<PAGE>
As filed with the Securities and Exchange Commission on July 29, 1998
1933 Act Registration No. 333-52965
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1940 Act Registration No. 811-8767
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. 1 [X]
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Post-Effective Amendment No. ______ [_]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 1
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MITCHELL HUTCHINS INSTITUTIONAL SERIES
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, Esq.
BENJAMIN J. HASKIN, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered: Shares of Beneficial Interest
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
MITCHELL HUTCHINS INSTITUTIONAL SERIES
Contents of Registration Statement
This Registration Statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
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Mitchell Hutchins Institutional Series
Form N-1A Cross Reference Sheet
<TABLE>
<CAPTION>
Part A Item No. and Caption Prospectus Caption
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<S> <C>
1. Cover Page Cover Page
2. Synopsis Highlights; Expense Table
3. Condensed Financial Information Performance
4. General Description of Registrant Highlights; Investment Objective and Policies; General
Information
5. Management of the Fund Management and Distribution Arrangements; General
Information
5A. Management's Discussion of Fund Not Applicable
Performance
6. Capital Stock and Other Securities Purchases; Redemptions; Dividends and Taxes; General
Information
7. Purchase of Securities Being Offered Purchases, Exchanges, Redemptions; Management and
Distribution Arrangements; Financial Intermediaries;
Determining the Shares' Net Asset Value
8. Redemption or Repurchase Exchanges; Redemptions; Financial Intermediaries
9. Pending Legal Proceedings Not Applicable
<CAPTION>
Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- --------------------------------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objective and Policies Investment Policies and Restrictions; Portfolio Transactions
14. Management of the Fund Trustees and Officers; Principal Holders of Securities
15. Control Persons and Principal Holders of Trustees and Officers; Principal Holders of Securities
Securities
16. Investment Advisory and Other Services Investment Advisory, Administration and Distribution
Arrangements
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing of Additional Information Regarding Redemptions; Valuation of
Securities Being Offered Shares
20. Tax Status Taxes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- --------------------------------------------------
<S> <C>
21. Underwriters Investment Advisory, Administration and Distribution
Arrangements
22. Calculation of Performance Data Calculation of Yield
23. Financial Statements To Be Supplied
</TABLE>
Part C
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Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
1285 AVENUE OF THE AMERICAS . NEW YORK, NEW YORK 10019
Professionally managed money market fund seeking:
. Maximum Current Income
. High Liquidity
. Preservation of Capital
Mitchell Hutchins LIR Select Money Fund is a series of Mitchell Hutchins
Institutional Series, a Delaware business trust ("Trust"). The Fund offers two
separate classes of shares--Institutional shares and Financial Intermediary
shares. Institutional shares are available for purchase primarily by
institutional investors. Financial Intermediary shares are available for
purchase by banks and other financial intermediaries for the benefit of their
customers. The Fund is newly organized and has no operating history.
This Prospectus concisely sets forth information that a prospective investor
should know about the Fund before investing. Please retain this Prospectus for
future reference. A Statement of Additional Information dated , 1998
(which is incorporated by reference herein) has been filed with the Securities
and Exchange Commission ("SEC" or "Commission"). The Statement of Additional
Information can be obtained without charge, and further inquiries can be made,
by contacting the Fund, your PaineWebber Investment Executive or PaineWebber's
correspondent firms, or by calling toll free 1-888-LIR-FUND. Customers of
banks and other financial intermediaries that purchase the Fund's Financial
Intermediary shares also may obtain the Statement of Additional Information
from their financial intermediaries. In addition, the Commission maintains a
website (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference and other information
regarding registrants that file electronically with the Commission.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS
TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO
LOSE MONEY BY INVESTING IN THE FUND.
Not FDIC insured. May lose value. No bank guarantee.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED , 1998
<PAGE>
HIGHLIGHTS
See elsewhere in the Prospectus for more information on the topics discussed
in these highlights.
The Fund: Professionally managed money market fund designed primarily
for institutions as an economical and convenient means for
the investment of short-term funds that they hold for their
own account or hold or manage for others.
The Fund offers investors the choice of investing in two
separate classes of shares.
. Institutional shares are available for purchase primarily
by institutional investors.
. Financial Intermediary shares are available for purchase
solely by banks and other financial intermediaries for
the benefit of their customers. Financial Intermediary
shares bear all fees payable by the Fund to those
financial intermediaries for certain services they
provide to the beneficial owners of those shares.
See "Purchases," "Redemptions," "Financial Intermediaries"
and "Valuation of Shares."
Investment Maximum current income consistent with liquidity and the
Objective and preservation of capital. The Fund invests in a diversified
Policies: portfolio of high quality, short-term, U.S. dollar-
denominated money market instruments.
Distributor: PaineWebber Incorporated ("PaineWebber"). See "Management."
Investment Mitchell Hutchins Asset Management Inc. ("Mitchell
Adviser: Hutchins"). See "Management."
Purchases: Shares may be purchased through PaineWebber, its
correspondent firms or through First Data Investor Services
Group, Inc., the Fund's transfer agent ("Transfer Agent").
See "Purchases."
Redemptions: Shares may be redeemed through PaineWebber, its
correspondent firms or the Transfer Agent. See
"Redemptions."
Dividends: Declared daily and paid monthly. All dividends are
automatically paid in Fund shares unless the shareholder
elects instead to have dividends transmitted by federal
funds wire to either a designated bank account or
PaineWebber account. See "Dividends and Taxes."
Minimum Initial $10,000,000; $100,000 minimum for subsequent purchases.
Purchase: (Financial intermediaries may establish different minimums
for their customers who purchase shares through them.)
Public Offering Net asset value, which the Fund seeks to maintain at $1.00
Price: per share.
WHO SHOULD INVEST. The Fund is designed primarily for institutions as an
economical and convenient means for the investment of short-term funds that
they hold for their own account or hold or manage for others. These
institutions include corporations, banks, trust companies, insurance companies,
investment counsellors, pension funds, employee benefit plans, professional
firms, trusts, estates and educational, religious and charitable organizations.
See "Purchases" and "Management."
RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective. While the types of money market securities in which the
Fund invests generally are considered to have low risk
2
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of loss of principal or interest, these securities are not completely risk
free. The Fund may invest in U.S. dollar-denominated securities of foreign
issuers, which may present a greater degree of risk than investments in
securities of domestic issuers. During periods when interest rates are
declining or rising, the Fund's yield will tend to lag behind prevailing short-
term market rates. Redemption of shares by one or more shareholders during the
Fund's initial period of operations when the Fund may have a relatively small
number of investors may cause the Fund to hold a higher portion of its assets
in the securities of fewer issuers, resulting in greater risk. See "Investment
Objective and Policies--Other Investment Policies and Risks."
EXPENSES OF INVESTING IN THE FUND. The following tables are intended to
assist investors in understanding the expenses associated with investing in the
Fund. "Miscellaneous Expenses" have been estimated for the current fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales charge on purchases of shares........................................ None
Sales charge on reinvested dividends....................................... None
Redemption fee or deferred sales charge.................................... None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
---------------------------
FINANCIAL
INSTITUTIONAL INTERMEDIARY
SHARES SHARES
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<S> <C> <C> <C> <C>
Management Fees ................................... 0.18% 0.18%
Other Expenses:
Shareholder Servicing Fees........................ 0.00% 0.25%
Miscellaneous Expenses*........................... 0.00% 0.00%
Total Other Expenses .............................. 0.00% 0.25%
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Total Operating Expenses .......................... 0.18% 0.43%
====== ======
</TABLE>
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* Although the Fund pays the fees and expenses (including counsel fees) of its
Independent Trustees (the Trustees who are not "interested persons" of the
Fund or Mitchell Hutchins, as defined in the Investment Company Act of 1940
("1940 Act")), Mitchell Hutchins is contractually obligated to reduce its
management fee in an amount equal to these fees and expenses. It is esti-
mated that these fees and expenses will be less than 0.01% of the Fund's av-
erage net assets.
EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
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<S> <C> <C>
Institutional shares........................................... $2 $ 6
Financial Intermediary shares.................................. $4 $14
</TABLE>
This Example assumes that all dividends 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 applicable to all mutual
funds; the assumed 5% annual return is not a prediction of, and does not
represent, the Fund's projected or actual performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to earn maximum current income consistent
with liquidity and the preservation of capital.
The Fund seeks to maintain a dollar-weighted average portfolio maturity of
90 days or less. All securities in which the Fund invests have or are deemed
to have remaining maturities of 397 days or less on the date of purchase.
The Fund invests in high quality, short-term, U.S. dollar-denominated money
market instruments of U.S. and foreign issuers. These instruments include gov-
ernment securities, obligations of banks, commercial paper and other short-
term obligations issued by corporations, partnerships, trusts or other enti-
ties, corporate bonds and notes, variable and floating rate securities, fund-
ing agreements, guaranteed investment contracts, variable amount master demand
notes, participation interests in any of the foregoing and repurchase agree-
ments. Participation interests are pro rata interests in securities held by
others.
The U.S. government securities in which the Fund may invest include direct
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and
obligations issued or guaranteed by U.S. government agencies and instrumental-
ities, including securities that are supported by the full faith and credit of
the United States (such as Government National Mortgage Association certifi-
cates ("GNMAs")), securities supported primarily or solely by the creditwor-
thiness of the issuer (such as securities of the Resolution Funding Corpora-
tion and the Tennessee Valley Authority) and securities that are supported
primarily or solely by specific pools of assets and the creditworthiness of a
U.S. government-related issuer (such as mortgage-backed securities issued by
Fannie Mae, also known as the Federal National Mortgage Association).
The Fund may invest in obligations (including certificates of deposit, bank-
ers' acceptances and similar obligations) of U.S. and foreign banks. The Fund
may invest in non-negotiable time deposits of banks, savings associations and
similar depository institutions only if the time deposits have maturities of
seven days or less.
The securities purchased by the Fund consist only of obligations that are
"First Tier Securities" as defined in Rule 2a-7 under the 1940 Act. As so de-
fined, First Tier Securities include securities that are rated in the highest
short-term rating category by at least two nationally recognized statistical
rating organizations ("NRSROs") or by a single NRSRO if only one NRSRO has as-
signed the obligation a short-term rating. The Fund also may rely on the
short-term rating and credit quality of a guarantee of a security (including
bond insurance, letters of credit or unconditional demand features) or the is-
suer of the guarantee to determine whether the security is eligible for pur-
chase. First Tier Securities also include unrated securities if Mitchell
Hutchins has determined the obligations to be of comparable quality to rated
securities that so qualify. The Fund generally may invest no more than 5% of
its total assets in the securities of a single issuer (other than securities
issued by the U.S. government, its agencies and instrumentalities).
OTHER INVESTMENT POLICIES AND RISKS
RISKS. While the types of money market instruments in which the Fund invests
generally are considered to have low risk of loss of principal or interest,
they are not completely risk free. An issuer or guarantor may be unable or un-
willing to pay interest or repay principal on its obligations for many rea-
sons, including adverse changes in its own financial condition or in economic
conditions generally.
The Fund's investments in U.S. dollar-denominated securities of foreign is-
suers may involve risks that are different from investments in U.S. issuers.
These risks may include future unfavorable political and economic develop-
ments, possible withholding taxes, seizure of foreign deposits, currency con-
trols, interest limitations or other governmental restrictions that might af-
fect the payment of principal or interest on the Fund's portfolio securities.
Additionally, there may be less publicly available information about foreign
issuers because they may not be subject to the same regulatory requirements as
domestic issuers.
During periods when interest rates are declining or rising, the Fund's yield
will tend to lag behind prevailing short-term market rates. This means that in
periods of declining interest rates the Fund's yield will tend to be somewhat
higher than prevailing short-term market rates, and in periods of rising in-
terest rates its yield generally will be somewhat lower. Also, when interest
rates are falling, net cash inflows from the continuous sale of the Fund's
shares are likely to be invested in portfolio instruments that produce lower
yields
4
<PAGE>
than the balance of its portfolio, thereby reducing its yield. In periods of
rising interest rates the opposite can be true.
Redemption of shares by one or more shareholders during the Fund's initial
period of operations, when the Fund may have a relatively small number of in-
vestors, may cause the Fund to hold a higher portion of its assets in the se-
curities of fewer issuers.
YEAR 2000 RISKS. Like other mutual funds, financial and business organiza-
tions around the world, the Fund could be adversely affected if the computer
systems used by Mitchell Hutchins, other service providers and entities with
computer systems that are linked to the Fund's records do not properly process
and calculate date-related information and data from and after January 1,
2000. This is commonly known as the "Year 2000 Issue." Mitchell Hutchins is
taking steps that it believes are reasonably designed to address the Year 2000
Issue with respect to the computer systems that is uses and to obtain satis-
factory assurances that comparable steps are being taken by the Fund's other
major service providers. However, there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the Fund.
U.S. GOVERNMENT SECURITIES. The Fund may also acquire custodial receipts
that evidence ownership of future interest payments, principal payments or
both that have been "stripped" from certain U.S. Treasury notes or bonds.
These custodial receipts are known by various names, including "Treasury In-
vestment Growth Receipts" ("TIGRs") and "Certificates of Accrual on Treasury
Securities" ("CATS"). The Fund may also invest in separately traded principal
and interest components of securities issued or guaranteed by the U.S. Trea-
sury. The principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the
U.S. Treasury.
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The Fund may purchase
commercial paper, which includes short-term obligations issued by corpora-
tions, partnerships, trusts or other entities to finance short-term credit
needs. The Fund may also purchase non-convertible debt obligations with no
more than 397 days remaining to maturity at the time of purchase. Short-term
obligations issued by trusts or special purpose entities may include certifi-
cates or notes that represent participations in or are backed by pools of
mortgages or credit card, automobile or other types of receivables or finan-
cial assets. The Fund may invest in funding agreements and guaranteed invest-
ment contracts issued by insurance companies which are obligations of the in-
surance company or its separate account. Funding agreements permit the invest-
ment of varying amounts under a direct agreement between the Fund and an in-
surance company and provide that the principal amount may be increased from
time to time (subject to specified maximums) by agreement of the parties or
decreased by either party. The Fund expects to invest in funding agreements
with floating or variable rates that are subject to demand features that per-
mit the Fund to tender its interest back to the issuer.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase variable and
floating rate securities with remaining maturities in excess of 13 months is-
sued by U.S. government agencies or instrumentalities or guaranteed by the
U.S. government. In addition, the Fund may purchase variable and floating rate
securities of other issuers with remaining maturities in excess of 13 months
if they are subject to a demand feature exercisable within 13 months or less.
The yield on these securities is adjusted in relation to changes in specific
rates, such as the prime rate, and different securities may have different ad-
justment rates. A demand feature gives the Fund the right to tender them back
to the issuer or a remarketing agent and receive the amortized cost of the se-
curity plus accrued interest prior to maturity. The demand feature may be
backed by letters of credit or other liquidity support arrangements provided
by banks or other financial institutions, whose credit standing affects the
credit quality of the obligation. Changes in the credit quality of these in-
stitutions could cause losses to the Fund and affect its share price.
VARIABLE AMOUNT MASTER DEMAND NOTES. Securities purchased by the Fund may
include variable amount master demand notes, which are unsecured redeemable
obligations that permit investment of varying amounts at fluctuating interest
rates under a direct agreement between the Fund and the issuer. The principal
amount of these notes may be increased from time to time by the parties (sub-
ject to specified maximums) or
5
<PAGE>
decreased by the Fund or the issuer. These notes are payable on demand and may
be unrated.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
Fund purchases obligations from banks, securities dealers or their respective
affiliates and simultaneously commits to resell the obligations to the
counterparty at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased obligations. The Fund maintains custody of the underlying obliga-
tions prior to their repurchase, either through its regular custodian or
through a special "tri-party" custodian or sub-custodian that maintains sepa-
rate accounts for both the Fund and its counterparty. Thus, the obligation of
the counterparty to pay the repurchase price on the date agreed to or upon de-
mand is, in effect, secured by such obligations.
Repurchase agreements carry certain risks not associated with direct invest-
ments in securities, including possible decline in the market value of the un-
derlying obligations. Repurchase agreements involving obligations other than
U.S. government securities (such as commercial paper, corporate bonds and
mortgage loans) may be subject to special risks and may not have the benefit
of certain protections in the event of the counterparty's insolvency. If the
counterparty or a guarantor becomes insolvent, the Fund may suffer delays,
costs and possible losses in connection with the disposition of the collater-
al. The Fund intends to enter into repurchase agreements only with
counterparties in transactions believed by Mitchell Hutchins to present mini-
mal credit risks in accordance with guidelines established by the board.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend its securities to quali-
fied broker-dealers or institutional investors in an amount up to 33 1/3% of
the Fund's total assets. Lending securities enables the Fund to earn addi-
tional income, but could result in a loss or delay in recovering these securi-
ties.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in il-
liquid securities. These include repurchase agreements maturing in more than
seven days and securities whose disposition is restricted under the federal
securities laws, other than those that Mitchell Hutchins has determined to be
liquid pursuant to guidelines established by the board. The Fund does not con-
sider securities that are eligible for resale under SEC Rule 144A to be illiq-
uid if Mitchell Hutchins has determined them to be liquid in accordance with
procedures approved by the board. The Fund's investments in Rule 144A securi-
ties could increase the level of its illiquidity, however, to the extent that
qualified institutional buyers, for a time, become uninterested in purchasing
these securities.
WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when-issued"
or forward commitment basis, that is, for delivery beyond the normal settle-
ment date at a stated price and yield. The Fund generally would not pay for
such securities or start earning interest on them until they are received.
However, when the Fund purchases securities on a when-issued basis, it immedi-
ately assumes the risks of ownership, including the risk of price fluctuation.
Failure by the issuer to deliver a security purchased on a when-issued basis
may result in a loss or missed opportunity to make an alternative investment.
OTHER INVESTMENT POLICIES. The Fund may borrow money from banks for tempo-
rary purposes in an aggregate amount not exceeding 33 1/3% of the value of its
total assets. The costs associated with borrowing money may reduce the Fund's
net income. The Fund may invest up to 10% of its total assets in the securi-
ties of other money market funds.
The Fund's investments in securities with remaining maturities in excess of
13 months, such as variable and floating rate securities and variable amount
master demand notes, must comply with conditions established by the SEC under
which these securities may be considered to have remaining maturities of 13
months or less.
In managing the Fund's portfolio, Mitchell Hutchins may employ a number of
professional money management techniques to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. These
techniques include varying the composition and the weighted average maturity
of the Fund's portfolio based upon its assessment of the relative values of
various money market instruments and future interest rate patterns. Mitchell
Hutchins may also seek to improve the Fund's yield by purchasing or selling
securities to take advantage of yield disparities among similar or dissimilar
money market instruments that regularly occur in the money markets.
New forms of money market instruments continue to be developed. The Fund may
invest
6
<PAGE>
in such instruments to the extent consistent with its investment objective.
The Fund's investment objective may not be changed without the approval of
its shareholders. Certain other investment limitations, as described in the
Statement of Additional Information, also may not be changed without share-
holder approval. All other investment policies may be changed by the board
without shareholder approval.
PURCHASES
The Fund accepts the settlement of purchase orders only in available federal
funds. ("Federal funds" are funds deposited by a commercial bank in an account
at a Federal Reserve Bank that can be transferred to a similar account of an-
other bank in one day and thus may be made immediately available to the Fund
through its custodian.)
The Fund offers investors the choice of investing in two separate classes of
shares--Institutional shares and Financial Intermediary shares. Institutional
shares are available for purchase by institutional investors, and, at the dis-
cretion of PaineWebber, for purchase by individuals or other entities. Finan-
cial Intermediary shares are available for purchase only by banks and other
financial intermediaries for the benefit of their customers. Financial Inter-
mediary shares bear all fees payable by the Fund to those financial intermedi-
aries for certain services they provide to the beneficial owners of these
shares.
The minimum initial investment is $10,000,000. The minimum subsequent
investment is the greater of $100,000 or the minimum required to bring a
shareholder's account balance to $10,000,000 if the account has fallen below
that amount. Both the initial minimum investment and the subsequent minimum
investment may be waived at the discretion of PaineWebber. Subsequent pur-
chases of shares by a shareholder whose account balance has fallen below
$10,000,000 will be accepted only if the account balance will be at least
$10,000,000 after that purchase. Financial intermediaries purchasing shares
for the accounts of their customers may set a higher or lower minimum for ini-
tial and subsequent investments by their customers, provided that when their
customers' shareholdings are aggregated, the above noted minimums are met. In-
vestors interested in purchasing Financial Intermediary shares should consult
their financial institutions concerning any initial or subsequent minimum in-
vestment requirements.
Shares of the Fund are offered for sale, without a sales charge, at the net
asset value per share next determined after receipt and acceptance of a pur-
chase order by the Transfer Agent, subject to timely receipt of federal funds
as provided below. An investor can place a purchase order by telephoning the
Transfer Agent at 1-888-LIR-FUND and speaking with a representative. Investors
may also place an order through a PaineWebber Investment Executive or corre-
spondent firm who must then relay the order to the Transfer Agent. The Fund
effects orders to purchase its shares three times on each Business Day at the
net asset value determined as of 12:00 noon (Eastern time), as of 2:30 p.m.
(Eastern Time) and as of 5:00 p.m. (Eastern time). For the purchase of Fund
shares to be effected on that Business Day, the investor must wire federal
funds to the Fund, care of the Transfer Agent, and that wire must be credited
to the Fund's bank account by a Federal Reserve Bank on that Business Day.
Otherwise, the order will be executed on the following Business Day if federal
funds have been received on that Business Day. Purchase orders may be initi-
ated by any authorized party on the account, including the shareholder's
PaineWebber Investment Executive. A "Business Day" is any day on which the New
York offices of the Trust's custodian, The Bank of New York ("Custodian"), the
Transfer Agent, PaineWebber and PaineWebber's bank are all open for business.
The Fund and PaineWebber reserve the right to reject any purchase order and
to suspend the offering of Fund shares for a period of time.
The availability of Fund shares to customers of PaineWebber's correspondent
firms may vary depending on the arrangements between PaineWebber and such
firms.
Investors who are purchasing shares should instruct their banks to transfer
federal funds by wire. Wire transfers should be directed to:
Mitchell Hutchins Institutional Funds
c/o The Bank of New York
CR DDA A/C #8900337516
FFC PW A/C #
[insert PaineWebber account name and account number]
ABA #021000018
Unless the investor otherwise specifies, all shares purchased will be Insti-
tutional shares.
7
<PAGE>
REMOTE TRADE ENTRY. At its discretion, the Fund may offer eligible institu-
tional investors who meet certain conditions an electronic trade order entry
(RTE) capability. For more information on this option, please contact your
PaineWebber Investment Executive or the Transfer Agent at 1-888-LIR-FUND.
PaineWebber and/or an investor's bank may impose a service charge for wire
transfers.
EXCHANGES
Shareholders may exchange shares of the Fund for shares of the same class of
any of the three Liquid Institutional Reserves funds--Money Market Fund, Gov-
ernment Securities Fund and Treasury Securities Fund. These funds all have
higher total operating expenses than the Fund and lower minimums for initial
and subsequent purchases. Exchange orders from Fund shareholders received by
12:00 noon, Eastern time, with respect to Government Securities Fund and Trea-
sury Securities Fund are effected on that Business Day. Exchange orders from
Fund shareholders received by 2:30 p.m., Eastern time, with respect to Money
Market Fund also are effected on that Business Day. Exchange orders received
after those times are executed on the next Business Day. If a shareholder ex-
changes all his or her Fund shares, the dividends accrued on those shares for
the month to date also will be invested in the shares of the other fund into
which the exchange is made.
Shareholders may place exchange orders by telephoning the Transfer Agent at
1-888-LIR-FUND and speaking with a representative. Investors may also place an
exchange order through a PaineWebber Investment Executive or correspondent
firm, who must then relay the order to the Transfer Agent as noted above. Ex-
change orders may be initiated by any authorized party on a shareholder's ac-
count, including the shareholder's PaineWebber Investment Executive.
The exchange privilege may be modified or terminated at any time and, when re-
quired by SEC rules, on 60 days' notice. The exchange privilege is available
only in those jurisdictions where the sale of the fund shares to be acquired
is authorized.
AUTOMATIC EXCHANGE WHEN ACCOUNTS FALL BELOW $10,000,000. If, at any time,
the total investment in a shareholder's account has been less than $10,000,000
for 30 consecutive days, the Fund may exchange those shares for shares of Liq-
uid Institutional Reserves Money Market Fund unless the shareholder has
elected in its account application to have the shares redeemed and the pro-
ceeds of redemption paid to the shareholder.
REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their accounts
at any time at the net asset value per share next computed after the receipt
of a redemption request in proper form by the Transfer Agent. Redemption or-
ders are effected three times on each Business Day at the net asset value de-
termined as of 12:00 noon (Eastern time), 2:30 p.m. (Eastern time) and as of
5:00 p.m. (Eastern time) by telephoning the Transfer Agent at 1-888-LIR-FUND
and speaking with a representative. Investors may also place an order through
a PaineWebber Investment Executive or correspondent firm which must then relay
the order to the Transfer Agent by the time noted above. Redemption orders may
be initiated by any authorized party on a shareholder's account, including the
shareholder's PaineWebber Investment Executive. Redemption proceeds will be
paid by federal funds wired to one or more of the bank accounts that have been
designated by the shareholder, normally on the Business Day the redemption re-
quest is accepted. If a shareholder redeems all the shares owned, dividends
accrued for the month to date will be paid in federal funds and wired at the
same time to the bank account(s) designated by the shareholder.
Redemption requests placed later in the day--especially between 3:30 p.m.
and 5:00 p.m., Eastern time--will be processed by the Transfer Agent and a
wire will be initiated. However, receipt by the shareholder's designated bank
account may be delayed if a Federal Reserve Bank is experiencing delays in
transfers of funds. Neither the Fund nor the Transfer Agent is responsible for
the performance of a shareholder's receiving bank or any of its intermediar-
ies.
A properly completed account application with signature guaranteed or other
authentication acceptable to the Transfer Agent must be on file with the
Transfer Agent before a redemption request can be processed. The application
requires that the shareholder designate the bank account(s) or PaineWebber ac-
count to which redemption proceeds should be wired. Any change
8
<PAGE>
in the account designated must be submitted in a form deemed acceptable by the
Transfer Agent. If the information provided by a shareholder in a redemption
request does not correspond to the information on the application, the Trans-
fer Agent will not effect the transaction.
ADDITIONAL INFORMATION ON REDEMPTIONS. Shareholders with questions about re-
demption requirements should consult their PaineWebber Investment Executives,
correspondent firms or the Transfer Agent at 1-888-LIR-FUND. Shareholders will
earn dividends on redeemed shares up to (but not including) the day of redemp-
tion. The redemption price may be more or less than the purchase price, de-
pending on the market value of the Fund's portfolio; however, the Fund antici-
pates that its net asset value per share will normally be $1.00 per share. See
"Valuation of Shares."
There is no minimum amount for redemptions.
ADDITIONAL INFORMATION ON FINANCIAL INTERMEDIARY SHARES. The Fund's shares
are sold and redeemed without charge by the Fund. Financial intermediaries
purchasing or holding Financial Intermediary shares for their customer ac-
counts may charge customers for cash management and other services provided in
connection with their accounts, including, for instance, account maintenance
fees, compensating balance requirements or fees based on account transactions,
assets or income. The dividends payable to beneficial owners of Financial In-
termediary shares will be lower than those on Institutional shares by the
amount of fees paid by the Fund for services provided by financial intermedi-
aries through which those shares are purchased and held. See "Financial Inter-
mediaries." A customer should consider the terms of his or her account with a
financial intermediary before purchasing shares. A financial intermediary pur-
chasing or redeeming shares on behalf of its customers is responsible for
transmitting orders to the Transfer Agent in accordance with its customer
agreements and the procedures noted above.
VALUATION OF SHARES
The Fund uses its best efforts to maintain its net asset value at $1.00 per
share. The Fund's net asset value per share is determined by dividing the
value of its investments and other assets minus its liabilities by the number
of Fund shares outstanding. The net asset value per share for each class is
determined three times each Business Day at 12:00 noon (Eastern time), 2:30
p.m. (Eastern time) and 5:00 p.m. (Eastern time).
The Fund values its portfolio securities using the amortized cost method of
valuation, under which market value is approximated by amortizing the differ-
ence between the acquisition cost and value at maturity of an instrument on a
straight-line basis over its remaining life. All cash, receivables and current
payables are carried at their face value. Other assets are valued at fair
value as determined in good faith by or under the direction of the board.
DIVIDENDS AND TAXES
DIVIDENDS. Each Business Day, the Fund declares as dividends all of its net
investment income. Shares are entitled to receive dividends beginning on the
date the purchase order is accepted; dividends are accrued to shareholder
accounts daily and are paid on the last Business Day of the month or upon re-
demption of a shareholder's entire Fund account. Dividends are automatically
paid in additional Fund shares unless the shareholder elects instead to have
dividends transmitted by federal funds wire to either a designated bank ac-
count or PaineWebber account. A shareholder must notify the Transfer Agent in
writing in a form deemed acceptable by the Transfer Agent at least two Busi-
ness Days prior to the end of the month if the shareholder wishes to change
this election with respect to a particular monthly dividend. Shares do not
earn dividends on the day of redemption.
The Fund distributes its net short-term capital gain, if any, annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The
Fund does not expect to realize net long-term capital gain and thus does not
anticipate payment of any long-term capital gain distributions. Dividends paid
on both classes of shares are calculated at the same time and in the same man-
ner. Dividends on Financial Intermediary shares are expected to be lower than
those paid on Institutional shares because of the higher expenses borne by the
Financial Intermediary shares.
TAXES. The Fund intends to qualify for treatment as a regulated investment
company under the Internal Revenue Code so that it will be relieved of federal
income tax on that part of its investment company taxable income (consisting
9
<PAGE>
generally of taxable net investment income and net short-term capital gain, if
any) that it distributes to its shareholders.
Dividends from the Fund's investment company taxable income (whether paid in
cash or in additional Fund shares) are taxable to its shareholders as ordinary
income to the extent of its earnings and profits. Shareholders not subject to
tax on their income will not be required to pay tax on amounts distributed to
them. The Fund's dividends will not qualify for the dividends-received deduc-
tion for corporations.
Some states and localities exempt from their income taxes the portions of
the Fund's dividends that are attributable to interest on U.S. Treasury secu-
rities and certain other U.S. government securities. Dividends attributable to
earnings on repurchase agreements and securities loans involving those securi-
ties are, as a general rule, not eligible for that exemption.
The Fund notifies its shareholders following the end of each calendar year
of the tax status of all distributions paid (or deemed paid) during that year.
The notice sent by the Fund specifies the portions of its dividends that are
attributable to U.S. Treasury securities and other U.S. government securities
generally exempt from state and local income taxes.
The Fund is required to withhold 31% of all dividends payable to any indi-
viduals and certain other noncorporate shareholders who (1) do not provide the
Fund with a correct taxpayer identification number or (2) otherwise are sub-
ject to backup withholding.
ADDITIONAL INFORMATION. The foregoing is only a summary of some of the im-
portant federal, state and local income tax considerations generally affecting
the Fund and its shareholders; see the Statement of Additional Information for
a further discussion. There may be other federal, state and local tax consid-
erations applicable to a particular investor. Prospective shareholders are
urged to consult their tax advisers.
MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
The board, as part of its overall management responsibility, oversees vari-
ous organizations responsible for the Fund's day-to-day management. Mitchell
Hutchins, the Fund's investment adviser and administrator, makes and imple-
ments all investment decisions and supervises all aspects of its operations.
The Fund incurs various expenses in its operations, such as the management
fee paid to Mitchell Hutchins, custody and transfer agency fees, shareholder
service fees paid for Financial Intermediary shares, professional fees, ex-
penses of board and shareholder meetings, fees and expenses relating to regis-
tration of its shares, taxes and governmental fees, fees and expenses of
trustees, costs of obtaining insurance, expenses of printing and distributing
shareholder materials, organizational expenses and extraordinary expenses, in-
cluding costs or losses in any litigation.
Mitchell Hutchins has agreed to bear all expenses of the Fund other than the
management fee, shareholder service fees paid for Financial Intermediary
shares, fees and expenses (including counsel fees) of the Independent Trust-
ees, interest, taxes and the cost (including brokerage commissions and other
transaction costs, if any) of securities purchased or sold by the Fund and any
losses incurred in connection therewith and extraordinary expenses. For its
services and its bearing these expenses, the Fund pays Mitchell Hutchins a
monthly fee at the annual rate of 0.18% of its average daily net assets. Al-
though Mitchell Hutchins is not obligated to pay the fees and expenses of the
Independent Trustees, it is contractually obligated to reduce its management
fee in an amount equal to those fees and expenses.
Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New
York 10019, and is a wholly owned asset management subsidiary of PaineWebber.
PaineWebber, the distributor of the Fund's shares, is located at the same ad-
dress and is wholly owned by Paine Webber Group Inc., a publicly owned finan-
cial services holding company. At June 30, 1998, Mitchell Hutchins was invest-
ment adviser or sub-adviser to 32 registered investment companies with 69 sep-
arate portfolios and aggregate assets of approximately $40.3 billion.
In accordance with procedures adopted by the board, the Fund may pay fees to
PaineWebber for its services as lending agent in its portfolio securities
lending program. Mitchell Hutchins investment personnel may engage in securi-
ties transactions for their own accounts pursuant to a code of ethics that es-
tablishes procedures for personal investing and restricts certain transac-
tions.
10
<PAGE>
FINANCIAL INTERMEDIARIES
Financial intermediaries, such as banks and savings associations, may pur-
chase Financial Intermediary shares for the accounts of their customers. The
Fund has adopted a shareholder services plan ("Plan") with respect to Finan-
cial Intermediary shares. PaineWebber implements the Plan on behalf of the
Trust by entering into a service agreement with each financial intermediary
that purchases Financial Intermediary shares requiring it to provide support
services to its customers who are the beneficial owners of Financial Interme-
diary shares.
Under the Plan, the Fund pays PaineWebber an annual fee at the annual rate
of 0.25% of the average daily net asset value of the Financial Intermediary
shares held by financial intermediaries on behalf of their customers. Under
each service agreement, PaineWebber pays an identical fee to the financial in-
termediary for providing the support services to its customers specified in
the service agreement. These services may include: aggregating and processing
purchase and redemption requests from customers and placing net purchase and
redemption orders with PaineWebber; providing customers with a service that
invests the assets of their accounts in Financial Intermediary shares;
processing dividend payments on behalf of customers; providing information pe-
riodically to customers showing their positions in Financial Intermediary
shares; arranging for bank wires; responding to customer inquiries relating to
the services performed by the financial intermediary; providing sub-accounting
with respect to Financial Intermediary shares beneficially owned by customers
or the information necessary for sub-accounting; forwarding shareholder commu-
nications from the Fund to customers, if required by law; and such other simi-
lar services as the Fund may reasonably request from time to time to the ex-
tent the financial intermediary is permitted to do so under federal and state
statutes, rules and regulations.
Under the terms of the service agreements, financial intermediaries are re-
quired to provide to their customers a schedule of any additional fees that
they may charge customers in connection with their investments in Financial
Intermediary shares. Financial Intermediary shares are available for purchase
only by financial intermediaries that have entered into service agreements
with PaineWebber in connection with their investment. Financial intermediaries
providing services to beneficial owners of Financial Intermediary shares in
certain states may be required to be registered as dealers under the laws of
those states.
Should future legislative, judicial or administrative action prohibit or re-
strict the activities of banks serving as financial intermediaries in connec-
tion with the provision of support services to their customers, the Trust and
PaineWebber might be required to alter or discontinue their arrangements with
financial intermediaries and change their method of operations with respect to
Financial Intermediary shares. It is not anticipated, however, that any change
in the Trust's method of operations would affect its net asset values per
share or result in a financial loss to any shareholder.
Conflict of interest restrictions may apply to a financial institution's re-
ceipt of compensation from the Fund through PaineWebber under a service agree-
ment resulting from fiduciary funds being invested in Financial Intermediary
shares. Before investing fiduciary funds in Financial Intermediary shares, fi-
nancial intermediaries, including investment advisers and other money managers
under the jurisdiction of the SEC, the Department of Labor or state securities
commissions and banks regulated by the Comptroller of the Currency should con-
sult their legal advisors.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not in-
tended to indicate future performance. The "current yield" of the Fund is the
income on an investment in the Fund over a specified seven-day period. This
income is then "annualized" (that is, assumed to be earned each week over a
52-week period) and shown as a percentage of the investment. The "effective
yield" is calculated similarly, but when annualized the income earned is as-
sumed to be reinvested. The "effective yield" will be higher than the "current
yield" because of the compounding effect of this assumed reinvestment.
Current yield and effective yield are calculated separately for Institu-
tional shares and Financial Intermediary shares. Since holders of Financial
Intermediary shares bear all service fees for the services rendered by finan-
cial intermediaries, the net yield on Financial Intermediary shares can be ex-
pected at any given time to
11
<PAGE>
be approximately 0.25% lower than the net yield on Institutional shares. Any
additional fees directly assessed by financial intermediaries will have the
effect of further reducing the net yield realized by a beneficial owner of Fi-
nancial Intermediary shares.
The Fund may also advertise other performance data, which may consist of the
annual or cumulative return (including realized net short-term capital gain,
if any) earned on a hypothetical investment in the Fund since it began opera-
tions or for shorter periods. This return data may or may not assume reinvest-
ment of dividends (compounding).
GENERAL INFORMATION
The Fund is a newly organized, diversified series of the Trust, an open-end
management investment company formed on April 29, 1998 as a business trust un-
der the laws of Delaware. The board has authority to issue an unlimited number
of shares of beneficial interest of separate series, par value $0.001 per
share.
Each share of the Fund has equal voting, dividend and liquidation rights,
except that beneficial owners of Financial Intermediary shares receive certain
services directly from financial intermediaries and bear the related service
fees.
The Fund does not hold annual shareholder meetings. There normally will be
no meetings of shareholders to elect trustees unless fewer than a majority of
the trustees holding office have been elected by shareholders.
Shareholders of record of no less than two-thirds of the outstanding shares
of the Fund may remove a trustee by vote cast in person or by proxy at a meet-
ing called for that purpose. The trustees are required to call a meeting of
shareholders of the Trust for the purposes of voting upon the question of re-
moval of any trustee when requested in writing to do so by the shareholders of
record of not less than 10% of the Trust's outstanding shares.
Shareholders of the Fund are entitled to one vote for each full share held
and fractional votes for fractional shares held. Voting rights are not cumula-
tive and, as a result, the holders of more than 50% of the shares of the Trust
may elect all of its trustees. The shares of the Fund will be voted together,
except that only the shareholders of a particular class of the Fund may vote
on matters affecting only that class. Financial intermediaries holding shares
for their own accounts must undertake to vote the shares in the same propor-
tions as the vote of shares held for their customers. As of the date of this
Prospectus, Mitchell Hutchins is the sole shareholder of the Fund and may be
deemed a controlling person of the Fund until additional investors purchase
Fund shares.
CERTIFICATES. To avoid additional operating expenses and for investor conve-
nience, share certificates are not issued. Ownership of shares of the Fund is
recorded on a share register by the Transfer Agent, and shareholders have the
same rights of ownership with respect to such shares as if certificates had
been issued.
REPORTS. Shareholders will receive audited annual and unaudited semiannual
financial statements of the Fund. All purchases and redemptions of Fund shares
are confirmed to shareholders at least quarterly.
CUSTODIAN AND TRANSFER AGENT. The Bank of New York, 48 Wall Street, New
York, New York 10286, is custodian of the Fund's assets. First Data Investor
Services Group, Inc., whose principal business address is 4400 Computer Drive,
Westborough, Massachusetts 01581-5159, is the Fund's transfer and dividend
disbursing agent.
12
<PAGE>
Mitchell Hutchins
LIR Select
Money
Fund
, 1998
S629
TABLE OF CONTENTS
<TABLE>
<S> <C>
Highlights.................................................................. 2
Investment Objective and Policies........................................... 4
Purchases................................................................... 7
Exchanges................................................................... 8
Redemptions................................................................. 8
Valuation of Shares......................................................... 9
Dividends and Taxes......................................................... 9
Management and Distribution Arrangements.................................... 10
Financial Intermediaries.................................................... 11
Performance Information..................................................... 11
General Information......................................................... 12
</TABLE>
- --------------------------------------------------------------------------------
Investors should rely only on the information contained or referred to in this
Prospectus. The Fund and its distributor have not authorized anyone to provide
investors with information that is different. This Prospectus is not an offer
to sell shares of the Fund in any jurisdiction where the Fund or its
distributor may not lawfully sell those shares.
PaineWebber
(C)1998 PaineWebber Incorporated
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
Mitchell Hutchins LIR Select Money Fund ("Fund") is a diversified series of
Mitchell Hutchins Institutional Series ("Trust"), an open-end investment company
organized as a Delaware business trust. The Fund seeks maximum current income
consistent with liquidity and the preservation of capital and invests in a
diversified portfolio of high quality, short-term, U.S. dollar-denominated money
market instruments. The Fund offers two separate classes of shares
Institutional shares and Financial Intermediary shares. The Fund is newly
organized and has no operating history.
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
asset management subsidiary of PaineWebber Incorporated ("PaineWebber"), serves
as the Fund's investment adviser and administrator. PaineWebber serves as
distributor of the Fund's shares.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Fund's current Prospectus, dated
_______________, 1998. A copy of the Prospectus may be obtained by contacting
any PaineWebber Investment Executive or correspondent firm or by calling 1-888-
LIR-FUND. Customers of banks and other financial intermediaries that purchase
the Fund's Financial Intermediary shares may obtain the Prospectus from their
financial intermediaries. This Statement of Additional Information is dated
__________, 1998.
INVESTMENT POLICIES AND RESTRICTIONS
The following supplements the information contained in the Prospectus
concerning the Fund's investment policies and limitations.
YIELDS AND RATINGS OF MONEY MARKET INVESTMENTS. The yields on the money
market instruments in which the Fund invests (such as U.S. government
securities, bank obligations, commercial paper and other short-term obligations)
are dependent on a variety of factors, including general money market
conditions, conditions in the particular market for the obligation, the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue. The ratings of nationally recognized
statistical rating organizations ("NRSROs") represent their opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices. Subsequent to its purchase by the Fund, an issue may cease to be rated
or its rating may be reduced.
The Fund may only purchase securities at are "First Tier Securities." To
qualify as a First Tier Security, a security must either be (1) rated in the
highest short-term rating category by at least two NRSROs, (2) rated in the
highest short-term rating category by a single NRSRO if only that NRSRO has
assigned the obligation a short-term rating, (3) issued by an issuer that has
received such a short-term rating with respect to a security that is comparable
in terms of priority and security, (4) subject to a guarantee rated in the
highest short-term rating category or issued by a guarantor that has received
the highest short-term rating for a comparable debt obligation or (5) unrated,
but determined by Mitchell Hutchins to be of comparable quality. If a security
in the Fund's portfolio ceases to be a First Tier Security or Mitchell Hutchins
becomes aware that a security has received a rating below the second highest
rating by any NRSRO, Mitchell Hutchins or the Trust's board of trustees
("board") will consider whether the Fund should continue to hold the obligation.
A First Tier Security rated in the highest short-term rating category by a
single NRSRO at the time of purchase that subsequently receives a rating below
the highest rating category from a different NRSRO may continue to be considered
a First Tier Security.
<PAGE>
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a Fund
purchases securities or other obligations and simultaneously commits to resell
them to the counterparty at an agreed-upon date or upon demand and at a price
reflecting a market rate of interest unrelated to the coupon rate or maturity of
the purchased securities or other obligations. The Fund maintains custody of
the underlying securities or obligations prior to their repurchase, either
through its regular custodian or through a special "tri-party" custodian or sub-
custodian that maintains separate accounts for both the Fund and its
counterparty. Thus, the obligation of the counterparty to pay the repurchase
price on the date agreed to or upon demand is, in effect, secured by such
securities or obligations. If their value becomes less than the repurchase
price, plus any agreed upon additional amount, the counterparty must provide
additional collateral so that at all times the collateral is at least equal to
the repurchase price plus any agreed upon additional amount. The difference
between the total amount to be received upon repurchase of the securities or
obligations and the price that was paid by the Fund upon acquisition is accrued
as interest and included in the Fund's net investment income.
ILLIQUID SECURITIES. The Fund may not invest more than 10% of its net assets
in illiquid securities. The term "illiquid securities" for this purpose means
securities or other assets that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued them and includes, among other things, repurchase agreements maturing in
more than seven days and restricted securities other than those Mitchell
Hutchins has determined to be liquid pursuant to guidelines established by the
board. To the extent the Fund invests in illiquid securities, it may not be
able readily to liquidate such investments and may have to sell other
investments if necessary to raise cash to meet its obligations.
Restricted securities are not registered under the Securities Act of 1933
("1933 Act") and may be sold only in privately negotiated or other exempted
transactions or after a 1933 Act registration statement has become effective.
Where registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the time
of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
However, not all restricted securities are illiquid. A large institutional
market has developed for many U.S. and foreign securities that are not
registered under the 1933 Act. Institutional investors generally will not seek
to sell these instruments to the general public, but instead will often depend
either on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers, providing both readily ascertainable values for restricted
securities and the ability to liquidate an investment in order to satisfy share
redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible securities held by the Fund,
however, could affect adversely the marketability of such portfolio securities,
and the Fund might be unable to dispose of such securities promptly or at
favorable prices.
The board has delegated the function of making day-to-day determinations of
liquidity to Mitchell Hutchins, pursuant to guidelines approved by the board.
Mitchell Hutchins takes into account a number of factors in reaching liquidity
decisions, including (1) the frequency of trades for the security, (2) the
number of dealers that make quotes for the security, (3) the number of dealers
that have undertaken to make a market in the security, (4) the number of other
potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities held by the Fund and reports periodically on such
decisions to the board.
2
<PAGE>
FLOATING RATE AND VARIABLE RATE DEMAND INSTRUMENTS. The Fund may invest in
floating rate and variable rate securities with demand features. A demand
feature gives the Fund the right to sell the securities back to a specified
party, usually a remarketing agent, on a specified date, at a price equal to
their amortized cost value plus accrued interest. A demand feature is often
backed by a letter of credit, guarantee or other liquidity support arrangement
from a bank or other financial institution that may be drawn upon demand, after
specified notice, for all or any part of the exercise price of the demand
feature. Generally, the Fund intends to exercise demand features (1) upon a
default under the terms of the underlying security, (2) to maintain the Fund's
portfolio in accordance with its investment objective and policies or applicable
legal or regulatory requirements or (3) as needed to provide liquidity to the
Fund in order to meet redemption requests. The ability of a bank or other
financial institution to fulfill its obligations under a letter of credit,
guarantee or other liquidity arrangement might be affected by possible financial
difficulties of its borrowers, adverse interest rate or economic conditions,
regulatory limitations or other factors. The interest rate on floating rate or
variable rate securities ordinarily is readjusted on the basis of the prime rate
of the bank that originated the financing or some other index or published rate,
such as the 90-day U.S. Treasury bill rate, or is otherwise reset to reflect
market rates of interest. Generally, these interest rate adjustments cause the
market value of floating rate and variable rate securities to fluctuate less
than the market value of fixed rate obligations.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As stated in the Prospectus, the
Fund may purchase securities on a "when-issued" or "delayed delivery" basis. A
security purchased on a when-issued or delayed delivery basis is recorded as an
asset on the commitment date and is subject to changes in market value,
generally based upon changes in the level of interest rates. Thus, fluctuation
in the value of the security from the time of the commitment date will affect
the Fund's net asset value. When the Fund commits to purchase securities on a
when-issued or delayed delivery basis, its custodian segregates assets to cover
the amount of the commitment. See "Investment Policies and Restrictions--
Segregated Accounts."
SEGREGATED ACCOUNTS. When the Fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis, the Fund will
maintain with an approved custodian in a segregated account cash or liquid
securities, marked to market daily, in an amount at least equal to the Fund's
obligation or commitment under such transactions.
LENDING OF PORTFOLIO SECURITIES. The Fund is authorized to lend up to
33 1/3% of its total assets to broker-dealers or institutional investors that
Mitchell Hutchins deems qualified, but only when the borrower maintains
acceptable collateral with the Fund's custodian, marked to market daily, at
least equal to the market value of the securities loaned, plus accrued interest
and dividends. Acceptable collateral is limited to cash, U.S. government
securities and irrevocable letters of credit that meet certain guidelines
established by Mitchell Hutchins. The Fund may reinvest the cash collateral in
money market instruments or other short-term liquid investments. In determining
whether to lend securities to a particular broker-dealer or institutional
investor, Mitchell Hutchins will consider, and during the period of the loan
will monitor, all relevant facts and circumstances, including the
creditworthiness of the borrower. The Fund will retain authority to terminate
any of its loans at any time. The Fund may pay reasonable fees in connection
with a loan and may pay the borrower or placing broker a negotiated portion of
the interest earned on the reinvestment of cash held as collateral. The Fund
will receive amounts equivalent to any dividends, interest or other
distributions on the securities loaned. The Fund will regain record ownership
of loaned securities to exercise beneficial rights, such as voting and
subscription rights, when regaining such rights is considered to be in the
Fund's interest.
Pursuant to procedures approved by the board governing the Fund's securities
lending program, PaineWebber has been retained to serve as lending agent for the
Fund. The board also has authorized the payment of fees (including fees
calculated as a percentage of invested cash collateral) to PaineWebber for these
services. The board periodically reviews all portfolio securities loan
transactions for which PaineWebber acted as lending agent.
OTHER POLICIES. The Fund will not invest in the following instruments during
the coming year: options, futures, currency contracts, swap transactions and
short sales "against the box."
3
<PAGE>
FUNDAMENTAL INVESTMENT LIMITATIONS. The following fundamental investment
limitations cannot be changed for the Fund without the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or
more of the shares of the Fund present at a shareholders' meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy. If a percentage restriction is adhered to at the time of an investment
or transaction, later changes in percentage resulting from changing values of
portfolio securities or amount of total assets will not be considered a
violation of any of the following limitations.
The Fund will not:
(1) purchase securities of any one issuer if, as a result, more than 5% of
the Fund's total assets would be invested in securities of that issuer
or the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or guaranteed
by the U.S. government, its agencies and instrumentalities or to
securities issued by other investment companies.
The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not
be considered to have been issued by the same issuer by reason of the
securities having the same sponsor, and mortgage- and asset-backed
securities issued by a finance or other special purpose subsidiary that
are not guaranteed by the parent company will be considered to be
issued by a separate issuer from the parent company.
(2) purchase any security if, as a result of that purchase, 25% or more of
the Fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry, except
that this limitation does not apply to securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities or to
municipal securities or to certificates of deposit and bankers'
acceptances of domestic branches of U.S. banks.
The following interpretations apply to, but are not a part of, this
fundamental restriction: (a) domestic and foreign banking will be
considered to be different industries; and (b) asset-backed securities
will be grouped in industries based upon their underlying assets and
not treated as constituting a single, separate industry.
(3) issue senior securities or borrow money, except as permitted under the
Investment Company Act of 1940 ("1940 Act") and then not in excess of
33 1/3% of the Fund's total assets (including the amount of the
senior securities issued but reduced by any liabilities not
constituting senior securities) at the time of the issuance or
borrowing, except that the Fund may borrow up to an additional 5% of
its total assets (not including the amount borrowed) for temporary or
emergency purposes.
(4) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction,
the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and
investments in government obligations, commercial paper, certificates
of deposit, bankers' acceptances or similar instruments will not be
considered the making of a loan.
(5) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter
under the federal securities laws in connection with its disposition of
portfolio securities.
(6) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except
that the Fund may exercise rights under agreements relating to such
securities, including the right to enforce security
4
<PAGE>
interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly
manner.
(7) purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but the Fund may purchase, sell
or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or
derivative instruments.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following investment
restrictions may be changed by the board without shareholder approval.
The Fund will not:
(1) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may
make deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments.
(2) engage in short sales of securities or maintain a short position,
except that the Fund may (a) sell short "against the box" and (b)
maintain short positions in connection with its use of financial
options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.
(3) purchase securities of other investment companies, except to the extent
permitted by the 1940 Act and except that this limitation does not
apply to securities received or acquired as dividends, through offers
of exchange or as a result of reorganization, consolidation or merger.
(4) purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding.
(5) invest more than 10% of its net assets in illiquid securities.
5
<PAGE>
TRUSTEES AND OFFICERS; PRINCIPAL HOLDERS OF SECURITIES
The trustees and executive officers of the Trust, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
Position with Business Experience;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ ------------------- ------------------------------------------------------
<S> <C> <C>
Margo N. Alexander**; 51 Trustee and Mrs. Alexander is president, chief executive officer
President and a director of Mitchell Hutchins (since January
1995), and an executive vice president and a director
of PaineWebber (since March 1984). Mrs. Alexander is
president and a director or trustee of 31 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
Richard Q. Armstrong; 63 Trustee Mr. Armstrong is chairman and principal of RQA
78 West Brother Drive Enterprises (management consulting firm) (since April
Greenwich, CT 06830 1991 and principal occupation since March 1995). Mr.
Armstrong was chairman of the board, chief executive
officer and co-owner of Adirondack Beverages
(producer and distributor of soft drinks and
sparkling/still waters) (October 1993-March 1995). He
was a partner of The New England Consulting Group
(management consulting firm) (December 1992-September
1993). He was managing director of LVMH U.S.
Corporation (U.S. subsidiary of the French luxury
goods conglomerate, Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman of its wine and
spirits subsidiary, Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a director or trustee
of 30 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
E. Garrett Bewkes, Jr.**; 71 Trustee and Mr. Bewkes is a director of Paine Webber Group Inc.
Chairman of the ("PW Group") (holding company of PaineWebber and
Board of Trustees Mitchell Hutchins). Prior to December 1995, he was a
consultant to PW Group. Prior to 1988, he was
chairman of the board, president and chief executive
officer of American Bakeries Company. Mr. Bewkes is
also a director of Interstate Bakeries Corporation
and NaPro BioTherapeutics, Inc. Mr. Bewkes is a
director or trustee of 31 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Position with Business Experience;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ ------------------- ------------------------------------------------------
<S> <C> <C>
Richard R. Burt; 51 Trustee Mr. Burt is chairman of IEP Advisors, Inc.
1101 Connecticut Avenue, N.W. (international investments and consulting firm)
Washington, D.C. 20036 (since March 1994) and a partner of McKinsey &
Company (management consulting firm) (since 1991).
He is also a director of Archer-Daniels-Midland Co.
(agricultural commodities). Hollinger International
Co, (publishing), Homestake Mining Corp., Powerhouse
Technologies, Inc. and Wierton Steel Corp He was the
chief negotiator in the Strategic Arms Reduction
Talks with the former Soviet Union (1989-1991) and
the U.S. Ambassador to the Federal Republic of
Germany (1985-1989). Mr. Burt is a director or
trustee of 30 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
Mary C. Farrell**; 48 Trustee Ms. Farrell is a managing director, senior investment
strategist and member of the Investment Policy
Committee of PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a member of the
Financial Women's Association and Women's Economic
Roundtable and appears as a regular panelist on Wall
$treet Week with Louis Rukeyser. She also serves on
the Board of Overseers of New York University's Stern
School of Business. Ms. Farrell is a director or
trustee of 30 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
Meyer Feldberg; 56 Trustee Mr. Feldberg is Dean and Professor of Management of
Columbia University the Graduate School of Business, Columbia University.
101 Uris Hall Prior to 1989, he was president of the Illinois
New York, New York 10027 Institute of Technology. Dean Feldberg is also a
director of Primedia Inc., Federated Department
Stores Inc. and Revlon, Inc. Dean Feldberg is a
director or trustee of 30 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
George W. Gowen; 68 Trustee Mr. Gowen is a partner in the law firm of Dunnington,
666 Third Avenue Bartholow & Miller. Prior to May 1994, he was a
New York, New York 10017 partner in the law firm of Fryer, Ross & Gowen. Mr.
Gowen is also a director of Columbia Real Estate
Investments, Inc. Mr. Gowen is a director or trustee
of 30 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Position with Business Experience;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ ------------------- ------------------------------------------------------
<S> <C> <C>
Frederic V. Malek; 61 Trustee Mr. Malek is chairman of Thayer Capital Partners
1455 Pennsylvania Avenue, N.W. (merchant bank). From January 1992 to November 1992,
Suite 350 he was campaign manager of Bush-Quayle `92. From 1990
Washington, D.C. 20004 to 1992, he was vice chairman and, from 1989 to 1990,
he was president of Northwest Airlines Inc., NWA Inc.
(holding company of Northwest Airlines Inc.) and
Wings Holdings Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline catering
and contract feeding), where he most recently was an
executive vice president and president of Marriott
Hotels and Resorts. Mr. Malek is also a director of
American Management Systems, Inc. (management
consulting and computer-related services), Automatic
Data Processing, Inc., CB Commercial Group, Inc.
(real estate services), Choice Hotels International
(hotel and hotel franchising), FPL Group, Inc.
(electric services), Manor Care, Inc. (health care)
and Northwest Airlines Inc. Mr. Malek is a director
or trustee of 30 investment companies for which
Mitchell Hutchins or PaineWebber serves as investment
adviser.
Carl W. Schafer; 62 Trustee Mr. Schafer is president of the Atlantic Foundation
66 Witherspoon Street, #1100 (charitable foundation supporting mainly
Princeton, NJ 08542 oceanographic exploration and research). He also is
a director of Base Ten Systems, Inc. (software),
Roadway Express, Inc. (trucking), The Guardian Group
of Mutual Funds, the Harding, Loevner Funds, Evans
Systems, Inc. (a motor fuels, convenience store and
diversified company), Electronic Clearing House, Inc.
(financial transactions processing), Frontier Oil
Corporation and Nutraceutix, Inc. (biotechnology
company). Prior to January 1993, he was chairman of
the Investment Advisory Committee of the Howard
Hughes Medical Institute. Mr. Schafer is a director
or trustee of 30 investment companies for which
Mitchell Hutchins or PaineWebber serves as investment
adviser.
Anthony G. Balestrieri; 35 Vice President Mr. Balestrieri is a senior vice president and a
portfolio manager in the short-term strategies group
of Mitchell Hutchins. Prior to April 1994, he was a
fixed income portfolio manager at Bankers Trust. Mr.
Balestrieri is a vice president of one investment
company for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C>
Kris L. Dorr; 34 Vice President Ms. Dorr is a first vice president and a portfolio
manager in the short-term strategies group of
Mitchell Hutchins. Prior to 1994, she was a vice
president and a portfolio manager in the money market
mutual funds group of Kidder Peabody Asset
Management, Inc.. Ms. Dorr is a vice president of
one investment company for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
John J. Lee; 29 Vice President and Mr. Lee is a vice president and a manager of the
Assistant Treasurer mutual fund finance department of Mitchell Hutchins.
Prior to September 1997, he was an audit manager in
the financial services practice of Ernst & Young LLP.
Mr. Lee is a vice president and assistant treasurer
of 31 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
Michael H. Markowitz; 33 Vice President Mr. Markowitz is a first vice president and a
portfolio manager in the short-term strategies group
of Mitchell Hutchins. Prior to 1994, he was an
assistant treasurer and a portfolio manager in the
global investment management group at Bankers Trust.
Mr. Markowitz is a vice president of one investment
company for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
Dennis McCauley; 51 Vice President Mr. McCauley is a managing director and chief
investment officer--fixed income of Mitchell
Hutchins. Prior to December 1994, he was director of
fixed income investments of IBM Corporation. Mr.
McCauley is a vice president of 21 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Position with Business Experience;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ ------------------- ------------------------------------------------------
<S> <C> <C>
Ann E. Moran; 41 Vice President Ms. Moran is a vice president and a manager of the
and Assistant mutual fund finance department of Mitchell Hutchins.
Treasurer Ms. Moran is a vice president and assistant treasurer
of 31 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
Dianne E. O'Donnell; 46 Vice President Ms. O'Donnell is a senior vice president and deputy
and Secretary general counsel of Mitchell Hutchins. Ms. O'Donnell
is a vice president and secretary of 30 investment
companies and vice president and assistant secretary
of one investment company for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
Emil Polito; 37 Vice President Mr. Polito is a senior vice president and director of
operations and control for Mitchell Hutchins. From
March 1991 to September 1993 he was director of the
Mutual Funds Sales Support and Service Center for
Mitchell Hutchins and PaineWebber. Mr. Polito is
vice president of 31 investment companies for which
Mitchell Hutchins or PaineWebber services as
investment adviser.
Victoria E. Schonfeld; 47 Vice President Ms. Schonfeld is a managing director and general
counsel of Mitchell Hutchins. Prior to May 1994, she
was a partner in the law firm of Arnold & Porter.
Ms. Schonfeld is a vice president of 30 investment
companies and vice president and secretary of one
investment company for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Paul H. Schubert; 35 Vice President Mr. Schubert is a senior vice president and the
and Treasurer director of the mutual fund finance department of
Mitchell Hutchins. From August 1992 to August 1994,
he was a vice president of Black-Rock Financial
Management, L.P. Prior to August 1992, he was an
audit manager with Ernst & Young LLP. Mr. Schubert
is a vice president and treasurer of 31 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Position with Business Experience;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ ------------------- ------------------------------------------------------
<S> <C> <C>
Barney A. Taglialatela; 37 Vice President Mr. Taglialatela is a vice president and a manager of
and Assistant the mutual fund finance department of Mitchell
Treasurer Hutchins. Prior to February 1995, he was a manager of
the mutual fund finance division of Kidder Peabody
Asset Management, Inc. Mr. Taglialatela is a vice
president and assistant treasurer of 31 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
Keith A. Weller; 36 Vice President Mr. Weller is a first vice president and associate
and Assistant general counsel of Mitchell Hutchins. Prior to May
Secretary 1995, he was an attorney in private practice. Mr.
Weller is a vice president and assistant secretary of
30 investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
</TABLE>
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are "interested persons" of the
Trust as defined in the 1940 Act by virtue of their positions with PW Group,
PaineWebber and/or Mitchell Hutchins.
- -------------------
The Trust pays trustees who are not "interested persons" of the Trust $ 1,000
annually for each series and $150 for each board meeting and each meeting of a
board committee (other than committee meetings held on the same day as a board
meeting). The Trust has only one series and thus pays each such Trustee $1,000
annually, plus any additional amounts due for board or committee meetings. Each
chairman of the audit and contract review committee of individual funds within
the PaineWebber fund complex receives additional compensation aggregating
$15,000 annually from the relevant funds. All trustees are reimbursed for any
expenses incurred in attending meetings. Trustees and officers own no
outstanding shares of the Fund. Because PaineWebber and Mitchell Hutchins
perform substantially all of the services necessary for the operation of the
Trust, the Trust requires no employees. No officer, director or employee of
Mitchell Hutchins or PaineWebber presently receives any compensation from the
Trust for acting as a trustee or officer.
11
<PAGE>
The table below shows the estimated compensation to be paid to each trustee
during the current fiscal year and the compensation of those trustees from other
PaineWebber funds during the calendar year ended December 31, 1997.
COMPENSATION TABLE+
<TABLE>
<CAPTION>
Estimated Total Compensation
Aggregate FROM THE TRUST
Compensation AND THE
Name of Persons, Position FROM THE TRUST* Fund Complex**
- ------------------------- --------------- --------------
<S> <C> <C>
Richard Q. Armstrong, Trustee....................................... $1,750 $94,885
Richard R. Burt, Trustee............................................ $1,750 $ 97,085
Meyer Feldberg, Trustee............................................. $1,750 $117,853
George W. Gowen, Trustee............................................ $2,205 $101,567
Frederic V. Malek, Trustee.......................................... $1,750 $95,845
Carl W. Schafer, Trustee............................................ $1,750 $94,885
</TABLE>
+ Only independent trustees are compensated by the Trust and identified above;
trustees who are "interested persons," as defined in the 1940 Act, do not
receive compensation.
* Estimated for the initial fiscal year of the Trust ending April 30, 1999.
** Represents total compensation paid to each trustee during the calendar year
ended December 31, 1997; no fund within the fund complex has a bonus,
pension, profit sharing or retirement plan.
PRINCIPAL HOLDERS OF SECURITIES. As of July 27, 1998, Mitchell Hutchins held
all the outstanding shares of the Fund and thus may be deemed a controlling
person of the Fund until additional investors purchase shares.
INVESTMENT ADVISORY, ADMINISTRATION AND
DISTRIBUTION ARRANGEMENTS
Investment Advisory and Administration Arrangements. Mitchell Hutchins acts as
the Trust's investment adviser and administrator pursuant to a contract dated
_____________, 1998 ("Advisory Contract"). Under the Advisory Contract, the
Trust pays Mitchell Hutchins an annual fee, computed daily and paid monthly, at
an annual rate of 0.18% of the Fund's average daily net assets
Under the terms of the Advisory Contract, Mitchell Hutchins bears all expenses
incurred in the Fund's operation other than the investment advisory fee payable
under the Advisory Contract, the fees payable pursuant to the shareholder
service plan adopted by the Trust with respect to the Fund's Financial
Intermediary shares, fees and expenses (including counsel fees) of the trustees
of the Trust who are not "interested persons"of the Trust or Mitchell Hutchins,
as that term is defined in the 1940 Act ("Independent Trustees"), interest,
taxes and the cost (including brokerage commissions and other transaction costs,
if any) of securities purchased or sold by the Fund and any losses incurred in
connection therewith and extraordinary expenses (such as costs of litigation to
which the Trust or Fund is a party and of indemnifying officers and trustees of
the Trust).
Although Mitchell Hutchins is not obligated to pay the fees and expenses of
the Independent Trustees, the Advisory Contract requires that Mitchell Hutchins
reduce its management fee by an amount equal to those fees and expenses.
Expenses borne by Mitchell Hutchins include the following (or the Fund's share
of the following): (1) organizational expenses (if these expenses are amortized
over a period of more than one year, Mitchell Hutchins will bear in any one year
only that portion of the organizational expenses that would have been borne by
the Fund in that year), (2) filing fees and expenses relating to the
registration and qualification of the shares of the Fund under federal and state
securities laws and maintaining such registrations and qualifications, (3) fees
and salaries payable
12
<PAGE>
to the trustees (other than the Independent Trustees) and officers, (4) all
expenses incurred in connection with the services of the trustees (other than
the Independent Trustees), including travel expenses, (5) costs of any
liability, uncollectable items of deposit and other insurance or fidelity bonds,
(6) ordinary legal, accounting and auditing expenses, excluding legal fees of
special counsel for the Independent Trustees and, as noted above, excluding
extraordinary expenses, such as litigation or indemnification expenses, (7)
charges of custodians, transfer agents and other agents, (8) costs of preparing
share certificates (if any); (9) expenses of setting in type and printing
prospectuses and supplements thereto, reports and statements to shareholders and
proxy material for existing shareholders, (10) costs of mailing prospectuses and
supplements thereto, statements of additional information and supplements
thereto, reports and proxy materials to existing shareholders, (11) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations, (12) costs of mailing and tabulating
proxies and costs of meetings of shareholders, the board and any committees
thereof, (13) the cost of investment company literature and other publications
provided to the trustees and officers, (14) costs of mailing, stationery and
communications equipment, (15) expenses incident to any dividend, withdrawal or
redemption options, and (16) charges and expenses of any outside pricing service
used to value portfolio securities.
Under the Advisory Contract, Mitchell Hutchins will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of the Advisory Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Mitchell Hutchins in the performance of its duties or from reckless disregard of
its duties and obligations thereunder.
The Advisory Contract is terminable with respect to the Fund at any time
without penalty by vote of the board or by vote of the holders of a majority of
the outstanding voting securities of that Fund on 60 days' written notice to
Mitchell Hutchins, as the case may be. The Advisory Contract is also terminable
without penalty by Mitchell Hutchins on 60 days' written notice to the other
party. The Advisory Contract terminates automatically upon its assignment.
The following table shows the approximate net assets as of June 30, 1998,
sorted by category of investment objective, of the investment companies as to
which Mitchell Hutchins serves as adviser or sub-adviser. An investment company
may fall into more than one of the categories below.
<TABLE>
<CAPTION>
INVESTMENT CATEGORY NET ASSETS
------------------- ----------
( $ MIL)
<S> <C>
Domestic (excluding Money Market).................................... $ 7,856.5
Global............................................................... 3,875.8
Equity/Balanced...................................................... 6,513.6
Fixed Income (excluding Money Market)................................ 5,218.7
Taxable Fixed Income............................................... 3,641.0
Tax-Free Fixed Income.............................................. 1,577.7
Money Market Funds................................................... 28,628.1
</TABLE>
Mitchell Hutchins personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders of the PaineWebber mutual funds and other Mitchell Hutchins'
advisory accounts by all Mitchell Hutchins' directors, officers and employees,
establishes procedures for personal investing and restricts certain
transactions. For example, employee accounts generally must be maintained at
PaineWebber, personal trades in most securities require pre-clearance and short-
term trading and participation in initial public offerings generally are
prohibited. In addition, the code of ethics puts restrictions on the timing of
personal investing in relation to trades by PaineWebber mutual funds and other
Mitchell Hutchins advisory clients.
DISTRIBUTION ARRANGEMENTS. PaineWebber acts as distributor of shares of the
Trust under a distribution contract with the Trust, which requires PaineWebber
to use its best efforts, consistent with its other business, to sell shares of
the Trust. Shares of the Trust are offered on a continuous basis, except that
the Trust and PaineWebber reserve the right to reject any purchase order and to
suspend the offering of Fund shares for a period of time.
13
<PAGE>
PORTFOLIO TRANSACTIONS
The Advisory Contract authorizes Mitchell Hutchins (with the approval of the
board) to select brokers and dealers to execute purchases and sales of the
Fund's portfolio securities. The Advisory Contract directs Mitchell Hutchins to
use its best efforts to obtain the best available price and most favorable
execution with respect to all transactions for the Fund. To the extent that the
execution and price offered by more than one dealer are comparable, Mitchell
Hutchins may, in its discretion, effect transactions in portfolio securities
with dealers who provide the Fund with research, analysis, advice and similar
services. Although Mitchell Hutchins may receive certain research or execution
services in connection with these transactions, Mitchell Hutchins will not
purchase securities at a higher price or sell securities at a lower price than
would otherwise be paid had no services been provided by the executing dealer.
Moreover, Mitchell Hutchins will not enter into any explicit soft dollar
arrangements relating to principal transactions and will not receive in
principal transactions the types of services that could be purchased for hard
dollars. Research services furnished by the dealers with which the Fund effects
securities transactions may be used by Mitchell Hutchins in advising other funds
or accounts it advises and, conversely, research services furnished to Mitchell
Hutchins in connection with other funds or accounts that Mitchell Hutchins
advises may be used in advising the Fund. Information and research received
from dealers will be in addition to, and not in lieu of, the services required
to be performed by Mitchell Hutchins under the Advisory Contract.
Mitchell Hutchins may engage in agency transactions in over-the-counter equity
and debt securities in return for research and execution services. These
transactions are entered into only in compliance with procedures ensuring that
the transaction (including commissions) is at least as favorable as it would
have been if effected directly with a market-maker that did not provide research
or execution services. These procedures include a requirement that Mitchell
Hutchins obtain multiple quotes from dealers before executing the transactions
on an agency basis.
The Fund purchases portfolio securities from dealers and underwriters as well
as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.
Investment decisions for the Fund and for other investment accounts managed by
Mitchell Hutchins are made independently of each other in light of differing
considerations for the various accounts. However, the same investment decision
may occasionally be made for the Fund and one or more of such accounts. In such
cases, simultaneous transactions are inevitable. Purchases or sales are then
averaged as to price and allocated between the Fund and such other account(s) as
to amount according to a formula deemed equitable to the Fund and such
account(s). While in some cases this practice could have a detrimental effect
upon the price or value of the security as far as the Fund is concerned, or upon
its ability to complete its entire order, in other cases it is believed that
coordination and the ability to participate in volume transactions will be
beneficial to the Fund.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
The Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange ("NYSE") is closed or
trading on the NYSE is restricted as determined by the Securities and Exchange
Commission ("SEC"), (2) when an emergency exists, as defined by the SEC, which
makes it not reasonably practicable for the Fund to dispose of securities owned
by it or to determine fairly the market value of its assets or (3) as the SEC
may otherwise permit. The redemption price may be more or less than the
shareholder's cost, depending on the market value of the Fund's portfolio at the
time, although the Fund seeks to maintain a constant net asset value of $1.00
per share.
14
<PAGE>
If conditions exist that make cash payments undesirable, the Fund reserves the
right to honor any request for redemption by making payment in whole or in part
in securities chosen by the Fund and valued in the same way as they would be
valued for purposes of computing the Fund's net asset value. If payment is made
in securities, a shareholder may incur brokerage expenses in converting these
securities into cash.
VALUATION OF SHARES
The Fund's net asset value per share is determined by The Bank of New York
("BONY") as of 12:00 noon, Eastern time, 2:30 p.m., Eastern time, and again at
5:00 p.m., Eastern time, on each Business Day. As defined in the Prospectus,
"Business Day" means any day on which the New York offices of BONY, the Fund's
transfer agent, First Data Investor Services Group, Inc. ("Transfer Agent")
PaineWebber and PaineWebber's bank (also The Bank of New York) are all open for
business. One or more of these institutions will be closed on the observance of
the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
The Fund values its portfolio securities in accordance with the amortized cost
method of valuation under Rule 2a-7 ("Rule") under the 1940 Act. To use
amortized cost to value its portfolio securities, the Fund must adhere to
certain conditions under the Rule relating to its investments, some of which are
discussed in the Prospectus. Amortized cost is an approximation of market value
of an instrument, whereby the difference between its acquisition cost and value
at maturity is amortized on a straight-line basis over the remaining life of the
instrument. The effect of changes in the market value of a security as a result
of fluctuating interest rates is not taken into account, and thus the amortized
cost method of valuation may result in the value of a security being higher or
lower than its actual market value. If a large number of redemptions take place
at a time when interest rates have increased, the Fund might have to sell
portfolio securities prior to maturity and at a price that might not be
desirable.
The board has established procedures ("Procedures") for the purpose of
maintaining a constant net asset value of $1.00 per share, which include a
review of the extent of any deviation of net asset value per share, based on
available market quotations, from the $1.00 amortized cost per share. If that
deviation exceeds 1/2 of 1% for any Fund, the board will promptly consider
whether any action should be initiated to eliminate or reduce material dilution
or other unfair results to shareholders. Such action may include redeeming
shares in kind, selling portfolio securities prior to maturity, reducing or
withholding dividends and utilizing a net asset value per share as determined by
using available market quotations. The Fund will maintain a dollar-weighted
average portfolio maturity of 90 days or less and will not purchase any
instrument having, or deemed to have, a remaining maturity of more than 397
days, will limit portfolio investments, including repurchase agreements, to
those U.S. dollar-denominated instruments that are of high quality under the
Rule and that Mitchell Hutchins, acting pursuant to the Procedures, determines
present minimal credit risks, and will comply with certain reporting and
recordkeeping procedures. There is no assurance that constant net asset value
per share will be maintained. If amortized cost ceases to represent fair value
per share, the board will take appropriate action.
In determining the approximate market value of portfolio investments, the Fund
may employ outside organizations, which may use a matrix or formula method that
takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used.
TAXES
To qualify for treatment as a regulated investment company ("RIC") under the
Internal Revenue Code, the Fund must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (consisting
generally of net investment income and net short-term capital gain, if any) and
must meet several additional requirements. Among these requirements are the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of securities and certain other
income; (2) at the close of each quarter of the Fund's taxable year, at least
50% of the value of its total assets must be represented by cash and cash items,
U.S. government securities, securities of other RICs and other securities that
are limited, in respect of any one issuer, to
15
<PAGE>
an amount that does not exceed 5% of the value of the Fund's total assets; and
(3) at the close of each quarter of the Fund's taxable year, not more than 25%
of the value of its total assets may be invested in securities (other than U.S.
government securities and securities of other RICs) of any one issuer. If the
Fund failed to qualify for treatment as a RIC for any taxable year, it would be
taxed as an ordinary corporation on its taxable income for that year (even if
that income was distributed to its shareholders) and all distributions out of
its earnings and profits would be taxable to its shareholders as dividends (that
is, ordinary income).
CALCULATION OF YIELD
The Fund computes its yield and effective yield quotations using standardized
methods required by the SEC. The Fund from time to time advertises (1) its
current yield based on a recently ended seven-day period, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7), with the resulting yield figure
carried to at least the nearest hundredth of one percent, and (2) its effective
yield based on the same seven-day period by compounding the base period return
by adding 1, raising the sum to a power equal to (365/7), and subtracting 1 from
the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)/365/7/] - 1
Yield may fluctuate daily and does not provide a basis for determining future
yields. Because the yield of the Fund fluctuates, it cannot be compared with
yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
OTHER INFORMATION. The Fund's performance data quoted in advertising and
other promotional materials ("Performance Advertisements") represent past
performance and are not intended to predict or indicate future results. The
return on an investment in the Fund will fluctuate. In Performance
Advertisements, the Fund may compare its taxable yield with data published by
Lipper Analytical Services, Inc. for money funds ("Lipper"), CDA Investment
Technologies, Inc. ("CDA"), IBC Financial Data, Inc. ("IBC"), Wiesenberger
Investment Companies Service ("Wiesenberger") or Investment Company Data Inc.
("ICD"), or with the performance of recognized stock and other indexes,
including the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Morgan Stanley Capital International World Index, the
Lehman Brothers Treasury Bond Index, the Lehman Brothers Government/Corporate
Bond Index, the Salomon Brothers Government Bond Index and changes in the
Consumer Price Index as published by the U.S. Department of Commerce. The Fund
also may refer in such materials to mutual fund performance rankings and other
data, such as comparative asset, expense and fee levels, published by Lipper,
CDA, IBC, Wiesenberger or ICD. Performance Advertisements also may refer to
discussions of the Fund and comparative mutual fund data and ratings reported in
independent periodicals, including THE WALL STREET JOURNAL, MONEY MAGAZINE,
FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES,
THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS. Comparisons
in Performance Advertisements may be in graphic form.
The Fund may also compare its performance with the performances of bank
certificates of deposit ("CDs") as measured by the CDA Certificate of Deposit
Index and the Bank Rate Monitor National Index and the average of yields of CDs
of major banks published by Banxquotes(R) Money Markets. In comparing the
Fund's performance to CD performance, investors should keep in mind that bank
CDs are insured in whole or in part by an agency of the U.S. government and
offer fixed principal and fixed or variable rates of interest, and that bank CD
yields may vary depending on the financial institution offering the CD and
prevailing interest rates. Bank accounts are insured in whole or in part by an
agency of the U.S. government and may offer a fixed rate of return. Fund shares
are not
16
<PAGE>
insured or guaranteed by the U.S. government and returns thereon will fluctuate.
While the Fund seeks to maintain a stable net asset value of $1.00 per share,
there can be no assurance that it will be able to do so.
The Fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on the Fund investment are reinvested by being paid in
additional Fund shares, any future income of the Fund would increase the value,
not only of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of the Fund investment
would increase more quickly than if dividends had been paid in cash. The Fund
may also make available to shareholders a daily accrual factor or "mil rate"
representing dividends accrued to shareholder accounts on a given day or days.
Certain shareholders may find that this information facilitates accounting or
recordkeeping.
OTHER INFORMATION
The Trust is a Delaware business trust and has authority to issue an unlimited
number of shares of beneficial interest. The Trust may, without shareholder
approval, divide the authorized shares into an unlimited number of separate
series and divide the shares of any series into classes.
Although Delaware law statutorily limits the potential liabilities of a
Delaware business trust's shareholders to the same extent as it limits the
potential liabilities of a Delaware corporation, shareholders of the Fund could,
under certain conflicts of laws jurisprudence in various states, be held
personally liable for the obligations of the Trust or Fund. However, the Trust
Instrument of the Trust disclaims shareholder liability for acts or obligations
of the Trust or its series (the Fund). The Trust Instrument provides for
indemnification from the Fund's property for all losses and expenses of any Fund
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations, a possibility which Mitchell Hutchins believes is
remote and not material. Upon payment of any liability incurred by a
shareholder solely by reason of being or having been a shareholder of the Fund,
the shareholder paying such liability will be entitled to reimbursement from the
general assets of the Fund. The trustees intend to conduct the operations of
the Fund in such a way as to avoid, as far as possible, ultimate liability of
the shareholders for liabilities of the Fund.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036, serves as counsel to the Fund.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for the Fund.
FINANCIAL INTERMEDIARIES
The Trust has adopted a Shareholder Services Plan and Agreement ("Plan") with
respect to the Financial Intermediary shares of the Fund to assure that the
beneficial owners of the Financial Intermediary shares receive certain support
services. PaineWebber will implement the Plan by entering into a service
agreement with each financial intermediary that purchases Financial Intermediary
shares requiring it to provide support services to its customers who are the
beneficial owners of the Financial Intermediary shares. Under the Plan, the
Fund pays PaineWebber an annual fee at the annual rate of 0.25% of the average
daily net asset value of the Financial Intermediary shares held by financial
intermediaries on behalf of their customers. Under each service agreement,
PaineWebber pays an identical fee to the financial intermediary for providing
the support services to its customers specified in the service agreement. These
services may include: (i) aggregating and processing purchase and redemption
requests from customers and placing net purchase and redemption orders with
PaineWebber; (ii) providing customers with a service that invests the assets of
their accounts in Financial Intermediary shares; (iii) processing dividend
payments from the Trust on behalf of customers; (iv) providing information
periodically to customers showing their positions in Financial Intermediary
shares; (v) arranging for bank wires; (vi) responding to customer inquiries
relating to the services performed by the financial intermediary; (vii)
providing sub-accounting with respect to Financial Intermediary shares
beneficially owned by customers or the information necessary for sub-
17
<PAGE>
accounting; (viii) forwarding shareholder communications from the Trust (such as
proxies, shareholder reports and dividend, distribution and tax notices) to
customers, if required by law; and (ix) other similar services if requested by
the Trust.
The Plan requires that PaineWebber provide to the board at least annually a
written report of the amounts expended by PaineWebber under service agreements
with financial intermediaries and the purposes for which such expenditures were
made. Each service agreement requires the financial intermediary to cooperate
with PaineWebber in providing information to the board with respect to amounts
expended and services provided under the service agreement. The Plan may be
terminated at any time, without penalty, by vote of the Independent Trustees who
have no direct or indirect financial interest in the operation of the Plan
("Disinterested Trustees"). Any amendment to the Plan must be approved by the
board and any material amendment must be approved by the Disinterested Trustees.
18
<PAGE>
FINANCIAL STATEMENTS
MITCHELL HUTCHINS INSTITUTIONAL SERIES
MITCHELL HUTCHINS LIR SELECT MONEY FUND
Statement of Assets and Liabilities
July 22, 1998
<TABLE>
<CAPTION>
Assets:
- ------
<S> <C>
Cash....................................................... $100,000
Total assets............................................. 100,000
Liabilities
Total liabilities........................................ 0
Net Assets (beneficial interest, $0.001 par
value, issued and outstanding)............................. $100,000
INSTITUTIONAL SHARES
Net Assets.................................................... $100,000
Shares outstanding............................................ 100,000
Net asset value, offering price and redemption value per share $1.00
</TABLE>
ORGANIZATION
- ------------
Mitchell Hutchins LIR Select Money Fund ("Fund") is a diversified series of
Mitchell Hutchins Institutional Series ("Trust"), an open-end management
investment company organized as a Delaware business trust on April 29, 1998.
The Fund has had no operations other than the sale to Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), its investment adviser, a wholly owned
subsidiary of PaineWebber Incorporated ("PaineWebber"), of 100,000 shares of
beneficial interest of the Institutional class for the amount of $100,000 on
July 22, 1998. The Fund currently offers two classes of shares Institutional
shares and Financial Intermediary shares. Each class is sold without any
initial sales charges, and without any contingent deferred sales charge. Each
class represents assets of the Fund, and the classes are identical except for
differences in ongoing service fees. The trustees of the Trust have authority
to issue an unlimited number of shares of beneficial interest, par value $0.001
per share.
MANAGEMENT AGREEMENT
Mitchell Hutchins acts as the investment adviser and administrator to the Fund
pursuant to a contract ("Advisory Contract") with the Trust dated ________,
1998. Under the Advisory Contract, the Fund pays Mitchell Hutchins a fee,
computed daily and paid monthly, at an annual rate of 0.18% of average daily net
assets. Under the Advisory Contract, Mitchell Hutchins has agreed to pay all
Fund expenses other than investment and advisory fees, the fees payable pursuant
to the shareholder service plan adopted by the Trust with respect to the Fund's
Financial Intermediary shares, interest, taxes and the cost (including brokerage
commissions and other transaction costs, if any) of securities purchased or sold
by the Fund and any losses incurred in connection therewith and
extraordinary
19
<PAGE>
expenses (such as costs of litigation to which the Trust or Fund is a party and
of indemnifying officers and trustees of the Trust). Mitchell Hutchins has also
agreed to pay all costs in connection with the organization and initial
registration of the Fund under the Advisory Contract. Although Mitchell
Hutchins is not obligated to pay the fees and expenses (including counsel fees)
of the trustees of the Trust who are not "interested persons" of the Fund or
Mitchell Hutchins, as that term is defined in the 1940 Act, the Advisory
Contract requires that Mitchell Hutchins reduce its management fee by an amount
equal to those fees and expenses.
SHAREHOLDER SERVICE PLAN AND AGREEMENT
Under a Shareholder Service Plan and Agreement with respect to its
Financial Intermediary shares, the Fund pays PaineWebber monthly fees at the
annual rate of 0.25% of the average daily net assets of the Financial
Intermediary shares held by financial intermediaries on behalf of their
customers. Under Service Agreements with those financial intermediaries,
PaineWebber pays an identical fee to the financial intermediaries for certain
support services that they provide for the beneficial owners of the Financial
Intermediary shares.
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Trustees
Mitchell Hutchins LIR Select Money Fund
We have audited the accompanying statement of assets and liabilities of the
Mitchell Hutchins LIR Select Money Fund as of July 22, 1998. This statement of
assets and liabilities is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit.
We conducted our audit in accordance with generally acceptable auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether this statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principals used
and significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Mitchell
Hutchins LIR Select Money Fund at July 22, 1998, in conformity with generally
accepted accounting principals.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
July 24, 1998
21
<PAGE>
<TABLE>
<CAPTION>
Mitchell Hutchins
LIR SELECT
MONEY
TABLE OF CONTENTS FUND
<S> <C>
Investment Policies and Restrictions.................... 1
Trustee and Officers; Principal Holders of Securities... 6
Investment Advisory, Administration and
Advisory Arrangements................................... 12
Portfolio Transactions.................................. 14
Additional Information Regarding Redemptions............ 14
Valuation of Shares..................................... 15
Taxes................................................... 15
Calculation of Yield.................................... 16
Other Information....................................... 17
Financial Statements.................................... 19
</TABLE>
Investors should rely only on the information contained or
referred to in the Prospectus and this Statement of Additional
Information. The Fund and its distributor have not authorized
anyone to provide investors with information that is different.
The Prospectus and this Statement of Additional Information are
not an offer to sell shares of the Fund in any jurisdiction where
the Fund or its distributor may not lawfully sell those shares.
PAINEWEBBER
(C) 1998 PaineWebber Incorporated
22
<PAGE>
PART C. OTHER INFORMATION
--------------------------
<TABLE>
<CAPTION>
Item 23. Exhibits
--------
<S> <C>
(1) Trust Instrument (filed herewith)
(2) By-Laws (filed herewith
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 1/
-
(4) Form of Investment Advisory and Administration Contract (filed
herewith)
(5) Form of Distribution Contract (filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) Form of Custodian Agreement (filed herewith)
(8) (a) Form of Transfer Agency Agreement (filed herewith)
(b) Form of Shareholder Service Plan (filed herewith)
(c) Form of Shareholder Service Agreement (filed herewith)
(9) Opinion of Counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents:
Auditors consent (filed herewith)
(11) Omitted Financial Statements - none
(12) Letter of investment intent (filed herewith)
(13) Plan Pursuant to Rule 12b-1 - none
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 (filed herewith)
</TABLE>
- ----------------------
1/ Incorporated by reference from Articles IV, VI and X of Registrant's
- - Trust Instrument and from Articles VI and IX of Registrant's By-
Laws.
Item 24. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
As of July 27, 1998, PaineWebber Incorporated ("PaineWebber") was the
sole shareholder and thus a controlling person of the Registrant. PaineWebber
and Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") (the
Registrant's investment adviser and administrator) are wholly owned direct or
indirect subsidiaries of Paine Webber Group, Inc. PaineWebber, Mitchell Hutchins
and Paine Webber Group, Inc. are Delaware corporations.
Item 25. Indemnification
---------------
Section 2 of Article IX of the Trust Instrument, "Indemnification,"
provides that the appropriate series of the Registrant will indemnify the
trustees and officers of the Registrant to the fullest extent permitted by law
against claims and expenses asserted against or incurred by them by virtue of
being or having been a trustee or officer; provided that no such person shall be
indemnified where there has been an adjudication or other determination, as
described in
C-1
<PAGE>
Article IX, that such person is liable to the Registrant or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office or did not act in
good faith in the reasonable belief that his action was in the best interest of
the Registrant. Section 2 of Article IX also provides that the Registrant may
maintain insurance policies covering such rights of indemnification.
Additionally, "Limitation of Liability" in Section 1 of Article IX of the
Trust Instrument provides that the trustees or officers of the Registrant shall
not be personally liable to any person extending credit to, contracting with or
having a claim against the Registrant or a particular series; and that, provided
they have exercised reasonable care and have acted under the reasonable belief
that their actions are in the best interest of the Registrant, the trustees and
officers shall not be liable for neglect or wrongdoing by them or any officer,
agent, employee, investment adviser or independent contractor of the Registrant.
Section 9 of the Investment Advisory and Administration Contract with Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins") provides that Mitchell
Hutchins shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any series of the Registrant in connection with the matters
to which the Contract relates, except for a loss resulting from the willful
misfeasance, bad faith, or gross negligence of Mitchell Hutchins in the
performance of its duties or from its reckless disregard of its obligations and
duties under the Contract. Section 10 of the Contract provides that the
Trustees shall not be liable for any obligations of the Trust or any series
under the Contract and that Mitchell Hutchins shall look only to the assets and
property of the Registrant in settlement of such right or claim and not to the
assets and property of the Trustees.
Section 9 of the Distribution Contract provides that the Trust will indemnify
PaineWebber and its officers, directors and controlling persons against all
liabilities arising from any alleged untrue statement of material fact in the
Registration Statement or from any alleged omission to state in the Registration
Statement a material fact required to be stated in it or necessary to make the
statements in it, in light of the circumstances under which they were made, not
misleading, except insofar as liability arises from untrue statements or
omissions made in reliance upon and in conformity with information furnished by
PaineWebber to the Trust for use in the Registration Statement; and provided
that this indemnity agreement shall not protect any such persons against
liabilities arising by reason of their bad faith, gross negligence or willful
misfeasance; and shall not inure to the benefit of any such persons unless a
court of competent jurisdiction or controlling precedent determines that such
result is not against public policy as expressed in the Securities Act of 1933.
Section 9 of the Distribution Contract also provides that PaineWebber agrees to
indemnify, defend and hold the Trust, its officers and Trustees free and
harmless of any claims arising out of any alleged untrue statement or any
alleged omission of material fact contained in information furnished by
PaineWebber for use in the Registration Statement or arising out of an agreement
between PaineWebber and any retail dealer, or arising out of supplementary
literature or advertising used by PaineWebber in connection with the Contract.
Section 10 of the Distribution Contract contains provisions similar to Section
10 of the Investment Advisory and Administration Contract, with respect to
Mitchell Hutchins and PaineWebber, as appropriate.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be provided to trustees, officers and controlling persons
of the Registrant, pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Registrant by
such trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Mitchell Hutchins, a Delaware corporation, is a registered investment adviser
and is a wholly owned subsidiary of PaineWebber which is, in turn, a wholly
owned subsidiary of Paine Webber Group Inc. Mitchell
C-2
<PAGE>
Hutchins is primarily engaged in the investment advisory business. Information
as to the officers and directors of Mitchell Hutchins is included in its Form
ADV, as filed with the Securities and Exchange Commission (registration number
801-13219), and is incorporated herein by reference.
Item 27. Principal Underwriters
----------------------
a) Mitchell Hutchins serves as principal underwriter and/or investment
adviser for the following investment companies:
ALL AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
GLOBAL SMALL CAP FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICPAL INCOME FUND INC.
MANAGED HIGH YIELD FUND INC.
MANAGED HIGH YIELD PLUS FUND INC.
MITCHELL HUTCHINS PORTFOLIOS
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST INC.
b) PaineWebber is the Registrant's principal underwriter. The
directors and officers of PaineWebber, their principal business addresses, and
their positions and offices with PaineWebber are identified in its Form ADV, as
filed with the Securities and Exchange Commission (registration number 801-7163)
and such information is hereby incorporated herein by reference. The information
set forth below is furnished for those directors and officers of PaineWebber who
also serve as trustees or officers of the Trust. Unless otherwise indicated, the
principal business address of each person named is 1285 Avenue of the Americas,
New York, NY 10019.
<TABLE>
<CAPTION>
Positions and Offices
Name With Registrant Positions and Offices With Underwriter
- ---- --------------- --------------------------------------
<S> <C> <C>
Margo N. Alexander President and Trustee Executive Vice President and Director of
PaineWebber
Mary C. Farrell Trustee Managing Director, Senior Investment
Strategist and Member of the Investment
Policy Committee of PaineWebber
</TABLE>
c) None
C-3
<PAGE>
Item 28. Location of Accounts and Records
--------------------------------
The books and other documents required by paragraphs (b)(4), (c) and
(d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Registrant's investment adviser, Mitchell Hutchins, 1285
Avenue of the Americas, New York, New York 10019. All other accounts, books and
documents required by Rule 31a-1 are maintained in the physical possession of
Registrant's transfer agent and custodian.
Item 29. Management Services
-------------------
Not applicable.
Item 30. Undertakings
------------
None.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Pre-Effective Amendment
No. 1 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York, on the 28th day of July, 1998.
MITCHELL HUTCHINS INSTITUTIONAL SERIES
By: /s/ Dianne E. O'Donnell
-----------------------
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander President and Trustee July 28, 1998
- --------------------------------------------
Margo N. Alexander * (Chief Executive Officer)
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman July 28, 1998
- --------------------------------------------
E. Garrett Bewkes, Jr. * of the Board of Trustees
/s/ Richard Q. Armstrong Trustee July 28, 1998
- --------------------------------------------
Richard Q. Armstrong *
/s/ Richard R. Burt Trustee July 28, 1998
- --------------------------------------------
Richard R. Burt *
/s/ Mary C. Farrell Trustee July 28, 1998
- --------------------------------------------
Mary C. Farrell *
/s/ Meyer Feldberg Trustee July 28, 1998
- --------------------------------------------
Meyer Feldberg *
/s/ George W. Gowen Trustee July 28, 1998
- --------------------------------------------
George W. Gowen *
/s/ Frederic V. Malek Trustee July 28, 1998
- --------------------------------------------
Frederic V. Malek *
/s/ Carl W. Schafer Trustee July 28, 1998
- --------------------------------------------
Carl W. Schafer *
/s/ Paul H. Schubert Vice President and Treasurer (Chief July 28, 1998
- --------------------------------------------
Paul H. Schubert Financial and Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES (CONTINUED)
* Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated
May 13, 1998 and incorporated by reference from the Initial Registration
Statement of Mitchell Hutchins Institutional Series, SEC File 333-52965,
filed May 19, 1998.
<PAGE>
MITCHELL HUTCHINS INSTITUTIONAL SERIES
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
(1) Trust Instrument (filed herewith)
(2) By-Laws (filed herewith)
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 1/
-
(4) Form of Investment Advisory and Administration Contract (filed
herewith)
(5) Form of Distribution Contract (filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) Form of Custodian Agreement (filed herewith)
(8) (a) Form of Transfer Agency Agreement (filed herewith)
(b) Form of Shareholder Service Plan (filed herewith)
(c) Form of Shareholder Service Agreement (filed herewith)
(9) Opinion of Counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents:
Auditors consent (filed herewith)
(11) Omitted Financial Statements - none
(12) Letter of investment intent (filed herewith)
(13) Plan Pursuant to Rule 12b-1 - none
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 (filed herewith)
</TABLE>
- -----------------
1/ Incorporated by reference from Articles IV, VI and X of Registrant's Trust
- - Instrument and from Articles VI and IX of Registrant's By-Laws.
<PAGE>
Exhibit No.1
MITCHELL HUTCHINS INSTITUTIONAL SERIES
TRUST INSTRUMENT
April 29, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
- ---------
DEFINITIONS....................................................................1
- -----------
ARTICLE II
TRUSTEES.......................................................................2
- --------
Section 1. Management of the Trust......................................2
-----------------------
Section 2. Initial Trustees; Number and Election of Trustees............2
-------------------------------------------------
Section 3. Term of Office...............................................2
--------------
Section 4. Vacancies; Appointment of Trustees...........................3
----------------------------------
Section 5. Temporary Vacancy or Absence.................................3
----------------------------
Section 6. Chairman.....................................................3
--------
Section 7. Action by the Trustees.......................................3
----------------------
Section 8. Ownership of Trust Property..................................4
---------------------------
Section 9. Effect of Trustees Not Serving...............................4
------------------------------
Section 10. Trustees, etc. as Shareholders...............................4
------------------------------
ARTICLE III
- -----------
POWERS OF THE TRUSTEES.........................................................4
- ----------------------
Section 1. Powers.......................................................4
------
Section 2. Certain Transactions.........................................7
--------------------
ARTICLE IV
- ----------
SERIES; CLASSES; SHARES........................................................8
- -----------------------
Section 1. Establishment of Series or Class.............................8
--------------------------------
Section 2. Shares.......................................................8
------
Section 3. Investment in the Trust......................................9
-----------------------
Section 4. Assets and Liabilities of Series.............................9
--------------------------------
Section 5. Ownership and Transfer of Shares............................10
--------------------------------
Section 6. Status of Shares; Limitation of Shareholder Liability.......10
-----------------------------------------------------
ARTICLE V
- ---------
DISTRIBUTIONS AND REDEMPTIONS.................................................10
- -----------------------------
Section 1. Distributions...............................................10
-------------
Section 2. Redemptions.................................................11
-----------
Section 3. Determination of Net Asset Value............................11
--------------------------------
i
<PAGE>
Section 4. Suspension of Right of Redemption...........................12
---------------------------------
Section 5. Redemptions Necessary for Qualification as Regulated
----------------------------------------------------
Investment Company..........................................12
------------------
ARTICLE VI
- ----------
SHAREHOLDERS' VOTING POWERS AND MEETINGS......................................12
- ----------------------------------------
Section 1. Voting Power................................................12
------------
Section 2. Meetings of Shareholders....................................13
------------------------
Section 3. Quorum; Required Vote.......................................13
---------------------
ARTICLE VII
- -----------
CONTRACTS WITH SERVICE PROVIDERS..............................................14
- --------------------------------
Section 1. Investment Adviser..........................................14
------------------
Section 2. Principal Underwriter.......................................14
---------------------
Section 3. Transfer Agency, Shareholder Services, and Administration
---------------------------------------------------------
Agreements..................................................14
----------
Section 4. Custodian...................................................14
---------
Section 5. Parties to Contracts with Service Providers.................14
-------------------------------------------
Section 6. Requirements of the 1940 Act................................15
----------------------------
ARTICLE VIII
- ------------
EXPENSES OF THE TRUST AND SERIES..............................................15
- --------------------------------
ARTICLE IX
- ----------
LIMITATION OF LIABILITY AND INDEMNIFICATION...................................16
- -------------------------------------------
Section 1. Limitation of Liability.....................................16
-----------------------
Section 2. Indemnification.............................................16
---------------
Section 3. Indemnification of Shareholder..............................18
------------------------------
ARTICLE X
- ---------
MISCELLANEOUS.................................................................18
- -------------
Section 1. Trust Not a Partnership.....................................18
-----------------------
Section 2. Trustee Action; Expert Advice; No Bond or Surety............18
------------------------------------------------
Section 3. Record Dates................................................18
------------
Section 4. Termination of the Trust....................................19
------------------------
Section 5. Reorganization..............................................20
--------------
Section 6. Trust Instrument............................................20
----------------
Section 7. Applicable Law..............................................20
--------------
Section 8. Amendments..................................................21
----------
Section 9. Fiscal Year.................................................21
-----------
Section 10. Severability................................................21
------------
ii
<PAGE>
MITCHELL HUTCHINS INSTITUTIONAL SERIES
TRUST INSTRUMENT
This TRUST INSTRUMENT is made on April 29, 1998, by the Trustees, to establish
a business trust for the investment and reinvestment of funds contributed to the
Trust by investors. The Trustees declare that all money and property
contributed to the Trust shall be held and managed in trust pursuant to this
Trust Instrument. The name of the Trust created by this Trust Instrument is
Mitchell Hutchins Institutional Series.
ARTICLE I
---------
DEFINITIONS
-----------
Unless otherwise provided or required by the context:
(a) "By-laws" means the By-laws of the Trust adopted by the Trustees, as
amended from time to time;
(b) "Class" means a class of Shares in a Series established pursuant to
Article IV;
(c) "Commission," "Interested Person," and "Principal Underwriter" have the
meanings provided in the 1940 Act;
(d) "Covered Person" means a person so defined in Article IX, Section 2;
(e) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time;
(f) "Majority Shareholder Vote" means "the vote of a majority of the
outstanding voting securities" as defined in the 1940 Act;
(g) "Net Asset Value" means the net asset value of each Series of the
Trust, determined as provided in Article V, Section 3;
(h) "Registered Investment Company" means a company registered as a
management investment company under the 1940 Act.
(i) "Outstanding Shares" means Shares shown on the books of the Trust or
its transfer agent as then issued and outstanding, but does not include Shares
which have been repurchased or redeemed by the Trust;
(j) "Series" means a series of Shares established pursuant to Article IV;
(k) "Shareholder" means a record owner of Outstanding Shares;
<PAGE>
(l) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each Series or Class is divided from time
to time (including whole Shares and fractions of Shares);
(m) "Trust" means Mitchell Hutchins Institutional Series established
hereby, and reference to the Trust, when applicable to one or more Series,
refers to that Series;
(n) "Trustees" means the persons who have signed this Trust Instrument, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly qualified and serving as
Trustees in accordance with Article II, in all cases in their capacities as
Trustees hereunder;
(o) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the Trust or any Series or the
Trustees on behalf of the Trust or any Series; and
(p) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
TRUSTEES
--------
Section 1. Management of the Trust. The business and affairs of the
-----------------------
Trust shall be managed by or under the direction of the Trustees, and they shall
have all powers necessary or desirable to carry out that responsibility. No
Shareholder shall have any right to conduct any Trust business solely by reason
of being a Shareholder. The Trustees may execute all instruments and take all
action they deem necessary or desirable to promote the interests of the Trust.
Any determination made by the Trustees in good faith as to what is in the
interests of the Trust shall be conclusive.
Section 2. Initial Trustees; Number and Election of Trustees. The
-------------------------------------------------
initial Trustees shall be the persons initially signing this Trust Instrument.
The number of Trustees (other than the initial Trustees) shall be fixed from
time to time by a majority of the Trustees; provided, that there shall be at
least two (2) Trustees. The Shareholders shall elect the Trustees (other than
the initial Trustees) on such dates as the Trustees may fix from time to time.
Section 3. Term of Office. Each Trustee shall hold office for life or
--------------
until his or her successor is elected or the Trust terminates; except that (a)
any Trustee may resign by delivering to the other Trustees or to any Trust
officer a written resignation effective upon such delivery or a later date
specified therein; (b) any Trustee may be removed with or without cause at any
time by a written instrument signed by at least two-thirds of the other
Trustees, specifying the effective date of removal; (c) any Trustee who requests
to be retired, or who has become physically or mentally incapacitated or is
otherwise unable to serve, may be retired by a written instrument signed by a
majority of the other Trustees, specifying the effective date of retirement; and
(d) any Trustee may be removed at any meeting of the Shareholders by a vote of
at least two-thirds of the Outstanding Shares.
2
<PAGE>
Section 4. Vacancies; Appointment of Trustees. Whenever a vacancy shall
----------------------------------
exist in the Board of Trustees, regardless of the reason for such vacancy, the
remaining Trustees shall appoint any person as they determine in their sole
discretion to fill that vacancy, consistent with the limitations under the 1940
Act. Such appointment shall be made by a written instrument signed by a
majority of the Trustees or by a resolution of the Trustees, duly adopted and
recorded in the records of the Trust, specifying the effective date of the
appointment. The Trustees may appoint a new Trustee as provided above in
anticipation of a vacancy expected to occur because of the retirement,
resignation, or removal of a Trustee, or an increase in number of Trustees,
provided that such appointment shall become effective only at or after the
expected vacancy occurs. As soon as any such Trustee has accepted his or her
appointment in writing, the trust estate shall vest in the new Trustee, together
with the continuing Trustees, without any further act or conveyance, and he or
she shall be deemed a Trustee hereunder.
Section 5. Temporary Vacancy or Absence. Whenever a vacancy in the
----------------------------
Board of Trustees shall occur, until such vacancy is filled, or while any
Trustee is absent from his or her domicile (unless that Trustee has made
arrangements to be informed about, and to participate in, the affairs of the
Trust during such absence), or is physically or mentally incapacitated, the
remaining Trustees shall have all the powers hereunder and their certificate as
to such vacancy, absence, or incapacity shall be conclusive. Any Trustee may,
by power of attorney, delegate his or her powers as Trustee for a period not
exceeding six (6) months at any one time to any other Trustee or Trustees to the
extent permitted by the 1940 Act.
Section 6. Chairman. The Trustees shall appoint one of their number to
--------
be Chairman of the Board of Trustees. The Chairman shall preside at all
meetings of the Trustees, shall be responsible for the execution of policies
established by the Trustees and the administration of the Trust, and may be the
chief executive, financial and/or accounting officer of the Trust.
Section 7. Action by the Trustees. The Trustees shall act by majority
----------------------
vote at a meeting duly called (including a meeting by telephonic or other
electronic means, unless the 1940 Act requires that a particular action be taken
only at a meeting of Trustees in person) at which a quorum is present or by
written consent of a majority of Trustees (or such greater number as may be
required by applicable law) without a meeting. A majority of the Trustees shall
constitute a quorum at any meeting. Meetings of the Trustees may be called
orally or in writing by the Chairman of the Board of Trustees or by any two
other Trustees. Notice of the time, date and place of all Trustees meetings
shall be given to each Trustee by telephone, facsimile or other electronic
mechanism sent to his or her home or business address at least twenty-four hours
in advance of the meeting or by written notice mailed to his or her home or
business address at least seventy-two hours in advance of the meeting. Notice
need not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who signs a waiver of notice either before or after the
meeting. Subject to the requirements of the 1940 Act, the Trustees by majority
vote may delegate to any Trustee or Trustees authority to approve particular
matters or take particular actions on behalf of the Trust. Any written consent
or waiver may be provided and delivered to the Trust by facsimile or other
similar electronic mechanism.
3
<PAGE>
Section 8. Ownership of Trust Property. The Trust Property of the Trust
---------------------------
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. All of the Trust Property and legal title thereto
shall at all times be considered as vested in the Trustees on behalf of the
Trust, except that the Trustees may cause legal title to any Trust Property to
be held by or in the name of the Trust, or in the name of any person as nominee.
No Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or of any Series or any right of partition or possession
thereof, but each Shareholder shall have, as provided in Article IV, a
proportionate undivided beneficial interest in the Trust or Series represented
by Shares.
Section 9. Effect of Trustees Not Serving. The death, resignation,
------------------------------
retirement, removal, incapacity, or inability or refusal to serve of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Trust Instrument.
Section 10. Trustees, etc. as Shareholders. Subject to any restrictions
------------------------------
in the By-laws, any Trustee, officer, agent or independent contractor of the
Trust may acquire, own and dispose of Shares to the same extent as any other
Shareholder; the Trustees may issue and sell Shares to and buy Shares from any
such person or any firm or company in which such person is interested, subject
only to any general limitations herein.
ARTICLE III
-----------
POWERS OF THE TRUSTEES
----------------------
Section 1. Powers. The Trustees shall have exclusive and absolute
------
control over the Trust Property and over the business of the Trust to the same
extent as if they were the sole owners of the Trust Property and business in
their own right, but with such powers of delegation as may be permitted in this
Trust Instrument. The Trustees in all instances shall act as principals, free
of the control of the Shareholders. The Trustees shall have full power and
authority to take or refrain from taking any action and to execute any contracts
and instruments that they may consider necessary or desirable in the management
of the Trust. The Trustees shall not in any way be bound or limited by current
or future laws or customs applicable to trust investments, but shall have full
power and authority to make any investments which they, in their sole
discretion, deem proper to accomplish the purposes of the Trust. The Trustees
may exercise all of their powers without recourse to any court or other
authority. Subject to any applicable limitation herein or in the By-laws,
operating documents or resolutions of the Trust, the Trustees shall have power
and authority, without limitation:
(a) To operate as and carry on the business of a Registered Investment
Company and to exercise all the powers necessary and proper to conduct such a
business
(b) To subscribe for, invest in, reinvest in, purchase, or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, or
otherwise deal in or dispose of any form of property, including cash (U.S.
currency), foreign currencies and related instruments, and securities (including
common and preferred stocks, warrants, bonds, debentures, time notes, and all
other evidences of indebtedness, negotiable or non-negotiable instruments,
obligations, certificates of deposit or
4
<PAGE>
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, convertible securities, forward contracts, options, and futures
contracts) issued, guaranteed, or sponsored by any state, territory, or
possession of the United States or the District of Columbia or their political
subdivisions, agencies, or instrumentalities, or by the U.S. government, any
foreign government, or any agency, instrumentality, or political subdivision
thereof, or by any international instrumentality, or by any bank, savings
institution, corporation, or other business entity organized under the laws of
the United States (including a Registered Investment Company or any series
thereof, subject to the provisions of the 1940 Act) or under foreign laws,
without regard to whether any such securities mature before or after the
possible termination of the Trust; to exercise any and all rights, powers, and
privileges of ownership or interest in respect of any and all such investments
of every kind and description; and to hold cash or other property uninvested,
without in any event being bound or limited by any current or future law or
custom concerning investments by trustees;
(c) To adopt By-laws not inconsistent with this Trust Instrument providing
for the conduct of the business of the Trust and to amend and repeal them to the
extent such right is not reserved to the Shareholders;
(d) To elect and remove such officers and appoint and terminate such agents
as they deem appropriate;
(e) To employ as custodian of any assets of the Trust, subject to any
provisions herein or in the By-laws, one or more banks, trust companies or
companies that are members of a national securities exchange, or other entities
permitted by the Commission to serve as such;
(f) To retain one or more transfer agents and Shareholder servicing agents,
or both;
(g) To provide for the distribution of Shares either through a Principal
Underwriter as provided herein or by the Trust itself, or both, or pursuant to a
distribution plan of any kind;
(h) To set record dates in the manner provided for herein or in the By-
laws;
(i) To delegate such authority as they consider desirable to any officers
of the Trust and to any agent, independent contractor, manager, investment
adviser, custodian or underwriter;
(j) To sell, exchange or otherwise dispose of any or all of the assets of
the Trust, subject to Article X, Section 4;
(k) To vote or give assent, or exercise any rights of ownership, with
respect to other securities or property; and to execute and deliver powers of
attorney delegating such power to other persons;
(l) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities or other property;
(m) To hold any security or other property (i) in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form, or
(ii) either in the Trust's or Trustees'
5
<PAGE>
own name or in the name of a custodian or a nominee or nominees, subject to
safeguards according to the usual practice of business trusts or investment
companies;
(n) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article IV;
(o) To incur and pay all expenses that in the Trustees' opinion are
necessary or incidental to carry out any of the purposes of this Trust
Instrument; to pay reasonable compensation to themselves as Trustees from the
Trust Property or the assets belonging to any appropriate Series or Class; to
pay themselves such compensation for special services, including legal and
brokerage services, and such reimbursement for expenses reasonably incurred by
themselves on behalf of the Trust or any Series or Class, as they in good faith
may deem reasonable; and to fix the compensation of all officers and employees
of the Trust;
(p) To the full extent permitted by Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series
and liabilities and expenses to a particular Class or to apportion the same
between or among two or more Series or Classes, provided that any liabilities or
expenses incurred by a particular Series or Class shall be payable solely out of
the assets belonging to that Series or Class as provided for in Article IV,
Section 4;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern whose securities are held
by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of
property by such corporation or concern; and to pay calls or subscriptions with
respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to Shareholders in
the manner hereinafter provided for;
(t) To borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging, or otherwise subjecting as security any assets of the
Trust, including the lending of portfolio securities, and to endorse, guarantee,
or undertake the performance of any obligation, contract, or engagement of any
other person, firm, association, or corporation;
(u) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum;
(v) To purchase, and pay for, out of Trust Property or the assets belonging
to any appropriate Series, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, and/or independent contractors of the
Trust (including the investment adviser of any Series) against all claims
arising by reason of holding any such position or by reason of any action taken
or
6
<PAGE>
omitted by any such person in such capacity, whether or not the Trust would have
the power to indemnify such person against such claim;
(w) To establish committees for such purposes, with such membership, and
with such responsibilities as the Trustees may consider proper, including a
committee consisting of fewer than all of the Trustees then in office, which may
act for and bind the Trustees and the Trust with respect to the institution,
prosecution, dismissal, settlement, review or investigation of any legal action,
suit or proceeding, pending or threatened;
(x) To interpret the investment policies, practices, or limitations of any
Series;
(y) To establish a registered office and have a registered agent in the
State of Delaware;
(z) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares; to establish terms and
conditions regarding the issuance, sale, repurchase, redemption, cancellation,
retirement, acquisition, holding, resale, reissuance, disposition of or dealing
in Shares; and, subject to Articles IV and V, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust or of the particular Series with respect to which such
Shares are issued; and
(aa) To carry on any other business in connection with or incidental to any
of the foregoing powers, to do everything necessary or desirable to accomplish
any purpose or to further any of the foregoing powers, and to take every other
action incidental to the foregoing business or purposes, objects or powers.
(bb) To select such name for the Trust, or any Series or Class, as the
Trustees deem proper in their discretion, without Shareholder approval, in which
event the Trust may hold its property and conduct its activities under such
other name
The clauses above shall be construed as objects and powers, and the
enumeration of specific powers shall not limit in any way the general powers of
the Trustees. Any action by one or more of the Trustees in their capacity as
such hereunder shall be deemed an action on behalf of the Trust or the
applicable Series, and not an action in an individual capacity. No one dealing
with the Trustees shall be under any obligation to make any inquiry concerning
the authority of the Trustees, or to see to the application of any payments made
or property transferred to the Trustees or upon their order. In construing this
Trust Instrument, the presumption shall be in favor of a grant of power to the
Trustees.
Section 2. Certain Transactions. Except as prohibited by applicable
--------------------
law, the Trustees may, on behalf of the Trust, buy any securities from or sell
any securities to, or lend any assets of the Trust to, any Trustee or officer of
the Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser, administrator,
distributor or transfer agent for the Trust or with any Interested Person of
such person. The Trust may employ any such person or entity in which such
person is an Interested Person, as broker, legal counsel, registrar, investment
adviser, administrator, distributor, transfer agent, dividend disbursing agent,
custodian or in any other capacity upon customary terms.
7
<PAGE>
ARTICLE IV
----------
SERIES; CLASSES; SHARES
-----------------------
Section 1. Establishment of Series or Class. The Trust shall consist of
--------------------------------
one or more Series. The Trustees hereby establish the Series listed in Schedule
A attached hereto and made a part hereof. Each additional Series shall be
established by the adoption of a resolution by the Trustees. The Trustees may
designate the relative rights and preferences of the Shares of each Series. The
Trustees may divide the Shares of any Series into Classes and hereby establish
the Classes listed in Schedule A. In such case each Class of a Series shall
represent a proportional beneficial interest in the assets of that Series and
have identical voting, dividend, liquidation and other rights and the same terms
and conditions, except that expenses allocated to a Class may be borne solely by
such Class as determined by the Trustees and a Series or Class may have
exclusive voting rights with respect to matters affecting only that Series or
Class. The Trust shall maintain separate and distinct records for each Series
and hold and account for the assets thereof separately from the other assets of
the Trust or of any other Series. A Series may issue any number of Shares and
need not issue Shares. Each Share of a Series shall represent an equal
beneficial interest in the net assets belonging to that Series, except to the
extent of expenses separately allocated to Classes thereof as permitted herein.
Each holder of Shares of a Series shall be entitled to receive his or her pro
rata share of all distributions made with respect to such Series, provided that,
if Classes of a Series are outstanding, each holder of Shares of a Class shall
be entitled to receive his or her pro rata share of all distributions made with
respect to such Class of the Series. Upon redemption of his or her Shares, such
Shareholder shall be paid solely out of the assets and property of such Series.
Section 2. Shares. The beneficial interest in the Trust shall be
------
divided into Shares of one or more separate and distinct Series or Classes
established by the Trustees. The number of Shares of the Trust and of each
Series and Class is unlimited and each Share shall have a par value of $0.001
per Share. All Shares issued hereunder shall be fully paid and nonassessable.
Shareholders shall have no preemptive or other right to subscribe to any
additional Shares or other securities issued by the Trust. The Trustees shall
have full power and authority, in their sole discretion and without obtaining
Shareholder approval: to issue original or additional Shares and fractional
Shares at such times and on such terms and conditions as they deem appropriate;
to establish and to change in any manner Shares of any Series or Classes with
such preferences, terms of conversion, voting powers, rights and privileges as
the Trustees may determine (but the Trustees may not change Outstanding Shares
in a manner materially adverse to the Shareholders of such Shares); to divide or
combine the Shares of any Series or Classes into a greater or lesser number; to
classify or reclassify any unissued Shares of any Series or Classes into one or
more Series or Classes of Shares; to abolish any one or more Series or Classes
of Shares; to issue Shares to acquire other assets (including assets subject to,
and in connection with, the assumption of liabilities) and businesses; and to
take such other action with respect to the Shares as the Trustees may deem
desirable.
Section 3. Investment in the Trust. The Trustees shall accept
-----------------------
investments in any Series from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which that Series
is authorized to invest, valued as provided in Article V, Section 3.
Investments in a Series shall be credited to each Shareholder's account in the
form of full and fractional Shares
8
<PAGE>
at the Net Asset Value per Share next determined after the investment is
received or accepted in good form as may be determined by the Trustees;
provided, however, that the Trustees may, in their sole discretion, (a) impose a
sales charge upon investments in any Series or Class, or (b) determine the Net
Asset Value per Share of the initial capital contribution. The Trustees shall
have the right to refuse to accept investments in any Series at any time without
any cause or reason therefor whatsoever.
Section 4. Assets and Liabilities of Series. All consideration received
--------------------------------
by the Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof (including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be), shall be held and accounted for separately from the other assets of the
Trust and every other Series and are referred to as "assets belonging to" that
Series. The assets belonging to a Series shall belong only to that Series for
all purposes, and to no other Series, subject only to the rights of creditors of
that Series. Any assets, income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as belonging to any
particular Series shall be allocated by the Trustees between and among one or
more Series as the Trustees deem fair and equitable. Each such allocation shall
be conclusive and binding upon the Shareholders of all Series for all purposes,
and such assets, earnings, income, profits or funds, or payments and proceeds
thereof shall be referred to as assets belonging to that Series. The assets
belonging to a Series shall be so recorded upon the books of the Trust, and
shall be held by the Trustees in trust for the benefit of the Shareholders of
that Series. The assets belonging to a Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series, except that liabilities and expenses allocated
solely to a particular Class shall be borne by that Class. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or Class shall be
allocated and charged by the Trustees between or among any one or more of the
Series or Classes in such manner as the Trustees deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.
Without limiting the foregoing, but subject to the right of the Trustees to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not against the assets
of the Trust generally or of any other Series. Notice of this contractual
limitation on liabilities among Series may, in the Trustees' discretion, be set
forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the Delaware Act, and upon giving of such
notice in the certificate of trust, the statutory provisions of Section 3804 of
the Delaware Act relating to limitations on liabilities among Series (and the
statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim against any
Series may look only to the assets of that Series to satisfy or enforce any
debt, with respect to that Series. No Shareholder or former
9
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Shareholder of any Series shall have a claim on or any right to any assets
allocated or belonging to any other Series.
Section 5. Ownership and Transfer of Shares. The Trust shall maintain a
--------------------------------
register containing the names and addresses of the Shareholders of each Series
and Class thereof, the number of Shares of each Series and Class held by such
Shareholders, and a record of all Share transfers. The register shall be
conclusive as to the identity of Shareholders of record and the number of Shares
held by them from time to time. The Trustees shall not be required to, but may
authorize the issuance of certificates representing Shares and adopt rules
governing their use. The Trustees may make rules governing the transfer of
Shares, whether or not represented by certificates.
Section 6. Status of Shares; Limitation of Shareholder Liability.
-----------------------------------------------------
Shares shall be deemed to be personal property giving Shareholders only the
rights provided in this Trust Instrument. Every Shareholder, by virtue of
having acquired a Share, shall be held expressly to have assented to and agreed
to be bound by the terms of this Trust Instrument and to have become a party
hereto. No Shareholder shall be personally liable for the debts, liabilities,
obligations and expenses incurred by, contracted for, or otherwise existing with
respect to, the Trust or any Series. Neither the Trust nor the Trustees shall
have any power to bind any Shareholder personally or to demand payment from any
Shareholder for anything, other than as agreed by the Shareholder. Shareholders
shall have the same limitation of personal liability as is extended to
shareholders of a private corporation for profit incorporated in the State of
Delaware. Every written obligation of the Trust or any Series may contain a
statement to the effect that such obligation may only be enforced against the
assets of the Trust or such Series; however, the omission of such statement
shall not operate to bind or create personal liability for any Shareholder or
Trustee.
ARTICLE V
---------
DISTRIBUTIONS AND REDEMPTIONS
-----------------------------
Section 1. Distributions. The Trustees may declare and pay dividends
-------------
and other distributions, including dividends on Shares of a particular Series
and other distributions from the assets belonging to that Series. The amount
and payment of dividends or distributions and their form, whether they are in
cash, Shares or other Trust Property, shall be determined by the Trustees.
Dividends and other distributions may be paid pursuant to a standing resolution
adopted once or more often as the Trustees determine. All dividends and other
distributions on Shares of a particular Series shall be distributed pro rata to
the Shareholders of that Series in proportion to the number of Shares of that
Series they held on the record date established for such payment, except that
such dividends and distributions shall appropriately reflect expenses allocated
to a particular Class of such Series. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
similar plans as the Trustees deem appropriate.
Section 2. Redemptions . Each Shareholder of a Series shall have the
-----------
right at such times as may be permitted by the Trustees to require the Series to
redeem all or any part of his or her Shares at a redemption price per Share
equal to the Net Asset Value per Share at such time as the Trustees shall have
prescribed by resolution less such charges as are determined by the Trustees and
10
<PAGE>
described in the Trust's Registration Statement for that Series under the
Securities Act of 1933 or any prospectus or statement of additional information
contained therein, as supplemented. In the absence of such resolution, the
redemption price per Share shall be the Net Asset Value next determined after
receipt by the Series of a request for redemption in proper form less such
charges as are determined by the Trustees and described in the Trust's
Registration Statement for that Series under the Securities Act of 1933 or any
prospectus or statement of additional information contained therein, as
supplemented.
The Trustees may specify conditions, prices, and places of redemption, and
may specify binding requirements for the proper form or forms of requests for
redemption. Payment of the redemption price may be wholly or partly in
securities or other assets at the value of such securities or assets used in
such determination of Net Asset Value, or may be in cash. Upon redemption,
Shares may be reissued from time to time. The Trustees may require Shareholders
to redeem Shares for any reason under terms set by the Trustees, including the
failure of a Shareholder to supply a personal identification number if required
to do so, or to have the minimum investment required, or to pay when due for the
purchase of Shares issued to him or her. To the extent permitted by law, the
Trustees may retain the proceeds of any redemption of Shares required by them
for payment of amounts due and owing by a Shareholder to the Trust or any Series
or Class. Notwithstanding the foregoing, the Trustees may postpone payment of
the redemption price and may suspend the right of the Shareholders to require
any Series or Class to redeem Shares during any period of time when and to the
extent permissible under the 1940 Act.
Section 3. Determination of Net Asset Value. The Trustees shall cause
--------------------------------
the Net Asset Value of Shares of each Series or Class to be determined from time
to time in a manner consistent with applicable laws and regulations. The
Trustees may delegate the power and duty to determine Net Asset Value per Share
to one or more Trustees or officers of the Trust or to an investment manager,
administrator or investment adviser, custodian, depository or other agent
appointed for such purpose. The Net Asset Value of Shares shall be determined
separately for each Series or Class at such times as may be prescribed by the
Trustees or, in the absence of action by the Trustees, as of the close of
regular trading on the New York Stock Exchange on each day for all or part of
which such Exchange is open for unrestricted trading.
Section 4. Suspension of Right of Redemption. If, as referred to in
---------------------------------
Section 2 of this Article, the Trustees postpone payment of the redemption price
and suspend the right of Shareholders to redeem their Shares, such suspension
shall take effect at the time the Trustees shall specify, but not later than the
close of business on the business day next following the declaration of
suspension. Thereafter Shareholders shall have no right of redemption or
payment until the Trustees declare the end of the suspension. If the right of
redemption is suspended, a Shareholder may either withdraw his request for
redemption or receive payment based on the Net Asset Value per Share next
determined after the suspension terminates.
Section 5. Redemptions Necessary for Qualification as Regulated Investment
---------------------------------------------------------------
Company. If the Trustees shall determine that direct or indirect ownership of
- -------
Shares of any Series has or may become concentrated in any person to an extent
which would disqualify any Series as a regulated investment company under the
Internal Revenue Code, then the Trustees shall have the power (but
11
<PAGE>
not the obligation) by lot or other means they deem equitable to (a) call for
redemption by any such person of a number, or principal amount, of Shares
sufficient to maintain or bring the direct or indirect ownership of Shares into
conformity with the requirements for such qualification and (b) refuse to
transfer or issue Shares to any person whose acquisition of Shares in question
would, in the Trustees' judgment, result in such disqualification. Any such
redemption shall be effected at the redemption price and in the manner provided
in this Article. Shareholders shall upon demand disclose to the Trustees in
writing such information concerning direct and indirect ownership of Shares as
the Trustees deem necessary to comply with the requirements of any taxing
authority.
ARTICLE VI
----------
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
Section 1. Voting Power. The Shareholders shall have power to vote only
------------
with respect to (a) the election of Trustees as provided in Section 2 of this
Article; (b) the removal of Trustees as provided in Article II, Section 3(d);
(c) any investment advisory or management contract as provided in Article VII,
Section 1; (d) any termination of the Trust as provided in Article X, Section 4;
(e) the amendment of this Trust Instrument to the extent and as provided in
Article X, Section 8; and (f) such additional matters relating to the Trust as
may be required or authorized by law, this Trust Instrument, or the By-laws or
any registration of the Trust with the Commission or any State, or as the
Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted by individual Series, except (a) when required by the 1940 Act, Shares
shall be voted in the aggregate and not by individual Series, and (b) when the
Trustees have determined that the matter affects only the interests of one or
more Classes, then the Shareholders of only such Class or Classes shall be
entitled to vote thereon. Each whole Share shall be entitled to one vote as to
any matter on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy
or in any manner provided for in the By-laws. The By-laws may provide that
proxies may be given by any electronic or telecommunications device or in any
other manner, but if a proposal by anyone other than the officers or Trustees is
submitted to a vote of the Shareholders of any Series or Class, or if there is a
proxy contest or proxy solicitation or proposal in opposition to any proposal by
the officers or Trustees, Shares may be voted only in person or by written
proxy. Until Shares of a Series or Class thereof are issued, as to that Series
or Class, the Trustees may exercise all rights of Shareholders and may take any
action required or permitted to be taken by Shareholders by law, this Trust
Instrument or the By-laws.
Section 2. Meetings of Shareholders. The first Shareholders' meeting of
------------------------
the Trust (but not the first shareholders' meeting of a Series that is not also
the first shareholders' meeting of the Trust) shall be held to elect Trustees at
such time and place as the Trustees designate. Annual meetings shall not be
required. Special meetings of the Shareholders of any Series or Class may be
called by the Trustees and shall be called by the Trustees upon the written
request of Shareholders owning at least ten percent of the Outstanding Shares of
such Series or Class, or at least ten percent of the Outstanding Shares of the
Trust entitled to vote. Special meetings of Shareholders shall be held, notice
of such meetings shall be delivered and waiver of notice shall occur according
to the
12
<PAGE>
provisions of the Trust's By-laws. Any action that may be taken at a meeting of
Shareholders may be taken without a meeting according to the procedures set
forth in the By-laws.
Section 3. Quorum; Required Vote. One-third of the Outstanding Shares of
---------------------
each Series or Class, or one-third of the Outstanding Shares of the Trust,
entitled to vote in person or by proxy shall be a quorum for the transaction of
business at a Shareholders' meeting with respect to such Series or Class, or
with respect to the entire Trust, respectively. Any lesser number shall be
sufficient for adjournments. Any adjourned session of a Shareholders' meeting
may be reconvened within a reasonable time without further notice. Except when a
Majority Shareholder Vote or other larger vote is required by law, this Trust
Instrument or the By-laws, a majority of the Outstanding Shares voted, in person
or by proxy, shall decide any matters to be voted upon with respect to the
entire Trust and a plurality of such Outstanding Shares voted shall elect a
Trustee; provided, that if this Trust Instrument or applicable law permits or
requires that Shares be voted on any matter by an individual Series or Class,
then a majority of the Outstanding Shares voted, in person or by proxy, of that
Series or Class (or, if required by law, regulation, Commission order, or no-
action letter, a Majority Shareholder Vote or other larger vote of that Series
or Class) voted, in person or by proxy, on the matter shall decide that matter
insofar as that Series or Class is concerned. Shareholders may act as to the
Trust or any Series or Class by the written consent of a majority (or such
greater amount as may be required by applicable law) of the Outstanding Shares
of the Trust or of such Series or Class, as the case may be.
ARTICLE VII
-----------
CONTRACTS WITH SERVICE PROVIDERS
--------------------------------
Section 1. Investment Adviser. The Trustees may enter into one or more
------------------
investment advisory contracts on behalf of the Trust or any Series, providing
for investment advisory services, statistical and research facilities and
services, and other facilities and services to be furnished to the Trust or
Series on terms and conditions acceptable to the Trustees. Any such contract
may provide for the investment adviser to effect purchases, sales or exchanges
of portfolio securities or other Trust Property on behalf of the Trustees or may
authorize any officer or agent of the Trust to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser. The Trustees
may authorize the investment adviser to employ one or more sub-advisers or
servicing agents.
Section 2. Principal Underwriter. The Trustees may enter into contracts
---------------------
on behalf of the Trust or any Series or Class, providing for the distribution
and sale of Shares by the other party, either directly or as sales agent, on
terms and conditions acceptable to the Trustees. The Trustees may adopt a plan
or plans of distribution with respect to Shares of any Series or Class and enter
into any related agreements, whereby the Series or Class finances directly or
indirectly any activity that is primarily intended to result in sales of its
Shares, subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1
thereunder, and other applicable rules and regulations.
Section 3. Transfer Agency, Shareholder Services, and Administration
---------------------------------------------------------
Agreements. The Trustees, on behalf of the Trust or any Series or Class, may
- ----------
enter into transfer agency agreements,
13
<PAGE>
Shareholder service agreements, and administration and management agreements
with any party or parties on terms and conditions acceptable to the Trustees.
Section 4. Custodian. The Trustees shall at all times place and maintain
---------
the securities and similar investments of the Trust and of each Series with a
custodian meeting the requirements of Section 17(f) of the 1940 Act and the
rules thereunder or as otherwise permitted by the Commission or its staff. The
Trustees, on behalf of the Trust or any Series, may enter into an agreement with
a custodian on terms and conditions acceptable to the Trustees, providing for
the custodian, among other things, (a) to hold the securities owned by the Trust
or any Series and deliver the same upon written order or oral order confirmed in
writing, (b) to receive and receipt for any moneys due to the Trust or any
Series and deposit the same in its own banking department or elsewhere, (c) to
disburse such funds upon orders or vouchers, and (d) to employ one or more sub-
custodians.
Section 5. Parties to Contracts with Service Providers. The Trustees
-------------------------------------------
may enter into any contract referred to in this Article with any entity,
although one or more of the Trustees or officers of the Trust may be an officer,
director, trustee, partner, shareholder, or member of such entity, and no such
contract shall be invalidated or rendered void or voidable because of such
relationship. No person having such a relationship shall be disqualified from
voting on or executing a contract in his or her capacity as Trustee and/or
Shareholder, or be liable merely by reason of such relationship for any loss or
expense to the Trust with respect to such a contract or accountable for any
profit realized directly or indirectly therefrom; provided, that the contract
was reasonable and fair and not inconsistent with this Trust Instrument or the
By-laws.
Section 6. Requirements of the 1940 Act. Any contract referred to in
----------------------------
Sections 1 and 2 of this Article shall be consistent with and subject to the
applicable requirements of Section 15 of the 1940 Act and the rules and orders
thereunder with respect to its continuance in effect, its termination, and the
method of authorization and approval of such contract or renewal. No amendment
to a contract referred to in Section 1 of this Article shall be effective unless
assented to in a manner consistent with the requirements of Section 15 of the
1940 Act, and the rules and orders thereunder, if applicable.
ARTICLE VIII
------------
EXPENSES OF THE TRUST AND SERIES
--------------------------------
Subject to Article IV, Section 4, the Trust or a particular Series shall
pay, or shall reimburse the Trustees from the Trust estate or the assets
belonging to the particular Series, for their expenses and disbursements,
including, but not limited to, interest charges, taxes, brokerage fees and
commissions; expenses of issue, repurchase and redemption of Shares; insurance
premiums; applicable fees, interest charges and expenses of third parties,
including the Trust's investment advisers, managers, administrators,
distributors, custodians, transfer agents and fund accountants; fees of pricing,
interest, dividend, credit and other reporting services; costs of membership in
trade associations; telecommunications expenses; funds transmission expenses;
auditing, legal and compliance expenses; costs of forming the Trust and its
Series and maintaining its existence; costs of preparing and printing the
prospectuses of the Trust and each Series, statements of additional
14
<PAGE>
information and reports for Shareholders and delivering them to Shareholders;
expenses of meetings of Shareholders and proxy solicitations therefor (unless
otherwise agreed to by another party); costs of maintaining books and accounts;
costs of reproduction, stationery and supplies; fees and expenses of the
Trustees; compensation of the Trust's officers and employees and costs of other
personnel performing services for the Trust or any Series; costs of Trustee
meetings; Commission registration fees and related expenses; state or foreign
securities laws registration fees and related expenses; and for such non-
recurring items as may arise, including litigation to which the Trust or a
Series (or a Trustee or officer of the Trust acting as such) is a party, and for
all losses and liabilities by them incurred in administering the Trust. The
Trustees shall have a lien on the assets belonging to the appropriate Series, or
in the case of an expense allocable to more than one Series, on the assets of
each such Series, prior to any rights or interests of the Shareholders thereto,
for the reimbursement to them of such expenses, disbursements, losses and
liabilities.
ARTICLE IX
----------
LIMITATION OF LIABILITY AND INDEMNIFICATION
-------------------------------------------
Section 1. Limitation of Liability. All persons contracting with or
-----------------------
having any claim against the Trust or a particular Series shall look only to the
assets of the Trust or such Series for payment under such contract or claim; and
neither the Trustees nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable therefor. Any
written instrument or obligation on behalf of the Trust or any Series may
contain a statement to the foregoing effect, but the absence of such statement
shall not operate to make any Trustee or officer of the Trust liable thereunder.
Provided they have exercised reasonable care and have acted under the reasonable
belief that their actions are in the best interest of the Trust, the Trustees
and officers of the Trust shall not be responsible or liable for any act or
omission or for neglect or wrongdoing of them or any officer, agent, employee,
investment adviser or independent contractor of the Trust, but nothing contained
in this Trust Instrument or in the Delaware Act shall protect any Trustee or
officer of the Trust against liability to the Trust or to Shareholders to which
he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Section 2. Indemnification. (a) Subject to the exceptions and limitations
---------------
contained in subsections (b) and (c) below:
(i) every person who is, or has been, a Trustee or an officer,
employee, investment manager and administrator, director, officer
or employee of an investment manager and administrator, investment
adviser or agent of the Trust ("Covered Person") shall be
indemnified by the Trust or the appropriate Series to the fullest
extent permitted by law against liability and against all expenses
reasonably incurred or paid by him or her in connection with any
claim, action, suit or proceeding in which he or she becomes
involved as a party or otherwise by virtue of his or her being or
having been a Covered Person and against amounts paid or incurred
by him or her in the settlement thereof; and
15
<PAGE>
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual
or threatened, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person
who is, or has been: an investment manager and administrator; director, officer
or employee of an investment manager and administrator; an investment adviser or
an agent of the Trust and:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office, or (B) not to have acted in good
faith in the reasonable belief that his or her action was in the
best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office; (A) by the
court or other body approving the settlement; (B) by the vote of at
least a majority of those Trustees who are neither Interested
Persons of the Trust nor are parties to the proceeding based upon a
review of readily available facts (as opposed to a full trial-type
inquiry); or (C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a
full trial-type inquiry).
(c) No indemnification shall be provided hereunder to a Covered Person
who is, or has been, a Trustee or an officer or employee of the Trust, and
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office, or (B) not to have acted in good
faith in the reasonable belief that his or her action was in the
best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office; (A) by the
court or other body approving the settlement; (B) by the vote of at
least a majority of those Trustees who are neither Interested
Persons of the Trust nor are parties to the proceeding based upon a
review of readily available facts (as opposed to a full trial-type
inquiry); or (C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a
full trial-type inquiry).
16
<PAGE>
(d) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, and shall inure to the benefit of the heirs, executors
and administrators of a Covered Person. Nothing contained herein shall affect
any rights to indemnification to which Trust personnel (other than Trustees and
officers) and other persons may be entitled to by contract or otherwise under
law.
(e) To the maximum extent permitted by applicable law, expenses in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in subsection (a) of this
Section may be paid by the Trust or applicable Series from time to time prior to
final disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him or her to the Trust or
applicable Series if it is ultimately determined that he or she is not entitled
to indemnification under this Section; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust nor parties to the proceeding, or independent legal counsel
in a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that there is reason
to believe that such Covered Person will not be disqualified from
indemnification under this Section.
(f) Any repeal or modification of this Article IX by the Shareholders
of the Trust, or adoption or modification of any other provision of the Trust
Instrument or By-laws inconsistent with this Article, shall be prospective only,
to the extent that such repeal or modification would, if applied
retrospectively, adversely affect any limitation on the liability of any Covered
Person or indemnification available to any Covered Person with respect to any
act or omission which occurred prior to such repeal, modification or adoption.
Section 3. Indemnification of Shareholder. If any Shareholder or former
------------------------------
Shareholder of any Series shall be held personally liable solely by reason of
his or her being or having been a Shareholder and not because of his or her acts
or omissions or for some other reason, the Shareholder or former Shareholder (or
his or her heirs, executors, administrators or other legal representatives or in
the case of any entity, its general successor) shall be entitled out of the
assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The
Trust, on behalf of the affected Series, shall, upon request by such
Shareholder, assume the defense of any claim made against such Shareholder for
any act or obligation of the Series and satisfy any judgment thereon from the
assets of the Series.
ARTICLE X
---------
MISCELLANEOUS
-------------
Section 1. Trust Not a Partnership. This Trust Instrument creates a
-----------------------
trust and not a partnership. No Trustee shall have any power to bind personally
either the Trust's officers or any Shareholder.
17
<PAGE>
Section 2. Trustee Action; Expert Advice; No Bond or Surety. The
------------------------------------------------
exercise by the Trustees of their powers and discretion hereunder in good faith
and with reasonable care under the circumstances then prevailing shall be
binding upon everyone interested. Subject to the provisions of Article IX, the
Trustees shall not be liable for errors of judgment or mistakes of fact or law.
The Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Trust Instrument, and subject to the provisions of
Article IX, shall not be liable for any act or omission in accordance with such
advice or for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is obtained.
Section 3. Record Dates. The Trustees may fix in advance a date up to
------------
ninety (90) days before the date of any Shareholders' meeting, or the date for
the payment of any dividends or other distributions, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of such dividend or other distribution, or to
receive any such allotment of rights, or to exercise such rights in respect of
any such change, conversion or exchange of Shares. Record dates for adjourned
meetings of Shareholders shall be set according to the Trust's By-laws.
Section 4. Termination of the Trust. (a) This Trust shall have
------------------------
perpetual existence. Subject to a Majority Shareholder Vote of the Trust or of
each Series to be affected, the Trustees may
(i) sell and convey all or substantially all of the assets of the
Trust or any affected Series to another Series or to another entity
which is a Registered Investment Company, or a series thereof, for
adequate consideration, which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust or any affected Series, and which may
include shares of or interests in such Series, entity, or series
thereof; or
(ii) at any time sell and convert into money all or substantially
all of the assets of the Trust or any affected Series.
Upon making reasonable provision for the payment of all known liabilities of the
Trust or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the Shareholders of the Trust or any affected
Series then outstanding; however, the payment to any particular Class of such
Series may be reduced by any fees, expenses or charges allocated to that Class.
Nothing in this Trust Instrument shall preclude the Trustees from distributing
such remaining proceeds or assets so that holders of the Shares of a particular
Class of the Trust or any affected Series receive as their ratable distribution
shares solely of an analogous class, as determined by the Trustees, of a
Registered Investment Company or series thereof.
(b) The Trustees may take any of the actions specified in subsection
(a) (i) and (ii) above without obtaining a Majority Shareholder Vote of the
Trust or any Series if a majority of the Trustees determines that the
continuation of the Trust or Series is not in the best interests of the Trust,
such Series, or their respective Shareholders as a result of factors or events
adversely
18
<PAGE>
affecting the ability of the Trust or such Series to conduct its business and
operations in an economically viable manner. Such factors and events may include
the inability of the Trust or a Series to maintain its assets at an appropriate
size, changes in laws or regulations governing the Trust or the Series or
affecting assets of the type in which the Trust or Series invests, or economic
developments or trends having a significant adverse impact on the business or
operations of the Trust or such Series.
(c) Upon completion of the distribution of the remaining proceeds or
assets pursuant to subsection (a), the Trust or affected Series shall terminate
and the Trustees and the Trust shall be discharged of any and all further
liabilities and duties hereunder with respect thereto and the right, title and
interest of all parties therein shall be canceled and discharged. Upon
termination of the Trust, following completion of winding up of its business,
the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
Section 5. Reorganization. Notwithstanding anything else herein, to
--------------
change the Trust's form of organization the Trustees may, without Shareholder
approval, (a) cause the Trust to merge or consolidate with or into one or more
entities, if the surviving or resulting entity is the Trust or another open-end
management investment company under the 1940 Act, or a series thereof, that will
succeed to or assume the Trust's registration under the 1940 Act, or (b) cause
the Trust to incorporate to the extent permitted by law. Any agreement of
merger or consolidation or certificate of merger may be signed by a majority of
Trustees and facsimile signatures conveyed by electronic or telecommunication
means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, an agreement of merger or consolidation approved by the Trustees
in accordance with this Section 5 may effect any amendment to the Trust
Instrument or effect the adoption of a new trust instrument of the Trust if it
is the surviving or resulting trust in the merger or consolidation.
Section 6. Trust Instrument. The original or a copy of this Trust
----------------
Instrument and of each amendment hereto or Trust Instrument supplemental shall
be kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by a Trustee or an
officer of the Trust as to the authenticity of the Trust Instrument or any such
amendments or supplements and as to any matters in connection with the Trust.
The masculine gender herein shall include the feminine and neuter genders.
Headings herein are for convenience only and shall not affect the construction
of this Trust Instrument. This Trust Instrument may be executed in any number of
counterparts, each of which shall be deemed an original.
Section 7. Applicable Law. This Trust Instrument and the Trust created
--------------
hereunder are governed by and shall be construed and administered according to
the Delaware Act and the applicable laws of the State of Delaware; provided,
however, that there shall not be applicable to the Trust, the Trustees or this
Trust Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware
Code, or (b) any provisions of the laws (statutory or common) of the State of
Delaware (other than the Delaware Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of trustee
accounts or schedules of trustee fees and charges,
19
<PAGE>
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
Delaware business trust, and, without limiting the provisions hereof, the Trust
may exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
Section 8. Amendments. The Trustees may, without any Shareholder vote,
----------
amend or otherwise supplement this Trust Instrument by making an amendment, a
Trust Instrument supplemental hereto or an amended and restated trust
instrument; provided, that Shareholders shall have the right to vote on any
amendment (a) which would affect the voting rights of Shareholders granted in
Article VI, Section 1, (b) to this Section 8, (c) required to be approved by
Shareholders by law or by the Trust's registration statement(s) filed with the
Commission, or (d) submitted to them by the Trustees in their discretion. Any
amendment submitted to Shareholders which the Trustees determine would affect
the Shareholders of any Series shall be authorized by vote of the Shareholders
of such Series and no vote shall be required of Shareholders of a Series not
affected. Notwithstanding anything else herein, any amendment to Article IX
which would have the effect of reducing the indemnification and other rights
provided thereby to Trustees, officers, employees, and agents of the Trust or to
Shareholders or former Shareholders, and any repeal or amendment of this
sentence shall each require the affirmative vote of the holders of two-thirds of
the Outstanding Shares of the Trust entitled to vote thereon.
Section 9. Fiscal Year. The fiscal year of the Trust shall end on a
-----------
specified date as set forth in the By-laws or in a resolution adopted by the
Trustees. The Trustees may change the fiscal year of the Trust or any Series
without Shareholder approval.
Section 10. Severability. The provisions of this Trust Instrument are
------------
severable. If the Trustees determine, with the advice of counsel, that any
provision hereof conflicts with the 1940 Act, the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision hereof shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach to such provision only in such jurisdiction and shall not affect such
provision in any other jurisdiction or any other provision of this Trust
Instrument.
20
<PAGE>
SCHEDULE A
Series of the Trust
- -------------------
Mitchell Hutchins LIR Select Money Fund
Classes of Shares of Each Series
- --------------------------------
The Board establishes an unlimited number of shares of beneficial interest as
Institutional shares and Financial Intermediary shares of Mitchell Hutchins LIR
Select Money Fund. The Institutional shares and the Financial Intermediary
shares represent interests in the assets of only that Series and have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of shares, except as provided in the Trust's Trust Instrument.
21
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have executed
this Trust Instrument as of the date first above written.
/s/ Victoria E. Schonfeld
-------------------------
Victoria E. Schonfeld, as
Trustee and not individually
Address: 1285 Avenue of the Americas
New York, New York 10019
STATE OF NEW YORK ) ss
CITY OF NEW YORK )
Before me this 29th day of April, 1998, personally appeared the above-named
Victoria E. Schonfeld, known to me to be the person who executed the foregoing
instrument and who acknowledged that she executed the same.
/s/ Keith A. Weller
-------------------
Notary Public
Keith A. Weller
Notary Public, State of New York
No. 02WE5026923
Qualified in New York County
My commission expires: Commission Expires April 25, 2000
---------------------------------
/s/ Dianne E. O'Donnell
-----------------------
Dianne E. O'Donnell, as
Trustee and not individually
Address: 1285 Avenue of the Americas
New York, New York 10019
STATE OF NEW YORK ) ss
CITY OF NEW YORK )
Before me this 29th day of April, 1998, personally appeared the above-named
Dianne E. O'Donnell, known to me to be the person who executed the foregoing
instrument and who acknowledged that she executed the same.
/s/ Keith A. Weller
-------------------
Notary Public
Keith A. Weller
Notary Public, State of New York
No. 02WE5026923
Qualified in New York County
My commission expires: Commission Expires April 25, 2000
---------------------------------
22
<PAGE>
Exhibit No. 2
BY-LAWS
OF
MITCHELL HUTCHINS INSTITUTIONAL SERIES
April 29, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I PRINCIPAL OFFICE AND SEAL............................................1
Section 1. Principal Office..............................................1
Section 2. Seal..........................................................1
ARTICLE II MEETINGS OF TRUSTEES................................................1
Section 1. Action by Trustees............................................1
Section 2. Compensation of Trustees......................................1
Section 3. Retirement of Trustees........................................1
ARTICLE III COMMITTEES.........................................................2
Section 1. Establishment.................................................2
Section 2. Proceedings; Quorum; Action...................................2
Section 3. Compensation of Committee Members.............................2
ARTICLE IV OFFICERS............................................................2
Section 1. General.......................................................2
Section 2. Election......................................................2
Section 3. Vacancies and Newly Created Offices...........................3
Section 4. Removal and Resignation.......................................3
Section 5. Chairman......................................................3
Section 6. President.....................................................3
Section 7. Vice President(s).............................................3
Section 8. Treasurer and Assistant Treasurer(s)..........................4
Section 9. Secretary and Assistant Secretaries...........................4
Section 10. Compensation of Officers......................................4
Section 11. Surety Bond...................................................4
ARTICLE V MEETINGS OF SHAREHOLDERS.............................................5
Section 1. No Annual Meetings............................................5
Section 2. Special Meetings..............................................5
Section 3. Notice of Meetings; Waiver....................................5
Section 4. Adjourned Meetings............................................5
Section 5. Validity of Proxies...........................................6
Section 6. Record Date...................................................6
Section 7. Action Without a Meeting......................................7
ARTICLE VI SHARES OF BENEFICIAL INTEREST.......................................7
Section 1. No Share Certificates.........................................7
Section 2. Transfer of Shares............................................7
i
<PAGE>
ARTICLE VII CUSTODY OF SECURITIES..............................................7
Section 1. Employment of a Custodian......................................7
Section 2. Termination of Custodian Agreement.............................7
Section 3. Other Arrangements.............................................7
ARTICLE VIII FISCAL YEAR AND ACCOUNTANT........................................8
Section 1. Fiscal Year....................................................8
Section 2. Accountant.....................................................8
ARTICLE IX AMENDMENTS..........................................................8
Section 1. General........................................................8
Section 2. By Shareholders Only...........................................8
ARTICLE X NET ASSET VALUE......................................................8
ARTICLE XI MISCELLANEOUS.......................................................9
Section 1. Inspection of Books............................................9
Section 2. Severability...................................................9
Section 3. Headings.......................................................9
ii
<PAGE>
BY-LAWS
OF
MITCHELL HUTCHINS INSTITUTIONAL SERIES
These By-laws of Mitchell Hutchins Institutional Series (the "Trust"), a
Delaware business trust, are subject to the Trust Instrument of the Trust dated
as of April 29, 1998, as from time to time amended, supplemented or restated
(the "Trust Instrument"). Capitalized terms used herein have the same meanings
as in the Trust Instrument.
ARTICLE I
---------
PRINCIPAL OFFICE AND SEAL
-------------------------
Section 1. Principal Office. The principal office of the Trust shall be
--------- -----------------
located in New York, New York, or such other location as the Trustees determine.
The Trust may establish and maintain other offices and places of business as the
Trustees determine.
Section 2. Seal. The Trustees may adopt a seal for the Trust in such form
---------- ----
and with such inscription as the Trustees determine. Any Trustee or officer of
the Trust shall have authority to affix the seal to any document.
ARTICLE II
----------
MEETINGS OF TRUSTEES
--------------------
Section 1. Action by Trustees. Trustees may take actions at meetings held
--------- ------------------
at such places and times as the Trustees may determine, or without meetings, all
as provided in Article II, Section 7, of the Trust Instrument.
Section 2. Compensation of Trustees. Each Trustee who is neither an
--------- ------------------------
employee of an investment adviser of the Trust or any Series nor an employee of
an entity affiliated with the investment adviser may receive such compensation
from the Trust for services as the Trustees may determine. Each Trustee may
receive such reimbursement for expenses as the Trustees may determine.
Section 3. Retirement of Trustees. Each Trustee who has attained the age
--------- ----------------------
of seventy-two (72) years as of December 31 of any year shall retire from
service as a Trustee on such date unless that retirement would cause the Trust
to be required to call a meeting of Shareholders to fill the resulting vacancy
on the Board of Trustees. Notwithstanding anything in this Section, a Trustee
may retire at any time as provided for in the Trust Instrument.
ARTICLE III
-----------
COMMITTEES
----------
Section 1. Establishment. The Trustees may designate one or more
--------- -------------
committees of the Trustees, which may include an Executive Committee, a
Nominating Committee, and an Audit Committee. The Trustees shall determine the
number of members of each committee and its
<PAGE>
powers and shall appoint its members and its chair. Each committee member shall
serve at the pleasure of the Trustees. The Trustees may abolish any committee at
any time. Each committee shall maintain records of its meetings and report its
actions to the Trustees. The Trustees may rescind any action of any committee,
but such rescission shall not have retroactive effect. The Trustees may delegate
to any committee any of its powers, subject to the limitations of applicable
law.
Section 2. Proceedings; Quorum; Action. Each committee may adopt such
--------- ---------------------------
rules governing its proceedings, quorum and manner of acting as it shall deem
proper and desirable. In the absence of such rules, a majority of any committee
shall constitute a quorum, and a committee shall act by the vote of a majority
of a quorum.
Section 3. Compensation of Committee Members. Each committee member who is
--------- ----------------------------------
not an "interested person" of the Trust, as defined in the 1940 Act
("Disinterested Trustees") may receive such compensation from the Trust for
services as the Trustees may determine. Each Trustee may receive such
reimbursement for expenses as the Trustees may determine.
ARTICLE IV
----------
OFFICERS
--------
Section 1. General. The officers of the Trust shall be a Chairman, a
--------- -------
President, one or more Vice Presidents, a Treasurer, and a Secretary, and may
include one or more Assistant Treasurers or Assistant Secretaries and such other
officers ("Other Officers") as the Trustees may determine.
Section 2. Election. Tenure and Qualifications of Officers. The Trustees
--------- --------
shall elect the officers of the Trust. Each officer elected by the Trustees
shall hold office until his or her successor shall have been elected and
qualified or until his or her earlier death, inability to serve, or resignation.
Any person may hold one or more offices, except that the Chairman and the
Secretary may not be the same individual. A person who holds more than one
office in the Trust may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer. No officer other than the
Chairman need be a Trustee or Shareholder.
Section 3. Vacancies and Newly Created Offices. Whenever a vacancy shall
--------- -----------------------------------
occur in any office or if any new office is created, the Trustees may fill such
vacancy or new office.
Section 4. Removal and Resignation. Officers serve at the pleasure of the
--------- -----------------------
Trustees and may be removed at any time with or without cause. The Trustees may
delegate this power to the Chairman or President with respect to any Other
Officer. Such removal shall be without prejudice to the contract rights, if any,
of the person so removed. Any officer may resign from office at any time by
delivering a written resignation to the Trustees, Chairman, or the President.
Unless otherwise specified therein, such resignation shall take effect upon
delivery.
Section 5. Chairman. The Chairman shall preside at all meetings of the
--------- --------
Trustees and shall in general exercise the powers and perform the duties of the
Chairman of the Trustees. The
2
<PAGE>
Chairman shall exercise such other powers and perform such other duties as the
Trustees may assign to the Chairman.
Section 6. President. The President shall be the chief executive officer
--------- ---------
of the Trust. The President shall preside at any Shareholders' meetings. Subject
to the direction of the Trustees, the President shall have general charge,
supervision and control over the Trust's business affairs and shall be
responsible for the management thereof and the execution of policies established
by the Trustees. Except as the Trustees may otherwise order, the President shall
have the power to grant, issue, execute or sign powers of attorney, proxies,
agreements or other documents. The President also shall have the power to employ
attorneys, accountants and other advisers and agents for the Trust, except as
otherwise required by the 1940 Act. At the request or in the absence or
disability of the Chairman, the President shall perform all the duties of the
Chairman and, when so acting, shall have all the powers of the Chairman.
Section 7. Vice President(s). The Vice President(s) shall have such powers
--------- -----------------
and perform such duties as the Trustees or the Chairman may determine. At the
request or in the absence or disability of the President, the Vice President
(or, if there are two or more Vice Presidents, then the senior of the Vice
Presidents present and able to act) shall perform all the duties of the
President and, when so acting, shall have all the powers of the President. The
Trustees may designate a Vice President as the principal financial officer of
the Trust or to serve one or more other functions. If a Vice President is
designated as principal financial officer of the Trust, he or she shall have
general charge of the finances and books of the Trust and shall report to the
Trustees annually regarding the financial condition of each Series as soon as
possible after the close of such Series's fiscal year. The Trustees also may
designate one of the Vice Presidents as Executive Vice President.
Section 8. Treasurer and Assistant Treasurer(s).
--------- ------------------------------------
The Treasurer may be designated as the principal financial officer or as
the principal accounting officer of the Trust. If designated as principal
financial officer, the Treasurer shall have general charge of the finances and
books of the Trust, and shall report to the Trustees annually regarding the
financial condition of each Series as soon as possible after the close of such
Series' fiscal year. The Treasurer shall be responsible for the delivery of all
funds and securities of the Trust to such company as the Trustees shall retain
as Custodian. The Treasurer shall furnish such reports concerning the financial
condition of the Trust as the Trustees may request. The Treasurer shall perform
all acts incidental to the office of Treasurer, subject to the Trustees'
supervision, and shall perform such additional duties as the Trustees may
designate.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Trustees or the Treasurer may assign, and, in the absence of the Treasurer, may
perform all the duties of the Treasurer.
Section 9. Secretary and Assistant Secretaries.
--------- -----------------------------------
The Secretary shall record all votes and proceedings of the meetings of
Trustees and Shareholders in books to be kept for that purpose. The Secretary
shall be responsible for giving
3
<PAGE>
and serving notices of the Trust. The Secretary shall have custody of any seal
of the Trust and shall be responsible for the records of the Trust, including
the Share register and such other books and documents as may be required by the
Trustees or by law. The Secretary shall perform all acts incidental to the
office of Secretary, subject to the supervision of the Trustees, and shall
perform such additional duties as the Trustees may designate.
Any Assistant Secretary may perform such duties of the Secretary as the
Trustees or the Secretary may assign, and, in the absence of the Secretary, may
perform all the duties of the Secretary.
Section 10. Compensation of Officers.
---------- ------------------------
Each officer may receive such compensation from the Trust for services and
reimbursement for expenses as the Trustees may determine.
Section 11. Surety Bond.
---------- -----------
The Trustees may require any officer or agent of the Trust to execute a
bond (including, without limitation, any bond required by the 1940 Act and the
rules and regulations of the Securities and Exchange Commission ("Commission"))
to the Trust in such sum and with such surety or sureties as the Trustees may
determine, conditioned upon the faithful performance of his or her duties to the
Trust, including responsibility for negligence and for the accounting of any of
the Trust's property, funds or securities that may come into his or her hands.
ARTICLE V
---------
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. No Annual Meetings.
--------- ------------------
There shall be no annual Shareholders' meetings, unless required by law.
Section 2. Special Meetings.
--------- ----------------
The Secretary shall call a special meeting of Shareholders of any Series
or Class whenever ordered by the Trustees.
The Secretary also shall call a special meeting of Shareholders of any
Series or Class upon the written request of Shareholders owning at least ten
percent of the Outstanding Shares of such Series or Class entitled to vote at
such meeting; provided, that (1) such request shall state the purposes of such
meeting and the matters proposed to be acted on, and (2) the Shareholders
requesting such meeting shall have paid to the Trust the reasonably estimated
cost of preparing and mailing the notice thereof, which the Secretary shall
determine and specify to such Shareholders. If the Secretary fails for more
than thirty days to call a special meeting when required to do so, the Trustees
or the Shareholders requesting such a meeting may, in the name of the Secretary,
call the meeting by giving the required notice. The Secretary shall not call a
special meeting upon the request of Shareholders of any Series or Class to
consider any matter
4
<PAGE>
that is substantially the same as a matter voted upon at any special meeting of
Shareholders of such Series or Class held during the preceding twelve months,
unless requested by the holders of a majority of the Outstanding Shares of such
Series or Class entitled to be voted at such meeting.
A special meeting of Shareholders of any Series or Class shall be held at
such time and place as is determined by the Trustees and stated in the notice of
that meeting.
Section 3. Notice of Meetings; Waiver.
--------- --------------------------
The Secretary shall call a special meeting of Shareholders by giving
written notice of the place, date, time, and purposes of that meeting at least
fifteen days before the date of such meeting. The Secretary may deliver or
mail, postage prepaid, the written notice of any meeting to each Shareholder
entitled to vote at such meeting. If mailed, notice shall be deemed to be given
when deposited in the United States mail directed to the Shareholder at his or
her address as it appears on the records of the Trust.
Section 4. Adjourned Meetings.
--------- ------------------
A Shareholders' meeting may be adjourned one or more times for any reason,
including the failure of a quorum to attend the meeting. No notice of
adjournment of a meeting to another time or place need be given to Shareholders
if such time and place are announced at the meeting at which the adjournment is
taken or reasonable notice is given to Persons present at the meeting, and if
the adjourned meeting is held within a reasonable time after the date set for
the original meeting. Determination of reasonable notice and a reasonable time
for purposes of the foregoing sentence is to be made by the officers of the
Trust. Any business that might have been transacted at the original meeting may
be transacted at any adjourned meeting. If after the adjournment a new record
date is fixed for the adjourned meeting, the Secretary shall give notice of the
adjourned meeting to Shareholders of record entitled to vote at such meeting.
Any irregularities in the notice of any meeting or the nonreceipt of any such
notice by any of the Shareholders shall not invalidate any action otherwise
properly taken at any such meeting.
Section 5. Validity of Proxies.
--------- -------------------
Subject to the provisions of the Trust Instrument, Shareholders entitled
to vote may vote either in person or by proxy; provided, that either (1) the
Shareholder or his or her duly authorized attorney has signed and dated a
written instrument authorizing such proxy to act, or (2) the Trustees adopt by
resolution an electronic, telephonic, computerized or other alternative to
execution of a written instrument authorizing the proxy to act, but if a
proposal by anyone other than the officers or Trustees is submitted to a vote of
the Shareholders of any Series or Class, or if there is a proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees, Shares may be voted only in person or by written proxy. Unless the
proxy provides otherwise, it shall not be valid for more than eleven months
before the date of the meeting. All proxies shall be delivered to the Secretary
or other person responsible for recording the proceedings before being voted. A
proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of such proxy
the Trust receives a specific written notice to the contrary from any one of
them. Unless
5
<PAGE>
otherwise specifically limited by their terms, proxies shall entitle the
Shareholder to vote at any adjournment of a Shareholders' meeting. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. At every meeting of Shareholders,
unless the voting is conducted by inspectors, the chairman of the meeting shall
decide all questions concerning the qualifications of voters, the validity of
proxies, and the acceptance or rejection of votes. Subject to the provisions of
the Delaware Business Trust Act, the Trust Instrument, or these By-laws, the
General Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder shall govern all matters concerning the
giving, voting or validity of proxies, as if the Trust were a Delaware
corporation and the Shareholders were shareholders of a Delaware corporation.
Section 6. Record Date.
--------- -----------
The Trustees may fix in advance a date up to ninety days before the date
of any Shareholders' meeting as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting. The
Shareholders of record entitled to vote at a Shareholders' meeting shall be
deemed the Shareholders of record at any meeting reconvened after one or more
adjournments, unless the Trustees have fixed a new record date.
Section 7. Action Without a Meeting.
--------- ------------------------
Shareholders may take any action without a meeting if a majority (or such
greater amount as may be required by law) of the Outstanding Shares entitled to
vote on the matter consent to the action in writing and such written consents
are filed with the records of Shareholders' meetings. Such written consent
shall be treated for all purposes as a vote at a meeting of the Shareholders.
ARTICLE VI
----------
SHARES OF BENEFICIAL INTEREST
-----------------------------
Section 1. No Share Certificates.
--------- ---------------------
Neither the Trust nor any Series or Class shall issue certificates
certifying the ownership of Shares, unless the Trustees may otherwise
specifically authorize such certificates.
Section 2. Transfer of Shares.
--------- ------------------
Shares shall be transferable only by a transfer recorded on the books of
the Trust by the Shareholder of record in person or by his or her duly
authorized attorney or legal representative. Shares may be freely transferred
and the Trustees may, from time to time, adopt rules and regulations regarding
the method of transfer of such Shares.
6
<PAGE>
ARTICLE VII
-----------
CUSTODY OF SECURITIES
---------------------
Section 1. Employment of a Custodian.
--------- -------------------------
The Trust shall at all times place and maintain all cash, securities and
other assets of the Trust and of each Series in the custody of a custodian
meeting the requirements set forth in Article VII, Section 4 of the Trust
Instrument ("Custodian"). The Custodian shall be appointed from time to time by
the Board of Trustees, who shall determine its remuneration.
Section 2. Termination of Custodian Agreement.
--------- ----------------------------------
Upon termination of any Custodian Agreement or the inability of the
Custodian to continue to serve as custodian, in either case with respect to the
Trust or any Series, the Board of Trustees shall (a) use its best efforts to
obtain a successor Custodian; and (b) require that the cash, securities and
other assets owned by the Trust or any Series be delivered directly to the
successor Custodian.
Section 3. Other Arrangements.
--------- ------------------
The Trust may make such other arrangements for the custody of its assets
(including deposit arrangements) as may be required by any applicable law, rule
or regulation.
ARTICLE VIII
------------
FISCAL YEAR AND ACCOUNTANT
--------------------------
Section 1. Fiscal Year.
--------- -----------
The fiscal year of the Trust shall end on April 30 or such other date with
respect to the Trust or a Series of the Trust as the Trustees may hereafter
determine by resolution.
Section 2. Accountant.
--------- ----------
The Trust shall employ independent certified public accountants as its
Accountant to examine the accounts of the Trust and to sign and certify
financial statements filed by the Trust. The Accountant's certificates and
reports shall be addressed both to the Trustees and to the Shareholders. A
majority of the Disinterested Trustees shall select the Accountant, acting upon
the recommendation of the Audit Committee. The employment of the Accountant
shall be conditioned upon the right of the Trust to terminate such employment
without any penalty by vote of a Majority Shareholder Vote at any Shareholders'
meeting called for that purpose.
7
<PAGE>
ARTICLE IX
----------
AMENDMENTS
----------
Section 1. General.
--------- -------
Except as provided in Section 2 of this Article, these By-laws may be
amended by the Trustees, or by the affirmative vote of a majority of the
Outstanding Shares entitled to vote at any meeting.
Section 2. By Shareholders Only.
--------- --------------------
After the issue of any Shares, this Article may only be amended by the
affirmative vote of the holders of the lesser of (a) at least two-thirds of the
Outstanding Shares present and entitled to vote at any meeting, or (b) at least
fifty percent of the Outstanding Shares.
ARTICLE X
---------
NET ASSET VALUE
---------------
The term "Net Asset Value" of any Series shall mean that amount by which
the assets belonging to that Series exceed its liabilities, all as determined by
or under the direction of the Trustees. Net Asset Value per Share shall be
determined separately for each Series and each Class and shall be determined on
such days and at such times as the Trustees may determine. The Trustees shall
make such determination with respect to securities for which market quotations
are readily available, at the market value of such securities, and with respect
to other securities and assets, at the fair value as determined in good faith by
the Trustees; provided, however, that the Trustees, without Shareholder
approval, may alter the method of appraising portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations and interpretations
thereof promulgated or issued by the SEC or insofar as permitted by any order of
the SEC applicable to the Series or to the Class. The Trustees may delegate any
of their powers and duties under this Article X with respect to appraisal of
assets and liabilities. At any time the Trustees may cause the Net Asset Value
per Share last determined to be determined again in a similar manner and may fix
the time when such redetermined values shall become effective.
ARTICLE XI
----------
MISCELLANEOUS
-------------
Section 1. Inspection of Books.
--------- -------------------
The Board of Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions the
accounts and books of the Trust or any Series or Class shall be open to the
inspection of Shareholders. No Shareholder shall have any right to inspect any
account or book or document of the Trust except as conferred by law or otherwise
by the Board of Trustees or by resolution of Shareholders.
8
<PAGE>
Section 2. Severability.
--------- ------------
The provisions of these By-laws are severable. If the Board of Trustees
determine, with the advice of counsel, that any provision hereof conflicts with
the 1940 Act, the regulated investment company provisions of the Internal
Revenue Code or with other applicable laws and regulations, the conflicting
provision shall be deemed never to have constituted a part of these By-laws;
provided, however, that such determination shall not affect any of the remaining
provisions of these By-laws or render invalid or improper any action taken or
omitted prior to such determination. If any provision hereof shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of these Bylaws.
Section 3. Headings.
--------- --------
Headings are placed in these By-laws for convenience of reference only and
in case of any conflict, the text of these By-laws rather than the headings
shall control.
9
<PAGE>
Exhibit No. 4
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of_________, 1998 between MITCHELL HUTCHINS INSTITUTIONAL
SERIES, a Delaware business trust ("Trust"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered as a
broker-dealer under the Securities Exchange Act of 1934, as amended ("1934
Act"), and as an investment adviser under the Investment Advisers Act of 1940,
as amended.
WHEREAS the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and
intends to offer for public sale distinct series of shares of beneficial
interest ("Series"), each corresponding to a distinct portfolio; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment adviser
and administrator to furnish certain administrative, investment advisory and
portfolio management services to the Trust and each Series as now exists and as
hereafter may be established (provided that the Board of Trustees ("Board")
approves the applicability of this Contract to such subsequent Series), and
Mitchell Hutchins is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints Mitchell Hutchins as investment
-----------
adviser and administrator of the Trust and each Series for the period and on the
terms set forth in this Contract. Mitchell Hutchins accepts such appointment
and agrees to render the services herein set forth, for the compensation herein
provided.
2. Duties as Investment Adviser.
----------------------------
(a) Subject to the supervision of the Board, Mitchell Hutchins will provide
a continuous investment program for each Series, including investment research
and management with respect to all securities and investments and cash
equivalents in each Series. Mitchell Hutchins will determine from time to time
what securities and other investments will be purchased, retained or sold by
each Series.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution; provided
that, on behalf of any Series, Mitchell Hutchins may, in its discretion, use
brokers who provide the Series with research, analysis, advice and similar
services to execute portfolio transactions on behalf of the Series, and Mitchell
Hutchins may pay to those brokers in return for brokerage and research services
a higher commission than may be charged by other brokers, subject to Mitchell
Hutchins' determining in good faith that such commission is reasonable in terms
either of the particular transaction or of the
<PAGE>
overall responsibility of Mitchell Hutchins to such Series and its other clients
and that the total commissions paid by such Series will be reasonable in
relation to the benefits to the Series over the long term. In no instance will
portfolio securities be purchased from or sold to Mitchell Hutchins, or any
affiliated person thereof, except in accordance with the federal securities laws
and the rules and regulations thereunder. Whenever Mitchell Hutchins
simultaneously places orders to purchase or sell the same security on behalf of
a Series and one or more other accounts advised by Mitchell Hutchins, such
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable to each account. The Trust recognizes that in
some cases this procedure may adversely affect the results obtained for the
Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and records
with respect to the securities transactions of each Series, and will furnish the
Board with such periodic and special reports as the Board reasonably may
request. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
Mitchell Hutchins hereby agrees that all records which it maintains for the
Trust are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Trust and which are required to be maintained by Rule 31a-1 under the 1940
Act and further agrees to surrender promptly to the Trust any records which it
maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset value
and the net income of each Series as described in the currently effective
registration statement of the Trust under the Securities Act of 1933, as
amended, and the 1940 Act and any supplements thereto ("Registration Statement")
or as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or person
associated with Mitchell Hutchins which is a member of a national securities
exchange to effect any transaction on such exchange for the account of any
Series, which transaction is permitted by Section 11(a) of the 1934 Act, and the
Trust hereby consents to the retention of compensation by Mitchell Hutchins or
any person or entity associated with Mitchell Hutchins.
3. Duties as Administrator. Mitchell Hutchins will administer the affairs
-----------------------
of the Trust and each Series subject to the supervision of the Board and the
following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of the
Trust and each Series, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Trust and
each Series.
(b) Mitchell Hutchins will provide the Trust and each Series with such
corporate, administrative and clerical personnel (including officers of the
Trust) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Trust and
each Series.
(c) Mitchell Hutchins will arrange for the periodic preparation, updating,
filing and dissemination (as applicable) of the Trust's Registration Statement,
proxy material, tax returns and
-2-
<PAGE>
required reports to each Series' shareholders and the Securities and Exchange
Commission and other appropriate federal or state regulatory authorities.
(d) Mitchell Hutchins will provide the Trust and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. Further Duties. In all matters relating to the performance of this
--------------
Contract, Mitchell Hutchins will act in conformity with the Trust Instrument,
By-Laws and Registration Statement of the Trust and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
5. Delegation of Mitchell Hutchins' Duties as Investment Adviser and
-----------------------------------------------------------------
Administrator. With respect to any or all Series, Mitchell Hutchins may enter
- -------------
into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
a sub-adviser or sub-administrator in which Mitchell Hutchins delegates to such
sub-adviser or sub-administrator any or all its duties specified in Paragraphs 2
and 3 of this Contract, provided that each Sub-Advisory or Sub-Administration
Contract imposes on the sub-adviser or sub-administrator bound thereby all
applicable duties and conditions to which Mitchell Hutchins is subject by
Paragraphs 2, 3 and 4 of this Contract, and further provided that each Sub-
Advisory or Sub-Administration Contract meets all requirements of the 1940 Act
and rules thereunder.
6. Services Not Exclusive. The services furnished by Mitchell Hutchins
----------------------
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a Trustee, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
7. Expenses.
--------
(a) Mitchell Hutchins will bear all expenses incurred in the operation of
each Series to which this Contract is applicable, including the Series'
allocable share of the expenses of the Trust, other than (i) the investment and
advisory fee payable under this Contract, (ii) the fees payable pursuant to any
Shareholder Service Plan adopted by the Trust with respect to the Series or a
class of shares of the Series, (iii) fees and expenses of the Independent
Trustees (defined in paragraph 10(a) below), including counsel fees of the
Independent Trustees, (iv) interest, taxes and the cost (including brokerage
commissions and other transaction costs, if any) of securities purchased or sold
by the Series and any losses incurred in connection therewith and (v)
extraordinary expenses
-3-
<PAGE>
(such as costs of litigation to which the Trust or a Series is a party and of
indemnifying officers and Trustees of the Trust), which will be borne by the
Trust or Series, as applicable.
(b) The expenses to be borne by Mitchell Hutchins include the following (or
each Series' proportionate share of the following): (i) expenses of organizing
the Trust and the Series; (ii) filing fees and expenses relating to the
registration and qualification of the Series' shares and the Trust under federal
and/or state securities laws and maintaining such registration and
qualifications; (iii) fees and salaries payable to the Trust's Trustees and
officers; (iv) all expenses incurred in connection with the services of Trustees
other than the Independent Trustees, including travel expenses; (v) costs of any
liability, uncollectible items of deposit and other insurance and fidelity
bonds; (vi) legal, accounting and auditing expenses, other than the legal fees
of special counsel for the Independent Trustees; (vii) charges of custodians,
transfer agents and other agents (including any lending agent); (viii) costs of
preparing share certificates; (ix) expenses of setting in type and printing
prospectuses and supplements thereto, statements of additional information and
supplements thereto, reports and proxy materials for existing shareholders; (x)
costs of mailing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials to existing
shareholders; (xi) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (xii) the cost
of mailing and tabulating proxies and costs of meetings of shareholders, the
Board and any committees thereof; (xii) the cost of investment company
literature and other publications provided by the Trust to its Trustees and
officers; (xiii) costs of mailing, stationery and communications equipment;
(xiv) expenses incident to any dividend, withdrawal or redemption options; (xv)
charges and expenses of any outside pricing service used to value portfolio
securities; and (xvi) interest on borrowings of the Fund.
(c) The payment or assumption by Mitchell Hutchins of any expenses of the
Trust or a Series that Mitchell Hutchins is not required by this Contract to pay
or assume shall not obligate Mitchell Hutchins to pay or assume the same or any
similar expense of the Trust or a Series on any subsequent occasion.
8. Compensation.
------------
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to the Trust's existing Series, Mitchell Hutchins
Institutional Money Fund, the Trust will pay to Mitchell Hutchins a fee,
computed daily and paid monthly, at an annual rate of 0.18% of such Series'
average daily net assets less that Series' allocable share of the accrued fees
and expenses of the Independent Trustees (including counsel fees of the
Independent Trustees).
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any Series hereafter established and for which the
Board approves the applicability of this Contract, the Trust will pay to
Mitchell Hutchins from the assets of such Series a fee in an amount to be agreed
upon in a written fee agreement ("Fee Agreement") executed by the Trust on
behalf of such Series and by Mitchell Hutchins. All such Fee Agreements shall
provide that they are subject to all terms and conditions of this Contract.
-4-
<PAGE>
(c) The fee shall be computed daily and paid monthly to Mitchell Hutchins
on or before the first business day of the next succeeding calendar month.
(d) If this Contract becomes effective or terminates before the end of any
month, the fee for the period from the effective day to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
9. Limitation of Liability of Mitchell Hutchins. Mitchell Hutchins and
--------------------------------------------
its delegates, including any Sub-Adviser or Sub-Administrator to any Series or
the Trust, shall not be liable for any error of judgment or mistake of law or
for any loss suffered by any Series, the Trust or any of its shareholders, in
connection with the matters to which this Contract relates, except to the extent
that such a loss results from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract. Any person, even though also an
officer, director, employee, or agent of Mitchell Hutchins, who may be or become
an officer, Trustee, employee or agent of the Trust shall be deemed, when
rendering services to any Series or the Trust or acting with respect to any
business of such Series or the Trust, to be rendering such service to or acting
solely for the Series or the Trust and not as an officer, director, employee, or
agent or one under the control or direction of Mitchell Hutchins even though
paid by it.
10. Duration and Termination.
------------------------
(a) This Contract shall become effective upon the date hereabove written
provided that, with respect to any Series, this Contract shall not take effect
unless it has first been approved (i) by a vote of a majority of those Trustees
of the Trust who are not parties to this Contract or interested persons of any
such party ("Independent Trustees") cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by vote of a majority of that
Series' outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if
not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or, with respect to any given Series, by vote of
a majority of the outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this Contract
may be terminated at any time, without the payment of any penalty, by vote of
the board or by a vote of a majority of the outstanding voting securities of
such Series on sixty days' written notice to Mitchell Hutchins or by Mitchell
Hutchins at any time, without the payment of any penalty, on sixty days' written
notice to the Trust. Termination of this Contract with respect to any given
Series shall in no way affect the continued validity of this Contract or the
performance thereunder with respect to any other Series. This Contract will
automatically terminate in the event of its assignment.
-5-
<PAGE>
11. Limitation of Liability of the Trustees and Shareholders of the Trust.
---------------------------------------------------------------------
The Trustees of the Trust and the shareholders of any Series shall not be liable
for any obligations of any Series or the Trust under this Contract, and Mitchell
Hutchins agrees that, in asserting any rights or claims under this Contract, it
shall look only to the assets and property of the Trust in settlement of such
right or claim, and not to such Trustees or shareholders.
12. Amendment of this Contract. No provision of this Contract may be
--------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract as to any
given Series shall be effective until approved by vote of a majority of such
Series' outstanding voting securities.
13. Governing Law. This Contract shall be construed in accordance with
-------------
the laws of the State of Delaware, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act. To the extent
that the applicable laws of the State of Delaware conflict with the applicable
provisions of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities", "affiliated person",
"interested person", "assignment", "broker", "investment adviser", "national
securities exchange", "net assets", "prospectus", "sale", "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission. Where the effect of a requirement of the
1940 Act reflected in any provision of this Contract is relaxed by a rule,
regulation, order or other action of the Securities and Exchange Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation, order or other action.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers and delivered as of the day and year first above
written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
By
- -------------------------- ------------------------------------
Attest: MITCHELL HUTCHINS INSTITUTIONAL SERIES
By
- -------------------------- ------------------------------------
-6-
<PAGE>
Exhibit No. 5
MITCHELL HUTCHINS INSTITUTIONAL SERIES
DISTRIBUTION CONTRACT
CONTRACT made as of ____________________, 1998 between MITCHELL HUTCHINS
INSTITUTIONAL SERIES, a Delaware business trust ("Fund"), and PAINEWEBBER
INCORPORATED, a Delaware corporation ("PaineWebber").
WHEREAS the Fund is registered under the Investment Company Act of l940, as
amended ("l940 Act"), as an open-end management investment company and currently
has one distinct series of shares of beneficial interest ("Series"), which
corresponds to a distinct portfolio and has been designated as Mitchell Hutchins
Instituitonal Money Fund,; and
WHEREAS the Fund's board of trustees ("Board") has established an unlimited
number of shares of beneficial interest of the above-referenced Series as
Institutional shares and Financial Intermediary shares ("Shares"); and
WHEREAS the Fund desires to retain PaineWebber as principal distributor in
connection with the offering and sale of the Shares of the above-referenced
Series and of such other Series as may hereafter be designated by the Board and
have Shares established; and
WHEREAS PaineWebber is willing to act as principal distributor of the Shares
of each such Series on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PaineWebber as its exclusive agent
-----------
to be the principal distributor to sell and to arrange for the sale of the
Shares on the terms and for the period set forth in this Contract. Mitchell
Hutchins hereby accepts such appointment and agrees to act hereunder. It is
understood, however, that this appointment does not preclude sales of the Shares
directly through the Fund's transfer agent in the manner set forth in the
Registration Statement. As used in this Contract, the term "Registration
Statement" shall mean the currently effective registration statement of the
Fund, and any supplements thereto, under the Securities Act of 1933, as amended
("1933 Act"), and the 1940 Act.
2. Services and Duties of PaineWebber.
----------------------------------
(a) PaineWebber agrees to sell the Shares on a best efforts basis from
time to time during the term of this Contract as agent for the Fund and upon the
terms described in the Registration Statement.
(b) Upon the later of the date of this Contract or the initial offering
of the Shares by a Series, PaineWebber will hold itself available to receive
purchase orders, satisfactory
<PAGE>
to PaineWebber, for Shares of that Series and will accept such orders on behalf
of the Fund as of the time of receipt of such orders and promptly transmit such
orders as are accepted to the Fund's transfer agent. Purchase orders shall be
deemed effective at the time and in the manner set forth in the Registration
Statement.
(c) PaineWebber in its discretion may enter into agreements to sell
Shares to such registered and qualified retail dealers, including but not
limited to Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") as it
may select. In making agreements with such dealers, PaineWebber shall act only
as principal and not as agent for the Fund.
(d) The offering price of the Shares of each Series shall be the net
asset value per Share as next determined by the Fund following receipt of an
order at PaineWebber's principal office. The Fund shall promptly furnish
PaineWebber with a statement of each computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain number of
Shares.
(f) To facilitate redemption of Shares by shareholders directly or
through dealers, PaineWebber is authorized but not required on behalf of the
Fund to repurchase Shares presented to it by shareholders and dealers at the
price determined in accordance with, and in the manner set forth in, the
Registration Statement.
(g) PaineWebber shall have the right to use any list of shareholders
of the Fund or any other list of investors which it obtains in connection with
its provision of services under this Contract; provided, however, that
PaineWebber shall not sell or knowingly provide such list or lists to any
unaffiliated person.
3. Authorization to Enter into Exclusive Dealer Contracts and to Delegate
----------------------------------------------------------------------
Duties as Distributor. With respect to the Shares of any or all Series,
- ---------------------
PaineWebber may enter into an exclusive dealer agreement with Mitchell Hutchins
or any other registered and qualified dealer with respect to sales of the
Shares. In a separate contract or as part of any such exclusive dealer
agreement, PaineWebber also may delegate to Mitchell Hutchins or another
registered and qualified dealer ("sub-distributor") any or all of its duties
specified in this Contract, provided that such separate contract or exclusive
dealer agreement imposes on the sub-distributor bound thereby all applicable
duties and conditions to which PaineWebber is subject under this Contract, and
further provided that such separate contract or exclusive dealer agreement meets
all requirements of the 1940 Act and rules thereunder.
4. Services Not Exclusive. The services furnished by PaineWebber hereunder
----------------------
are not to be deemed exclusive and PaineWebber shall be free to furnish similar
services to others so long as its services under this Contract are not impaired
thereby. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of PaineWebber, who may also be a trustee, officer
or employee of the Fund, to engage in any other business or to devote his or her
time and attention in part to the management or other aspects of any other
business, whether of a similar or a dissimilar nature.
-2-
<PAGE>
5. Compensation and Reimbursement of Distribution Expenses. The Fund shall
-------------------------------------------------------
have no obligation to compensate or reimburse PaineWebber for any services
performed by it hereunder.
6. Duties of the Fund.
-------------------
(a) The Fund reserves the right at any time to withdraw offering Shares
of any or all Series by written notice to PaineWebber at its principal office.
(b) The Fund shall determine in its sole discretion whether certificates
shall be issued with respect to the Shares. If the Fund has determined that
certificates shall be issued, the Fund will not cause certificates representing
Shares to be issued unless so requested by shareholders. If such request is
transmitted by PaineWebber, the Fund will cause certificates evidencing Shares
to be issued in such names and denominations as PaineWebber shall from time to
time direct.
(c) The Fund shall keep PaineWebber fully informed of its affairs and
shall make available to PaineWebber copies of all information, financial
statements, and other papers which PaineWebber may reasonably request for use in
connection with the distribution of Shares, including, without limitation,
certified copies of any financial statements prepared for the Fund by its
independent public accountant and such reasonable number of copies of the most
current prospectus, statement of additional information, and annual and interim
reports of any Series as Mitchell Hutchins may request, and the Fund shall
cooperate fully in the efforts of PaineWebber to sell and arrange for the sale
of the Shares of the Series and in the performance of PaineWebber under this
Contract.
(d) The Fund shall take, from time to time, all necessary action,
including payment of the related filing fee, as may be necessary to register the
Shares under the 1933 Act to the end that there will be available for sale such
number of Shares as PaineWebber may be expected to sell. The Fund agrees to
file, from time to time, such amendments, reports, and other documents as may be
necessary in order that there will be no untrue statement of a material fact in
the Registration Statement, nor any omission of a material fact which omission
would make the statements therein misleading.
(e) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of Shares of each Series for sale under
the securities laws of such states or other jurisdictions as PaineWebber and the
Fund may approve, and, if necessary or appropriate in connection therewith, to
qualify and maintain the qualification of the Fund as a broker or dealer in such
jurisdictions; provided that the Fund shall not be required to amend its Trust
Instrument or By-Laws to comply with the laws of any jurisdiction, to maintain
an office in any jurisdiction, to change the terms of the offering of the Shares
in any jurisdiction from the terms set forth in its Registration Statement, to
qualify as a foreign corporation in any jurisdiction, or to consent to service
of process in any jurisdiction other than with respect to claims arising out of
the offering of the Shares. PaineWebber shall furnish such information and other
material relating to its affairs and activities as may be required by the Fund
in connection with such qualifications.
-3-
<PAGE>
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
---------------------
registering the Shares with the Securities and Exchange Commission and
qualifying the shares with state and other regulatory bodies, and shall assume
expenses related to communications with shareholders of each Series, including
(i) fees and disbursements of its counsel and independent public accountant;
(ii) the preparation, filing and printing of registration statements and/or
prospectuses or statements of additional information required under the federal
securities laws; (iii) the preparation and mailing of annual and interim
reports, prospectuses, statements of additional information and proxy materials
to shareholders; and (iv) the qualifications of Shares for sale and of the Fund
as a broker or dealer under the securities laws of such jurisdictions as shall
be selected by the Fund and PaineWebber pursuant to Paragraph 6(e) hereof, and
the costs and expenses payable to each such jurisdiction for continuing
qualification therein.
8. Expenses of PaineWebber. PaineWebber shall bear all costs and expenses of
-----------------------
(i) preparing, printing and distributing any materials not prepared by the Fund
and other materials used by PaineWebber in connection with the sale of Shares
under this Contract, including the additional cost of printing copies of
prospectuses, statements of additional information, and annual and interim
shareholder reports other than copies thereof required for distribution to
existing shareholders or for filing with any federal or state securities
authorities; (ii) any expenses of advertising incurred by PaineWebber in
connection with such offering; (iii) the expenses of registration or
qualification of PaineWebber as a broker or dealer under federal or state laws
and the expenses of continuing such registration or qualification; and (iv) all
compensation paid to PaineWebber's employees and others for selling Shares, and
all expenses of PaineWebber, its employees and others who engage in or support
the sale of Shares as may be incurred in connection with their sales efforts.
9. Indemnification.
---------------
(a) The Fund agrees to indemnify, defend and hold PaineWebber, its
officers and directors, and any person who controls PaineWebber within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which PaineWebber, its officers,
directors or any such controlling person may incur under the 1933 Act, or under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement or arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement or necessary to make the statements
therein not misleading, except insofar as such claims, demands, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information furnished in writing by PaineWebber to the Fund for use in the
Registration Statement; provided, however, that this indemnity agreement shall
not inure to the benefit of any person who is also an officer or trustee of the
Fund or who controls the Fund within the meaning of Section 15 of the 1933 Act,
unless a court of competent jurisdiction shall determine, or it shall have been
determined by controlling precedent, that such result would not be against
public policy as expressed in the 1933 Act; and further provided, that in no
event shall anything contained herein be so construed as to protect
-4-
<PAGE>
PaineWebber against any liability to the Fund or to the shareholders of any
Series to which PaineWebber would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations under this Contract. The
Fund shall not be liable to PaineWebber under this indemnity agreement with
respect to any claim made against PaineWebber or any person indemnified unless
PaineWebber or other such person shall have notified the Fund in writing of the
claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon PaineWebber or such other person (or after PaineWebber or the person
shall have received notice of service on any designated agent). However, failure
to notify the Fund of any claim shall not relieve the Fund from any liability
which it may have to PaineWebber or any person against whom such action is
brought otherwise than on account of this indemnity agreement. The Fund shall be
entitled to participate at its own expense in the defense or, if it so elects,
to assume the defense of any suit brought to enforce any claims subject to this
indemnity agreement. If the Fund elects to assume the defense of any such claim,
the defense shall be conducted by counsel chosen by the Fund and satisfactory to
indemnified defendants in the suit whose approval shall not be unreasonably
withheld. In the event that the Fund elects to assume the defense of any suit
and retain counsel, the indemnified defendants shall bear the fees and expenses
of any additional counsel retained by them. If the Fund does not elect to assume
the defense of a suit, it will reimburse the indemnified defendants for the
reasonable fees and expenses of any counsel retained by the indemnified
defendants. The Fund agrees to notify PaineWebber promptly of the commencement
of any litigation or proceedings against it or any of its officers or trustees
in connection with the issuance or sale of any of its Shares.
(b) PaineWebber agrees to indemnify, defend, and hold the Fund, its
officers and trustees, and any person who controls the Fund within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which the Fund, its trustees or officers, or
any such controlling person may incur under the 1933 Act or under common law or
otherwise arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by PaineWebber to
the Fund for use in the Registration Statement, arising out of or based upon any
alleged omission to state a material fact in connection with such information
required to be stated in the Registration Statement necessary to make such
information not misleading, or arising out of any agreement between PaineWebber
and any retail dealer, or arising out of any supplemental sales literature or
advertising used by PaineWebber in connection with its duties under this
Contract. PaineWebber shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if PaineWebber elects to assume the defense, the defense
shall be conducted by counsel chosen by PaineWebber and satisfactory to the
indemnified defendants whose approval shall not be unreasonably withheld. In the
event that PaineWebber elects to assume the defense of any suit and retain
counsel, the defendants in the suit shall bear the fees and expenses of any
additional counsel retained by them. If PaineWebber does not elect to assume the
defense of any suit, it will reimburse the indemnified defendants in the suit
for the reasonable fees and expenses of any counsel retained by them.
-5-
<PAGE>
10. Limitation of Liability of the Trustees and Shareholders of the Fund.
--------------------------------------------------------------------
The trustees of the Fund and the shareholders of any Series shall not be liable
for any obligations of the Fund or any Series under this Contract, and
PaineWebber agrees that, in asserting any rights or claims under this Contract,
it shall look only to the assets and property of the Fund or the particular
Series in settlement of such right or claims, and not to such trustees or
shareholders.
11. Services Provided to the Fund by Employees of PaineWebber. Any person,
---------------------------------------------------------
even though also an officer, director, employee or agent of PaineWebber, who may
be or become an officer, trustee, employee or agent of the Fund, shall be
deemed, when rendering services to the Fund or acting in any business of the
Fund, to be rendering such services to or acting solely for the Fund and not as
an officer, director, employee or agent or one under the control or direction of
PaineWebber even though paid by PaineWebber.
12. Duration and Termination.
------------------------
(a) This Contract shall become effective upon the date written above,
provided that, with respect to any Series, this Contract shall not take effect
with respect to a class of Shares of that Series unless such action has first
been approved by vote of a majority of the Board and by vote of a majority of
those trustees of the Fund who are not interested persons of the Fund, and have
no direct or indirect financial interest in this Contract or in any agreements
related thereto (all such Trustees collectively being referred to herein as the
"Independent Trustees"), cast in person at a meeting called for the purpose of
voting on such action.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or with respect to a class of Shares of any given Series by vote of
a majority of the outstanding voting securities of the that class of Shares of
such Series.
(c) Notwithstanding the foregoing, with respect to a class of Shares
of any Series, this Contract may be terminated at any time, without the payment
of any penalty, by vote of the Board, by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting securities of that
class of Shares of such Series on sixty days' written notice to PaineWebber or
by PaineWebber at any time, without the payment of any penalty, on sixty days'
written notice to the Fund or such Series. This Contract will automatically
terminate in the event of its assignment.
(d) Termination of this Contract with respect to any given Series or
class of Shares of a Series shall in no way affect the continued validity of
this Contract or the performance thereunder with respect to any other Series or
class of Shares.
13. Amendment of this Contract. No provision of this Contract may be
--------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
-6-
<PAGE>
14. Governing Law. This Contract shall be construed in accordance with the
-------------
laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the l940 Act, the latter shall control.
15. Notice. Any notice required or permitted to be given by either party to
------
the other shall be deemed sufficient upon receipt in writing at the other
party's principal offices.
16. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meaning as such terms have in the l940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: MITCHELL HUTCHINS INSTITUTIONAL SERIES
By:
-------------------------------- -----------------------------------
ATTEST: PAINEWEBBER INCORPORATED
By:
--------------------------------- -----------------------------------
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<PAGE>
CUSTODY AGREEMENT
Agreement made as of this day of June, 1998, between
MITCHELL HUTCHINS INSTITUTIONAL SERIES, a Delaware business trust
organized and existing under the laws of the State of Delaware,
having its principal office and place of business at 1285 Avenue of
the Americas, New York, New York 10019 (hereinafter called the
"Fund"), and THE BANK OF NEW YORK, a New York corporation authorized
to do a banking business, having its principal office and place of
business at One Wall Street, New York, New York 10286 (hereinafter
called the "Custodian" when providing services pursuant to this
agreement).
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Authorized Persons" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund,
duly authorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix A or
such other Certificate as may be received by the Custodian from time
to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities,
its successor or successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and payment of the exercise
<PAGE>
price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian which is actually received by the Custodian
and signed on behalf of the Fund by any two Authorized Persons, and
the term Certificate shall also include Instructions.
5. "Clearing Member" shall mean a registered broker-dealer
which is a clearing member under the rules of O.C.C. and a member of
a national securities exchange qualified to act as a custodian for an
investment company, or any broker-dealer reasonably believed by the
Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so
denominated which is specifically allocated to a Series and pledged
to the Custodian as security for, and in consideration of, the
Custodian's issuance of (a) any Put Option guarantee letter or
similar document described in paragraph 8 of Article V herein, or (b)
any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency
Unit or any other composite unit consisting of the aggregate of
specified amounts of specified Currencies as such unit may be
constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded Option
entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer
thereof the specified underlying Securities (excluding Futures
Contracts) which are owned by the writer thereof and subject to
appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful
currency of any country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its nominee or
nominees. The term "Depository" shall further mean and include any
other person authorized to act as a depository under the Investment
Company Act of 1940, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a
resolution of the Fund's Board of Trustees specifically approving
deposits therein by the Custodian.
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<PAGE>
11. "Financial Futures Contract" shall mean the firm commitment
to buy or sell fixed income securities including, without limitation,
U.S. Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds,
domestic bank certificates of deposit, and Eurodollar certificates of
deposit, during a specified month at an agreed upon price.
12. "Futures Contract" shall mean a Financial Futures Contract
and/or Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an Option with respect
to a Futures Contract.
14. "FX Transaction" shall mean any transaction for the
purchase by one party of an agreed amount in one Currency against the
sale by it to the other party of an agreed amount in another
Currency.
15. "Instructions" shall mean instructions communications
transmitted by electronic or telecommunications media including
S.W.I.F.T., computer-to-computer interface, dedicated transmission
line, facsimile transmission signed by an Authorized Person and
tested telex.
16. "Margin Account" shall mean a segregated account in the
name of a broker, dealer, futures commission merchant, or a Clearing
Member, or in the name of the Fund for the benefit of a broker,
dealer, futures commission merchant, or Clearing Member, or
otherwise, in accordance with an agreement between the Fund, the
Custodian and a broker, dealer, futures commission merchant or a
Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or
money of the Fund shall be deposited and withdrawn from time to time
in connection with such transactions as the Fund may from time to
time determine. Securities held in the Book-Entry System or the
Depository shall be deemed to have been deposited in, or withdrawn
from, a Margin Account upon the Custodian's effecting an appropriate
entry in its books and records.
17. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations
issued or guaranteed as to interest and principal by the government
of the United States or agencies or instrumentalities thereof, any
tax, bond or revenue anticipation note issued by any state or
municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase
agreements with respect to the same and bank time deposits, where the
purchase and
-3-
<PAGE>
sale of such securities normally requires settlement in federal funds
on the same day as such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its nominee or
nominees.
19. "Option" shall mean a Call Option, Covered Call Option,
Stock Index Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded Option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and tender of the specified underlying Securities, to
sell such Securities to the writer thereof for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Fund sells Securities and agrees to repurchase
such Securities at a described or specified date and price.
23. "Security" shall be deemed to include, without limitation,
Money Market Securities, Call Options, Put Options, Stock Index
Options, Stock Index Futures Contracts, Stock Index Futures Contract
Options, Financial Futures Contracts, Financial Futures Contract
Options, Reverse Repurchase Agreements, common stocks and other
securities having characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal governments and
by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial
development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase, sell or
subscribe for the same, or evidencing or representing any other
rights or interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained
and specifically allocated to a Series under the terms of this
Agreement as a segregated account, by recordation or otherwise,
within the custody account in which certain
-4-
<PAGE>
Securities and/or other assets of the Fund specifically allocated to
such Series shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in connection
with such transactions as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the
Fund listed on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of beneficial interest of
the Fund, each of which is, in the case of a Fund having Series,
allocated to a particular Series.
27. "Stock Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount
times the difference between the value of a particular stock index at
the close of the last business day of the contract and the price at
which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of
cash determined by reference to the difference between the exercise
price and the value of the index on the date of exercise.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and money at any time owned by the Fund
during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, the Fund will deliver or cause to be delivered
to the Custodian all Securities and all money owned by it, at any
time during the period of this Agreement,
-5-
<PAGE>
and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. For purposes of
this Agreement, "receipt" of Securities and money shall include the
acquisition of a security entitlement as that term is defined in the
New York Uniform Commercial Code ("UCC") with respect thereto. The
Custodian shall segregate, keep and maintain the assets of the Series
separate and apart. The Custodian will not be responsible for any
Securities and money not actually received by it. The Custodian will
be entitled to reverse any credits made on the Fund's behalf where
such credits have been previously made and money is not finally
collected; provided that if such reversal is thirty (30) days or more
after the credit was issued, the Custodian will give five (5) days
prior notice of such reversal. The Fund shall deliver to the
Custodian a certified resolution of the Board of Trustees of the
Fund, substantially in the form of Exhibit A hereto, approving,
authorizing and instructing the Custodian on a continuous and on-
going basis to deposit in the Book-Entry System all Securities
eligible to be maintained indirectly through it, regardless of the
Series to which the same are specifically allocated and to utilize
the Book-Entry System to the extent possible in connection with its
performance hereunder, including, without limitation, in connection
with settlements of purchases and sales of Securities, loans of
Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the
Depository, the Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the
form of Exhibit B hereto, approving, authorizing and instructing the
Custodian on a continuous and ongoing basis until instructed to the
contrary by a Certificate actually received by the Custodian to
deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the
Depository to the extent possible with respect to such Securities in
connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and money maintained indirectly
through either the Book-Entry System or the Depository will be
represented in accounts which include only assets held by the
Custodian for customers, including, but not limited to, accounts in
which the Custodian acts in a fiduciary or representative capacity
and will be specifically allocated on the Custodian's books to the
separate account for the applicable Series. Prior to the Custodian's
accepting, utilizing and acting with respect to Clearing Member
confirma-tions for Options and transactions in Options for a Series
as provided in this Agreement, the Custodian shall have received
-6-
<PAGE>
a certified resolution of the Fund's Board of Trustees, substantially
in the form of Exhibit C hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received by the
Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such
Series. All Securities are to be held or disposed of by the Custodian
for, and subject at all times to the instructions of, the Fund
pursuant to the terms of this Agreement. The Custodian shall have no
power or authority to assign, hypothecate, pledge or otherwise
dispose of any Securities except as provided by the terms of this
Agreement, and shall have the sole right to release and deliver
Securities held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all money received by it for the
account of the Fund with respect to such Series. Money credited to a
separate account for a Series shall be subject to draft, orders, or
charges of the Custodian pursuant to this Agreement and shall be
disbursed by the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the Series
account from which payment is to be made and the purpose for which
payment is to be made; or
(c) in payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such
Series.
3. Promptly after the close of business on each day, the
Custodian shall furnish the Fund with confirmations and a summary, on
a per Series basis, of all transfers to or from the account of the
Fund for a Series, either hereunder or with any co-custodian or sub-
custodian appointed in accordance with this Agreement during said
day. Where Securities are transferred to the account of the Fund for
a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a
fungible bulk of Securities registered in the name of the Custodian
(or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from
time to time, the Custodian shall furnish the Fund with a detailed
statement, on a per Series
-7-
<PAGE>
basis, of the Securities and money held by the Custodian for the
Fund.
4. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, all Securities maintained by the Custodian
hereunder, which are issued or issuable only in bearer form, except
such Securities as are maintained indirectly through in the Book-
Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund,
in the name of any duly appointed registered nominee of the Custodian
as the Custodian may from time to time determine, or in the name of
the Book-Entry System or the Depository or their successor or
successors, or their nominee or nominees. The Fund agrees to furnish
to the Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry
System or the Depository any Securities which it may hold hereunder
and which may from time to time be registered in the name of the
Fund. The Custodian shall hold all such Securities specifically
allocated to a Series which are not held in the Book-Entry System or
in the Depository in a separate account in the name of such Series
physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian
by itself, or indirectly through the use of the Book-Entry System or
the Depository with respect to Securities maintained hereunder, shall
with respect to all Securities held for the Fund hereunder in
accordance with preceding paragraph 4:
(a) promptly collect all income, dividends and
distributions due or payable;
(b) promptly give notice to the Fund and promptly present
payment and collect the amount payable upon such Securities which are
called, but only if either (i) the Custodian receives a written
notice of such call, or (ii) notice of such call appears in one or
more of the publications listed in Appendix C annexed hereto, which
may be amended at any time by the Custodian without the prior
notification or consent of the Fund;
(c) promptly present for payment and collect the amount
payable upon all Securities which mature;
-8-
<PAGE>
(d) promptly surrender Securities in temporary form
for definitive Securities;
(e) promptly execute, as custodian, any necessary
declarations or certificates of ownership under the Federal Income
Tax Laws or the laws or regulations of any other taxing authority now
or hereafter in effect;
(f) hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of a Series, all rights and similar securities issued with
respect to any Securities held by the Custodian for such Series
hereunder;
(g) deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information
(including, without limitation, notices of tender offers and exchange
offers, pendency of calls, maturities of Securities and expiration of
rights) relating to Securities held pursuant to this Agreement which
are actually received by the Custodian, such proxies and other
similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund),
but without indicating the manner in which proxies or consents are to
be voted; and
(h) pursuant to Certificates to pay interest, taxes,
management fees or operating expenses (including, without limitation
thereto, Board of Trustees' fees and expenses, and fees for legal,
accounting and auditing services), which Certificates set forth the
name and address of the person to whom payment is to be made, state
the purpose of such payment and designate the Series for whose
account the payment is to be made.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or
the Depository, shall:
(a) promptly execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and
any other instruments whereby the authority of the Fund as owner of
any Securities held by the Custodian hereunder for the Series
specified in such Certificate may be exercised;
(b) promptly deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in exchange
for other Securities or cash issued or paid in connection with the
liquidation, reorganization,
-9-
<PAGE>
refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any right, warrant or conversion
privilege and receive and hold hereunder specifically allocated to
such Series any cash or other Securities received in exchange;
(c) promptly deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series
such certificates of deposit, interim receipts or other instruments
or documents as may be issued to it to evidence such delivery;
(d) promptly make such transfers or exchanges of the
assets of the Series specified in such Certificate, and take such
other steps as shall be stated in such Certificate to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) promptly present for payment and collect the amount
payable upon Securities not described in preceding paragraph 5(b) of
this Article which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein,
the Custodian shall not be required to obtain possession of any
instrument or certificate representing any Futures Contract, any
Option, or any Futures Contract Option until after it shall have
determined, or shall have received a Certificate from the Fund
stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than
the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply
with Section 17(f) of the Investment Company Act of 1940, as amended,
in connection with the purchase, sale, settlement, closing-out or
writing of Futures Contracts, Options, or Futures Contract Options
by making payments or deliveries specified in Certificates received
by the Custodian in connection with any such purchase, sale, writing,
settlement or closing-out upon its receipt from a broker, dealer, or
futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by
brokers, dealers, or futures commission merchants with respect to
such Futures Contracts, Options, or
-10-
<PAGE>
Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures com-mission
merchant, in book-entry form or otherwise, in the name of the
Custodian (or any nominee of the Custodian) as custodian for the
Fund, provided, however, that notwithstanding the foregoing,
payments to or deliveries from the Margin Account, and payments with
respect to Securities to which a Margin Account relates, shall be
made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision in this
Agreement to the contrary, make payment for any Futures Contract,
Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian
of such instrument or such certificate, and deliver any Futures
Contract, Option or Futures Contract Option for which such
instruments or such certificates are available only against receipt
by the Custodian of payment therefor. Any such instrument or
certificate delivered to the Custodian shall be held by the Custodian
hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a Futures
Contract Option, the Fund shall deliver to the Custodian (i) with
respect to each purchase of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each purchase of
Money Market Securities, a Certificate or Oral Instructions,
specifying with respect to each such purchase: (i) the Series to
which such Securities are to be specifically allocated; (ii) the name
of the issuer and the title of the Securities; (iii) the number of
shares or the principal amount purchased and accrued interest, if
any; (iv) the date of purchase and settlement; (v) the purchase price
per unit; (vi) the total amount payable upon such purchase; (vii) the
name of the person from whom or the broker through whom the purchase
was made, and the name of the clearing broker, if any; and (viii) the
name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay
to the broker specified in the Certificate out of the money held for
the account of such Series the total amount payable upon such
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<PAGE>
purchase, provided that the same conforms to the total amount payable
as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other
than a sale of any Option, Futures Contract, Futures Contract Option,
or any Reverse Repurchase Agreement, the Fund shall deliver to the
Custodian (i) with respect to each sale of Securities which are not
Money Market Securities, a Certificate, and (ii) with respect to each
sale of Money Market Securities, a Certificate or Oral Instructions,
specifying with respect to each such sale: (i) the Series to which
such Securities were specifically allocated; (ii) the name of the
issuer and the title of the Security; (iii) the number of shares or
principal amount sold, and accrued interest, if any; (iv) the date of
sale; (v) the sale price per unit; (vi) the total amount payable to
the Fund upon such sale; (vii) the name of the broker through whom or
the person to whom the sale was made, and the name of the clearing
broker, if any; and (viii) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the
Securities specifically allocated to such Series to the broker
specified in the Certificate against payment of the total amount
payable to the Fund upon such sale, provided that the same conforms
to the total amount payable as set forth in such Certificate or Oral
Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to each Option purchased: (a) the Series to which such Option
is specifically allocated; (b) the type of Option (put or call); (c)
the name of the issuer and the title and number of shares subject to
such Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the
dates of purchase and settlement; (g) the total amount payable by the
Fund in connection with such purchase; (h) the name of the Clearing
Member through whom such Option was purchased; and (i) the name of
the broker to whom payment is to be made. The Custodian shall pay,
upon receipt of a Clearing Member's statement confirming the
purchase of such Option held by such Clearing Member for the account
of the Custodian (or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of money held for the
account of the Series to which such Option is to be
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<PAGE>
specifically allocated, the total amount payable upon such purchase
to the Clearing Member through whom the purchase was made, provided
that the same conforms to the total amount payable as set forth in
such Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to each such sale:
(a) the Series to which such Option was specifically allocated; (b)
the type of Option (put or call); (c) the name of the issuer and the
title and number of shares subject to such Option or, in the case of
a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (i)
the sale price; (e) the date of settlement; (f) the total amount
payable to the Fund upon such sale; and (g) the name of the Clearing
Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding paragraph
1 of this Article with respect to such Option against payment to the
Custodian of the total amount payable to the Fund, provided that the
same conforms to the total amount payable as set forth in such
Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to
such Call Option: (a) the Series to which such Call Option was
specifically allocated; (b) the name of the issuer and the title and
number of shares subject to the Call Option; (c) the expiration date;
(d) the date of exercise and settlement; (e) the exercise price per
share; (f) the total amount to be paid by the Fund upon such
exercise; and (g) the name of the Clearing Member through whom such
Call Option was exercised. The Custodian shall, upon receipt of the
Securities underlying the Call Option which was exercised, pay out of
the money held for the account of the Series to which such Call
Option was specifically allocated the total amount payable to the
Clearing Member through whom the Call Option was exercised, provided
that the same conforms to the total amount payable as set forth in
such Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to
such Put Option: (a) the Series to which such Put Option was
specifically allocated; (b) the name of the issuer and the title and
number of shares subject to the Put Option; (c) the expiration date;
(d) the date of exercise
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and settlement; (e) the exercise price per share; (f) the total
amount to be paid to the Fund upon such exercise; and (g) the name of
the Clearing Member through whom such Put Option was exercised. The
Custodian shall, upon receipt of the amount payable upon the exercise
of the Put Option, deliver or direct the Depository to deliver the
Securities specifically allocated to such Series, provided the same
conforms to the amount payable to the Fund as set forth in such
Certificate.
5. Promptly after the exercise by the Fund of any Stock Index
Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund
shall deliver to the Custodian a Certificate specifying with respect
to such Stock Index Option: (a) the Series to which such Stock Index
Option was specifically allocated; (b) the type of Stock Index
Option (put or call); (c) the number of Options being exercised; (d)
the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by
the Fund in connection with such exercise; and (h) the Clearing
Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Covered Call Option: (a) the Series for which such
Covered Call Option was written; (b) the name of the issuer and the
title and number of shares for which the Covered Call Option was
written and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund; (f) the
date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The
Custodian shall deliver or cause to be delivered, in exchange for
receipt of the premium specified in the Certificate with respect to
such Covered Call Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members dealing in Covered
Call Options and shall impose, or direct the Depository to impose,
upon the underlying Securities specified in the Certificate
specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the
Custodian has the right, upon prior written notification to the Fund,
at any time to refuse to issue any receipts for Securities in the
possession of the Custodian and not deposited with the Depository
underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is exercised,
the Fund shall promptly deliver to the Custodian a Certificate
instructing the Custodian to deliver, or to direct
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<PAGE>
the Depository to deliver, the Securities subject to such Covered
Call Option and specifying: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the
Clearing Member to whom the underlying Securities are to be
delivered; and (d) the total amount payable to the Fund upon such
delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian
shall deliver, or direct the Depository to deliver, the underlying
Securities as specified in the Certificate against payment of the
amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series for which such Put Option
was written; (b) the name of the issuer and the title and number of
shares for which the Put Option is written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is
written; (g) the name of the Clearing Member through whom the premium
is to be received and to whom a Put Option guarantee letter is to be
delivered; (h) the amount of cash, and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; and (i) the
amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account
for such Series. The Custodian shall, after making the deposits into
the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the
Custodian on the date hereof, and deliver the same to the Clearing
Member specified in the Certificate against receipt of the premium
specified in said Certificate. Notwithstanding the foregoing, the
Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of
the representations contained therein.
9. Whenever a Put Option written by the Fund and described in
the preceding paragraph is exercised, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the Series to which
such Put Option was written; (b) the name of the issuer and title and
number of shares subject to the Put Option; (c) the Clearing Member
from whom the underlying Securities are to be received; (d) the total
amount payable by the Fund upon such delivery; (e) the amount of cash
and/or the amount and kind of Securities specifically allocated to
such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the
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<PAGE>
amount and kind of Securities, specifically allocated to such Series,
if any, to be withdrawn from the Senior Security Account. Upon the
return and/or cancellation of any Put Option guarantee letter or
similar document issued by the Custodian in connection with such Put
Option, the Custodian shall pay out of the money held for the account
of the Series to which such Put Option was specifically allocated the
total amount payable to the Clearing Member specified in the
Certificate as set forth in such Certificate against delivery of such
Securities, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Stock Index Option: (a) the Series for which such
Stock Index Option was written; (b) whether such Stock Index Option
is a put or a call; (c) the number of options written; (d) the stock
index to which such Option relates; (e) the expiration date; (f) the
exercise price; (g) the Clearing Member through whom such Option was
written; (h) the premium to be received by the Fund; (i) the amount
of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior
Security Account for such Series; (j) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has
been established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into the
Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has specifically
agreed to issue, which are in accordance with the customs prevailing
among Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or (2) make
the deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and
described in the preceding paragraph of this Article is exercised,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the Series
for which such Stock Index Option was written; (b) such information
as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index
Option is being exercised; (d) the total amount payable upon such
exercise, and whether such amount is to be paid by or to the Fund;
(e)
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<PAGE>
the amount of cash and/or amount and kind of Securities, if any, to
be withdrawn from the Margin Account; and (f) the amount of cash
and/or amount and kind of Securities, if any, to be withdrawn from
the Senior Security Account for such Series; and the amount of cash
and/or the amount and kind of Securities, if any, to be withdrawn
from the Collateral Account for such Series. Upon the return and/or
cancellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay out of
the money held for the account of the Series to which such Stock
Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as
specified therein.
12. Whenever the Fund purchases any Option identical to a
previously written Option described in paragraphs, 6, 8 or 10 of this
Article in a transaction expressly designated as a "Closing Purchase
Transaction" in order to liquidate its position as a writer of an
Option, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to the Option being purchased:
(a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer
and the title and number of shares subject to the Option, or, in the
case of a Stock Index Option, the stock index to which such Option
relates and the number of Options held; (d) the exercise price; (e)
the premium to be paid by the Fund; (f) the expiration date; (g) the
type of Option (put or call); (h) the date of such purchase; (i) the
name of the Clearing Member to whom the premium is to be paid; and
(j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin
Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium and the return and/or cancellation
of any receipt issued pursuant to paragraphs 6, 8 or 10 of this
Article with respect to the Option being liquidated through the
Closing Purchase Transaction, the Custodian shall remove, or direct
the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to any Option purchased or written
by the Fund and described in this Article, the Custodian shall delete
such Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein, and upon the return and/or
cancellation of any receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified
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in a Certificate received in connection with such expiration,
exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Futures Contract, (or with respect to any number of
identical Futures Contract(s)): (a) the Series for which the Futures
Contract is being entered; (b) the category of Futures Contract (the
name of the underlying stock index or financial instrument); (c) the
number of identical Futures Contracts entered into; (d) the delivery
or settlement date of the Futures Contract(s); (e) the date the
Futures Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going short)
on such Futures Contract(s); (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker, dealer,
or futures commission merchant through whom the Futures Contract was
entered into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make
the deposits, if any, to the Margin Account in accordance with the
terms and conditions of the Margin Account Agreement. The Custodian
shall make payment out of the money specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate
and deposit in the Senior Security Account for such Series the amount
of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or futures
commission merchant with respect to an outstanding Futures Contract,
shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with
respect to an outstanding Futures Contract, shall be received and
dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder
is retained by the Fund until delivery or settlement
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is made on such Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to a Stock Index
Futures Contract, the total cash settlement amount to be paid or
received, and with respect to a Financial Futures Contract, the
Securities and/or amount of cash to be delivered or received; (c) the
broker, dealer, or futures commission merchant to or from whom
payment or delivery is to be made or received; and (d) the amount of
cash and/or Securities to be withdrawn from the Senior Security
Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures
Contract from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate specifying: (a) the
items of information required in a Certificate described in paragraph
1 of this Article, and (b) the Futures Contract being offset. The
Custodian shall make payment out of the money specifically allocated
to such Series of the fee or commission, if any, specified in the
Certificate and delete the Futures Contract being offset from the
statements delivered to the Fund pursuant to paragraph 3 of Article
III herein, and make such withdrawals from the Senior Security
Account for such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to
the contrary, the Custodian shall deliver cash and Securities to a
futures commission merchant upon receipt of a Certificate from the
Fund specifying: (a) the name of the futures commission merchant; (b)
the specific cash and Securities to be delivered; (c) the date of
such delivery; and (d) the date of the agreement between the Fund and
such futures commission merchant entered pursuant to Rule 17f-6 under
the Investment Company Act 1940, as amended. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and
warranty by the Fund that the Rule 17f-6 agreement has been duly
authorized, executed and delivered by the Fund and the futures
commission merchant and complies with Rule 17f-6, and (y) an
agreement by the Fund that the Custodian shall not be liable for the
acts or omissions of any such futures commission merchant.
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ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option
by the Fund, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Futures Contract Option:
(i) the Series to which such Option is specifically allocated; (ii)
the type of Futures Contract Option (put or call); (iii) the type of
Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option
purchased; (iv) the expiration date; (v) the exercise price; (vi) the
dates of purchase and settlement; (vii) the amount of premium to be
paid by the Fund upon such purchase; (viii) the name of the broker or
futures commission merchant through whom such option was purchased;
and (ix) the name of the broker, or futures commission merchant, to
whom payment is to be made. The Custodian shall pay out of the money
specifically allocated to such Series, the total amount to be paid
upon such purchase to the broker or futures commissions merchant
through whom the purchase was made, provided that the same conforms
to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to each such sale: (a) the Series to which such Futures
Contract Option was specifically allocated; (i) the type of Futures
Contract Option (put or call); (ii) the type of Futures Contract and
such other information as may be necessary to identify the Futures
Contract underlying the Futures Contract Option; (iii) the date of
sale; (iv) the sale price; (v) the date of settlement; (vi) the total
amount payable to the Fund upon such sale; and (vii) the name of the
broker or futures commission merchant through whom the sale was made.
The Custodian shall consent to the cancellation of the Futures
Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the
total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option (put or call)
being exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the date of exercise; (e) the name of
the broker or futures
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commission merchant through whom the Futures Contract Option is
exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of
cash and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall make,
out of the money and Securities specifically allocated to such
Series, the payments, if any, and the deposits, if any, into the
Senior Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made by
the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the
Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series for
which such Futures Contract Option was written; (b) the type of
Futures Contract Option (put or call); (c) the type of Futures
Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the
expiration date; (e) the exercise price; (f) the premium to be
received by the Fund; (g) the name of the broker or futures
commission merchant through whom the premium is to be received; and
(h) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such Series.
The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically
allocated to such Series the deposits into the Senior Security
Account, if any, as specified in the Certificate. The deposits, if
any, to be made to the Margin Account shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account
Agreement.
5. Whenever a Futures Contract Option written by the Fund
which is a call is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such
Futures Contract Option was specifically allocated; (b) the
particular Futures Contract Option exercised; (c) the type of Futures
Contract underlying the Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any,
payable to the Fund upon such exercise; (f) the net total amount, if
any, payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall, upon
its receipt of the net total amount payable to the Fund, if any,
specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security
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Account as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
6. Whenever a Futures Contract Option which is written by the
Fund and which is a put is exercised, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the Series to which
such Option was specifically allocated; (b) the particular Futures
Contract Option exercised; (c) the type of Futures Contract
underlying such Futures Contract Option; (d) the name of the broker
or futures commission merchant through whom such Futures Contract
Option is exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by
the Fund upon such exercise; and (g) the amount and kind of
Securities and/or cash to be withdrawn from or deposited in, the
Senior Security Account for such Series, if any. The Custodian shall,
upon its receipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in
the Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option
identical to a previously written Futures Contract Option described
in this Article in order to liquidate its position as a writer of
such Futures Contract Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to the Futures
Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing
transaction; (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Option Contract; (d) the exercise price; (e)
the premium to be paid by the Fund; (f) the expiration date; (g) the
name of the broker or futures commission merchant to whom the premium
is to be paid; and (h) the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Senior Security
Account for such Series. The Custodian shall effect the withdrawals
from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
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8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or
purchased by the Fund and described in this Article, the Custodian
shall (a) delete such Futures Contract Option from the statements
delivered to the Fund pursuant to paragraph 3 of Article III herein
and, (b) make such withdrawals from and/or in the case of an exercise
such deposits into the Senior Security Account as may be specified in
a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise
of a Futures Contract Option described in this Article shall be
subject to Article VI hereof.
10. Notwithstanding any other provision in this Agreement to
the contrary, the Custodian shall deliver cash and Securities to a
futures commission merchant upon receipt of a Certificate from the
Fund specifying: (a) the name of the futures commission merchant; (b)
the specific cash and Securities to be delivered; (c) the date of
such delivery; and (d) the date of the agreement between the Fund and
such futures commission merchant entered pursuant to Rule 17f-6 under
the Investment Company Act 1940, as amended. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and
warranty by the Fund that the Rule 17f-6 agreement has been duly
authorized, executed and delivered by the Fund and the futures
commission merchant and complies with Rule 17f-6, and (y) an
agreement by the Fund that the Custodian shall not be liable for the
acts or omissions of any such futures commission merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund,
the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b)
the name of the issuer and the title of the Security; (c) the number
of shares or principal amount sold, and accrued interest or
dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon
such sale, if any, (g) the amount of cash and/or the amount and kind
of Securities, if any, which are to be deposited in a Margin Account
and the name in which such Margin Account has been or is to be
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established; (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in a Senior Security Account, and
(i) the name of the broker through whom such short sale was made. The
Custodian shall upon its receipt of a statement from such broker
confirming such sale and that the total amount credited to the Fund
upon such sale, if any, as specified in the Certificate is held by
such broker for the account of the Custodian (or any nominee of the
Custodian) as custodian of the Fund, issue a receipt or make the
deposits into the Margin Account and the Senior Security Account
specified in the Certificate.
2. In connection with the closing-out of any short sale, the
Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to each such closing-out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title
of the Security; (c) the number of shares or the principal amount,
and accrued interest or dividends, if any, required to effect such
closing-out to be delivered to the broker; (d) the dates of closing-
out and settlement; (e) the purchase price per unit; (f) the net
total amount payable to the Fund upon such closing-out; (g) the net
total amount payable to the broker upon such closing-out; (h) the
amount of cash and the amount and kind of Securities to be withdrawn,
if any, from the Margin Account; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account; and (j) the name of the broker through whom
the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if
any, issued by the Custodian with respect to the short sale being
closed-out, pay out of the money held for the account of the Fund to
the broker the net total amount payable to the broker, and make the
withdrawals from the Margin Account and the Senior Security Account,
as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate, or
in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions specifying: (a) the
Series for which the Reverse Repurchase Agreement is entered; (b) the
total amount payable to the Fund
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in connection with such Reverse Repurchase Agreement and specifically
allocated to such Series; (c) the broker or dealer through or with
whom the Reverse Repurchase Agreement is entered; (d) the amount and
kind of Securities to be delivered by the Fund to such broker or
dealer; (e) the date of such Reverse Repurchase Agreement; and (f)
the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior
Security Account for such Series in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of the total
amount payable to the Fund specified in the Certificate or Oral
Instructions make the delivery to the broker or dealer, and the
deposits, if any, to the Senior Security Account, specified in such
Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement
described in preceding paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or
Oral Instructions to the Custodian specifying: (a) the Reverse
Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection
with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in
connection with such termination; (d) the date of termination; (e)
the name of the broker or dealer with or through whom the Reverse
Repurchase Agreement is to be terminated; and (f) the amount of cash
and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by the
Fund specified in the Certificate or Oral Instructions, make the
payment to the broker or dealer, and the withdrawals, if any, from
the Senior Security Account, specified in such Certificate or Oral
Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian hereunder,
the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan: (a) the Series
to which the loaned Securities are specifically allocated; (b) the
name of the issuer and the title of the Securities, (c) the number of
shares or the
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principal amount loaned, (d) the date of loan and delivery, (e) the
total amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the premium,
if any, separately identified, and (f) the name of the broker,
dealer, or financial institution to which the loan was made. The
Custodian shall deliver the Securities thus designated to the broker,
dealer or financial institution to which the loan was made upon
receipt of the total amount designated as to be delivered against the
loan of Securities. The Custodian may accept payment in connection
with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check
payable to the order of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver Securities in accordance with
the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities
by the Fund, the Fund shall deliver or cause to be delivered to the
Custodian a Certificate specifying with respect to each such loan
termination and return of Securities: (a) the Series to which the
loaned Securities are specifically allocated; (b) the name of the
issuer and the title of the Securities to be returned, (c) the number
of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any
offsetting credits as described in said Certificate), and (f) the
name of the broker, dealer, or financial institution from which the
Securities will be returned. The Custodian shall receive all
Securities returned from the broker, dealer, or financial institution
to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the total
amount payable upon such return of Securities as set forth in the
Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits
to, or withdrawals from, a Senior Security Account as specified in a
Certificate received by the Custodian. Such Certificate shall specify
the Series for which such deposit or withdrawal is to be made and the
amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited in, or withdrawn from, such
Senior
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Security Account for such Series. In the event that the Fund fails to
specify in a Certificate the Series, the name of the issuer, the
title and the number of shares or the principal amount of any
particular Securities to be deposited by the Custodian into, or
withdrawn from, a Senior Securities Account, the Custodian shall be
under no obligation to make any such deposit or withdrawal and shall
so notify the Fund.
2. The Custodian shall make deliveries or payments from a
Margin Account to the broker, dealer, futures commission merchant or
Clearing Member in whose name, or for whose benefit, the account was
established as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian in
any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on any
such property whenever the Custodian has made payment or delivery
pursuant to any Put Option guarantee letter or similar document or
any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are
less than the Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such deficiency shall be a
debt owed the Custodian by the Fund within the scope of Article XIV
herein.
5. On each business day the Custodian shall furnish the Fund
with a statement with respect to each Margin Account in which money
or Securities are held specifying as of the close of business on the
previous business day: (a) the name of the Margin Account; (b) the
amount and kind of Securities held therein; and (c) the amount of
money held therein. The Custodian shall make available upon request
to any broker, dealer, or futures commission merchant specified in
the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day
in which cash and/or Securities are maintained in a Collateral
Account for any Series, the Custodian shall furnish the Fund with a
statement with respect to such Collateral Account specifying the
amount of cash and/or the amount and kind
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of Securities held therein. No later than the close of business next
succeeding the delivery to the Fund of such statement, the Fund
shall furnish to the Custodian a Certificate specifying the then
market value of the Securities described in such statement. In the
event such then market value is indicated to be less than the
Custodian's obligation with respect to any outstanding Put Option
guarantee letter or similar document, the Fund shall promptly specify
in a Certificate the additional cash and/or Securities to be
deposited in such Collateral Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Trustees of the Fund, certified by the
Secretary or any Assistant Secretary, either (i) setting forth with
respect to the Series specified therein the date of the declaration
of a dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable
to the Dividend Agent and any sub-dividend agent or co-dividend agent
of the Fund on the payment date, or (ii) authorizing with respect to
the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian to rely
on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per Share of such Series to
the shareholders of record as of that date and the total amount
payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall
pay out of the money held for the account of each Series the total
amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund with respect to such Series.
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ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver
to the Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and
price; and
(b) the amount of money to be received by the Custodian
for the sale of such Shares and specifically allocated to the
separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the name
of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of
the money held for the account of such Series, all original issue or
other taxes required to be paid by the Fund in connection with such
issuance upon the receipt of a Certificate specifying the amount to
be paid.
4. Except as provided hereinafter, whenever the Fund desires
the Custodian to make payment out of the money held by the Custodian
hereunder in connection with a redemption of any Shares, it shall
furnish to the Custodian a Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting
forth the Series and number of Shares received by the Transfer Agent
for redemption and that such Shares are in good form for redemption,
the Custodian shall make payment to the Transfer Agent out of the
money held in the separate account in the name of the Series the
total amount specified in the Certificate issued pursuant to the
foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed pursuant
to any check redemption privilege which may from time to time be
offered by the Fund, the Custodian, unless otherwise instructed by a
Certificate, shall, upon receipt of
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an advice from the Fund or its agent setting forth that the
redemption is in good form for redemption in accordance with the
check redemption procedure, honor the check presented as part of such
check redemption privilege out of the money held in the separate
account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds
on behalf of any Series which results in an overdraft because the
money held by the Custodian in the separate account for such Series
shall be insufficient to pay the total amount payable upon a purchase
of Securities specifically allocated to such Series, as set forth in
a Certificate or Oral Instructions, or which results in an overdraft
in the separate account of such Series for some other reason, or if
the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New
York under the Fund's Cash Management and Related Services Agreement
(except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan
made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum
(based on a 360-day year for the actual number of days involved)
equal to 1/2% over Custodian's prime commercial lending rate in
effect from time to time, such rate to be adjusted on the effective
date of any change in such prime commercial lending rate but in no
event to be less than 6% per annum. In addition, the Fund hereby
agrees that the Custodian shall have a continuing lien, security
interest, and security entitlement in and to any property including
any investment property or any financial asset specifically allocated
to such Series at any time held by it for the benefit of such Series
or in which the Fund may have an interest which is then in the
Custodian's possession or control or in possession or control of any
third party acting in the Custodian's behalf, provided that the
amount of such lien shall be limited to property having a value from
time to time equal to the amount of the overdraft or indebtedness
plus interest thereon. The Fund authorizes the Custodian, in its sole
discretion, at any time to charge any such overdraft or indebtedness
together with interest due thereon against any balance of account
standing to such Series' credit on the Custodian's books. In
addition,
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the Fund hereby covenants that on each Business Day on which either
it intends to enter a Reverse Repurchase Agreement and/or otherwise
borrow from a third party, or which next succeeds a Business Day on
which at the close of business the Fund had outstanding a Reverse
Repurchase Agreement or such a borrowing, it shall prior to 9 a.m.,
New York City time, advise the Custodian, in writing, of each such
borrowing, shall specify the Series to which the same relates, and
shall not incur any indebtedness not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for investment
or for temporary or emergency purposes using Securities held by the
Custodian hereunder as collateral for such borrowings, a notice or
undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
each such borrowing: (a) the Series to which such borrowing relates;
(b) the name of the bank, (c) the amount and terms of the borrowing,
which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the
total amount payable to the Fund on the borrowing date, (g) the
market value of Securities to be delivered as collateral for such
loan, including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities, and (h)
a statement specifying whether such loan is for investment purposes
or for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date
specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to
the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to
all rights therein given the lending bank by virtue of any promissory
note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to
collateralize further any transaction described in this paragraph.
The Fund shall cause all Securities released from collateral status
to be returned directly to the Custodian, and the Custodian shall
receive from time to time such return
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of collateral as may be tendered to it. In the event that the Fund
fails to specify in a Certificate the Series, the name of the issuer,
the title and number of shares or the principal amount of any
particular Securities to be delivered as collateral by the Custodian,
the Custodian shall not be under any obligation to deliver any
Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a
Fund or its agents in order for the Fund or its agents to transmit
Instructions to the Custodian (the "Software"), the Custodian grants
to such Fund and its agents a personal, nontransferable and
nonexclusive license to use the Software solely for the purpose of
transmitting Instructions to, and receiving communications from, the
Custodian in connection with its account(s). The Fund shall use the
Software solely for its own internal and proper business purposes,
and not in the operation of a service bureau, and agrees not to sell,
reproduce, lease or otherwise provide, directly or indirectly, the
Software or any portion thereof to any third party (other than its
agents) without the prior written consent of the Custodian. The Fund
acknowledges that the Custodian and its suppliers have title and
exclusive proprietary rights to the Software, including any trade
secrets or other ideas, concepts, know how, methodologies, or
information incorporated therein and the exclusive rights to any
copyrights, trademarks and patents (including registrations and
applications for registration of either) or statutory or legal
protections available with respect thereof. The Fund further
acknowledges that all or a part of the Software may be copyrighted or
trademarked (or a registration or claim made therefor) by the
Custodian or its suppliers. The Fund shall not take any action with
respect to the Software inconsistent with the foregoing
acknowledgments, nor shall the Fund attempt to decompile, reverse
engineer or modify the Software. The Fund may not copy, sell, lease
or provide, directly or indirectly, any of the Software or any
portion thereof to any other person or entity without the Custodian's
prior written consent. The Fund may not remove any statutory
copyright notice, or other notice including the software or on any
media containing the Software. The Fund shall reproduce any such
notice on any reproduction of the Software and shall add statutory
copyright notice or other notice to the Software or media upon the
Bank's request. Custodian agrees to provide reasonable training,
instruction manuals and access to Custodian's "help desk" in
connection
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with the Fund's user support necessary to use of the Software. At the
Fund's request, Custodian agrees to permit reasonable testing of the
Software by the Fund.
2. The Fund shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to
communications services, necessary for it to utilize the Software and
transmit Instructions to the Custodian. The Custodian shall not be
responsible for the reliability, compatibility with the Software or
availability of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Fund acknowledges that the Software, all data bases
made available to the Fund by utilizing the Software (other than data
bases relating solely to the assets of the Fund and transactions with
respect thereto), and any proprietary data, processes, information
and documentation (other than which are or become part of the public
domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential
property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses
with respect to its own confidential property and trade secrets and
shall neither make nor permit any disclosure (except as provided
above) without the prior written consent of the Custodian. Upon
termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all
copies of the Information which are in its possession or under its
control or which the Fund distributed to third parties. The
provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to
all Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own
expense, the Software from time to time without prior notice and the
Fund shall install new releases of the Software as the Custodian may
direct. The Fund agrees not to modify or attempt to modify the
Software without the Custodian's prior written consent. The Fund
acknowledges that any modifications to the Software, whether by the
Fund or the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
5. The Custodian and its manufacturers and suppliers make no
warranties or representations of any kind with regard to the Software
or the method(s) by which the Fund may transmit Instructions to the
Custodian, express or implied,
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including but not limited to any implied warranties of
merchantability or fitness for a particular purpose.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED
-------------------
BY UNITED STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY
CIRCUMSTANCES RESELL, DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE
DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO ANY OTHER COUNTRY. IF
THE CUSTODIAN DELIVERS THE SOFTWARE TO THE FUND OUTSIDE THE UNITED
STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN
ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY
TO U.S. LAWS PROHIBITED. The Fund hereby authorizes Custodian to
report its name and address to government agencies to which Custodian
is required to provide such information by law.
7. Where the method for transmitting Instructions by the Fund
involves an automatic systems acknowledgment by the Custodian of its
receipt of such Instructions, then in the absence of such
acknowledgment the Custodian shall not be liable for any failure to
act pursuant to such Instructions, the Fund may not claim that such
Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the
Custodian Instructions hereunder, it shall be the Fund's sole
responsibility to ensure that only persons duly authorized by the
Fund transmit such Instructions to the Custodian. The Fund will cause
all persons transmitting Instructions to the Custodian to treat
applicable user and authorization codes, passwords and authentication
keys with extreme care, and authorizes the Custodian to act in
accordance with and rely upon Instructions received by it pursuant
hereto, provided, however, that upon notification from the Fund of a
breach in security or errors in the Software, the Custodian will
follow such Instructions as the Fund may provide and its authority to
act upon Instructions received through the Software shall be revoked
until Custodian received a hard copy signed Certificate.
(b) The Fund hereby represents, acknowledges and agrees
that it is fully informed of the protections and risks associated
with the various methods of transmitting Instructions to the
Custodian.
9. The Fund hereby represents, warrants and covenants to the
Custodian that this Agreement has been duly approved by a resolution
of its Board of Trustees, and that its transmission of Instructions
pursuant hereto shall at all times comply with the Investment Company
Act.
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10. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of, its
ability to send Instructions as promptly as practicable, and in any
event within 24 hours after the earliest of (i) discovery thereof,
(ii) the Business Day on which discovery should have occurred through
the exercise of reasonable care and (iii) in the case of any error,
the date of actual receipt of the earliest notice which reflects such
error, it being agreed that discovery and receipt of notice may only
occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or
interruption in, or delay or unavailability of, the Fund's ability to
send Instructions.
11. Custodian will indemnify and hold harmless the Fund with
respect to any liability, damages, loss or claim incurred by or
brought against Fund by reason any claim or infringement against any
patent, copyright, license or other property right arising out or by
reason of the Fund's use of the Software in the form provided under
this Section. Custodian at its own expense will defend such action or
claim brought against Fund to the extent that it is based on a claim
that the Software in the form provided by Custodian infringes any
patents, copyrights, license or other property right, provided that
--------
Custodian is provided with reasonable written notice of such claim,
provided that the Fund has not settled, compromised or confessed any
such claim without the Custodian's written consent, in which event
Custodian shall have no liability or obligation hereunder, and
provided Fund cooperates with and assists Custodian in the defense of
such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of
any claim of infringement against any patent, copyright, license or
other property right, Custodian is enjoined from using the Software,
or if Custodian believes that the System is likely to become the
subject of a claim of infringement, Custodian at its option may in
its sole discretion either (a) at its expenses procure the right for
the Fund to continue to use the Software, or (b), replace or modify
the Software so as to make it non-infringing, or (c) may discontinue
the license granted herein upon written notice to Customer.
12. The Custodian agrees that it will, on behalf of itself and
its affiliates, agents, officers and employees, treat all information
relating to transactions affected by the Fund as confidential and not
to be disclosed to any person, other than the Fund and its other
service providers or as may be disclosed in the examination of any
books or records by any person lawfully entitled to examine the same,
except as may be authorized by the Fund by way of a Certificate.
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Notwithstanding the foregoing, Custodian may disclose any such
information to its counsel, its regulators, its auditors and to any
other person when it is advised by its counsel that it may be liable
for a failure to do so.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Securities for which the primary
market is outside the United States ("Foreign Securities") and other
assets, the foreign banking institutions and foreign securities
depositories and clearing agencies designated on Schedule I hereto
("Foreign Sub-Custodians"). The Fund may designate any additional
foreign sub-custodian with which the Custodian has an agreement for
such entity to act as the Custodian's agent, as its sub-custodian and
any such additional foreign sub-custodian shall be deemed added to
Schedule I. Upon receipt of a Certificate from the Fund, the
Custodian shall cease the employment of any one or more Foreign Sub-
Custodians for maintaining custody of the Fund's assets and such
Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each delivery of a Certificate to the Custodian in
connection with a transaction involving the use of a Foreign Sub-
Custodian shall constitute a representation and warranty by the Fund
that its Board of Trustees, or its third party foreign custody
manager as defined in Rule 17f-5 under the Investment Company Act of
1940, as amended, if any, has determined that use of such Foreign
Sub-Custodian satisfies the requirements of such Investment Company
Act of 1940 and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to
each Series of the Fund the Foreign Securities of such Series held by
each Foreign Sub-Custodian. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claims by the Fund or any Series against a Foreign Sub-
Custodian as a consequence of any loss, damage, cost, expense,
liability or claim sustained or incurred by the Fund or any Series if
and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
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4. Upon request of the Fund, the Custodian will, consistent
with the terms of the applicable Foreign Sub-Custodian agreement, use
reasonable efforts to arrange for the independent accountants of the
Fund to be afforded access to the books and records of any Foreign
Sub-Custodian insofar as such books and records relate to the
performance of such Foreign Sub-Custodian under its agreement with
the Custodian on behalf of the Fund.
5. Until the Fund has entered into a Delegation Agreement with
the Custodian pursuant to Rule 17f-5 (as amended on May 15, 1997)
under the Investment Company Act of 1940 or similar agreement, the
Custodian shall furnish annually to the Fund, as mutually agreed
upon, information concerning the Foreign Sub-Custodians employed by
the Custodian. Such Information shall be similar in kind and scope to
that furnished to the Fund in connection with the Fund's initial
approval of such Foreign Sub-Custodian. The Custodian also agrees to
use reasonable and diligent efforts to enforce its rights under the
relevant Foreign Sub-Custodian Agreement.
6. The Custodian shall transmit promptly to the Fund all
notices, reports or other written information received pertaining to
the Fund's Foreign Securities, including without limitation, notices
of corporate action, proxies and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for securities received for the
account of any Series and delivery of securities maintained for the
account of such Series may be effected in accordance with the
customary or established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to
the contrary, with respect to any losses or damages arising out of or
relating to any actions or omissions of any Foreign Sub-Custodian the
sole responsibility and liability of the Custodian shall be to take
appropriate action at the Fund's expense to recover such loss or
damage from the Foreign Sub-Custodian. It is expressly understood and
agreed that the Custodian's sole responsibility and liability shall
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be limited to amounts so recovered from the Foreign Sub-Custodian.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the
Fund shall promptly deliver to the Custodian a Certificate or Oral
Instructions specifying with respect to such FX Transaction: (i) the
Series to which such FX Transaction is specifically allocated; (b)
the type and amount of Currency to be purchased by the Fund; (c) the
type and amount of Currency to be sold by the Fund; (d) the date on
which the Currency to be purchased is to be delivered; (e) the date
on which the Currency to be sold is to be delivered; and (f) the name
of the person from whom or through whom such currencies are to be
purchased and sold. Unless otherwise instructed by a Certificate or
Oral Instructions, the Custodian shall deliver, or shall instruct a
Foreign Sub-Custodian to deliver, the Currency to be sold on the date
on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-Custodian
to receive, the Currency to be purchased on the date as set forth in
the Certificate.
2. Where the Currency to be sold is to be delivered on the
same day as the Currency to be purchased, as specified in the
Certificate or Oral Instructions, the Custodian or a Foreign Sub-
Custodian may arrange for such deliveries and receipts to be made in
accordance with the customs prevailing from time to time among
brokers or dealers in Currencies, and such receipt and delivery may
not be completed simultaneously. The Fund assumes all responsibility
and liability for all credit risks involved in connection with such
receipts and deliveries, which responsibility and liability shall
continue until the Currency to be received by the Fund has been
received in full.
3. Any FX Transaction effected by the Custodian in connection
with this Agreement may be entered with the Custodian, any office,
branch or subsidiary of The Bank of New York Company, Inc., or any
Foreign Sub-Custodian acting as principal or otherwise through
customary banking channels. The Fund may issue a standing Certificate
with respect to FX Transactions but the Custodian may establish rules
or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in
Securities or holding Currency. Without limiting
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the foregoing, the Fund shall bear the risks that rules or procedures
imposed by a Foreign Sub-Custodian or foreign depositories, exchange
controls, asset freezes or other laws, rules, regulations or orders
shall prohibit or impose burdens or costs on the transfer to, by or
for the account of the Fund of Securities or any cash held outside
the Fund's jurisdiction or denominated in Currency other than its
home jurisdiction or the conversion of cash from one Currency into
another currency. The Custodian shall not be obligated to substitute
another Currency for a Currency (including a Currency that is a
component of a Composite Currency Unit) whose transferability,
convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from
any of the foregoing events.
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance
of its duties hereunder, and except as hereinafter provided neither
the Custodian nor its nominee shall be liable for any loss or damage,
including reasonable counsel fees, resulting from its action or
omission to act or otherwise, either hereunder or under any Margin
Account Agreement, except for any such loss or damage arising out of
its own negligence or willful misconduct. In no event shall the
Custodian be liable to the Fund or any third party for special,
indirect or consequential damages or lost profits or loss of
business, arising under or in connection with this Agreement, even if
previously informed of the possibility of such damages and regardless
of the form of action. The Custodian may, with respect to questions
of law arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund (at the
Fund's expense), or of its own counsel (at its expense) and shall be
fully protected with respect to anything done or omitted by it in
good faith in conformity with such advice or opinion. The Custodian
shall be liable to the Fund for any loss or damage resulting from the
use of the Book-Entry System or any Depository arising by reason of
any negligence or willful misconduct on the part of the Custodian or
any of its employees or agents.
2. Without limiting the generality of the foregoing, the
Custodian shall be under no obligation to inquire into, and shall not
be liable for:
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(a) the validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase,
sale or writing thereof, or the propriety of the amount paid or
received therefor;
(b) the legality of the sale or redemption of any Shares,
or the propriety of the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any
dividend by the Fund;
(d) the legality of any borrowing by the Fund using
Securities as collateral;
(e) the legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that
any cash collateral delivered to it by a broker, dealer, or financial
institution or held by it at any time as a result of such loan of
portfolio Securities of the Fund is adequate collateral for the Fund
against any loss it might sustain as a result of such loan. The
Custodian specifically, but not by way of limitation, shall not be
under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall
be the sole responsibility of the Fund. In addition, the Custodian
shall be under no duty or obliga-tion to see that any broker, dealer
or financial institution to which portfolio Securities of the Fund
are lent pursuant to Article X of this Agreement makes payment to it
of any dividends or interest which are payable to or for the account
of the Fund during the period of such loan or at the termination of
such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not
paid and received when due; or
(f) the sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Senior Security Account
or Collateral Account in connection with transactions by the Fund. In
addition, the Custodian shall be under no duty or obligation to see
that any broker, dealer, futures commission merchant or Clearing
Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such
broker, dealer, futures commission merchant or Clearing Member, to
see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount
the Fund is entitled to receive, or to notify the Fund of the
Custodian's receipt or non-receipt of any such payment.
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3. The Custodian shall not be liable for, or considered to be
the Custodian of, any money, whether or not represented by any check,
draft, or other instrument for the payment of money, received by it
on behalf of the Fund until the Custodian actually receives and
collects such money directly or by the final crediting of the account
representing the Fund's interest at the Book-Entry System or the
Depository.
4. The Custodian shall have no responsibility and shall not be
liable for ascertaining or acting upon any calls, conversions,
exchange offers, tenders, interest rate changes or similar matters
relating to Securities held in the Depository, unless the Custodian
shall have actually received timely notice from the Depository. In no
event shall the Custodian have any responsibility or liability for
the failure of the Depository to collect, or for the late collection
or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be
redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on
Securities held in the Depository the Custodian shall make a claim
against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute
or defend any action, suit or proceeding in respect to any Securities
held by the Depository which in its reasonable opinion may involve it
in expense or liability, unless indemnity satisfactory to it against
all expense and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund from
the Transfer Agent of the Fund nor to take any action to effect
payment or distribution by the Transfer Agent of the Fund of any
amount paid by the Custodian to the Transfer Agent of the Fund in
accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount if the Securities upon
which such amount is payable are in default, or if payment is refused
after due demand or presentation, unless and until (i) it shall be
directed to take such action by a Certificate and (ii) it shall be
assured to its satisfaction of reimbursement of its costs and
expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking
institutions as Depository or Depositories, as Sub-Custodian or Sub-
Custodians, or as Co-Custodian or
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Co-Custodians including, but not limited to, banking institutions
located in foreign countries, of Securities and money at any time
owned by the Fund, upon such terms and conditions as may be approved
in a Certificate or contained in an agreement executed by the
Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation
(i) to ascertain whether any Securities at any time delivered to, or
held by it or by any Foreign Sub-Custodian, for the account of the
Fund and specifically allocated to a Series are such as properly may
be held by the Fund or such Series under the provisions of its then
current prospectus, or (ii) to ascertain whether any transactions by
the Fund, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian all reasonable out-of-pocket expenses
and such compensation as may be agreed upon in writing from time to
time between the Custodian and the Fund. The Custodian may charge
such compensation as is agreed to in writing and any expenses with
respect to a Series incurred by the Custodian in the performance of
its duties pursuant to such agreement against any money specifically
allocated to such Series. Unless and until the Fund instructs the
Custodian by a Certificate to apportion any loss, damage, liability
or expense among the Series in a specified manner, the Custodian
shall also be entitled to charge against any money held by it for the
account of a Series such Series' pro rata share (based on such
Series, net asset value at the time of the charge to the aggregate
net asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees, for which
it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the
expenses of sub-custodians and foreign branches of the Custodian
incurred in settling outside of New York City transactions involving
the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by the
Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any Oral
Instructions actually received by the Custodian hereinabove provided
for. The Fund agrees to forward to the Custodian a Certificate or
facsimile thereof confirming such Oral Instructions in such manner so
that such Certificate or
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facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the
close of business of the same day that such Oral Instructions are
given to the Custodian. The Fund agrees that the fact that such
confirming instructions are not received, or that contrary
instructions are received, by the Custodian shall in no way affect
the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the
Custodian shall incur no liability to the Fund in acting upon Oral
Instructions given to the Custodian hereunder concerning such
transactions provided such instructions reasonably appear to have
been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance with
the terms and conditions of any Margin Account Agreement. Without
limiting the generality of the foregoing, the Custodian shall be
under no duty to inquire into, and shall not be liable for, the
accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any
specification of any amount to be paid to a broker, dealer, futures
commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are in
the possession of the Custodian shall be the property of the Fund.
Such books and records shall be prepared and maintained as required
by the Investment Company Act of 1940, as amended, and other
applicable securities laws and rules and regulations. The Fund, or
the Fund's authorized representatives, including the Fund's
independent accountants shall have access to such books and records
during the Custodian's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be
provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its
reasonable expenses of providing such copies. Upon reasonable request
of the Fund, the Custodian shall provide in hard copy or on micro-
film, whichever the Custodian elects, any records included in any
such delivery which are maintained by the Custodian on a computer
disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its reasonable expenses of providing such hard copy or
micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C.,
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and with such reports on its own systems of internal accounting
control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save
the Custodian harmless from all liability, claims, losses and demands
whatsoever, including reasonable attorney's fees, howsoever arising
or incurred because of or in connection with this Agreement,
including the Custodian's payment or non-payment of checks pursuant
to paragraph 6 of Article XIII as part of any check redemption
privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or
willful misconduct.
15. Subject to the foregoing provisions of this Agreement,
including, without limitation, those contained in Article XVI and
XVII the Custodian may deliver and receive Securities, and receipts
with respect to such Securities, and arrange for payments to be made
and received by the Custodian in accordance with the customs
prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities
against payment, delivery of such Securities and receipt of payment
therefor may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in
connection with the Custodian's delivery of Securities pursuant to
instructions of the Fund, which responsibility and liability shall
continue until final payment in full has been received by the
Custodian.
16. Upon the occurrence of any event which causes or may cause
any loss, damage or expense to the Fund or a Series the Custodian
shall exercise its rights and remedies under the related agreement.
17. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement
by giving to the other party a notice in writing specifying the date
of such termination, which shall be not
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less than ninety (90) days after the date of giving of such notice.
In the event such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Trustees of the
Fund, certified by the Secretary or any Assistant Secretary, electing
to terminate this Agreement and designating a successor custodian or
custodians, each of which shall be a bank or trust company having not
less than $2,000,000 aggregate capital, surplus and undivided
profits. In the event such notice is given by the Custodian, the Fund
shall, on or before the termination date, deliver to the Custodian a
copy of a resolution of the Board of Trustees of the Fund, certified
by the Secretary or any Assistant Secretary, designating a successor
custodian or custodians. In the absence of such designation by the
Fund, the Custodian may designate a successor custodian which shall
be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall
upon receipt of a notice of acceptance by the successor custodian on
that date deliver directly to the successor custodian all Securities
and money then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or
the Custodian in accordance with the preceding paragraph, the Fund
shall upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of all Securities
(other than Securities held in the Book-Entry System which cannot be
delivered to the Fund) and money then owned by the Fund be deemed to
be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry
System which cannot be delivered to the Fund to hold such Securities
hereunder in accordance with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this
Agreement upon the date specified in a written notice in the event of
the "Bankruptcy" of The Bank of New York. As used in this sub-
paragraph, the term "Bankruptcy" shall mean The Bank of New York's
making a general assignment, arrangement or composition with or for
the benefit of its creditors, or instituting or having instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or the entry of an order for relief under any applicable
bankruptcy law or any relief under any bankruptcy or insolvency law
or other similar law affecting creditors rights, or if a petition is
presented for the winding up or
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liquidation of the party or the resolution is passed for its winding
up or liquidation, or it seeks, or becomes subject to, the
appointment of an administrator, receiver, trustee, custodian or
other similar official for it or for all or substantially all of its
assets or its taking any action in furtherance of, or indicating its
consent to approval of, or acquiescence in any of the foregoing.
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two
of the present Authorized Persons of the Fund under its seal, setting
forth the names and the signatures of the present Authorized Persons.
The Fund agrees to furnish to the Custodian a new Certificate in
similar form in the event that any such present Authorized Person
ceases to be an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until such
new Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon Oral
Instructions or signatures of the Authorized Persons as set forth in
the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at 90 Washington Street, New York, New
York 10286, or at such other place as the Custodian may from time to
time designate in writing.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be
sufficiently given if addressed to the Fund and mailed or delivered
to it at its office at the address for the Fund first above written,
or at such other place as the Fund may from time to time designate in
writing.
4. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement and approved by a resolution of the Board
of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the
Fund without the written consent of the
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Custodian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of the Fund's Board of
Trustees.
6. This Agreement and any account established thereunder shall
be construed in accordance with the laws of the State of New York
without giving effect to conflict of laws principles thereof. Each
party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute
arising hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument.
8. A copy of the Trust Instrument of the Fund is on file with
the Secretary of the State of Delaware, and notice is hereby given
that this instrument is executed on behalf of the Board of Trustees
of the Fund as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and
property of the Fund.
9. With respect to any obligation of the Fund, on behalf of
any Series, arising out of this Agreement, the Custodian shall look
for payment or satisfaction of such obligation solely to the assets
and property of the Series to which such obligation relates as though
the Series had separately contracted with the Custodian by separate
written instrument with respect to each Series.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers, thereunto duly
authorized and their respective seals to be hereunto affixed, as of
the day and year first above written.
MITCHELL HUTCHINS
INSTITUTIONAL SERIES
By:
----------------------------
Name:
Title:
[SEAL]
Attest:
-----------------------
THE BANK OF NEW YORK
[SEAL]
By:
----------------------------
Name:
Title:
Attest:
-----------------------
<PAGE>
Exhibit 8(a)
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 3rd day of August, 1998 between MITCHELL
HUTCHINS INSTITUTIONAL SERIES (the "Fund"), a Delaware business trust having its
principal place of business at 1285 Avenue of the Americas, New York, NY 10019
and FIRST DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts
corporation with principal offices at 4400 Computer Drive, Westboro,
Massachusetts 01581.
WITNESSETH
----------
WHEREAS, the Fund is authorized to issue Shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets;
WHEREAS, the Fund initially intends to offer Shares in that Portfolio
identified in the attached Exhibit 1, such Portfolio, together with all other
Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund, on behalf of the Portfolios, desires to appoint FDISG as
its transfer agent, dividend disbursing agent and agent in connection with
certain other activities and FDISG desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and FDISG agree as follows:
Article 1 Definitions.
-----------
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended from
time to time.
(b) "Authorized Person" shall be deemed to include (i) any authorized
officer of the Fund; or (ii) any person, whether or not such person is an
officer or employee of the Fund, duly authorized to give Oral Instructions
or Written Instructions on behalf of the Fund as indicated in writing to
FDISG from time to time.
(c) "Board of Directors" shall mean the Board of Directors or Board of
Trustees of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange Commission.
<PAGE>
(e) "Custodian" refers to any custodian or subcustodian of securities
and other property which the Fund may from time to time deposit, or cause
to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(f) "1934 Act" shall mean the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, all as amended from time to
time.
(g) "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder, all as amended from time to
time.
(h) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by FDISG from a person reasonably believed
by FDISG to be an Authorized Person;
(i) "Portfolio" shall mean each separate series of shares offered by
the Fund representing interests in a separate portfolio of securities and
other assets;
(j) "Prospectus" shall mean the most recently dated Fund Prospectus
and Statement of Additional Information, including any supplements thereto,
if any, which has become effective under the Securities Act of 1933 and the
1940 Act.
(k) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(l) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(m) "Written Instructions" shall mean a written communication signed
by a person reasonably believed by FDISG to be an Authorized Person and
actually received by FDISG. Written Instructions shall include manually
executed originals and authorized electronic transmissions, including
telefacsimile of a manually executed original or other process.
Article 2 Appointment of FDISG.
--------------------
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
FDISG as transfer agent and dividend disbursing agent for Shares of each
respective Portfolio of the Fund and as shareholder servicing agent for the
Fund, and FDISG hereby accepts such appointments and agrees to perform the
duties hereinafter set forth. (As used herein, "shareholder servicing agent"
refers to the services contemplated by this Agreement and not to those described
in the Prospectus as being provided by financial intermediaries, such as banks
and savings associations, to the holders of the Fund's Financial Intermediary
shares.)
2
<PAGE>
Article 3 Duties of FDISG.
---------------
3.1 FDISG shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend and
distribution functions; and performing shareholder account and
administrative agent functions in connection with the issuance, transfer
and redemption or repurchase (including coordination with the Custodian) of
Shares of each Portfolio, as more fully described in the written schedule
of Duties of FDISG annexed hereto as Schedule A and incorporated herein,
and in accordance with the terms of the Prospectus of the Fund on behalf of
the applicable Portfolio, applicable law and the procedures established
from time to time between FDISG and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant to Rule
17Ad-10(e) of the 1934 Act a record of the total number of Shares of each
Portfolio which are authorized, based upon data provided to it by the Fund,
and issued and outstanding. FDISG shall provide the Fund on a regular
basis with the total number of Shares of each Portfolio which are
authorized and issued and outstanding and shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of such Shares or
to take cognizance of any laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, FDISG shall be under no duty or obligation to inquire into, and
shall not be liable for: (i) the legality of the issuance or sale of any
Shares or the sufficiency of the amount to be received therefor; (ii) the
legality of the redemption of any Shares, or the propriety of the amount to
be paid therefor; (iii) the legality of the declaration of any dividend by
the Board of Directors, or the legality of the issuance of any Shares in
payment of any dividend; or (iv) the legality of any recapitalization or
readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to FDISG in writing those
transactions and assets to be treated as exempt from blue sky reporting for each
State and (ii) verify the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily activity for each
State. The responsibility of FDISG for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions subject to
blue sky compliance by the Fund and the reporting of such transactions to the
Fund as provided above.
3.3 In addition to the duties set forth herein, FDISG shall perform such
other duties and functions, and shall be paid such amounts therefor, as may from
time to time be agreed upon in writing between the Fund and FDISG.
3.4 FDISG shall cooperate with the Fund's independent public accountants
and shall take all reasonable actions in the performance of its obligations
under this Agreement to ensure
3
<PAGE>
that the necessary information is made available to such accountants for the
expression of their opinion, as required by the Fund. The Fund agrees to
reimburse FDISG for all reasonable out of pocket expenses incurred by FDISG in
connection with FDISG's compliance with this Section 3.4.
3.5 In addition to performing the foregoing services, the Fund hereby
engages FDISG as its non-exclusive service provider with respect to the
Print/Mail Services as set forth in Schedule B for the fees also identified in
Schedule B. FDISG agrees to perform the services and its obligations subject to
the terms and conditions of this Agreement, recognizing that certain of such
communications with Shareholders will originate directly from PaineWebber and
not be subject to the charges set forth in Schedule B.
Article 4 Recordkeeping and Other Information.
-----------------------------------
4.1 FDISG shall create and maintain all records required of it pursuant
to its duties hereunder and as set forth in Schedule A in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the 1940 Act. Where applicable, such records shall be maintained by
FDISG for the periods and in the places required by Rule 31a-2 under the 1940
Act.
4.2 To the extent required by Section 31 of the 1940 Act, FDISG agrees
that all such records prepared or maintained by FDISG relating to the services
to be performed by FDISG hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such section, and
will be surrendered promptly to the Fund on and in accordance with the Fund's
request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, FDISG will endeavor to notify the Fund of such
request and secure Written Instructions as to the handling of such request.
FDISG reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to comply with such request.
Article 5 Fund Instructions.
-----------------
5.1 FDISG will have no liability when acting upon Written or Oral
Instructions reasonably believed by FDISG to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. FDISG will also have no liability when processing Share
certificates which it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper countersignature of FDISG.
5.2 At any time, FDISG may request Written Instructions from the Fund
and may seek advice from legal counsel for the Fund, or its own legal counsel,
with respect to any matter arising in connection with this Agreement, and it
shall not be liable for any action taken or not taken or suffered by it in good
faith in accordance with such Written Instructions or in
4
<PAGE>
accordance with the opinion of counsel for the Fund or for FDISG, except that
FDISG remains liable for any action taken or not taken by it which constitutes
willful misfeasance, bad faith or negligence by FDISG or its employees or the
reckless disregard by FDISG or its employees of its duties and obligations under
this Agreement. Written Instructions requested by FDISG will be provided by the
Fund within a reasonable period of time.
5.3 FDISG, its officers, agents or employees, shall accept Oral
Instructions or Written Instructions given to them by any person representing or
acting on behalf of the Fund only if said representative is an Authorized
Person. The Fund agrees that all Oral Instructions shall be followed within one
business day by confirming Written Instructions, and that the Fund's failure to
so confirm shall not impair in any respect FDISG's right to rely on Oral
Instructions.
Article 6 Compensation.
------------
6.1 The Fund on behalf of each of the Portfolios will compensate FDISG
for the performance of its obligations hereunder in accordance with the fees set
forth in the written Fee Schedule annexed hereto as Schedule B and incorporated
herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed separately
for, reasonable out-of-pocket expenses incurred by FDISG in the performance of
its duties hereunder. Out-of-pocket expenses shall include, but shall not be
limited to, the items specified in the written schedule of out-of-pocket charges
annexed hereto as Schedule C and incorporated herein. Schedule C may be modified
by written agreement between the parties. Unspecified out-of-pocket expenses
shall be limited to those out-of-pocket expenses reasonably incurred by FDISG in
the performance of its obligations hereunder and pre-approved by the Fund.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all fees
and out-of-pocket expenses within fifteen (15) days following the receipt of the
respective invoice.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule B a revised Fee Schedule executed and dated by the
parties hereto.
Article 7 Documents.
---------
In connection with the appointment of FDISG, the Fund shall, on or
before the date this Agreement goes into effect, but in any case within a
reasonable period of time for FDISG to prepare to perform its duties hereunder,
deliver or caused to be delivered to FDISG the documents set forth in the
written schedule of Fund Documents annexed hereto as Schedule D.
Article 8 Transfer Agent System.
---------------------
8.1 FDISG shall retain title to and ownership of any and all data
bases, computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents,
5
<PAGE>
copyrights, trade secrets, and other related legal rights utilized by FDISG in
connection with the services provided by FDISG to the Fund herein (the "FDISG
System") provided, however, it is understood that the Fund shall retain
ownership of all Shareholder records and information maintained by FDISG on the
FDISG System.
8.2 FDISG hereby grants to the Fund a limited license to the FDISG
System for the sole and limited purpose of having FDISG provide the services
contemplated hereunder and nothing contained in this Agreement shall be
construed or interpreted otherwise and such license shall immediately terminate
with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund, or any third party acting on behalf of the Fund is provided with direct
access to the FDISG System for either account inquiry or to transmit transaction
information, including but not limited to maintenance, exchanges, purchases and
redemptions, such direct access capability shall be limited to direct entry to
the FDISG System by means of on-line mainframe terminal entry or PC emulation of
such mainframe terminal entry and any other non-conforming method of
transmission of information to the FDISG System is strictly prohibited without
the prior written consent of FDISG.
8.4 In the event that the Fund, including any affiliate or agent of the
Fund, or any third party desires to transmit certain transaction instructions
directly to the FDISG System and produce reports associated with these
transactions from a remote location, FDISG agrees to make available its
proprietary Remote Trade Entry ("RTE") Software. The Fund's use of RTE shall be
in accordance with the terms of this Agreement. Any third party utilizing RTE
shall execute and be bound by the terms and conditions of the Remote Trade Entry
License Agreement attached hereto as Exhibit 1 or such other agreement that is
acceptable to both the Fund and FDISG. FDISG hereby acknowledges that
Shareholders which utilize RTE shall in no event be deemed to be agents of the
Fund.
Article 9 Representations and Warranties.
------------------------------
9.1 FDISG represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory agency as
a transfer agent and such registration will remain in effect for the
duration of this Agreement; and
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<PAGE>
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to FDISG that:
(a) it is duly organized, existing and in good standing under the
laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933, as
amended, and the 1940 Act on behalf of each of the Portfolios is
currently effective and will remain effective, and all appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale; and
(e) all outstanding Shares are validly issued, fully paid and non-
assessable and when Shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its Prospectus with
respect to each Portfolio, such Shares shall be validly issued, fully
paid and non-assessable.
Article 10 Indemnification.
---------------
10.1 Except as set forth in Sections 10.2 and 10.3 below, FDISG shall
not be responsible for and the Fund on behalf of each Portfolio shall indemnify
and hold FDISG harmless from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), losses, damages, charges, payments and
liabilities of any sort or kind which may be asserted against FDISG or for which
FDISG may be held to be liable (a "Claim") arising out of or attributable to any
of the following:
(a) any actions of FDISG required to be taken pursuant to this
Agreement;
(b) FDISG's reasonable reliance on, or reasonable use of
information, data, records and documents (including but not limited to
magnetic tapes, computer printouts, hard copies and microfilm copies)
received by FDISG from the Fund, or any authorized third party acting on
behalf of the Fund in the performance of FDISG's duties and obligations
hereunder;
(c) the reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Fund on behalf
of the applicable Portfolio;
(d) the offer or sales of shares in violation of any requirement
under the
7
<PAGE>
securities laws or regulations of any state that such shares be
registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale
of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's negligence or
misconduct or the breach of any representation or warranty of the Fund
made herein.
10.2 FDISG shall not be indemnified under Section 10.1 against any
liability (or any expense incidental to such liability) arising out of the
willful misfeasance, bad faith or negligence of FDISG or its employees or the
reckless disregard by FDISG or its employees of its duties and obligations under
this Agreement.
10.3 FDISG shall indemnify and hold the Fund, on behalf of each
Portfolio, harmless from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), losses, damages, charges, payments and
liabilities of any sort or kind which may be asserted against the Fund or for
which the Fund may be held to be liable (a "Claim") arising out of or
attributable to the willful misfeasance, bad faith or negligence of FDISG or its
employees or the reckless disregard by FDISG or its employees of it duties and
obligations under this Agreement.
10.4 In any case in which a party may be asked to indemnify or hold the
other party harmless, the party seeking indemnification ("Indemnified Party")
will notify the other party promptly after identifying any situation which it
believes presents or appears to present a claim for indemnification against the
other party, although the failure to do so shall not prevent recovery by the
Indemnified Party, and shall keep the other party advised with respect to all
developments concerning such situation. The party who may be required to
indemnify ("Indemnifying Party") shall have the option to defend the Indemnified
Party against any Claim which may be the subject of this indemnification and in
the event that the Indemnifying Party so elects, such defense shall be conducted
by counsel chosen by the Indemnifying Party and satisfactory to the Indemnified
Party, and thereupon the Indemnifying Party shall take over complete defense of
the Claim and the Indemnified Party shall sustain no further legal or other
expenses in respect of such Claim. The Indemnified Party will not confess any
Claim or make any compromise in any case in which the Indemnifying Party will be
asked to provide indemnification, except with the Indemnifying Party's prior
written consent. The obligations of the parties hereto under this Article 10
shall survive the termination of this Agreement.
10.5 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Indemnifying Party becomes aware of the
event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
8
<PAGE>
10.6 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
the sole and exclusive remedy for claims or other actions or proceedings to
which a party's indemnification obligations pursuant to this Article 10 may
apply.
Article 11 Standard of Care and Limitation of Liability
--------------------------------------------
11.1 FDISG shall at all times act in good faith and agrees to use its
best efforts within commercially reasonable limits to ensure the accuracy of all
services performed under this Agreement, but assumes no responsibility for loss
or damage to the Fund unless said errors are caused by FDISG's own negligence,
bad faith, willful misconduct or that of its employees, or the reckless
disregard by FDISG or its employees of its duties and obligations under this
Agreement.
11.2 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.3 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
11.4 The members of the Board of Directors of the Fund and the
Shareholders of any Portfolio shall not be liable for any obligations of the
Fund or the Portfolios under this Agreement, and FDISG agrees, that in asserting
any rights or claims under this Agreement, it shall look only to the assets and
property of the Fund or the particular Portfolio in settlement of such right or
claims, and not to such members of the Board of Directors or Shareholders.
FDISG further agrees that it will look only to the assets and property of a
particular Portfolio in asserting any right or claims under this Agreement with
respect to services rendered with respect to that Portfolio and will not seek to
obtain settlement of such rights or claims from the assets of any other
Portfolio of the Fund.
Article 12 Consequential Damages.
---------------------
12.1 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL EITHER PARTY TO THIS AGREEMENT, ITS AFFILIATES OR ANY OF ITS OR
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER
ANY THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE
THEORY TO THE OTHER CONTRACTING PARTY FOR LOST PROFITS, EXEMPLARY, PUNITIVE,
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY
EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE
FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
--------------------
9
<PAGE>
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of five (5) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each
provided that it may be terminated by either party during a Renewal Term upon
written notice given at least sixty (60) days prior to termination.
13.3 In the event a termination notice is given by the Fund, it shall
be accompanied by a resolution of the Board of Directors, certified by the
Secretary of the Fund, designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Fund, FDISG will deliver
to such successor a certified list of shareholders of the Fund (with names and
addresses), and all other relevant books, records, correspondence and other Fund
records or data in the possession of FDISG, and FDISG will cooperate with the
Fund and any successor transfer agent or agents in the substitution process.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If FDISG is the Non-Defaulting Party, its termination of
this Agreement shall not constitute a waiver of any other rights or remedies of
FDISG with respect to services performed prior to such termination or rights of
FDISG to be reimbursed for out-of-pocket expenses. In all cases, termination by
the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting
Party of any other rights it might have under this Agreement or otherwise
against the Defaulting Party.
Article 14 Additional Portfolios.
---------------------
14.1 In the event that the Fund establishes one or more Portfolios in
addition to the Portfolio identified in Exhibit 1, with respect to which the
Fund desires to have FDISG render services as transfer agent under the terms
hereof, the Fund shall so notify FDISG in writing, and if FDISG agrees in
writing to provide such services, Exhibit 1 shall be amended to include such
additional Portfolios.
Article 15 Confidentiality.
---------------
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The
Fund and FDISG shall exercise at least the same degree of care, but not less
than reasonable care, to safeguard the confidentiality of the Confidential
Information of the other as it would exercise to protect its own confidential
information of a similar nature. The Fund and FDISG shall not duplicate, sell or
disclose to others the Confidential Information of the other, in whole or in
part, without the prior written
10
<PAGE>
permission of the other party, except as may be required by applicable law or at
the request of the Commission or other governmental agency. The parties further
agree that a breach of this Section 15.1 would irreparably damage the other
party and accordingly agree that each of them is entitled, without bond or other
security, to an injunction or injunctions to prevent breaches of this provision.
The Fund and FDISG may, however, disclose Confidential Information to their
respective parent corporation, their respective affiliates, their subsidiaries
and affiliated companies and employees, provided that each shall use reasonable
efforts to ensure that the Confidential Information is not duplicated or
disclosed in breach of this Agreement. The Fund and FDISG may also disclose the
Confidential Information to independent contractors, auditors, and professional
advisors. Notwithstanding the previous sentence, in no event shall either the
Fund or FDISG disclose the Confidential Information to any competitor of the
other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, the
Fund's shareholders, sales estimates, business plans, and internal
performance results relating to the past, present or future business
activities of the Fund or FDISG, their respective subsidiaries and
affiliated companies (including, with respect to the Fund, its
investment adviser and principal underwriter) and the customers, clients
and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or FDISG a
competitive advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
Article 16 Security and Disaster Recovery
------------------------------
16.1 FDISG represents and warrants that, to the best of its knowledge,
the various procedures and systems which FDISG has implemented with regard to
the safeguarding from loss or damage attributable to fire, theft or any other
cause (including provision for 24 hours a day restricted access) of the Fund's
blank checks, certificates, records and other data and
11
<PAGE>
FDISG's equipment, facilities and other property used in the performance of its
obligations hereunder are adequate, and that it will make such changes therein
from time to time as in its judgment are required for the secure performance of
its obligations hereunder. FDISG shall review such systems and procedures on a
periodic basis and the Fund shall have access to review these systems and
procedures.
16.2 FDISG, or an affiliate of FDISG, shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provision for periodic backup of computer files and data with respect
to the Fund and emergency use of electronic data processing equipment. In the
event of equipment failures, FDISG shall, at no additional expense to the Fund,
take all reasonable steps to minimize service interruptions. FDISG shall have no
liability with respect to the loss of data or service interruptions caused by
equipment failures, provided such loss or interruption is not caused by the
negligence of FDISG and provided further that FDISG has complied with the
provisions of this Article 16.
Article 17 Force Majeure.
-------------
17.1 Subject to the provisions of Article 16, no party shall be liable
for any default or delay in the performance of its obligations under this
Agreement if and to the extent such default or delay is caused, directly or
indirectly, by (i) fire, flood, elements of nature or other acts of God; (ii)
any outbreak or escalation of hostilities, war, riots or civil disorders in any
country, (iii) any act or omission of the other party or any governmental
authority; (iv) any labor disputes (whether or not the employees' demands are
reasonable or within the party's power to satisfy); or (v) nonperformance by a
third party or any similar cause beyond the reasonable control of such party,
including without limitation, failures or fluctuations in telecommunications or
other equipment. In any such event, the non-performing party shall be excused
from any further performance and observance of the obligations so affected only
for as long as such circumstances prevail and such party continues to use
commercially reasonable efforts to recommence performance or observance as soon
as practicable.
Article 18 Assignment and Subcontracting.
-----------------------------
18.1 This Agreement, its benefits and obligations shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned or otherwise
transferred by either party hereto, without the prior written consent of the
other party, which consent shall not be unreasonably withheld; provided,
however, that FDISG may, in its sole discretion, assign all its right, title and
interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. FDISG may, in its sole
discretion, engage subcontractors to perform any of the obligations contained in
this Agreement to be performed by FDISG; however, such subcontractors shall be
bound by the terms of this Agreement as though an original party hereto, and
FDISG shall be responsible for the performance of such subcontractors under the
terms and conditions of this Agreement as if such performance were its own,
unless such subcontractors are PaineWebber Incorporated, Mitchell Hutchins Asset
Management, Inc. or an affiliated person of either.
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18.2 Notwithstanding Section 18.1 above, FDISG may assign its rights
and delegate its duties under the Agreement to PaineWebber Incorporated or
Mitchell Hutchins Asset Management Inc., or an affiliated person of either, upon
mutual prior written acknowledgment of such assignment by FDISG and the Fund.
Article 19 Arbitration.
-----------
19.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
National Association of Securities Dealers in New York, New York in accordance
with its applicable rules, except that the Federal Rules of Evidence and the
Federal Rules of Civil Procedure with respect to the discovery process shall
apply.
19.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
19.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 19.
Article 20 Notice.
------
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or FDISG, shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To the Fund:
Mitchell Hutchins Institutional Series
1285 Avenue of the Americas
New York, NY 10019
Attention: Colleen McDermott
with copies to: Dianne E. O'Donnell, Secretary
To FDISG:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
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<PAGE>
with a copy to FDISG's General Counsel
Article 21 Governing Law/Venue.
-------------------
The laws of the State of New York, excluding the laws on conflicts of
laws, shall govern the interpretation, validity, and enforcement of this
Agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in New York City, and FDISG and
the Fund hereby submit themselves to the exclusive jurisdiction of those courts.
Article 22 Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 23 Captions.
--------
The captions of this Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
Article 24 Publicity.
---------
Neither FDISG nor the Fund shall release or publish news releases,
public announcements, advertising or other publicity relating to this Agreement
or to the transactions contemplated by it without the prior review and written
approval of the other party; provided, however, that either party may make such
disclosures as are required by legal, accounting or regulatory requirements.
Article 25 Relationship of Parties.
-----------------------
25.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
25.2 Upon reasonable notice by the Fund, FDISG shall make available
during regular business hours such of its facilities and premises employed in
connection with the performance of its duties under this Agreement for
reasonable visitation by the Fund, or any person retained by the Fund, as may be
necessary for the Fund to evaluate the quality of the services performed by
FDISG pursuant hereto.
Article 26 Entire Agreement; Severability.
------------------------------
26.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter
14
<PAGE>
hereof. No change, termination, modification, or waiver of any term or condition
of the Agreement shall be valid unless in writing signed by each party. No such
writing shall be effective as against FDISG unless said writing is executed by a
Senior Vice President, Executive Vice President, or President of FDISG. A
party's waiver of a breach of any term or condition in the Agreement shall not
be deemed a waiver of any subsequent breach of the same or another term or
condition.
26.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
MITCHELL HUTCHINS INSTITUTIONAL SERIES
By:
--------------------------
Title:
-----------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
--------------------------
Title:
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15
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Exhibit 1
LIST OF PORTFOLIOS
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Mitchell Hutchins LIR Select Money Fund
16
<PAGE>
Schedule A
DUTIES OF FDISG
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1. Shareholder Information. FDISG shall maintain a record of the number
-----------------------
of Shares held by each Shareholder of record which shall include name, address
and taxpayer identification number. FDISG has been informed by the Fund that it
has not and does not intend to issue share certificates.
2. Shareholder Services. FDISG shall respond as appropriate to all
--------------------
inquiries and communications from Shareholders relating to Shareholder accounts
with respect to its duties hereunder and as may be from time to time mutually
agreed upon between FDISG and the Fund. As part of these services, FDISG shall
provide toll-free lines (at the expense of the Fund) for direct shareholder use,
plus customer liaison staff for on-line inquiry response.
3. Mailing Communications to Shareholders; Proxy Materials. FDISG will
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address and mail to Shareholders whose Fund accounts are not linked to a
PaineWebber account (each a "Fund-only account"), all reports to such
Shareholders, and dividend and distribution notices. At the expense of the Fund,
FDISG shall provide such Shareholder account information as is reasonably
necessary to facilitate the mailing and tabulation of proxy material for the
Fund's meetings of Shareholders. FDISG understands that the Fund normally
retains the services of other service providers in connection with proxy
solicitations. However, in connection with meetings of Shareholders, if
requested in advance by the Fund, FDISG will prepare Shareholder lists, mail and
certify as to the mailing of proxy materials, process and tabulate returned
proxy cards, report on proxies voted prior to meetings, act as inspector of
election at meetings and certify Shares voted at meetings. If the Fund retains a
third party in connection with a proxy solicitation, FDISG agrees to take
reasonable steps to facilitate such party's activities.
4. Sales of Shares
---------------
(a) FDISG shall not be required to issue any Shares of the Fund where
it has received a Written Instruction from the Fund or official notice from any
appropriate authority that the sale of the Shares of the Fund has been suspended
or discontinued. The existence of such Written Instructions or such official
notice shall be conclusive evidence of the right of FDISG to rely on such
Written Instructions or official notice. FDISG recognizes that the Fund and
PaineWebber reserve the right to reject any purchase order and to suspend the
offering of Fund Shares for a period of time as provided in the Prospectus; the
Fund will provide FDISG with Written Instructions in connection with the
exercise of this right.
(b) In the event that any wire of Federal Funds for the payment of
money in connection with the sale of Shares is not received or voided or
reversed for any reason, FDISG will endeavor to: (I) give prompt notice of such
occurrence to the Fund or its designee; (ii) place a stop transfer order against
all Shares issued as a result of such order, if any; and (iii) take such actions
as FDISG may from time to time deem appropriate.
17
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(c) FDISG shall maintain necessary communication with the Fund's
custodian in order to report daily sales activity and transmit sales proceeds to
such custodian on a daily basis for those days on which the Fund is open for
business.
5. Transfer and Repurchase
-----------------------
(a) FDISG shall process all requests to transfer or redeem Shares
in accordance with the transfer or repurchase procedures set forth in the Fund's
Prospectus.
(b) FDISG will transfer or repurchase Shares upon receipt of Oral
or Written Instructions accompanied by such documents as FDISG reasonably may
deem necessary or otherwise pursuant to the Prospectus.
(c) FDISG reserves the right to refuse to transfer or repurchase
Shares until it is satisfied that the endorsement on the instructions is valid
and genuine. FDISG also reserves the right to refuse to transfer or repurchase
Shares until it is satisfied that the requested transfer or repurchase is
legally authorized, and it shall incur no liability for the refusal, in good
faith, to make transfers or repurchases which FDISG, in its good judgment, deems
improper or unauthorized, or until it is reasonably satisfied that there is no
basis to any claims adverse to such transfer or repurchase.
(d) When Shares are redeemed, FDISG shall, upon receipt of the
instructions and documents in proper form, deliver to the Custodian and the Fund
or its designee a notification setting forth the number of Shares to be
repurchased. Such repurchased shares shall be reflected on appropriate accounts
maintained by FDISG reflecting outstanding Shares of the Fund and Shares
attributed to individual accounts.
(e) FDISG shall, upon receipt of the monies provided to it by the
Custodian for the repurchase of Shares, pay such monies as are received from the
Custodian, all in accordance with the procedures described in the written
instruction received by FDISG from the Fund.
(f) FDISG shall not process or effect any repurchase with respect
to Shares of the Fund after receipt by FDISG or its agent of notification of the
suspension of the determination of the net asset value of the Fund.
6. Dividends
---------
(a) Upon the declaration of each dividend and each capital gains
distribution by the Board of Directors of the Fund with respect to Shares of the
Fund, the Fund shall furnish or cause to be furnished to FDISG Written
Instructions setting forth the date of the declaration of such dividend or
distribution, the ex-dividend date, the date of payment thereof, the record date
as of which Shareholders entitled to payment shall be determined, the amount
payable per Share to the Shareholders of record as of that date, the total
amount payable on the payment date and whether such dividend or distribution is
to be paid in Shares at net asset value.
18
<PAGE>
(b) On or before the payment date specified in such resolution of
the Board of Directors, the Fund will provide FDISG with sufficient cash to make
payment to the Shareholders of record as of such payment date.
(c) If FDISG does not receive sufficient cash from the Fund to make
total dividend and/or distribution payments to all Shareholders of the Fund as
of the payable date, FDISG will, upon notifying the Fund, withhold payment to
all such Shareholders until sufficient cash is provided to FDISG.
7. Additional Services.
--------------------
(a) Calculate Shareholder Servicing Fee payments and broker trail
commissions.
(b) Monitor and maintain all systems necessary to implement and
operate the multi-class distribution system, as described in the Prospectus,
provided, however, that such systems shall not be materially different from
those used by FDISG in connection with providing services to its other clients
utilizing a multi-class structure.
(c) Send duplicate confirmations and statements to brokers of their
clients' activity, whether executed through the broker-dealer or directly with
FDISG if requested by the Fund to do so with regard to Fund-only accounts only.
8. In addition to and neither in lieu nor in contravention of the
services set forth above, FDISG shall: (i) perform all the customary services of
a transfer agent, registrar, dividend and distribution disbursing agent and
agent of the dividend reinvestment plan as described in the Fund's prospectus
and herein consistent with those requirements in effect as at the date of this
Agreement. The detailed definition, frequency, limitations and associated costs
(if any) set out in the attached fee schedule, include but are not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies (if requested by the Fund), tabulating proxies (if requested by
the Fund), mailing Shareholder reports to current Shareholders (unless the Fund
selects another service provider for this task and so informs FDISG),
withholding taxes on U.S. resident and non-resident alien accounts for "Fund -
only accounts" where applicable, preparing and filing U.S. Treasury Department
Forms 1099 and other appropriate forms required with respect to dividends and
distributions by federal authorities for all Fund - only account Shareholders.
If the Fund retains another service provider with respect to a Shareholder
mailing, FDISG agrees to take reasonable steps, at the expense of the Fund, to
facilitate such other service provider's activities, including providing
Shareholder account information.
19
<PAGE>
Exhibit No. 8(b)
MITCHELL HUTCHINS INSTITUTIONAL SERIES
FINANCIAL INTERMEDIARY SHARES
SHAREHOLDER SERVICES PLAN AND AGREEMENT
---------------------------------------
This Shareholder Services Plan and Agreement ("Plan") is adopted by
Mitchell Hutchins Institutional Series ("Trust"), a business trust organized
under the laws of the State of Delaware pursuant to a Trust Instrument dated
April 29, 1998, as amended from time to time, with respect to the Trust's
Financial Intermediary shares, a class of shares issued by the Trust's current
Series, Mitchell Hutchins Institutional Money Fund, and such other series of the
Trust as may be established in the future with Financial Intermediary shares
(collectively, "Funds"), and is entered into by PaineWebber Incorporated
("PaineWebber") and the Trust, subject to the following terms and conditions:
Section 1. Service Arrangements.
--------------------
PaineWebber, in respect of each Fund, may enter into a shareholder service
agreement ("Service Agreement"), substantially in the form attached hereto as
Appendix A, with each financial intermediary that purchases Financial
Intermediary shares. Each Service Agreement will require the financial
intermediary to provide support services to its customers ("Customers") who are
the beneficial owners of Financial Intermediary shares. Such services may
include, without limitation: (i) assisting Customers in changing dividend
options, account designations and addresses; (ii) aggregating and processing
purchase and redemption requests from Customers and placing net purchase and
redemption orders with PaineWebber; (iii) transmitting and receiving funds in
connection with Customer orders to purchase and redeem Financial Intermediary
shares; (iv) processing dividend payments on behalf of Customers; (v) providing
information periodically to Customers showing their position in Financial
Intermediary shares; (vi) arranging for bank wires; (vii) responding to Customer
inquiries regarding account status and history, the manner in which purchases
and redemptions of Financial Intermediary shares may be made and other matters;
(viii) providing sub-accounting with respect to Financial Intermediary shares
beneficially owned by Customers or the information to the Trust necessary for
sub-accounting; (ix) forwarding communications from the Trust (for example,
proxies, shareholder reports, annual and semiannual financial statements and
dividend, distribution and tax notices) to Customers; (x) providing the
necessary personnel and facilities to establish and maintain shareholder
accounts and records; and (xi) such other similar services as PaineWebber or a
Customer may reasonably request from time to time, to the extent the Financial
Intermediary is permitted to perform such services under Federal and state
statutes, rules and regulations.
Section 2. Compensation.
------------
Each Fund will pay PaineWebber an annual fee which PaineWebber will pay
over to each financial intermediary (the "Service Payment") for the services
provided by the financial intermediary. The Service Payment will be calculated
daily and paid monthly by the Trust at the
<PAGE>
annual rate of 0.25% of the average daily net asset value of the Financial
Intermediary shares held by a financial intermediary that has entered into a
Service Agreement with PaineWebber on behalf of the financial intermediary's
Customers. All expenses incurred by a Fund in respect of Service Payments shall
be borne entirely by the holders of Financial Intermediary shares of that Fund.
Section 3. Approval by Board of Trustees.
-----------------------------
This Plan will not take effect until approved by a majority of both (i) the
full Board of Trustees of the Trust ("Board"), and (ii) those Trustees who are
not "interested persons" of the Trust (as defined in the Investment Company Act
of 1940, as amended ("1940 Act")) and who have no direct or indirect financial
interest in the operation of this Plan (the "Disinterested Trustees").
Section 4. Continuance of the Plan.
-----------------------
The Plan will continue in effect from year to year so long as such
continuance is specifically approved annually by the Board in accordance with
the procedure specified in Section 3 above.
Section 5. Termination.
-----------
The Plan may be terminated at any time, without penalty, by vote of a
majority of the Disinterested Trustees. The Plan will terminate automatically in
the event of its assignment, as defined in the 1940 Act.
Section 6. Amendment.
---------
The Plan may be amended from time to time by the Board, provided, however,
that all material amendments of the Plan must be approved in accordance with the
procedures specified in Section 3 above.
Section 7. Shareholder Voting.
------------------
To the extent that matters pertaining to the Plan or to the Financial
Intermediary shares are submitted to shareholders for approval, only the holders
of Financial Intermediary shares shall be entitled to vote thereon.
Section 8. Reports to the Trustees and Records.
-----------------------------------
(a) While the Plan is in effect, PaineWebber shall provide to the Board,
at such times as the Board shall request and in no event less frequently than
annually, and the Board shall review, a written report of the amounts expended
by PaineWebber under Service Agreements with financial intermediaries and the
purposes for which such expenditures were made.
(b) The Trust shall preserve copies of the Plan and any Service
Agreements, any other agreements relating to the Plan and any reports made
pursuant to Section 8(a) above for a period
2
<PAGE>
of not less than six years from the date of the Plan, each Service Agreement,
agreement or report, the first two years in an easily accessible place.
Section 9. Limitation of Liability of the Trustees and Shareholders of the
---------------------------------------------------------------
Trust.
- -----
The Trustees of the Trust and the shareholders of any Fund shall not be
liable for any obligation of the Trust or any Fund under this Plan, and
PaineWebber agrees that, in asserting any rights or claims under this Plan, it
shall look only to the assets and property of the Trust or the particular Fund
in settlement of such right or claims, and not to such Trustees or shareholders.
Section 10. Governing Law.
--------------
This Plan shall be construed in accordance with the laws of the State of
New York and the 1940 Act, provided, however, that Section 9 above will be
construed in accordance with the laws of the State of Delaware. To the extent
the applicable laws of the State of New York or the State of Delaware conflict
with the applicable provisions of the 1940 Act, the latter shall control.
Section 11. Effective Date.
--------------
The Plan will become effective as of _______________, 1998.
MITCHELL HUTCHINS INSTITUTIONAL SERIES
By
----------------------------
PAINEWEBBER INCORPORATED
By
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3
<PAGE>
Exhibit No. 8(c)
MITCHELL HUTCHINS INSTITUTIONAL SERIES
FINANCIAL INTERMEDIARY SHARES
SHAREHOLDER SERVICE AGREEMENT
-----------------------------
PaineWebber Incorporated ("Firm"), as distributor of the Financial
Intermediary shares of Mitchell Hutchins Institutional Series ( "Trust") and the
counterparty named below ("Financial Intermediary") wish to enter into an
agreement ("Agreement") pursuant to which the Financial Intermediary will
provide services to certain shareholders of, and administer certain shareholder
accounts in, Financial Intermediary shares ("Shares") of the Trust.
In consideration of the mutual covenants herein contained, it is agreed by
and between the Firm and the Financial Intermediary as follows:
Section 1. Services to Be Provided. The Financial Intermediary will
-----------------------
provide shareholder and administrative services for its customers ("Customers")
who own Shares. Such services may include, without limitation: (i) assisting
Customers in changing dividend options, account designations and addresses; (ii)
aggregating and processing purchase and redemption requests from Customers and
placing net purchase and redemption orders with the Firm; (iii) transmitting and
receiving funds in connection with Customer orders to purchase and redeem
Shares; (iv) processing dividend payments on behalf of Customers; (v) providing
information periodically to Customers showing their position in Shares; (vi)
arranging for bank wires; (vii) responding to Customer inquiries regarding
account status and history, the manner in which purchases and redemptions of
Shares may be made and other matters pertaining to the Shares; (viii) providing
sub-accounting with respect to Shares beneficially owned by Customers or the
information to the Trust necessary for sub-accounting; (ix) forwarding
shareholder communications from the Trust (for example, proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Customers; (x) providing necessary personnel and facilities
to establish and maintain shareholder accounts and records; and (xi) such other
similar services as the Firm or a Customer may reasonably request from time to
time to the extent the Financial Intermediary is permitted to perform such
services under Federal and state statutes, rules and regulations.
Section 2. Financial Intermediary as Agent for Its Customers. The
-------------------------------------------------
Financial Intermediary agrees that, in all activities covered by this Agreement;
the Financial Intermediary will act as agent for its customers; it is not
authorized to act as agent for the Firm or the Trust. This Agreement shall not
make either party the legal representative of the other, nor shall either party
have the right or authority to assume, create or incur any liability or any
obligation of any kind, express or implied, against or in the name of or on
behalf of the other party.
Section 3. Information Concerning the Trust and the Shares. The
-----------------------------------------------
Financial Intermediary agrees that neither it nor any of its employees or agents
are authorized to make any representation concerning the Shares or the Trust,
except those contained in the then-current
<PAGE>
Prospectus and Statement of Additional Information for the Trust, copies of
which will be supplied by the Firm in reasonable quantities upon request, or in
other material approved in writing by the Firm.
Section 4. Compensation. The Firm will pay the Financial Intermediary an
------------
annual fee (the "Service Payment") for its services in connection with the
Shares beneficially owned by its Customers. The Service Payment will be
calculated daily and paid monthly by the Firm at the annual rate of 0.25% of the
average daily net asset value of the Shares held by the Financial Intermediary
for its Customers. For purposes of calculating the fee payable to the Financial
Intermediary, the average daily net asset value of the Shares will be calculated
in accordance with the procedure set forth in the Trust's then current
Prospectus and Statement of Additional Information. The Financial Intermediary
agrees that no trustee, officer or shareholder of the Trust (or any of its
series) shall be liable for the performance of the Firm's obligations hereunder
or for the Service Payment.
Section 5. Right to Suspend Sales. The Firm and the Trust reserve the
----------------------
right, at their discretion, to suspend the sale of Shares of any series or
withdraw the Shares of any series from sale.
Section 6. Other Duties of the Financial Intermediary. (a) The Financial
------------------------------------------
Intermediary agrees to provide the Firm and the Trust such information relating
to its services hereunder as may be required to be maintained by the Firm and
the Trust under applicable regulatory and self-regulatory agencies or
authorities, and to cooperate with the Firm in providing information to the
Trust and its Board of Trustees with respect to amounts expended and services
provided under this Agreement.
(b) In the event an issue pertaining to the Shares is submitted for
shareholder approval, the Financial Intermediary will vote any Shares of a
series held for its own account, or over which it otherwise has discretion to
vote, in the same proportions as the votes cast by those Shares of the same
series held for its Customer's accounts for which instructions have been
received from the beneficial owners or other persons entitled to vote.
Section 7. Representations of Financial Intermediary. (a) The Financial
-----------------------------------------
Intermediary represents and warrants that its Customers are aware of and have
agreed to the arrangements provided for in this Agreement and that the
compensation payable to the Financial Intermediary hereunder, together with any
other compensation payable to the Financial Intermediary in connection with the
investment of their assets in the Shares, will be properly disclosed by the
Financial Intermediary to its Customers and authorized by them.
(b) The Financial Intermediary represents and warrants that, in providing
services hereunder, it will act in accordance with federal and state law, and
rules and regulations thereunder, applicable to it and its Customer's accounts.
Section 8. Customer Lists. Each party agrees that it (and/or its
--------------
affiliates) will not use any list of customers of the other party that may be
obtained in connection with this Agreement for the purpose of solicitation of
any product or service without the express written consent of the
2
<PAGE>
other party. However, nothing in this Agreement shall be deemed to prohibit or
restrict either party (or its affiliates) in any way from solicitations of any
product or service directed at, without limitation, the general public, any
segment thereof, or any specific individual, provided such solicitation is not
based upon such list.
Section 9. Indemnification. (a) The Financial Intermediary will
---------------
indemnify and hold the Firm and the Trust harmless from any claim, demand, loss,
expense or cause of action resulting from the misconduct or negligence, as
measured by industry standards, of the Financial Intermediary, its agents or
employees, in carrying out the Financial Intermediary's obligations under this
Agreement. Such indemnification will survive the termination of this Agreement.
(b) The Firm will indemnify and hold the Financial Intermediary harmless
from any claim, loss, expense or cause of action resulting from the misconduct
or negligence, as measured by industry standards, of the Firm, its agents or
employees, in carrying out the Firm's obligations under this Agreement.
Section 10. Duration of Agreement. This Agreement will continue in effect
---------------------
for one year from its Effective Date, and thereafter will continue automatically
for successive annual periods; provided, however, that the Agreement is subject
to termination as provided below and subject to termination at any time without
penalty with respect to the Trust or a particular series thereof if a majority
of the Trust's Trustees who are not interested persons of the Trust (as defined
in the Investment Company Act of 1940 ("1940 Act")), or a majority of the Shares
of the Trust or a particular series thereof (as defined in the 1940 Act) vote to
terminate the Agreement.
Section 11. Amendment and Termination of the Agreement. This Agreement
------------------------------------------
may be amended upon written agreement of the parties. Either party to the
Agreement may terminate the Agreement, without cause or penalty, by giving the
other party at least thirty (30) days' written notice of its intention to
terminate. This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
Section 12. Effective Date. This Agreement will become effective on the
--------------
date set forth below.
Section 13. Notices. All notices required or permitted to be given under
-------
this Agreement shall be given in writing and delivered by personal delivery, by
postage prepaid mail, or by facsimile machine or a similar means of same day
delivery (with a confirming copy by mail). All notices to the Firm shall be
given or sent to its offices located at 1285 Avenue of the Americas, New York,
New York 10019, ATTN: ______________. All notices to the Financial
Intermediary shall be given or sent to it at the address specified by it below.
Either party may change the address to which notices shall be sent by giving
notice to the other party in accordance with this paragraph 13.
Section 14. Miscellaneous. (a) This Agreement shall be construed in
-------------
accordance with the laws of the State of New York, without giving effect to the
conflict of law provisions thereof, and the 1940 Act. To the extent that the
applicable laws of the State of New York conflict with the applicable provisions
of the 1940 Act, the latter shall control.
3
<PAGE>
(b) The captions in this Agreement are included for convenience of
reference only and in no way defined or limit any of the provisions of this
Agreement or otherwise affect their construction or effect.
(c) In the case that any provision in this Agreement shall be found by a
court of competent jurisdiction to be invalid, illegal or unenforceable, such
provision shall be construed and enforced as if it had been more narrowly drawn
so as not to be invalid, illegal or unenforceable, and the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
PAINEWEBBER INCORPORATED
By:
---------------------
PLEASE RETURN TWO SIGNED COPIES OF THIS AGREEMENT TO PAINEWEBBER
INCORPORATED. UPON ACCEPTANCE BY PAINEWEBBER, ONE COUNTERSIGNED COPY WILL BE
RETURNED TO YOU FOR YOUR FILES.
Name of Financial Intermediary:
--------------------------------------
Address:
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-------------------------------------------------------------
By:
------------------------------------------------------------------
Authorized Representative
------------------------------------------------------------------
(Name and Title; please print or type)
ACCEPTED AND AGREED:
PAINEWEBBER INCORPORATED
By:
--------------------------
Dated:
-----------------------
4
<PAGE>
Exhibit No. 9
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE 202-778-9000
FACSIMILE 202-778-9100
WWW.KL.COM
July 28, 1998
Mitchell Hutchins Institutional Series
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
You have requested our opinion, as counsel to Mitchell Hutchins Institutional
Series ("Trust"), as to certain matters regarding the issuance of certain Shares
of the Trust. As used in this letter, the term "Shares" means the Institutional
and Financial Intermediary shares of beneficial interest of the series of the
Trust listed below during the time that Pre-Effective Amendment No. 1 to the
Trust's Registration Statement on Form N-1A ("PEA") is effective and has not
been superseded by a post-effective amendment. The series of the Trust is
Mitchell Hutchins LIR Select Money Fund.
As such counsel, we have examined certified or other copies, believed by us to
be genuine, of the Trust's Trust Instrument and by-laws and such resolutions and
minutes of meetings of the Trust's Board of Trustees as we have deemed relevant
to our opinion, as set forth herein. Our opinion is limited to the laws and
facts in existence on the date hereof, and it is further limited to the laws
(other than the conflict of law rules) in the State of Delaware that in our
experience are normally applicable to the issuance of shares by investment
companies organized as business trusts in that State and to the Securities Act
of 1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.
Based on the foregoing, we are of the opinion that the issuance of the Shares
has been duly authorized by the Trust and that, when sold in accordance with the
terms contemplated by the PEA, including receipt by the Trust of full payment
for the Shares and compliance with the 1933 Act and the 1940 Act, the Shares
will have been validly issued, fully paid and non-assessable.
We hereby consent to this opinion accompanying the PEA when it is filed with
the SEC and to the reference to our firm in the statement of additional
information that is being filed as part of the PEA.
Very truly yours,
/s/ Kirkpatrick & Lockhart LLP
KIRKPATRICK & LOCKHART LLP
<PAGE>
Ex 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Auditors" in the
Statement of Additional Information and to the use of our report dated July 24,
1998 on Mitchell Hutchins LIR Select Money Fund in this Registration Statement
(Form N-1A No. 333-52965) of Mitchell Hutchins Institutional Series.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
July 24, 1998
<PAGE>
[LETTERHEAD OF MITCHELL HUTCHINS ASSET MANAGEMENT INC. APPEARS HERE]
Exhibit No. 12
MITCHELL HUTCHINS
July 27, 1998
Mitchell Hutchins Institutional Series
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
We are writing in connection with the 100,000 Institutional shares of
Mitchell Hutchins LIR Select Money Fund, which we have purchased from you at a
price of $1.00 per share. This is to advise you that such shares were purchased
for investment only with no present intention of selling such shares, and we do
not now have any intention of selling such shares.
Very truly yours,
/s/ Dianne E. O'Donnell
Dianne E. O'Donnell
Senior Vice President
<PAGE>
Exhibit No. 15
MITCHELL HUTCHINS INSTITUTIONAL SERIES
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
Mitchell Hutchins Institutional Series hereby adopts this Multiple Class Plan
pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended
("1940 Act"), on behalf of its current series, Mitchell Hutchins Institutional
Money Fund and any series that may be established in the future (referred to
hereinafter collectively as the "Funds" and individually as a "Fund").
A. GENERAL DESCRIPTION OF CLASSES THAT ARE OFFERED:
-----------------------------------------------
1. INSTITUTIONAL SHARES. Institutional shares of each Fund may be sold to
the general public without imposition of an initial sales charge or
contingent deferred sales charge ("CDSC") and are not subject to any
service or distribution fees.
FINANCIAL INTERMEDIARY SHARES. Financial Intermediary shares are sold
without imposition of an initial sales charge or CDSC and are not
subject to any distribution fees. Financial Intermediary shares of each
Fund are available for purchase only by banks and other financial
intermediaries for the benefit of their customers.
Financial Intermediary shares of each Fund are subject to an annual
service fee of .25% of the average daily net assets of the Financial
Intermediary shares of the Fund, paid in accordance with a plan adopted
by Mitchell Hutchins Institutional Series to assure that the banks and
other financial intermediaries that purchase Financial Intermediary
shares on for the benefit of their customers provide certain support
services to those customers and are compensated for those services.
B. EXPENSE ALLOCATIONS OF EACH CLASS:
---------------------------------
Certain expenses may be attributable to a particular Class of shares of each
Fund ("Class Expenses"). Class Expenses are charged directly to the net
assets of the particular Class and, thus, are borne on a pro rata basis by
the outstanding shares of that Class.
In addition to the service fees described above, each Class may also pay a
different amount of the following other expenses:
1. printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses, and proxies to
current shareholders of a specific Class;
2. Blue Sky fees incurred by a specific Class of shares;
3. SEC registration fees incurred by a specific Class of shares;
<PAGE>
Mitchell Hutchins Institutional Series
Multiple Class Plan
Page 2
4. expenses of administrative personnel and services required to
support the shareholders of a specific Class of shares;
5. Trustees' fees incurred as a result of issues relating to a specific
Class of shares;
6. litigation expenses or other legal expenses relating to a specific
Class of shares; and
7. transfer agent fees identified as being attributable to a specific
Class.
C. EXCHANGE PRIVILEGES:
-------------------
Shares may be exchanged for shares of the corresponding Class of Liquid
Institutional Reserves Money Market Fund when a shareholder fails to maintain
minimum account levels as specified from time to time in a Fund's prospectus.
Shares of a Fund are not otherwise exchangeable.
D. CLASS DESIGNATION:
-----------------
Subject to approval by the Board of Trustees of Mitchell Hutchins
Institutional Series, a Fund may alter the nomenclature for the designations
of one or more of its Classes of shares.
E. ADDITIONAL INFORMATION:
----------------------
This Multiple Class Plan is qualified by and subject to the terms of the
then current prospectus for the applicable Classes; provided, however, that
none of the terms set forth in any such prospectus shall be inconsistent
with the terms of the Classes contained in this Plan. The prospectus for
each Fund contains additional information about the Classes and each Fund's
multiple class structure. The payment of Class Expenses by a Fund's adviser
and administrator or other party is not considered to be inconsistent with
the terms of the Classes contained in this Plan.
F. DATE OF EFFECTIVENESS:
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This Multiple Class Plan is effective as of the date hereof, provided that
this Plan shall not become effective with respect to any Fund unless such
action has first been approved by the vote of a majority of the Board of
Trustees and by vote of a majority of those Trustees who are not interested
persons of Mitchell Hutchins Institutional Series.
May 13, 1998
