may have redemption proceeds of $1 million or more wired to the shareholder's PaineWebber brokerage account or a commercial bank account designated by the shareholder. Questions about this option, or redemption requirements generally, should be referred to the shareholder's PaineWebber investment executive or correspondent firm. If a shareholder requests redemption of shares which were purchased recently, the Fund may delay payment until it is assured that good payment has been received. In the case of purchases by check, this can take up to 15 days. 17 Because the Funds incur certain fixed costs in maintaining shareholder accounts, each Fund reserves the right to redeem all Fund shares in any shareholder account having a net asset value below the lesser of $500 or the current minimum for initial purchases. If the Fund elects to do so, it will notify the shareholder and provide the shareholder the opportunity to increase the amount invested to the minimum required level or more within 60 days of the notice. The Funds will not redeem accounts that fall below the minimum required level solely as a result of a reduction in net asset value per share. If a Reorganization is approved with respect to an Acquired Fund, purchases of all Classes of its shares will cease on October 6, 1995, so that its shares will no longer be available for purchase or exchange starting on October 9, 1995 (the next Business Day). If the Meeting with respect to an Acquired Fund is adjourned and the Reorganization involving it is approved on a later date, its shares will no longer be available for purchase or exchange on the Business Day following the date on which the Reorganization is approved and all contingencies have been met. Redemptions of the Acquired Fund's shares and exchanges of such shares for shares of any other PaineWebber or MH/KP fund may be effected through the Closing Date. Exchanges Except for the $5.00 exchange fee, which does not apply to exchanges of Equity Income Fund shares, the exchange policies of the Funds are identical. Class A, Class B and Class D shares of Growth and Income Fund and Global Energy Fund, and Class A and B shares of Equity Income Fund, may be exchanged for shares of the Corresponding Class of other PaineWebber and MH/KP funds, and Class A, Class B and Class D shares of Growth and Income Fund and Global Energy Fund, and Class A and Class B shares of Equity Income Fund may, be acquired through an exchange of shares of the Corresponding Class of other PaineWebber and MH/KP funds, as provided in the prospectus of each Fund. No initial sales charge is imposed on the shares being acquired, and no CDSC is imposed on the shares being disposed of, through an exchange. However, a CDSC may apply to redemptions of a PaineWebber fund's Class B shares acquired through an exchange. Exchanges may be subject to minimum investment and other requirements of the fund into which exchanges are made. As noted above, the $5.00 service fee currently imposed on each exchange of shares of Growth and Income Fund for shares of any other PaineWebber or MH/KP fund will continue to be imposed following the Reorganizations. Class C shares of Growth and Income Fund and Equity Income Fund have no exchange privileges. Dividends and Other Distributions Growth and Income Fund distributes dividends from net investment income semi-annually, whereas Equity Income Fund distributes such dividends quarterly and Global Energy Fund declares and pays such dividends annually. Each Fund distributes substantially all of its net capital gain (the excess of net long-term capital gain over net short-term capital loss) and net short-term gain, and Global Energy Fund also distributes any net realized gain from foreign currency transactions, at least annually. Shareholders of each Fund may reinvest dividends and other distributions in additional shares on the payment date at those shares' NAV that day or receive them in cash. Each Fund may make additional distributions if necessary to avoid a 4% excise tax on certain undistributed ordinary income and capital gain. Growth and Income Fund's dividends and other distributions on its Class C shares are paid in additional Class C shares at NAV unless the shareholder has requested cash payments. Class C shareholders who wish to receive dividends and/or other distributions in cash, either mailed to the shareholder by check or credited to the shareholder's PaineWebber account, should contact their PaineWebber investment executives or correspondent firms. For PW SIP participants, Growth and Income Fund's Class C dividends and distributions are paid in additional Class C shares at NAV unless the Transfer Agent is instructed otherwise. On or before the Closing Date, each Acquired Fund will declare as a distribution substantially all of its net investment income, net capital gain, net short-term capital gain and (in the case of Global Energy Fund) net realized foreign currency gains in order to maintain its tax status as a regulated investment company. Each Acquired Fund will pay these distributions only in cash. Growth and Income Fund also may declare and distribute as a dividend to its shareholders on or before the Closing Date substantially all of any previously undistributed net investment income. 18 Federal Income Tax Consequences of the Reorganizations America Fund has received an opinion of Kirkpatrick & Lockhart LLP, its counsel, with respect to each Reorganization, Investment Series has received an opinion of Kirkpatrick & Lockhart LLP, its counsel, with respect to the Reorganization involving Global Energy Fund, and Equity Income Fund has received an opinion of Sullivan & Cromwell, its counsel, with respect to the Reorganization involving that Fund, each to the effect that the Reorganization will constitute a tax-free reorganization within the meaning of section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code"). Accordingly, no gain or loss will be recognized by any of the Funds or their shareholders as a result of the Reorganizations. See "The Proposed Transactions--Federal Income Tax Considerations," page 18. COMPARISON OF PRINCIPAL RISK FACTORS The fact that the Funds' investment objectives and policies are generally similar and that they are managed by the same investment adviser should minimize the risks that might otherwise be associated with the Reorganizations. In general, Growth and Income Fund's investment policies do not present investment risks that are not also presented by the investment policies of each Acquired Fund. There are, however, the following primary differences in the investment policies of Growth and Income Fund and the Acquired Funds. Industry Concentration Global Energy Fund concentrates its investments in the energy and energy service industries. Under normal circumstances, at least 65% of Global Energy Fund's net assets are invested in equity and debt securities of foreign and domestic energy and energy service companies. In contrast, Growth and Income Fund and Equity Income Fund do not concentrate investments in one industry and have more diversified portfolios. The policy of concentrating investments in energy and energy service industries may cause the value of Global Energy Fund's shares to fluctuate more than if it invested in a greater number of industries. Lower Rated Debt Securities Global Energy Fund and Growth and Income Fund may invest in lower rated securities than Equity Income Fund. The assets of those Funds may be invested in debt securities or convertible securities rated below investment grade. Such securities are commonly referred to as "junk bonds." While credit ratings are general and are not absolute standards of quality, lower-rated securities generally involve higher risks. Lower-rated securities generally offer a higher current yield than that available from higher-grade issues, but they involve higher risks, in that they are especially subject to adverse changes in general economic conditions and in the industries in which the issuers are engaged, to changes in the financial condition of the issuers and to price fluctuation in response to changes in interest rates. During periods of economic downturn or rising interest rates, highly leveraged issuers may experience financial stress that could adversely affect their ability to make payments of principal and interest (or, in the case of convertible preferred stock, dividends) and increase the possibility of default. In addition, such issuers may not have more traditional methods of financing available to them and may be unable to repay debt at maturity by refinancing. The risk of loss due to default by such issuers is significantly greater because such securities are frequently unsecured and subordinated to the prior payment of senior indebtedness. 19 The market for lower-rated debt securities has expanded rapidly in recent years, and its growth paralleled a long economic expansion. In the past, the prices of many lower-rated debt securities declined substantially, reflecting an expectation that many issuers of such securities might experience financial difficulties. As a result, the yields on such securities rose dramatically. However, such higher yields did not reflect the value of the income stream that holders of such securities expected, but rather the risk that holders of such securities could lose a substantial portion of their value as a result of the issuer's financial restructuring or default. There can be no assurance that such declines will not recur. The market for lower-rated debt securities generally is thinner and less active than that for higher-quality securities, which may limit a Fund's ability to sell such securities at their fair value in response to changes in the economy or the financial markets. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of lower-rated securities, especially in a thinly traded market. Foreign Securities Investments in each Fund involve the special risks of investing in foreign securities, although Global Energy Fund may invest without limit in foreign securities denominated in foreign currencies, while both Equity Income Fund and Growth and Income Fund are limited in their investments in foreign securities. Growth and Income Fund is limited to investing not more than 25% of its total assets in U.S. dollar-denominated securities of foreign issuers that are traded on recognized U.S. exchanges or in the U.S. over-the-counter market. The risks of investment in foreign securities include possible adverse political and economic developments abroad and differing regulatory systems and differing characteristics of foreign economies and markets, as well as the fact that there is often less information publicly available about foreign issuers. Many of the securities held by Global Energy Fund may be denominated in foreign currencies, and the value of each Fund's investments can be adversely affected by fluctuations in foreign currency values. Some foreign currencies can be volatile and may be subject to government controls or intervention. Hedging Strategies Each Fund, including Growth and Income Fund, may use options, futures contracts and options on futures contracts. There can be no assurance, however, that any strategy utilizing these instruments will succeed. If Mitchell Hutchins incorrectly forecasts interest rates, market values or other economic factors utilizing a strategy for a Fund, the Fund might have been in a better position had the Fund not hedged at all. The use of these instruments involves certain special risks, including (1) the fact that skills needed to use hedging instruments are different from those needed to select the Funds' 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 a 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 a 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 hedging transactions and the possible inability of the Fund to close out or to liquidate its hedged position. THE PROPOSED TRANSACTIONS Reorganization Plans The terms and conditions under which the proposed transactions may be consummated are set forth in the Reorganization Plans. Significant provisions of the Reorganization Plans are summarized below; however, this summary is qualified in its entirety by reference to the Reorganization Plans, which are attached as Appendices A and B to this Proxy Statement. 20 Each Reorganization Plan contemplates (1) Growth and Income Fund's acquiring on the Closing Date the assets of an Acquired Fund in exchange solely for its shares and its assumption of the Acquired Fund's liabilities and (2) the constructive distribution of such shares to the shareholders of the Acquired Fund. The assets of each Acquired Fund to be acquired by Growth and Income Fund include all cash, cash equivalents, securities, receivables and other property owned by the Acquired Fund. Growth and Income Fund will assume from each Acquired Fund all debts, liabilities, obligations and duties of such Fund of whatever kind or nature; provided, however, that each Acquired Fund will use its best efforts, to the extent practicable, to discharge all of its known debts, liabilities, obligations and duties prior to the Closing Date. Growth and Income Fund also will deliver its shares to each Acquired Fund, which then will be constructively distributed to the Acquired Fund's shareholders. The value of an Acquired Fund's assets to be acquired, and the amount of its liabilities to be assumed, by Growth and Income Fund and the NAV of a Class A, B, C and D share of Growth and Income Fund will be determined as of the close of regular trading on the New York Stock Exchange, Inc. ("NYSE") on the Closing Date. Where market quotations are readily available, portfolio securities will be valued based upon such market quotations, provided such quotations adequately reflect, in Mitchell Hutchins' judgment, fair value of the security. Where such market quotations are not readily available, such securities will be valued based upon appraisals received from a pricing service using a computerized matrix system or based upon appraisals derived from information concerning the security or similar securities received from recognized dealers in those securities. The amortized cost method of valuation generally will be used to value debt instruments with 60 days or less remaining to maturity, unless Equity Income Fund's board of directors (with respect to Equity Income Fund) or Investment Series' or America Fund's board of trustees (with respect to Global Energy Fund and Growth and Income Fund, respectively) determines that this does not represent fair value. All other securities and assets will be valued at fair value as determined in good faith by or under the direction of Equity Income Fund's board of directors or Investment Series' or America Fund's board of trustees, as applicable. All investments quoted in foreign currencies will be valued in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by each Fund's custodian. On, or as soon as practicable after, the Closing Date, each Acquired Fund will distribute to its shareholders of record the shares of Growth and Income Fund it received, by Class, so that each shareholder of the Acquired Fund will receive a number of full and fractional shares of the Corresponding Class or Classes of Growth and Income Fund shares equal in value to the shareholder's holdings in the Acquired Fund; each Acquired Fund will be terminated (in the case of Global Energy Fund) or liquidated (in the case of Equity Income Fund) as soon as practicable thereafter. Such distribution will be accomplished by opening accounts on the books of Growth and Income Fund in the names of the Acquired Fund's shareholders and by transferring thereto the shares of each Class previously credited to the account of each Acquired Fund on those books. Fractional shares in each Class of Growth and Income Fund will be rounded to the third decimal place. Accordingly, immediately after each Reorganization, each former shareholder of the participating Acquired Fund will own shares of the Class of Growth and Income Fund that will equal the value of that shareholder's shares of the Corresponding Class of the Acquired Fund immediately prior to the Reorganization. Moreover, because shares of each Class of Growth and Income Fund will be issued at NAV in exchange for the net assets applicable to the Corresponding Class of each Acquired Fund, the aggregate value of shares of each Class of Growth and Income Fund so issued will equal the aggregate value of shares of the Corresponding Class of the Acquired Funds. The NAV per share of Growth and Income Fund will be unchanged by the transactions. Thus, the Reorganizations will not result in a dilution of any shareholder interest. Any transfer taxes payable upon issuance of any shares of Growth and Income Fund in a name other than that of the registered holder of the shares on the books of an Acquired Fund shall be paid by the person to whom such shares are to be issued as a condition of such transfer. Any reporting responsibility of an Acquired Fund will continue to be its responsibility up to and including the Closing Date and such later date on which such Fund is terminated or liquidated. The cost of the Reorganizations, including professional fees and the cost of soliciting proxies for the Meeting, consisting principally of printing and mailing expenses, together with the cost of any supplementary solicitation, will be 21 borne by all three Funds in proportion to their respective net assets. Mitchell Hutchins recommended this method of expense allocation to the directors/trustees. Mitchell Hutchins based its recommendations on its belief that this method is fair because, for the reasons discussed under "Reasons for the Reorganizations," the Reorganizations have the potential to benefit all Funds. The directors of Equity Income Fund and the trustees of Investment Series considered this expense allocation method in approving the Reorganizations and in finding that the Reorganizations are in the best interests of their respective Funds. The consummation of each Reorganization is subject to a number of conditions set forth in its Reorganization Plan, some of which may be waived by an Acquired Fund. In addition, the Plans may be amended in any mutually agreeable manner, except that no amendment may be made subsequent to the Meeting that would have a material adverse effect on the shareholders' interests. Reasons for the Reorganizations The board of directors of Equity Income Fund, including a majority of its Independent Persons, has determined that the Reorganization involving that Fund is in the best interests of that Fund, that the terms of the Reorganization are fair and reasonable and that the interests of Equity Income Fund's shareholders will not be diluted as a result of the Reorganization. Investment Series' board of trustees, including a majority of its Independent Persons, has determined that the Reorganization involving Global Energy Fund is in the best interests of that Fund, that the terms of the Reorganization are fair and reasonable and that the interests of Global Energy Fund's shareholders will not be diluted as a result of the Reorganization. The board of trustees of America Fund, including a majority of its Independent Persons, has determined that the Reorganizations are in the best interests of Growth and Income Fund, that the terms of the Reorganizations are fair and reasonable and that the interests of Growth and Income Fund's shareholders will not be diluted as a result of the Reorganizations. In considering the Reorganizations, the boards of directors/trustees made an extensive inquiry into a number of factors, including the following: (1) the compatibility of the investment objectives, policies and restrictions of the Funds; (2) the effect of the Reorganizations on expected investment performance; (3) the effect of the Reorganizations on the expense ratio of Growth and Income Fund relative to its current expense ratio; (4) the expense ratio of Growth and Income Fund after the Reorganization relative to the current expense ratio of each of the Acquired Funds; (5) the costs to be incurred by each Fund as a result of the Reorganizations; (6) the tax consequences of the Reorganizations; (7) possible alternatives to the Reorganizations, including continuing to operate on a stand-alone basis or liquidation; and (8) the potential benefits of the Reorganizations to other persons, especially Mitchell Hutchins and PaineWebber. At meetings of the Acquired Funds' boards of directors/trustees on April 26 and 28, 1995, Mitchell Hutchins recommended, and the boards approved, the Reorganizations. The Amended and Restated Reorganization Plans were approved in their final form on July 20, 1995 by each Fund's board. Mitchell Hutchins advised the directors/trustees that 22 each Reorganization provided a sound alternative investment option, given the Funds' generally similar investment objectives and policies, with the material differences noted. Mitchell Hutchins and each Acquired Fund's board believe that the Reorganizations offer the Acquired Fund shareholders the benefits of investing in a larger, diversified open-end fund with an investment objective substantially similar to those of the Acquired Funds. In recommending the Reorganizations, Mitchell Hutchins indicated to the boards that the investment advisory and administration fee schedule applicable to Growth and Income Fund would be equal to or lower than that currently in effect for each of the Acquired Funds. The boards also were advised that the expense ratio for each Class of Growth and Income Fund's shares would likely decrease over time as a result of the Reorganizations due to the increased size of the combined Fund. In approving the Reorganizations, the boards noted that the overall investment objective of current income and capital growth remains an appropriate one to offer investors as part of an overall investment strategy. Mitchell Hutchins further advised the boards that, while past performance of Growth and Income Fund has not been as positive as that of the Acquired Funds, the investment policies of Growth and Income Fund have recently been revised. The new policies are intended to improve the Fund's performance. In addition, Mitchell Hutchins has recently appointed Mark A. Tincher as portfolio manager with day-to-day responsibility for Growth and Income Fund. Mr. Tincher is experienced in managing growth and income funds. Mitchell Hutchins also advised the boards that it did not expect to receive any immediate direct benefits from the Reorganizations, because the compensation that would be received by it as investment adviser to the combined Fund would be the same or less than the aggregate compensation it received from the Funds prior to the Reorganizations, assuming no change in aggregate net assets. However, Mitchell Hutchins noted that it could benefit in the future if the combined Fund's assets grow faster than would be the case for the three separate Funds in the absence of the Reorganizations. THE BOARDS OF TRUSTEES/DIRECTORS RECOMMEND THAT THE SHAREHOLDERS OF THE ACQUIRED FUNDS VOTE "FOR" THE PROPOSED REORGANIZATIONS. Description of Securities To Be Issued America Fund is registered with the SEC as an open-end management investment company. Its trustees are authorized to issue an unlimited number of shares of beneficial interest of separate series (par value $.001 per share). The trustees have established Growth and Income Fund as one of America Fund's series and have divided its shares into four Classes. Each share in a Class represents an equal proportionate interest in Growth and Income Fund with each other share in that Class. Shares of Growth and Income Fund entitle their holders to one vote per full share and fractional votes for fractional shares held, except that each Class of shares has exclusive voting rights on matters pertaining to its plan of distribution. On the Closing Date, Growth and Income Fund will have outstanding four Classes of shares, designated Class A, Class B, Class C and Class D shares. Each Class represents interests in the same assets of the Fund. The Classes differ as follows: (1) Class A, Class B and Class D shares, unlike Class C shares, bear certain fees under plans of distribution and have exclusive voting rights on matters pertaining to their plans of distribution; (2) Class A shares are subject to an initial sales charge; (3) Class B shares bear ongoing distribution expenses, are subject to a CDSC upon certain redemptions and automatically convert to Class A shares approximately six years after issuance; (4) Class C shares are subject to neither an initial sales charge nor a CDSC and bear no ongoing service or distribution fees; (5) Class D shares are subject to neither an initial sales charge nor a CDSC, bear no ongoing distribution fees and do not convert to another Class; and (6) each Class may bear differing amounts of certain Class-specific expenses. Each share of each Class of Growth and Income Fund will be entitled to participate equally in dividends and other distributions and the proceeds of any liquidation, except that because of the higher expenses resulting from the distribution fees borne by the Class B and D shares, dividends on those shares are expected to be lower than those for Class A and Class C shares; similarly, dividends on Class A shares are expected to be lower than those for Class C shares. Dividends on each Class also might be affected differently by the allocation of other Class-specific expenses. 23 America Fund does not hold annual meetings of shareholders. There will normally be no meetings of shareholders for the purpose of electing trustees unless fewer than a majority of the trustees holding office has been elected by shareholders, at which time the trustees then in office will call a shareholders' meeting for the election of trustees. Under the 1940 Act, shareholders of record of at least two-thirds of the outstanding shares of an investment company may remove a trustee by votes cast in person or by proxy at a meeting called for that purpose. The trustees are required to call a meeting of shareholders for the purpose of voting upon the question of removal of any trustee when requested in writing to do so by the shareholders of record holding at least 10% of America Fund's outstanding shares. Federal Income Tax Considerations The exchange of an Acquired Fund's assets for shares of Growth and Income Fund and Growth and Income Fund's assumption of liabilities of that Acquired Fund is intended to qualify for federal income tax purposes as a tax-free reorganization under section 368(a)(1)(C) of the Code. America Fund has received an opinion of Kirkpatrick & Lockhart LLP, its counsel, with respect to each Reorganization, Investment Series has received an opinion of Kirkpatrick & Lockhart LLP, its counsel, with respect to the Reorganization involving Global Energy Fund, and Equity Income Fund has received an opinion of Sullivan & Cromwell, its counsel, with respect to the Reorganization involving Equity Income Fund, each substantially to the effect that -- (i) Growth and Income Fund's acquisition of the Acquired Fund's assets in exchange solely for Growth and Income Fund shares and Growth and Income Fund's assumption of the Acquired Fund's liabilities, followed by the Acquired Fund's distribution of those shares to its shareholders constructively in exchange for their Acquired Fund shares, will constitute a "reorganization" within the meaning of section 368(a)(1)(C) of the Code, and each Fund will be "a party to a reorganization" within the meaning of section 368(b) of the Code; (ii) No gain or loss will be recognized to the Acquired Fund on the transfer to Growth and Income Fund of its assets in exchange solely for Growth and Income Fund shares and Growth and Income Fund's assumption of the Acquired Fund's liabilities or on the subsequent distribution of those shares to the Acquired Fund's shareholders in constructive exchange for their Acquired Fund shares; (iii) No gain or loss will be recognized to Growth and Income Fund on its receipt of the transferred assets in exchange solely for Growth and Income Fund shares and its assumption of the Acquired Fund's liabilities; (iv) Growth and Income Fund's basis for the transferred assets will be the same as the basis thereof in the Acquired Fund's hands immediately prior to the Reorganization, and Growth and Income Fund's holding period for those assets will include the Acquired Fund's holding period therefor; (v) An Acquired Fund shareholder will recognize no gain or loss on the constructive exchange of all its Acquired Fund shares solely for Growth and Income Fund shares pursuant to the Reorganization; and (vi) An Acquired Fund shareholder's basis for the Growth and Income Fund shares to be received by it in the Reorganization will be the same as the basis for its Acquired Fund shares to be constructively surrendered in exchange for those Growth and Income Fund shares, and its holding period for those Growth and Income Fund shares will include its holding period for those Acquired Fund shares, provided they are held as capital assets by the shareholder on the Closing Date. Each such opinion may state that no opinion is expressed as to the effect of the Reorganization on the Funds or any shareholder with respect to any asset (including certain options, futures and forward contracts) as to which unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting. 24 Utilization by Growth and Income Fund after the Reorganizations of pre-Reorganization capital losses realized by Global Energy Fund could be subject to limitation in future years under the Code. Shareholders of an Acquired Fund should consult their tax advisers regarding the effect, if any, of the proposed Reorganizations in light of their individual circumstances. Because the foregoing discussion only relates to the federal income tax consequences of the Reorganizations, those shareholders also should consult their tax advisers as to state and local tax consequences, if any, of the Reorganizations. Individual participants in the PW SIP should consult the Plan Documents and their own tax advisers for information on the tax consequences associated with participating in the PW SIP. 25 Capitalization The following tables show the capitalization of each Fund as of February 28, 1995 and on a pro forma combined basis (unaudited) as of that date, giving effect to the Reorganizations and assuming that the Acquired Funds indicated participate in the Reorganizations. If only Global Energy Fund participates in a Reorganization: Growth and Global Income Energy Pro Forma Fund Fund Combined ------------ ----------- ----------- Net Assets Class A ....... $180,816,735 $8,951,715 $189,768,450 Class B ....... $239,383,165 $12,442,509 $251,825,674 Class C ....... $14,543,879 -- $14,543,879 Class D ....... $29,927,874 $635,332 $30,563,206 NAV Per Share Class A ....... $19.15 $9.92 $19.15 Class B ....... $19.10 $9.92 $19.10 Class C ....... $19.14 -- $19.14 Class D ....... $19.15 $9.80 $19.15 Shares Outstanding Class A ....... 9,441,600 902,281 9,908,996 Class B ....... 12,533,576 1,254,095 13,184,917 Class C ....... 759,803 -- 759,803 Class D ....... 1,562,497 64,846 1,595,682 26 If only Equity Income Fund participates in a Reorganization: Growth and Equity Income Income Pro Forma Fund Fund Combined ------------ ----------- ----------- Net Assets Class A ....... $180,816,735 $58,224,548 $239,041,283 Class B1/ ..... $239,383,165 $1,612,995 $239,383,165 Class C ....... $14,543,879 $3,547,267 $18,091,146 Class D ....... $29,927,874 -- $31,540,869 NAV Per Share Class A ....... $19.15 $19.57 $19.15 Class B1/ ..... $19.10 $19.45 $19.10 Class C ....... $19.14 $19.56 $19.14 Class D ....... $19.15 $ -- $19.15 Shares Outstanding Class A ....... 9,441,600 2,975,547 12,482,407 Class B1/ ..... 12,533,576 82,939 12,533,576 Class C ....... 759,803 181,359 945,142 Class D ....... 1,562,497 -- 1,646,735 ------------ 1/ Class B shares of Equity Income Fund will be exchanged for Class D shares of Growth and Income Fund. 27 If both Acquired Funds participate in the Reorganizations: Growth and Equity Global Income Income Energy Pro Forma Fund Fund Fund Combined ------------ ----------- ----------- ------------ Net Assets Class A ....... $180,816,735 $58,224,548 $8,951,715 $247,992,998 Class B1/ ..... $239,383,165 $1,612,995 $12,442,509 $251,825,674 Class C ....... $14,543,879 $3,547,267 -- $18,091,146 Class D ....... $29,927,874 -- $635,332 $32,176,201 NAV Per Share Class A ....... $19.15 $19.57 $9.92 $19.15 Class B ....... $19.10 $19.45 $9.92 $19.10 Class C ....... $19.14 $19.56 -- $19.14 Class D ....... $19.15 -- $9.80 $19.15 Shares Outstanding Class A ....... 9,441,600 2,975,547 902,281 12,949,803 Class B ....... 12,533,576 82,939 1,254,095 13,184,917 Class C ....... 759,803 181,359 -- 945,142 Class D ....... 1,562,497 -- 64,846 1,679,920 ------------ 1/ Class B shares of Equity Income Fund will be exchanged for Class D shares of Growth and Income Fund. 28 ADDITIONAL INFORMATION ABOUT GROWTH AND INCOME FUND Financial Highlights The table below provides selected per share data and ratios for one Class A share, one Class B share, one Class C share and one Class D share of Growth and Income Fund for each of the periods shown. This information is supplemented by the financial statements and accompanying notes appearing in Growth and Income Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1994, which are incorporated by reference into its Statement of Additional Information. The financial statements and notes, as well as the information in the table appearing below insofar as it relates to the five years in the period ended August 31, 1994, have been audited by Ernst & Young LLP, independent auditors, whose report thereon is included in the Annual Report to Shareholders. Further information about the performance of Growth and Income Fund is also included in the Annual Report to Shareholders, which accompanies this prospectus/proxy. The information appearing below for periods prior to the year ended August 31, 1990 also has been audited by Ernst & Young LLP, whose reports thereon were unqualified. The financial statements and notes and the financial information in the table below insofar as they relate to the six months ended February 28, 1995 have been taken from the records of the Fund without examination by the Fund's independent auditors, who do not express an opinion thereon.
Class A -------------------------------------------------------------------------- For the Six Months Ended February 28, For the Years Ended 1995 (unaudited) 1994 1993 1992 1991 1990 ------------ -------- -------- -------- -------- ------- Net asset value, beginning of period .... $20.43 $20.86 $20.48 $19.26 $15.87 $16.50 -------- -------- -------- -------- -------- ------- Income (loss) from investment operations: Net investment income .. 0.10 0.28 0.28 0.24 0.19 0.51 Net realized and unrealized gains (losses) from investment transactions ........... (0.05) (0.41) 0.37 1.25 3.50 (0.61) -------- -------- -------- -------- -------- ------- Total income (loss) from investment operations .. 0.05 (0.13) 0.65 1.49 3.69 (0.10) -------- -------- -------- -------- -------- ------- Less dividends and distributions from: Net investment income .. (0.12) (0.27) (0.27) (0.27) (0.30) (0.53) Net realized gains on investments ............ (1.21) (0.03) -- -- -- -- -------- -------- -------- -------- -------- ------- Total dividends and distributions .......... (1.33) (0.30) (0.27) (0.27) (0.30) (0.53) -------- -------- -------- -------- -------- ------- Net asset value, end of period ................. $19.15 $20.43 $20.86 $20.48 $19.26 $15.87 ======== ======== ======== ======== ======== ======= Total return(1) ........ 0.65% (0.58)% 3.15% 7.78% 23.62% (0.72)% ======== ======== ======== ======== ======== ======= Ratios/Supplemental Data: Net assets, end of period (000's) ......... $180,817 $222,432 $359,073 $358,643 $232,555 $58,649 Net investment income to average net assets ..... 1.21%* 1.20% 1.13% 1.22% 1.42% 1.41% Net investment income to average net assets ..... 0.97%* 1.29% 1.33% 1.26% 1.79% 3.11% Portfolio turnover ..... 65.25% 94.32% 36.52% 15.57% 52.00% 32.10% Class B --------------------------------------------------------------- For the For the Six Period Months Ended For the Years Ended July 1, February 28, August 31, 1991+ to 1995 ---------------------------------- August 31, (unaudited) 1994 1993 1992 1991 ------------ -------- -------- -------- ---------- Net asset value, beginning of period .... $20.37 $20.78 $20.41 $19.23 $18.04 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income .. 0.02 0.10 0.12 0.13 0.02 Net realized and unrealized gains (losses) from investment transactions ........... (0.05) (0.37) 0.36 1.20 1.17 -------- -------- -------- -------- -------- Total income (loss) from investment operations .. (0.03) (0.27) 0.48 1.33 1.19 -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income .. (0.03) (0.11) (0.11) (0.15) -- Net realized gains on investments ............ (1.21) (0.03) -- -- -- -------- -------- -------- -------- -------- Total dividends and distributions .......... (1.24) (0.14) (0.11) (0.15) -- -------- -------- -------- -------- -------- Net asset value, end of period ................. $19.10 $20.37 $20.78 $20.41 $19.23 ======== ======== ======== ======== ======== Total return(1) ........ 0.22% (1.31)% 2.34% 6.99% 6.60% ======== ======== ======== ======== ======== Ratios/Supplemental Data: Net assets, end of period (000's) ......... $239,383 $289,290 $461,389 $386,275 $57,539 Net investment income to average net assets ..... 1.99%* 1.97% 1.90% 1.97% 2.10%* Net investment income to average net assets ..... 0.19%* 0.51% 0.57% 4.90% 1.18%* Portfolio turnover ..... 65.25% 94.32% 36.52% 15.57% 52.00%
30 Class C -------------------------------------------------- For the For the Six Period Months Ended For the Years February 12, February 28, Ended 1992+ to 1995 August 31, August 31, (unaudited) 1994 1993 1992 ------------ ------- ------- ------------ Net asset value, beginning of period ... $ 20.42 $ 20.86 $ 20.48 $ 20.95 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income . 0.13 0.33 0.33 0.16 Net realized and unrealized gains (losses) from investment transactions (0.05) (0.40) 0.37 (0.49) ------- ------- ------- ------- Total income (loss) from investment operations ............ 0.08 (0.07) 0.70 (0.33) ------- ------- ------- ------- Less dividends and distributions from: Net investment income . (0.15) (0.34) (0.32) (0.14) Net realized gains on investments ........... (1.21) (0.03) -- -- ------- ------- ------- ------- Total dividends and distributions ......... (1.36) (0.37) (0.32) (0.14) ------- ------- ------- ------- Net asset value, end of period ................ $ 19.14 $ 20.42 $ 20.86 $ 20.48 ======= ======= ======= ======= Total return(1) ....... 0.81% (0.31)% 3.44% (1.15)% ======= ======= ======= ======= Ratios/Supplemental Data: Net assets, end of period (000's) ........ $14,544 $14,690 $17,005 $10,560 Net investment income to average net assets . 0.90%* 0.90% 0.86% 0.93%* Net investment income to average net assets . 1.29%* 1.60% 1.62% 1.56%* Portfolio turnover .... 65.25% 94.32% 36.52% 15.57% 31 Class D ------------------------------------------------- For the For the Six Period Months Ended For the Years Ended July 2, February 28, August 31, 1992+ to 1995 -------------------- August 31, (unaudited) 1994 1993 1992 ------------ ------- ------- ---------- Net asset value, beginning of period ................. $ 20.42 $ 20.83 $ 20.47 $ 20.95 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income ..... 0.02 0.11 0.11 0.02 Net realized and unrealized gains (losses) from investment transactions .............. (0.05) (0.38) 0.37 (0.44) ------- ------- ------- ------- Total income (loss) from investment operations ..... (0.03) (0.27) 0.48 (0.42) ------- ------- ------- ------- Less dividends and distributions from: Net investment income ..... (0.03) (0.11) (0.12) (0.06) Net realized gains on investments ............... (1.21) (0.03) -- -- ------- ------- ------- ------- Total dividends and distributions ............. (1.24) (0.14) (1.12) (0.06) ------- ------- ------- ------- Net asset value, end of period .................... $ 19.15 $ 20.42 $ 20.83 $ 20.47 ======= ======= ======= ======= Total return(1) ........... 0.26% (1.29%) 2.35% 2.85% ======= ======= ======= ======= Ratios/Supplemental Data: Net assets, end of period (000's) ................... $29,928 $37,267 $61,869 $13,019 Net investment income to average net assets .................... 2.00%* 1.94% 1.87% 1.73% Net investment income to average net assets ........ 0.18%* 0.54% 0.61% 0.94% Portfolio turnover ........ 62.25% 94.32% 36.52% 15.57% ------------ * Annualized. + Commencement of offering of shares. (1) Total return is calculated assuming a $1,000 investment on the first day of each period reported, reinvestment of all dividends and capital gain distributions at net asset value on the payable date, and a sale at net asset value on the last day of each period reported. The figures do not include sales charges; results for Class A and Class B shares would be lower if sales charges were included. Total return information for periods less than one year is not annualized. 32 MISCELLANEOUS Available Information Investment Series, Equity Income Fund and America Fund are each subject to the informational requirements of the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith file reports, proxy material and other information with the SEC. Such reports, proxy material and other information can be inspected and copied at the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549 at prescribed rates. Legal Matters Certain legal matters in connection with the issuance of Growth and Income Fund shares will be passed upon by Kirkpatrick & Lockhart LLP, counsel to America Fund. Experts The audited financial statements of Growth and Income Fund, Global Energy Fund and Equity Income Fund, incorporated by reference herein and in each Fund's respective Statements of Additional Information, have been audited by Ernst & Young LLP, independent auditors, Price Waterhouse LLP, independent accountants, and Deloitte & Touche LLP, independent auditors, respectively, whose reports thereon are included in the Funds' Annual Reports to Shareholders for the fiscal years ended August 31, 1994, October 31, 1994 and January 31, 1995, respectively. In addition, there are unaudited financial statements of Growth and Income Fund and Global Energy Fund in their semi-annual reports to shareholders for the six-month period ended February 28, 1995 and April 30, 1995, respectively. The financial statements audited by Ernst & Young LLP, Price Waterhouse LLP and Deloitte & Touche LLP have been incorporated herein by reference in reliance on their reports given on their authority as experts in auditing and accounting. 33 APPENDIX A AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is made as of July 25, 1995, between PaineWebber America Fund, a Massachusetts business trust ("America Trust"), on behalf of PaineWebber Growth and Income Fund, a segregated portfolio of assets ("series") thereof ("Acquiring Fund"), and PaineWebber Investment Series, a Massachusetts business trust ("Investment Series"), on behalf of its PaineWebber Global Energy Fund series ("Target"). (Acquiring Fund and Target are sometimes referred to herein individually as a "Fund" and collectively as the "Funds," and America Trust and Investment Series are sometimes referred to herein collectively as the "Investment Companies.") RECITAL The parties entered into an Agreement and Plan of Reorganization and Liquidation dated as of May 30, 1995 ("Original Agreement"), which provided, inter alia, for Target shareholders to receive Acquiring Fund shares pursuant to the transactions contemplated thereby. The parties now desire to amend and restate the Original Agreement to reflect a change in the class of Acquiring Fund shares to be distributed to holders of Class C Target Shares (as defined below). Therefore, the Original Agreement is hereby amended and restated to read in its entirety as follows: AMENDED AND RESTATED PROVISIONS This Agreement is intended to be, and is adopted as, a plan of a reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code"). The reorganization will involve the transfer to Acquiring Fund of Target's assets solely in exchange for voting shares of beneficial interest in Acquiring Fund ("Acquiring Fund Shares") and the assumption by Acquiring Fund of Target's liabilities, followed by the constructive distribution of the Acquiring Fund Shares to the holders of shares of beneficial interest in Target ("Target Shares") in exchange therefor, all upon the terms and conditions set forth herein. The foregoing transactions are referred to herein as the "Reorganization." All agreements, representations, actions, and obligations described herein made or to be taken or undertaken by either Fund are made and shall be taken or undertaken by America Trust on behalf of Acquiring Fund and by Investment Series on behalf of Target. Acquiring Fund's shares are divided into four classes, designated Class A, Class B, Class C, and Class D shares ("Class A Acquiring Fund Shares," "Class B Acquiring Fund Shares," "Class C Acquiring Fund Shares," and "Class D Acquiring Fund Shares," respectively). Except as noted in the following sentence, these classes differ only with respect to the sales charges imposed on the purchase of shares and the fees ("12b-1 fees") payable by each class pursuant to plans adopted under Rule 12b-1 promulgated under the Investment Company Act of 1940 ("1940 Act"), as follows: (1) Class A Acquiring Fund Shares are offered at net asset value ("NAV") plus a sales charge, if applicable, and are subject to a 12b-1 service fee at the annual rate of 0.25% of the average daily net assets attributable to the class ("class assets"); (2) Class B Acquiring Fund Shares are offered at NAV without imposition of any sales charge and are subject to a contingent deferred sales charge and 12b-1 service and distribution fees at the respective annual rates of 0.25% and 0.75% of class assets; (3) Class C Acquiring Fund Shares are offered, currently only to the trustee of the PaineWebber Savings Investment Plan on behalf of that plan, at NAV without imposition of any sales charge and are not subject to any 12b-1 fee; and (4) Class D Acquiring Fund Shares are offered at NAV without imposition of any sales charge and are subject to 12b-1 service and distribution fees at the respective annual rates of 0.25% and 0.50% of class assets. These classes also may differ from one another with A - 1 respect to the allocation of certain class-specific expenses other than 12b-1 fees. Only Classes A, B, and D Acquiring Fund Shares are involved in the Reorganization. Target's shares are divided into three classes, designated Class A, Class B, and Class D shares ("Class A Target Shares," "Class B Target Shares," and "Class D Target Shares," respectively). These classes are identical to the correspondingly lettered classes of Acquiring Fund Shares, except that the Class A Target Shares are subject to a 12b-1 service fee at the annual rate of 0.25%, rather than 0.23%, of class assets. In consideration of the mutual promises herein, the parties covenant and agree as follows: 1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET 1.1. Target agrees to assign, sell, convey, transfer, and deliver all of its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring Fund agrees in exchange therefor -- (a) to issue and deliver to Target the number of full and fractional (i) Class A Acquiring Fund Shares determined by dividing the net value of Target (computed as set forth in paragraph 2.1) ("Target Value") attributable to the Class A Target Shares by the NAV (computed as set forth in paragraph 2.2) of a Class A Acquiring Fund Share, (ii) Class B Acquiring Fund Shares determined by dividing the Target Value attributable to the Class B Target Shares by the NAV (as so computed) of a Class B Acquiring Fund Share, and (iii) Class D Acquiring Fund Shares determined by dividing the Target Value attributable to the Class D Target Shares by the NAV (as so computed) of a Class D Acquiring Fund Share; and (b) to assume all of Target's liabilities described in paragraph 1.3 ("Liabilities"). Such transactions shall take place at the Closing (as defined in paragraph 3.1). 1.2. The Assets shall include, without limitation, all cash, cash equivalents, securities, receivables (including interest and dividends receivable), claims and rights of action, rights to register shares under applicable securities laws, books and records, deferred and prepaid expenses shown as assets on Target's books, and other property owned by Target at the Effective Time (as defined in paragraph 3.1). 1.3. The Liabilities shall include (except as otherwise provided herein) all of Target's liabilities, debts, obligations, and duties of whatever kind or nature, whether absolute, accrued, contingent, or otherwise, whether or not arising in the ordinary course of business, whether or not determinable at the Effective Time, and whether or not specifically referred to in this Agreement, including without limitation Target's share of the expenses described in paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best efforts to discharge all of its known Liabilities prior to the Effective Time. 1.4. At or immediately before the Effective Time, Target shall declare and pay to its shareholders a dividend and/or other distribution in an amount large enough so that it will have distributed substantially all (and in any event not less than 90%) of its investment company taxable income (computed without regard to any deduction for dividends paid) and realized net capital gain, if any, for the current taxable year through the Effective Time. 1.5. At the Effective Time (or as soon thereafter as is reasonably practicable), Target shall constructively distribute the Acquiring Fund Shares received by it pursuant to paragraph 1.1 to Target's shareholders of record, determined as of the Effective Time (collectively "Shareholders" and individually a "Shareholder"), in exchange for their Target Shares. Such distribution shall be accomplished by the Funds' transfer agent ("Transfer Agent") opening accounts on Acquiring Fund's share transfer books in the Shareholders' names and transferring such Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with the respective pro rata number A - 2 of full and fractional (rounded to the third decimal place) Acquiring Fund Shares due that Shareholder, by class (i.e., the account for a Shareholder of Class A Target Shares shall be credited with the respective pro rata number of Class A Acquiring Fund Shares due that Shareholder, the account for a Shareholder of Class B Target Shares shall be credited with the respective pro rata number of Class B Acquiring Fund Shares due that Shareholder, and the account for a Shareholder of Class D Target Shares shall be credited with the respective pro rata number of Class D Acquiring Fund Shares due that Shareholder). All outstanding Target Shares, including any represented by certificates, shall simultaneously be canceled on Target's share transfer records. Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares in connection with the Reorganization. 1.6. As soon as reasonably practicable after distribution of the Acquiring Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a series of Investment Series and any further actions shall be taken in connection therewith as required by applicable law. 1.7. Any reporting responsibility of Target to a public authority is and shall remain its responsibility up to and including the date on which it is terminated. 1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name other than that of the registered holder on Target's books of the Target Shares constructively exchanged therefor shall be paid by the person to whom such Acquiring Fund Shares are to be issued, as a condition of such transfer. 2. VALUATION 2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the value of the Assets computed as of the close of regular trading on the New York Stock Exchange, Inc. ("NYSE") on the date of the Closing ("Valuation Time"), using the valuation procedures set forth in Target's then-current prospectus and statement of additional information less (b) the amount of the Liabilities as of the Valuation Time. 2.2. For purposes of paragraph 1.1(a), the NAV of a Class A Acquiring Fund Share, a Class B Acquiring Fund Share, and a Class D Acquiring Fund Share shall be computed as of the Valuation Time, using the valuation procedures set forth in Acquiring Fund's then-current prospectus and statement of additional information. 2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or under the direction of Mitchell Hutchins Asset Management Inc. 3. CLOSING AND EFFECTIVE TIME 3.1. The Reorganization, together with related acts necessary to consummate the same ("Closing"), shall occur at the Funds' principal office on October 13, 1995, or at such other place and/or on such other date as the parties may agree. All acts taking place at the Closing shall be deemed to take place simultaneously as of the close of business on the date thereof or at such other time as the parties may agree ("Effective Time"). If, immediately before the Valuation Time, (a) the NYSE is closed to trading or trading thereon is restricted or (b) trading or the reporting of trading on the NYSE or elsewhere is disrupted, so that accurate appraisal of the net value of Target and the NAV per Acquiring Fund Share is impracticable, the Effective Time shall be postponed until the first business day after the day when such trading shall have been fully resumed and such reporting shall have been restored. 3.2. Investment Series shall deliver to America Trust at the Closing a schedule of the Assets as of the Effective Time, which shall set forth for all portfolio securities included therein their adjusted tax basis and holding period by lot. Target's custodian shall deliver at the Closing a certificate of an authorized officer stating that (a) the A - 3 Assets held by the custodian will be transferred to Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction with the delivery of the Assets, including all applicable federal and state stock transfer stamps, if any, have been paid or provision for payment has been made. 3.3. Investment Series shall deliver to America Trust at the Closing a list of the names and addresses of the Shareholders and the number (by class) of outstanding Target Shares owned by each Shareholder, all as of the Effective Time, certified by the Secretary or Assistant Secretary of Target. The Transfer Agent shall deliver at the Closing a certificate as to the opening on Acquiring Fund's share transfer books of accounts in the Shareholders' names. America Trust shall issue and deliver a confirmation to Investment Series evidencing the Acquiring Fund Shares (by class) to be credited to Target at the Effective Time or provide evidence satisfactory to Investment Series that such Acquiring Fund Shares have been credited to Target's account on Acquiring Fund's books. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts, or other documents as the other party or its counsel may reasonably request. 3.4. Each Investment Company shall deliver to the other at the Closing a certificate executed in its name by its President or a Vice President in form and substance satisfactory to the recipient and dated the Effective Time, to the effect that the representations and warranties it made in this Agreement are true and correct at the Effective Time except as they may be affected by the transactions contemplated by this Agreement. 4. REPRESENTATIONS AND WARRANTIES 4.1. Target represents and warrants as follows: 4.1.1. Investment Series is an unincorporated voluntary association with transferable shares organized as a business trust under a written instrument ("Business Trust"); it is duly organized, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts; and a copy of its Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts; 4.1.2. Investment Series is duly registered as an open-end management investment company under the 1940 Act, and such registration will be in full force and effect at the Effective Time; 4.1.3. Target is a duly established and designated series of Investment Series; 4.1.4. At the Closing, Target will have good and marketable title to the Assets and full right, power, and authority to sell, assign, transfer, and deliver the Assets free of any liens or other encumbrances; and upon delivery and payment for the Assets, Acquiring Fund will acquire good and marketable title thereto; 4.1.5. Target's current prospectus and statement of additional information conform in all material respects to the applicable requirements of the Securities Act of 1933 ("1933 Act") and the 1940 Act and the rules and regulations thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; 4.1.6. Target is not in violation of, and the execution and delivery of this Agreement and consummation of the transactions contemplated hereby will not conflict with or violate, Massachusetts law or any provision of Investment Series' Declaration of Trust or By-Laws or of any agreement, instrument, lease, or other undertaking to which Target is a party or by which it is bound or result in the acceleration of any obligation, or the imposition of any penalty, under any agreement, judgment, or decree to which Target is a party or by which it is bound, except as previously disclosed in writing to and accepted by America Trust; A - 4 4.1.7. Except as disclosed in writing to and accepted by America Trust, all material contracts and other commitments of or applicable to Target (other than this Agreement and investment contracts, including options, futures, and forward contracts) will be terminated, or provision for discharge of any liabilities of Target thereunder will be made, at or prior to the Effective Time, without either Fund's incurring any liability or penalty with respect thereto and without diminishing or releasing any rights Target may have had with respect to actions taken or omitted to be taken by any other party thereto prior to the Closing; 4.1.8. Except as otherwise disclosed in writing to and accepted by America Trust, no litigation, administrative proceeding, or investigation of or before any court or governmental body is presently pending or (to Target's knowledge) threatened against Investment Series with respect to Target or any of its properties or assets that, if adversely determined, would materially and adversely affect Target's financial condition or the conduct of its business; Target knows of no facts that might form the basis for the institution of any such litigation, proceeding, or investigation and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially or adversely affects its business or its ability to consummate the transactions contemplated hereby; 4.1.9. The execution, delivery, and performance of this Agreement has been duly authorized as of the date hereof by all necessary action on the part of Investment Series' board of trustees, which has made the determinations required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by Target's shareholders and receipt of any necessary exemptive relief or no-action assurances requested from the Securities and Exchange Commission ("SEC") or its staff with respect to sections 17(a) and 17(d) of the 1940 Act, this Agreement will constitute a valid and legally binding obligation of Target, enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws relating to or affecting creditors' rights and by general principles of equity; 4.1.10. At the Effective Time, the performance of this Agreement shall have been duly authorized by all necessary action by Target's shareholders; 4.1.11. No governmental consents, approvals, authorizations, or filings are required under the 1933 Act, the Securities Exchange Act of 1934 ("1934 Act"), or the 1940 Act for the execution or performance of this Agreement by Investment Series, except for (a) the filing with the SEC of a registration statement by America Trust on Form N-14 relating to the Acquiring Fund Shares issuable hereunder, and any supplement or amendment thereto ("Registration Statement"), including therein a prospectus/proxy statement ("Proxy Statement"), (b) receipt of the exemptive relief referenced in subparagraph 4.1.9, and (c) such consents, approvals, authorizations, and filings as have been made or received or as may be required subsequent to the Effective Time; 4.1.12. On the effective date of the Registration Statement, at the time of the shareholders' meeting referred to in paragraph 5.2, and at the Effective Time, the Proxy Statement will (a) comply in all material respects with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the regulations thereunder and (b) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading; provided that the foregoing shall not apply to statements in or omissions from the Proxy Statement made in reliance on and in conformity with information furnished by America Trust for use therein; 4.1.13. The Liabilities were incurred by Target in the ordinary course of its business; 4.1.14. Target is a "fund" as defined in section 851(h)(2) of the Code; it qualified for treatment as a regulated investment company ("RIC") under Subchapter M of the Code for each past taxable year since it commenced operations and will continue to meet all the requirements for such qualification for its current tax- A - 5 able year; and it has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it. The Assets shall be invested at all times through the Effective Time in a manner that ensures compliance with the foregoing; 4.1.15. Target is not under the jurisdiction of a court in a proceeding under Title 11 of the United States Code or similar case within the meaning of section 368(a)(3)(A) of the Code; 4.1.16. Not more than 25% of the value of Target's total assets (excluding cash, cash items, and U.S. government securities) is invested in the stock or securities of any one issuer, and not more than 50% of the value of such assets is invested in the stock or securities of five or fewer issuers; and 4.1.17. Target will be terminated as soon as reasonably practicable after the Reorganization, but in all events within six months after the Effective Time. 4.2. Acquiring Fund represents and warrants as follows: 4.2.1. America Trust is a Business Trust; it is duly organized, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts; and a copy of its Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts; 4.2.2. America Trust is duly registered as an open-end management investment company under the 1940 Act, and such registration will be in full force and effect at the Effective Time; 4.2.3. Acquiring Fund is a duly established and designated series of America Trust; 4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring Fund's assumption of the Liabilities) will be issued in exchange for the Assets in the Reorganization; 4.2.5. The Acquiring Fund Shares to be issued and delivered to Target hereunder will, at the Effective Time, have been duly authorized and, when issued and delivered as provided herein, will be duly and validly issued and outstanding shares of Acquiring Fund, fully paid and non-assessable, except to the extent that under Massachusetts law shareholders of a Business Trust may, under certain circumstances, be held personally liable for its obligations. Except as contemplated by this Agreement, Acquiring Fund does not have outstanding any options, warrants, or other rights to subscribe for or purchase any of its shares, nor is there outstanding any security convertible into any of its shares; 4.2.6. Acquiring Fund's current prospectus and statement of additional information conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; 4.2.7. Acquiring Fund is not in violation of, and the execution and delivery of this Agreement and consummation of the transactions contemplated hereby will not conflict with or violate, Massachusetts law or any provision of America Trust's Declaration of Trust or By-Laws or of any provision of any agreement, instrument, lease, or other undertaking to which Acquiring Fund is a party or by which it is bound or result in the acceleration of any obligation, or the imposition of any penalty, under any agreement, judgment, or decree to which Acquiring Fund is a party or by which it is bound, except as previously disclosed in writing to and accepted by Investment Series; 4.2.8. Except as otherwise disclosed in writing to and accepted by Investment Series, no litigation, administrative proceeding, or investigation of or before any court or governmental body is presently pending A - 6 or (to Acquiring Fund's knowledge) threatened against America Trust with respect to Acquiring Fund or any of its properties or assets that, if adversely determined, would materially and adversely affect Acquiring Fund's financial condition or the conduct of its business; Acquiring Fund knows of no facts that might form the basis for the institution of any such litigation, proceeding, or investigation and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially or adversely affects its business or its ability to consummate the transactions contemplated hereby; 4.2.9. The execution, delivery, and performance of this Agreement has been duly authorized as of the date hereof by all necessary action on the part of America Trust's board of trustees, which has made the determinations required by Rule 17a-8(a) under the 1940 Act; and, subject to receipt of any necessary exemptive relief or no-action assurances requested from the SEC or its staff with respect to sections 17(a) and 17(d) of the 1940 Act, this Agreement will constitute a valid and legally binding obligation of Acquiring Fund, enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws relating to or affecting creditors' rights and by general principles of equity; 4.2.10. No governmental consents, approvals, authorizations, or filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for the execution or performance of this Agreement by America Trust, except for (a) the filing with the SEC of the Registration Statement, (b) receipt of the exemptive relief referenced in subparagraph 4.2.9, and (c) such consents, approvals, authorizations, and filings as have been made or received or as may be required subsequent to the Effective Time; 4.2.11. On the effective date of the Registration Statement, at the time of the shareholders' meeting referred to in paragraph 5.2, and at the Effective Time, the Proxy Statement will (a) comply in all material respects with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the regulations thereunder and (b) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading; provided that the foregoing shall not apply to statements in or omissions from the Proxy Statement made in reliance on and in conformity with information furnished by Investment Series for use therein; 4.2.12. Acquiring Fund is a "fund" as defined in section 851(h)(2) of the Code; it qualified for treatment as a RIC under Subchapter M of the Code for each past taxable year since it commenced operations and will continue to meet all the requirements for such qualification for its current taxable year; Acquiring Fund intends to continue to meet all such requirements for the next taxable year; and it has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it; 4.2.13. Acquiring Fund has no plan or intention to issue additional Acquiring Fund Shares following the Reorganization except for shares issued in the ordinary course of its business as a series of an open-end investment company; nor does Acquiring Fund have any plan or intention to redeem or otherwise reacquire any Acquiring Fund Shares issued to the Shareholders pursuant to the Reorganization, other than through redemptions arising in the ordinary course of that business; 4.2.14. Acquiring Fund (a) will actively continue Target's business in substantially the same manner that Target conducted that business immediately before the Reorganization, (b) has no plan or intention to sell or otherwise dispose of any of the Assets, except for dispositions made in the ordinary course of that business and dispositions necessary to maintain its status as a RIC under Subchapter M of the Code, and (c) expects to retain substantially all the Assets in the same form as it receives them in the Reorganization, unless and until subsequent investment circumstances suggest the desirability of change or it becomes necessary to make dispositions thereof to maintain such status; A - 7 4.2.15. There is no plan or intention for Acquiring Fund to be dissolved or merged into another corporation or business trust or any "fund" thereof (within the meaning of section 851(h)(2) of the Code) following the Reorganization; 4.2.16. Immediately after the Reorganization, (a) not more than 25% of the value of Acquiring Fund's total assets (excluding cash, cash items, and U.S. government securities) will be invested in the stock or securities of any one issuer and (b) not more than 50% of the value of such assets will be invested in the stock or securities of five or fewer issuers; and 4.2.17. Acquiring fund does not own, directly or indirectly, nor at the Effective Time will it own, directly or indirectly, nor has it owned, directly or indirectly, at any time during the past five years, any shares of Target. 4.3. Each Fund represents and warrants as follows: 4.3.1. The fair market value of the Acquiring Fund Shares, when received by the Shareholders, will be approximately equal to the fair market value of their Target Shares constructively surrendered in exchange therefor; 4.3.2. Its management (a) is unaware of any plan or intention of Shareholders to redeem or otherwise dispose of any portion of the Acquiring Fund Shares to be received by them in the Reorganization and (b) does not anticipate dispositions of those Acquiring Fund Shares at the time of or soon after the Reorganization to exceed the usual rate and frequency of dispositions of shares of Target as a series of an open-end investment company. Consequently, its management expects that the percentage of Shareholder interests, if any, that will be disposed of as a result of or at the time of the Reorganization will be de minimis. Nor does its management anticipate that there will be extraordinary redemptions of Acquiring Fund Shares immediately following the Reorganization; 4.3.3. The Shareholders will pay their own expenses, if any, incurred in connection with the Reorganization; 4.3.4. Immediately following consummation of the Reorganization, Acquiring Fund will hold substantially the same assets and be subject to substantially the same liabilities that Target held or was subject to immediately prior thereto, plus any liabilities and expenses of the parties incurred in connection with the Reorganization; 4.3.5. The fair market value on a going concern basis of the Assets will equal or exceed the Liabilities to be assumed by Acquiring Fund and those to which the Assets are subject; 4.3.6. There is no intercompany indebtedness between the Funds that was issued or acquired, or will be settled, at a discount; 4.3.7. Pursuant to the Reorganization, Target will transfer to Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair market value of the net assets, and at least 70% of the fair market value of the gross assets, held by Target immediately before the Reorganization. For the purposes of this representation, any amounts used by Target to pay its Reorganization expenses and redemptions and distributions made by it immediately before the Reorganization (except for (a) distributions made to conform to its policy of distributing all or substantially all of its income and gains to avoid the obligation to pay federal income tax and/or the excise tax under section 4982 of the Code and (b) redemptions not made as part of the Reorganization) will be included as assets thereof held immediately before the Reorganization; A - 8 4.3.8. None of the compensation received by any Shareholder who is an employee of Target will be separate consideration for, or allocable to, any of the Target Shares held by such Shareholder-employee; none of the Acquiring Fund Shares received by any such Shareholder-employee will be separate consideration for, or allocable to, any employment agreement; and the consideration paid to any such Shareholder-employee will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm's-length for similar services; and 4.3.9. Immediately after the Reorganization, the Shareholders will not own shares constituting "control" of Acquiring Fund within the meaning of section 304(c) of the Code. 5. COVENANTS 5.1. Each Fund covenants to operate its respective business in the ordinary course between the date hereof and the Closing, it being understood that (a) such ordinary course will include declaring and paying customary dividends and other distributions and such changes in operations as are contemplated by each Fund's normal business activities and (b) each Fund will retain exclusive control of the composition of its portfolio until the Closing; provided that Target shall not dispose of more than an insignificant portion of its historic business assets during such period without Acquiring Fund's prior consent. 5.2. Target covenants to call a shareholders' meeting to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated hereby. 5.3. Target covenants that the Acquiring Fund Shares to be delivered hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms hereof. 5.4. Target covenants that it will assist America Trust in obtaining such information as America Trust reasonably requests concerning the beneficial ownership of Target Shares. 5.5. Target covenants that Target's books and records (including all books and records required to be maintained under the 1940 Act and the rules and regulations thereunder) will be turned over to America Trust at the Closing. 5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in compliance with applicable federal securities laws. 5.7. Each Fund covenants that it will, from time to time, as and when requested by the other Fund, execute and deliver or cause to be executed and delivered all such assignments and other instruments, and will take or cause to be taken such further action, as the other Fund may deem necessary or desirable in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession of all the Assets, and (b) Target, title to and possession of the Acquiring Fund Shares to be delivered hereunder, and otherwise to carry out the intent and purpose hereof. 5.8. America Trust covenants to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and such state securities laws it may deem appropriate in order to continue its operations after the Effective Time. 5.9. Subject to this Agreement, each Fund covenants to take or cause to be taken all actions, and to do or cause to be done all things, reasonably necessary, proper, or advisable to consummate and effectuate the transactions contemplated hereby. A - 9 6. CONDITIONS PRECEDENT Each Fund's obligations hereunder shall be subject to (a) performance by the other Fund of all the obligations to be performed hereunder at or before the Effective Time, (b) all representations and warranties of the other Fund contained herein being true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated hereby, as of the Effective Time, with the same force and effect as if made at and as of the Effective Time, and (c) the following further conditions that, at or before the Effective Time: 6.1. This Agreement and the transactions contemplated hereby shall have been duly adopted and approved by Investment Series' board of trustees and shall have been approved by Target's shareholders in accordance with applicable law. 6.2. All necessary filings shall have been made with the SEC and state securities authorities, and no order or directive shall have been received that any other or further action is required to permit the parties to carry out the transactions contemplated hereby. The Registration Statement shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued, and the SEC shall not have issued an unfavorable report with respect to the Reorganization under section 25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin consummation of the transactions contemplated hereby under section 25(c) of the 1940 Act. All consents, orders, and permits of federal, state, and local regulatory authorities (including the SEC and state securities authorities) deemed necessary by either Fund to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain same would not involve a risk of a material adverse effect on the assets or properties of either Fund, provided that either Fund may for itself waive any of such conditions. 6.3. At the Effective Time, no action, suit, or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or to obtain damages or other relief in connection with, the transactions contemplated hereby. 6.4. Investment Series shall have received an opinion of Kirkpatrick & Lockhart LLP, counsel to America Trust, substantially to the effect that: 6.4.1. Acquiring Fund is a duly established series of America Trust, a Business Trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts with power under its Declaration of Trust to own all of its properties and assets and, to the knowledge of such counsel, to carry on its business as presently conducted; 6.4.2. This Agreement (a) has been duly authorized, executed, and delivered by America Trust on behalf of Acquiring Fund and (b) assuming due authorization, execution, and delivery of this Agreement by Investment Series on behalf of Target, is a valid and legally binding obligation of America Trust with respect to Acquiring Fund, enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws relating to or affecting creditors' rights and by general principles of equity; 6.4.3. The Acquiring Fund Shares to be issued and distributed to the Shareholders under this Agreement, assuming their due delivery as contemplated by this Agreement, will be duly authorized and validly issued and outstanding and fully paid and non-assessable, except to the extent that under Massachusetts law shareholders of a Business Trust may, under certain circumstances, be held personally liable for its obligations, and no shareholder of Acquiring Fund has any preemptive right to subscribe for or purchase such shares; 6.4.4. The execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, materially violate America Trust's Declaration of Trust or By-Laws or any provision of any agreement (known to such counsel, without any independent inquiry or investigation) to which A - 10 America Trust (with respect to Acquiring Fund) is a party or by which it is bound or (to the knowledge of such counsel, without any independent inquiry or investigation) result in the acceleration of any obligation, or the imposition of any penalty, under any agreement, judgment, or decree to which America Trust (with respect to Acquiring Fund) is a party or by which it is bound, except as set forth in such opinion or as previously disclosed in writing to and accepted by Investment Series; 6.4.5. To the knowledge of such counsel (without any independent inquiry or investigation), no consent, approval, authorization, or order of any court or governmental authority is required for the consummation by America Trust on behalf of Acquiring Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act, and the 1940 Act and such as may be required under state securities laws; 6.4.6. America Trust is registered with the SEC as an investment company, and to the knowledge of such counsel no order has been issued or proceeding instituted to suspend such registration; and 6.4.7. To the knowledge of such counsel (without any independent inquiry or investigation), (a) no litigation, administrative proceeding, or investigation of or before any court or governmental body is pending or threatened as to America Trust (with respect to Acquiring Fund) or any of its properties or assets attributable or allocable to Acquiring Fund and (b) America Trust (with respect to Acquiring Fund) is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects Acquiring Fund's business, except as set forth in such opinion or as otherwise disclosed in writing to and accepted by Investment Series. In rendering such opinion, such counsel may (i) rely, as to matters governed by the laws of the Commonwealth of Massachusetts, on an opinion of competent Massachusetts counsel, (ii) make assumptions regarding the authenticity, genuineness, and/or conformity of documents and copies thereof without independent verification thereof, (iii) limit such opinion to applicable federal and state law, and (iv) define the word "knowledge" and related terms to mean the knowledge of attorneys then with such firm who have devoted substantive attention to matters directly related to this Agreement and the Reorganization. 6.5. America Trust shall have received an opinion of Kirkpatrick & Lockhart LLP, counsel to Investment Series, substantially to the effect that: 6.5.1. Target is a duly established series of Investment Series, a Business Trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts with power under its Declaration of Trust to own all of its properties and assets and, to the knowledge of such counsel, to carry on its business as presently conducted; 6.5.2. This Agreement (a) has been duly authorized, executed, and delivered by Investment Series on behalf of Target and (b) assuming due authorization, execution, and delivery of this Agreement by America Trust on behalf of Acquiring Fund, is a valid and legally binding obligation of Investment Series with respect to Target, enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws relating to or affecting creditors' rights and by general principles of equity; 6.5.3. The execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, materially violate Investment Series' Declaration of Trust or By-Laws or any provision of any agreement (known to such counsel, without any independent inquiry or investigation) to which Investment Series (with respect to Target) is a party or by which it is bound or (to the knowledge of such counsel, without any independent inquiry or investigation) result in the acceleration of any obligation, or the imposition of any penalty, under any agreement, judgment, or decree to which Investment Series (with respect A - 11 to Target) is a party or by which it is bound, except as set forth in such opinion or as previously disclosed in writing to and accepted by America Trust; 6.5.4. To the knowledge of such counsel (without any independent inquiry or investigation), no consent, approval, authorization, or order of any court or governmental authority is required for the consummation by Investment Series on behalf of Target of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act, and the 1940 Act and such as may be required under state securities laws; 6.5.5. Investment Series is registered with the SEC as an investment company, and to the knowledge of such counsel no order has been issued or proceeding instituted to suspend such registration; and 6.5.6. To the knowledge of such counsel (without any independent inquiry or investigation), (a) no litigation, administrative proceeding, or investigation of or before any court or governmental body is pending or threatened as to Investment Series (with respect to Target) or any of its properties or assets attributable or allocable to Target and (b) Investment Series (with respect to Target) is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business, except as set forth in such opinion or as otherwise disclosed in writing to and accepted by America Trust. In rendering such opinion, such counsel may (i) rely, as to matters goverened by the laws of the Commonwealth of Massachusetts, on an opinion of competent Massachusetts counsel, (ii) make assumptions regarding the authenticity, genuineness, and/or conformity of documents and copies thereof without independent verification thereof, (iii) limit such opinion to applicable federal and state law, and (iv) define the word "knowledge" and related terms to mean the knowledge of attorneys then with such firm who have devoted substantive attention to matters directly related to this Agreement and the Reorganization. 6.6. Each Investment Company shall have received an opinion of Kirkpatrick & Lockhart LLP, its counsel, addressed to and in form and substance satisfactory to it, as to the federal income tax consequences mentioned below ("Tax Opinion"). In rendering the Tax Opinion, such counsel may rely as to factual matters, exclusively and without independent verification, on the representations made in this Agreement (or in separate letters addressed to such counsel) and the certificates delivered pursuant to paragraph 3.4. The Tax Opinion shall be substantially to the effect that, based on the facts and assumptions stated therein, for federal income tax purposes: 6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities, followed by Target's distribution of those shares to the Shareholders constructively in exchange for the Shareholders' Target Shares, will constitute a reorganization within the meaning of section 368(a)(1)(C) of the Code, and each Fund will be "a party to a reorganization" within the meaning of section 368(b) of the Code; 6.6.2. No gain or loss will be recognized to Target on the transfer to Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities or on the subsequent distribution of those shares to the Shareholders in constructive exchange for their Target Shares; 6.6.3. No gain or loss will be recognized to Acquiring Fund on its receipt of the Assets in exchange solely for Acquiring Fund Shares and its assumption of the Liabilities; 6.6.4. Acquiring Fund's basis for the Assets will be the same as the basis thereof in Target's hands immediately before the Reorganization, and Acquiring Fund's holding period for the Assets will include Target's holding period therefor; A - 12 6.6.5. A Shareholder will recognize no gain or loss on the constructive exchange of all its Target Shares solely for Acquiring Fund Shares pursuant to the Reorganization; and 6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be received by it in the Reorganization will be the same as the basis for its Target Shares to be constructively surrendered in exchange for those Acquiring Fund Shares, and its holding period for those Acquiring Fund Shares will include its holding period for those Target Shares, provided they are held as capital assets by the Shareholder at the Effective Time. Notwithstanding paragraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no opinion is expressed as to the effect of the Reorganization on the Funds or any Shareholder with respect to any asset (including certain options, futures, and forward contracts included in the Assets) as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting. At any time before the Closing, (a) Acquiring Fund may waive any of the foregoing conditions if, in the judgment of America Trust's board of trustees, such waiver will not have a material adverse effect on its shareholders' interests, and (b) Target may waive any of the foregoing conditions if, in the judgment of Investment Series' board of trustees, such waiver will not have a material adverse effect on the Shareholders' interests. 7. BROKERAGE FEES AND EXPENSES 7.1. Each Investment Company represents and warrants to the other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 7.2. Except as otherwise provided herein, all expenses incurred in connection with the transactions contemplated by this Agreement (whether or not they are consummated) will be borne by the Funds proportionately, as follows: each such expense will be borne by the Funds in proportion to their respective net assets as of the close of business on the last business day of the month in which such expense was incurred. Such expenses include: (a) expenses incurred in connection with entering into and carrying out the provisions of this Agreement; (b) expenses associated with the preparation and filing of the Registration Statement; (c) registration or qualification fees and expenses of preparing and filing such forms as are necessary under applicable state securities laws to qualify the Acquiring Fund Shares to be issued in connection herewith in each state in which Target's shareholders are resident as of the date of the mailing of the Proxy Statement to such shareholders; (d) printing and postage expenses; (e) legal and accounting fees; and (f) solicitation costs. 8. ENTIRE AGREEMENT; SURVIVAL Neither party has made any representation, warranty, or covenant not set forth herein, and this Agreement constitutes the entire agreement between the parties. The representations, warranties, and covenants contained herein or in any document delivered pursuant hereto or in connection herewith shall survive the Closing. 9. TERMINATION OF AGREEMENT This Agreement may be terminated at any time at or prior to the Effective Time, whether before or after approval by Target's shareholders: 9.1. By either Fund (a) in the event of the other Fund's material breach of any representation, warranty, or covenant contained herein to be performed at or prior to the Effective Time, (b) if a condition to its obligations has A - 13 not been met and it reasonably appears that such condition will not or cannot be met, or (c) if the Closing has not occurred on or before December 31, 1995; or 9.2. By the parties' mutual agreement. In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no liability for damages on the part of either Fund, or the trustees or officers of either Investment Company, to the other Fund. 10. AMENDMENT This Agreement may be amended, modified, or supplemented at any time, notwithstanding approval thereof by Target's shareholders, in such manner as may be mutually agreed upon in writing by the parties; provided that following such approval no such amendment shall have a material adverse effect on the Shareholders' interests. 11. MISCELLANEOUS 11.1. This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts; provided that, in the case of any conflict between such laws and the federal securities laws, the latter shall govern. 11.2. Nothing expressed or implied herein is intended or shall be construed to confer upon or give any person, firm, trust, or corporation other than the parties and their respective successors and assigns any rights or remedies under or by reason of this Agreement. 11.3. The parties acknowledge that each Investment Company is a Business Trust. Notice is hereby given that this instrument is executed on behalf of each Investment Company's trustees solely in their capacity as trustees, and not individually, and that each Investment Company's obligations under this instrument are not binding on or enforceable against any of its trustees, officers, or shareholders, but are only binding on and enforceable against the respective Funds' assets and property. Each Fund agrees that, in asserting any rights or claims under this Agreement, it shall look only to the other Fund's assets and property in settlement of such rights or claims and not to such trustees or shareholders. A - 14 IN WITNESS WHEREOF, each party has caused this Agreement to be executed by its duly authorized officer. ATTEST: PAINEWEBBER AMERICA FUND, on behalf of its series, PAINEWEBBER GROWTH AND INCOME FUND By: \s\ Ilene Shore \s\ Dianne E. O'Donnell Assistant Secretary Vice President ATTEST: PAINEWEBBER INVESTMENT SERIES, on behalf of its series, PAINEWEBBER GLOBAL ENERGY FUND By: \s\ Ilene Shore \s\ Dianne E. O'Donnell Assistant Secretary Vice President A - 15 APPENDIX B AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION ("Agreement") is made as of July 25, 1995, between PaineWebber America Fund, a Massachusetts business trust ("PW Trust"), on behalf of PaineWebber Growth and Income Fund, a segregated portfolio of assets ("series") thereof ("Acquiring Fund"), and Mitchell Hutchins/Kidder, Peabody Equity Income Fund, Inc., a Maryland corporation ("Target"). (Acquiring Fund and Target are sometimes referred to herein individually as a "Fund" and collectively as the "Funds," and PW Trust and Target are sometimes referred to herein collectively as the "Investment Companies.") RECITAL The parties entered into an Agreement and Plan of Reorganization and Liquidation dated as of May 30, 1995 ("Original Agreement"), which provided, inter alia, for Target shareholders to receive Acquiring Fund shares pursuant to the transactions contemplated thereby. The parties now desire to amend and restate the Original Agreement to reflect a change in the class of Acquiring Fund shares to be distributed to holders of Class C Target Shares (as defined below). Therefore, the Original Agreement is hereby amended and restated to read in its entirety as follows: AMENDED AND RESTATED PROVISIONS This Agreement is intended to be, and is adopted as, a plan of a reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code"). The reorganization will involve the transfer to Acquiring Fund of Target's assets solely in exchange for voting shares of beneficial interest in Acquiring Fund ("Acquiring Fund Shares") and the assumption by Acquiring Fund of Target's liabilities, followed by the constructive distribution of the Acquiring Fund Shares to the holders of shares of common stock in Target ("Target Shares") in exchange therefor, all upon the terms and conditions set forth herein. The foregoing transactions are referred to herein as the "Reorganization." All agreements, representations, actions, and obligations described herein made or to be taken or undertaken by Acquiring Fund are made and shall be taken or undertaken by PW Trust on its behalf. Acquiring Fund's shares are divided into four classes, designated Class A, Class B, Class C, and Class D shares ("Class A Acquiring Fund Shares," "Class B Acquiring Fund Shares," "Class C Acquiring Fund Shares," and "Class D Acquiring Fund Shares," respectively). Except as noted in the following sentence, these classes differ only with respect to the sales charges imposed on the purchase of shares and the fees ("12b-1 fees") payable by each class pursuant to plans adopted under Rule 12b-1 promulgated under the Investment Company Act of 1940 ("1940 Act"), as follows: (1) Class A Acquiring Fund Shares are offered at net asset value ("NAV") plus a sales charge, if applicable, and are subject to a 12b-1 service fee at the annual rate of 0.23% of the average daily net assets attributable to the class ("class assets"); (2) Class B Acquiring Fund Shares are offered at NAV without imposition of any sales charge and are subject to a contingent deferred sales charge and 12b-1 service and distribution fees at the respective annual rates of 0.25% and 0.75% of class assets; (3) Class C Acquiring Fund Shares are offered, currently only to the trustee of the PaineWebber Savings Investment Plan on behalf of that plan, at NAV without imposition of any sales charge and are not subject to any 12b-1 fee; and (4) Class D Acquiring Fund Shares are offered at NAV without imposition of any sales charge and are subject to 12b-1 service and distribution fees at the respective annual rates of 0.25% and 0.75% of class assets. These classes also may differ from one another with B - 1 respect to the allocation of certain class-specific expenses other than 12b-1 fees. Only Classes A, C and D Acquiring Fund Shares are involved in the Reorganization. Target's shares are divided into three classes, designated Class A, Class B, and Class C shares ("Class A Target Shares," "Class B Target Shares," and "Class C Target Shares," respectively). Apart from differences in certain ancillary class-specific expenses, these classes differ only with respect to the sales charges imposed on the purchase of shares and the 12b-1 fees, as follows: (1) Class A Target Shares are offered at NAV plus a sales charge, if applicable, and are subject to 12b-1 service and distribution fees at the annual rate for each of 0.25% of class assets; (2) Class B Target Shares are offered at NAV without imposition of any sales charge and are subject to 12b-1 service and distribution fees at the respective annual rates of 0.25% and 0.75% of class assets; and (3) Class C Target Shares are offered, currently to a limited group of investors (consisting of former employees of Kidder, Peabody & Co. Incorporated ("Kidder") and their associated accounts, directors and trustees of mutual funds formerly distributed by Kidder (now known as Mitchell Hutchins/ Kidder, Peabody Funds and PaineWebber/Kidder, Peabody Funds), Kidder's employee benefit plans, and participants in a certain portfolio asset allocation program), at NAV without imposition of any sales charge and are not subject to any 12b-1 fee. In consideration of the mutual promises herein, the parties covenant and agree as follows: 1. PLAN OF REORGANIZATION AND LIQUIDATION OF TARGET 1.1. Target agrees to assign, sell, convey, transfer, and deliver all of its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring Fund agrees in exchange therefor -- (a) to issue and deliver to Target the number of full and fractional (i) Class A Acquiring Fund Shares determined by dividing the net value of Target (computed as set forth in paragraph 2.1) ("Target Value") attributable to the Class A Target Shares by the NAV (computed as set forth in paragraph 2.2) of a Class A Acquiring Fund Share, (ii) Class D Acquiring Fund Shares determined by dividing the Target Value attributable to the Class B Target Shares by the NAV (as so computed) of a Class D Acquiring Fund Share, and (iii) Class C Acquiring Fund Shares determined by dividing the Target Value attributable to the Class C Target Shares by the NAV (as so computed) of a Class C Acquiring Fund Share; and (b) to assume all of Target's liabilities described in paragraph 1.3 ("Liabilities"). Such transactions shall take place at the Closing (as defined in paragraph 3.1). 1.2. The Assets shall include, without limitation, all cash, cash equivalents, securities, receivables (including interest and dividends receivable), claims and rights of action, rights to register shares under applicable securities laws, books and records, deferred and prepaid expenses shown as assets on Target's books, and other property owned by Target at the Effective Time (as defined in paragraph 3.1). 1.3. The Liabilities shall include (except as otherwise provided herein) all of Target's liabilities, debts, obligations, and duties of whatever kind or nature, whether absolute, accrued, contingent, or otherwise, whether or not arising in the ordinary course of business, whether or not determinable at the Effective Time, and whether or not specifically referred to in this Agreement, including without limitation Target's share of the expenses described in paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best efforts to discharge all of its known Liabilities prior to the Effective Time. 1.4. At or immediately before the Effective Time, Target shall declare and pay to its shareholders a dividend and/or other distribution in an amount large enough so that it will have distributed substantially all (and in any event not less than 90%) of its investment company taxable income (computed without regard to any deduction for dividends paid) and realized net capital gain, if any, for the current taxable year through the Effective Time. B - 2 1.5. At the Effective Time (or as soon thereafter as is reasonably practicable), Target shall constructively distribute the Acquiring Fund Shares received by it pursuant to paragraph 1.1 to Target's shareholders of record, determined as of the Effective Time (collectively "Shareholders" and individually a "Shareholder"), in exchange for their Target Shares. Such distribution shall be accomplished by the Funds' transfer agent ("Transfer Agent") opening accounts on Acquiring Fund's share transfer books in the Shareholders' names and transferring such Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with the respective pro rata number of full and fractional (rounded to the third decimal place) Acquiring Fund Shares due that Shareholder, by class (i.e., the account for a Shareholder of Class A Target Shares shall be credited with the respective pro rata number of Class A Acquiring Fund Shares due that Shareholder, the account for a Shareholder of Class B Target Shares shall be credited with the respective pro rata number of Class D Acquiring Fund Shares due that Shareholder, and the account for a Shareholder of Class C Target Shares shall be credited with the respective pro rata number of Class C Acquiring Fund Shares due that Shareholder). All outstanding Target Shares, including any represented by certificates, shall simultaneously be canceled on Target's share transfer records. Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares in connection with the Reorganization. 1.6. As soon as reasonably practicable after distribution of the Acquiring Fund Shares pursuant to paragraph 1.5, Target shall be liquidated and any further actions shall be taken in connection therewith as required by applicable law. 1.7. Any reporting responsibility of Target to a public authority is and shall remain its responsibility up to and including the date on which it is liquidated. 1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name other than that of the registered holder on Target's books of the Target Shares constructively exchanged therefor shall be paid by the person to whom such Acquiring Fund Shares are to be issued, as a condition of such transfer. 2. VALUATION 2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the value of the Assets computed as of the close of regular trading on the New York Stock Exchange, Inc. ("NYSE") on the date of the Closing ("Valuation Time"), using the valuation procedures set forth in Target's then-current prospectus and statement of additional information less (b) the amount of the Liabilities as of the Valuation Time. 2.2. For purposes of paragraph 1.1(a), the NAV of a Class A Acquiring Fund Share, a Class C Acquiring Fund Share, and a Class D Acquiring Fund Share shall be computed as of the Valuation Time, using the valuation procedures set forth in Acquiring Fund's then-current prospectus and statement of additional information. 2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or under the direction of Mitchell Hutchins Asset Management Inc. 3. CLOSING AND EFFECTIVE TIME 3.1. The Reorganization, together with related acts necessary to consummate the same ("Closing"), shall occur at the Funds' principal office on October 13, 1995, or at such other place and/or on such other date as the parties may agree. All acts taking place at the Closing shall be deemed to take place simultaneously as of the close of business on the date thereof or at such other time as the parties may agree ("Effective Time"). If, immediately before the Valuation Time, (a) the NYSE is closed to trading or trading thereon is restricted or (b) trading or the reporting of trading on the NYSE or elsewhere is disrupted, so that accurate appraisal of the net value of Target and the NAV per Acquiring Fund Share is impracticable, the Effective Time shall be postponed until the first B - 3 business day after the day when such trading shall have been fully resumed and such reporting shall have been restored. 3.2. Target shall deliver to PW Trust at the Closing a schedule of the Assets as of the Effective Time, which shall set forth for all portfolio securities included therein their adjusted tax basis and holding period by lot. Target's custodian shall deliver at the Closing a certificate of an authorized officer stating that (a) the Assets held by the custodian will be transferred to Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction with the delivery of the Assets, including all applicable federal and state stock transfer stamps, if any, have been paid or provision for payment has been made. 3.3. Target shall deliver to PW Trust at the Closing a list of the names and addresses of the Shareholders and the number (by class) of outstanding Target Shares owned by each Shareholder, all as of the Effective Time, certified by the Secretary or Assistant Secretary of Target. The Transfer Agent shall deliver at the Closing a certificate as to the opening on Acquiring Fund's share transfer books of accounts in the Shareholders' names. PW Trust shall issue and deliver a confirmation to Target evidencing the Acquiring Fund Shares (by class) to be credited to Target at the Effective Time or provide evidence satisfactory to Target that such Acquiring Fund Shares have been credited to Target's account on Acquiring Fund's books. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts, or other documents as the other party or its counsel may reasonably request. 3.4. Each Investment Company shall deliver to the other at the Closing a certificate executed in its name by its President or a Vice President in form and substance satisfactory to the recipient and dated the Effective Time, to the effect that the representations and warranties it made in this Agreement are true and correct at the Effective Time except as they may be affected by the transactions contemplated by this Agreement. 4. REPRESENTATIONS AND WARRANTIES 4.1. Target represents and warrants as follows: 4.1.7. Target is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland, and a copy of its Articles of Incorporation is on file with the Department of Assessments and Taxation of Maryland; 4.1.8. Target is duly registered as an open-end management investment company under the 1940 Act, and such registration will be in full force and effect at the Effective Time; 4.1.9. At the Closing, Target will have good and marketable title to the Assets and full right, power, and authority to sell, assign, transfer, and deliver the Assets free of any liens or other encumbrances; and upon delivery and payment for the Assets, Acquiring Fund will acquire good and marketable title thereto; 4.1.10. Target's current prospectus and statement of additional information conform in all material respects to the applicable requirements of the Securities Act of 1933 ("1933 Act") and the 1940 Act and the rules and regulations thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; 4.1.11. Target is not in violation of, and the execution and delivery of this Agreement and consummation of the transactions contemplated hereby will not conflict with or violate, Maryland law or any provision of Target's Articles of Incorporation or By-Laws or of any agreement, instrument, lease, or other undertaking to which Target is a party or by which it is bound or result in the acceleration of any obligation, or the B - 4 imposition of any penalty, under any agreement, judgment, or decree to which Target is a party or by which it is bound, except as previously disclosed in writing to and accepted by PW Trust; 4.1.12. Except as disclosed in writing to and accepted by PW Trust, all material contracts and other commitments of or applicable to Target (other than this Agreement and investment contracts, including options, futures, and forward contracts) will be terminated, or provision for discharge of any liabilities of Target thereunder will be made, at or prior to the Effective Time, without either Fund's incurring any liability or penalty with respect thereto and without diminishing or releasing any rights Target may have had with respect to actions taken or omitted to be taken by any other party thereto prior to the Closing; 4.1.13. Except as otherwise disclosed in writing to and accepted by PW Trust, no litigation, administrative proceeding, or investigation of or before any court or governmental body is presently pending or (to Target's knowledge) threatened against Target or any of its properties or assets that, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business; Target knows of no facts that might form the basis for the institution of any such litigation, proceeding, or investigation and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially or adversely affects its business or its ability to consummate the transactions contemplated hereby; 4.1.14. The execution, delivery, and performance of this Agreement has been duly authorized as of the date hereof by all necessary action on the part of Target's board of directors, which has made the determinations required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by Target's shareholders and receipt of any necessary exemptive relief or no-action assurances requested from the Securities and Exchange Commission ("SEC") or its staff with respect to sections 17(a) and 17(d) of the 1940 Act, this Agreement will constitute a valid and legally binding obligation of Target, enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws relating to or affecting creditors' rights and by general principles of equity; 4.1.15. At the Effective Time, the performance of this Agreement shall have been duly authorized by all necessary action by Target's shareholders; 4.1.16. No governmental consents, approvals, authorizations, or filings are required under the 1933 Act, the Securities Exchange Act of 1934 ("1934 Act"), or the 1940 Act for the execution or performance of this Agreement by Target, except for (a) the filing with the SEC of a registration statement by PW Trust on Form N-14 relating to the Acquiring Fund Shares issuable hereunder, and any supplement or amendment thereto ("Registration Statement"), including therein a prospectus/proxy statement ("Proxy Statement"), (b) receipt of the exemptive relief referenced in subparagraph 4.1.8, and (c) such consents, approvals, authorizations, and filings as have been made or received or as may be required subsequent to the Effective Time; 4.1.17. On the effective date of the Registration Statement, at the time of the shareholders' meeting referred to in paragraph 5.2, and at the Effective Time, the Proxy Statement will (a) comply in all material respects with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the regulations thereunder and (b) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading; provided that the foregoing shall not apply to statements in or omissions from the Proxy Statement made in reliance on and in conformity with information furnished by PW Trust for use therein; 4.1.18. The Liabilities were incurred by Target in the ordinary course of its business; B - 5 4.1.19. Target qualified for treatment as a regulated investment company ("RIC") under Subchapter M of the Code for each past taxable year since it commenced operations and will continue to meet all the requirements for such qualification for its current taxable year; and it has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it. The Assets shall be invested at all times through the Effective Time in a manner that ensures compliance with the foregoing; 4.1.20. Target is not under the jurisdiction of a court in a proceeding under Title 11 of the United States Code or similar case within the meaning of section 368(a)(3)(A) of the Code; 4.1.21. Not more than 25% of the value of Target's total assets (excluding cash, cash items, and U.S. government securities) is invested in the stock or securities of any one issuer, and not more than 50% of the value of such assets is invested in the stock or securities of five or fewer issuers; and 4.1.22. Target will be liquidated as soon as reasonably practicable after the Reorganization, but in all events within six months after the Effective Time. 4.2. Acquiring Fund represents and warrants as follows: 4.2.1. PW Trust is an unincorporated voluntary association with transferable shares organized as a business trust under a written instrument ("Business Trust"); it is duly organized, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts; and a copy of its Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts; 4.2.2. PW Trust is duly registered as an open-end management investment company under the 1940 Act, and such registration will be in full force and effect at the Effective Time; 4.2.3. Acquiring Fund is a duly established and designated series of PW Trust; 4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring Fund's assumption of the Liabilities) will be issued in exchange for the Assets in the Reorganization; 4.2.5. The Acquiring Fund Shares to be issued and delivered to Target hereunder will, at the Effective Time, have been duly authorized and, when issued and delivered as provided herein, will be duly and validly issued and outstanding shares of Acquiring Fund, fully paid and non-assessable, except to the extent that under Massachusetts law shareholders of a Business Trust may, under certain circumstances, be held personally liable for its obligations. Except as contemplated by this Agreement, Acquiring Fund does not have outstanding any options, warrants, or other rights to subscribe for or purchase any of its shares, nor is there outstanding any security convertible into any of its shares; 4.2.6. Acquiring Fund's current prospectus and statement of additional information conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; 4.2.7. Acquiring Fund is not in violation of, and the execution and delivery of this Agreement and consummation of the transactions contemplated hereby will not conflict with or violate, Massachusetts law or any provision of PW Trust's Declaration of Trust or By-Laws or of any provision of any agreement, instrument, lease, or other undertaking to which Acquiring Fund is a party or by which it is bound or result in the acceleration of any obligation, or the imposition of any penalty, under any agreement, judgment, or decree to which Acquiring Fund is a party or by which it is bound, except as previously disclosed in writing to and accepted by Target; B - 6 4.2.8. Except as otherwise disclosed in writing to and accepted by Target, no litigation, administrative proceeding, or investigation of or before any court or governmental body is presently pending or (to Acquiring Fund's knowledge) threatened against PW Trust with respect to Acquiring Fund or any of its properties or assets that, if adversely determined, would materially and adversely affect Acquiring Fund's financial condition or the conduct of its business; Acquiring Fund knows of no facts that might form the basis for the institution of any such litigation, proceeding, or investigation and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially or adversely affects its business or its ability to consummate the transactions contemplated hereby; 4.2.9. The execution, delivery, and performance of this Agreement has been duly authorized as of the date hereof by all necessary action on the part of PW Trust's board of trustees, which has made the determinations required by Rule 17a-8(a) under the 1940 Act; and, subject to receipt of any necessary exemptive relief or no-action assurances requested from the SEC or its staff with respect to sections 17(a) and 17(d) of the 1940 Act, this Agreement will constitute a valid and legally binding obligation of Acquiring Fund, enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws relating to or affecting creditors' rights and by general principles of equity; 4.2.10. No governmental consents, approvals, authorizations, or filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for the execution or performance of this Agreement by PW Trust, except for (a) the filing with the SEC of the Registration Statement, (b) the filing with the SEC of a post-effective amendment to the registration statement of PW Trust ("PEA"), (c) receipt of the exemptive relief referenced in subparagraph 4.2.9, and (d) such consents, approvals, authorizations, and filings as have been made or received or as may be required subsequent to the Effective Time; 4.2.11. On the effective date of the Registration Statement, at the time of the shareholders' meeting referred to in paragraph 5.2, and at the Effective Time, the Proxy Statement will (a) comply in all material respects with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the regulations thereunder and (b) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading; provided that the foregoing shall not apply to statements in or omissions from the Proxy Statement made in reliance on and in conformity with information furnished by Target for use therein; 4.2.12. Acquiring Fund is a "fund" as defined in section 851(h)(2) of the Code; it qualified for treatment as a RIC under Subchapter M of the Code for each past taxable year since it commenced operations and will continue to meet all the requirements for such qualification for its current taxable year; Acquiring Fund intends to continue to meet all such requirements for the next taxable year; and it has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it; 4.2.13. Acquiring Fund has no plan or intention to issue additional Acquiring Fund Shares following the Reorganization except for shares issued in the ordinary course of its business as a series of an open-end investment company; nor does Acquiring Fund have any plan or intention to redeem or otherwise reacquire any Acquiring Fund Shares issued to the Shareholders pursuant to the Reorganization, other than through redemptions arising in the ordinary course of that business; 4.2.14. Acquiring Fund (a) will actively continue Target's business in substantially the same manner that Target conducted that business immediately before the Reorganization, (b) has no plan or intention to sell or otherwise dispose of any of the Assets, except for dispositions made in the ordinary course of that business and dispositions necessary to maintain its status as a RIC under Subchapter M of the Code, and (c) expects to retain substantially all the Assets in the same form as it receives them in the Reorganization, unless and until B - 7 subsequent investment circumstances suggest the desirability of change or it becomes necessary to make dispositions thereof to maintain such status; 4.2.15. There is no plan or intention for Acquiring Fund to be dissolved or merged into another corporation or business trust or any "fund" thereof (within the meaning of section 851(h)(2) of the Code) following the Reorganization; 4.2.16. Immediately after the Reorganization, (a) not more than 25% of the value of Acquiring Fund's total assets (excluding cash, cash items, and U.S. government securities) will be invested in the stock or securities of any one issuer and (b) not more than 50% of the value of such assets will be invested in the stock or securities of five or fewer issuers; and 4.2.17. Acquiring fund does not own, directly or indirectly, nor at the Effective Time will it own, directly or indirectly, nor has it owned, directly or indirectly, at any time during the past five years, any shares of Target. 4.3. Each Fund represents and warrants as follows: 4.3.1. The fair market value of the Acquiring Fund Shares, when received by the Shareholders, will be approximately equal to the fair market value of their Target Shares constructively surrendered in exchange therefor; 4.3.2. Its management (a) is unaware of any plan or intention of Shareholders to redeem or otherwise dispose of any portion of the Acquiring Fund Shares to be received by them in the Reorganization and (b) does not anticipate dispositions of those Acquiring Fund Shares at the time of or soon after the Reorganization to exceed the usual rate and frequency of dispositions of shares of Target as an open-end investment company. Consequently, its management expects that the percentage of Shareholder interests, if any, that will be disposed of as a result of or at the time of the Reorganization will be de minimis. Nor does its management anticipate that there will be extraordinary redemptions of Acquiring Fund Shares immediately following the Reorganization; 4.3.3. The Shareholders will pay their own expenses, if any, incurred in connection with the Reorganization; 4.3.4. Immediately following consummation of the Reorganization, Acquiring Fund will hold substantially the same assets and be subject to substantially the same liabilities that Target held or was subject to immediately prior thereto, plus any liabilities and expenses of the parties incurred in connection with the Reorganization; 4.3.5. The fair market value on a going concern basis of the Assets will equal or exceed the Liabilities to be assumed by Acquiring Fund and those to which the Assets are subject; 4.3.6. There is no intercompany indebtedness between the Funds that was issued or acquired, or will be settled, at a discount; 4.3.7. Pursuant to the Reorganization, Target will transfer to Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair market value of the net assets, and at least 70% of the fair market value of the gross assets, held by Target immediately before the Reorganization. For the purposes of this representation, any amounts used by Target to pay its Reorganization expenses and redemptions and distributions made by it immediately before the Reorganization (except for (a) distributions made to conform to its policy of distributing all or substantially all of its income and gains to avoid the obligation to pay federal in- B - 8 come tax and/or the excise tax under section 4982 of the Code and (b) redemptions not made as part of the Reorganization) will be included as assets thereof held immediately before the Reorganization; 4.3.8. None of the compensation received by any Shareholder who is an employee of Target will be separate consideration for, or allocable to, any of the Target Shares held by such Shareholder-employee; none of the Acquiring Fund Shares received by any such Shareholder-employee will be separate consideration for, or allocable to, any employment agreement; and the consideration paid to any such Shareholder-employee will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm's-length for similar services; and 4.3.9. Immediately after the Reorganization, the Shareholders will not own shares constituting "control" of Acquiring Fund within the meaning of section 304(c) of the Code. 5. COVENANTS 5.1. Each Fund covenants to operate its respective business in the ordinary course between the date hereof and the Closing, it being understood that (a) such ordinary course will include declaring and paying customary dividends and other distributions and such changes in operations as are contemplated by each Fund's normal business activities and (b) each Fund will retain exclusive control of the composition of its portfolio until the Closing; provided that Target shall not dispose of more than an insignificant portion of its historic business assets during such period without Acquiring Fund's prior consent. 5.2. Target covenants to call a shareholders' meeting to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated hereby. 5.3. Target covenants that the Acquiring Fund Shares to be delivered hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms hereof. 5.4. Target covenants that it will assist PW Trust in obtaining such information as PW Trust reasonably requests concerning the beneficial ownership of Target Shares. 5.5. Target covenants that Target's books and records (including all books and records required to be maintained under the 1940 Act and the rules and regulations thereunder) will be turned over to PW Trust at the Closing. 5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in compliance with applicable federal securities laws. 5.7. Each Fund covenants that it will, from time to time, as and when requested by the other Fund, execute and deliver or cause to be executed and delivered all such assignments and other instruments, and will take or cause to be taken such further action, as the other Fund may deem necessary or desirable in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession of all the Assets, and (b) Target, title to and possession of the Acquiring Fund Shares to be delivered hereunder, and otherwise to carry out the intent and purpose hereof. 5.8. PW Trust covenants to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and such state securities laws it may deem appropriate in order to continue its operations after the Effective Time. 5.9. Subject to this Agreement, each Fund covenants to take or cause to be taken all actions, and to do or cause to be done all things, reasonably necessary, proper, or advisable to consummate and effectuate the transactions contemplated hereby. B - 9 6. CONDITIONS PRECEDENT Each Fund's obligations hereunder shall be subject to (a) performance by the other Fund of all the obligations to be performed hereunder at or before the Effective Time, (b) all representations and warranties of the other Fund contained herein being true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated hereby, as of the Effective Time, with the same force and effect as if made at and as of the Effective Time, and (c) the following further conditions that, at or before the Effective Time: 6.1. This Agreement and the transactions contemplated hereby shall have been duly adopted and approved by Target's board of directors and shall have been approved by Target's shareholders in accordance with applicable law. 6.2. All necessary filings shall have been made with the SEC and state securities authorities, and no order or directive shall have been received that any other or further action is required to permit the parties to carry out the transactions contemplated hereby. The Registration Statement and the PEA shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued, and the SEC shall not have issued an unfavorable report with respect to the Reorganization under section 25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin consummation of the transactions contemplated hereby under section 25(c) of the 1940 Act. All consents, orders, and permits of federal, state, and local regulatory authorities (including the SEC and state securities authorities) deemed necessary by either Fund to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain same would not involve a risk of a material adverse effect on the assets or properties of either Fund, provided that either Fund may for itself waive any of such conditions. 6.3. At the Effective Time, no action, suit, or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or to obtain damages or other relief in connection with, the transactions contemplated hereby. 6.4. Target shall have received an opinion of Kirkpatrick & Lockhart LLP, counsel to PW Trust, substantially to the effect that: 6.4.1. Acquiring Fund is a duly established series of PW Trust, a Business Trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts with power under its Declaration of Trust to own all of its properties and assets and, to the knowledge of such counsel, to carry on its business as presently conducted; 6.4.2. This Agreement (a) has been duly authorized, executed, and delivered by PW Trust on behalf of Acquiring Fund and (b) assuming due authorization, execution, and delivery of this Agreement by Target, is a valid and legally binding obligation of PW Trust with respect to Acquiring Fund, enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws relating to or affecting creditors' rights and by general principles of equity; 6.4.3. The Acquiring Fund Shares to be issued and distributed to the Shareholders under this Agreement, assuming their due delivery as contemplated by this Agreement, will be duly authorized and validly issued and outstanding and fully paid and non-assessable, except to the extent that under Massachusetts law shareholders of a Business Trust may, under certain circumstances, be held personally liable for its obligations, and no shareholder of Acquiring Fund has any preemptive right to subscribe for or purchase such shares; 6.4.4. The execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, materially violate PW Trust's Declaration of Trust or By-Laws or any provision of any agreement (known to such counsel, without any independent inquiry or investigation) to which PW B - 10 Trust (with respect to Acquiring Fund) is a party or by which it is bound or (to the knowledge of such counsel, without any independent inquiry or investigation) result in the acceleration of any obligation, or the imposition of any penalty, under any agreement, judgment, or decree to which PW Trust (with respect to Acquiring Fund) is a party or by which it is bound, except as set forth in such opinion or as previously disclosed in writing to and accepted by Target; 6.4.5. To the knowledge of such counsel (without any independent inquiry or investigation), no consent, approval, authorization, or order of any court or governmental authority is required for the consummation by PW Trust on behalf of Acquiring Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act, and the 1940 Act and such as may be required under state securities laws; 6.4.6. PW Trust is registered with the SEC as an investment company, and to the knowledge of such counsel no order has been issued or proceeding instituted to suspend such registration; and 6.4.7. To the knowledge of such counsel (without any independent inquiry or investigation), (a) no litigation, administrative proceeding, or investigation of or before any court or governmental body is pending or threatened as to PW Trust (with respect to Acquiring Fund) or any of its properties or assets attributable or allocable to Acquiring Fund and (b) PW Trust (with respect to Acquiring Fund) is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects Acquiring Fund's business, except as set forth in such opinion or as otherwise disclosed in writing to and accepted by Target. In rendering such opinion, such counsel may (i) rely, as to matters governed by the laws of the Commonwealth of Massachusetts, on an opinion of competent Massachusetts counsel, (ii) make assumptions regarding the authenticity, genuineness, and/or conformity of documents and copies thereof without independent verification thereof, (iii) limit such opinion to applicable federal and state law, and (iv) define the word "knowledge" and related terms to mean the knowledge of attorneys then with such firm who have devoted substantive attention to matters directly related to this Agreement and the Reorganization. 6.5. PW Trust shall have received an opinion of Sullivan & Cromwell, counsel to Target, substantially to the effect that: 6.5.1. Target is a corporation duly organized and validly existing under the laws of the State of Maryland with power under its Articles of Incorporation to own all of its properties and assets and, to the knowledge of such counsel, to carry on its business as presently conducted; 6.5.2. This Agreement (a) has been duly authorized, executed, and delivered by Target and (b) assuming due authorization, execution, and delivery of this Agreement by PW Trust on behalf of Acquiring Fund, is a valid and legally binding obligation of Target, enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws relating to or affecting creditors' rights and by general principles of equity; 6.5.3. The execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, materially violate Target's Articles of Incorporation or By-Laws or any provision of any agreement (known to such counsel, without any independent inquiry or investigation) to which Target is a party or by which it is bound or (to the knowledge of such counsel, without any independent inquiry or investigation) result in the acceleration of any obligation, or the imposition of any penalty, under any agreement, judgment, or decree to which Target is a party or by which it is bound, except as set forth in such opinion or as previously disclosed in writing to and accepted by PW Trust; B - 11 6.5.4. To the knowledge of such counsel (without any independent inquiry or investigation), no consent, approval, authorization, or order of any court or governmental authority is required for the consummation by Target of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act, and the 1940 Act and such as may be required under state securities laws; 6.5.5. Target is registered with the SEC as an investment company, and to the knowledge of such counsel no order has been issued or proceeding instituted to suspend such registration; and 6.5.6. To the knowledge of such counsel (without any independent inquiry or investigation), (a) no litigation, administrative proceeding, or investigation of or before any court or governmental body is pending or threatened as to Target or any of its properties or assets and (b) Target is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business, except as set forth in such opinion or as otherwise disclosed in writing to and accepted by PW Trust. In rendering such opinion, such counsel may (i) rely, as to matters governed by the laws of the State of Maryland, on an opinion of competent Maryland counsel, (ii) make assumptions regarding the authenticity, genuineness, and/or conformity of documents and copies thereof without independent verification thereof, (iii) limit such opinion to applicable federal and state law, and (iv) define the word "knowledge" and related terms to mean the knowledge of attorneys then with such firm who have devoted substantive attention to matters directly related to this Agreement and the Reorganization. 6.6. PW Trust shall have received an opinion of Kirkpatrick & Lockhart LLP, its counsel, addressed to and in form and substance satisfactory to PW Trust, and Target shall have received an opinion of Sullivan & Cromwell, its counsel, addressed to and in form and substance satisfactory to Target, each as to the federal income tax consequences mentioned below (each a "Tax Opinion"). In rendering its Tax Opinion, each such counsel may rely as to factual matters, exclusively and without independent verification, on the representations made in this Agreement (or in separate letters addressed to such counsel) and the certificates delivered pursuant to paragraph 3.4. Each Tax Opinion shall be substantially to the effect that, based on the facts and assumptions stated therein, for federal income tax purposes: 6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities, followed by Target's distribution of those shares to the Shareholders constructively in exchange for the Shareholders' Target Shares, will constitute a reorganization within the meaning of section 368(a)(1)(C) of the Code, and each Fund will be "a party to a reorganization" within the meaning of section 368(b) of the Code; 6.6.2. No gain or loss will be recognized to Target on the transfer to Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities or on the subsequent distribution of those shares to the Shareholders in constructive exchange for their Target Shares; 6.6.3. No gain or loss will be recognized to Acquiring Fund on its receipt of the Assets in exchange solely for Acquiring Fund Shares and its assumption of the Liabilities; 6.6.4. Acquiring Fund's basis for the Assets will be the same as the basis thereof in Target's hands immediately before the Reorganization, and Acquiring Fund's holding period for the Assets will include Target's holding period therefor; 6.6.5. A Shareholder will recognize no gain or loss on the constructive exchange of all its Target Shares solely for Acquiring Fund Shares pursuant to the Reorganization; and B - 12 6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be received by it in the Reorganization will be the same as the basis for its Target Shares to be constructively surrendered in exchange for those Acquiring Fund Shares, and its holding period for those Acquiring Fund Shares will include its holding period for those Target Shares, provided they are held as capital assets by the Shareholder at the Effective Time. Notwithstanding paragraphs 6.6.2 and 6.6.4, each Tax Opinion may state that no opinion is expressed as to the effect of the Reorganization on the Funds or any Shareholder with respect to any asset (including certain options, futures, and forward contracts included in the Assets) as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting. At any time before the Closing, (a) Acquiring Fund may waive any of the foregoing conditions if, in the judgment of PW Trust's board of trustees, such waiver will not have a material adverse effect on its shareholders' interests, and (b) Target may waive any of the foregoing conditions if, in the judgment of its board of directors, such waiver will not have a material adverse effect on the Shareholders' interests. 7. BROKERAGE FEES AND EXPENSES 7.1. Each Investment Company represents and warrants to the other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 7.2. Except as otherwise provided herein, all expenses incurred in connection with the transactions contemplated by this Agreement (whether or not they are consummated) will be borne by the Funds proportionately, as follows: each such expense will be borne by the Funds in proportion to their respective net assets as of the close of business on the last business day of the month in which such expense was incurred. Such expenses include: (a) expenses incurred in connection with entering into and carrying out the provisions of this Agreement; (b) expenses associated with the preparation and filing of the Registration Statement; (c) registration or qualification fees and expenses of preparing and filing such forms as are necessary under applicable state securities laws to qualify the Acquiring Fund Shares to be issued in connection herewith in each state in which Target's shareholders are resident as of the date of the mailing of the Proxy Statement to such shareholders; (d) printing and postage expenses; (e) legal and accounting fees; and (f) solicitation costs. 8. ENTIRE AGREEMENT; SURVIVAL Neither party has made any representation, warranty, or covenant not set forth herein, and this Agreement constitutes the entire agreement between the parties. The representations, warranties, and covenants contained herein or in any document delivered pursuant hereto or in connection herewith shall survive the Closing. 9. TERMINATION OF AGREEMENT This Agreement may be terminated at any time at or prior to the Effective Time, whether before or after approval by Target's shareholders: 9.1. By either Fund (a) in the event of the other Fund's material breach of any representation, warranty, or covenant contained herein to be performed at or prior to the Effective Time, (b) if a condition to its obligations has not been met and it reasonably appears that such condition will not or cannot be met, or (c) if the Closing has not occurred on or before December 31, 1995; or 9.2. By the parties' mutual agreement. B - 13 In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no liability for damages on the part of either Fund, or the trustees, directors, or officers of either Investment Company, to the other Fund. 10. AMENDMENT This Agreement may be amended, modified, or supplemented at any time, notwithstanding approval thereof by Target's shareholders, in such manner as may be mutually agreed upon in writing by the parties; provided that following such approval no such amendment shall have a material adverse effect on the Shareholders' interests. 11. MISCELLANEOUS 11.1. This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts; provided that, in the case of any conflict between such laws and the federal securities laws, the latter shall govern. 11.2. Nothing expressed or implied herein is intended or shall be construed to confer upon or give any person, firm, trust, or corporation other than the parties and their respective successors and assigns any rights or remedies under or by reason of this Agreement. 11.3. The parties acknowledge that PW Trust is a Business Trust. Notice is hereby given that this instrument is executed on behalf of PW Trust's trustees solely in their capacity as trustees, and not individually, and that PW Trust's obligations under this instrument are not binding on or enforceable against any of its trustees, officers, or shareholders, but are only binding on and enforceable against Acquiring Fund's assets and property. Target agrees that, in asserting any rights or claims under this Agreement, it shall look only to Acquiring Fund's assets and property in settlement of such rights or claims and not to such trustees or shareholders. IN WITNESS WHEREOF, each party has caused this Agreement to be executed by its duly authorized officer. ATTEST: PAINEWEBBER AMERICA FUND, on behalf of its series, PAINEWEBBER GROWTH AND INCOME FUND By: \s\ Ilene Shore \s\ Dianne E. O'Donnell Assistant Secretary Vice President ATTEST: MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY INCOME FUND, INC. By: \s\ Stephanie Hemphill Johnson \s\ Scott Griff Assistant Secretary Vice President B - 14 EX-99.17(B) 2 PROXY CARDS PROXY ----- MITCHELL HUTCHINS/KIDDER PEABODY EQUITY INCOME FUND, INC. SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 6, 1995 The undersigned hereby appoints as proxies Dianne E. O'Donnell and Jennifer Farrell and each of them (with power of substitution) to vote for the undersigned all shares of beneficial interest of the undersigned at the aforesaid meeting and any adjournment thereof with all the power the undersigned would have if personally present. The shares represented by this proxy will be voted as instructed. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE "FOR" ALL PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MITCHELL HUTCHINS/KIDDER PEABODY EQUITY INCOME FUND, INC. YOUR VOTE IS IMPORTANT Please date and sign this proxy on the reverse side and return it in the enclosed envelope to Alamo Direct Mail Services, Inc., 10 Lucon Drive, Deer Park, NY 11729. PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" FOR AGAINST ABSTAIN 1. Approval of an Amended and Restated Agreement and Plan of Reorganization and Liquidation between PaineWebber Growth and Income Fund and Mitchell Hutchins/ Kidder Peabody Equity Income Fund, Inc. / / / / / / CONTINUED AND TO BE SIGNED ON REVERSE SIDE This proxy will not be voted unless it is dated and signed exactly as instructed below. If shares are held jointly, each Shareholder named should sign. If only one signs, his or her signature will be binding. If the Shareholder is a corporation, the President or a Vice President should sign in his or her own name, indicating title. If the Shareholder is a partnership, a partner should sign in his or her own name, indicating that he or she is a "Partner." Sign exactly as name appears hereon. ______________________________(L.S.) ______________________________(L.S.) Date ________________________, 1995 PROXY PAINEWEBBER INVESTMENT SERIES -- PAINEWEBBER GLOBAL ENERGY FUND SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 6, 1995 The undersigned hereby appoints as proxies Dianne E. O'Donnell and Jennifer Farrell and each of them (with power of substitution) to vote for the undersigned shares of beneficial interest of the undersigned at the aforesaid meeting and any adjournment thereof with all the power the undersigned would have if personally present. The shares represented by this proxy will be voted as instructed. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE "FOR" ALL PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF PAINEWEBBER INVESTMENT SERIES. YOUR VOTE IS IMPORTANT Please date and sign this proxy on the reverse side and return it in the enclosed envelope to Alamo Direct Mail Services, Inc., 10 Lucon Drive, Deer Park, NY 11729. PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW. THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" FOR AGAINST ABSTAIN 1. Approval of an Amended and Restated Agreement and Plan of Reorganization and Termination between PaineWebber Growth and Income Fund and PaineWebber Global Energy Fund ("Fund"). / / / / / / CONTINUED AND TO BE SIGNED ON REVERSE SIDE This proxy will not be voted unless it is dated and signed exactly as instructed below If shares are held jointly, each Shareholder named should sign. If only one signs, his or her signature will be binding. If the Shareholder is a corporation, the President or a Vice President should sign in his or her own name, indicating title. If the Shareholder is a partnership, a partner should sign in his or her own name indicating that he or she is a "Partner". Sign exactly as name appears hereon. ______________________________(L.S.) ______________________________(L.S.) Date ________________________, 1995