As filed with the Securities and Exchange Commission on November 9, 1999
1933 Act Registration No. 333-52965
1940 Act Registration No. 811-8767
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. --- [---]
Post-Effective Amendment No. 6 [ X ]
--- ---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 7 [ X ]
-- ---
MITCHELL HUTCHINS LIR MONEY SERIES
(Exact name of registrant as specified in charter)
51 West 52nd Street
New York, New York 10019-6114
(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: Effective Date of this
Post-Effective Amendment.
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
[ X ] On November 12, 1999, pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] On pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On pursuant to Rule 485(a)(2)
Title of Securities Being Registered: Shares of Beneficial Interest of LIR
Premier Money Market Fund and LIR Premier Tax-Free Money Market Fund.
<PAGE>
LIR PREMIER MONEY MARKET FUND
LIR PREMIER TAX-FREE MONEY MARKET FUND
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PROSPECTUS
NOVEMBER 12, 1999
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This prospectus offers shares of these money market funds through firms that
have arrangements with Correspondent Services Corporation (csc) and certain
other financial services firms for the benefit of their clients.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the funds' shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
<PAGE>
CONTENTS
THE FUNDS
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What every investor 3 Premier Money Market Fund
should know about 7 Premier Tax-Free Money Market Fund
the funds 11 More About Risks and Investment Strategies
YOUR INVESTMENT
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Information for 12 Managing Your Fund Account
managing your fund ----Buying Shares
account ----Selling Shares
----Exchanging Shares
----Pricing and Valuation
ADDITIONAL INFORMATION
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Additional important 15 Management
information about 16 Dividends and Taxes
the funds 17 Financial Highlights
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Where to learn more Back Cover
about the funds
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The funds are not a complete or
balanced investment program.
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2
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PREMIER MONEY MARKET FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------
FUND OBJECTIVE
High level of current income consistent with the preservation of capital and the
maintenance of liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. To do this, the fund invests in a diversified portfolio of high
quality money market instruments of governmental and private issuers.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests in foreign money market instruments only if they are
denominated in U.S. dollars.
Mitchell Hutchins Asset Management Inc., the fund's investment adviser, selects
money market instruments for the fund based on its assessment of relative values
and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risk. When short-term interest rates rise, the value of
the fund's investments generally will fall, and its yield will tend to lag
behind prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
o Credit Risk
o Interest Rate Risk
o Foreign Securities Risk
INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN THE CURRENT
ANNUAL/SEMI-ANNUAL REPORTS FOR THE FUND'S PREDECESSOR, CORRESPONDENT CASH
RESERVES MONEY MARKET PORTFOLIO, A SERIES OF THE INFINITY MUTUAL FUNDS, INC.
(SEE BACK COVER FOR INFORMATION ON ORDERING THESE REPORTS).
3
<PAGE>
PERFORMANCE
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RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about Premier Money Market
Fund's performance and thus give some indication of the risks of an investment
in the fund. The bar chart and table reflect the performance of the fund's
predecessor, Correspondent Cash Reserves Money Market Portfolio, a series of The
Infinity Mutual Funds, Inc. On November __, 1999, the shareholders of
Correspondent Cash Reserves Money Market Portfolio approved an Agreement and
Plan of Conversion and Termination to reorganize into Premier Money Market Fund.
This reorganization is expected to occur before the end of January 2000. The
performance shown below assumes that the reorganization is effected.
The bar chart shows how the fund's performance has varied from year to year.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.
The Fund's past performance does not necessarily indicate how the fund will
perform in the future.
PREMIER MONEY MARKET FUND -- TOTAL RETURN (1992 IS THE FUND'S FIRST FULL
CALENDAR YEAR OF OPERATIONS)
The chart below contains the following plot points:
1992 3.11%
1993 2.48%
1994 3.45%
1995 5.24%
1996 4.72%
1997 4.77%
1998 4.75%
Best quarter during years shown: 2nd quarter, 1995 ----- 1.31%
Worst quarter during years shown: 2nd quarter, 1993 ----- 0.59%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
One Year 4.75%
Five Years 4.59%
Life of Fund (5/20/91) 4.16%
4
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EXPENSES AND FEE TABLES
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FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of offering
price)...................................... None
Maximum Deferred Sales Charge
(Load) (as a percentage of offering price).. None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
Management Fees............................. 0.20%
Distribution and/or Service
(12b-1) Fees................................ 0.60%
Other Expenses(1)........................... 0.24%
Total Annual Fund Operating Expenses........ 1.04%
Expense Reimbursements(2)................... 0.14%
Net Expenses(2)............................. 0.90%
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(1) Other Expenses are based on estimated amounts for the current fiscal year.
(2) The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent
that the fund's expenses through the end of its fiscal year ending December
31, 2000 otherwise would exceed the "Net Expenses" rate shown above. The
fund has agreed to repay Mitchell Hutchins for those unreimbursed expenses
if it can do so over the following three years without causing the fund's
expenses in any of those three years to exceed the "Net Expenses" rate.
5
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EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$92 $317 $560 $1,258
6
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PREMIER TAX-FREE MONEY MARKET FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------
FUND OBJECTIVE
High level of current income exempt from federal income tax consistent with the
preservation of capital and the maintenance of liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality,
municipal money market instruments.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests primarily in money market instruments that are exempt
from federal income tax. The fund may invest up to 20% of its total assets in
securities that are subject to the federal alternative minimum tax.
Mitchell Hutchins Asset Management Inc., the fund's investment adviser, selects
money market instruments for the fund based on its assessment of relative values
and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risks. When short-term interest rates rise, the value
of the fund's investments generally will fall, and its yield will tend to lag
behind prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
o Credit Risk
o Interest Rate Risk
INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN THE CURRENT
ANNUAL/SEMI-ANNUAL REPORTS FOR THE FUND'S PREDECESSOR, CORRESPONDENT CASH
RESERVES TAX FREE MONEY MARKET PORTFOLIO, A SERIES OF THE INFINITY MUTUAL FUNDS,
INC. (SEE BACK COVER FOR INFORMATION ON ORDERING THESE REPORTS).
7
<PAGE>
PERFORMANCE
- -----------
RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about Premier Tax-Free
Money Market Fund's performance and thus give some indication of the risks of an
investment in the fund. The bar chart and table reflect the performance of the
fund's predecessor, Correspondent Cash Reserves Tax Free Money Market Portfolio,
a series of The Infinity Mutual Funds, Inc. On November __, 1999, the
shareholders of Correspondent Cash Reserves Tax Free Money Market Portfolio
approved an Agreement and Plan of Conversion and Termination to reorganize into
Premier Tax-Free Money Market Fund. This reorganization is expected to occur
before the end of January 2000. The performance shown below assumes that the
reorganization is effected.
The bar chart shows how the fund's performance has varied from year to year.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
PREMIER TAX-FREE MONEY MARKET FUND -- TOTAL RETURN (1997 IS THE FUND'S FIRST
FULL CALENDAR YEAR OF OPERATIONS)
The chart below contains the following plot points:
1997 2.90%
1998 2.83%
Best quarter during years shown: 2nd quarter, 1998 ----- 0.75%
Worst quarter during years shown: 4th quarter, 1998 ----- 0.66%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
One Year 2.83%
Life of Fund (10/7/96) 2.86%
8
<PAGE>
EXPENSES AND FEE TABLES
- -----------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of offering
price)...................................... None
Maximum Deferred Sales Charge
(Load) (as a percentage of offering price).. None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
Management Fees............................. 0.20%
Distribution and/or Service (Rule 12b-1)
Fees(1)..................................... 0.60%
Other Expenses(2).......................... 0.39%
Total Annual Fund Operating Expenses........ 1.19%
Expense Reimbursements/Fee Waivers(3) 0.51%
Net Expenses(3)............................. 0.68%
- --------------------------
1 Mitchell Hutchins and its affiliates have agreed to waive 0.17% of the fund's
Rule 12b-1 fees through December 31, 2000, making the effective rate of these
fees 0.43%.
2 Other Expenses are based on estimated amounts for the current fiscal year.
3 Mitchell Hutchins and its affiliates have agreed to waive 0.17% of the fund's
Rule 12b-1 fees through December 31, 2000, making the effective rate of these
fees 0.43%. In addition, the fund and Mitchell Hutchins have entered into an
expense reimbursement agreement. Mitchell Hutchins has agreed to reimburse
the fund to the extent that the fund's expenses through the end of its fiscal
year ending December 31, 2000 otherwise would exceed the "Net Expenses" rate
shown above. The fund has agreed to repay Mitchell Hutchins for those
unreimbursed expenses if it can do so over the following three years without
causing the fund's expenses in any of those three years to exceed the "Net
Expenses" rate.
9
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$69 $327 $605 $1,398
10
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MORE ABOUT RISKS AND INVESTMENT STRATEGIES
- ------------------------------------------
PRINCIPAL RISKS
The main risks of investing in the funds are described below. Not all of these
risks apply to each fund. You can find a list of the main risks that apply to
either fund under the "Investment Objective, Strategies and Risks" heading for
that fund.
Other risks of investing in a fund, along with further details about some of
the risks described below, are discussed in the funds' Statement of Additional
Information ("SAI"). Information on how you can obtain the SAI is on the back
cover of this prospectus.
CREDIT RISK. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even the highest quality money market
instruments are subject to some credit risk.
INTEREST RATE RISK. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of a fund's investments will fall. ALSO, a fund's yield
will tend to lag behind changes in prevailing short-term interest rates. This
means that a fund's income will tend to rise more slowly than increases in
short-term interest rates. Similarly, when short-term interest rates are
falling, a fund's income generally will tend to fall more slowly.
FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
YEAR 2000 RISK. The funds could be adversely affected by problems relating to
the inability of computer systems used by Mitchell Hutchins and the funds' other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the funds, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.
Similarly, the issuers whose money market instruments are bought by the funds
and the trading systems used by the funds could be adversely affected by this
issue. The ability of an issuer or trading system to respond successfully to
this issue requires both technological sophistication and diligence, and there
can be no assurance that any steps taken will be sufficient to avoid an adverse
impact on the funds.
POLITICAL RISK. Political or regulatory developments could adversely affect the
tax-exempt status of interest paid on municipal securities or the tax-exempt
status of Premier Tax-Free Money Market Fund's dividends. These developments
could also cause the value of this fund's municipal money market instruments to
fall.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the funds are subject to maturity, quality and
diversification requirements designed to help them maintain a stable price of
$1.00 per share. In addition, Mitchell Hutchins may use 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 a fund's composition and weighted average maturity based upon its
assessment of the relative values of various money market instruments and future
interest rate patterns. Mitchell Hutchins also may buy or sell money market
instruments to take advantage of yield differences.
During adverse market conditions, Premier Tax-Free Money Market Fund may
temporarily invest in cash or taxable money market instruments. These
investments may not be consistent with achieving the fund's investment objective
during the relatively short periods that they are held.
11
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YOUR INVESTMENT
MANAGING YOUR FUND ACCOUNT
- --------------------------
BUYING SHARES
The funds offer their shares only to clients of certain securities dealers
(correspondent firms) that have securities clearing arrangements with
Correspondent Services Corporation (csc) or certain other financial services
firms. These clients include qualified retirement plans and individual
retirement accounts. You must buy shares through your Investment Representative
at your correspondent firm or other financial services firm.
You may buy shares of the funds at the net asset value per share on the same
business day after receipt and acceptance of the purchase order by the transfer
agent, subject to timely receipt of the purchase order and federal funds for the
purchase as provided below. You can place a purchase order through your
Investment Representative By presenting him or her with a check made out to your
correspondent firm, your financial services firm or csc. Your correspondent firm
or other financial services firm is then responsible for timely depositing that
check and crediting your account so that payment is swept into a fund. Your
purchase order must be received by the transfer agent by noon, Eastern time, and
Federal funds must be available to the funds by 4:00 p.m., Eastern time, on a
business day for your purchase to be effective.
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 another
bank in one day and thus can be made immediately available to a fund through its
custodian. A business day is any day that the funds' custodian, their transfer
agent, Mitchell Hutchins and your correspondent (or other financial services )
firm's office(s) are open for business.
Federal funds are deemed available to a fund two business days after the deposit
of a personal check and one business day after deposit of a cashier's or
certified check. Your correspondent (or other financial services) firm, csc or
their affiliates, I.E., PaineWebber Incorporated, may benefit from the temporary
use of the proceeds of personal checks if they are converted to federal funds in
less than two business days.
Each fund's shares are sold at net asset value. However, under a Rule 12b-1 plan
adopted by the funds, the funds pay a fee for services and expenses relating to
the sale and distribution of the funds' shares and/or for providing shareholder
services. Because these fees are paid from the funds' assets on an ongoing
basis, over time they will increase the cost of your investment and may cost you
more than paying other types of sales charges. The funds pay Rule 12b-1 plan
fees at the following rates based on average daily net assets:
Premier Money Market Fund....................0.60%
Premier Tax-Free Money Market Fund...........0.43%*
- --------------
* This is the effective rate resulting from Mitchell Hutchins' and its
affiliates' waiver, through December 31, 2000, of 0.17% of its 0.60% Rule
12b-1 plan fee.
The funds and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of fund shares. The availability of fund shares to
customers of correspondent firms or other financial services firms may vary
depending on the arrangements between csc and those firms.
BUYING SHARES AUTOMATICALLY
All free cash credit balances (that is, immediately available funds) of over
$1.00 in your brokerage account at your correspondent firm or other financial
services firm (including proceeds from securities you have sold) are
automatically invested in the fund you selected as your primary sweep money
market fund on a daily basis for settlement the next business day, when federal
funds normally are available. For cash balances arising from the sale of
securities in your brokerage account, federal funds availability can sometimes
take longer.
Fund shares will be purchased only after debits and other charges to your
brokerage account are satisfied.
12
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MINIMUM INVESTMENTS:
To open an Individual Retirement
Account ^(IRA)............................$25
To open any other (non-IRA) account.......$1,000
To add to an account ......................None
The funds may change their minimum investment requirements at any time.
Correspondent firms or other participating financial services firms may
establish higher minimums for their customers. Your Investment Representative at
your correspondent firm or other financial services firm is responsible for
transmitting orders in a timely manner and may have an earlier cut-off time for
purchase and sale requests. Speak with your Investment Representative for more
information on minimum investments.
12A
<PAGE>
SELLING SHARES
You may sell your fund shares by check or through the funds' systematic
withdrawal plan. Your fund shares will also be sold automatically to settle any
outstanding securities purchases or debits to your linked or associated
brokerage account, unless you instruct your Investment Representative otherwise.
You may request sales proceeds at any time by following the instructions related
to your account at your correspondent firm or other financial services firm.
Your correspondent firm or other financial services firm is responsible for
transmitting the sales order to the transfer agent and crediting your account on
a timely basis. The funds will not accept requests to sell shares by wire or
telephone from you or your financial institution. Your Investment Representative
may charge a fee for transmitting the sales order. Please contact your
Investment Representative if you have questions about sales order requirements
or closing your account.
SELLING BY CHECK
You may sell your fund shares by using a check drawn on your fund account. You
may obtain a supply of checks from the transfer agent or by contacting your
Investment Representative. When the transfer agent receives the check for
payment, the transfer agent will arrange for the sale of a sufficient amount of
fund shares to cover the amount of the check. You will continue to receive
dividends until the transfer agent receives the check.
You will not receive canceled checks, but you may request photocopies of
canceled checks. If you have insufficient funds in your account to cover a check
you have written, the payee will receive a returned check. You should not
attempt to sell all the shares in your account by writing a check because the
amount of fund shares is likely to change each day as you earn dividends. You
may not close your account by check.
The transfer agent may impose charges for specially imprinted checks, business
checks, stop payment orders, copies of canceled checks and checks returned for
insufficient funds. You will pay these charges through automatic sales of an
appropriate number of your fund shares.
You may obtain the necessary forms for the checkwriting service from your
Investment Representative. This service generally is not available to persons
who own fund shares through any sub-account or tax-deferred retirement plan
account.
SELLING SHARES AUTOMATICALLY
Csc has instituted an automatic sales procedure applicable to fund shareholders.
Csc may use this procedure if you have outstanding amounts due as a result of
securities purchases or other transactions. Csc may review your securities
account each business day prior to noon, Eastern time, and automatically sell a
sufficient number of fund shares to satisfy any outstanding amounts due from
your account. This procedure will occur on the business day prior to the day you
are obligated to make a payment. Your correspondent firm or other financial
services firm will receive these sales proceeds on the day following the sales
date.
SYSTEMATIC WITHDRAWAL PLAN
You may receive automatic payments from your account on a monthly, quarterly or
semi-annual basis if you maintain a minimum $1,000 balance in your fund account.
The minimum withdrawal is $50. Ordinarily, sales proceeds will be on deposit in
your designated account at an Automatic Clearing House member bank two business
days after the withdrawal. You may request that payment be made by check to
yourself or a third party. You, your correspondent firm (or other financial
services firm), the transfer agent or a fund may request that your participation
in the systematic withdrawal plan end at any time.
13
<PAGE>
If you are a retirement plan participant, you may be eligible for participation
in the systematic withdrawal plan. Such withdrawals are generally taxable as
ordinary income. Generally, withdrawals from an eligible benefit plan will be
taxable as ordinary income and withdrawals will be subject to an additional tax
equal to 10% of the amount distributed (unless the withdrawals are used to pay
certain higher education expenses and certain acquisition costs of first time
home buyers) if made prior to the time the participant:
o reaches age 59 1/2;
o becomes permanently disabled; or
o reaches at least age 55 and is separated from service of the employer who
sponsored the plan.
Please contact your Investment Representative for more information on the
systematic withdrawal plan.
ADDITIONAL INFORMATION
It costs the funds money to maintain shareholder accounts. Therefore, the funds
reserve the right to repurchase all shares in any account that has a net asset
value of less than $500. If a fund elects to do this with your account, you will
be notified that you can increase the amount invested to $500 or more within 60
13A
<PAGE>
days. This notice may appear on your account statement. This requirement will be
waived for IRA accounts.
If you want to sell shares that you purchased recently, a fund may delay payment
until it verifies that it has received good payment. If you purchased shares by
check, this can take up to 15 days.
Each fund's shares are bought and sold without charge to the shareholder.
Correspondent firms or other financial services firms buying or holding shares
for their client accounts may charge clients for cash management and other
services provided in connection with their accounts.
You should consider the terms of your account with your correspondent firm or
other financial services firm before purchasing shares. A correspondent firm or
other financial services firm buying or selling shares on your behalf is
responsible for transmitting orders to the transfer agent in accordance with its
shareholder agreements and the procedures noted above.
PRICING AND VALUATION
The price of fund shares is based on net asset value. The net asset value is the
total value of the fund divided by the total number of shares outstanding. In
determining net asset value, each fund values its securities at their amortized
cost. This method uses a constant amortization to maturity of the difference
between the cost of the instrument to the fund and the amount due at maturity.
Each fund's net asset value per share is expected to be $1.00 per share,
although this value is not guaranteed.
The net asset value per share for each fund is determined once each business day
at noon, Eastern time, on days that the New York Stock Exchange is open, except
Columbus Day and Veterans Day. Your price for buying , selling or exchanging
your shares will be the net asset value that is next calculated after a fund
accepts your order.
14
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MANAGEMENT
- ----------
INVESTMENT ADVISER
Mitchell Hutchins Asset Management Inc. is the investment adviser and
administrator of the funds. Mitchell Hutchins is located at 51 West 52nd Street,
New York, New York, 10019 and is a wholly owned asset management subsidiary of
PaineWebber Incorporated, which is wholly owned by Paine Webber Group Inc., a
publicly owned financial services holding company. On September 30, 1999,
Mitchell Hutchins managed over $59 billion in client assets with Mitchell
Hutchins or its affiliates serving as the adviser or sub-adviser of 33
investment companies with 75 separate portfolios and aggregate assets of
approximately $47.3 billion.
ADVISORY FEES
Each fund will pay advisory and administration fees to Mitchell Hutchins at the
annual rate of 0.20% of its average daily net assets.
15
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DIVIDENDS AND TAXES
- -------------------
DIVIDENDS
The funds declare dividends daily and pay them monthly. The funds distribute any
net short-term capital gain annually, but may make more frequent distributions
if necessary to maintain their share price at $1.00 per share.
Shares earn dividends on the day they are purchased but not on the day they are
sold.
You will receive dividends in additional shares of a fund unless you elect to
receive them in cash. Contact your Investment Representative if you prefer to
receive dividends in cash.
TAXES
Dividends from Premier Tax-Free Money Market Fund generally are not subject to
federal income tax. The dividends that you receive from Premier Money Market
Fund generally are subject to federal income tax regardless of whether you
receive them in additional fund shares or in cash and are expected to be taxed
as ordinary income.
If you hold fund shares through a tax-exempt account or plan such as an IRA or
401(k) plan, dividends on your shares generally will not be subject to tax.
Each fund will tell you annually how you should treat its dividends for tax
purposes. You will not recognize any gain on the sale of your fund shares so
long as the funds maintain a share price of $1.00.
Each fund is required to withhold 31% of all taxable dividends payable to any
individuals and certain other noncorporate shareholders who
o have not provided the funds or their correspondent firm (or other
financial services firm) with
o a correct taxpayer identification number on Form W-9 (for U.S.
citizens and resident aliens) or
o a properly completed claim for exemption on Form W-8 (for nonresident
aliens and other foreign entities), or
o are otherwise subject to backup withholding.
16
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights tables are intended to help you understand
the funds' financial performance for the fiscal periods indicated. Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the funds (assuming reinvestment of all dividends and
distributions).
The information in the financial highlights for the years ended December 31 has
been audited by KPMG LLP, independent auditors for the reported periods of each
fund's predecessor, whose report, along with the predecessor funds' financial
statements, are included in the predecessor funds' Annual Report to
Shareholders. The information for the six months ended June 30, 1999, is
unaudited. The predecessor funds' Annual Report may be obtained without charge
by calling 1-800-442-3809.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PREMIER MONEY MARKET FUND(1)
- ----------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 0.9994 $ 0.9992 $ 0.9991 $ 0.9986 $ 0.9975 $ 0.9999
Income from investment operations:
Net investment income 0.0206 0.0465 0.0467 0.0462 0.0512 0.0340
Net realized gains(losses) on
investment transactions 0.0001 0.0002 0.0001 0.0005 0.0011 (0.0024)
Total from investment operations 0.0207 0.0467 0.0468 0.0467 0.0523 0.0316
Dividends to shareholders from net
investment income (0.0206) (0.0465) (0.0467) (0.0462) (0.0512) (0.0340)
Net change in net asset value 0.0001 0.0002 0.0001 0.0005 0.0011 (0.0024)
Net asset value, End of Period $ 0.9995 $ 0.9994 $ 0.9992 $ 0.9991 $ 0.9986 $ 0.9975
TOTAL RETURN 2.08%(2) 4.75% 4.77% 4.72% 5.24% 3.45%
RATIOS/SUPPLEMENTAL DATA: $1,633,666 $1,387,903 $1,151,012 $1,007,265 $ 779,011 $ 458,092
Net assets, end of period (000's)
Ratio of expenses to average net assets
(after fee waivers) 0.91%(3) 0.93% 0.95% 0.88% 0.85% 0.94%
Ratio of net investment income to
average net assets (after fee 4.15%(3) 4.64% 4.68% 4.65% 5.14% 3.47%
Ratio of expenses to average net assets(4) 1.02%(3) 1.04% 1.06% l.01% 1.03% 1.12%
</TABLE>
- -------------------
1 The financial highlights for the periods indicated reflect the financial
performance of Correspondent Cash Reserves Money Market Portfolio, which is
expected to be reorganized into Premier Money Market Fund before the end of
January 2000.
2 Not annualized.
3 Annualized.
4 During the period, certain fees and expenses were voluntarily waived and/or
reimbursed. If such voluntary waivers and/or reimbursements had not
occurred, the ratios would have been as indicated.
17
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PREMIER TAX-FREE MONEY MARKET FUND(1)
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS PERIOD ENDED
ENDED JUNE 30 YEAR ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996(2)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
Income from investment operations:
Net investment income 0.0117 0.0279 0.0286 0.0100
Total from investment operations 0.0117 0.0279 0.0286 0.0100
Dividends to shareholders from net
investment income (0.0117) (0.0279) (0.0286) (0.0100)
Net change in net asset value
Net Asset Value, End of Period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
TOTAL RETURN 1.17%(3) 2.83% 2.90% 0.66%(3)
RATIOS/SUPPLEMENTAL DATA: $107,568 $102,821 $103,399 $80,409
Net assets, end of period (000's)
Ratio of expenses to average net 0.73%(4) 0.71% 0.78% 0.74%(4)
assets (after fee waivers)
- ---------------------------
Ratio of net investment income 2.35%(4) 2.79% 2.86% 2.80%(4)
to average net assets (after
fee waivers)
Ratio of expenses to average net 1.04%(4) 1.02% 1.18% 1.20%(4)
assets(5)
</TABLE>
- ------------------------
1 The financial highlights for the periods indicated reflect the financial
performance of Correspondent Cash Reserves Tax Free Money Market Portfolio,
which is expected to be reorganized into Premier Tax-Free Money Market Fund
before the end of January 2000.
2 For the period from October 7, 1996, (commencement of operations) through
December 31, 1996.
3 Not annualized.
4 Annualized.
5 During the period, certain fees and expenses were voluntarily waived and/or
reimbursed. If such voluntary waivers and/or reimbursements had not
occurred, the ratios would have been as indicated.
18
<PAGE>
TICKER SYMBOL:. LIR Premier Money Market Fund: ICCXX
LIR Premier Tax-Free Money Market Fund: CTFXX
If you want more information about the funds, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the funds' investments is available in the
predecessor funds' annual and semi-annual reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the funds and is incorporated
by reference into this prospectus.
You may discuss your questions about the funds by contacting your Investment
Representative. You may obtain free copies of the predecessor funds' annual and
semi-annual reports and the funds' SAI by contacting the funds directly at
1-800-^ 442-3809.
You may review and copy information about the funds and their predecessors,
including shareholder reports and the SAI, at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies of reports and
other information about the funds and their predecessors and information about
the operations of the SEC's Public Reference Room:
o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov
Mitchell Hutchins LIR Money Series
-- LIR Premier Money Market Fund
-- LIR Premier Tax-Free Money Market Fund
Investment Company Act File No. 811-08767
(C) 1999 Mitchell Hutchins Asset Management Inc. All rights reserved.
<PAGE>
LIR PREMIER MONEY MARKET FUND
LIR PREMIER TAX-FREE MONEY MARKET FUND
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
STATEMENT OF ADDITIONAL INFORMATION
Premier Money Market Fund and Premier Tax-Free Money Market Fund are
professionally managed money market funds organized as diversified series of
Mitchell Hutchins LIR Money Series, a Delaware business trust ("Trust").
The funds' investment adviser, administrator and distributor is Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset
management subsidiary of PaineWebber Incorporated ("PaineWebber").
Portions of the Annual Report and Semi-Annual Report to Shareholders of
the funds' predecessors are incorporated by reference into this Statement of
Additional Information ("SAI"). The Annual Report and Semi-Annual Report
accompany this SAI. You may obtain additional copies of the Reports by calling
toll-free 1-800-442-3809.
This SAI is not a prospectus and should be read only in conjunction with
the funds' current Prospectus, dated November 12, 1999. A copy of the Prospectus
may be obtained by calling your Investment Representative at your correspondent
firm or by calling toll-free 1-800-442-3809. This SAI is dated November 12,
1999.
TABLE OF CONTENTS
PAGE
----
The Funds and Their Investment Policies......... 2
The Funds' Investments, Related Risks and
Limitations..................................... 3
Organization of the Trust; Trustees and Officers
and Principal Holders of Securities............ 13
Investment Advisory, Administration and
Distribution Arrangements....................... 20
Portfolio Transactions.......................... 24
Additional Purchase and Redemption Information;
Service Organizations........................... 25
Valuation of Shares............................. 25
Performance Information......................... 26
Taxes........................................... 29
Other Information............................... 31
Financial Statements............................ 32
<PAGE>
THE FUNDS AND THEIR INVESTMENT POLICIES
Each fund's investment objective may not be changed without shareholder
approval. Except where noted, the other investment policies of each fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that a fund will achieve its investment objective.
Each fund is a money market fund that invests in high quality money market
instruments that have, or are deemed to have, remaining maturities of 13 months
or less. Money market instruments are short-term debt-obligations and similar
securities. They also include longer term bonds that have variable interest
rates or other special features that give them the financial characteristics of
short-term debt. Each fund may purchase only those obligations that Mitchell
Hutchins determines, pursuant to procedures adopted by the board, present
minimal credit risks and are "First Tier Securities" as defined in Rule 2a-7
under the Investment Company Act of 1940, as amended ("Investment Company Act").
PREMIER MONEY MARKET FUND'S investment objective is to provide a high
level of current income consistent with the preservation of capital and the
maintenance of liquidity. The fund invests in a diversified portfolio of money
market instruments. The fund's investments include (1) U.S. and foreign
government securities, (2) obligations of U.S. and foreign banks, (3) commercial
paper and other short-term obligations of U.S. and foreign corporations,
partnerships, trusts and other entities, (4) repurchase agreements and (5)
investment company securities.
The fund may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks having total assets at the time of purchase in excess of $1.5 billion. The
fund's investments in non-negotiable time deposits of these institutions will be
considered illiquid if they have maturities greater than seven days.
The fund generally may invest no more than 5% of its total assets in the
securities of a single issuer (other than U.S. government securities), except
that the fund may invest up to 25% of its total assets in First Tier Securities
of a single issuer for a period of up to three business days. The fund may
purchase only U.S. dollar-denominated obligations of foreign issuers.
The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33-1/3% of its total assets. The fund
may borrow up to 15% of the value of its total assets for temporary purposes,
including reverse repurchase agreements. The fund may invest in the securities
of other money market funds.
PREMIER TAX-FREE MONEY MARKET FUND'S investment objective is to provide a
high level of current income exempt from federal income tax consistent with the
preservation of capital and the maintenance of liquidity. The fund invests
substantially all of its assets in money market instruments issued by states,
municipalities, public authorities and other issuers, the interest from which is
exempt from federal income tax ("Municipal Securities"). These instruments
include (1) municipal commercial paper, (2) municipal bonds and notes and (3)
variable and floating rate municipal securities.
Municipal bonds include industrial development bonds ("IDBs"), private
activity bonds ("PABs"), moral obligation bonds, municipal lease obligations and
certificates of participation therein and put bonds. The interest on most PABs
is an item of tax preference for purposes of the federal alternative minimum tax
("AMT"). Under normal market conditions, the fund intends to invest in Municipal
Securities that pay interest that is not an item of tax preference for purposes
of the AMT ("AMT exempt interest"), but may invest up to 20% of its total assets
in such securities if, in Mitchell Hutchins' judgment, market conditions
warrant. In addition, when Mitchell Hutchins believes that there is an
insufficient supply of Municipal Securities or during other unusual market
conditions, the fund may temporarily hold cash and may invest all or any portion
of its net assets in taxable money market instruments, including repurchase
agreements. To the extent that the fund holds cash, such cash would not earn
income and would reduce the fund's yield.
2
<PAGE>
The fund may invest more than 25% of its total assets in municipal
obligations which are related in such a way that an economic, business or
political development or change affecting one such security also would affect
the other securities; for example, securities the interest upon which is paid
from revenues of similar types of projects such as mass transit or water and
sewer works, or securities whose issuers are located in the same state. As a
result of such investments, the fund's yield may be more affected by factors
pertaining to the economy of the relevant governmental issuer and other factors
specifically affecting the ability of issuers of such securities to meet their
obligations.
The fund generally may invest no more than 5% of its total assets in the
securities of a single issuer (other than U.S. government securities), except
that the fund may invest up to 25% of its total assets in First Tier Securities
of a single issuer for a period of up to three business days. The fund may
purchase only U.S. dollar-denominated obligations of foreign issuers.
The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33-1/3% of its total assets. The fund
may borrow up to 15% of its total assets for temporary purposes, including
through entering into reverse repurchase agreements. It may invest in the
securities of other investment companies.
THE FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS
The following supplements the information contained in the Prospectus and
above concerning the funds' investments, related risks and limitations. Except
as otherwise indicated in the Prospectus or the Statement of Additional
Information, the funds have established no policy limitations on their ability
to use the investments or techniques discussed in these documents.
YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER
SECURITIES. The yields on the money market instruments in which each fund
invests 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 assigned by rating agencies
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 funds, an issue may cease to be rated or
its rating may be reduced. If a security in the funds' portfolios ceases to be a
First Tier Security (as defined above) or Mitchell Hutchins becomes aware that a
security has received a rating below the second highest rating by any rating
agency, Mitchell Hutchins and, in certain cases, the funds' board, will consider
whether the funds should continue to hold the obligation. Each fund may purchase
only those obligations that Mitchell Hutchins determines, pursuant to procedures
adopted by the board, present minimal credit risks and are "First Tier
Securities" as defined in Rule 2a-7 under the Investment Company Act. A First
Tier Security is either (1) rated in the highest short-term rating category by
at least two nationally recognized statistical rating agencies ("rating
agencies"), (2) rated in the highest short-term rating category by a single
rating agency if only that rating agency 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 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. A First Tier Security rated in the highest
short-term category at the time of purchase that subsequently receives a rating
below the highest rating category from a different rating agency may continue to
be considered a First Tier Security.
Opinions relating to the validity of municipal securities and to the
exemption of interest thereon from federal income tax and (when available) from
the federal alternative minimum tax are rendered by bond counsel to the
respective issuing authorities at the time of issuance. Neither Premier Tax-Free
Money Market Fund nor Mitchell Hutchins will review the proceedings relating to
the issuance of municipal securities or the basis for these opinions. An
issuer's obligations under its municipal securities are subject to the
3
<PAGE>
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors (such as the federal bankruptcy laws) and federal, state and local
laws that may be enacted that adversely affect the tax-exempt status of interest
on the municipal securities held by a fund or the exempt-interest dividends
received by a fund's shareholders, extend the time for payment of principal or
interest, or both, or impose other constraints upon enforcement of such
obligations. There is also the possibility that, as a result of litigation or
other conditions, the power or ability of issuers to meet their obligations for
the payment of principal of and interest on their municipal securities may be
materially and adversely affected.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S.
Treasury (such as Treasury bills, notes or bonds) and obligations issued or
guaranteed as to principal and interest (but not as to market value) by the
U.S. government, its agencies or its instrumentalities. U.S. government
securities include mortgage-backed securities issued or guaranteed by
government agencies or government-sponsored enterprises. Other U.S.
government securities may be backed by the full faith and credit of the U.S.
government or supported primarily or solely by the creditworthiness of the
government-related issuer or, in the case of mortgage-backed securities, by
pools of assets.
U.S. government securities also include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury,
which are traded independently under the Separate Trading of Registered
Interest and Principal of Securities ("STRIPS") program. Under the STRIPS
programs, the principal and interest components are individually numbered and
separately issued by the U.S. Treasury.
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The funds may purchase
commercial paper, which includes short-term obligations issued by corporations,
partnerships, trusts or other entities to finance short-term credit needs. The
funds also may purchase other types of non-convertible debt obligations subject
to maturity constraints imposed by Rule 2a-7 under the Investment Company Act.
Descriptions of certain types of short-term obligations are provided below.
ASSET-BACKED SECURITIES. The funds may invest in securities that are
comprised of financial assets that have been securitized through the use of
trusts or special purpose corporations or other entities. Such assets may
include motor vehicle and other installment sales contracts, home equity loans,
leases of various types of real and personal property and receivables from
revolving credit (credit card) agreements or other types of financial assets.
Payments or distributions of principal and interest may be guaranteed up to a
certain amount and for a certain time period by a letter of credit or pool
insurance policy issued by a financial institution unaffiliated with the issuer,
or other credit enhancements may be present. See "The Funds' Investments,
Related Risks and Limitations -- Credit and Liquidity Enhancements."
VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. The funds
may purchase variable and floating rate securities with remaining maturities in
excess of 13 months issued by U.S. government agencies or instrumentalities or
guaranteed by the U.S. government. In addition, the funds may purchase variable
and floating rate securities of other issuers. The yields on these securities
are adjusted in relation to changes in specific rates, such as the prime rate,
and different securities may have different adjustment rates. Certain of these
obligations carry a demand feature that gives the funds the right to tender them
back to a specified party, usually the issuer or a remarketing agent, prior to
maturity. The funds' investments in these securities must comply with conditions
established by the Securities and Exchange Commission ("SEC") under which they
may be considered to have remaining maturities of 13 months or less. Certain of
these obligations carry a demand feature that gives the funds the right to
tender them back to a specified party, usually the issuer or a remarketing
agent, prior to maturity. The funds will purchase variable and floating rate
securities of non-U.S. government issuers that have remaining maturities of more
than 13 months only if the securities are subject to a demand feature
exercisable within 13 months or less. See "The Funds' Investments, Related Risks
and Limitations -- Credit and Liquidity Enhancements."
Generally, each fund may exercise demand features (1) upon a default under
the terms of the underlying security, (2) to maintain its 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
4
<PAGE>
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 securities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The funds may invest in 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 funds and an issuer. The principal amount of these
notes may be increased from time to time by the parties (subject to specified
maximums) or decreased by the funds or the issuer. These notes are payable on
demand and may or may not be rated.
INVESTING IN FOREIGN SECURITIES. Premier Money Market Fund's investments
in U.S. dollar-denominated securities of foreign issuers may involve risks that
are different from investments in U.S. issuers. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect the payment of principal or interest
on the fund's investments. 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.
CREDIT AND LIQUIDITY ENHANCEMENTS. The funds may invest in securities that
have credit or liquidity enhancements or the funds may purchase these types of
enhancements in the secondary market. Such enhancements may be structured as
demand features that permit the funds to sell the instrument at designated times
and prices. These credit and liquidity enhancements may be backed by letters of
credit or other instruments provided by banks or other financial institutions
whose credit standing affects the credit quality of the underlying obligation.
Changes in the credit quality of these financial institutions could cause losses
to a fund and affect its share price. The credit and liquidity enhancements may
have conditions that limit the ability of the funds to use them when the funds
wish to do so.
ILLIQUID SECURITIES. The term "illiquid securities" means securities that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which the funds have valued the securities and
includes, among other things, repurchase agreements maturing in more than seven
days and restricted securities other than those Mitchell Hutchins has determined
are liquid pursuant to guidelines established by the board. To the extent the
funds invest in illiquid securities, they may not be able to liquidate such
investments readily and may have to sell other investments if necessary to raise
cash to meet their obligations.
Restricted securities are not registered under the Securities Act of 1933,
as amended ("Securities Act"), and may be sold only in privately negotiated or
other exempted transactions or after a registration statement under the
Securities Act has become effective. Where registration is required, the funds
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 funds may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the funds 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 Securities 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 Securities Act for resales of certain securities to
qualified institutional buyers. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
5
<PAGE>
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 restricted securities held by
the funds, however, could affect adversely the marketability of such portfolio
securities, and the funds 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, which may include (1) the frequency of trades for the security, (2)
the number of dealers that make quotes for the security, (3) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how bids are solicited and the mechanics of transfer) and (4) the
existence of demand features or similar liquidity enhancements. Mitchell
Hutchins monitors the liquidity of restricted securities in the funds'
portfolios and reports periodically on such decisions to the board.
In making determinations as to the liquidity of municipal lease
obligations, Mitchell Hutchins will distinguish between direct investments in
municipal lease obligations (or participations therein) and investments in
securities that may be supported by municipal lease obligations or certificates
of participation therein. Since these municipal lease obligation-backed
securities are based on a well-established means of securitization, Mitchell
Hutchins does not believe that investing in such securities presents the same
liquidity issues as direct investments in municipal lease obligations.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
funds purchase securities or other obligations from a bank or securities dealer
(or its affiliate) and simultaneously commit 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 obligations.
Securities or other obligations subject to repurchase agreements may have
maturities in excess of 13 months. The funds maintain custody of the underlying
obligations prior to their repurchase, either through their regular custodian or
through a special "tri-party" custodian or sub-custodian that maintains separate
accounts for both the funds and their 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 obligations.
Repurchase agreements carry certain risks not associated with direct
investments in securities, including a possible decline in the market value of
the underlying 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 obligations and
the price that was paid by the funds upon acquisition is accrued as interest and
included in its net investment income. Repurchase agreements involving
obligations other than U.S. government securities (such as commercial paper and
corporate bonds) 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 seller
or guarantor becomes insolvent, the funds may suffer delays, costs and possible
losses in connection with the disposition of collateral. The funds intend to
enter into repurchase agreements only in transactions with counterparties
believed by Mitchell Hutchins to present minimum credit risks.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the
sale of securities held by the funds subject to their agreement to repurchase
the securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to the funds'
limitation on borrowings and may be entered into only with banks and securities
dealers. While a reverse repurchase agreement is outstanding, the funds will
maintain, in a segregated account with their custodian, cash or liquid
securities, marked to market daily, in an amount at least equal to its
obligations under the reverse repurchase agreement. See "The Funds' Investments,
Related Risks and Limitations - Segregated Accounts."
Reverse repurchase agreements involve the risk that the buyer of the
securities sold by the funds might be unable to deliver them when the funds seek
to repurchase. If the buyer of securities under a reverse repurchase agreement
6
<PAGE>
files for bankruptcy or becomes insolvent, such buyer or trustee or receiver may
receive an extension of time to determine whether to enforce that fund's
obligation to repurchase the securities, and the fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The funds may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery, I.E., for issuance or delivery to or by the funds later than
the normal settlement date for such securities at a stated price and yield. The
funds generally would not pay for such securities or start earning interest on
them until they are received. However, when the funds undertake a when-issued or
delayed delivery obligation, they immediately assume the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by the funds on a when-issued or delayed delivery basis may
result in the funds' incurring a loss or missing an opportunity to make an
alternative investment.
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 funds' net asset value. When the funds commit to purchase
securities on a when-issued or delayed delivery basis, their custodian
segregates assets to cover the amount of the commitment. See "The Funds'
Investments, Related Risks and Limitations--Segregated Accounts." The funds may
sell the right to acquire the security prior to delivery if Mitchell Hutchins
deems it advantageous to do so, which may result in a gain or loss to the funds.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each fund may invest in
securities of other money market funds, subject to Investment Company Act
limitations, which at present restrict these investments in the aggregate to no
more than 10% of each fund's total assets. The shares of other money market
funds are subject to the management fees and other expenses of those funds. At
the same time, the funds would continue to pay their own management fees and
expenses with respect to all its investments, including shares of other money
market funds. The funds may invest in the securities of other money market funds
when Mitchell Hutchins believes that (1) the amounts to be invested are too
small or are available too late in the day to be effectively invested in other
money market instruments, (2) shares of other money market funds otherwise would
provide a better return than direct investment in other money market instruments
or (3) such investments would enhance the funds' liquidity.
LENDING OF PORTFOLIO SECURITIES. Each fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables a fund to earn additional
income, but could result in a loss or delay in recovering these securities. The
borrower of the fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, 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. Each fund may reinvest any cash collateral in money market
investments 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. Each fund will retain authority to terminate any of its loans at any
time. Each fund may pay 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. Each fund will receive amounts
equivalent to any interest, dividends or other distributions on the securities
loaned. Each 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 adopted by the board governing the funds'
securities lending program, PaineWebber has been retained to serve as lending
agent for the funds. The board also has authorized the payment of fees
(including fees calculated as a percentage of invested cash collateral) to that
financial services company for these services. The board periodically reviews
all portfolio securities loan transactions for which that company acted as
lending agent. That company also has been approved as a borrower under the
funds' securities lending program.
7
<PAGE>
SEGREGATED ACCOUNTS. When a 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 or reverse
repurchase agreements, they 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 each fund's obligation or commitment under such
transactions.
TYPES OF MUNICIPAL SECURITIES. Premier Tax-Free Money Market Fund may
invest in a variety of municipal securities, as described below:
MUNICIPAL BONDS. Municipal bonds are debt obligations that are issued by
states, municipalities, public authorities or other issuers and that pay
interest that is exempt from federal income tax in the opinion of issuer's
counsel. The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as from
the user of the facility being financed. The term "municipal bonds" also
includes "moral obligation" issues, which are normally issued by special purpose
authorities. In the case of such issues, an express or implied "moral
obligation" of a related government unit is pledged to the payment of the debt
service, but is usually subject to annual budget appropriations. Custodial
receipts that represent an ownership interest in one or more municipal bonds
also are considered to be municipal bonds. Various types of municipal bonds are
described in the following sections.
MUNICIPAL LEASE OBLIGATIONS. Municipal bonds include municipal lease
obligations, such as leases, installment purchase contracts and conditional
sales contracts, and certificates of participation therein. Municipal lease
obligations are issued by state and local governments and authorities to
purchase land or various types of equipment or facilities and may be subject to
annual budget appropriations. The funds generally invest in municipal lease
obligations through certificates of participation.
Although municipal lease obligations do not constitute general obligations
of the municipality for which the municipality's taxing power is pledged, they
ordinarily are backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. The leases underlying
certain municipal lease obligations, however, provide that lease payments are
subject to partial or full abatement if, because of material damage or
destruction of the leased property, there is substantial interference with the
lessee's use or occupancy of such property. This "abatement risk" may be reduced
by the existence of insurance covering the leased property, the maintenance by
the lessee of reserve funds or the provision of credit enhancements such as
letters of credit.
Certain municipal lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Some municipal lease obligations of this type
are insured as to timely payment of principal and interest, even in the event of
a failure by the municipality to appropriate sufficient funds to make payments
under the lease. However, in the case of an uninsured municipal lease
obligation, the fund's ability to recover under the lease in the event of a
non-appropriation or default will be limited solely to the repossession of
leased property without recourse to the general credit of the lessee, and
disposition of the property in the event of foreclosure might prove difficult.
INDUSTRIAL DEVELOPMENT BONDS ("IDBS") AND PRIVATE ACTIVITY BONDS ("PABS").
IDBs and PABs are issued by or on behalf of public authorities to finance
various privately operated facilities, such as airport or pollution control
facilities. These obligations are considered municipal bonds if the interest
paid thereon is exempt from federal income tax in the opinion of the bond
issuer's counsel. IDBs and PABs are in most cases revenue bonds and thus are not
payable from the unrestricted revenues of the issuer. The credit quality of IDBs
and PABs is usually directly related to the credit standing of the user of the
facilities being financed. IDBs issued after August 15, 1986 generally are
considered PABs, and to the extent the fund invests in such PABs, shareholders
generally will be required to include a portion of their exempt-interest
dividends from the fund in calculating their liability for the AMT. See "Taxes"
8
<PAGE>
below. Premier Tax-Free Money Market Fund may invest more than 25% of its assets
in IDBs and PABs.
PARTICIPATION INTERESTS. Participation interests are interests in
municipal bonds, including IDBs, PABs and floating and variable rate
obligations, that are owned by financial institutions. These interests carry a
demand feature permitting the holder to tender them back to the financial
institution, which demand feature generally is backed by an irrevocable letter
of credit or guarantee of the financial institution. The credit standing of such
financial institution affects the credit quality of the participation interests.
A participation interest gives the fund an undivided interest in a
municipal bond owned by a financial institution. The fund has the right to sell
the instruments back to the financial institution. As discussed above under "The
Funds' Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements," to the extent that payment of an obligation is backed by a letter
of credit, guarantee or liquidity support arrangement from a financial
institution, such payment may be subject to the financial institution's ability
to satisfy that commitment. Mitchell Hutchins will monitor the pricing, quality
and liquidity of the participation interests held by the fund, and the credit
standing of financial institutions issuing letters of credit or guarantees
supporting such participation interests on the basis of published financial
information, reports of rating services and financial institution analytical
services.
PUT BONDS. A put bond is a municipal bond that gives the holder the
unconditional right to sell the bond back to the issuer or a third party at a
specified price and exercise date, which is typically well in advance of the
bond's maturity date. The obligation to purchase the bond on the exercise date
may be supported by a letter of credit or other credit support arrangement from
a bank, insurance company or other financial institution, the credit standing of
which affects the credit quality of the obligation.
If the put is a "one time only" put, the fund ordinarily will either sell
the bond or put the bond, depending upon the more favorable price. If the bond
has a series of puts after the first put, the bond will be held as long as, in
the judgment of Mitchell Hutchins, it is in the best interest of the fund to do
so. There is no assurance that the issuer of a put bond acquired by the fund
will be able to repurchase the bond upon the exercise date, if the fund chooses
to exercise its right to put the bond back to the issuer or to a third party.
TENDER OPTION BONDS. Tender option bonds are long-term municipal
securities sold by a bank or other financial institution subject to a demand
feature that gives the purchaser the right to sell them to the bank or other
financial institution at par plus accrued interest at designated times (the
"tender option"). The fund may invest in bonds with tender options that may be
exercisable at intervals ranging from daily to 397 days, and the interest rate
on the bonds is typically reset at the end of the applicable interval in an
attempt to cause the bonds to have a market value that approximates their par
value, plus accrued interest. The tender option may not be exercisable in the
event of a default on, or significant downgrading of, the underlying municipal
securities, and may be subject to other conditions. Therefore, the fund's
ability to exercise the tender option will be affected by the credit standing of
both the bank or other financial institution involved and the issuer of the
underlying securities.
TAX-EXEMPT COMMERCIAL PAPER AND SHORT-TERM MUNICIPAL NOTES. Municipal
bonds include tax-exempt commercial paper and short-term municipal notes, such
as tax anticipation notes, bond anticipation notes, revenue anticipation notes
and other forms of short-term securities. Such notes are issued with a
short-term maturity in anticipation of the receipt of tax funds, the proceeds of
bond placements and other revenues.
MORTGAGE SUBSIDY BONDS. The fund also may purchase mortgage subsidy bonds
with a remaining maturity of less than 13 months that are issued to subsidize
mortgages on single family homes and "moral obligation" bonds with a remaining
maturity of less than 13 months that are normally issued by special purpose
public authorities. In some cases the repayment of such bonds depends upon
annual legislative appropriations; in other cases repayment is a legal
9
<PAGE>
obligation of the issuer, and if the issuer is unable to meet its obligations,
repayment becomes a moral commitment of a related government unit (subject,
however, to such appropriations).
STAND-BY COMMITMENTS. Premier Tax-Free Money Market Fund may acquire
stand-by commitments under unusual market conditions to facilitate portfolio
liquidity. Pursuant to a stand-by commitment, a municipal bond dealer agrees to
purchase the securities that are the subject of the commitment at an amount
equal to (1) the acquisition cost (excluding any accrued interest paid on
acquisition), less any amortized market premium and plus any accrued market or
original issue discount, plus (2) all interest accrued on the securities since
the last interest payment date or the date the securities were purchased,
whichever is later.
Premier Tax-Free Money Market Fund will enter into stand-by commitments
only with those banks or other dealers that, in the opinion of Mitchell
Hutchins, present minimal credit risk. The fund's right to exercise stand-by
commitments will be unconditional and unqualified. Stand-by commitments will not
be transferable by the fund, although the fund may sell the underlying
securities to a third party at any time. The fund may pay for stand-by
commitments either separately in cash or by paying a higher price for the
securities that are acquired subject to such a commitment (thus reducing the
yield to maturity otherwise available for the same securities). The acquisition
of a stand-by commitment will not ordinarily affect the valuation or maturity of
the underlying municipal securities. Stand-by commitments acquired by the fund
will be valued at zero in determining net asset value. Whether the fund paid
directly or indirectly for a stand-by commitment, its cost will be treated as
unrealized depreciation and will be amortized over the period the commitment is
held by the fund.
TEMPORARY AND DEFENSIVE INVESTMENTS. When Mitchell Hutchins believes that
there is an insufficient supply of municipal securities or that other
circumstances warrant a defensive posture, Premier Tax-Free Money Market Fund
may hold cash and may invest all or any portion of its net assets in taxable
money market instruments, including repurchase agreements. To the extent the
fund holds cash, such cash would not earn income and would reduce the fund's
yield.
INVESTMENT LIMITATIONS OF THE FUNDS
FUNDAMENTAL LIMITATIONS. The following investment limitations cannot be
changed with respect to a fund without the affirmative vote of the lesser of (a)
more than 50% of the outstanding shares of the fund or (b) 67% or more of the
shares 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, a later
increase or decrease 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.
Each 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.
With respect to Premier Tax-Free Money Market Fund, the following
interpretation applies to, but is not a part of, fundamental limitation (1):
Each state, territory and possession of the United States (including the
District of Columbia and Puerto Rico), each political subdivision, agency,
instrumentality and authority thereof, and each multi-state agency of which a
state is a member is a separate "issuer." When the assets and revenues of an
agency, authority, instrumentality or other political subdivision are separate
10
<PAGE>
from the government creating the subdivision and the security is backed only by
the assets and revenues of the subdivision, such subdivision would be deemed to
be the sole issuer. Similarly, in the case of an IDB or PAB, if that bond is
backed only by the assets and revenues of the non-governmental user, then that
non-governmental user would be deemed to be the sole issuer. However, if the
creating government or another entity guarantees a security, then to the extent
that the value of all securities issued or guaranteed by that government or
entity and owned by the fund exceeds 10% of the fund's total assets, the
guarantee would be considered a separate security and would be treated as issued
by that government or entity.
(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 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.
The following interpretation applies to, but is not a part of, this
fundamental restriction: a fund's investments in master notes and similar
instruments will not be considered to be 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 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 LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without shareholder
approval.
Each 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 margin deposits in connection with its use of financial options and
11
<PAGE>
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 Investment Company 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.
* * *
12
<PAGE>
ORGANIZATION OF THE TRUST; TRUSTEES AND OFFICERS AND
PRINCIPAL HOLDERS OF SECURITIES
The Trust was organized on April 29, 1998, as a business trust under the
laws of Delaware and has five series. The Trust has authority to issue an
unlimited number of shares of beneficial interest of separate series, par value
$0.001 per share. The Trust is governed by a board of trustees, which oversees
the funds' operations. The board is authorized to establish additional series.
The trustees and executive officers of the Trust, their ages, business addresses
and principal occupations during the past five years are:
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE POSITION WITH TRUST DIRECTORSHIPS
--------------------- ------------------- -------------
Margo N. Alexander*+; 52 Trustee and Mrs. Alexander is chairman
President (since March 1999), chief
executive officer 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 32
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
Richard Q. Armstrong; 64 Trustee Mr. Armstrong is chairman and
R.Q.A. Enterprises principal of R.Q.A. Enterprises
One Old Church Road (management consulting firm)
Unit #6 (since April 1991 and principal
Greenwich, CT 06830 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 31
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
13
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE POSITION WITH TRUST DIRECTORSHIPS
--------------------- ------------------- -------------
E. Garrett Bewkes, Director and Mr. Bewkes is a director of
Jr.**+; 73 Chairman of the Paine Webber Group Inc. ("PW
Board of Trustees Group") (holding company of
PaineWebber and 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 (baker and distributor
of bakery products). Mr. Bewkes
is a director of Interstate
Bakeries Corporation. Mr.
Bewkes is a director or trustee
of 35 investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
Richard R. Burt; 52 Trustee Mr. Burt is chairman of IEP
1275 Pennsylvania Ave., Advisors, Inc. (international
N.W. investments and consulting
Washington, DC 20004 firm) (since March 1994) and a
partner of McKinsey & Company
(management consulting firm)
(since 1991). He is also a
director of
Archer-Daniels-Midland Co.
(agricultural commodities),
Hollinger International Co.
(publishing), Homestake Mining
Corp. (gold mining), Powerhouse
Technologies Inc. (provides
technology to the gaming and
wagering industries) and
Weirton Steel Corp. (steel
fabrication and finished steel
products). 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 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Mary C. Farrell**+; 49 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, PaineWebber
or one of their affiliates
serves as investment adviser.
14
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE POSITION WITH TRUST DIRECTORSHIPS
--------------------- ------------------- -------------
Meyer Feldberg; 57 Trustee Mr. Feldberg is Dean and
Columbia University Professor of Management of the
101 Uris Hall Graduate School of Business,
New York, NY 10027 Columbia University. Prior to
1989, he was president of the
Illinois Institute of
Technology. Dean Feldberg is
also a director of Primedia,
Inc. (publishing), Federated
Department Stores, Inc.
(operator of department stores)
and Revlon, Inc. (cosmetics).
Dean Feldberg is a director or
trustee of 34 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
George W. Gowen; 70 Trustee Mr. Gowen is a partner in the
666 Third Avenue law firm of Dunnington,
New York, NY 10017 Bartholow & Miller. Prior to
May 1994, he was a partner in
the law firm of Fryer, Ross &
Gowen. Mr. Gowen is a director
or trustee of 34 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Frederic V. Malek; 62 Trustee Mr. Malek is chairman of Thayer
1455 Pennsylvania Ave., Capital Partners (merchant
N.W. bank). From January 1992 to
Suite 350 November 1992, he was campaign
Washington, DC 20004 manager of Bush-Quayle `92.
From 1990 to 1992, he was vice
chairman and, from 1989 to
1990, he was president of
Northwest Airlines Inc., NWA
Inc. (holding company of
Northwest Airlines Inc.) and
Wings Holdings Inc. (holding
company of NWA Inc.). Prior to
1989, he was employed by the
Marriott Corporation (hotels,
restaurants, airline catering
and contract feeding), where he
most recently was an executive
vice president and president
of Marriott Hotels and Resorts.
Mr. Malek is also a director of
Aegis Communications, Inc.
(tele-services), American
Management Systems, Inc.
(management consulting and
computer related services),
Automatic Data Processing, Inc.
(computing services), CB
Richard Ellis, Inc. (real
estate services), Choice Hotels
International (hotel and hotel
franchising), FPL Group, Inc.
(electric services), Global
Vacation Group (packaged
vacations), HCR/Manor Care,
Inc. (health care) and
Northwest Airlines Inc. Mr.
Malek is a director or trustee
of 31 investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
15
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE POSITION WITH TRUST DIRECTORSHIPS
--------------------- ------------------- -------------
Carl W. Schafer; 63 Trustee Mr. Schafer is president of the
66 Witherspoon Street, Atlantic Foundation (charitable
#1100 foundation supporting mainly
Princeton, NJ 08542 oceanographic exploration and
research). He 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. (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 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Brian M. Storms*+; 45 Trustee Mr. Storms is president and
chief operating officer of
Mitchell Hutchins (since March
1999). Prior to March 1999, he
was president of Prudential
Investments (1996-1999). Prior
to joining Prudential, he was a
managing director at Fidelity
Investments. Mr. Storms is a
director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Kris L. Dorr*; 35 Vice President Ms. Dorr is a first vice
president and a portfolio
manager in the short-term
strategies group of Mitchell
Hutchins. Ms. Dorr is a vice
president of one investment
company for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Elbridge T. Gerry III*; Vice President Mr. Gerry is a senior vice
42 president and a portfolio
manager of Mitchell Hutchins.
Prior to January 1996, he was
with J. P. Morgan Private
Banking where he was
responsible for managing
municipal assets, including
several municipal bond funds.
Mr. Gerry is a vice president
of five investment companies
for which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
16
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE POSITION WITH TRUST DIRECTORSHIPS
--------------------- ------------------- -------------
John J. Lee**; 31 Vice President and Mr. Lee is a vice president and
Assistant Treasurer a manager of the mutual fund
finance department of Mitchell
Hutchins. Prior to September
1997, he was an audit manager in
the financial services practice
of Ernst & Young LLP. Mr. Lee is
a vice president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as an
investment adviser.
Kevin J. Mahoney**; 34 Vice President and Mr. Mahoney is a first vice
Assistant Treasurer president and a senior manager
of the mutual fund finance
department of Mitchell
Hutchins. From August 1996
through March 1999, he was the
manager of the mutual fund
internal control group of
Salomon Smith Barney. Prior to
August 1996, he was an
associate and assistant
treasurer of BlackRock
Financial Management L.P. Mr.
Mahoney is a vice president and
assistant treasurer of 32
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Michael H. Markowitz*; 34 Vice President Mr. Markowitz is a first vice
president and a portfolio
manager in the short-term
strategies group of Mitchell
Hutchins. Mr. Markowitz is a
vice president of one
investment company for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Dennis McCauley*; 53 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 22
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Kevin P. McIntyre*; 33 Vice President Mr. McIntyre is a vice
president and a portfolio
manager of Mitchell Hutchins.
Mr. McIntyre is a vice
president of one investment
company for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
17
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE POSITION WITH TRUST DIRECTORSHIPS
--------------------- ------------------- -------------
Ann E. Moran**; 42 Vice President and Ms. Moran is a vice president
Assistant Treasurer and a manager of the mutual
fund finance department of
Mitchell Hutchins. Ms. Moran is
a vice president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Dianne E. O'Donnell**; 47 Vice President and Ms. O'Donnell is a senior vice
Secretary president and deputy general
counsel of Mitchell Hutchins.
Ms. O'Donnell is a vice
president and secretary of 31
investment companies and a vice
president and assistant
secretary of one investment
company for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Emil Polito*; 39 Vice President Mr. Polito is a senior vice
president and director of
operations and control for
Mitchell Hutchins. Mr. Polito
is a vice president of 32
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Susan Ryan*; 39 Vice President Ms. Ryan is a senior vice
president and portfolio manager
of Mitchell Hutchins and has
been with Mitchell Hutchins
since 1982. Ms. Ryan is a vice
president of five investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Victoria E. Schonfeld**; Vice President Ms. Schonfeld is a managing
48 director and general counsel of
Mitchell Hutchins (since May
1994) and a senior vice
president of PaineWebber (since
July 1995). Ms. Schonfeld is a
Ms. Schonfeld is a vice
president of 31 investment
companies and a vice president
and secretary of one investment
company for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Paul H. Schubert**; 36 Vice President and Mr. Schubert is a senior vice
Treasurer president and director of the
mutual fund finance department
of Mitchell Hutchins. Mr.
Schubert is a vice president
and treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
18
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS; AGE POSITION WITH TRUST DIRECTORSHIPS
--------------------- ------------------- -------------
Barney A. Vice President and Mr. Taglialatela is a vice
Taglialatela**; 38 Assistant Treasurer president and a manager of the
mutual fund finance department
of Mitchell 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 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Debbie Vermann*; 40 Vice President Ms. Vermann is a vice president
and a portfolio manager of
Mitchell Hutchins. Ms. Vermann
is a vice president of three
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Keith A. Weller**; 38 Vice President and Mr. Weller is a first vice
Assistant Secretary president and associate general
counsel of Mitchell Hutchins.
Prior to May 1995, he was an
attorney in private practice.
Mr. Weller is a vice president
and assistant secretary of 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
- -------------
* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.
** This person's business address is 1285 Avenue of the Americas, New York, New
York 10019-6028.
+ Mrs. Alexander, Mr. Bewkes, Ms. Farrell and Mr. Storms are "interested
persons" of the funds as defined in the Investment Company Act by virtue of
their positions with Mitchell Hutchins, PaineWebber and/or PW Group.
The Trust pays each trustee who is not an "interested person" of the Trust
$1,000 annually for each series and up to $150 per series for each board meeting
and each meeting of a board committee. The Trust thus pays each such trustee
$5,000 annually, plus any additional amounts due for board or committee
meetings. Each chairman of the audit and contract review committees 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 of the Trust own in the aggregate less than 1% of the
outstanding shares of any class of each fund. Because Correspondent Services
Corporation and Mitchell Hutchins perform substantially all 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.
The table below includes certain information relating to the compensation
of the Trust's current board members and the compensation of those board members
from all PaineWebber funds during the 1998 calendar year.
19
<PAGE>
COMPENSATION TABLE+
AGGREGATE
COMPENSATION TOTAL COMPENSATION
FROM THE FROM THE FUND
NAME OF PERSON, POSITION TRUST* COMPLEX**
------------------------ ----- -------
Richard Q. Armstrong, $8,160 $101,372
Trustee
Richard R. Burt, $8,130 $101,372
Trustee
Meyer Feldberg, $8,160 $116,222
Trustee
George W. Gowen, $8,474 $108,272
Trustee
Frederic V. Malek, $8,160 $101,372
Trustee
Carl W. Schafer, $8,160 $101,372
Trustee
- --------------------
+ Only independent board members are compensated by the PaineWebber funds and
identified above; board members who are "interested persons," as defined by
the Investment Company Act, do not receive compensation.
* Represents fees estimated to be paid to each board member during the funds'
initial full fiscal year.
** Represents total compensation paid during the calendar year ended December
31, 1998, to each board member by 31 investment companies (34 in the case of
Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or one
of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.
PRINCIPAL HOLDERS OF SECURITIES
As of October 31, 1999, the funds had no shareholders.
INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. Mitchell Hutchins
acts as each fund's investment adviser and administrator pursuant to a contract
("Advisory and Administration Contract") under which each fund pays Mitchell
Hutchins an annual fee, computed daily and paid monthly, at the rate of 0.20% of
average daily net assets.
Services provided by Mitchell Hutchins under the Advisory and
Administration Contract, as discussed below, include the provision of a
continuous investment program for the funds and supervision of all matters
relating to the administration and operation of the funds.
On November __, 1999, shareholders of Correspondent Cash Reserves Money
Market Portfolio and Correspondent Cash Reserves Tax Free Money Market
Portfolio, series of The Infinity Mutual Funds, Inc., each approved an Agreement
and Plan of Conversion and Termination ("Plan"). Pursuant to the Plan,
Correspondent Cash Reserves Money Market Portfolio will be reorganized into
Premier Money Market Fund, and Correspondent Cash Reserves Tax Free Money Market
Portfolio will be reorganized into Premier Tax-Free Money Market Fund, expected
to occur in January 2000, or another date agreed to by the parties to the Plan.
Mitchell Hutchins serves as investment adviser to Correspondent Cash Reserves
Money Market Portfolio and Correspondent Cash Reserves Tax Free Money Market
Portfolio. Premier Money Market Fund and Premier Tax-Free Money Market Fund will
20
<PAGE>
have no investment operations prior to the reorganizations. During each of the
periods indicated, Mitchell Hutchins was paid the fees indicated below under a
substantially similar advisory agreement with the predecessor entity to each
Premier fund:
FISCAL YEAR ENDED DECEMBER 31
---------------------------------------
1998 1997 1996
---------- ----------- -----------
Correspondent Cash $1,328,616 $1,088,088 $950,074
Reserves Money Market
Portfolio............
Correspondent Cash $ 113,647 $ 79,470* $ 9,950**
Reserves Tax Free Money
Market Portfolio.....
- ---------------------
* Pursuant to an undertaking by Mitchell Hutchins, $14,024 of the $93,494
advisory fee payable for the fiscal year ended December 31, 1997, was waived
resulting in the net payment of $79, 470.
** Pursuant to an undertaking by Mitchell Hutchins, $9,950 of the $19,900
advisory fee payable for the fiscal year ended December 31, 1996, was waived
resulting in the net payment of $9,950.
Under a contract with BISYS Fund Services Ohio, Inc. ("BISYS") ("BISYS
Administration Contract"), BISYS served as the administrator to Correspondent
Cash Reserves Money Market Portfolio and Correspondent Cash Reserves Tax Free
Money Market Portfolio. Under the BISYS Administration Contract, each fund paid
BISYS a fee, computed daily and paid monthly, at an annual rate of 0.10% of the
value of each fund's average daily net assets. For the fiscal years ended
December 31, 1998, 1997 and 1996, the predecessor entities to Premier Money
Market Fund and Premier Tax-Free Money Market Fund paid BISYS fees in the amount
of $1,328,616, $1,088,088 and $950,074; and $66,199, $26,487 and $0,
respectively.
Pursuant to the terms of a Special Management Services Agreement with
Mitchell Hutchins and BISYS, Correspondent Cash Reserves Money Market Portfolio
and Correspondent Cash Reserves Tax Free Money Market Portfolio had agreed to
pay Mitchell Hutchins and BISYS each a monthly fee at the annual rate of 0.05%
of each fund's average daily net asset value. The fees payable to Mitchell
Hutchins by Correspondent Cash Reserves Money Market Portfolio under the Special
Management Services Agreement for the fiscal years ended December 31, 1998, 1997
and 1996, amounted to $664,308, $544,044 and $461,556, respectively; however,
pursuant to an undertaking, Mitchell Hutchins waived its fee in its entirety for
each such fiscal year. The fees payable to Mitchell Hutchins by Correspondent
Cash Reserves Tax Free Money Market Portfolio under the Special Management
Services Agreement for the fiscal years ended December 31, 1998, 1997 and 1996,
amounted to $56,824, $46,747 and $9,950, respectively, which amounts were waived
in their entirety pursuant to an undertaking. The fees payable to BISYS by
Correspondent Cash Reserves Money Market Portfolio under the Special Management
Services Agreement for the fiscal years ended December 31, 1998, 1997 and 1996
amounted to $664,308, $544,044 and $461,555, respectively; however, pursuant to
an undertaking, BISYS waived its fee in its entirety for each such fiscal year.
The fees payable to BISYS by Correspondent Cash Reserves Tax Free Money Market
Portfolio under the Special Management Services Agreement for the fiscal years
ended December 31, 1998, 1997 and 1996 amounted to $56,823, $46,747 and $9,950,
respectively, which amounts were waived in their entirety pursuant to an
undertaking.
Under the Advisory and Administration Contract, Mitchell Hutchins will not
be liable for any error of judgment of mistake of law or for any loss suffered
by the funds in connection with the performance of the Advisory and
Administration 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 and Administration Contract terminates automatically upon
assignment and is terminable at any time without penalty by the board or by vote
of the holders of a majority of the funds' outstanding voting securities on 60
days' written notice to Mitchell Hutchins, or by Mitchell Hutchins on 60 days'
written notice to the funds.
21
<PAGE>
Under the terms of the Advisory and Administration Contract, each fund
bears all expenses incurred in its operation that are not specifically assumed
by Mitchell Hutchins. General expenses of the Trust not readily identifiable as
belonging to a specific fund or to the Trust's other series are allocated among
series by or under the direction of the board of trustees in such manner as the
board deems fair and equitable. Expenses borne by the Trust include the
following (or each fund's share of the following): (1) the cost (including
brokerage commissions) of securities purchased or sold by a fund and any losses
incurred in connection therewith; (2) fees payable to and expenses incurred on
behalf of a fund by Mitchell Hutchins under the contract; (3) expenses of
organizing the Trust and each fund; (4) filing fees and expenses relating to the
registration and qualification of the funds' shares and the Trust under federal
and/or state securities laws and maintaining such registration and
qualifications; (5) fees and salaries payable to the Trust's trustees and
officers who are not interested persons of the Trust or Mitchell Hutchins; (6)
all expenses incurred in connection with the trustees' services, including
travel expenses; (7) taxes (including any income or franchise taxes) and
governmental fees; (8) costs of any liability, uncollectible items of deposit
and other insurance and fidelity bonds; (9) any costs, expenses or losses
arising out of a liability of or claim for damages or other relief asserted
against the Trust or a fund for violation of any law; (10) legal, accounting and
auditing expenses, including legal fees of special counsel for those trustees of
the Trust who are not interested persons of the Trust; (11) charges of
custodians, transfer agents and other agents (including any lending agent); (12)
costs of preparing share certificates (if any); (13) 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; (14) costs of mailing prospectuses and supplements thereto,
statements of additional information and supplements thereto, reports and proxy
materials to existing shareholders; (15) any extraordinary expenses (including
fees and disbursements of counsel, costs of actions, suits or proceedings to
which the Trust is a party and the expenses the Trust may incur as a result of
its legal obligation to provide indemnification to its officers, trustees,
agents and shareholders) incurred by the Trust or a fund; (16) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations; (17) the cost of mailing and tabulating
proxies and costs of meetings of shareholders, the Board and any committees
thereof; (18) the cost of investment company literature and other publications
provided by the Trust to its trustees and officers; (19) costs of mailing,
stationery and communications equipment; (20) expenses incident to any dividend,
withdrawal or redemption options; (21) charges and expenses of any outside
pricing service used to value portfolio securities; and (22) interest on
borrowings of the funds.
NET ASSETS. The following table shows the approximate net assets as of
September 30, 1999, 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.
NET ASSETS
INVESTMENT CATEGORY ($MIL)
------------------- ------
Domestic (excluding Money Market).......................$7,765.7
Global..................................................$4,455.8
Equity/Balanced.........................................$7,453.2
Fixed income (excluding Money Market)...................$4,768.3
Taxable Fixed Income............................$3,269.7
Tax-Free Fixed Income...........................$1,498.6
Money Markt Funds......................................$35,065.1
PERSONAL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to a code of ethics that describes
22
<PAGE>
the fiduciary duty owed to shareholders of PaineWebber 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 Funds and other Mitchell
Hutchins advisory clients.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of
each fund's shares under a distribution contract with the Trust ("Distribution
Contract"), which requires Mitchell Hutchins to use its best efforts, consistent
with its other business, to sell shares of the funds. No separate compensation
is payable by either fund to Mitchell Hutchins or its affiliates under the
Distribution Contract. Instead, Mitchell Hutchins or an affiliate shall receive
service and distribution fees under the funds' plan of distribution, as
described below. Shares of the funds are offered continuously, except that the
Trust and Mitchell Hutchins or its affiliates reserve the right to reject any
purchase order and to suspend the offering of fund shares for a period of time.
Under a plan of distribution pertaining to each fund's shares adopted by
the Trust in the manner prescribed under Rule 12b-1 under the Investment Company
Act ("12b-1 Plan"), each fund pays Correspondent Services Corporation (csc) a
distribution and service fee, accrued daily and payable monthly, at the annual
rate of 0.60% of the average daily net assets of each fund. However, csc, along
with its affiliate, Mitchell Hutchins, has agreed to waive 0.17% of Premier
Tax-Free Money Market Fund's Rule 12b-1 fee through December 31, 2000, making
the effective rate of this fee 0.43% until then.
Csc uses the amounts that it receives under the 12b-1 Plan to pay certain
correspondent firms (together with csc, the "Securities Firms") with which it
has entered into clearing agreements under which the Securities Firms have
agreed to perform certain services for their clients who are shareholders of a
fund. Csc receives no special compensation from either of the funds or investors
at the time shares are bought.
Csc also uses the 12b-1 Plan fee to:
o Spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of fund shares.
o Offset each fund's marketing costs, such as preparation, printing
and distribution of sales literature, advertising and prospectuses
to prospective investors and related overhead expenses, such as
employee salaries and bonuses.
The 12b-1 Plan and the related Distribution Contract for each fund's
shares specify that the funds must pay service and distribution fees to csc for
their activities, not as reimbursement for specific expenses incurred.
Therefore, even if csc's expenses exceed the fees it receives, the funds will
not be obligated to pay more than those fees. On the other hand, if csc's
expenses are less than such fees, it will retain its full fees and realize a
profit. Expenses in excess of fees received or accrued through the termination
date of the 12b-1 Plan will be csc's sole responsibility and not that of the
funds. Annually, the board reviews the 12b-1 Plan and csc's corresponding
expenses for each fund.
Among other things, the 12b-1 Plan provides that (1) csc will submit to
the board at least quarterly, and the trustees will review, reports regarding
all amounts expended under the 12b-1 Plan and the purposes for which such
expenditures were made, (2) the 12b-1 Plan will continue in effect only so long
as it is approved at least annually, and any material amendment thereto is
approved, by the board, including those trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the 12b-1 Plan or any agreement related to the 12b-1 Plan,
acting in person at a meeting called for that purpose, (3) payments by the funds
under the 12b-1 Plan shall not be materially increased without the affirmative
vote of the holders of a majority of the outstanding shares of the funds and (4)
while the 12b-1 Plan remains in effect, the selection and nomination of trustees
23
<PAGE>
who are not "interested persons" of the Trust shall be committed to the
discretion of the trustees who are not "interested persons" of the Trust.
The funds' predecessors, Correspondent Cash Reserves Money Market
Portfolio and Correspondent Cash Reserves Tax Free Money Market Portfolio,
operated under a separate Rule 12b-1 plan with csc. Under this Rule 12b-1 plan,
$7,981,102 was payable to csc by Correspondent Cash Reserves Money Market
Portfolio for the fiscal year ended December 31, 1998. However, pursuant to an
undertaking, this amount was reduced by $110,436, resulting in a net amount paid
by Correspondent Cash Reserves Money Market Fund of $7,860,666. For the fiscal
year ended December 31, 1998, the amount payable pursuant to the Rule 12b-1 plan
by Correspondent Cash Reserves Tax Free Money Market Portfolio was $681,887;
however, pursuant to an undertaking, the amount was reduced by $196,182,
resulting in a net amount paid by Correspondent Cash Reserves Tax Free Money
Market Portfolio of $485,705. All of the above amounts were paid to
broker-dealers in connection with the sale of fund shares.
In January 2000, when the funds are expected to reorganize into Premier
Money Market Fund and Premier Tax-Free Money Market Fund, the new 12b-1 Plan
with csc will take effect.
In approving the 12b-1 Plan, the board considered all the features of the
distribution system, including (1) the reasonableness of csc's fees, (2) the
likelihood that the 12b-1 Plan would facilitate distribution of fund shares, (3)
the structural continuity of the 12b-1 Plan with the plan of distribution of the
funds' predecessor entities, (4) the advantage to the shareholders of economies
of scale resulting from growth in the funds' assets and potential continued
growth and other possible benefits to shareholders of the 12b-1 Plan, (5) the
services provided to the funds and their shareholders by csc, (6) the services
provided by Securities Firms pursuant to their clearing agreements with csc, (7)
csc's shareholder service- and distribution-related expenses and costs and (8)
the similarity of the 12b-1 Plan to plans of distribution adopted by competitor
money market funds.
With respect to the 12b-1 Plan, the board considered all compensation that
csc would receive under the Plan. The board also considered the benefits that
would accrue to csc under the Plan in that csc would receive a service and
distribution fee that is calculated based upon a percentage of the average net
assets of each fund and would increase if the 12b-1 Plan were successful and the
funds attained and maintained significant asset levels.
PORTFOLIO TRANSACTIONS
The funds purchase 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. During the fiscal years ended December 31, 1996, 1997 and
1998, neither fund's predecessor entity paid any brokerage commissions;
therefore, neither predecessor entity has allocated any brokerage transactions
for research, analysis, advice and similar services.
For purchases or sales with broker-dealer firms that act as principal,
Mitchell Hutchins seeks best execution. 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, if no weight was
attributed to the services provided by the executing dealer. Mitchell Hutchins
may engage in agency transactions in over-the-counter 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.
Research services and information received from brokers or dealers are
supplemental to Mitchell Hutchins' own research efforts and, when utilized, are
24
<PAGE>
subject to internal analysis before being incorporated into their investment
processes. Information and research services furnished by brokers or dealers
through which or with which the funds effect securities transactions may be used
by Mitchell Hutchins in advising other funds or accounts and, conversely,
research services furnished to Mitchell Hutchins by brokers or dealers in
connection with other funds or accounts that either of them advises may be used
in advising the funds.
Investment decisions for the funds 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 funds 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 that fund and such
other account(s) as to amount according to a formula deemed equitable to the
fund and the other 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 funds
are 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 benefit the fund.
ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION; SERVICE ORGANIZATIONS
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION. Each fund may suspend
redemption privileges or postpone the date of payment during any period (1) when
the New York Stock Exchange is closed or trading on the New York Stock Exchange
is restricted as determined by the SEC, (2) when an emergency exists, as defined
by the SEC, that makes it not reasonably practicable for the fund to dispose of
securities owned by it or fairly to determine the 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 each fund's portfolio at
the time; although the funds attempt to maintain a constant net asset value of
$1.00 per share.
Under normal circumstances, the funds' shares may be redeemed by a
shareholder's check or through the funds' systematic withdrawal plan. Such a
redemption order will be executed at the net asset value next determined after
the order is received by Mitchell Hutchins. Redemptions of each fund's shares
effected through a broker-dealer or other financial institution may be subject
to a service charge by that broker-dealer or other financial institution.
The transfer agent may modify or terminate the funds' checkwriting service
at any time or impose service fees for checkwriting.
SERVICE ORGANIZATIONS. The funds may authorize service organizations, and
their agents, to accept on their behalf purchase and redemption orders that are
in "good form." The funds will be deemed to have received these purchase and
redemption orders when a service organization or its agent accepts them. Like
all customer orders, these orders will be priced based on each fund's net asset
value next computed after receipt of the order by the service organizations or
their agents. Service organizations may include retirement plan service
providers who aggregate purchase and redemption instructions received from
numerous retirement plans or plan participants.
VALUATION OF SHARES
Each fund uses its best efforts to maintain its net asset value at $1.00
per share. Each fund's net asset values per share are determined by the funds'
custodian, The Bank of New York ("BONY"), as of 12:00 noon, Eastern time, on
each Business Day. As defined in the Prospectus, "Business Day" means any day on
which the offices of BONY, the funds' transfer agent, BISYS, Mitchell Hutchins
and the relevant correspondent (or other financial services) firm 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.
25
<PAGE>
Each fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ("Rule") under the Investment Company
Act. To use amortized cost to value its portfolio securities, the funds must
adhere to certain conditions under the Rule relating to its investments, some of
which are discussed in this Statement of Additional Information. 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, a fund might have to sell portfolio securities
prior to maturity and at a price that might not be desirable.
The board has established 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 each 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. Each 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, each
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. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board.
PERFORMANCE INFORMATION
The funds' performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represent past performance and are not
intended to indicate future performance. The investment return will fluctuate.
All performance shown is that of the funds' predecessors.
TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in each fund's Performance Advertisements are
calculated according to the following formula:
P(1 + T)(n)= ERV
where: P = a hypothetical initial payment of $1,000 to purchase
shares of a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
at the beginning of that period.
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. All dividends are assumed to have been reinvested at net asset value.
26
<PAGE>
The funds may also advertise other performance data, which may consist of
the annual or cumulative return (including short-term capital gain, if any)
earned on a hypothetical investment in the fund since it began operations or for
shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).
The following tables show performance information for the funds' shares
outstanding for the periods indicated. All returns for periods of more than one
year are expressed as an average annual return.
PREMIER MONEY MARKET FUND
Year ended June 30, 1999:
Standardized Return........... 4.44%
Five Years ended June 30, 1999:
Standardized Return........... 4.72%
Inception* to June 30, 1999:
Standardized Return........... 4.16%
- --------------
* The inception date for the predecessor fund is May 20, 1991.
PREMIER TAX-FREE MONEY MARKET FUND
Year ended June 30, 1999: 2.56%
Standardized Return...........
Inception* to June 30, 1999: 2.78%
Standardized Return...........
- --------------
* The inception date for the predecessor fund is October 7, 1996.
YIELD. Each fund computes its yield and effective yield quotations using
standardized methods required by the SEC. Each 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) their
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
Premier Tax-Free Money Market Fund from time to time also advertises its
tax-equivalent yield and tax-equivalent effective yield, also based on a
recently ended seven-day period. These quotations are calculated by dividing
that portion of the fund's yield (or effective yield, as the case may be) that
is tax-exempt by 1 minus a stated income tax rate and adding the product to that
portion, if any, of the fund's yield that is not tax-exempt, according to the
following formula:
TAX EQUIVALENT YIELD = (E/1-p)+t
E = tax-exempt yield of shares
p = stated income tax rate
27
<PAGE>
t = taxable yield of shares
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of each 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.
The following yields are for the seven-day period ended June 30, 1999:
Effective
YIELD YIELD
----- -----
Premier Money Market Fund 4.14% 4.22%
Premier Tax-Free Money Market Fund 2.82%* 2.86%
- ----------------------
* For the seven-day yield as of June 30, 1999, the predecessor fund's service
providers voluntarily waived a portion of their fees. If the service providers
had not waived a portion of their fees, the seven-day yield shown would have
been 2.61% for the predecessor entity to Premier Tax-Free Money Market Fund.
The following tax equivalent yields are based, in each case, on the
maximum individual tax rates and are also for the seven-day period ended June
30, 1999:
Effective
YIELD YIELD
----- -----
Premier Tax-Free Money Market Fund 4.47% 4.53%
The funds may also advertise other performance data, which may consist of
the annual or cumulative return (including net short-term capital gain, if any)
earned on a hypothetical investment in each fund since they or their
predecessors began operations or for shorter periods. This return data may or
may not assume reinvestment of dividends (compounding).
OTHER INFORMATION. The funds' 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 each fund will fluctuate. In Performance
Advertisements, the funds may compare its 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
28
<PAGE>
Consumer Price Index as published by the U.S. Department of Commerce. The funds
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 funds 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.
Each fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on fund shares are reinvested by being paid in additional
fund shares, any future income of the funds would increase the value, not only
of the original funds' investments, but also of the additional fund shares
received through reinvestment. As a result, the value of the funds' investment
would increase more quickly than if dividends had been paid in cash.
Each fund may also compare its performance with the performance 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 a 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
insured or guaranteed by the U.S. government and returns thereon will fluctuate.
While the funds seek to maintain a stable net asset value of $1.00 per share,
there can be no assurance that they will be able to do so.
TAXES
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to qualify
for treatment as a regulated investment company ("RIC") under the Internal
Revenue Code, each fund must distribute to its shareholders for each taxable
year at least 90% of its investment company taxable income (consisting generally
of taxable net investment income and net short-term capital gain, if any) plus,
in the case of Premier Tax-Free Money Market Fund, its net interest income
excludable from gross income under section 103(a) of the Internal Revenue Code,
and must meet several additional requirements. With respect to each fund, these
requirements include 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 and other securities, with these
other securities limited, in respect of any one issuer, to 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) of any one issuer. If a fund failed to qualify for treatment as a
RIC for any taxable year, (a) it would be taxed as an ordinary corporation on
the full amount of its taxable income for that year without being able to deduct
the distributions it makes to its shareholders and (b) the shareholders would
treat all those distributions, including distributions that otherwise would be
"exempt-interest dividends" described in the following paragraph, as dividends
(that is, ordinary income) to the extent of the fund's earnings and profits. In
addition, the fund could be required to recognize unrealized gains, pay
substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.
Dividends paid by Premier Tax-Free Money Market Fund will qualify as
"exempt-interest dividends," and thus will be excludable from gross income by
its shareholders, if it satisfies the additional requirement that, at the close
of each quarter of its taxable year, at least 50% of the value of its total
assets consists of securities the interest on which is excludable from gross
income under section 103(a). Premier Tax-Free Money Market Fund intends to
continue to satisfy this requirement. The aggregate amount annually designated
by a municipal fund as exempt-interest dividends may not exceed its interest for
the year that is excludable under section 103(a) over certain amounts disallowed
as deductions. The shareholders' treatment of dividends from Premier Tax-Free
29
<PAGE>
Money Market Fund under state and local income tax laws may differ from the
treatment thereof under the Internal Revenue Code.
Tax-exempt interest attributable to certain PABs (including, in the case
of Premier Tax-Free Money Market Fund receiving interest on those bonds, a
proportionate part of the exempt-interest dividends paid by that fund) is an
item of tax preference for purposes of the federal alternative minimum tax
("AMT"). Exempt-interest dividends received by a corporate shareholder also may
be indirectly subject to the AMT without regard to whether Premier Tax-Free
Money Market Fund's tax-exempt interest was attributable to those bonds. PABs
are issued by or on behalf of public authorities to finance various privately
operated facilities and are described in the SAI above.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by IDBs or PABs should consult their
tax advisers before purchasing shares of Premier Tax-Free Money Market Fund
because, for users of certain of these facilities, the interest on those bonds
is not exempt from federal income tax. For these purposes, the term "substantial
user" is defined generally to include a "non-exempt person" who regularly uses
in trade or business a part of a facility financed from the proceeds of IDBs or
PABs.
Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as a municipal fund) plus 50% of their
benefits exceeds certain base amounts. Exempt-interest dividends from Premier
Tax-Free Money Market Fund still are tax-exempt to the extent described above;
they are only included in the calculation of whether a recipient's income
exceeds the established amounts.
If Premier Tax-Free Money Market Fund invests in any instruments that
generate taxable income, under the circumstances described in the discussion of
the fund's investment policies above and in the discussion of municipal market
discount bonds below, the portion of any fund dividend attributable to the
interest earned thereon will be taxable to its shareholders as ordinary income
to the extent of its earnings and profits and only the remaining portion will
qualify as an exempt-interest dividend. The respective portions will be
determined by the "actual earned" method, under which the portion of any
dividend that qualifies as an exempt-interest dividend may vary, depending on
the relative proportions of tax-exempt and taxable interest earned during the
dividend period. Moreover, if the fund realizes capital gain as a result of
market transactions, any distribution of that gain will be taxable to its
shareholders.
Premier Tax-Free Money Market Fund may invest in municipal bonds that are
purchased, generally not on their original issue, with market discount (that is,
at a price less than the principal amount of the bond or, in the case of a bond
that was issued with original issue discount, a price less than the amount of
the issue price plus accrued original issue discount) ("municipal market
discount bonds"). If a bond's market discount is less than the product of (1)
0.25% of the redemption price at maturity times (2) the number of complete years
to maturity after the taxpayer acquired the bond, then no market discount is
considered to exist. Gain on the disposition of a municipal market discount bond
(other than a bond with a fixed maturity date within one year from its issuance)
generally is treated as ordinary (taxable) income, rather than capital gain, to
the extent of the bond's accrued market discount at the time of disposition.
Market discount on such a bond generally is accrued ratably, on a daily basis,
over the period from the acquisition date to the date of maturity. In lieu of
treating the disposition gain as above, the fund may elect to include market
discount in its gross income currently, for each taxable year to which it is
attributable.
Dividends from investment company taxable income paid to a shareholder
who, as to the United States, is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation or foreign partnership
("foreign shareholder") generally are subject to a 30% withholding tax, unless
the applicable tax rate is reduced by a treaty between the United States and the
shareholder's country of residence. Withholding does not apply to a dividend
paid to a foreign shareholder that is "effectively connected with the
[shareholder's] conduct of a trade or business within the United States," in
which case the withholding requirements applicable to domestic taxpayers apply.
Exempt-interest dividends paid by Premier Tax-Free Money Market Fund are not
subject to withholding.
30
<PAGE>
Each fund will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year substantially all its
ordinary (I.E., taxable) income for that year and any capital gain net income
for the one-year period ending October 31 of that year, plus certain other
amounts.
TAX-FREE INCOME VS. TAXABLE INCOME--PREMIER TAX-FREE MONEY MARKET FUND.
The table below illustrates approximate equivalent taxable and tax-free yields
at the 1999 federal individual income tax rates in effect on the date of this
SAI. For example, a couple with taxable income of $90,000 in 1999, or a single
individual with taxable income of $55,000 in 1999, whose investments earn a 3%
tax-free yield, would have to earn a 4.17% taxable yield to receive the same
benefit.
31
<PAGE>
1999 FEDERAL TAXABLE VS. TAX-FREE YIELDS*
TAXABLE INCOME (000'S) A TAX-FREE YIELD OF
- ------------------------ ---------------------------------------------
SINGLE JOINT FEDERAL 3.00% 4.00% 5.00% 6.00%
RETURN RETURN TAX IS EQUAL TO A TAXABLE YIELD OF
BRACKET APPROXIMATELY
- --------------------------------------------------------------------------------
$ 0 - 25.8 0 - 15.00% 3.53% 4.71% 5.88% 7.06%
43.1
25.8 - 62.5 43.1-104.1 28.00 4.17 5.56 6.94 8.33
62.5 - 130.3 104.1-158.6 31.00 4.35 5.80 7.25 8.70
130.3 - 283.2 158.6-283.2 36.00 4.69 6.25 7.81 9.38
Over 283.2 Over 283.2 39.60 4.97 6.62 8.28 9.93
- --------------------
* The yields listed are for illustration only and are not necessarily
representative of the fund's yield. The fund invests primarily in
obligations the interest on which is exempt from federal income tax;
however, some of the fund's investments may generate taxable income.
Effective tax rates shown are those in effect on the date of this SAI;
such rates might change after that date. Certain simplifying
assumptions have been made. Any particular taxpayer's rate may differ.
The effective rates reflect the highest tax bracket within each range
of income listed. The figures set forth above do not reflect the
federal alternative minimum tax, limitations on federal or state
itemized deductions and personal exemptions or any state or local taxes
payable on fund distributions.
OTHER INFORMATION
DELAWARE BUSINESS TRUST. 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 funds could, under certain conflicts of laws jurisprudence
in various states, be held personally liable for the obligations of the Trust or
a fund. However, the Trust Instrument of the Trust disclaims shareholder
liability for acts or obligations of the Trust or its series (the funds). The
Trust Instrument provides for indemnification from the funds' property for all
losses and expenses of any fund shareholder held personally liable for the
obligations of a fund. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which a
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 a fund, the shareholder paying such liability will be entitled to
reimbursement from the general assets of that fund. The trustees intend to
conduct the operations of the funds in such a way as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the funds.
PRIOR NAMES. Prior to July 28, 1999, the name of the Trust was
"Mitchell Hutchins Institutional Series."
VOTING RIGHTS. Shareholders of the funds are entitled to one vote for each
full share held and fractional votes for fractional shares held. Voting rights
are not cumulative and, as a result, the holders of more than 50% of all the
shares of the Trust may elect all its board members.
The Trust does not hold annual 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 Trust may
remove a trustee by vote cast in person or by proxy at a meeting called for that
purpose. The trustees are required to call a meeting of shareholders when
requested in writing to do so by the shareholders of record holding at least 10%
of the Trust's outstanding shares.
32
<PAGE>
CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. The Bank
of New York, located at 48 Wall Street, New York, NY 10286, serves as custodian
and recordkeeping agent for the funds. BISYS, located at 3435 Stelzer Road,
Columbus, OH 43219, serves as the funds' transfer and dividend disbursing agent.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to
the funds. 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 funds.
FINANCIAL STATEMENTS
The Annual Report to Shareholders for the last fiscal year ended December
31, 1998 and the Semi-Annual Report for the six-month period ended June 30, 1999
of the funds' predecessors are separate documents supplied with this Statement
of Additional Information, and the financial statements, accompanying notes and
report of independent auditors on the financial statements for the fiscal year
ended December 31, 1998 appearing therein are incorporated herein by this
reference.
33
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION. THE FUNDS AND THEIR
DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN
OFFER TO SELL SHARES OF THE FUNDS IN ANY JURISDICTION WHERE THE FUNDS OR THEIR
DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.
-----------
LIR Premier Money
Market Fund
LIR Premier Tax-Free Money
Market Fund
----------------------------------------
Statement of Additional Information
November 12, 1999
----------------------------------------
(C)1999 Mitchell Hutchins Asset Management Inc. All rights reserved.
34
<PAGE>
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits
--------
(1) (a) Trust Instrument 1/
(b) Amendment to Trust Instrument effective July 28, 1999 2/
(2) By-Laws 1/
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 3/
(4) (a) Investment Advisory and Administration Contract for Mitchell
Hutchins LIR Select Money Fund 2/
(b) Form of Investment Advisory and Administration Contract for LIR
Premier Money Market Fund and LIR Premier Tax-Free Money Market
Fund (filed herewith)
(c) Form of Investment Advisory and Administration Contract for LIR
Cash Reserves Fund 4/
(d) Form of Investment Advisory and Administration Contract for LIR
Liquid Assets Fund 4/
(5) (a) Distribution Contract for Mitchell Hutchins LIR Select Money
Fund 2/
(b) Form of Distribution Contract for LIR Premier Money Market Fund
and LIR Premier Tax-Free Money Market Fund (filed herewith)
(c) Form of Distribution Contract for LIR Cash Reserves Fund and LIR
Liquid Assets Fund (filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) (a) Custodian Agreement for LIR Select Money Fund 2/
(b) Form of Custodian Agreement for LIR Premier Money Market Fund and
LIR Premier Tax-Free Money Market Fund (filed herewith)
(c) Form of Custodian Contract for LIR Cash Reserves Fund and LIR
Liquid Assets Fund (filed herewith)
(8) (a) (i) Form of Transfer Agency Agreement for LIR Select Money
Fund 2/
-
(ii) Form of Transfer Agency Agreement for LIR Premier Money
Market Fund and LIR Premier Tax-Free Money Market Fund
(filed herewith)
(iii) Form of Transfer Agency and Related Services Agreement for
LIR Cash Reserves Fund (filed herewith)
(iv) Form of Transfer Agency and Related Services Agreement for
LIR Liquid Assets Fund (filed herewith)
(b) Shareholder Service Plan 2/
(c) Shareholder Service Agreement 2/
(9) Opinion and consent 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 1/
(13) (a) Form of Plan of Distribution pursuant to Rule 12b-1 (filed
herewith)
(b) Form of Plan Agreement for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (filed herewith)
C-1
<PAGE>
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 1/
- -----------------------
1/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
registration statement, SEC File No. 333-52965, filed July 29, 1998.
2/ Incorporated by reference from Post-Effective Amendment No. 3 to the
registration statement, SEC File No. 333-52965, filed September 1, 1999.
3/ 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.
4/ Incorporated by reference from Post-Effective Amendment No. 5 to the
registration statement, SEC File No. 333-52965, filed October 21, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
None.
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 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
C-2
<PAGE>
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 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:
2002 TARGET TERM TRUST INC.
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.
LIQUID INSTITUTIONAL RESERVES
MANAGED HIGH YIELD FUND INC.
MANAGED HIGH YIELD PLUS FUND INC.
MITCHELL HUTCHINS LIR MONEY SERIES
MITCHELL HUTCHINS PORTFOLIOS
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER CASHFUND, INC.
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
C-3
<PAGE>
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MANAGED MUNICIPAL TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL MONEY MARKET SERIES
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER RMA MONEY FUND, INC.
PAINEWEBBER RMA TAX-FREE FUND, INC.
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
b) Mitchell Hutchins serves as the Registrant's principal underwriter and
is a wholly owned subsidiary of PaineWebber. 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). The directors and officers of Mitchell Hutchins, their
principal business addresses and their positions and offices with
Mitchell Hutchins are identified in its Form ADV, as filed with the
Securities and Exchange Commission (registration number 801-13219). The
foregoing information is hereby incorporated herein by reference. The
information set forth below is furnished for those directors and
officers of PaineWebber or Mitchell Hutchins who also serve as trustees
or officers of the Trust.
<TABLE>
<CAPTION>
<S> <C> <C>
Positions and Offices With Underwriter
Name Positions and Offices With Registrant or Exclusive Dealer
---- ------------------------------------- -------------------
Margo N. Alexander* Trustee and President President, Chief Executive Officer and a
Director of Mitchell Hutchins and an
Executive Vice President and a Director of
PaineWebber
Mary C. Farrell** Trustee Managing Director, Senior Investment
Strategist and member of the Investment
Policy Committee of PaineWebber
Brian M. Storms* Trustee President and Chief Operating Officer
of Mitchell Hutchins
Kris L. Dorr* Vice President First Vice President and a Portfolio Manager
in the Short-Term Strategies Group of
Mitchell Hutchins
Elbridge T. Gerry, III* Vice President Senior Vice President and a Portfolio
Manager of Mitchell Hutchins
John J. Lee** Vice President and Assistant Vice President and a Manager of the Mutual
Treasurer Fund Finance Department of Mitchell
Hutchins
Kevin J. Mahoney** Vice President and Assistant First Vice President and a Senior Manager
Treasurer of the Mutual Fund Finance Department of
Mitchell Hutchins
Michael H. Markowitz* Vice President First Vice President and a Portfolio Manager
in the Short-Term Strategies Group of
Mitchell Hutchins
C-4
<PAGE>
<S> <C> <C>
Positions and Offices With Underwriter
Name Positions and Offices With Registrant or Exclusive Dealer
---- ------------------------------------- -------------------
Dennis McCauley* Vice President Managing Director and Chief Investment
Officer - Fixed Income of Mitchell Hutchins
Kevin P. McIntyre* Vice President Vice President and a Portfolio Manager
of Mitchell Hutchins
Ann E. Moran** Vice President and Assistant Vice President and a Manager of the Mutual
Treasurer Fund Finance Department of Mitchell Hutchins
Dianne E. O'Donnell** Vice President and Secretary Senior Vice President and Deputy General
Counsel of Mitchell Hutchins
Emil Polito* Vice President Senior Vice President and Director of
Operations and Control of Mitchell Hutchins
Susan Ryan* Vice President Senior Vice President and a Portfolio Manager
of Mitchell Hutchins
Victoria E. Schonfeld** Vice President Managing Director and General Counsel of
Mitchell Hutchins and a Senior Vice President
of PaineWebber
Paul H. Schubert** Vice President and Treasurer Senior Vice President and Director of the
Mutual Fund Finance Department of
Mitchell Hutchins
Barney A. Taglialatela** Vice President and Assistant Vice President and a Manager of the Mutual
Treasurer Fund Finance Department of Mitchell Hutchins
Debbie Vermann* Vice President Vice President and a Portfolio Manager of
Mitchell Hutchins
Keith A. Weller** Vice President and Assistant First Vice President and Associate General
Secretary Counsel of Mitchell Hutchins
- ---------------------
* The business address of this person is 51 West 52nd Street, New York, New York 10019-6114.
** The business address of this person is 1285 Avenue of the Americas, New York, New York 10019
</TABLE>
c) None
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.
C-5
<PAGE>
Item 29. Management Services
Not applicable.
Item 30. Undertakings
None.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement under Rule 485(b) of the Securities Act of 1933 and has
duly caused this Post-Effective Amendment 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 9th day of November, 1999.
MITCHELL HUTCHINS LIR MONEY 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:
Signature Title Date
- --------- ----- ----
/s/ Margo N. Alexander President and Trustee November 9, 1999
- ---------------------------- (Chief Executive Officer)
Margo N. Alexander *
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman November 9, 1999
- ---------------------------- of the Board of Trustees
E. Garrett Bewkes, Jr. *
/s/ Richard Q. Armstrong Trustee November 9, 1999
- ----------------------------
Richard Q. Armstrong *
/s/ Richard R. Burt Trustee November 9, 1999
- ----------------------------
Richard R. Burt *
/s/ Mary C. Farrell Trustee November 9, 1999
- ----------------------------
Mary C. Farrell *
/s/ Meyer Feldberg Trustee November 9, 1999
- ----------------------------
Meyer Feldberg *
/s/ George W. Gowen Trustee November 9, 1999
- ----------------------------
George W. Gowen *
/s/ Frederic V. Malek Trustee November 9, 1999
- ----------------------------
Frederic V. Malek *
/s/ Carl W. Schafer Trustee November 9, 1999
- ----------------------------
Carl W. Schafer *
/s/ Brian M. Storms Trustee November 9, 1999
- ----------------------------
Brian M. Storms **
/s/ Paul H. Schubert Vice President and November 9, 1999
- ---------------------------- Treasurer (Chief
Paul H. Schubert Financial and
Accounting Officer)
<PAGE>
SIGNATURES (CONTINUED)
* Signature affixed by Arthur J. Brown pursuant to powers of attorney dated
May 13, 1998 and incorporated by reference from the Initial Registration
Statement of Mitchell Hutchins LIR Money Series (formerly Mitchell
Hutchins Institutional Series), SEC File 333-52965, filed May 19, 1998.
** Signature affixed by Arthur J. Brown pursuant to power of attorney dated
May 14, 1999 and incorporated by reference from Post-Effective Amendment
No. 61 to the registration statement of PaineWebber Managed Investments
Trust, SEC File 2-91362, filed June 1, 1999.
<PAGE>
MITCHELL HUTCHINS LIR MONEY SERIES
EXHIBIT INDEX
-------------
Exhibit
Number
- ------
(1) (a) Trust Instrument 1/
(b) Amendment to Trust Instrument effective July 28, 1999 2/
(2) By-Laws 1/
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 3/
(4) (a) Investment Advisory and Administration Contract for Mitchell Hutchins
LIR Select Money Fund 2/
(b) Form of Investment Advisory and Administration Contract for LIR
Premier Money Market Fund and LIR Premier Tax-Free Money Market Fund
(filed herewith)
(c) Form of Investment Advisory and Administration Contract for LIR Cash
Reserves Fund 4/
(d) Form of Investment Advisory and Administration Contract for LIR
Liquid Assets Fund 4/
(5) (a) Distribution Contract for Mitchell Hutchins LIR Select Money Fund 2/
(b) Form of Distribution Contract for LIR Premier Money Market Fund and
LIR Premier Tax-Free Money Market Fund (filed herewith)
(c) Form of Distribution Contract for LIR Cash Reserves Fund and LIR
Liquid Assets Fund (filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) (a) Custodian Agreement for LIR Select Money Fund 2/
(b) Form of Custodian Agreement for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (filed herewith)
(c) Form of Custodian Contract for LIR Cash Reserves Fund and LIR Liquid
Assets Fund (filed herewith)
(8) (a) (i) Form of Transfer Agency Agreement for LIR Select Money Fund 2/
(ii) Form of Transfer Agency Agreement for LIR Premier Money Market
Fund and LIR Premier Tax-Free Money Market Fund (filed herewith)
(iii) Form of Transfer Agency and Related Services Agreement for LIR
Cash Reserves Fund (filed herewith)
(iv) Form of Transfer Agency and Related Services Agreement for LIR
Liquid Assets Fund (filed herewith)
(b) Shareholder Service Plan 2/
(c) Shareholder Service Agreement 2/
(9) Opinion and consent 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 1/
(13) (a) Form of Plan of Distribution pursuant to Rule 12b-1 (filed herewith)
<PAGE>
(b) Form of Plan Agreement for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (filed herewith)
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 1/
- ------------------
1/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
registration statement, SEC File No. 333-52965, filed July 29, 1998.
2/ Incorporated by reference from Post-Effective Amendment No. 3 to the
registration statement, SEC File No. 333-52965, filed September 1, 1999.
3/ 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.
4/ Incorporated by reference from Post-Effective Amendment No. 5 to the
registration statement, SEC File No. 333-52965, filed October 21, 1999.
<PAGE>
Exhibit No. 4(b)
FORM OF INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of [____________], 2000 between MITCHELL HUTCHINS LIR
MONEY 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 investment management company, and
intends to offer for public sale two distinct series of shares of beneficial
interest, LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market
Fund, 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 with respect to LIR Premier Money
Market Fund and LIR Premier Tax-Free Money Market Fund and any other Series to
which this Contract may hereafter be made applicable (each a "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 with respect to 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 Trust's Board of Trustees ("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, pursuant to Board authorization, may pay to those brokers in return
for brokerage and research services a higher commission than may be charged by
other brokers, subject to Mitchell Hutchins' determining in good faith that such
commission is reasonable in terms either of the particular transaction or of the
overall responsibility of Mitchell Hutchins to 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
<PAGE>
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 with respect to 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, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Trust's
Registration Statement, proxy material, tax returns and required reports to each
- 2 -
<PAGE>
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) During the term of this Contract, each Series will bear all expenses,
not specifically assumed by Mitchell Hutchins, incurred in its operations and
the offering of its shares.
(b) Expenses borne by each Series will include but not be limited to the
following (or each Series' proportionate share of the following): (i) the cost
(including brokerage commissions) of securities purchased or sold by the Series
and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Series by Mitchell Hutchins under this
Contract; (iii) expenses of organizing the Trust and the Series; (iv) filing
fees and expenses relating to the registration and qualification of the Series'
- 3 -
<PAGE>
shares and the Trust under federal and/or state securities laws and maintaining
such registration and qualifications; (v) fees and salaries payable to the
Trust's Trustees and officers who are not interested persons of the Trust or
Mitchell Hutchins; (vi) all expenses incurred in connection with the Trustees'
services, including travel expenses; (vii) taxes (including any income or
franchise taxes) and governmental fees; (viii) costs of any liability,
uncollectible items of deposit and other insurance and fidelity bonds; (ix) any
costs, expenses or losses arising out of a liability of or claim for damages or
other relief asserted against the Trust or Series for violation of any law; (x)
legal, accounting and auditing expenses, including legal fees of special counsel
for those Trustees of the Trust who are not interested persons of the Trust;
(xi) charges of custodians, transfer agents and other agents (including any
lending agent); (xii) costs of preparing share certificates; (xiii) 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; (xiv) costs of mailing prospectuses and supplements
thereto, statements of additional information and supplements thereto, reports
and proxy materials to existing shareholders; (xv) any extraordinary expenses
(including fees and disbursements of counsel, costs of actions, suits or
proceedings to which the Trust is a party and the expenses the Trust may incur
as a result of its legal obligation to provide indemnification to its officers,
Trustees, agents and shareholders) incurred by the Trust or Series; (xvi) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (xvii) the cost of mailing and tabulating
proxies and costs of meetings of shareholders, the Board and any committees
thereof; (xviii) the cost of investment company literature and other
publications provided by the Trust to its Trustees and officers; (xix) costs of
mailing, stationery and communications equipment; (xx) expenses incident to any
dividend, withdrawal or redemption options; (xxi) charges and expenses of any
outside pricing service used to value portfolio securities; and (xxii) interest
on borrowings of the Series.
(c) The Trust or a Series may pay directly any expenses incurred by it in
its normal operations and, if any such payment is consented to by Mitchell
Hutchins and acknowledged as otherwise payable by Mitchell Hutchins pursuant to
this Contract, the Series may reduce the fee payable to Mitchell Hutchins
pursuant to paragraph 8 hereof by such amount. To the extent that such
deductions exceed the fee payable to Mitchell Hutchins on any monthly payment
date, such excess shall be carried forward and deducted in the same manner from
the fee payable on succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those Trustees who are interested persons of the Trust.
(e) 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.
- 4 -
<PAGE>
8. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to LIR Premier Money Market Fund and LIR Premier Tax-Free
Money Market Fund, the Trust will pay to Mitchell Hutchins a fee, computed daily
and paid monthly, at an annual rate of 0.20% of each such Series' average daily
net assets.
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any Series as to which this Contract hereafter is made
applicable, 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.
(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 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
- 5 -
<PAGE>
least annually (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, 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.
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.
- 6 -
<PAGE>
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 LIR MONEY SERIES
- -------------------- By__________________________________
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Exhibit No. 5(b)
MITCHELL HUTCHINS LIR MONEY SERIES
FORM OF DISTRIBUTION CONTRACT
CONTRACT made as of ____________, 1999, between MITCHELL HUTCHINS LIR
MONEY SERIES, a Delaware business trust ("Trust"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins").
WHEREAS the Trust is registered under the Investment Company Act of
l940, as amended ("l940 Act"), as an open-end management investment company, and
has established two distinct series of shares of beneficial interest, which
correspond to distinct portfolios and have been designated LIR Premier Money
Market Fund and LIR Premier Tax-Free Money Market Fund; and
WHEREAS the Trust's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of the above-referenced Series
(together with shares of any series of the Trust to which this Contract
hereafter is made applicable ("Shares"); and
WHEREAS the Trust has adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act for the Shares ("Plan") and desires to retain Mitchell
Hutchins as principal distributor in connection with the offering and sale of
the Shares of the above-referenced Series and of such other Series as to which
this Contract hereafter is made applicable (each a "Series"); and
WHEREAS Mitchell Hutchins 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 Trust hereby appoints Mitchell Hutchins 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.
As used in this Contract, the term "Registration Statement" shall mean the
currently effective registration statement of the Trust, and any supplements
thereto, under the Securities Act of 1933, as amended ("1933 Act"), and the 1940
Act.
2. SERVICES AND DUTIES OF MITCHELL HUTCHINS.
(a) Mitchell Hutchins agrees to sell Shares on a best efforts
basis from time to time during the term of this Contract as agent for the Trust
and upon the terms described in the Registration Statement.
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(b) Upon the later of the date of this Contract or the initial
offering of the Shares to the public by a Series, Mitchell Hutchins will hold
itself available to receive purchase orders, satisfactory to Mitchell Hutchins,
for Shares of that Series and will accept such orders on behalf of the Trust as
of the time of receipt of such orders and promptly transmit such orders as are
accepted to the Trust's transfer agent with respect to the Series. Purchase
orders shall be deemed effective at the time and in the manner set forth in the
Registration Statement.
(c) Mitchell Hutchins in its discretion may enter into agreements
to sell Shares to such registered and qualified retail dealers, including but
not limited to PaineWebber Incorporated ("PaineWebber"), as it may select. In
making agreements with such dealers, Mitchell Hutchins shall act only as
principal and not as agent for the Trust.
(d) The offering price of the Shares of each Series shall be the
net asset value per Share as next determined by the Trust following receipt of
an order at Mitchell Hutchins' principal office. The Trust shall promptly
furnish Mitchell Hutchins with a statement of each computation of net asset
value.
(e) Mitchell Hutchins shall not be obligated to sell any certain
number of Shares.
(f) To facilitate redemption of Shares by shareholders directly
or through dealers, Mitchell Hutchins is authorized but not required on behalf
of the Trust 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) Mitchell Hutchins or its affiliate shall provide or arrange
for the provision of ongoing shareholder services, which include responding to
shareholder inquiries, providing shareholders with information on their
investments in the Shares and any other services now or hereafter deemed to be
appropriate subjects for the payments of "service fees" under Rule 2830 of the
Conduct Rules of the National Association of Securities Dealers, Inc. ("NASD")
(collectively, "service activities").
(h) Mitchell Hutchins shall have the right to use any list of
shareholders of the Trust or any other list of investors which it obtains in
connection with its provision of services under this Contract; provided,
however, that Mitchell Hutchins shall not sell or knowingly provide such list or
lists to any unaffiliated person.
3. AUTHORIZATION TO ENTER INTO DEALER AGREEMENTS AND TO DELEGATE DUTIES
AS DISTRIBUTOR. With respect to the Shares of any or all Series, Mitchell
Hutchins may enter into dealer agreements with PaineWebber or any other
registered and qualified dealer with respect to sales of the Shares or the
provision of service activities. In a separate contract or as part of any such
dealer agreement, Mitchell Hutchins also may delegate to PaineWebber 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 Mitchell Hutchins is subject under this Contract,
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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 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 or a dissimilar nature.
5. COMPENSATION.
(a) As compensation for its activities under this contract with
respect to the distribution of the Shares, Mitchell Hutchins or its affiliate
shall receive from the Trust such service and distribution fees at the rate and
under the terms and conditions of the Plan adopted by the Trust with respect to
the Shares of the Series, as such Plan is amended from time to time, and subject
to any further limitations on such fees as the Board may impose.
(b) Mitchell Hutchins or its affiliate may reallow any or all of
the service and distribution fees which it is paid under this Contract to such
dealers as Mitchell Hutchins or its affiliate may from time to time determine.
6. DUTIES OF THE TRUST.
(a) The Trust reserves the right at any time to withdraw offering
Shares of any or all Series by written notice to Mitchell Hutchins at its
principal office.
(b) The Trust shall determine in its sole discretion whether
certificates shall be issued with respect to the Shares. If the Trust has
determined that certificates shall be issued, the Trust will not cause
certificates representing Shares to be issued unless so requested by
shareholders. If such request is transmitted by Mitchell Hutchins, the Trust
will cause certificates evidencing Shares to be issued in such names and
denominations as Mitchell Hutchins shall from time to time direct.
(c) The Trust shall keep Mitchell Hutchins fully informed of its
affairs and shall make available to Mitchell Hutchins copies of all information,
financial statements, and other papers which Mitchell Hutchins may reasonably
request for use in connection with the distribution of Shares, including,
without limitation, certified copies of any financial statements prepared for
the Trust 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 Trust shall cooperate fully in the efforts of Mitchell Hutchins to sell and
arrange for the sale of the Shares of the Series and in the performance of
Mitchell Hutchins under this Contract.
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(d) The Trust 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 Mitchell Hutchins may be expected to sell. The
Trust 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 Trust 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 Mitchell
Hutchins and the Trust may approve, and, if necessary or appropriate in
connection therewith, to qualify and maintain the qualification of the Trust as
a broker or dealer in such jurisdictions; provided that the Trust 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. Mitchell Hutchins shall
furnish such information and other material relating to its affairs and
activities as may be required by the Trust in connection with such
qualifications.
7. EXPENSES OF THE TRUST. The Trust 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 Trust
as a broker or dealer under the securities laws of such jurisdictions as shall
be selected by the Trust and Mitchell Hutchins pursuant to Paragraph 6(e)
hereof, and the costs and expenses payable to each such jurisdiction for
continuing qualification therein.
8. EXPENSES OF MITCHELL HUTCHINS. Mitchell Hutchins shall bear all costs
and expenses of (i) preparing, printing and distributing any materials not
prepared by the Trust and other materials used by Mitchell Hutchins 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
Mitchell Hutchins in connection with such offering; (iii) the expenses of
registration or qualification of Mitchell Hutchins 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 Mitchell Hutchins' employees
and others for selling Shares, and all expenses of Mitchell Hutchins, its
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employees and others who engage in or support the sale of Shares as may be
incurred in connection with their sales efforts. For the purposes of this
paragraph 8, references to Mitchell Hutchins shall include any of its delegates.
9. INDEMNIFICATION.
(a) The Trust agrees to indemnify, defend and hold Mitchell
Hutchins, its officers and directors, and any person who controls, within the
meaning of Section 15 of the 1933 Act, is controlled by, or is under common
control with Mitchell Hutchins ("Indemnified Parties"), 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 the Indemnified Parties,
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 an
Indemnified Party to the Trust 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 Trust or who controls the Trust
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 an Indemnified Party against any liability
to the Trust or to the shareholders of any Series to which and Indemnified Party
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 Trust shall not be liable
to an Indemnified Party under this indemnity agreement with respect to any claim
made against Indemnified Party unless that Indemnified Party shall have notified
the Trust 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 the Indemnified Party (or after the Indemnified
Party shall have received notice of service on any designated agent). However,
failure to notify the Trust of any claim shall not relieve the Trust from any
liability which it may have to an Indemnified Party against whom such action is
brought otherwise than on account of this indemnity agreement. The Trust 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 Trust elects to assume the defense of any
such claim, the defense shall be conducted by counsel chosen by the Trust and
satisfactory to indemnified defendants in the suit whose approval shall not be
unreasonably withheld. In the event that the Trust 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 Trust 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 Trust agrees to notify Mitchell Hutchins as
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representative of the Indemnified Parties 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) Mitchell Hutchins agrees to indemnify, defend, and hold the
Trust, its officers and trustees and any person who controls the Trust 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 Trust, 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
Mitchell Hutchins to the Trust 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 Mitchell Hutchins and any retail dealer, or arising out of any
supplemental sales literature or advertising used by Mitchell Hutchins in
connection with its duties under this Contract. Mitchell Hutchins 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 Mitchell
Hutchins elects to assume the defense, the defense shall be conducted by counsel
chosen by Mitchell Hutchins and satisfactory to the indemnified defendants whose
approval shall not be unreasonably withheld. In the event that Mitchell Hutchins
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 Mitchell Hutchins 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.
10. 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 the Trust or any Series 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 or the
particular Series in settlement of such right or claims, and not to such
trustees or shareholders.
11. SERVICES PROVIDED TO THE TRUST BY EMPLOYEES OF MITCHELL HUTCHINS.
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 the Trust or acting in any
business of the Trust, to be rendering such services to or acting solely for the
Trust and not as an officer, director, employee or agent or one under the
control or direction of Mitchell Hutchins even though paid by Mitchell Hutchins.
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 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 Trust who are not
interested persons of the Trust, and have no direct or indirect financial
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interest in the operation of the Plan relating to the Series 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 any given Series by vote of a
majority of the outstanding voting securities of the Shares 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, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding voting securities of the Shares 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 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
shall in no way affect the continued validity of this Contract or the
performance thereunder with respect to any other Series.
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.
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.
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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 LIR MONEY SERIES
------------------------------- By:-------------------------------
ATTEST: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
------------------------------- By:-------------------------------
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Exhibit No. 5(c)
MITCHELL HUTCHINS LIR MONEY SERIES
FORM OF DISTRIBUTION CONTRACT
CONTRACT made as of ____________, 2000 between MITCHELL HUTCHINS LIR
MONEY SERIES, a Delaware business trust ("Fund"), and Mitchell Hutchins Asset
Management Inc., a Delaware corporation ("Mitchell Hutchins").
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company and
currently has five distinct series of shares of beneficial interest, each of
which include corresponds to a distinct portfolio;
WHEREAS two of these series of shares of beneficial interest have been
designated as LIR Cash Reserves Fund and LIR Liquid Assets Fund (each a
"Series"); and
WHEREAS the Fund's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of the above-referenced Series
("Shares"); and
WHEREAS the Fund desires to retain Mitchell Hutchins 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 Mitchell Hutchins 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 Mitchell Hutchins 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 MITCHELL HUTCHINS.
(a) Mitchell Hutchins 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, Mitchell Hutchins will hold itself available
to receive purchase orders, satisfactory to Mitchell Hutchins, for Shares of
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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) Mitchell Hutchins in its discretion may enter into agreements
to sell Shares to such registered and qualified retail dealers as it may select.
In making agreements with such dealers, Mitchell Hutchins 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 Mitchell Hutchins' principal office. The Fund shall promptly furnish
Mitchell Hutchins with a statement of each computation of net asset value.
(e) Mitchell Hutchins shall not be obligated to sell any certain
number of Shares.
(f) To facilitate redemption of Shares by shareholders directly or
through dealers, Mitchell Hutchins 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) Mitchell Hutchins 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 Mitchell Hutchins 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,
Mitchell Hutchins may enter into an exclusive dealer agreement with 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, Mitchell
Hutchins also may delegate to 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
Mitchell Hutchins 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 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 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.
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5. COMPENSATION AND REIMBURSEMENT OF DISTRIBUTION EXPENSES. The Fund
shall have no obligation to compensate or reimburse Mitchell Hutchins 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, or any or all class or classes thereof, by written
notice to Mitchell Hutchins 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 Mitchell Hutchins, the Fund will
cause certificates evidencing Shares to be issued in such names and
denominations as Mitchell Hutchins shall from time to time direct.
(c) The Fund shall keep Mitchell Hutchins fully informed of its
affairs and shall make available to Mitchell Hutchins copies of all information,
financial statements, and other papers which Mitchell Hutchins 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 Mitchell Hutchins to sell and
arrange for the sale of the Shares of the Series and in the performance of
Mitchell Hutchins 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 Mitchell Hutchins 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 Mitchell
Hutchins 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. Mitchell Hutchins shall
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furnish such information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
qualifications.
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 Mitchell Hutchins pursuant to Paragraph 6(e) hereof,
and the costs and expenses payable to each such jurisdiction for continuing
qualification therein.
8. EXPENSES OF MITCHELL HUTCHINS. Mitchell Hutchins shall bear all
costs and expenses of (i) preparing, printing and distributing any materials not
prepared by the Fund and other materials used by Mitchell Hutchins 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 Mitchell
Hutchins in connection with such offering; (iii) the expenses of registration or
qualification of Mitchell Hutchins 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 Mitchell Hutchins' employees and others for selling
Shares, and all expenses of Mitchell Hutchins, 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 Mitchell
Hutchins, its officers and directors, and any person who controls Mitchell
Hutchins 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
Mitchell Hutchins, 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
Mitchell Hutchins 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
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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 Mitchell Hutchins against any liability to
the Fund or to the shareholders of any Series to which Mitchell Hutchins 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 Mitchell Hutchins under this indemnity agreement with respect to any claim
made against Mitchell Hutchins or any person indemnified unless Mitchell
Hutchins 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 Mitchell Hutchins or such other person (or after Mitchell Hutchins
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 Mitchell Hutchins 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 Mitchell Hutchins 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) Mitchell Hutchins 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
Mitchell Hutchins 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 Mitchell Hutchins and any retail dealer, or arising out of any
supplemental sales literature or advertising used by Mitchell Hutchins in
connection with its duties under this Contract. Mitchell Hutchins 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 Mitchell
Hutchins elects to assume the defense, the defense shall be conducted by counsel
chosen by Mitchell Hutchins and satisfactory to the indemnified defendants whose
approval shall not be unreasonably withheld. In the event that Mitchell Hutchins
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
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them. If Mitchell Hutchins 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.
10. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS AND SHAREHOLDERS
OF THE FUND. The trustees and officers 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 Mitchell Hutchins 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, officers or shareholders.
11. SERVICES PROVIDED TO THE FUND BY EMPLOYEES OF MITCHELL HUTCHINS.
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
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 Mitchell Hutchins even though paid by Mitchell Hutchins.
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 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 a Series or class of Shares
thereof, by vote of a majority of the outstanding voting securities of that
Series or class.
(c) Notwithstanding the foregoing, with respect to a Series or
class of Shares thereof, 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 Series or class 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 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.
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<PAGE>
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.
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 LIR MONEY SERIES
_________________________________________ By:_______________________________
Vice President and Assistant Secretary Vice President and Secretary
ATTEST: MITCHELL HUTCHINS ASSET MANAGEMENT
INC.
_________________________________________ By:______________________________
Vice President and Secretary Vice President
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Exhibit No. 7(b)
FORM OF CUSTODY AGREEMENT
Agreement made as of this ____ day of _______________, 1999, between
___________________________, a _________________ business trust organized and
existing under the laws of the State of ________________, having its principal
office and place of business at _____________________________________________
(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:
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
"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.
"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.
"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 price, as
specified therein, to purchase from the writer thereof the specified underlying
Securities.
"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.
"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.
<PAGE>
"Collateral Account" shall mean a segregated account held hereunder by the
Custodian 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.
"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.
"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.
"Currency" shall mean money denominated in a lawful currency of any country or
the European Currency Unit or the Euro.
"Depository" shall mean The Depository Trust Company ("DTC"), Participants Trust
Company ("PTC") and any other clearing agency registered with the Securities and
Exchange Commission, and their respective 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.
"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.
"Futures Contract" shall mean a Financial Futures Contract and/or Stock Index
Futures Contracts. "Futures Contract Option" shall mean an Option with respect
to a Futures Contract. "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.
"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.
"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
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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.
"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 sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale.
"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.
"Option" shall mean a Call Option, Covered Call Option, Stock Index Option
and/or a Put Option.
"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.
"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.
"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. "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.
"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
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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.
"Series" shall mean the various portfolios, if any, of the Fund listed on
Appendix B hereto as amended from time to time.
"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.
"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.
"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.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of New
York.
APPOINTMENT OF CUSTODIAN
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.
The Custodian hereby accepts appointment as such custodian and agrees to
perform the duties thereof as hereinafter set forth.
CUSTODY OF CASH AND SECURITIES
(a) 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, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall credit
all such Securities and money in and to one or more accounts (collectively, the
"custody account") for and in the name of each Series, and shall segregate, keep
and maintain the custody account for each Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received by it.
(b) The custody account for each Series shall constitute a "securities
account" within the meaning of Section 8-501 of the UCC, and the Custodian
agrees that all Securities, Currency and other assets (other than Currency or
money) of the Series that are credited to the custody account shall constitute
"financial assets," as such term is defined in Section 8-102(a)(9) or the UCC.
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Except as specified in the next sentence, the Series to whose custody account
such financial assets are to be credited shall have a "security entitlement," as
that term is defined in Section 8-102(a)(17) the UCC, with the Custodian with
respect to such financial assets. To the extent that any financial assets are
registered in the name of, payable to the order of, or specially endorsed to the
Fund or Series and have not been endorsed to the Custodian (or if applicable,
the Book-Entry System, the Depository, a sub-custodian or one of their
respective nominees) or in blank, the Custodian shall hold such financial assets
in the custody account as custodian and bailee for and on behalf of such Series
in accordance with the terms of this Agreement.
(c) References in this Agreement to the deposit or maintenance of
Securities or other financial assets with or in the Book-Entry System, the
Depository or a sub-custodian (including any Foreign Sub-Custodian) refer to the
deposit and maintenance of financial assets of the Custodian that correspond to
the security entitlements established in favor of the Series and do not alter
the obligation of the Custodian, as a securities intermediary for the Fund and
its Series, to credit those Securities to the custody account maintained by the
Custodian for the appropriate Series pursuant to this Agreement. For purposes of
this Agreement, "receipt" or "delivery" of a Security or other financial asset
by or to the Custodian includes the acquisition by the Custodian of a security
entitlement with respect to such financial asset.
(d) 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.
(e) 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 of the Custodian with the Book-Entry System or the
Depository 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 custody account for the applicable Series.
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(f) Prior to the Custodian's accepting, utilizing and acting with
respect to Clearing Member confirmations for Options and transactions in Options
for a Series as provided in this Agreement, the Custodian shall have received 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.
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: as hereinafter provided; 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 in payment of the fees and in
reimbursement of the expenses and liabilities of the Custodian attributable to
such Series.
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.
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 the Book-Entry System or the Depository, 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.
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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: promptly
collect all income, dividends and distributions due or payable; 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; promptly present for payment and collect the amount payable
upon all Securities which mature;
(d) promptly surrender Securities in temporary form for definitive
Securities; 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; 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; 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 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.
Upon receipt of a Certificate and not otherwise, the Custodian, directly
or through the use of the Book-Entry System or the Depository, shall: 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; 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, 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; 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; promptly make such
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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
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.
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 Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission 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.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
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
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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 purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.
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.
OPTIONS
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 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.
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
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<PAGE>
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.
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.
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 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.
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.
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;
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<PAGE>
(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.
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 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. 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.
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
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<PAGE>
amount of cash and/or the 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.
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.
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) 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.
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
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<PAGE>
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. 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 in a
Certificate received in connection with such expiration, exercise, or
consummation.
FUTURES CONTRACTS
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.
(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
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<PAGE>
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.
Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement 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.
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.
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.
FUTURES CONTRACT OPTIONS
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);
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<PAGE>
(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.
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.
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 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.
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
15
<PAGE>
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.
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 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.
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.
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
16
<PAGE>
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. 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. 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.
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.
SHORT SALES
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 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.
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
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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.
REVERSE REPURCHASE AGREEMENTS
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 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.
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.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
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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 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.
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.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
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 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.
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. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin Account shall
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be dealt with in accordance with the terms and conditions of the Margin Account
Agreement.
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.
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.
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 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.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
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
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that date and the total amount payable to the Dividend Agent on the payment
date.
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.
SALE AND REDEMPTION OF SHARES
Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying: the Series, the number of Shares sold,
trade date, and price; and 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. 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.
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.
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: the number and Series of Shares redeemed; and the amount to be paid
for such Shares.
Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares tendered to 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.
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 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.
OVERDRAFTS OR INDEBTEDNESS
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
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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 in connection with the services performed by the Custodian pursuant to
this Agreement, or for any indebtedness to The Bank of New York under the Fund's
Cash Management and Related Services Agreement, 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. To secure
any such loan, 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, 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.
If the Fund borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, 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. If so
requested by the Fund, the Custodian shall at the Fund's cost and expense enter
into a control agreement with the lending bank and the Fund, on such terms as
are reasonably acceptable to the Custodian, providing for the lending bank to
obtain control of the collateral specified by the Fund. The Custodian may, at
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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 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.
INSTRUCTIONS
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 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.
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.
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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.
The Custodian reserves the right to modify, at its own expense, the
Software from time to time upon reasonable 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.
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,
including but not limited to any implied warranties of merchantability or
fitness for a particular purpose.
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.
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.
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(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.
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. 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.
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.
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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. 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.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
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. 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.
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.
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.
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
26
<PAGE>
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.
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.
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.
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 be limited to amounts so recovered from the Foreign Sub-Custodian.
FX TRANSACTIONS
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.
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.
27
<PAGE>
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 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.
CONCERNING THE CUSTODIAN
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.
Without limiting the generality of the foregoing, the Custodian shall be
under no obligation to inquire into, and shall not be liable for: 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; the legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid therefor; the
legality of the declaration or payment of any dividend by the Fund; the legality
of any borrowing by the Fund using Securities as collateral; 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
28
<PAGE>
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 obligation 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 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 provided that the Custodian is
responsible for verifying its receipt of payment against the amount specified in
the Certificates that are to be delivered to it hereunder.
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 Custodian's account at the Book-Entry System or the Depository.
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.
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
29
<PAGE>
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
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.
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 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. The Custodian agrees that except as any such
Certificate or any such agreement may otherwise provide, the terms and
conditions shall include the Custodian assuming liability for the negligence,
bad faith or willful misconduct of any sub-custodian where such sub-custodian is
appointed at the request of the Custodian. The provisions of this paragraph
shall not apply to Foreign Sub-Custodians described in Article XVI hereof.
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.
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.
30
<PAGE>
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 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.
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.
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. 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., and with such reports on its own
systems of internal accounting control as the Fund may reasonably request from
time to time.
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.
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<PAGE>
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.
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.
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.
TERMINATION
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 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.
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
32
<PAGE>
delivered to the Fund to hold such Securities hereunder in accordance with this
Agreement.
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
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.
MISCELLANEOUS
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.
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.
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.
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.
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 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. This
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<PAGE>
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.
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. A copy of the Trust Instrument of the Fund is on
file with the Secretary of the State of __________________, 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.
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.
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.
By:
Name:
Title:
[SEAL]
Attest:
THE BANK OF NEW YORK
[SEAL]
By:
Name: Stephen E. Grunston
Title: Vice President
Attest:
34
<PAGE>
APPENDIX B
SERIES
- ---------------------------------
35
<PAGE>
APPENDIX C
I, Richard A. Yacovone, a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
36
<PAGE>
EXHIBIT D
The undersigned, , hereby certifies that he or she is the duly elected and
acting of ____________________, a _______________________ business trust (the
"Fund"), further certifies that the following resolutions were adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1999, at which a
quorum was at all times present and that such resolutions have not been modified
or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Fund dated as of , 1999 (the
"Custody Agreement") is authorized and instructed on a continuous and ongoing
basis to act in accordance with, and to rely on Instructions (as defined in the
Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to Authorized Persons of the Fund as defined in the Custody
Agreement, shall establish internal safekeeping procedures to safeguard and
protect the confidentiality and availability of user and access codes, passwords
and authentication keys, and shall use Instructions only in a manner that does
not contravene the Investment Company Act of 1940, as amended, or the rules and
regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
_______________________________________, as of the day of , 1999.
[SEAL]
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<PAGE>
Exhibit No. 7(c)
FORM OF CUSTODIAN CONTRACT
--------------------------
This Contract between Mitchell Hutchins LIR Money Series, a business trust
organized and existing under the laws of the State of Delaware, having its
principal place of business at 1285 Avenue of the Americas, New York, New York
10019 hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
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; and
WHEREAS, the Fund intends to offer shares in the following series, LIR
Cash Reserves Fund and LIR Liquid Assets Fund (such series together with all
other series made subject to this Contract in accordance with paragraph 17,
being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian
all securities and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect to all
securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury
(each, a U.S. Securities System") and (b) commercial paper of an issuer
for which State Street Bank and Trust Company acts as issuing and paying
agent ("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian (the "Direct Paper System") pursuant to
Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Portfolio or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
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8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, BUT ONLY against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of
the Portfolio, which may be in the form of cash or obligations
issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the receipt
of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by the
Fund on behalf of the Portfolio, BUT ONLY against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Portfolio of the Fund;
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14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may
be described from time to time in the currently effective prospectus
and statement of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on
such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies as
it may in its discretion deem necessary or desirable; PROVIDED, however,
that every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each such bank
or trust company and the funds to be deposited with each such bank or
trust company shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of Trustees of the Fund. Such funds shall
be deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
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2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf of
a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of such
Portfolio which are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held by the Custodian
or its agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended, to
act as a custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the Portfolio or
in the name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a purchase
effected through a U.S. Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of repurchase
agreements entered into between the Fund on behalf of the Portfolio
and the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
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against delivery of the receipt evidencing purchase by the Portfolio
of securities owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such securities from
the Portfolio or (e) for transfer to a time deposit account of the
Fund in any bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund as
defined in Article 5;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses of
the Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to
be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of
a Portfolio is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from
the Fund on behalf of such Portfolio to so pay in advance, the Custodian
shall be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such of
the provisions of this Article 2 as the Custodian may from time to time
direct; PROVIDED, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
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2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "U.S. Securities System" in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in
an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Portfolio.
The Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the U.S. Securities System
of transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon request,
the Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the U.S.
Securities System for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from use
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of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or
of any of its or their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as it may have
against the U.S. Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Portfolio has not
been made whole for any such loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the Fund
on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the U.S.
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
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of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights
in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers
of the securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Portfolio shall notify the Custodian at
least three business days prior to the date on which the Custodian is to
take such action.
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3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of Trustees, the
Custodian and the Fund may agree to amend Schedule A hereto from time to
time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the employment
of any one or more such sub-custodians for maintaining custody of the
Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the
foreign securities of the Fund held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a clearing agency which acts as a securities depository or
in a book-entry system for the central handling of securities located
outside the United States (each a "Foreign Securities System") only
through arrangements implemented by the foreign banking institutions
serving as sub-custodians pursuant to the terms hereof (Foreign Securities
Systems and U.S. Securities Systems are collectively referred to herein as
the "Securities Systems"). Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.5
hereof.
3.4 HOLDING SECURITIES. The Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, PROVIDED HOWEVER, that (i) the
records of the Custodian with respect to securities and other non-cash
property of the Fund which are maintained in such account shall identify
by book-entry those securities and other non-cash property belonging to
the Fund and (ii) the Custodian shall require that securities and other
non-cash property so held by the foreign sub-custodian be held separately
from any assets of the foreign sub-custodian or of others.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
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its creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records will
be maintained identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and (e)
assets of the Portfolios held by the foreign sub-custodian will be subject
only to the instructions of the Custodian or its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of the Portfolio(s) held by foreign sub-custodians, including
but not limited to an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained
by a foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a
Portfolio, the identity of the entity having physical possession of such
securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and
2.7 of this Contract shall apply, MUTATIS MUTANDIS to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the account
of each applicable Portfolio may be effected in accordance with the
customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering 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.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any
such nominee harmless from any liability as a holder of record of such
securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
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performance of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.10, in delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any responsibility to the Fund for
any loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to advance
cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of
such Portfolio's assets to the extent necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the
Fund, during the month of June, 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 initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
12
<PAGE>
3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.14 TAX LAW. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the responsibility
of the Fund to notify the Custodian of the obligations imposed on the Fund
or the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other governmental
charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to
use reasonable efforts to assist the Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
----------------------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
13
<PAGE>
5. PROPER INSTRUCTIONS
-------------------
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three - party agreement which requires a segregated asset account in
accordance with Section 2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
---------------------
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
14
<PAGE>
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. RECORDS
-------
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
-------------------------------------------------
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
15
<PAGE>
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
---------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts; (ii) errors by the Fund or the Investment Advisor
in their instructions to the Custodian provided such instructions have been in
accordance with this Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian, the Fund,
16
<PAGE>
the Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System; and
(vii) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
-------------------------------------------
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; PROVIDED,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees of the Fund has
approved the initial use of a particular Securities System by such Portfolio, as
required by Rule 17f-4 under the Investment Company Act of 1940, as amended and
that the Custodian shall not with respect to a Portfolio act under Section 2.11
hereof in the absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Trustees has approved the initial use
of the Direct Paper System by such Portfolio ; PROVIDED FURTHER, however, that
the Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
17
<PAGE>
Trust, and further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. SUCCESSOR CUSTODIAN
-------------------
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
--------------------------------------
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
18
<PAGE>
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
17. ADDITIONAL FUNDS
----------------
In the event that the Fund desires to have the Custodian render services
as custodian to additional series of the Fund under the terms hereof, it shall
so notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
18. MASSACHUSETTS LAW TO APPLY
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. PRIOR CONTRACTS
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. REPRODUCTION OF DOCUMENTS
-------------------------
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
21. SHAREHOLDER COMMUNICATIONS ELECTION
-----------------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
19
<PAGE>
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's
name, address, and share positions.
22. LIMITATION OF LIABILITY
-----------------------
The Custodian agrees that the Contract may only be enforced against the
assets of the Fund or the particular Portfolio of the Fund.
20
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the day
of , 1999.
ATTEST MITCHELL HUTCHINS LIR MONEY SERIES
By:
________________________ ____________________________________
Name: Name:
Title: Title:
ATTEST STATE STREET BANK AND TRUST COMPANY
________________________ By: ____________________________________
Marc L. Parsons Ronald E. Logue
AVP & Associate Counsel Vice Chairman
21
<PAGE>
Exhibit No. 8(a)(ii)
FORM OF TRANSFER AGENCY AGREEMENT
AGREEMENT made this ____ day of ____________, ____, between MITCHELL
HUTCHINS LIR MONEY SERIES (the "Company"), a Delaware business trust having its
principal place of business at 51 West 52nd Street, New York, New York 10019,
and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Company desires that BISYS perform certain services for each
series of the Company provided in Schedule A (individually referred to herein as
a "Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES.
--------
BISYS shall perform for the Company the transfer agent services set
forth in Schedule A hereto. BISYS also agrees to perform for the Company such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. BISYS shall perform such
additional services as are provided on an amendment to Schedule A hereof, in
consideration of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the
Company (individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Company or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. FEES.
----
The Company shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in,
Schedule C hereto. Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule B hereto shall be subject to mutual
agreement at the time such amendment to Schedule B is proposed.
<PAGE>
3. REIMBURSEMENT OF EXPENSES.
-------------------------
In addition to paying BISYS the fees described in Section 2 hereof,
the Company agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Company and in delivering all
materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in communication with
the Company, the Company's investment adviser or custodian, dealers,
shareholders or others as required for BISYS to perform the services to be
provided hereunder;
(c) Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms, proxies, notices or
other forms of printed material which shall be required by BISYS for the
performance of the services to be provided hereunder;
The cost of microfilm or microfiche of records or other materials;
(e) All systems-related expenses associated with the provision of
special reports and services pursuant to Schedule D, Item 8, attached hereto;
and
(f) Any expenses BISYS shall incur at the written direction of an
officer of the Company thereunto duly authorized.
4. EFFECTIVE DATE.
--------------
This Agreement shall become effective as of the date first written
above (the "Effective Date").
5. TERM.
----
This Agreement shall have an initial term of six (6) months
commencing on the date of this Agreement indicated above, unless terminated
earlier for cause. Either party may terminate this Agreement, without penalty,
upon the provision of at least sixty (60) days' written notice to the other
party that the Agreement shall terminate as of a specified date, which date
shall be no earlier than the expiration of the initial term. In the absence of
such termination notice, this Agreement shall continue in full force and effect
until it is terminated as provided herein.
For purposes of this Agreement, "cause" shall mean (a) a material
breach of this Agreement that has not been remedied for thirty (30) days
following written notice of such breach from the non-breaching party; (b) a
final, unappealable judicial, regulatory or administrative ruling or order in
which the party to be terminated has been found guilty of criminal or unethical
2
<PAGE>
behavior in the conduct of its business; or (c) financial difficulties on the
part of the party to be terminated which are evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent or
acquiescence in, a voluntary or involuntary case under Title 11 of the United
States Code, as from time to time is in effect, or any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors.
After such termination, for so long as BISYS, with the written
consent of the Company, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees and
out-of-pocket expenses incurred by BISYS but unpaid by the Company upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Company, in addition to
the fees and disbursements provided by Sections 2 and 3 hereof, the amount of
all of BISYS' cash disbursements in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Company and/or its distributor or investment adviser and/or other parties, of
the Company's property, records, instruments and documents.
6. UNCONTROLLABLE EVENTS.
---------------------
BISYS assumes no responsibility hereunder, and shall not be liable
for any damage, loss of data, delay or any other loss whatsoever caused by
events beyond its reasonable control.
7. LEGAL ADVICE.
------------
BISYS shall notify the Company at any time BISYS believes that it is
in need of the advice of counsel (other than counsel in the regular employ of
BISYS or any affiliated companies) with regard to BISYS' responsibilities and
duties pursuant to this Agreement; and after so notifying the Company, BISYS, at
its discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing, such advice to be at the expense of the Company or
Funds unless relating to a matter involving BISYS' willful misfeasance, bad
faith, gross negligence or reckless disregard with respect to BISYS'
responsibilities and duties hereunder and BISYS shall in no event be liable to
the Company or any Fund or any shareholder or beneficial owner of the Company
for any action reasonably taken pursuant to such advice.
8. INSTRUCTIONS.
------------
Whenever BISYS is requested or authorized to take action hereunder
pursuant to instructions from a shareholder, or a properly authorized agent of a
shareholder ("shareholder's agent"), concerning an account in a Fund, BISYS
shall be entitled to rely upon any certificate, letter or other instrument or
communication, believed by BISYS to be genuine and to have been properly made,
signed or authorized by an officer or other authorized agent of the Company or
by the shareholder or shareholder's agent, as the case may be, and shall be
3
<PAGE>
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Company or
any other person authorized by the Company 's Board of Trustees/Directors
(hereafter referred to as the "DirectorTrustees") or by the shareholder or
shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Company relating to the Funds to the extent that such
services are described therein unless BISYS receives written instructions to the
contrary in a timely manner from the Company.
9. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Company agrees to indemnify and hold harmless BISYS, its employees,
agents, trustees, directors, officers and nominees from and against any and all
claims, demands, actions and suits, whether groundless or otherwise, and from
and against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Company, the investment adviser and on any records provided
by any fund accountant or custodian thereof; provided that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties; and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Company written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
10. RECORD RETENTION AND CONFIDENTIALITY.
------------------------------------
BISYS shall keep and maintain on behalf of the Company all books and
records which the Company or BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees that
all such books and records shall be the property of the Company and to make such
books and records available for inspection by the Company or by the Securities
and Exchange Commission (the "Commission") at reasonable times and otherwise to
keep confidential all books and records and other information relative to the
Company and its shareholders, except when requested to divulge such information
by duly-constituted authorities or court process, or requested by a shareholder
or shareholder's agent with respect to information concerning an account as to
which such shareholder has either a legal or beneficial interest or when
requested by the Company, the shareholder, or shareholder's agent, or the dealer
of record as to such account.
4
<PAGE>
11. REPORTS.
-------
BISYS will furnish to the Company and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Company in writing,
such reports at such times as are prescribed in Schedule D attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
D. To the extent that it possesses actual knowledge of the information contained
in such report, the Company agrees to examine each such report or copy promptly
and will report or cause to be reported any errors or discrepancies therein.
12. RIGHTS OF OWNERSHIP.
-------------------
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Company and all such other records and data will be
furnished to the Company in appropriate form as soon as practicable after
termination of this Agreement for any reason.
13. RETURN OF RECORDS.
-----------------
BISYS may at its option at any time, and shall promptly upon the
Company's demand, turn over to the Company and cease to retain BISYS' files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Company, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Company unless the Company authorizes in writing the destruction of such
records and documents.
14. BANK ACCOUNTS.
-------------
The Company and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Company, as are
necessary in order that BISYS may perform the services required to be performed
hereunder. To the extent that the performance of such services shall require
BISYS directly to disburse amounts for payment of dividends, redemption proceeds
or other purposes, the Company and Funds shall provide such bank or banks with
all instructions and authorizations necessary for BISYS to effect such
disbursements.
15. REPRESENTATIONS OF THE COMPANY.
------------------------------
The Company certifies to BISYS that: (a) as of the close of business
on the Effective Date, each Fund which is in existence as of the Effective Date
has authorized unlimited shares, and (b) by virtue of its Declaration of Trust
or Articles of Incorporation, shares of each Fund which are redeemed by the
Company may be sold by the Company from its treasury, and (c) this Agreement has
5
<PAGE>
been duly authorized by the Company and, when executed and delivered by the
Company, will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
16. REPRESENTATIONS OF BISYS.
------------------------
BISYS represents and warrants that: (a) BISYS has been in, and shall
continue to be in, substantial compliance with all provisions of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), required in connection with the performance of its duties under this
Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Company and BISYS' records, data, 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 are required for the secure
performance of its obligations hereunder.
17. INSURANCE.
---------
BISYS shall maintain a fidelity bond covering larceny and
embezzlement and an insurance policy with respect to directors and officers
errors and omissions coverage in amounts that are appropriate in light of its
duties and responsibilities hereunder. BISYS shall notify the Company should its
insurance coverage with respect to professional liability or errors and
omissions coverage be canceled or reduced. Such notification shall include the
date of change and the reasons therefor. BISYS shall notify the Company of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Company from time to time as may be appropriate of the total outstanding claims
made by BISYS under its insurance coverage.
18. INFORMATION TO BE FURNISHED BY THE COMPANY AND FUNDS.
----------------------------------------------------
The Company has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Company and of any
amendments thereto, certified by the proper official of the state in which such
Declaration or Articles has been filed.
(b) Copies of the following documents:
1. The Company 's Bylaws and any amendments thereto;
2. Certified copies of resolutions of the DirectorTrustees
covering the following matters:
6
<PAGE>
A. Approval of this Agreement and authorization of
a specified officer of the Company to execute and deliver this Agreement and
authorization for specified officers of the Company to instruct BISYS hereunder;
and
B. Authorization of BISYS to act as Transfer Agent
for the Company on behalf of the Funds.
(c) A list of all officers of the Company, together with specimen
signatures of those officers, who are authorized to instruct BISYS in all
matters.
(d) Two copies of the following (if such documents are employed by
the Company):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Company or its
Distributor with regard to their relationships and transactions with
shareholders of the Funds.
(e) A certificate as to shares of beneficial interest or common
stock of the Company authorized, issued, and outstanding as of the Effective
Date of BISYS' appointment as Transfer Agent (or as of the date on which BISYS'
services are commenced, whichever is the later date) and as to receipt of full
consideration by the Company for all shares outstanding, such statement to be
certified by the Treasurer of the Company .
19. INFORMATION FURNISHED BY BISYS.
------------------------------
BISYS has furnished to the Company the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this Agreement;
2. Authorization of BISYS to act as Transfer Agent for the
Company .
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with the Commission
pursuant to Rule 17Ad-13 under the Exchange Act.
7
<PAGE>
20. AMENDMENTS TO DOCUMENTS.
-----------------------
The Company shall furnish BISYS written copies of any amendments to,
or changes in, any of the items referred to in Section 18 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Company agrees
that no amendments will be made to the Prospectuses or Statement of Additional
Information of the Company which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Company
first obtains BISYS' approval of such amendments or changes.
21. RELIANCE ON AMENDMENTS.
----------------------
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Company pursuant to Sections 18
and 20 of this Agreement and the Company hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 18
and 20 hereof, BISYS shall be under no duty to comply with or take any action as
a result of any of such amendments or changes unless the Company first obtains
BISYS' written consent to and approval of such amendments or changes.
22. COMPLIANCE WITH LAW.
-------------------
Except for the obligations of BISYS set forth in Section 10 hereof,
the Company assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Company as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Company 's shares. The
Company represents and warrants that no shares of the Company will be offered to
the public until the Company's registration statement under the 1933 Act and the
1940 Act has been declared or becomes effective.
23. NOTICES.
-------
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice at the following address: 3435 Stelzer Road, Columbus, Ohio 43219, or at
such other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
24. HEADINGS.
--------
8
<PAGE>
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
25. ASSIGNMENT.
----------
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
26. GOVERNING LAW.
-------------
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
27. 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 the Trust or any Series under this Contract, and BISYS
agrees that, in asserting any rights or claims under this Contract, it shall
look only to the assets and property of the Trust or the particular Series in
settlement of such right or claims, and not to such trustees or shareholders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
MITCHELL HUTCHINS LIR MONEY SERIES
By:________________________________
Title: ______________________________
BISYS FUND SERVICES OHIO, INC.
By:________________________________
Title: ______________________________
9
<PAGE>
SCHEDULE A
----------
Series of the Company:
LIR Premier Money Market Fund
LIR Premier Tax-Free Money Market Fund
10
<PAGE>
SCHEDULE B
----------
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MITCHELL HUTCHINS LIR MONEY SERIES
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENCY SERVICES
------------------------
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the Securities
Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. Shareholder Information Services
a. Make information available to shareholder servicing unit and other
remote access units regarding trade date, share price, current holdings, yields,
and dividend information.
b. Produce detailed history of transactions through duplicate or special
order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current shareholders.
3. Compliance Reporting
a. Provide reports to the Securities and Exchange Commission, the National
Association of Securities Dealers and the States in which the Fund is
registered.
11
<PAGE>
b. Prepare and distribute appropriate Internal Revenue Service forms for
corresponding Fund and shareholder income and capital gains.
c. Issue tax-withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation and purchases made
under a Letter of Intent.
b. Account for separation of shareholder investments from transaction sale
charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and marketing
expenses.
d. Track sales and commission statistics by dealer and provide for payment
of commissions on direct shareholder purchases in a load Fund.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the Company .
b. Issue customer statements on scheduled cycle, providing duplicate
second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
12
<PAGE>
SCHEDULE C
----------
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MITCHELL HUTCHINS LIR MONEY SERIES
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENT FEES
-------------------
Annual Per Fund Fee: $
Annual Per Account Fee:
Daily/Monthly Dividend $
Annual Dividend $
Closed Accounts $
Additional Services:
Additional services such as IRA processing, development of interface
capabilities, servicing of 403(b) and 408(c) accounts, management of cash sweeps
between DDAs and mutual fund accounts and coordination of the printing and
distribution of prospectuses, annual reports and semi-annual reports are subject
to additional fees which will be quoted upon request. Programming costs or
database management fees for special reports or specialized processing will be
quoted upon request.
Multiple Classes of Shares:
Classes of shares which have different net asset values or pay different daily
dividends will be treated as separate classes, and the fee schedule above,
including the appropriate minimums, will be charged for each separate class.
Out-of-pocket Expenses:
BISYS shall be entitled to be reimbursed for all reasonable out-of-pocket
expenses including, but not limited to, the expenses set forth in Section 3 of
the Transfer Agency Agreement to which this Schedule C is attached.
13
<PAGE>
SCHEDULE D
----------
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MITCHELL HUTCHINS LIR MONEY SERIES
AND
BISYS FUND SERVICES OHIO, INC.
REPORTS
-------
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
Annual report by independent public accountants concerning BISYS' shareholder
system and internal accounting control systems to be filed with the Securities
and Exchange Commission pursuant to Rule 17Ad-13 of the Securities Exchange Act
of 1934, as amended.
Such special reports and additional information that the parties may agree upon,
from time to time.
14
<PAGE>
Exhibit No. 8(a)(iii)
FORM OF TRANSFER AGENCY AND RELATED SERVICES AGREEMENT
THIS AGREEMENT is made as of December ____, 1999 by and between PFPC
INC., a Delaware corporation ("PFPC"), and MITCHELL HUTCHINS LIR MONEY SERIES, a
Delaware business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to the Fund's
Portfolios (as hereinafter defined) and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
--------------------------------------
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as
amended.
(c) "AUTHORIZED PERSON" means any officer of the Fund and any
other person duly authorized by the Fund's Board of Trustees ("Board") to give
Oral Instructions and Written Instructions on behalf of the Fund and listed on
the Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
<PAGE>
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC
from an Authorized Person.
(f) "PORTFOLIO" means a series or investment portfolio of the
Fund identified on Annex A hereto, as the same may from time to time be amended,
if the Fund consists of more than one series or investment portfolio; however,
if the Fund does not have separate series or investment portfolios, then this
term shall be deemed to refer to the Fund itself.
(g) "SEC" means the Securities and Exchange Commission.
(h) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940
Act and the CEA. (i) "SHARES" mean the shares of common stock or beneficial
interest of any series or class of the Fund.
(j) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to serve as transfer
agent, registrar, dividend disbursing agent and related services agent to the
Fund, and should the Fund have separate Portfolios, those Portfolios which are
listed on Annex A hereto, in accordance with the terms set forth in this
Agreement. PFPC accepts such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund (or a particular Portfolio, as
appropriate) has provided or, where applicable, will provide PFPC with the
following:
(a) Certified or authenticated copies of the resolutions of the
Fund's Board approving the appointment of PFPC to provide
2
<PAGE>
services to the Fund and approving this Agreement;
(b) A copy of each executed broker-dealer agreement with respect
to each Fund; and
(c) Copies (certified or authenticated if requested by PFPC) of
any post-effective amendment to the Fund's registration
statement, advisory agreement, distribution agreement,
shareholder servicing agreement and all amendments or
supplements to the foregoing upon request.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with
all applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any of
its Portfolios.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or of any vote, resolution or proceeding of the Fund's
Board or of the Fund's shareholders, unless and until PFPC receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the next day after such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PFPC
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from an Authorized
Person, PFPC shall incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions comply with
the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question
of law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be counsel
for the Fund, the Fund's investment adviser or PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from the Fund, and the advice it receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Fund or from counsel and which PFPC
3
<PAGE>
believes, in good faith, to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section shall be construed
so as to impose an obligation upon PFPC (i) to seek such directions, advice or
Oral Instructions or Written Instructions, or (ii) to act in accordance with
such directions, advice or Oral Instructions or Written Instructions unless,
under the terms of other provisions of this Agreement, the same is a condition
of PFPC's properly taking or not taking such action. Nothing in this subsection
shall excuse PFPC when an action or omission on the part of PFPC constitutes
willful misfeasance, bad faith, negligence or reckless disregard by PFPC of any
duties, obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS. PFPC shall prepare and maintain in complete and
accurate form all books and records necessary for it to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to each
Portfolio, including (a) all those records required to be prepared and
maintained by the Fund under the 1940 Act, by other applicable Securities Laws,
rules and regulations and by state laws and (b) such books and records as are
necessary for PFPC to perform all of the services it agrees to provide in this
Agreement and the appendices attached hereto, including but not limited to the
books and records necessary to effect the conversion of Class B shares, the
calculation of any contingent deferred sales charges and the calculation of
front-end sales charges. The books and records pertaining to the Fund, which are
in the possession or under the control of PFPC, shall be the property of the
Fund. The Fund and Authorized Persons shall have access to such books and
records in the possession or under the control of PFPC at all times during
PFPC's normal business hours. Upon the reasonable request of the Fund, copies of
any such books and records in the possession or under the control of PFPC shall
4
<PAGE>
be provided by PFPC to the Fund or to an Authorized Person. Upon reasonable
notice by the Fund, PFPC shall make available during regular business hours its
facilities and premises employed in connection with its performance of this
Agreement for reasonable visits by the Fund, any agent or person designated by
the Fund or any regulatory agency having authority over the Fund.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders (past, present
and future), its investment adviser and its principal underwriter, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund prior to its release. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to civil
or criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC 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 that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions 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, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. PFPC shall have no liability
with respect to the loss of data or service interruptions caused by equipment
failure, provided such loss or interruption is not caused by PFPC's own willful
5
<PAGE>
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations under this Agreement and provided further that PFPC has complied
with the provisions of this paragraph 10.
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to from time to time in writing by the Fund and PFPC.
12. INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless PFPC and its
affiliates from all taxes, charges, expenses, assessments, penalties, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements, arising directly or indirectly from (i) any
action or omission to act which PFPC takes (a) at the request or on the
direction of or in reliance on the advice of the Fund or (b) upon Oral
Instructions or Written Instructions or (ii) the acceptance, processing and/or
negotiation of checks or other methods utilized for the purchase of Shares.
Neither PFPC, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of PFPC's or
its affiliates' own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement. The Fund's
liability to PFPC for PFPC's acceptance, processing and/or negotiation of checks
or other methods utilized for the purchase of Shares shall be limited to the
extent of the Fund's policy(ies) of insurance that provide for coverage of such
liability, and the Fund's insurance coverage shall take precedence.
(b) PFPC agrees to indemnify and hold harmless the Fund from all
taxes, charges, expenses, assessments, penalties, claims and liabilities arising
6
<PAGE>
from PFPC's obligations pursuant to this Agreement (including, without
limitation, liabilities arising under the Securities Laws, and any state and
foreign securities and blue sky laws, and amendments thereto) and expenses,
including (without limitation) reasonable attorneys' fees and disbursements
arising directly or indirectly out of PFPC's or its nominee's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
(c) In order that the indemnification provisions contained in this
Paragraph 12 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
(d) The members of the Board of the Fund, its officers and
shareholders, or of any Portfolio thereof, shall not be liable for any
obligations of the Fund, or any such Portfolio, under this Agreement, and PFPC
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 rights or claims and not to such members of the Board, its
officers or shareholders. PFPC further agrees that it will look only to the
assets and property of a particular Portfolio of the Fund, should the Fund have
established separate series, in asserting any rights or claims under this
Agreement with respect to services rendered with respect to that Portfolio and
7
<PAGE>
will not seek to obtain settlement of such rights or claims from the assets of
any other Portfolio of the Fund.
13. INSURANCE. PFPC shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of insurance
may provide for coverage of claims for liability or indemnity by the parties set
forth in this Agreement, the contracts of insurance shall take precedence, and
no provision of this Agreement shall be construed to relieve an insurer of any
obligation to pay claims to the Fund, PFPC or other insured party which would
otherwise be a covered claim in the absence of any provision of this Agreement.
14. SECURITY.
(a) PFPC represents and warrants that, to the best of its knowledge,
the various procedures and systems which PFPC has implemented with regard to the
safeguarding from loss or damage attributable to fire, theft or any other cause
(including provision for twenty-four hours a day restricted access) of the
Fund's blank checks, certificates, records and other data and PFPC'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. PFPC shall review such systems and procedures on a
periodic basis, and the Fund shall have reasonable access to review these
systems and procedures.
(b) Y2K Compliance. PFPC further represents and warrants that any
and all electronic data processing systems and programs that it uses or retains
in connection with the provision of services hereunder on or before January 1,
1999 will be year 2000 compliant.
15. RESPONSIBILITY OF PFPC.
8
<PAGE>
(a) PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed to
by PFPC in writing. PFPC shall be obligated to exercise care and diligence in
the performance of its duties hereunder, to act in good faith and to use its
best efforts in performing services provided for under this Agreement. PFPC
shall be liable for any damages arising out of PFPC's failure to perform its
duties under this Agreement to the extent such damages arise out of PFPC's
willful misfeasance, bad faith, negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC shall not be under any duty or obligation to
inquire into and shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instruction or Written Instruction, notice
or other instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to
Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur or
suffer by or as a consequence of PFPC's or its affiliates' performance of the
services provided hereunder, whether or not the likelihood of such losses or
damages was known by PFPC or its affiliates.
(d) Notwithstanding anything in this Agreement to the contrary, the
Fund shall not be liable to PFPC nor its affiliates for any consequential,
9
<PAGE>
special or indirect losses or damages which PFPC or its affiliates may incur or
suffer by or as a consequence of PFPC's performance of the services provided
hereunder, whether or not the likelihood of such losses or damages was known by
the Fund.
16. DESCRIPTION OF SERVICES.
(a) Services Provided on an Ongoing Basis, If Applicable.
----------------------------------------------------
(i) Calculate 12b-1 payments to financial intermediaries,
including brokers, and financial intermediary trail
commissions;
(ii) Develop, monitor and maintain, in consultation with the
Fund, all systems necessary to implement and operate the
four-tier distribution system, including Class B
conversion feature, as described in the registration
statement and related documents of the Fund, as they may
be amended from time to time;
(iii) Calculate contingent deferred sales charge amounts upon
redemption of Fund shares and deduct such amounts from
redemption proceeds;
(iv) Calculate front-end sales load amounts at time of
purchase of shares;
(v) Determine dates of Class B conversion and effect the
same;
(vi) Establish and maintain proper shareholder registrations;
(vii) Review new applications and correspond with shareholders
to complete or correct information;
(viii) Direct payment processing of checks or wires;
(ix) Prepare and certify stockholder lists in conjunction
with proxy solicitations;
(x) Prepare and mail to shareholders confirmation of
activity;
(xi) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
10
<PAGE>
(xii) Send duplicate confirmations to broker-dealers of their
clients' activity, whether executed through the
broker-dealer or directly with PFPC;
(xiii) Provide periodic shareholder lists, outstanding share
calculations and related statistics to the Fund;
(xiv) Provide detailed data for underwriter/broker
confirmations;
(xv) Prepare and mail required calendar and taxable year-end
tax and statement information (including forms 1099-DIV
and 1099-B and accompanying statements);
(xvi) Notify on a daily basis the investment adviser,
accounting agent, and custodian of fund activity;
(xvii) Perform, itself or through a delegate, such of the
services, whether or not included within the scope of
another paragraph of this Paragraph 16(a), specified on
Annex B hereto as may be agreed upon from time to time;
and
(xviii) Perform other participating broker-dealer shareholder
services as may be agreed upon from time to time.
(b) Services Provided by PFPC Under Oral Instructions or Written
----------------------------------------------------------------
Instructions.
------------
(i) Accept and post daily Fund and class purchases and
redemptions;
(ii) Accept, post and perform shareholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Cancel certificates.
(c) PURCHASE OF SHARES. PFPC shall issue and credit an account of
an investor, in the manner described in the Fund's prospectus, once it receives:
(i) A purchase order;
11
<PAGE>
(ii) Proper information to establish a shareholder account;
and
(iii) Confirmation of receipt or crediting of funds for such
order to the Fund's custodian.
(d) REDEMPTION OF SHARES. PFPC shall redeem Shares only if that
function is properly authorized by the Fund's organizational documents or
resolutions of the Fund's Board. Shares shall be redeemed and payment therefor
shall be made in accordance with the Fund's or Portfolio's prospectus.
(i) BROKER-DEALER ACCOUNTS.
When a broker-dealer notifies PFPC of a redemption
desired by a customer, and the Fund's or Portfolio's
custodian (the "Custodian") has provided PFPC with
funds, PFPC shall (a) transfer by Fedwire or other
agreed upon electronic means such redemption payment to
the broker-dealer for the credit to, and for the benefit
of, the customer's account or (b) shall prepare and send
a redemption check to the broker-dealer, made payable to
the broker-dealer on behalf of its customer.
(ii) FUND-ONLY ACCOUNTS.
If Shares (or appropriate instructions) are received in
proper form, at the Fund's request Shares may be
redeemed before the funds are provided to PFPC from the
Custodian. If the recordholder has not directed that
redemption proceeds be wired, when the Custodian
provides PFPC with funds, the redemption check shall be
sent to and made payable to the recordholder, unless:
12
<PAGE>
(a) the surrendered certificate is drawn to the order
of an assignee or holder and transfer authorization
is signed by the recordholder; or
(b) transfer authorizations are signed by the
recordholder when Shares are held in book-entry
form.
(e) DIVIDENDS AND DISTRIBUTIONS. Upon receipt of a resolution of the
Fund's Board authorizing the declaration and payment of dividends and
distributions, PFPC shall issue dividends and distributions declared by the Fund
in Shares, or, upon shareholder election, pay such dividends and distributions
in cash, if provided for in the appropriate Fund's or Portfolio's prospectus.
PFPC shall mail to the Fund's shareholders and the IRS and other appropriate
taxing authorities such tax forms, or permissible substitute forms, and other
information relating to dividends and distributions paid by the Fund (including
designations of the portions of distributions of net capital gain that are 20%
rate gain distributions and 28% rate gain distributions pursuant to IRS Notice
97-64) as are required to be filed and mailed by applicable law, rule or
regulation within the time required thereby. PFPC shall mail to the Fund's
shareholders such tax forms and other information, or permissible substitute
notice, relating to dividends and distributions paid by the Fund as are required
to be filed and mailed by applicable law, rule or regulation. PFPC shall
prepare, maintain and file with the IRS and other appropriate taxing authorities
reports relating to all dividends above a stipulated amount paid by the Fund to
its shareholders as required by tax or other law, rule or regulation.
(f) Shareholder Account Services.
----------------------------
(i) PFPC will arrange, in accordance with the appropriate
Fund's or Portfolio's prospectus, for issuance of Shares
13
<PAGE>
obtained through:
- The transfer of funds from shareholders' accounts at
financial institutions, provided PFPC receives advance
Oral or Written Instruction of such transfer;
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks and
applications.
(ii) PFPC will arrange, in accordance with the appropriate
Fund's or Portfolio's prospectus, for a shareholder's:
- Exchange of Shares for shares of another fund with which
the Fund has exchange privileges;
- Automatic redemption from an account where that
shareholder participates in a systematic withdrawal plan;
and/or
- Redemption of Shares from an account with a checkwriting
privilege.
(g) COMMUNICATIONS TO SHAREHOLDERS. Upon timely Written
Instructions, PFPC shall mail all communications by the Fund to its
shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax forms (including substitute forms) and accompanying
information containing the information required by
paragraph 16(e).
If requested by the Fund, PFPC will receive and tabulate the
proxy cards for the meetings of the Fund's shareholders and supply personnel to
serve as inspectors of election.
14
<PAGE>
(h) RECORDS. PFPC shall maintain those records required by the
Securities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PFPC hereunder
with respect to shareholder accounts or by transfer agents generally, including
records of the accounts for each shareholder showing the following information:
(i) Name, address and United States Taxpayer Identification or
Social Security number;
(ii) Number and class of Shares held and number and class of
Shares for which certificates, if any, have been issued,
including certificate numbers and denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions paid,
their character (e.g. ordinary income, net capital gain
(including 20% rate gain and 28% rate gain),
exempt-interest, foreign tax-credit and dividends received
deduction eligible) for federal income tax purposes and
the date and price for all transactions on a shareholder's
account;
(iv) Any stop or restraining order placed against a
shareholder's account;
(v) Any correspondence relating to the current maintenance of
a shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer agent
to perform any calculations contemplated or required by
this Agreement.
(i) LOST OR STOLEN CERTIFICATES. PFPC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. The lost or stolen certificate will be canceled and
uncertificated Shares will be issued to a shareholder's account only upon:
(i) The shareholder's pledge of a lost instrument bond or such
other appropriate indemnity bond issued by a surety
company approved by PFPC; and
15
<PAGE>
(ii) Completion of a release and indemnification agreement
signed by the shareholder to protect PFPC and its
affiliates.
(j) SHAREHOLDER INSPECTION OF STOCK RECORDS. Upon a request from any
Fund shareholder to inspect stock records, PFPC will notify the Fund, and the
Fund will issue instructions granting or denying each such request. Unless PFPC
has acted contrary to the Fund's instructions, the Fund agrees and does hereby
release PFPC from any liability for refusal of permission for a particular
shareholder to inspect the Fund's shareholder records.
(k) WITHDRAWAL OF SHARES AND CANCELLATION OF CERTIFICATES. Upon
receipt of Written Instructions, PFPC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
17. DURATION AND TERMINATION.
------------------------
(a) This Agreement shall be effective on the date first written
above and shall continue until August 1, 2000 (the "Initial Term"). 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 ninety (90) days prior to termination. During either the Initial Term or
the Renewal Terms, this Agreement may also be terminated on an earlier date by
either party for cause.
(b) With respect to the Fund, cause includes, but is not limited to,
(i) PFPC's material breach of this Agreement causing it to fail to substantially
perform its duties under this Agreement. In order for such material breach to
constitute "cause" under this Paragraph, PFPC must receive written notice from
the Fund specifying the material breach and PFPC shall not have corrected such
16
<PAGE>
breach within a 15-day period; (ii) financial difficulties of PFPC evidenced by
the authorization or commencement of a voluntary or involuntary bankruptcy under
the U.S. Bankruptcy Code or any applicable bankruptcy or similar law, or under
any applicable law of any jurisdiction relating to the liquidation or
reorganization of debt, the appointment of a receiver or to the modification or
alleviation of the rights of creditors; and (iii) issuance of an administrative
or court order against PFPC with regard to the material violation or alleged
material violation of the Securities Laws or other applicable laws related to
its business of performing transfer agency services;
(c) With respect to PFPC, cause includes, but is not limited to, the
failure of the Fund to pay the compensation set forth in writing pursuant to
Paragraph 11 of this Agreement.
(d) Any notice of termination for cause in conformity with
subparagraphs (a), (b) and (c) of this Paragraph by the Fund shall be effective
thirty (30) days from the date of any such notice. Any notice of termination for
cause by PFPC shall be effective 90 days from the date of such notice.
(e) Upon the termination hereof, the Fund shall pay to PFPC such
compensation as may be due for the period prior to the date of such termination.
In the event that the Fund designates a successor to any of PFPC's obligations
under this Agreement, PFPC shall, at the direction and expense of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by PFPC hereunder including, a certified list of the
shareholders of the Fund or any Portfolio thereof with name, address, and if
provided, taxpayer identification or Social Security number, and a complete
record of the account of each shareholder. To the extent that PFPC incurs
expenses related to a transfer of responsibilities to a successor, other than
17
<PAGE>
expenses involved in PFPC's providing the Fund's books and records described in
the preceding sentence to the successors, PFPC shall be entitled to be
reimbursed for such extraordinary expenses, including any out-of-pocket expenses
reasonably incurred by PFPC in connection with the transfer.
(f) Any termination effected pursuant to this Paragraph shall not
affect the rights and obligations of the parties under Paragraph 12 hereof.
(g) Notwithstanding the foregoing, this Agreement shall terminate
with respect to the Fund or any Portfolio thereof upon the liquidation, merger,
or other dissolution of the Fund or Portfolio or upon the Fund's ceasing to be a
registered investment company.
18. REGISTRATION AS A TRANSFER AGENT. PFPC represents that it is
currently registered with the appropriate federal agency for the registration of
transfer agents, or is otherwise permitted to lawfully conduct its activities
without such registration and that it will remain so registered or able to so
conduct such activities for the duration of this Agreement. PFPC agrees that it
will promptly notify the Fund in the event of any material change in its status
as a registered transfer agent. Should PFPC fail to be registered with the SEC
as a transfer agent at any time during this Agreement, and such failure to
register does not permit PFPC to lawfully conduct its activities, the Fund may,
on written notice to PFPC, terminate this Agreement upon five days written
notice to PFPC.
19. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at the address
of the Fund or (c) if to neither of the foregoing, at such other address as
18
<PAGE>
shall have been given by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by confirming telegram,
cable, telex or facsimile sending device during regular business hours, it shall
be deemed to have been given immediately; if sent at a time other than regular
business hours, such notice shall be deemed to have been given at the opening of
the next business day. If notice is sent by first-class mail, it shall be deemed
to have been given three days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day it is delivered. All
postage, cable, telegram, telex and facsimile sending device charges arising
from the sending of a notice hereunder shall be paid by the sender.
20. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
21. ADDITIONAL PORTFOLIOS. In the event that the Fund establishes one or
more investment series in addition to and with respect to which it desires to
have PFPC render services as transfer agent, registrar, dividend disbursing
agent and related services agent under the terms set forth in this Agreement, it
shall so notify PFPC in writing, and PFPC shall agree in writing to provide such
services, and such investment series shall become a Portfolio hereunder, subject
to such additional terms, fees and conditions as are agreed to by the parties.
22. DELEGATION; ASSIGNMENT.
----------------------
(a) PFPC may, at its own expense, assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PFPC or
PNC Bank Corp., provided that (i) PFPC gives the Fund thirty (30) days' prior
written notice; (ii) the delegate (or assignee) agrees with PFPC and the Fund to
comply with all relevant provisions of the Securities Laws; and (iii) PFPC and
19
<PAGE>
such delegate (or assignee) promptly provide such information as the Fund may
request, and respond to such questions as the Fund may ask, relative to the
delegation (or assignment), including (without limitation) the capabilities of
the delegate (or assignee). The assignment and delegation of any of PFPC's
duties under this subparagraph (a) shall not relieve PFPC of any of its
responsibilities or liabilities under this Agreement.
(b) PFPC may delegate to PaineWebber Incorporated its obligation to
perform the services described on Annex B hereto. In addition, PFPC may assign
its rights and delegate its other duties hereunder to PaineWebber Incorporated
or Mitchell Hutchins Asset Management Inc. or an affiliated person of either,
provided that (i) PFPC gives the Fund thirty (30) days' prior written notice;
(ii) the delegate (or assignee) agrees with PFPC and the Fund to comply with all
relevant provisions of the Securities Laws; and (iii) PFPC and such delegate (or
assignee) promptly provide such information as the Fund may request, and respond
to such questions as the Fund may ask, relative to the delegation (or
assignment), including (without limitation) the capabilities of the delegate (or
assignee). In assigning its rights and delegating its duties under this
paragraph, PFPC may impose such conditions or limitations as it determines
appropriate including the condition that PFPC be retained as a sub-transfer
agent.
(c) In the event that PFPC assigns its rights and delegates its
duties under this section, no amendment of the terms of this Agreement shall
become effective without the written consent of PFPC.
23. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20
<PAGE>
24. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
25. MISCELLANEOUS.
-------------
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to services to be performed and fees payable under this Agreement.
(b) CAPTIONS. The captions in this Agreement 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.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:_____________________________
Title:__________________________
MITCHELL HUTCHINS LIR
MONEY SERIES
By:_____________________________
Title:__________________________
22
<PAGE>
ANNEX A
Portfolios
LIR Cash Reserves Fund
A-1
<PAGE>
Authorized PERSONS APPENDIX
NAME (TYPE) SIGNATURE
_________________________________ ____________________________________
_________________________________ ____________________________________
_________________________________ ____________________________________
_________________________________ ____________________________________
_________________________________ ____________________________________
_________________________________ ____________________________________
A-2
<PAGE>
ANNEX B
a. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all shareholder
inquiries received by telephone, mail or in-person regarding the Funds
and their accounts
b. Provide timely execution of redemptions, exchanges and non-financial
transactions directed to investment executives and specifically
requested by Fund shareholders
c. Issue checks from proceeds of Fund share redemptions to shareholders as
directed by the shareholders or their agents
d. Process and maintain shareholder account registration information
e. With respect to customer accounts maintained through PaineWebber
Incorporated ("PaineWebber"), review new applications and correspond
with shareholders to complete or correct information
f. Prepare and mail monthly or quarterly consolidated account statements
that reflect PaineWebber Mutual Fund balances and transactions (such
information to be combined with other activity and holdings in
investors' brokerage accounts if this responsibility is delegated to
PaineWebber)
g. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all branch
inquiries regarding operational issues and performance
h. Capture, process and mail required tax information to shareholders and
report this information to the Internal Revenue Service
i. Provide the capability to margin PaineWebber Mutual Funds held within
the client's brokerage account (if this responsibility is delegated to
PaineWebber)
j. Prepare and provide shareholder registrations for mailing of proxies,
reports and other communications to shareholders
k. Develop, maintain and issue checks from the PaineWebber systematic
withdrawal plan offered within the client's brokerage account (if this
responsibility is delegated to PaineWebber)
l. Maintain duplicate shareholder records and reconcile those records with
those at the transfer agent (if this responsibility is delegated to
PaineWebber)
B-1
<PAGE>
m. Process and mail duplicate PaineWebber monthly or quarterly statements
to PaineWebber Investment Executives
n. Establish and maintain shareholder distribution options (i.e., election
to have dividends paid in cash, rather than reinvested in Fund shares)
o. Process and mail purchase, redemption and exchange confirmations to Fund
shareholders and PaineWebber Investment Executives
p. Issue dividend checks to shareholders that select cash distributions to
their brokerage account (if this responsibility is delegated to
PaineWebber)
q. Develop and maintain the automatic investment plan offered within the
client's brokerage account (if this responsibility is delegated to
PaineWebber)
r. Provide bank-to-bank wire transfer capabilities related to transactions
in Fund shares
s. Maintain computerized compliance programs for blue sky and non-resident
alien requirements (only with respect to PaineWebber Cashfund, Inc.)
<PAGE>
Exhibit No. 8(a)(iv)
FORM OF TRANSFER AGENCY AND RELATED SERVICES AGREEMENT
THIS AGREEMENT is made as of December ____, 1999 by and between PFPC INC.,
a Delaware corporation ("PFPC"), and MITCHELL HUTCHINS LIR MONEY SERIES, a
Delaware business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to the Fund's
Portfolios (as hereinafter defined) and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as
amended.
(c) "AUTHORIZED PERSON" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees ("Board") to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
<PAGE>
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC from
an Authorized Person.
(f) "PORTFOLIO" means a series or investment portfolio of the Fund
identified on Annex A hereto, as the same may from time to time be amended, if
the Fund consists of more than one series or investment portfolio; however, if
the Fund does not have separate series or investment portfolios, then this term
shall be deemed to refer to the Fund itself.
(g) "SEC" means the Securities and Exchange Commission.
(h) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(i) "SHARES" mean the shares of common stock or beneficial interest
of any series or class of the Fund.
(j) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to serve as transfer
agent, registrar, dividend disbursing agent and related services agent to the
Fund, and should the Fund have separate Portfolios, those Portfolios which are
listed on Annex A hereto, in accordance with the terms set forth in this
Agreement. PFPC accepts such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund (or a particular Portfolio, as
appropriate) has provided or, where applicable, will provide PFPC with the
following:
(a) Certified or authenticated copies of the resolutions of the
Fund's Board approving the appointment of PFPC to provide
2
<PAGE>
services to the Fund and approving this Agreement;
(b) A copy of each executed broker-dealer agreement with respect to
each Fund; and
(c) Copies (certified or authenticated if requested by PFPC) of any
post-effective amendment to the Fund's registration statement,
advisory agreement, distribution agreement, shareholder
servicing agreement and all amendments or supplements to the
foregoing upon request.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply
with all applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any of
its Portfolios.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or of any vote, resolution or proceeding of the Fund's
Board or of the Fund's shareholders, unless and until PFPC receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the next day after such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PFPC
3
<PAGE>
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from an Authorized
Person, PFPC shall incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions comply with
the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question
of law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be counsel
for the Fund, the Fund's investment adviser or PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from the Fund, and the advice it receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Fund or from counsel and which PFPC
4
<PAGE>
believes, in good faith, to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section shall be construed
so as to impose an obligation upon PFPC (i) to seek such directions, advice or
Oral Instructions or Written Instructions, or (ii) to act in accordance with
such directions, advice or Oral Instructions or Written Instructions unless,
under the terms of other provisions of this Agreement, the same is a condition
of PFPC's properly taking or not taking such action. Nothing in this subsection
shall excuse PFPC when an action or omission on the part of PFPC constitutes
willful misfeasance, bad faith, negligence or reckless disregard by PFPC of any
duties, obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS. PFPC shall prepare and maintain in complete and
accurate form all books and records necessary for it to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to each
Portfolio, including (a) all those records required to be prepared and
maintained by the Fund under the 1940 Act, by other applicable Securities Laws,
rules and regulations and by state laws and (b) such books and records as are
necessary for PFPC to perform all of the services it agrees to provide in this
Agreement and the appendices attached hereto, including but not limited to the
books and records necessary to effect the conversion of Class B shares, the
calculation of any contingent deferred sales charges and the calculation of
front-end sales charges. The books and records pertaining to the Fund, which are
in the possession or under the control of PFPC, shall be the property of the
Fund. The Fund and Authorized Persons shall have access to such books and
records in the possession or under the control of PFPC at all times during
PFPC's normal business hours. Upon the reasonable request of the Fund, copies of
any such books and records in the possession or under the control of PFPC shall
5
<PAGE>
be provided by PFPC to the Fund or to an Authorized Person. Upon reasonable
notice by the Fund, PFPC shall make available during regular business hours its
facilities and premises employed in connection with its performance of this
Agreement for reasonable visits by the Fund, any agent or person designated by
the Fund or any regulatory agency having authority over the Fund.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of
the Fund and information relating to the Fund and its shareholders (past,
present and future), its investment adviser and its principal underwriter,
unless the release of such records or information is otherwise consented to, in
writing, by the Fund prior to its release. The Fund agrees that such consent
shall not be unreasonably withheld and may not be withheld where PFPC may be
exposed to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC 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 that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions 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, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. PFPC shall have no liability
with respect to the loss of data or service interruptions caused by equipment
failure, provided such loss or interruption is not caused by PFPC's own willful
6
<PAGE>
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations under this Agreement and provided further that PFPC has complied
with the provisions of this paragraph 10.
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to from time to time in writing by the Fund and PFPC.
12. INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless PFPC and its
affiliates from all taxes, charges, expenses, assessments, penalties, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements, arising directly or indirectly from (i) any
action or omission to act which PFPC takes (a) at the request or on the
direction of or in reliance on the advice of the Fund or (b) upon Oral
Instructions or Written Instructions or (ii) the acceptance, processing and/or
negotiation of checks or other methods utilized for the purchase of Shares.
Neither PFPC, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of PFPC's or
its affiliates' own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement. The Fund's
liability to PFPC for PFPC's acceptance, processing and/or negotiation of checks
or other methods utilized for the purchase of Shares shall be limited to the
extent of the Fund's policy(ies) of insurance that provide for coverage of such
liability, and the Fund's insurance coverage shall take precedence.
(b) PFPC agrees to indemnify and hold harmless the Fund from all
taxes, charges, expenses, assessments, penalties, claims and liabilities arising
7
<PAGE>
from PFPC's obligations pursuant to this Agreement (including, without
limitation, liabilities arising under the Securities Laws, and any state and
foreign securities and blue sky laws, and amendments thereto) and expenses,
including (without limitation) reasonable attorneys' fees and disbursements
arising directly or indirectly out of PFPC's or its nominee's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
(c) In order that the indemnification provisions contained in this
Paragraph 12 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
(d) The members of the Board of the Fund, its officers and
shareholders, or of any Portfolio thereof, shall not be liable for any
obligations of the Fund, or any such Portfolio, under this Agreement, and PFPC
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 rights or claims and not to such members of the Board, its
officers or shareholders. PFPC further agrees that it will look only to the
assets and property of a particular Portfolio of the Fund, should the Fund have
established separate series, in asserting any rights 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.
13. INSURANCE. PFPC shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of insurance
may provide for coverage of claims for liability or indemnity by the parties set
forth in this Agreement, the contracts of insurance shall take precedence, and
no provision of this Agreement shall be construed to relieve an insurer of any
obligation to pay claims to the Fund, PFPC or other insured party which would
otherwise be a covered claim in the absence of any provision of this Agreement.
14. SECURITY.
(a) PFPC represents and warrants that, to the best of its knowledge,
the various procedures and systems which PFPC has implemented with regard to the
safeguarding from loss or damage attributable to fire, theft or any other cause
(including provision for twenty-four hours a day restricted access) of the
Fund's blank checks, certificates, records and other data and PFPC'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. PFPC shall review such systems and procedures on a
periodic basis, and the Fund shall have reasonable access to review these
systems and procedures.
(b) Y2K Compliance. PFPC further represents and warrants that any
and all electronic data processing systems and programs that it uses or retains
in connection with the provision of services hereunder on or before January 1,
1999 will be year 2000 compliant.
15. RESPONSIBILITY OF PFPC.
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<PAGE>
(a) PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed to
by PFPC in writing. PFPC shall be obligated to exercise care and diligence in
the performance of its duties hereunder, to act in good faith and to use its
best efforts in performing services provided for under this Agreement. PFPC
shall be liable for any damages arising out of PFPC's failure to perform its
duties under this Agreement to the extent such damages arise out of PFPC's
willful misfeasance, bad faith, negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC shall not be under any duty or obligation to
inquire into and shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instruction or Written Instruction, notice
or other instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to
Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur or
suffer by or as a consequence of PFPC's or its affiliates' performance of the
services provided hereunder, whether or not the likelihood of such losses or
damages was known by PFPC or its affiliates.
(d) Notwithstanding anything in this Agreement to the contrary, the
Fund shall not be liable to PFPC nor its affiliates for any consequential,
9
<PAGE>
special or indirect losses or damages which PFPC or its affiliates may incur or
suffer by or as a consequence of PFPC's performance of the services provided
hereunder, whether or not the likelihood of such losses or damages was known by
the Fund.
16. DESCRIPTION OF SERVICES.
(a) Services Provided on an Ongoing Basis, If Applicable.
-----------------------------------------------------
(i) Calculate 12b-1 payments to financial intermediaries,
including brokers, and financial intermediary trail
commissions;
(ii) Develop, monitor and maintain, in consultation with the
Fund, all systems necessary to implement and operate the
four-tier distribution system, including Class B
conversion feature, as described in the registration
statement and related documents of the Fund, as they may
be amended from time to time;
(iii) Calculate contingent deferred sales charge amounts upon
redemption of Fund shares and deduct such amounts from
redemption proceeds;
(iv) Calculate front-end sales load amounts at time of
purchase of shares;
(v) Determine dates of Class B conversion and effect the
same;
(vi) Establish and maintain proper shareholder
registrations;
(vii) Review new applications and correspond with shareholders
to complete or correct information;
(viii) Direct payment processing of checks or wires;
(ix) Prepare and certify stockholder lists in conjunction
with proxy solicitations;
(x) Prepare and mail to shareholders confirmation of
activity;
(xi) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
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<PAGE>
(xii) Send duplicate confirmations to broker-dealers of their
clients' activity, whether executed through the
broker-dealer or directly with PFPC;
(xiii) Provide periodic shareholder lists, outstanding share
calculations and related statistics to the Fund;
(xiv) Provide detailed data for underwriter/broker
confirmations;
(xv) Prepare and mail required calendar and taxable year-end
tax and statement information (including forms 1099-DIV
and 1099-B and accompanying statements);
(xvi) Notify on a daily basis the investment adviser,
accounting agent, and custodian of fund activity;
(xvii) Perform, itself or through a delegate, such of the
services, whether or not included within the scope of
another paragraph of this Paragraph 16(a), specified on
Annex B hereto as may be agreed upon from time to time;
and
(xviii) Perform other participating broker-dealer shareholder
services as may be agreed upon from time to time.
(b) Services Provided by PFPC Under Oral Instructions or Written
------------------------------------------------------------
Instructions.
------------
(i) Accept and post daily Fund and class purchases and
redemptions;
(ii) Accept, post and perform shareholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Cancel certificates.
(c) PURCHASE OF SHARES. PFPC shall issue and credit an account of an
investor, in the manner described in the Fund's prospectus, once it receives:
(i) A purchase order;
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<PAGE>
(ii) Proper information to establish a shareholder account;
and
(iii) Confirmation of receipt or crediting of funds for such
order to the Fund's custodian.
(d) REDEMPTION OF SHARES. PFPC shall redeem Shares only if that
function is properly authorized by the Fund's organizational documents or
resolutions of the Fund's Board. Shares shall be redeemed and payment therefor
shall be made in accordance with the Fund's or Portfolio's prospectus.
(i) Broker-Dealer Accounts.
----------------------
When a broker-dealer notifies PFPC of a redemption
desired by a customer, and the Fund's or Portfolio's
custodian (the "Custodian") has provided PFPC with
funds, PFPC shall (a) transfer by Fedwire or other
agreed upon electronic means such redemption payment to
the broker-dealer for the credit to, and for the benefit
of, the customer's account or (b) shall prepare and send
a redemption check to the broker-dealer, made payable to
the broker-dealer on behalf of its customer.
(ii) Fund-Only Accounts.
------------------
If Shares (or appropriate instructions) are received in
proper form, at the Fund's request Shares may be
redeemed before the funds are provided to PFPC from the
Custodian. If the recordholder has not directed that
redemption proceeds be wired, when the Custodian
provides PFPC with funds, the redemption check shall be
sent to and made payable to the recordholder, unless:
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<PAGE>
(a) the surrendered certificate is drawn to the
order of an assignee or holder and transfer
authorization is signed by the recordholder;
or
(b) transfer authorizations are signed by the
recordholder when Shares are held in book-entry
form.
(e) DIVIDENDS AND DISTRIBUTIONS. Upon receipt of a resolution of the
Fund's Board authorizing the declaration and payment of dividends and
distributions, PFPC shall issue dividends and distributions declared by the Fund
in Shares, or, upon shareholder election, pay such dividends and distributions
in cash, if provided for in the appropriate Fund's or Portfolio's prospectus.
PFPC shall mail to the Fund's shareholders and the IRS and other appropriate
taxing authorities such tax forms, or permissible substitute forms, and other
information relating to dividends and distributions paid by the Fund (including
designations of the portions of distributions of net capital gain that are 20%
rate gain distributions and 28% rate gain distributions pursuant to IRS Notice
97-64) as are required to be filed and mailed by applicable law, rule or
regulation within the time required thereby. PFPC shall mail to the Fund's
shareholders such tax forms and other information, or permissible substitute
notice, relating to dividends and distributions paid by the Fund as are required
to be filed and mailed by applicable law, rule or regulation. PFPC shall
prepare, maintain and file with the IRS and other appropriate taxing authorities
reports relating to all dividends above a stipulated amount paid by the Fund to
its shareholders as required by tax or other law, rule or regulation.
(f) Shareholder Account Services.
----------------------------
(i) PFPC will arrange, in accordance with the appropriate
Fund's or Portfolio's prospectus, for issuance of Shares
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<PAGE>
obtained through:
- The transfer of funds from shareholders' accounts at
financial institutions, provided PFPC receives advance
Oral or Written Instruction of such transfer;
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks
and applications.
(ii) PFPC will arrange, in accordance with the appropriate
Fund's or Portfolio's prospectus, for a shareholder's:
- Exchange of Shares for shares of another fund with
which the Fund has exchange privileges;
- Automatic redemption from an account where that
shareholder participates in a systematic withdrawal
plan; and/or
- Redemption of Shares from an account with a
checkwriting privilege.
(g) COMMUNICATIONS TO SHAREHOLDERS. Upon timely Written Instructions,
PFPC shall mail all communications by the Fund to its shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax forms (including substitute forms) and accompanying
information containing the information required by
paragraph 16(e).
If requested by the Fund, PFPC will receive and tabulate the proxy
cards for the meetings of the Fund's shareholders and supply personnel to serve
as inspectors of election.
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<PAGE>
(h) RECORDS. PFPC shall maintain those records required by the
Securities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PFPC hereunder
with respect to shareholder accounts or by transfer agents generally, including
records of the accounts for each shareholder showing the following information:
(i) Name, address and United States Taxpayer
Identification or Social Security number;
(ii) Number and class of Shares held and number and class of
Shares for which certificates, if any, have been issued,
including certificate numbers and denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions paid,
their character (e.g. ordinary income, net capital gain
(including 20% rate gain and 28% rate gain),
exempt-interest, foreign tax-credit and dividends
received deduction eligible) for federal income tax
purposes and the date and price for all transactions on
a shareholder's account;
(iv) Any stop or restraining order placed against a
shareholder's account;
(v) Any correspondence relating to the current maintenance
of a shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer agent
to perform any calculations contemplated or required by
this Agreement.
(i) LOST OR STOLEN CERTIFICATES. PFPC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. The lost or stolen certificate will be canceled and
uncertificated Shares will be issued to a shareholder's account only upon:
(i) The shareholder's pledge of a lost instrument bond or
such other appropriate indemnity bond issued by a surety
company approved by PFPC; and
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<PAGE>
(ii) Completion of a release and indemnification agreement
signed by the shareholder to protect PFPC and its
affiliates.
(j) SHAREHOLDER INSPECTION OF STOCK RECORDS. Upon a request from any
Fund shareholder to inspect stock records, PFPC will notify the Fund, and the
Fund will issue instructions granting or denying each such request. Unless PFPC
has acted contrary to the Fund's instructions, the Fund agrees and does hereby
release PFPC from any liability for refusal of permission for a particular
shareholder to inspect the Fund's shareholder records.
(k) WITHDRAWAL OF SHARES AND CANCELLATION OF CERTIFICATES. Upon
receipt of Written Instructions, PFPC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
17. DURATION AND TERMINATION.
------------------------
(a) This Agreement shall be effective on the date first written above
and shall continue until August 1, 2000 (the "Initial Term"). 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 ninety (90) days prior to termination. During either the Initial Term or
the Renewal Terms, this Agreement may also be terminated on an earlier date by
either party for cause.
(b) With respect to the Fund, cause includes, but is not limited to,
(i) PFPC's material breach of this Agreement causing it to fail to substantially
perform its duties under this Agreement. In order for such material breach to
constitute "cause" under this Paragraph, PFPC must receive written notice from
the Fund specifying the material breach and PFPC shall not have corrected such
16
<PAGE>
breach within a 15-day period; (ii) financial difficulties of PFPC evidenced by
the authorization or commencement of a voluntary or involuntary bankruptcy under
the U.S. Bankruptcy Code or any applicable bankruptcy or similar law, or under
any applicable law of any jurisdiction relating to the liquidation or
reorganization of debt, the appointment of a receiver or to the modification or
alleviation of the rights of creditors; and (iii) issuance of an administrative
or court order against PFPC with regard to the material violation or alleged
material violation of the Securities Laws or other applicable laws related to
its business of performing transfer agency services;
(c) With respect to PFPC, cause includes, but is not limited to, the
failure of the Fund to pay the compensation set forth in writing pursuant to
Paragraph 11 of this Agreement.
(d) Any notice of termination for cause in conformity with
subparagraphs (a), (b) and (c) of this Paragraph by the Fund shall be effective
thirty (30) days from the date of any such notice. Any notice of termination for
cause by PFPC shall be effective 90 days from the date of such notice.
(e) Upon the termination hereof, the Fund shall pay to PFPC such
compensation as may be due for the period prior to the date of such termination.
In the event that the Fund designates a successor to any of PFPC's obligations
under this Agreement, PFPC shall, at the direction and expense of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by PFPC hereunder including, a certified list of the
shareholders of the Fund or any Portfolio thereof with name, address, and if
provided, taxpayer identification or Social Security number, and a complete
record of the account of each shareholder. To the extent that PFPC incurs
expenses related to a transfer of responsibilities to a successor, other than
17
<PAGE>
expenses involved in PFPC's providing the Fund's books and records described in
the preceding sentence to the successors, PFPC shall be entitled to be
reimbursed for such extraordinary expenses, including any out-of-pocket expenses
reasonably incurred by PFPC in connection with the transfer.
(f) Any termination effected pursuant to this Paragraph shall not
affect the rights and obligations of the parties under Paragraph 12 hereof.
(g) Notwithstanding the foregoing, this Agreement shall terminate
with respect to the Fund or any Portfolio thereof upon the liquidation, merger,
or other dissolution of the Fund or Portfolio or upon the Fund's ceasing to be a
registered investment company.
18. REGISTRATION AS A TRANSFER AGENT. PFPC represents that it is currently
registered with the appropriate federal agency for the registration of transfer
agents, or is otherwise permitted to lawfully conduct its activities without
such registration and that it will remain so registered or able to so conduct
such activities for the duration of this Agreement. PFPC agrees that it will
promptly notify the Fund in the event of any material change in its status as a
registered transfer agent. Should PFPC fail to be registered with the SEC as a
transfer agent at any time during this Agreement, and such failure to register
does not permit PFPC to lawfully conduct its activities, the Fund may, on
written notice to PFPC, terminate this Agreement upon five days written notice
to PFPC.
19. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at the address
of the Fund or (c) if to neither of the foregoing, at such other address as
18
<PAGE>
shall have been given by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by confirming telegram,
cable, telex or facsimile sending device during regular business hours, it shall
be deemed to have been given immediately; if sent at a time other than regular
business hours, such notice shall be deemed to have been given at the opening of
the next business day. If notice is sent by first-class mail, it shall be deemed
to have been given three days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day it is delivered. All
postage, cable, telegram, telex and facsimile sending device charges arising
from the sending of a notice hereunder shall be paid by the sender.
20. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
21. ADDITIONAL PORTFOLIOS. In the event that the Fund establishes one or
more investment series in addition to and with respect to which it desires to
have PFPC render services as transfer agent, registrar, dividend disbursing
agent and related services agent under the terms set forth in this Agreement, it
shall so notify PFPC in writing, and PFPC shall agree in writing to provide such
services, and such investment series shall become a Portfolio hereunder, subject
to such additional terms, fees and conditions as are agreed to by the parties.
22. DELEGATION; ASSIGNMENT.
(a) PFPC may, at its own expense, assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PFPC or
PNC Bank Corp., provided that (i) PFPC gives the Fund thirty (30) days' prior
written notice; (ii) the delegate (or assignee) agrees with PFPC and the Fund to
comply with all relevant provisions of the Securities Laws; and (iii) PFPC and
19
<PAGE>
such delegate (or assignee) promptly provide such information as the Fund may
request, and respond to such questions as the Fund may ask, relative to the
delegation (or assignment), including (without limitation) the capabilities of
the delegate (or assignee). The assignment and delegation of any of PFPC's
duties under this subparagraph (a) shall not relieve PFPC of any of its
responsibilities or liabilities under this Agreement.
(b) In the event that PFPC assigns its rights and delegates its
duties under this section, no amendment of the terms of this Agreement shall
become effective without the written consent of PFPC.
23. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
25. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to services to be performed and fees payable under this Agreement.
(b) CAPTIONS. The captions in this Agreement 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.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
20
<PAGE>
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:_______________________________
Title:____________________________
MITCHELL HUTCHINS LIR
MONEY SERIES
By:_______________________________
Title:____________________________
21
<PAGE>
ANNEX A
Portfolios
LIR Liquid Assets Fund
22
<PAGE>
Authorized PERSONS APPENDIX
NAME (TYPE) SIGNATURE
____________________________ _______________________________
____________________________ _______________________________
____________________________ _______________________________
____________________________ _______________________________
____________________________ _______________________________
____________________________ _______________________________
<PAGE>
Exhibit No. 9
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
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November 9, 1999
Mitchell Hutchins LIR Money Series
51 West 52nd Street
New York, New York 10019-6114
Ladies and Gentlemen:
You have requested our opinion, as counsel to Mitchell Hutchins LIR Money
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 shares of
beneficial interest of the series of the Trust listed below that may be issued
during the time that Post-Effective Amendment No. 6 to the Trust's Registration
Statement on Form N-1A ("PEA") is effective and has not been superseded by
another post-effective amendment. The series of the Trust are LIR Premier Money
Market Fund and LIR Premier Tax-Free Money Market 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) of 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, as amended, ("1933 Act"), the Investment Company Act of 1940, as
amended, ("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.
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Mitchell Hutchins LIR Money Series
November 9, 1999
Page 2
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
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Exhibit No. 10
KPMG Telephone 614 249 2300
Two Nationwide Plaza Fax 614 249 7348
Columbus, OH 43216
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees of
Mitchell Hutchins LIR Money Series:
We consent to use of our report dated February 19, 1999 for The Infinity Mutual
Funds, Inc. - Correspondent Cash Reserves Money Market Portfolio and
Correspondent Cash Reserves Tax Free Money Market Portfolio as incorporated by
reference herein and to the reference to our firm under the heading "Financial
Highlights" in the Prospectus.
/s/ KPMG LLP
-------------------------
KPMG LLP
Columbus, Ohio
November 8, 1999
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Exhibit No. 13(a)
MITCHELL HUTCHINS LIR MONEY SERIES --
LIR PREMIER MONEY MARKET FUND
LIR PREMIER TAX-FREE MONEY MARKET FUND
FORM OF PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, Mitchell Hutchins LIR Money Series ("Fund") is registered under
the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and has established two distinct series of shares
of beneficial interest, two of which correspond to distinct portfolios and have
been designated as LIR PREMIER MONEY MARKET FUND and LIR PREMIER TAX-FREE MONEY
MARKET FUND; and
WHEREAS, the Fund wishes to adopt into a Plan of Distribution pursuant
to Rule 12b-1 under the 1940 Act with respect to the above-referenced Series and
of such other Series to which this Plan may hereafter be made applicable
("Series"); and
WHEREAS, the Fund intends to enter into a Plan Agreement ("Plan
Agreement") with Correspondent Services Corporation ("CSC") which has, in turn,
has entered in clearing agreements with certain correspondent firms (together
with CSC, the "Securities Firms") under which the Securities Firms have agreed
to perform certain services for their clients who are shareholders of a Series;
NOW, THEREFORE, the Fund hereby adopts this Plan with respect to the
shares of each Series ("Shares") in accordance with Rule 12b-1 under the 1940
Act.
1. A. Each Series is authorized to pay to CSC, as compensation for its
distribution and other services on behalf of each Series' shares of beneficial
interest ("Shares"), fees at the rate of 0.60%, on an annualized basis, of the
average daily net assets of the Series' Shares. Such fees shall be calculated
and accrued daily and paid monthly or at such other intervals as the Board shall
determine.
B. Any Series may pay a fee to CSC at a lesser rate than the fees
specified above, as agreed upon by the Fund's Board of Trustees ("Board") and
CSC and as approved in the manner specified in Paragraph 4 of this Plan.
2. As Plan agent for the Shares of each Series, CSC may spend such
amounts as it deems appropriate on any activities or expenses primarily intended
to result in the sale of the Shares of the Series or the servicing and
maintenance of shareholder accounts, including, but not limited to, compensation
to employees of CSC; compensation to and expenses of, including overhead and
telephone and other communication expenses, of CSC and Securities Firms who
engage in or support the distribution of shares or who service shareholder
accounts; costs of: processing Shareholder transactions; investing Shareholder
account cash balances automatically in Series shares; providing periodic
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statements showing a Shareholder's account balance and integrating such
statements with those of other transactions and balances in the Shareholder's
other accounts serviced by the Securities Firm; arranging for bank wires;
performing sub-accounting or other services; assisting Shareholders in changing
dividend options, account designations and addresses establishing and
maintaining Shareholder accounts and records; transmitting Fund communications
and documents to Fund shareholders; answering Shareholder inquiries; providing
such information as Shareholders reasonably request; the printing of
prospectuses, statements of additional information, and reports for other than
existing shareholders; and the preparation, printing and distribution of sales
literature and advertising materials.
3. The amounts payable under this Plan will be paid in accordance with
the Plan Agreement between the Fund and CSC.
4. If adopted with respect to Shares of a Series after any public
offering of those shares, this Plan shall not take effect with respect to those
shares unless it has first been approved by a majority of the voting securities
of the Shares of that Series. This provision does not apply to adoption as an
amended Plan of Distribution where the prior Plan of Distribution either was
approved by a vote of a majority of the voting securities of the Shares of the
applicable Series or such approval was not required under Rule 12b-1.
5. This Plan shall not take effect with respect to the Shares of any
Series unless it first has been approved, together with any related agreements,
by votes of a majority of both (a) the Board and (b) those Board members of the
Fund who are not "interested persons" of the Fund (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related thereto ("Independent Board Members"), cast in person
at a meeting (or meetings) called for the purpose of voting on such approval;
and until the Board members who approve the Plan's taking effect with respect to
such Series' Shares have reached the conclusion required by Rule 12b-1(e) under
the 1940 Act.
6. After approval as set forth in Paragraph 4 (if applicable) and
Paragraph 5, this Plan shall take effect and continue in full force and effect
for so long as such continuance is specifically approved at least annually in
the manner provided for approval of this Plan in Paragraph 5.
7. CSC shall provide to the Board and the Board shall review, at least
quarterly, a written report of the amounts expended with respect to the Shares
of each Series by CSC under this Plan and the Contract and the purposes for
which such expenditures were made.
8. This Plan may be terminated with respect to the Shares of any Series
at any time by vote of the Board, by vote of a majority of the Independent Board
Members, or by vote of a majority of the outstanding voting securities of the
Shares of that Series.
9. This Plan may not be amended to increase materially the amount of
distribution fees provided for in Paragraph 1A or the amount of service fees
provided for in Paragraph 1B hereof unless such amendment is approved by a
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<PAGE>
majority of the outstanding voting securities of the Shares of the affected
Series and no material amendment to the Plan shall be made unless approved in
the manner provided for initial approval in Paragraph 4 hereof.
10. The amount of the fees payable by the Series to CSC under Paragraphs
1A hereof is not related directly to expenses incurred by CSC on behalf of such
Series and Paragraph 2 hereof and the Contract do not obligate the Series to
reimburse CSC for such expenses. The fees set forth in Paragraphs 1A hereof will
be paid by the Series to CSC until the Plan is terminated or not renewed. If the
Plan is terminated or not renewed with respect to the Shares of any Series, any
distribution expenses incurred by CSC on behalf of the Class B shares of the
Series in excess of payments of the fees specified in Paragraph 1A hereof which
CSC has received or accrued through the termination date are the sole
responsibility and liability of CSC, and are not obligations of the Series.
11. While this Plan is in effect, the selection and nomination of the
Board members who are not interested persons of the Fund shall be committed to
the discretion of the Board members who are not interested persons of the Fund.
12. As used in this Plan, the terms "majority of the outstanding voting
securities" and "interested person" shall have the same meaning as those terms
have in the 1940 Act.
13. The Fund shall preserve copies of this Plan (including any
amendments thereto) and any related agreements and all reports made pursuant to
Paragraph 7 hereof for a period of not less than six years from the date of this
Plan, the first two years in an easily accessible place.
14. The Board members of the Fund and the shareholders of each Series
shall not be liable for any obligations of the Fund or any Series under this
Plan, and CSC or any other person, in asserting any rights or claims under this
Plan, shall look only to the assets and property of the Fund or such Series in
settlement of such right or claim, and not to such Board members or
shareholders.
IN WITNESS WHEREOF, the Fund has executed this Plan of Distribution on
the day and year set forth below in New York, New York.
Date:
ATTEST: MITCHELL HUTCHINS LIR MONEY SERIES
By:
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Exhibit No. 13(b)
FORM OF PLAN AGREEMENT
Mitchell Hutchins LIR Money Series
51 West 52nd Street
New York, NY 10019-6114
Ladies and Gentlemen:
We wish to enter into an Agreement with MITCHELL HUTCHINS LIR MONEY
SERIES (the "Fund") to provide the services described below to shareholders of
each series of the Fund set forth on Exhibit A hereto ("Shareholders"), as such
Exhibit may be revised from time to time (each, a "Series").
The terms and conditions of this Agreement are as follows:
1. We agree to enter into agreements with certain correspondent firms
and other financial services firms ("Securities Firms") which are expected to
engage in activities or incur expenses primarily intended to result in the sale
of the Shares of the Series or the servicing and maintenance of shareholder
accounts, including for their Shareholders who own shares of any Series
("Shares"), which services or activities may include, without limitation:
providing telephone and other communications facilities, answering Shareholder
inquiries about the Fund or any Series; assisting Shareholders in changing
dividend options, account designations and addresses; performing sub-accounting;
establishing and maintaining shareholder accounts and records; processing
Shareholder transactions; arranging for bank wires; transmitting Fund
communications to Shareholders; providing prospectuses, statements of additional
information, and reports to other than existing Shareholders; preparing,
printing and distributing sales literature and advertising materials; investing
Shareholder account cash balances automatically in Series shares; providing
periodic statements showing a Shareholder's account balance and integrating such
statements with those of other transactions and balances in the Shareholder's
other accounts serviced by the Securities Firm; arranging for bank wires; and
providing such other information and services as the Shareholders reasonably may
request, to the extent the Securities Firm is permitted by applicable statute,
rule or regulation. We will advise each Securities Firm to provide to
Shareholders a schedule of the services the Securities Firm will provide and of
any fees that the Security Firm may charge directly to them for such services.
CSC may also pay compensation for its activities under this Agreement with
respect to the distribution of correspondent class shares, including such
commissions for sales of Shares by CSC employees, correspondent firms and other
dealers.
2. We shall provide such office space and equipment, telephone
facilities and personnel (which may be all or any part of the space, equipment
and facilities currently used in our business, or all or any personnel employed
by us) as is necessary or beneficial for providing the services contemplated
hereby. We shall transmit promptly to each Securities Firm for transmission to
its clients all communications sent to us for transmission to Shareholders by or
on behalf of any Series, the Fund's investment adviser, distributor, custodian
or transfer or dividend disbursing agent.
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3. We agree that neither we nor any of our employees or agents are
authorized to make any representation concerning any Series' shares, except
those contained in the then-current Prospectus and Statement of Additional
Information for such Series, copies of which will be supplied to us. We shall
have no authority to act as the fund's agent or for the Fund's distributor. We
agree to advise each Securities Firm that it is not so authorized.
4. In consideration of the services and facilities described herein, we
shall be entitled to receive from the Fund, and the fund agrees to pay to us
with respect to each Series, the fees set forth opposite such Series' name on
Exhibit A hereto. We agree to pay a portion of the aggregate fee paid hereunder
to the Securities Firms. We understand that the payment of these fees has been
authorized and will be paid pursuant to a Plan of Distribution approved as
required by Rule 12b-1 of the Investment Company Act of 1940, as amended (the
"1940 Act") (the "Plan"), and any payments pursuant to this Agreement shall be
paid only so long as the Plan is in effect.
5. The Fund reserves the right, at its discretion and without notice,
to suspend then sale of shares or withdraw the sale of any Series' shares.
6. We acknowledge that this Agreement shall become effective, as to a
Series, only when approved by vote of a majority of (i) the Fund's Board of
Trustees and (ii) Trustees who are not "interested persons" (as defined in the
1940 Act) of the Fund and who have no direct or indirect financial interest in
this Agreement ("Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such approval.
7. As to each Series, this Agreement shall continue until the last day
of the calendar year next following the date of execution, and thereafter shall
continue automatically for successive annual periods ending on the last day of
each calendar year, provided such continuance is approved specifically at least
annually by a vote of a majority of (i) the Fund's Board of Trustees and (ii)
the Funds' Independent Trustees, upon not more than 60 days' written notice, or
by vote of the holders of a majority of such Series' shares. Notwithstanding
anything contained herein, if, as to one or more Series, the Plan is terminated
by the Fund's Board of Trustees, or the Plan, or any part thereof is found
invalid or is ordered terminated by any regulatory or judicial authority, or we
fail to perform the services contemplated herein, this Agreement shall be
terminable, as to the relevant Series, effective upon receipt of notice thereof
by us. This Agreement also shall terminate automatically, as to the relevant
Series, in the event of its assignment (as defined in the 1940 Act).
8. All communications to the Fund shall be sent to the Fund at the
address set forth above. Any notice to us shall be duly given if mailed or
telegraphed to us at the address set forth below.
9. This Agreement shall be construed in accordance with the internal
laws of the State of New York, without giving effective to principles of
conflict of laws.
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Very truly yours,
CORRESPONDENT SERVICES CORPORATION
Date____________________ By:_______________________________________
Authorized Signature
NOTE: Please return both signed copies of this Agreement to the Fund. Upon
acceptance one countersigned copy will be returned for your files.
Accepted:
MITCHELL HUTCHINS LIR MONEY
SERIES
Date:__________________ By:_______________________________________
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<PAGE>
EXHIBIT A
Plan Agreement
between
MITCHELL HUTCHINS LIR MONEY SERIES
and
CORRESPONDENT SERVICES CORPORATION
Monthly Fee at an Annual
Rate as a Percentage
of Average Daily Net
Asset Value of Series'
Name of Series Shares Owned by Clients*
- -------------- -----------------------
LIR Premier
Money Market Fund .60 of 1%
LIR Premier
Tax-Free Money Market Fund .60 of 1%
- ------------
* For purposes of determining the fees payable hereunder, the average daily net
asset value of Series' shares shall be computed it the manner specified in the
Fund's Trust Instrument and then-current Prospectus and Statement of Additional
Information.
- --------------------------------------------------------------------------------
