<PAGE>
As filed with the Securities and Exchange Commission on September 1, 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. 3 [X]
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
MITCHELL HUTCHINS LIR MONEY SERIES
(Formerly, Mitchell Hutchins Institutional Series)
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, ESQ.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, ESQ.
BENJAMIN J. HASKIN, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: 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 September 1, 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 Mitchell
Hutchins LIR Select Money Fund.
<PAGE>
Mitchell Hutchins
LIR Select Money Fund
------------------------------------
PROSPECTUS
SEPTEMBER 1, 1999
------------------------------------
This prospectus offers two classes of money market fund shares. Institutional
shares are offered primarily to institutional investors and Financial
Intermediary shares are offered to banks and other financial intermediaries for
the benefit of their customers.
Not FDIC insured. May lose value.
No bank guarantee.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
<PAGE>
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Mitchell Hutchins LIR Select Money Fund
Contents
THE FUND
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
What every investor 3 LIR Select Money Fund
should know about 5 More About Risks and
the fund Investment
Strategies
YOUR INVESTMENT
- ---------------------------------------------------------------------------------------------------------
Information for 6 Managing Your Fund Account
managing your fund -- Buying Shares
account -- Selling Shares
-- Exchanging Shares
-- Additional Information
About Your Account
-- Pricing and Valuation
ADDITIONAL INFORMATION
- ---------------------------------------------------------------------------------------------------------
Additional important 9 Management
information about 10 Dividends and Taxes
the fund 11 Financial Highlights
- ---------------------------------------------------------------------------------------------------------
Where to learn more Back Cover
about the fund
</TABLE>
The fund is not a complete or
balanced investment program.
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Mitchell Hutchins LIR Select Money Fund
Mitchell Hutchins LIR Select Money Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
Maximum current income consistent with liquidity and the preservation of
capital.
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 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 may invest 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:
Credit Risk
Interest Rate Risk
Foreign Securities Risk
Information on the fund's recent holdings can be found in its current
annual/semi-annual reports (see back cover for information on ordering those
reports).
The fund commenced operations on August 10, 1998. As a result, the fund does not
have performance information of at least one calendar year to include in a bar
chart or table at this point in the prospectus, as some other funds might. You
can obtain some idea of how the fund has performed by requesting copies of its
annual/semi-annual reports or by speaking with your Financial Advisor.
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Mitchell Hutchins LIR Select Money Fund
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)
<TABLE>
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)............................................. None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)............................................. None
</TABLE>
ANNUAL FUND OPERATING EXPENSES* (expenses that are deducted from fund assets)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES FINANCIAL INTERMEDIARY SHARES
-------------------- -----------------------------
<S> <C> <C> <C> <C>
Management Fees........................ 0.18% 0.18%
Distribution and/or Service (12b-1)
Fees................................. 0.00% 0.00%
Other Expenses
Shareholder Servicing Fee............ 0.00% 0.25%
Miscellaneous Expenses............... 0.00% 0.00%
0.00% 0.25%
----- -----
Total Annual Fund Operating Expenses... 0.18% 0.43%
----- -----
----- -----
</TABLE>
- ------------
* Mitchell Hutchins has agreed to waive 0.03% of its management fee from
September 1, 1999 through January 31, 2000, so that the effective total fund
operating expenses during that period will be 0.15% for Institutional shares
and 0.40% for Financial Intermediary shares.
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 redeem 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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Institutional shares.......... $18 $ 58 $101 $230
Financial Intermediary
shares...................... 44 138 241 542
</TABLE>
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Mitchell Hutchins LIR Select Money Fund
MORE ABOUT RISKS
AND INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further detail about some of the risks
described below, are discussed in the fund's 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 the fund's investments will fall. Also, the fund's
yield will tend to lag behind changes in prevailing short-term interest rates.
This means that the fund's income will tend to rise more slowly than increases
in short-term interest rates. Similarly, when short-term interest rates are
falling, the fund's income 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 fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, 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 fund and
the trading systems used by the fund could be adversely affected by this issue.
The ability of an issuer or trading system to respond successfully to the 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 fund.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the fund is subject to maturity, quality and
diversification requirements designed to help it 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
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5
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Mitchell Hutchins LIR Select Money Fund
changing economic and money market conditions and to shifts in fiscal and
monetary policy. These techniques include varying the 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.
- --------------------------------------------------------------------------------
MANAGING YOUR FUND ACCOUNT
- --------------------------------------------------------------------------------
BUYING SHARES
The fund accepts the settlement of purchase orders only in available federal
funds. Federal funds are funds deposited by a commercial bank in an account at a
Federal Reserve Bank that can be transferred to a similar account of another
bank in one day and thus may be made immediately available to the fund through
its custodian.
The fund offers two separate classes of shares -- Institutional shares and
Financial Intermediary shares -- as an economical and convenient means for
institutions to invest short-term funds that they hold for their own account or
hold or manage for others.
You may buy Institutional shares if you are an institutional investor.
PaineWebber Incorporated, the distributor of the fund's shares, may, in its
discretion, make Institutional shares available to individuals or other
entities.
You may buy Financial Intermediary shares only if you are a bank or other
financial intermediary buying the shares for the benefit of your customers.
Financial Intermediary shares bear special fees at the annual rate of 0.25% of
average net assets for services that these financial intermediaries provide to
the beneficial owners of the Financial Intermediary shares.
Unless you specify otherwise, all shares purchased will be Institutional shares.
You may buy fund shares by calling the fund's transfer agent, First Data
Investor Services Group, Inc. at 1-888-LIR-FUND and speaking to a
representative. You may also buy fund shares by contacting your Financial
Advisor at PaineWebber or its correspondent firms, who are then responsible for
sending the order to the transfer agent. The availability of fund shares to
customers of PaineWebber's correspondent firms may vary depending on the
arrangements between PaineWebber and those firms.
You will buy shares at the net asset value next determined after receipt and
acceptance of your purchase order by the transfer agent, subject to the fund
receiving payment the same day. Your purchase order will be effective only if
you wire payment in federal funds on the same business day that you place your
order, and your wire must actually be credited to the fund's bank account by a
Federal Reserve Bank that day. Otherwise, the order will be rejected. The fund
effects orders to buy shares three times each business day at its net asset
value determined as of noon (Eastern time), 2:30 p.m. (Eastern time) and 5:00
p.m. (Eastern time). A business day is any day that the fund's custodian, the
fund's
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6
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Mitchell Hutchins LIR Select Money Fund
transfer agent and PaineWebber are open for business.
The fund and PaineWebber reserve the right to reject a purchase order or suspend
the offering of fund shares. PaineWebber may return without notice money wired
to the fund where the investor fails to place a corresponding share purchase
order.
WIRE INSTRUCTIONS:
Instruct your bank to transfer federal funds by wire to:
Mitchell Hutchins Institutional Funds
c/o The Bank of New York
CR DDA A/C # 8900337516
FFC PW A/C #
[insert PaineWebber account name and account
number]
LIR Select Money Fund
ABA #021000018
PaineWebber or an investor's bank may impose a service charge for wire
transfers.
MINIMUM INVESTMENTS:
<TABLE>
<S> <C>
To open an account. $10,000,000
To add to an account......... $ 100,000
</TABLE>
If your account balance has fallen below $10,000,000, your purchase order to add
to the account will be accepted only if the account balance will be at least
$10,000,000 after that purchase.
PaineWebber may waive these minimums. The fund may change its minimum investment
requirements at any time.
Financial intermediaries may establish different minimums for their customers
who purchase Financial Intermediary shares through them, provided that the
aggregate amounts purchased meet the above minimums. You may obtain additional
information about these minimums from your financial intermediary.
REMOTE TRADE ENTRY
The fund may offer an electronic trade order entry (RTE) capability to eligible
institutional investors who meet certain conditions. For more information on
this option, contact your Financial Advisor or the transfer agent at
1-888-LIR-FUND.
SELLING SHARES
You may sell your shares by calling the transfer agent at 1-888-LIR FUND and
speaking with a representative. You may also sell your shares by contacting your
Financial Advisor or correspondent firm (if you previously designated them to
give instructions to the transfer agent on your behalf); they are then
responsible for sending the order to the transfer agent. Sell orders are
effected three times each business day at the net asset value determined as of
noon (Eastern time), 2:30 p.m. (Eastern time) and 5:00 p.m. (Eastern time).
Your sales proceeds will be paid in federal funds wired to one or more accounts
you have designated, normally on the business day the sale order is accepted. If
you sell all the shares you own, dividends accrued for the month to date will be
paid in federal funds and wired at the same time to the bank account(s) that you
designate.
If the transfer agent receives your order to sell shares late in the day, it
will process your order and initiate a wire. However, your bank account may not
receive the proceeds that day if a Federal Reserve Bank is experiencing delay in
transfer of funds. Neither the fund, PaineWebber nor the transfer agent is
responsible for the
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7
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Mitchell Hutchins LIR Select Money Fund
performance of your bank or any of its intermediaries.
The transfer agent will process your orders to sell shares only if you have on
file with it a properly completed account application, with signature guaranteed
or other authentication acceptable to the transfer agent. The account
application requires you to designate the bank account(s) or PaineWebber account
for wiring sales proceeds. You must submit any change in the designated
account(s) for sale proceeds in a form acceptable to the transfer agent. The
transfer agent will not place the sales order if the information you provide
does not correspond to the information on your application.
If you have additional questions on selling shares you should contact your
Financial Advisor or call the transfer agent at 1-888-LIR-FUND.
EXCHANGING SHARES
You may exchange shares of the fund for shares of the same class of any of the
Liquid Institutional Reserves funds -- Money Market Fund, Government Securities
Fund and Treasury Securities Fund. Those funds all have higher total operating
expenses than the fund, but lower minimums for initial and subsequent purchases.
You can place an exchange order by calling the transfer agent at 1-888-LIR FUND
and speaking with a representative. You also can place an order through a
PaineWebber Financial Advisor or correspondent firm (if you previously
designated them to give instructions to the transfer agent on your behalf), who
is then responsible for sending the order to the transfer agent.
Your exchange order must be received by noon (Eastern time), for Government
Securities Fund and Treasury Securities Fund to be effective on that business
day. Your exchange order must be received by 2:30 p.m. (Eastern time) for Money
Market Fund to be effective on that business day. Exchange orders received after
those times will not be executed, and you will have to place an exchange order
before these times on the following business day if you still wish to effect an
exchange.
If you exchange all your fund shares, the dividends accrued on those shares for
the month to date will be invested in the shares of the other fund into which
the exchange is made.
Shareholders making their initial purchase of another fund through an exchange
should allow more time and must provide the transfer agent with a properly
completed account application for the new fund. These exchange orders should be
received by the transfer agent at least one half hour before the previously
mentioned deadlines to allow the transfer agent sufficient time to establish an
account in the new fund in the investor's name. Otherwise, the transfer agent
may not be able to effect the exchange.
If the total investment in your account has been less than $10,000,000 for 30
consecutive days, the fund may exchange your shares for shares of Liquid
Institutional Reserves -- Money Market Fund unless you elected in your account
application to have the shares sold and the proceeds paid to you in federal
funds wired to your designated account.
The fund may modify or terminate the exchange privilege at any time.
ADDITIONAL INFORMATION ABOUT YOUR ACCOUNT
Financial Intermediary Shares. Financial intermediaries buying or holding shares
for their customer accounts may charge those customers for cash management and
other services provided in connection with their account. These charges may
include account maintenance fees, compensating balance requirements or fees
based
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8
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Mitchell Hutchins LIR Select Money Fund
on account transactions, assets or income. The dividends payable to the
financial intermediaries' customers, who are the beneficial owners of the
shares, will be lower than those on Institutional shares by the amount of the
fees paid by the fund for shareholder services. A customer should consider the
terms of his account with a financial intermediary before purchasing shares.
A financial intermediary buying or selling shares for its customers is
responsible for transmitting orders to the transfer agent in accordance with its
customer agreements and the procedures noted above.
Institutional Shares. PaineWebber or Mitchell Hutchins (not the fund) may pay
shareholder servicing fees to financial institutions that make Institutional
shares available to their customers. The amount of these fees will be negotiated
between PaineWebber and the financial institution.
PRICING AND VALUATION
The price of fund shares is based on net asset value and is determined
separately for each class of shares. The net asset value is the total value of
the fund divided by the total number of shares outstanding. In determining net
asset value, the 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. The fund's net asset
value per share is expected to be $1.00, although this value is not guaranteed.
The fund's net asset value is determined three times each business day:
noon (Eastern time),
2:30 p.m. (Eastern time) and
5:00 p.m. (Eastern time).
Your price for buying or selling shares will be the net asset value that is next
calculated after the fund accepts your order.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Mitchell Hutchins is the investment adviser and administrator of the fund, and
is located at 1285 Avenue of the Americas, New York, New York, 10019. Mitchell
Hutchins is a wholly owned asset management subsidiary of PaineWebber.
PaineWebber, the distributor of the fund's shares, is located at the same
address and is wholly owned by Paine Webber Group Inc., a publicly owned
financial services holding company. On July 31, 1999, Mitchell Hutchins was the
adviser or sub-adviser of 33 investment companies with 75 separate portfolios
and aggregate assets of approximately $48.0 billion.
MANAGEMENT FEES
Mitchell Hutchins' contract fee for the management services it provides to the
fund is at the annual rate of 0.18% of the fund's average daily net assets.
During its initial fiscal period ended April 30, 1999, Mitchell Hutchins waived
part of this fee so that the fund paid management fees to Mitchell Hutchins at
the
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9
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Mitchell Hutchins LIR Select Money Fund
annual rate of 0.07% of its average daily net assets.
In exchange for this fee, Mitchell Hutchins has agreed to bear all expenses of
the fund other than the management fees, shareholder service fees paid for
Financial Intermediary shares, interest, taxes, extraordinary costs and the cost
of securities purchased and sold by the fund, including any transaction costs.
Although Mitchell Hutchins is not obligated to pay the fees and expenses of the
fund's independent trustees, it is contractually obligated to reduce its
management fee in an amount equal to those fees and expenses. Mitchell Hutchins
estimates that these fees and expenses will be less than 0.01% of the fund's
average net assets.
Mitchell Hutchins has agreed to waive 0.03% of its management fees from
September 1, 1999 through January 31, 2000, so that the effective management
fees during that period will be 0.15%.
OTHER INFORMATION
The fund will maintain a rating from one or more rating agencies that provide
ratings on money market funds. There can be no assurance that the fund will
maintain any particular rating or maintain it with a particular rating agency.
- --------------------------------------------------------------------------------
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS
The fund declares dividends daily and pays them monthly. Dividends are paid on
the last business day of a month or upon the sale of all the fund shares in a
shareholder's account.
The fund distributes any net short-term capital gain annually and anticipates
that any short-term capital gain distribution would be declared during the month
of December in a given year. The fund may make more frequent distributions if
necessary to maintain its share price at $1.00.
Shares earn dividends on the day they are purchased but do not earn dividends on
the day they are sold.
Dividends on Financial Intermediary shares will be lower than dividends on
Institutional shares because of the higher expenses borne by Financial
Intermediary shares.
You will receive dividends in additional shares of the same class unless you
elect to have the dividends transmitted by federal funds wire to either a
designated bank account or PaineWebber account. You must notify the transfer
agent in writing in a form acceptable to the transfer agent at least two
business days prior to the end of the month if you wish to change this election
for a particular monthly dividend.
TAXES
The dividends that you receive from the fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. 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.
The fund expects that its dividends will be taxed as ordinary income. The fund
will tell you how you should treat its dividends for tax purposes. You should
not recognize any capital gain on the sale of your shares so long as the fund
maintains a share price of $1.00.
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10
<PAGE>
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Mitchell Hutchins LIR Select Money Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial highlights table is intended to help you understand the
fund's financial performance since it commenced operations on August 10, 1998.
Certain information reflects financial results for a single fund share. In the
table, 'total investment return' represents the rate that an investor would have
earned on an investment in the fund (assuming reinvestment of all dividends).
The information in the financial highlights has been audited by Ernst & Young,
LLP independent auditors, whose report, along with the fund's financial
statements, are included in the fund's annual report to shareholders. The annual
report may be obtained without charge by calling 1-888-LIR-FUND.
<TABLE>
<CAPTION>
FINANCIAL
INSTITUTIONAL SHARES INTERMEDIARY SHARES
-------------------- --------------------
FOR THE PERIOD FOR THE PERIOD
AUGUST 10, 1998'D' DECEMBER 29, 1998'D'
TO TO
APRIL 30, 1999 FEBRUARY 9, 1999(2)
-------------- -------------------
<S> <C> <C>
Net asset value, beginning of period.................... $ 1.00 $ 1.00
---------- -------
Net investment income................................... 0.037 0.006
Dividends from net investment income.................... (0.037) (0.006)
---------- -------
Net asset value, end of period.......................... $ 1.00 $ 1.00
---------- -------
---------- -------
Total investment return(1).............................. 3.81% 0.57%
---------- -------
---------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)....................... $1,322,807 --
Expenses to average net assets net of waivers from
adviser............................................... 0.07%* 0.32%*
Expenses to average net assets before waivers from
adviser............................................... 0.18%* 0.43%*
Net investment income to average net assets net of
waivers from adviser.................................. 5.06%* 4.81%*
Net investment income to average net assets before
waivers from adviser.................................. 4.95%* 4.70%*
</TABLE>
- ------------
'D' Issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of the period reported, reinvestment of all dividends at net asset
value on the payable dates, and a sale at net asset value on the last day of
the period reported. Total investment return for periods of less than one
year has not been annualized.
(2) At February 9, 1999, there were no longer any Financial Intermediary shares
outstanding. Any further subscriptions of such shares would be at a $1.00
per share.
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11
<PAGE>
TICKER SYMBOL: Institutional Shares SELXX
If you want more information about the fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the fund's investments is available in the fund's
annual and semi-annual reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about the fund by contacting your Financial
Advisor at PaineWebber or one of its correspondent firms. You may obtain free
copies of annual and semi-annual reports and the SAI by contacting the fund
directly at 1-888-LIR-FUND.
You may review and copy information about the fund, 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 fund and information about the operations of the SEC's Public Reference
Room:
For a fee, by writing to or calling the
SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
Free, from the SEC's Internet website at:
http://www.sec.gov
Mitchell Hutchins LIR Money Series
-- Mitchell Hutchins LIR Select Money Fund
Investment Company Act File No. 811-8767
'c' 1999 PaineWebber Incorporated
MITCHELL HUTCHINS
LIR SELECT MONEY FUND
Prospectus
-----------------------
September 1, 1999
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
Mitchell Hutchins LIR Select Money Fund is a professionally managed
money market fund. The Fund is a diversified series of Mitchell Hutchins LIR
Money Series ("Trust") an open-end investment company.
The fund's investment adviser and administrator is Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset management
subsidiary of PaineWebber Incorporated ("PaineWebber"). PaineWebber is the
fund's distributor.
Portions of the fund's Annual Report to Shareholders are incorporated
by reference into this Statement of Additional Information ("SAI"). The Annual
Report accompanies this SAI. You may obtain an additional copy of the Annual
Report by calling toll-free 1-888-LIR-FUND.
This SAI is not a prospectus and should be read only in conjunction
with the fund's current Prospectus, dated September 1, 1999. A copy of the
Prospectus may be obtained by calling any PaineWebber Financial Advisor or
correspondent firm or by calling toll-free 1-888-LIR-FUND. Customers of banks
and financial intermediaries that purchase the Fund's Financial Intermediary
Shares may obtain the Prospectus from their financial intermediaries. This SAI
is dated September 1, 1999.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Fund and Its Investment Policies................................... 2
The Fund's Investments, Related Risks and Limitations.................. 2
Organization of the Trust; Trustees and Officers and Principal Holders of
Securities......................................................... 9
Investment Advisory, Administration and Distribution Arrangements...... 16
Portfolio Transactions................................................. 18
Additional Information Regarding Redemptions........................... 19
Valuation of Shares.................................................... 19
Performance Information................................................ 20
Taxes.................................................................. 22
Other Information...................................................... 22
Financial Statements................................................... 23
</TABLE>
<PAGE>
THE FUND AND ITS INVESTMENT POLICIES
The fund's investment objective may not be changed without shareholder
approval. Except where noted, the other investment policies of the fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that the fund will achieve its investment objective.
The fund's investment objective is earn maximum current income
consistent with liquidity and preservation of capital. The fund 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. These instruments 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 and trusts and similar entities, (4) funding
agreements and other insurance company obligations, (5) repurchase agreements
regarding any of the foregoing and (6) investment company securities. Money
market instruments 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 maintains a dollar-weighted average portfolio maturity
of 90 days or less.
The fund may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks only if the institution has 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 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"). 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.
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). 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 33 1/3% of its total assets for temporary purposes, including
reverse repurchase agreements. The costs associated with borrowing may reduce
the fund's net income. The fund may invest in the securities of other investment
companies.
The fund may be rated by a rating agency. As of the date of this SAI,
Duff & Phelps Credit Rating Co. (DCR) has given the fund a AAA rating. According
to DCR, the AAA rating means the fund's ability to meet redemption requests in a
timely manner for $1.00 per share is strong. This rating is based on the fund's
risk management procedures, internal control systems, limitations on market risk
and experienced management team.
THE FUND'S INVESTMENTS, RELATED RISKS AND LIMITATIONS
The following supplements the information contained in the Prospectus
and above concerning the fund's investments, related risks and limitations.
Except as otherwise indicated in the Prospectus or the SAI, the fund has
established no policy limitations on its ability to use the investments or
techniques discussed in these documents. New forms of money market instruments
continue to be developed. The fund may invest in these instruments to the extent
consistent with its investment objective.
2
<PAGE>
YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER
SECURITIES. The yields on the money market instruments in which the 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 fund, an issue may cease to be rated
or its rating may be reduced. If a security in the fund's portfolio 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 fund's board, will consider
whether the fund should continue to hold the obligation. A First Tier Security
rated in the highest short-term category by a single rating agency 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.
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 fund may
purchase commercial paper, which includes short-term obligations issued by
corporations, partnerships, trusts or other entities to finance short-term
credit needs. The fund 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 fund may invest in securities that are
comprised of financial assets. 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. Such assets are securitized
through the use of trusts or special purpose corporations or other entities.
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 Fund's Investments,
Related Risks and Limitations -- Credit and Liquidity Enhancements."
VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. The fund
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 fund may purchase variable
and floating rate securities of other issuers with remaining maturities in
excess of 13 months. The fund's investment 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.
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 fund the right to tender them back to a specified party, usually the issuer
or a remarketing agent, prior to maturity. See "The Fund's Investments, Related
Risks and Limitations -- Credit and Liquidity Enhancements."
3
<PAGE>
Generally, the 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
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 fund 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 fund 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 fund or the issuer. These notes are payable on
demand and may or may not be rated.
FUNDING AGREEMENTS AND GUARANTEED INVESTMENT CONTRACTS. The fund may
invest in funding agreements and guaranteed investment contracts issued by
insurance companies which are obligations of the insurance company or its
separate account. Funding agreements permit the investment of varying amounts
under a direct agreement between the fund and an insurance company and provide
that the principal amount may be increased from time to time (subject to
specified maximums) by agreement of the parties or decreased by either party.
The fund expects to invest primarily in funding agreements and guaranteed
investment contracts with floating or variable rates that are subject to demand
features that permit the fund to tender its interest back to the issuer. To the
extent the fund invests in funding agreements and guaranteed investment
contracts that either do not have demand features or have demand features that
may be exercised more than seven days after the date of acquisition, these
investments will be subject to the fund's limitation on investments in illiquid
securities. See "The Fund's Investments, Related Risks and Limitations -- Credit
and Liquidity Enhancements" and "-- Illiquid Securities."
INVESTING IN FOREIGN SECURITIES. The 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 fund may invest in securities
that have credit or liquidity enhancements or the fund may purchase these types
of enhancements in the secondary market. Such enhancements may be structured as
demand features that permit the fund 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 the fund. The credit and liquidity enhancements may have conditions that
limit the ability of the fund to use them when the fund wishes 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 fund has 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
fund invests in illiquid securities, it may not be able readily to liquidate
such investments and may have to sell other investments if necessary to raise
cash to meet its obligations.
Restricted securities are not registered under the Securities Act of
1933, as amended ("Securities Act") and may be sold only in privately negotiated
or other exempted transactions or after a registration statement under the
4
<PAGE>
Securities Act has become effective. Where registration is required, the fund
may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the fund might obtain a less favorable price than prevailed when it
decided to sell.
However, not all restricted securities are illiquid. A large
institutional market has developed for many U.S. and foreign securities that are
not registered under the 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 under the Securities Act, which establishes a "safe
harbor" from the registration requirements of that 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 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 fund, however, could affect adversely the
marketability of such portfolio securities, and the fund might be unable to
dispose of such securities promptly or at favorable prices.
The board has delegated the function of making day-to-day
determinations of liquidity to Mitchell Hutchins pursuant to guidelines approved
by the board. Mitchell Hutchins takes into account a number of factors in
reaching liquidity decisions, 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 fund's portfolio
and reports periodically on such decisions to the board.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which
the fund purchases securities or other obligations from a bank or securities
dealer (or its affiliate) and simultaneously commits to resell them to the
counterparty at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased obligations. Securities or other obligations subject to repurchase
agreements may have maturities in excess of 13 months. The fund maintains
custody of the underlying obligations prior to their repurchase, either through
its regular custodian or through a special "tri-party" custodian or
sub-custodian that maintains separate accounts for both the fund and its
counterparty. Thus, the obligation of the counterparty to pay the repurchase
price on the date agreed to or upon demand is, in effect, secured by such
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 fund 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,
corporate bonds and mortgage loans) may be subject to special risks and may not
have the benefit of certain protections in the event of the counterparty's
insolvency. If the seller or guarantor becomes insolvent, the fund may suffer
delays, costs and possible losses in connection with the disposition of
collateral. The fund intends to enter into repurchase agreements only with
counterparties in transactions believed by Mitchell Hutchins to present minimum
credit risks.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve
the sale of securities held by the fund subject to its agreement to repurchase
the securities at an agreed-upon date or upon demand and at a price
5
<PAGE>
reflecting a market rate of interest. Reverse repurchase agreements are subject
to the fund's limitation on borrowings and may be entered into only with banks
and securities dealers. While a reverse repurchase agreement is outstanding, the
fund will maintain, in a segregated account with its 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 Fund's Investments,
Related Risks and Limitations -- Segregated Accounts."
Reverse repurchase agreements involve the risk that the buyer of the
securities sold by the fund might be unable to deliver them when the fund seeks
to repurchase. If the buyer of securities under a reverse repurchase agreement
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 fund 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 fund later than
the normal settlement date for such securities at a stated price and yield. The
fund generally would not pay for such securities or start earning interest on
them until they are received. However, when the fund undertakes a when-issued or
delayed delivery obligation, it immediately assumes the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by the fund on a when-issued or delayed delivery basis may
result in the fund's 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 a fund's net asset value. When the fund commits to purchase
securities on a when-issued or delayed delivery basis, its custodian segregates
assets to cover the amount of the commitment. See "The Fund's Investments,
Related Risks and Limitations--Segregated Accounts." The fund 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 fund.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The 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 the 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 fund would continue to pay its own management fees and expenses
with respect to all its investments, including shares of other money market
funds. The fund 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 fund's liquidity.
LENDING OF PORTFOLIO SECURITIES. The fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables the 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. The 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. The fund will retain authority to terminate any of its loans at any
time. The fund may pay reasonable fees in connection with a loan and may pay the
borrower or placing broker a negotiated portion of the interest earned on the
reinvestment of cash held as collateral. The fund will receive amounts
equivalent to any interest, dividends or other distributions on the securities
loaned. The fund will regain record ownership of loaned securities to exercise
beneficial rights, such as voting and subscription rights, when regaining such
rights is considered to be in the fund's interest.
6
<PAGE>
Pursuant to procedures adopted by the board governing the fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for the fund. The board also has authorized the payment of fees (including
fees calculated as a percentage of invested cash collateral) to PaineWebber for
these services. The board periodically reviews all portfolio securities loan
transactions for which PaineWebber acted as lending agent. PaineWebber also has
been approved as a borrower under the fund's securities lending program.
SEGREGATED ACCOUNTS. When the fund enters into certain transactions
that involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis or reverse
repurchase agreements, it will maintain with an approved custodian in a
segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the fund's obligation or commitment under such
transactions.
INVESTMENT LIMITATIONS OF THE FUND
FUNDAMENTAL LIMITATIONS. The following fundamental investment
limitations cannot be changed for the 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 of the fund present at a shareholders' meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy. If a percentage restriction is adhered to at the time of an investment or
transaction, later changes in percentage resulting from a change in values of
portfolio securities or amount of total assets will not be considered a
violation of any of the following limitations.
The fund will not:
(1) purchase securities of any one issuer if, as a result, more than 5%
of the fund's total assets would be invested in securities of that issuer or the
fund would own or hold more than 10% of the outstanding voting securities of
that issuer, except that up to 25% of the fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its agencies
and instrumentalities or to securities issued by other investment companies.
The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.
(2) purchase any security if, as a result of that purchase, 25% or more
of the fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to municipal securities or to
certificates of deposit and bankers' acceptances of domestic branches of U.S.
banks.
The following interpretations apply to, but are not a part of, this
fundamental restriction: (a) domestic and foreign banking will be considered to
be different industries; and (b) asset-backed securities will be grouped in
industries based upon their underlying assets and not treated as constituting a
single, separate industry.
(3) issue senior securities or borrow money, except as permitted under
the Investment Company Act 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
7
<PAGE>
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: the fund's investments in master notes, funding
agreements 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.
The fund will not:
(1) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the fund may
make margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(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.
8
<PAGE>
ORGANIZATION OF THE TRUST; TRUSTEES AND OFFICERS
AND PRINCIPAL HOLDERS OF SECURITIES
The Trust was formed on April 29, 1998 as a business trust under the
laws of Delaware and has one operating series. The board has authority to
establish additional series and to issue an unlimited number of shares of each
beneficial interest of each existing or future series, par value $0.001 per
share. The board oversees the fund's operations.
Trustees and executive officers of the Trust, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------- ----------------------------------------------
<S> <C> <C>
Margo N. Alexander**; 52 Trustee and President Mrs. Alexander is chairman (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 principal of
R.Q.A. Enterprises R.Q.A. Enterprises (management consulting
One Old Church Road firm) (since April 1991 and principal
Unit #6 occupation since March 1995). Mr. Armstrong
Greenwich, CT 06830 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.
</TABLE>
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<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------- ----------------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**; 72 Trustee and Chairman of the Mr. Bewkes is a director of Paine Webber Group
Board of Trustees Inc. ("PW 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. 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 Advisors, Inc.
1275 Pennsylvania Ave, N.W. (international 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 gaming and wagering
industry) and Wierton Steel Corp. (makes and
finishes 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 31 investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------- ----------------------------------------------
<S> <C> <C>
Meyer Feldberg; 57 Trustee Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of Business,
101 Uris Hall Columbia University. Prior to 1989, he was
New York, NY 10027 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; 69 Trustee Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to May
New York, NY 10017 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 Capital
1455 Pennsylvania Ave, N.W. Partners (merchant bank). From January 1992 to
Suite 350 November 1992, he was campaign manager of
Washington, DC 20004 Bush-Quayle `92. From 1990 to 1992, he was
vice chairman and, from 1989 to 1990, he was
president of Northwest Airlines Inc. and NWA
Inc. (holding company of Northwest Airlines
Inc.). Prior to 1989, he was employed by the
Marriott Corporation (hotels, restaurants,
airline catering and contract feeding), where
he most recently was an executive vice
president and president of Marriott Hotels and
Resorts. Mr. Malek is also a director of
American Management Systems, Inc. (management
consulting and computer related services),
Automatic Data Processing, Inc. (computing
services), CB Richard Ellis, Inc. (real estate
services), 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.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------- ----------------------------------------------
<S> <C> <C>
Carl W. Schafer; 63 Trustee Mr. Schafer is president of the Atlantic
66 Witherspoon Street, #1100 Foundation (charitable foundation supporting
Princeton, NJ 08542 mainly 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;** 44 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.
Anthony G. Balestrieri; 36 Vice President Mr. Balestrieri is a senior vice president and
a portfolio manager in the short-term
strategies group of Mitchell Hutchins. Mr.
Balestrieri is a vice president of one
investment company for which Mitchell Hutchins
or PaineWebber 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 or PaineWebber serves as
investment adviser.
John J. Lee; 31 Vice President and Mr. Lee is a vice president and a manager of
Assistant Treasurer 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.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------- ----------------------------------------------
<S> <C> <C>
Kevin J. Mahoney; 33 Vice President and Mr. Mahoney is a first vice president and a
Assistant Treasurer 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; 33 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 or PaineWebber serves
as investment adviser.
Dennis McCauley; 52 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.
Ann E. Moran; 42 Vice President and Ms. Moran is a vice president and a manager of
Assistant Treasurer 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 Secretary Ms. O'Donnell is a senior vice president and
deputy general counsel of Mitchell Hutchins.
Ms. O'Donnell is a vice president and
secretary of 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; 38 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.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------- ----------------------------------------------
<S> <C> <C>
Victoria E. Schonfeld; 48 Vice President Ms. Schonfeld is a managing director and
general counsel of Mitchell Hutchins (since
May 1994) and a senior vice president of
PaineWebber (since July 1995). 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 Treasurer Mr. Schubert is a senior vice 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.
Barney A. Taglialatela; 38 Vice President and Mr. Taglialatela is a vice president and a
Assistant Treasurer 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.
Keith A. Weller; 38 Vice President and Mr. Weller is a first vice president and
Assistant Secretary 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.
</TABLE>
- -------------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Mrs. Alexander, Mr. Bewkes, Ms. Farrell and Mr. Storms are "interested
persons" of the trust 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 per series and up to $150 for each board meeting and each
separate meeting of a board committee. The Trust has only one operating series
and thus pays each such trustee $1,000 annually plus any additional amounts due
for board or committee meetings. Each chairman of the audit and contract review
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 the Trust. Because PaineWebber and Mitchell
Hutchins perform substantially all the services necessary for the operation of
the fund, the fund requires no employees. No officer, director or employee of
Mitchell Hutchins or PaineWebber presently receives any compensation from the
Trust for acting as a board member or officer.
14
<PAGE>
The table below includes certain information relating to the
compensation of the current board members who held office with the fund during
the fiscal period ended April 30, 1999 and the compensation of those board
members from all PaineWebber funds during the 1998 calendar year.
COMPENSATION TABLE'D'
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION FROM THE TRUST AND THE FUND
NAME OF PERSON, POSITION THE TRUST* COMPLEX**
------------------------ ---------- ---------
<S> <C> <C>
Richard Q. Armstrong,
Trustee............................... $ 1,160 $ 101,372
Richard R. Burt,
Trustee............................... 1,130 101,372
Meyer Feldberg,
Trustee............................... 1,160 116,222
George W. Gowen,
Trustee............................... 1,474 108,272
Frederic V. Malek,
Trustee............................... 1,160 101,372
Carl W. Schafer,
Trustee............................... 1,160 101,372
</TABLE>
- --------------------
'D' 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 from the funds.
* Represents fees paid to each board member for the fund's initial fiscal
period ended April 30, 1999.
** Represents total compensation paid during the calendar year ended December
31, 1998, to each board member by 31 investment companies (33 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 August 1, 1999, the fund's records showed the following
shareholders as owning 5% or more of a class of the fund's shares:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF INSTITUTIONAL SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS OF JULY 31, 1999
---------------- --------------------------------------
<S> <C> <C>
Probusiness Service Inc..................................... 372,564,544 shares 23%
State of Iowa -- State Treasurer............................. 175,000,000 shares 11%
Fleetwood Enterprises........................................ 114,715,951 shares 7%
Federal Agricultural Mortgage Corp........................... 113,176,119 7%
</TABLE>
- --------------------
* Each shareholder listed above may be contacted c/o Mitchell Hutchins Asset
Management Inc., 1285 Avenue of the Americas, New York, NY 10019.
15
<PAGE>
INVESTMENT ADVISORY, ADMINISTRATION AND
DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. Mitchell Hutchins
acts as the Trust's investment adviser and administrator pursuant to a contract
dated July 31, 1998 ("Advisory Contract"). Under the Advisory Contract, the
Trust pays Mitchell Hutchins an annual fee, computed daily and paid monthly, at
an annual rate of 0.18% of the Fund's average daily net assets.
During the period August 10, 1998 (commencement of operations) to April
30, 1999, the fund paid (or accrued) to Mitchell Hutchins fees of $1,115,803,
after giving effect to $668,641 in fee waivers by Mitchell Hutchins.
Under the terms of the Advisory Contract, Mitchell Hutchins bears all
expenses incurred in the fund's operation other than the fee payable under the
Advisory Contract, the fees payable pursuant to the shareholder service plan
adopted by the Trust with respect to the Fund's Financial Intermediary shares,
fees and expenses (including counsel fees) of the trustees of the Trust who are
not "interested persons" of the Trust or Mitchell Hutchins, as that term is
defined in the Investment Company Act ("Independent Trustees"), interest, taxes
and the cost (including brokerage commissions and other transaction costs, if
any) of securities purchased or sold by the Fund and any losses incurred in
connection therewith and extraordinary expenses (such as costs of litigation to
which the Trust or Fund is a party and of indemnifying officers and trustees of
the Trust).
Although Mitchell Hutchins is not obligated to pay the fees and
expenses of the Independent Trustees, the Advisory Contract requires that
Mitchell Hutchins reduce its management fee by an amount equal to those fees and
expenses.
Expenses borne by Mitchell Hutchins include the following (or the
fund's share of the following): (1) organizational expenses (if these expenses
are amortized over a period of more than one year, Mitchell Hutchins will bear
in any one year only that portion of the organizational expenses that would have
been borne by the fund in that year), (2) filing fees and expenses relating to
the registration and qualification of the shares of the fund under federal and
state securities laws and maintaining such registration and qualifications, (3)
fees and salaries payable to the trustees (other than the Independent Trustees)
and officers, (4) all expenses incurred in connection with the services of the
trustees (other than the Independent Trustees), including travel expenses, (5)
costs of any liability, uncollectable items of deposit and other insurance or
fidelity bonds, (6) ordinary legal, accounting and auditing expenses, excluding
legal fees of special counsel for the Independent Trustees and, as noted above,
excluding extraordinary expenses, such as litigation or indemnification
expenses, (7) charges of custodians, transfer agents and other agents, (8) costs
of preparing share certificate (if any); (9) expenses of setting in type and
printing prospectuses and supplements thereto, reports and statements to
shareholders and proxy materials for existing shareholders, (10) costs of
mailing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials to existing
shareholders, (11) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations, (12) costs of
mailing and tabulating proxies and costs of meetings of shareholders, the board
and any committees thereof, (13) the cost of investment company literature and
other publications provided to the trustees and officers, (14) costs of mailing
stationery and communications equipment, (15) expenses incident to any dividend,
withdrawal or redemption options, and (16) charges and expenses of any outside
pricing service used to value portfolio securities.
Under the Advisory Contract, Mitchell Hutchins will not be liable for
any error of judgment or mistake of law or for any loss suffered by the fund in
connection with the performance of the Advisory Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Mitchell Hutchins in the performance of its duties or from reckless disregard of
its duties and obligations thereunder.
The Advisory Contract is terminable with respect to the fund at any
time without penalty by vote of the board or by vote of the holders of a
majority of the outstanding voting securities of the fund on 60 days' written
notice to Mitchell Hutchins, as the case may be. The Advisory Contract is also
terminable without penalty by
16
<PAGE>
Mitchell Hutchins on 60 days' written notice to the other party. The Advisory
Contract terminates automatically upon its assignment.
NET ASSETS. The following table shows the approximate net assets as of
July 31, 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.
<TABLE>
<CAPTION>
NET ASSETS
INVESTMENT CATEGORY ($MIL)
------------------- -----------
<S> <C>
Domestic (excluding Money Market) ........................................... $ 8,159.6
Global....................................................................... 4,524.1
Equity/Balanced.............................................................. 7,791.1
Fixed Income (excluding Money Market) ....................................... 4,892.6
Taxable Fixed Income ................................................. 3,363.8
Tax-Free Fixed Income ................................................ 1,528.8
Money Market Funds .......................................................... 35,370.8
</TABLE>
PERSONAL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to a code of ethics that describes
the fiduciary duty owed to shareholders of 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. PaineWebber acts as distributor of each
class of shares of the fund under a distribution contract with the Trust, which
requires PaineWebber to use its best efforts, consistent with its other
business, to sell shares of the fund. Shares of the fund are offered on a
continuous basis, except that the Trust and PaineWebber reserve the right to
reject any purchase order and to suspend the offering of fund shares for a
period of time. PaineWebber may pay shareholder servicing fees to banks and
broker-dealers that make Institutional shares of the fund available to their
customers. The annual rate of the shareholder servicing fees will not exceed
five basis points (0.05%) multiplied by the average daily net asset value of
Institutional shares held through the bank or broker-dealer by its institutional
customers, and will be paid monthly. The cost of these shareholder servicing
fees will be borne by PaineWebber or Mitchell Hutchins Asset Management Inc. and
will not be charged to or reimbursed by the fund.
FINANCIAL INTERMEDIARIES. Financial intermediaries, such as banks and
savings associations, may purchase Financial Intermediary shares for the
accounts of their customers. The Trust has adopted a shareholder services plan
("Plan") with respect to Financial Intermediary shares. PaineWebber implements
the Plan on behalf of the Trust by entering into a service agreement with each
financial intermediary that purchases Financial Intermediary shares requiring it
to provide support services to its customers who are the beneficial owners of
Financial Intermediary shares.
Under the Plan, the fund pays PaineWebber an annual fee at the annual
rate of 0.25% of the average daily net assets value of the Financial
Intermediary shares held by financial intermediaries on behalf of their
customers. Under each service agreement, PaineWebber pays an identical fee to
the financial intermediary for providing the support services to its customers
specified in the service agreement. These services may include: (i) aggregating
and processing purchase and redemption requests from customers and placing net
purchase and redemption orders with PaineWebber; (ii) providing customers with a
service that invests the assets of their accounts in Financial Intermediary
shares; (iii) processing dividend payments from the Trust on behalf of
customers; (iv) providing information periodically to customers showing their
positions in Financial Intermediary shares; (v) arranging for
17
<PAGE>
bank wires; (vi) responding to customer inquiries relating to the services
performed by the financial intermediary; (vii) providing sub-accounting with
respect to Financial Intermediary shares beneficially owned by customers or the
information necessary for sub-accounting; (viii) forwarding shareholder
communications from the Trust (such as proxies, shareholder reports and
dividend, distribution and tax notices) to customers, if required by law; and
(ix) other similar services if requested by the Trust. The fund made payments
through PaineWebber to financial intermediaries in the amount of $373 with
respect to its Financial Intermediary shares that were outstanding during the
fiscal period ended April 30, 1999.
Under the terms of the service agreements, financial intermediaries are
required to provide to their customers a schedule of any additional fees that
they may charge customers in connection with their investments in Financial
Intermediary shares. Financial Intermediary shares are available for purchase
only by financial intermediaries that have entered into service agreements with
PaineWebber in connection with their investment. Financial intermediaries
providing services to beneficial owners of Financial Intermediary shares in
certain states may be required to be registered as dealers under the laws of
those states.
The Plan requires that PaineWebber provide to the board at least
annually a written report of the amounts expended by PaineWebber under service
agreements with financial intermediaries and the purposes for which such
expenditures were made. Each service agreement requires the financial
intermediary to cooperate with PaineWebber in providing information to the board
with respect to amounts expended and services provided under the service
agreement. The Plan may be terminated at any time, without penalty, by vote of
the trustees of the Trust who are not "interested persons" of the Trust as
defined in the Investment Company Act and who have no direct or indirect
financial interest in the operation of the Plan ("Disinterested Trustees"). Any
amendment to the Plan must be approved by the board and any material amendment
must be approved by the Disinterested Trustees.
Should future legislative, judicial or administrative action prohibit
or restrict the activities of banks serving as financial intermediaries in
connection with the provision of support services to their customers, the Trust
and PaineWebber might be required to alter or discontinue their arrangements
with financial intermediaries and change their method of operations with respect
to Financial Intermediary shares. It is not anticipated, however, that any
change in the Trust's method of operations would affect its net asset values per
share or result in a financial loss to any shareholder.
Conflict of interest restrictions may apply to a financial
institution's receipt of compensation from a fund through PaineWebber under a
service agreement resulting from fiduciary funds being invested in Financial
Intermediary shares. Before investing fiduciary funds in Financial Intermediary
shares, financial intermediaries, including investment advisers and other money
managers under the jurisdiction of the SEC, the Department of Labor or state
securities commissions and banks regulated by the Comptroller of the Currency
should consult their legal advisors.
PORTFOLIO TRANSACTIONS
The fund purchases portfolio securities from dealers and underwriters
as well as from issuers. Securities are usually traded on a net basis with
dealers acting as principal for their own accounts without a stated commission.
Prices paid to dealers in principal transactions generally include a "spread,"
which is the difference between the prices at which the dealer is willing to
purchase and sell a specific security at the time. When securities are purchased
directly from an issuer, no commissions or discounts are paid. When securities
are purchased in underwritten offerings, they include a fixed amount of
compensation to the underwriter. During the period August 10, 1998 (commencement
of operations) to April 30, 1999, the fund paid no brokerage commissions.
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, it
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 pursuant to procedures that
are designed to ensure that the transaction (including
18
<PAGE>
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
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 fund effects 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 fund.
Investment decisions for the fund and for other investment accounts
managed by Mitchell Hutchins are made independently of each other in light of
differing considerations for the various accounts. However, the same investment
decision may occasionally be made for the fund and one or more of such accounts.
In such cases, simultaneous transactions are inevitable. Purchases or sales are
then averaged as to price and allocated between the fund and such other
account(s) as to amount according to a formula deemed equitable to the fund and
such account(s). While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as the fund is concerned,
or upon its ability to complete its entire order, in other cases it is believed
that coordination and the ability to participate in volume transactions will be
beneficial to the fund.
As of April 30, 1999, the fund owned securities issued by the following
companies which are regular broker-dealers for the fund:
<TABLE>
<CAPTION>
ISSUER TYPE OF SECURITY VALUE
------ ---------------- -----
<S> <C> <C>
Bear Stearns Companies Incorporated master note $ 55,000,000
Goldman Sachs Group Incorporated master note 45,000,000
Morgan Stanley, Dean Witter & Company master note 55,000,000
NationsBanks N.A. master note 50,000,000
</TABLE>
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
ADDITIONAL REDEMPTION INFORMATION. The 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 the fund's portfolio at the
time; although the fund attempts to maintain a constant net asset value of $1.00
per share.
If conditions exist that make cash payments undesirable, the fund
reserves the right to honor any request for redemption by making payment in
whole or in part in securities chosen by the fund and valued in the same way as
they would be valued for purposes of computing the fund's net asset value. If
payment is made in securities, the shareholder may incur brokerage expenses in
converting these securities into cash.
VALUATION OF SHARES
The fund uses its best efforts to maintain its net asset value at $1.00
per share. The fund's net asset value per share is determined by The Bank of New
York ("BONY") as of noon, Eastern time, 2:30 p.m., Eastern time and again at
5:00 p.m. Eastern time, on each Business Day. As defined in the Prospectus,
"Business Day" means any day on which the New York City offices of BONY, the
fund's transfer agent (First Data Investors Services Group, Inc.) and
PaineWebber 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, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
19
<PAGE>
The 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 fund
must adhere to certain conditions under the Rule relating to its investments,
some of which are discussed in this SAI. Amortized cost is an approximation of
market value of an instrument, whereby the difference between its acquisition
cost and value at maturity is amortized on a straight-line basis over the
remaining life of the instrument. The effect of changes in the market value of a
security as a result of fluctuating interest rates is not taken into account,
and thus the amortized cost method of valuation may result in the value of a
security being higher or lower than its actual market value. If a large number
of redemptions take place at a time when interest rates have increased, the fund
might have to sell portfolio securities prior to maturity and at a price that
might not be desirable.
The board has established procedures 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 the fund, the board will promptly consider whether any action
should be initiated to eliminate or reduce material dilution or other unfair
results to shareholders. Such action may include redeeming shares in kind,
selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less and will not purchase any instrument
having, or deemed to have, a remaining maturity of more than 397 days, will
limit portfolio investments, including repurchase agreements, to those U.S.
dollar-denominated instruments that are of high quality under the Rule and that
Mitchell Hutchins, acting pursuant to the procedures, determines present minimal
credit risks, and will comply with certain reporting and recordkeeping
procedures. There is no assurance that constant net asset value per share will
be maintained. If amortized cost ceases to represent fair value per share, the
board will take appropriate action.
In determining the approximate market value of portfolio investments,
the fund may employ outside organizations, which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used. 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 fund's 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.
TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in the fund's Performance Advertisements are
calculated according to the following formula:
<TABLE>
<S> <C>
P(1 + T)'pp'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.
</TABLE>
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.
The following table shows performance information for the fund's shares
outstanding for the period indicated. Any returns for periods of more than one
year are expressed as an average annual return.
20
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES
(INCEPTION DATE) (08/10/99)
---------------- -------------
<S> <C>
Inception to April 30, 1999:
Standardized Return................. 3.81%
</TABLE>
The fund had Financial Intermediary shares outstanding only during the
period December 29, 1998 to February 9, 1999. Accordingly, no performance
information is provided for Financial Intermediary shares.
CALCULATION OF YIELD. The fund computes its yield and effective yield
quotations for each class of shares using standardized methods required by the
SEC. The fund from time to time advertises for each class of shares (1) its
current yield based on a recently ended seven-day period, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return and then
multiplying the base period return by (365/7), with the resulting yield figure
carried to at least the nearest hundredth of one percent; and (2) its effective
yield based on the same seven-day period by compounding the base period return
by adding 1, raising the sum to a power equal to (365/7) and subtracting 1 from
the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)'pp'365/7 ] - 1
The fund 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 the fund since it began operations
or for shorter periods. This return data may or may not assume reinvestment
of dividends (compounding).
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of the fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
For the seven-day period ended April 30, 1999, the yield and effective
yield of the fund's Institutional shares was 4.86% and 4.98%, respectively. The
fund had Financial Intermediary shares outstanding only during the period
December 29, 1998 to February 9, 1999. Accordingly, no yield information is
provided for Financial Intermediary shares.
OTHER INFORMATION. The fund's performance data quoted in advertising
and other promotional materials ("Performance Advertisements") represent past
performance and are not intended to predict or indicate future results. The
return on an investment in the fund will fluctuate. In Performance
Advertisements, the fund may compare its 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 Smith Barney Government Bond Index and changes in the
Consumer Price Index as published by the U.S. Department of Commerce. The fund
also may refer in such materials to mutual fund performance rankings and other
data, such as comparative asset, expense and fee levels, published by Lipper,
CDA, IBC, Wiesenberger or ICD. Performance Advertisements also may refer to
21
<PAGE>
discussions of the fund and comparative mutual fund data and ratings reported in
independent periodicals, including THE WALL STREET JOURNAL, MONEY MAGAZINE,
FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES,
THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS. Comparisons
in Performance Advertisements may be in graphic form.
The fund may also compare its performance with the 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 the fund's
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Bank accounts are insured in whole or in part by an agency of
the U.S. government and may offer a fixed rate of return. Fund shares are not
insured or guaranteed by the U.S. government and returns thereon will fluctuate.
While the fund seeks to maintain a stable net asset value of $1.00 per share,
there can be no assurance that it will be able to do so.
The fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on the fund investment are reinvested by being paid in
additional fund shares, any future income of the fund would increase the value,
not only of the original fund investment, but also of the additional fund shares
received through reinvestment. As a result, the value of the fund investment
would increase more quickly than if dividends had been paid in cash. The fund
may also make available to shareholders a daily accrual factor or "mil rate"
representing dividends accrued to shareholder accounts on a given day or days.
Certain shareholders may find that this information facilitates accounting or
recordkeeping.
TAXES
BACKUP WITHHOLDING. The fund is required to withhold 31% of all
dividends and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the fund or PaineWebber with a
correct taxpayer identification number or who otherwise are subject to backup
withholding.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to qualify
for treatment as a regulated investment company ("RIC") under the Internal
Revenue Code, the fund must distribute to its shareholders for each taxable year
at least 90% of its investment company taxable income (consisting generally of
net investment income and net short-term capital gains, if any) and must meet
several additional requirements. Among these requirements are the following: (1)
the fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities and certain other income; (2) at the
close of each quarter of the fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. government
securities, securities of other RICs and other securities that are limited, in
respect of any one issuer, to 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 or the securities of other
RICs) of any one issuer. If the 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 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.
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 fund could, under certain conflicts of laws jurisprudence in
various states, be held personally liable for the obligations of the Trust or
fund. However, the Trust Instrument of the Trust disclaims shareholder liability
for acts or obligations of the Trust or its series (the fund). The Trust
Instrument provides for
22
<PAGE>
indemnification from the fund's property for all losses and expenses of any fund
shareholder held personally liable for the obligations of the fund. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the fund itself would be unable
to meet its obligations, a possibility which Mitchell Hutchins believes is
remote and not material. Upon payment of any liability incurred by a shareholder
solely by reason of being or having been a shareholder of the fund, the
shareholder paying such liability will be entitled to reimbursement from the
general assets of the fund. The trustees intend to conduct the operations of the
fund in such a way as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the fund.
CLASSES OF SHARES. A share of each class of the fund represents an
interest in the fund's investment portfolio and has similar rights, privileges
and preferences. Each share has equal voting, dividend and liquidation rights,
except that beneficial owners of Financial Intermediary shares receive certain
services directly from financial intermediaries and bear the related service
costs.
VOTING RIGHTS. Shareholders of the fund are entitled to one vote for
each full share held and fractional votes for fractional shares held. Voting
rights are not 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 shares of the fund
will be voted together, except that only the shareholders of a particular class
of the fund may vote on matters affecting only that class. Financial
intermediaries holding shares for their own accounts must undertake to vote the
shares in the same proportion as the vote of shares held for their customers.
The fund does not hold annual meetings. Shareholders of record of no
less than two-thirds of the outstanding shares of the Trust may remove a board
member by vote cast in person or by proxy at a meeting called for that purpose.
A meeting will be called to vote on the removal of a board member at the written
request of holders of record of at least 10% of the outstanding shares of the
Trust.
PRIOR NAME. Prior to July 28, 1999, the Trust was known as "Mitchell
Hutchins Institutional Series."
CUSTODIAN; TRANSFER AND DIVIDEND AGENT. The Bank of New York, 48 Wall
Street, New York, New York 10286, is custodian of the fund's assets. First Data
Investor Services Group, Inc., whose principal business address is 4400 Computer
Drive, Westborough, Massachusetts 01581-5159, is the fund's transfer and
dividend disbursing agent
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the fund.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, serves as independent auditors for the fund.
FINANCIAL STATEMENTS
The fund's Annual Report to Shareholders for its initial fiscal period
ended April 30, 1999 is a separate document supplied with this SAI, and the
financial statements, accompanying notes and report of independent auditors
appearing therein are incorporated herein by this reference.
23
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION. THE FUND AND ITS
DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN
OFFER TO SELL SHARES OF THE FUND IN ANY JURISDICTION WHERE THE FUND OR ITS
DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.
-----------
Mitchell Hutchins LIR
Select Money Fund.
------------------------------------------
Statement of Additional Information
September 1, 1999
------------------------------------------
PAINEWEBBER
'c'1999 PaineWebber Incorporated
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<S> <C> <C>
(1) (a) Trust Instrument (1)
(b) Amendment to Trust Instrument effective July 28, 1999 (filed herewith)
(2) By-Laws (1)
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (2)
(4) Investment Advisory and Administration Contract for Mitchell Hutchins LIR Select Money Fund
(filed herewith)
(5) Distribution Contract for Mitchell Hutchins LIR Select Money Fund (filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (filed herewith)
(8) (a) Transfer Agency Agreement (filed herewith)
(b) Shareholder Service Plan (filed herewith)
(c) Shareholder Service Agreement (filed herewith)
(9) Opinion and consent of counsel (filed herewith)
(10) (a) Other opinions, appraisals, rulings and consents: Auditors' consent (filed herewith)
(b) Consent of Duff & Phelps Credit Rating Company (filed herewith)
(11) Omitted Financial Statements - none
(12) Letter of investment intent (1)
(13) Plan of Distribution pursuant to Rule 12b-1--none
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 (1)
-
</TABLE>
- -------------------------
(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 Articles IV, VI and X of Registrant's
Trust Instrument and from Articles VI and IX of Registrant's By-Laws.
Item 24. Persons Controlled by or under Common Control with Registrant
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
C-1
<PAGE>
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 with PaineWebber Incorporated
("PaineWebber") provides that the Trust will indemnify PaineWebber and its
officers, directors and controlling persons against all liabilities arising from
any alleged untrue statement of material fact in the Registration Statement or
from any alleged omission to state in the Registration Statement a material fact
required to be stated in it or necessary to make the statements in it, in light
of the circumstances under which they were made, not misleading, except insofar
as liability arises from untrue statements or omissions made in reliance upon
and in conformity with information furnished by PaineWebber to the Trust for use
in the Registration Statement; and provided that this indemnity agreement shall
not protect any such persons against liabilities arising by reason of their bad
faith, gross negligence or willful misfeasance; and shall not inure to the
benefit of any such persons unless a court of competent jurisdiction or
controlling precedent determines that such result is not against public policy
as expressed in the Securities Act of 1933. Section 9 of the Distribution
Contract also provides that PaineWebber agrees to indemnify, defend and hold the
Trust, its officers and Trustees free and harmless of any claims arising out of
any alleged untrue statement or any alleged omission of material fact contained
in information furnished by PaineWebber for use in the Registration Statement or
arising out of an agreement between PaineWebber and any retail dealer, or
arising out of supplementary literature or advertising used by PaineWebber in
connection with the Contract. Section 10 of the Distribution Contract contains
provisions similar to Section 10 of the Investment Advisory and Administration
Contract, with respect to Mitchell Hutchins and PaineWebber, as appropriate.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to trustees, officers and controlling
persons of the Registrant, pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding or payment pursuant to any insurance policy) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
C-2
<PAGE>
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) PaineWebber serves as principal underwriter and/or investment
adviser for the following investment companies:
LIQUID INSTITUTIONAL RESERVES
PAINEWEBBER RMA MONEY FUND, INC.
PAINEWEBBER RMA TAX-FREE FUND, INC.
PAINEWEBBER MUNICIPAL MONEY MARKET SERIES
PAINEWEBBER MANAGED MUNICIPAL TRUST
b) PaineWebber is the Registrant's principal underwriter. The directors
and officers of PaineWebber, their principal business addresses, and their
positions and offices with PaineWebber are identified in its Form ADV, as filed
with the Securities and Exchange Commission (registration number 801-7163) and
such information is hereby incorporated herein by reference. The information set
forth below is furnished for those directors and officers of PaineWebber who
also serve as trustees or officers of the Trust. Unless otherwise indicated, the
principal business address of each person named is 1285 Avenue of the Americas,
New York, NY 10019.
<TABLE>
<CAPTION>
Positions and Offices
Name With Registrant Positions and Offices With Underwriter
- ---- --------------- --------------------------------------
<S> <C> <C>
Margo N. Alexander Trustee and President Executive Vice President and Director of
PaineWebber
Mary C. Farrell Trustee Managing Director, Senior Investment
Strategist and member of the Investment
Policy Committee
</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.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
None.
C-3
<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 30th day of August, 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:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander President and Trustee August 30, 1999
- --------------------------- (Chief Executive Officer)
Margo N. Alexander *
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman August 30, 1999
- --------------------------- of the Board of Trustees
E. Garrett Bewkes, Jr. *
/s/ Richard Q. Armstrong Trustee August 30, 1999
- ---------------------------
Richard Q. Armstrong *
/s/ Richard R. Burt Trustee August 30, 1999
- ------------------------------------
Richard R. Burt *
/s/ Mary C. Farrell Trustee August 30, 1999
- ------------------------------------
Mary C. Farrell *
/s/ Meyer Feldberg Trustee August 30, 1999
- ------------------------------------
Meyer Feldberg *
/s/ George W. Gowen Trustee August 30, 1999
- ------------------------------------
George W. Gowen *
/s/ Frederic V. Malek Trustee August 30, 1999
- ------------------------------------
Frederic V. Malek *
/s/ Carl W. Schafer Trustee August 30, 1999
- ------------------------------------
Carl W. Schafer *
/s/ Brian M. Storms Trustee August 30, 1999
- ------------------------------------
Brian M. Storms **
/s/ Paul H. Schubert Vice President and Treasurer (Chief August 30, 1999
- ------------------------------------ Financial and Accounting Officer)
Paul H. Schubert
</TABLE>
* Signature affixed by Elinor W. Gammon pursuant to powers of attorney
dated May 13, 1998 and incorporated by reference from the Initial
Registration Statement of Mitchell Hutchins LIR Money Series (formerly
Mitchell Hutchins Institutional Series), SEC File 333-52965, filed May
19, 1998.
** Signature affixed by Elinor W. Gammon 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.
C-4
<PAGE>
MITCHELL HUTCHINS LIR MONEY SERIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C> <C>
(1) (a) Trust Instrument (1)
(b) Amendment to Trust Instrument effective July 28, 1999 (filed herewith)
(2) By-Laws (1)
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (2)
(4) Investment Advisory and Administration Contract for Mitchell Hutchins LIR Select Money Fund
(filed herewith)
(5) Distribution Contract for Mitchell Hutchins LIR Select Money Fund (filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (filed herewith)
(8) (a) Transfer Agency Agreement (filed herewith)
(b) Shareholder Service Plan (filed herewith)
(c) Shareholder Service Agreement (filed herewith)
(9) Opinion and consent of counsel (filed herewith)
(10) (a) Other opinions, appraisals, rulings and consents: Auditors' consent (filed herewith)
(b) Consent of Duff & Phelps Credit Rating Company (filed herewith)
(11) Omitted Financial Statements - none
(12) Letter of investment intent (1)
(13) Plan of Distribution pursuant to Rule 12b-1 - none
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 (1)
</TABLE>
- -----------
(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 Articles IV, VI and X of Registrant's Trust
Instrument and from Articles VI and IX of Registrant's By-Laws.
STATEMENT OF DIFFERENCES
The copyright symbol shall be expressed as............................... 'c'
The registered trademark symbol shall be expressed as.................... 'r'
The dagger symbol shall be expressed as.................................. 'D'
Characters normally expressed as superscript shall be preceded by........ 'pp'
<PAGE>
Exhibit No. 1(b)
MITCHELL HUTCHINS LIR MONEY SERIES
(formerly Mitchell Hutchins Institutional Series)
CERTIFICATE OF VICE PRESIDENT AND SECRETARY
I, Dianne E. O'Donnell, Vice President and Secretary of Mitchell
Hutchins LIR Money Series ("Trust"), hereby certify that the board of trustees
of the Trust adopted the following resolutions at a meeting held July 28, 1999,
that the resolutions became effective on that date, and that the Amended and
Restated Schedule A attached to this certificate is a true copy of the Amended
and Restated Schedule A to the Trust's Trust Instrument that was approved by the
board of trustees at its July 28, 1999 meeting:
RESOLVED, that pursuant to Section 8 of Article X of the
Trust's Trust Instrument, the name of the Trust be, and it hereby is,
changed from "Mitchell Hutchins Institutional Series" to "Mitchell
Hutchins LIR Money Series" and that the Trust Instrument be, and it
hereby is, amended as follows:
The last sentence of the introductory paragraph of the Trust
Instrument is amended to read as follows: "The name of the
Trust created by this Trust Instrument is Mitchell Hutchins
LIR Money Series."
Section (m) of Article I on the Trust Instrument is amended to
read as follows: "(m) "Trust" means Mitchell Hutchins LIR
Money Series established hereby, and reference to the Trust,
when applicable to one or more Series, refers to that Series."
All other references in the Trust Instrument to Mitchell
Hutchins Institutional Series are changed to Mitchell Hutchins
LIR Money Series.
and be it further
RESOLVED, that pursuant to Section 1 of Article IV of the
Trust's Trust Instrument, there are hereby established and designated
four new series of shares of beneficial interest in the Trust, each
having the rights and privileges specified in the Trust's Trust
Instrument, to be known as LIR Cash Reserves Fund, LIR Liquid Assets
Fund; LIR Premier Money Market Fund and LIR Premier Tax-Free Money
Market Fund, and be it further
<PAGE>
RESOLVED, that Schedule A of the Trust's Declaration of Trust
be, and hereby is, amended and restated to reflect the name change of
the Series and the establishment of the new series.
Dated: August 10, 1999 By: /s/ Dianne E. O'Donnell
-----------------------------------------
Dianne E. O'Donnell
Vice President and Secretary
Mitchell Hutchins Series Trust
Subscribed and sworn before me this 10th day of August, 1999:
/s/ Cristina Paradiso
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Cristina Paradiso
Notary Public State of New York
Qual. N.Y. Cty
No. 01PA6017191
Comm. Exp. 12/07/2000
2
<PAGE>
SCHEDULE A TO DECLARATION OF TRUST OF
MITCHELL HUTCHINS LIR MONEY SERIES
(AS AMENDED AND RESTATED JULY 28, 1999)
Series of the Trust
LIR Cash Reserves Fund
LIR Liquid Assets Fund
LIR Premier Money Market Fund
LIR Premier Tax-Free Money Market Fund
Mitchell Hutchins LIR Select Money Fund
Classes of Shares of Mitchell Hutchins LIR Select Money Fund
An unlimited number of shares of beneficial interest have been established by
the Board as Institutional shares and Financial Intermediary shares of Mitchell
Hutchins LIR Select Money Fund. The Institutional shares and Financial
Intermediary shares represent interests in the assets of only that Series and
have the same preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of shares, except as provided in the Trust's Trust
Instrument.
<PAGE>
Exhibit No. 4
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of July 31, 1998 between MITCHELL HUTCHINS
INSTITUTIONAL SERIES, a Delaware business trust ("Trust"), and MITCHELL HUTCHINS
ASSET MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered
as a broker-dealer under the Securities Exchange Act of 1934, as amended ("1934
Act"), and as an investment adviser under the Investment Advisers Act of 1940,
as amended.
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company, and
intends to offer for public sale distinct series of shares of beneficial
interest ("Series"), each corresponding to a distinct portfolio; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment
adviser and administrator to furnish certain administrative, investment advisory
and portfolio management services to the Trust and each Series as now exists and
as hereafter may be established (provided that the Board of Trustees ("Board")
approves the applicability of this Contract to such subsequent Series), and
Mitchell Hutchins is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints Mitchell Hutchins as
investment adviser and administrator of the Trust and each Series for the period
and on the terms set forth in this Contract. Mitchell Hutchins accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Investment Adviser.
(a) Subject to the supervision of the Board, Mitchell Hutchins will
provide a continuous investment program for each Series, including investment
research and management with respect to all securities and investments and cash
equivalents in each Series. Mitchell Hutchins will determine from time to time
what securities and other investments will be purchased, retained or sold by
each Series.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it
will attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of any Series, Mitchell Hutchins may, in its
discretion, use brokers who provide the Series with research, analysis, advice
and similar services to execute portfolio transactions on behalf of the Series,
and Mitchell Hutchins may pay to those brokers in return for brokerage and
research services a higher commission than may be charged by other brokers,
subject to Mitchell Hutchins' determining in good faith that such commission is
reasonable in terms either of the particular transaction or of the 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
<PAGE>
long term. In no instance will portfolio securities be purchased from or sold to
Mitchell Hutchins, or any affiliated person thereof, except in accordance with
the federal securities laws and the rules and regulations thereunder. Whenever
Mitchell Hutchins simultaneously places orders to purchase or sell the same
security on behalf of a Series and one or more other accounts advised by
Mitchell Hutchins, such orders will be allocated as to price and amount among
all such accounts in a manner believed to be equitable to each account. The
Trust recognizes that in some cases this procedure may adversely affect the
results obtained for the Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series, and will
furnish the Board with such periodic and special reports as the Board reasonably
may request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Mitchell Hutchins hereby agrees that all records which it maintains for the
Trust are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Trust and which are required to be maintained by Rule 31a-1 under the 1940
Act and further agrees to surrender promptly to the Trust any records which it
maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset
value and the net income of each Series as described in the currently effective
registration statement of the Trust under the Securities Act of 1933, as
amended, and the 1940 Act and any supplements thereto ("Registration Statement")
or as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or
person associated with Mitchell Hutchins which is a member of a national
securities exchange to effect any transaction on such exchange for the account
of any Series, which transaction is permitted by Section 11(a) of the 1934 Act,
and the Trust hereby consents to the retention of compensation by Mitchell
Hutchins or any person or entity associated with Mitchell Hutchins.
3. Duties as Administrator. Mitchell Hutchins will administer the
affairs of the Trust and each Series subject to the supervision of the Board and
the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of
the Trust and each Series, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Trust and
each Series.
(b) Mitchell Hutchins will provide the Trust and each Series with such
corporate, administrative and clerical personnel (including officers of the
Trust) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Trust and
each Series.
(c) Mitchell Hutchins will arrange for the periodic preparation,
updating, filing and dissemination (as applicable) of the Trust's Registration
Statement, proxy material, tax returns and required reports to each Series'
shareholders and the Securities and Exchange Commission and other appropriate
federal or state regulatory authorities.
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<PAGE>
(d) Mitchell Hutchins will provide the Trust and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. Further Duties. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Trust Instrument,
By-Laws and Registration Statement of the Trust and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
5. Delegation of Mitchell Hutchins' Duties as Investment Adviser and
Administrator. With respect to any or all Series, Mitchell Hutchins may enter
into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
a sub-adviser or sub-administrator in which Mitchell Hutchins delegates to such
sub-adviser or sub-administrator any or all its duties specified in Paragraphs 2
and 3 of this Contract, provided that each Sub-Advisory or Sub-Administration
Contract imposes on the sub-adviser or sub-administrator bound thereby all
applicable duties and conditions to which Mitchell Hutchins is subject by
Paragraphs 2, 3 and 4 of this Contract, and further provided that each
Sub-Advisory or Sub-Administration Contract meets all requirements of the 1940
Act and rules thereunder.
6. Services Not Exclusive. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a Trustee, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
7. Expenses.
(a) Mitchell Hutchins will bear all expenses incurred in the operation
of each Series to which this Contract is applicable, including the Series'
allocable share of the expenses of the Trust, other than (i) the investment and
advisory fee payable under this Contract, (ii) the fees payable pursuant to any
Shareholder Service Plan adopted by the Trust with respect to the Series or a
class of shares of the Series, (iii) fees and expenses of the Independent
Trustees (defined in paragraph 10(a) below), including counsel fees of the
Independent Trustees, (iv) interest, taxes and the cost (including brokerage
commissions and other transaction costs, if any) of securities purchased or sold
by the Series and any losses incurred in connection therewith and (v)
extraordinary expenses (such as costs of litigation to which the Trust or a
Series is a party and of indemnifying officers and Trustees of the Trust), which
will be borne by the Trust or Series, as applicable.
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<PAGE>
(b) The expenses to be borne by Mitchell Hutchins include the following
(or each Series' proportionate share of the following): (i) expenses of
organizing the Trust and the Series; (ii) filing fees and expenses relating to
the registration and qualification of the Series' shares and the Trust under
federal and/or state securities laws and maintaining such registration and
qualifications; (iii) fees and salaries payable to the Trust's Trustees and
officers; (iv) all expenses incurred in connection with the services of Trustees
other than the Independent Trustees, including travel expenses; (v) costs of any
liability, uncollectible items of deposit and other insurance and fidelity
bonds; (vi) legal, accounting and auditing expenses, other than the legal fees
of special counsel for the Independent Trustees; (vii) charges of custodians,
transfer agents and other agents (including any lending agent); (viii) costs of
preparing share certificates; (ix) expenses of setting in type and printing
prospectuses and supplements thereto, statements of additional information and
supplements thereto, reports and proxy materials for existing shareholders; (x)
costs of mailing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials to existing
shareholders; (xi) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (xii) the cost
of mailing and tabulating proxies and costs of meetings of shareholders, the
Board and any committees thereof; (xii) the cost of investment company
literature and other publications provided by the Trust to its Trustees and
officers; (xiii) costs of mailing, stationery and communications equipment;
(xiv) expenses incident to any dividend, withdrawal or redemption options; (xv)
charges and expenses of any outside pricing service used to value portfolio
securities; and (xvi) interest on borrowings of the Fund.
(c) The payment or assumption by Mitchell Hutchins of any expenses of
the Trust or a Series that Mitchell Hutchins is not required by this Contract to
pay or assume shall not obligate Mitchell Hutchins to pay or assume the same or
any similar expense of the Trust or a Series on any subsequent occasion.
8. Compensation.
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to the Trust's existing Series, Mitchell Hutchins LIR
Select Money Fund, the Trust will pay to Mitchell Hutchins a fee, computed daily
and paid monthly, at an annual rate of 0.18% of such Series' average daily net
assets less that Series' allocable share of the accrued fees and expenses of the
Independent Trustees (including counsel fees of the Independent Trustees).
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any Series hereafter established and for which the
Board approves the applicability of this Contract, the Trust will pay to
Mitchell Hutchins from the assets of such Series a fee in an amount to be agreed
upon in a written fee agreement ("Fee Agreement") executed by the Trust on
behalf of such Series and by Mitchell Hutchins. All such Fee Agreements shall
provide that they are subject to all terms and conditions of this Contract.
(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.
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<PAGE>
(d) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective day to the end of the month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
9. Limitation of Liability of Mitchell Hutchins. Mitchell Hutchins and
its delegates, including any Sub-Adviser or Sub-Administrator to any Series or
the Trust, shall not be liable for any error of judgment or mistake of law or
for any loss suffered by any Series, the Trust or any of its shareholders, in
connection with the matters to which this Contract relates, except to the extent
that such a loss results from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract. Any person, even though also an
officer, director, employee, or agent of Mitchell Hutchins, who may be or become
an officer, Trustee, employee or agent of the Trust shall be deemed, when
rendering services to any Series or the Trust or acting with respect to any
business of such Series or the Trust, to be rendering such service to or acting
solely for the Series or the Trust and not as an officer, director, employee, or
agent or one under the control or direction of Mitchell Hutchins even though
paid by it.
10. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove
written provided that, with respect to any Series, this Contract shall not take
effect unless it has first been approved (i) by a vote of a majority of those
Trustees of the Trust who are not parties to this Contract or interested persons
of any such party ("Independent Trustees") cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by vote of a majority of
that Series' outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or, with respect to any given Series, by vote of a majority of the
outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the board or by a vote of a majority of the outstanding voting
securities of such Series on sixty days' written notice to Mitchell Hutchins or
by Mitchell Hutchins at any time, without the payment of any penalty, on sixty
days' written notice to the Trust. Termination of this Contract with respect to
any given Series shall in no way affect the continued validity of this Contract
or the performance thereunder with respect to any other Series. This Contract
will automatically terminate in the event of its assignment.
11. Limitation of Liability of the Trustees, Officers and Shareholders
of the Trust. The Trustees and officers of the Trust and the shareholders of any
Series shall not be liable for any
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<PAGE>
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, officers or shareholders.
12. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract as to any
given Series shall be effective until approved by vote of a majority of such
Series' outstanding voting securities.
13. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Delaware, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act. To the extent that
the applicable laws of the State of Delaware conflict with the applicable
provisions of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities", "affiliated person",
"interested person", "assignment", "broker", "investment adviser", "national
securities exchange", "net assets", "prospectus", "sale", "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission. Where the effect of a requirement of the
1940 Act reflected in any provision of this Contract is relaxed by a rule,
regulation, order or other action of the Securities and Exchange Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation, order or other action.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers and delivered as of the day and year first above
written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/ Scott Griff By: /s/ Keith A. Weller
- --------------------------- --------------------------
First Vice President First Vice President
Attest: MITCHELL HUTCHINS INSTITUTIONAL SERIES
/s/ Evelyn Chieffo By: /s/ Dianne E. O'Donnell
- --------------------------- --------------------------
Assistant Secretary Vice President and Secretary
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<PAGE>
Exhibit No. 5
MITCHELL HUTCHINS INSTITUTIONAL SERIES
DISTRIBUTION CONTRACT
CONTRACT made as of July 31, 1998 between MITCHELL HUTCHINS
INSTITUTIONAL SERIES, a Delaware business trust ("Fund"), and PAINEWEBBER
INCORPORATED, a Delaware corporation ("PaineWebber").
WHEREAS the Fund is registered under the Investment Company Act of
l940, as amended ("l940 Act"), as an open-end management investment company and
currently has one distinct series of shares of beneficial interest ("Series"),
which corresponds to a distinct portfolio and has been designated as Mitchell
Hutchins LIR Select Money Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of the above-referenced Series
as Institutional shares and Financial Intermediary shares ("Shares"); and
WHEREAS the Fund desires to retain PaineWebber as principal distributor
in connection with the offering and sale of the Shares of the above-referenced
Series and of such other Series as may hereafter be designated by the Board and
have Shares established; and
WHEREAS PaineWebber is willing to act as principal distributor of the
Shares of each such Series on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PaineWebber as its exclusive
agent to be the principal distributor to sell and to arrange for the sale of the
Shares on the terms and for the period set forth in this Contract. PaineWebber
hereby accepts such appointment and agrees to act hereunder. It is understood,
however, that this appointment does not preclude sales of the Shares directly
through the Fund's transfer agent in the manner set forth in the Registration
Statement. As used in this Contract, the term "Registration Statement" shall
mean the currently effective registration statement of the Fund, and any
supplements thereto, under the Securities Act of 1933, as amended ("1933 Act"),
and the 1940 Act.
2. Services and Duties of PaineWebber.
(a) PaineWebber agrees to sell the Shares on a best efforts basis
from time to time during the term of this Contract as agent for the Fund and
upon the terms described in the Registration Statement.
(b) Upon the later of the date of this Contract or the initial
offering of the Shares by a Series, PaineWebber will hold itself available to
receive purchase orders, satisfactory to PaineWebber, for Shares of that Series
and will accept such orders on behalf of the Fund as of
<PAGE>
the time of receipt of such orders and promptly transmit such orders as are
accepted to the Fund's transfer agent. Purchase orders shall be deemed effective
at the time and in the manner set forth in the Registration Statement.
(c) PaineWebber in its discretion may enter into agreements to sell
Shares to such registered and qualified retail dealers as it may select. In
making agreements with such dealers, PaineWebber shall act only as principal and
not as agent for the Fund.
(d) The offering price of the Shares of each Series shall be the net
asset value per Share as next determined by the Fund following receipt of an
order at PaineWebber's principal office. The Fund shall promptly furnish
PaineWebber with a statement of each computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain number of
Shares.
(f) To facilitate redemption of Shares by shareholders directly or
through dealers, PaineWebber is authorized but not required on behalf of the
Fund to repurchase Shares presented to it by shareholders and dealers at the
price determined in accordance with, and in the manner set forth in, the
Registration Statement.
(g) PaineWebber shall have the right to use any list of shareholders
of the Fund or any other list of investors which it obtains in connection with
its provision of services under this Contract; provided, however, that
PaineWebber shall not sell or knowingly provide such list or lists to any
unaffiliated person.
3. Authorization to Enter into Exclusive Dealer Contracts and to
Delegate Duties as Distributor. With respect to the Shares of any or all Series,
PaineWebber may enter into an exclusive dealer agreement with any other
registered and qualified dealer with respect to sales of the Shares. In a
separate contract or as part of any such exclusive dealer agreement, PaineWebber
also may delegate to another registered and qualified dealer ("sub-distributor")
any or all of its duties specified in this Contract, provided that such separate
contract or exclusive dealer agreement imposes on the sub-distributor bound
thereby all applicable duties and conditions to which PaineWebber is subject
under this Contract, and further provided that such separate contract or
exclusive dealer agreement meets all requirements of the 1940 Act and rules
thereunder.
4. Services Not Exclusive. The services furnished by PaineWebber
hereunder are not to be deemed exclusive and PaineWebber shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of PaineWebber, who may also be a
trustee, officer or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar or a dissimilar nature.
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<PAGE>
5. Compensation and Reimbursement of Distribution Expenses. The Fund
shall have no obligation to compensate or reimburse PaineWebber for any services
performed by it hereunder.
6. Duties of the Fund.
(a) The Fund reserves the right at any time to withdraw offering
Shares of any or all Series, or any or all class or classes thereof, by written
notice to PaineWebber at its principal office.
(b) The Fund shall determine in its sole discretion whether
certificates shall be issued with respect to the Shares. If the Fund has
determined that certificates shall be issued, the Fund will not cause
certificates representing Shares to be issued unless so requested by
shareholders. If such request is transmitted by PaineWebber, the Fund will cause
certificates evidencing Shares to be issued in such names and denominations as
PaineWebber shall from time to time direct.
(c) The Fund shall keep PaineWebber fully informed of its affairs
and shall make available to PaineWebber copies of all information, financial
statements, and other papers which PaineWebber may reasonably request for use in
connection with the distribution of Shares, including, without limitation,
certified copies of any financial statements prepared for the Fund by its
independent public accountant and such reasonable number of copies of the most
current prospectus, statement of additional information, and annual and interim
reports of any Series as PaineWebber may request, and the Fund shall cooperate
fully in the efforts of PaineWebber to sell and arrange for the sale of the
Shares of the Series and in the performance of PaineWebber under this Contract.
(d) The Fund shall take, from time to time, all necessary action,
including payment of the related filing fee, as may be necessary to register the
Shares under the 1933 Act to the end that there will be available for sale such
number of Shares as PaineWebber may be expected to sell. The Fund agrees to
file, from time to time, such amendments, reports, and other documents as may be
necessary in order that there will be no untrue statement of a material fact in
the Registration Statement, nor any omission of a material fact which omission
would make the statements therein misleading.
(e) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of Shares of each Series for sale under
the securities laws of such states or other jurisdictions as PaineWebber and the
Fund may approve, and, if necessary or appropriate in connection therewith, to
qualify and maintain the qualification of the Fund as a broker or dealer in such
jurisdictions; provided that the Fund shall not be required to amend its Trust
Instrument or By-Laws to comply with the laws of any jurisdiction, to maintain
an office in any jurisdiction, to change the terms of the offering of the Shares
in any jurisdiction from the terms set forth in its Registration Statement, to
qualify as a foreign corporation in any jurisdiction, or to consent to service
of process in any jurisdiction other than with respect to claims arising out of
the offering of the Shares. PaineWebber shall furnish such information and other
material
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<PAGE>
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 PaineWebber pursuant to Paragraph 6(e) hereof, and
the costs and expenses payable to each such jurisdiction for continuing
qualification therein.
8. Expenses of PaineWebber. PaineWebber shall bear all costs and
expenses of (i) preparing, printing and distributing any materials not prepared
by the Fund and other materials used by PaineWebber in connection with the sale
of Shares under this Contract, including the additional cost of printing copies
of prospectuses, statements of additional information, and annual and interim
shareholder reports other than copies thereof required for distribution to
existing shareholders or for filing with any federal or state securities
authorities; (ii) any expenses of advertising incurred by PaineWebber in
connection with such offering; (iii) the expenses of registration or
qualification of PaineWebber as a broker or dealer under federal or state laws
and the expenses of continuing such registration or qualification; and (iv) all
compensation paid to PaineWebber's employees and others for selling Shares, and
all expenses of PaineWebber, its employees and others who engage in or support
the sale of Shares as may be incurred in connection with their sales efforts.
9. Indemnification.
(a) The Fund agrees to indemnify, defend and hold PaineWebber, its
officers and directors, and any person who controls PaineWebber within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which PaineWebber, its officers,
directors or any such controlling person may incur under the 1933 Act, or under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement or arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement or necessary to make the statements
therein not misleading, except insofar as such claims, demands, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information furnished in writing by PaineWebber to the Fund for use in the
Registration Statement; provided, however, that this indemnity agreement shall
not inure to the benefit of any person who is also an officer or trustee of the
Fund or who controls the Fund within the meaning of Section 15 of the 1933 Act,
unless a
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<PAGE>
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 PaineWebber
against any liability to the Fund or to the shareholders of any Series to which
PaineWebber would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations under this Contract. The Fund shall not be
liable to PaineWebber under this indemnity agreement with respect to any claim
made against PaineWebber or any person indemnified unless PaineWebber or other
such person shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon PaineWebber
or such other person (or after PaineWebber or the person shall have received
notice of service on any designated agent). However, failure to notify the Fund
of any claim shall not relieve the Fund from any liability which it may have to
PaineWebber or any person against whom such action is brought otherwise than on
account of this indemnity agreement. The Fund shall be entitled to participate
at its own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any claims subject to this indemnity agreement. If
the Fund elects to assume the defense of any such claim, the defense shall be
conducted by counsel chosen by the Fund and satisfactory to indemnified
defendants in the suit whose approval shall not be unreasonably withheld. In the
event that the Fund elects to assume the defense of any suit and retain counsel,
the indemnified defendants shall bear the fees and expenses of any additional
counsel retained by them. If the Fund does not elect to assume the defense of a
suit, it will reimburse the indemnified defendants for the reasonable fees and
expenses of any counsel retained by the indemnified defendants. The Fund agrees
to notify PaineWebber promptly of the commencement of any litigation or
proceedings against it or any of its officers or trustees in connection with the
issuance or sale of any of its Shares.
(b) PaineWebber agrees to indemnify, defend, and hold the Fund, its
officers and trustees, and any person who controls the Fund within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which the Fund, its trustees or officers, or
any such controlling person may incur under the 1933 Act or under common law or
otherwise arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by PaineWebber to
the Fund for use in the Registration Statement, arising out of or based upon any
alleged omission to state a material fact in connection with such information
required to be stated in the Registration Statement necessary to make such
information not misleading, or arising out of any agreement between PaineWebber
and any retail dealer, or arising out of any supplemental sales literature or
advertising used by PaineWebber in connection with its duties under this
Contract. PaineWebber shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if PaineWebber elects to assume the defense, the defense
shall be conducted by counsel chosen by PaineWebber and satisfactory to the
indemnified defendants whose approval shall not be unreasonably withheld. In the
event that PaineWebber elects to assume the defense of any suit and retain
counsel, the defendants in the suit shall bear the fees
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and expenses of any additional counsel retained by them. If PaineWebber does not
elect to assume the defense of any suit, it will reimburse the indemnified
defendants in the suit for the reasonable fees and expenses of any counsel
retained by them.
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 PaineWebber agrees that, in asserting any rights or claims
under this Contract, it shall look only to the assets and property of the Fund
or the particular Series in settlement of such right or claims, and not to such
trustees, officers or shareholders.
11. Services Provided to the Fund by Employees of PaineWebber. Any
person, even though also an officer, director, employee or agent of PaineWebber,
who may be or become an officer, trustee, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting in any business of the
Fund, to be rendering such services to or acting solely for the Fund and not as
an officer, director, employee or agent or one under the control or direction of
PaineWebber even though paid by PaineWebber.
12. Duration and Termination.
(a) This Contract shall become effective upon the date written
above, provided that, with respect to any Series, this Contract shall not take
effect with respect to a class of Shares of that Series unless such action has
first been approved by vote of a majority of the Board and by vote of a majority
of those trustees of the Fund who are not interested persons of the Fund, and
have no direct or indirect financial interest in this Contract or in any
agreements related thereto (all such Trustees collectively being referred to
herein as the "Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Contract
shall continue in effect for 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 PaineWebber
or by PaineWebber at any time, without the payment of any penalty, on sixty
days' written notice to the Fund or such Series. This Contract will
automatically terminate in the event of its assignment.
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(d) Termination of this Contract with respect to any given Series
or class of Shares of a Series shall in no way affect the continued validity of
this Contract or the performance thereunder with respect to any other Series or
class of Shares.
13. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
14. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the l940 Act, the latter shall control.
15. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient upon receipt in writing at the
other party's principal offices.
16. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meaning as such terms have in the l940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: MITCHELL HUTCHINS INSTITUTIONAL SERIES
/s/ Keith A. Weller By: /s/ Dianne E. O'Donnell
- --------------------------------------- -------------------------------
Vice President and Assistant Secretary Vice President and Secretary
ATTEST: PAINEWEBBER INCORPORATED
/s/ Dorothy F. Haughey By: /s/ Victoria Schonfeld
- ------------------------------------------- -----------------------------
Vice President and Secretary Senior Vice President
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Exhibit No. 7
CUSTODY AGREEMENT
Agreement made as of this 10th day of August, 1998, between MITCHELL
HUTCHINS INSTITUTIONAL SERIES, a Delaware business trust organized and existing
under the laws of the State of Delaware, having its principal office and place
of business at 1285 Avenue of the Americas, New York, New York 10019
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal office and
place of business at One Wall Street, New York, New York 10286 (hereinafter
called the "Custodian" when providing services pursuant to this agreement).
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund, duly
authorized by the Board of Trustees of the Fund to execute any Certificate,
instruction, notice or other instrument on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect
to Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is actually received by the Custodian and signed on behalf
of the Fund by any two Authorized Persons, and the term Certificate shall also
include Instructions.
<PAGE>
5. "Clearing Member" shall mean a registered broker-dealer which
is a clearing member under the rules of O.C.C. and a member of a national
securities exchange qualified to act as a custodian for an investment company,
or any broker-dealer reasonably believed by the Custodian to be such a clearing
member.
6. "Collateral Account" shall mean a segregated account 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.
7. "Composite Currency Unit" shall mean the European Currency Unit
or any other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded Option
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
Securities (excluding Futures Contracts) which are owned by the writer thereof
and subject to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of
any country or the European Currency Unit or the Euro.
10. "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.
11. "Financial Futures Contract" shall mean the firm commitment to
buy or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an Option with respect to a
Futures Contract.
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14. "FX Transaction" shall mean any transaction for the purchase
by one party of an agreed amount in one Currency against the sale by it to the
other party of an agreed amount in another Currency.
15. "Instructions" shall mean instructions communications transmitted
by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission signed by an Authorized Person and tested telex.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option, Stock
Index Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded Option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract
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Options entitling the holder, upon timely exercise and tender of the specified
underlying Securities, to sell such Securities to the writer thereof for the
exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
23. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund
listed on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of beneficial interest of the Fund,
each of which is, in the case of a Fund having Series, allocated to a particular
Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of cash
determined by reference to the difference between the exercise price and the
value of the index on the date of exercise.
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29. "UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and money at any time owned by the Fund during the
period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. (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. 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
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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.
(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
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instructed to the contrary by a Certificate actually received by the Custodian,
to accept, utilize and act in accordance with such confirmations as provided
in this Agreement with respect to such Series. All Securities are to be held or
disposed of by the Custodian for, and subject at all times to the instructions
of, the Fund pursuant to the terms of this Agreement. The Custodian shall
have no power or authority to assign, hypothecate, pledge or otherwise dispose
of any Securities except as provided by the terms of this Agreement, and
shall have the sole right to release and deliver Securities held pursuant to
this Agreement.
2. The Custodian shall establish and maintain separate accounts, in
the name of each Series, and shall credit to the separate account for each
Series all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be subject to
draft, orders, or charges of the Custodian pursuant to this Agreement and shall
be disbursed by the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address of
the person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses
and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day.
4. Except as otherwise provided in paragraph 7 of this Article and
in Article VIII, all Securities maintained by the Custodian hereunder, which are
issued or issuable only in bearer form, except such Securities as are maintained
indirectly through 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-
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Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian by itself,
or indirectly through the use of the Book-Entry System or the Depository with
respect to Securities maintained hereunder, shall with respect to all Securities
held for the Fund hereunder in accordance with preceding paragraph 4:
(a) promptly collect all income, dividends and distributions due
or payable;
(b) promptly give notice to the Fund and promptly present payment
and collect the amount payable upon such Securities which are called, but only
if either (i) the Custodian receives a written notice of such call, or (ii)
notice of such call appears in one or more of the publications listed in
Appendix C annexed hereto, which may be amended at any time by the Custodian
without the prior notification or consent of the Fund;
(c) promptly present for payment and collect the amount payable
upon all Securities which mature;
(d) promptly surrender Securities in temporary form for definitive
Securities;
(e) promptly execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder;
(g) deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted; and
(h) pursuant to Certificates to pay interest, taxes, management
fees or operating expenses (including, without limitation thereto, Board of
Trustees' fees and
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expenses, and fees for legal, accounting and auditing services), which
Certificates set forth the name and address of the person to whom payment is to
be made, state the purpose of such payment and designate the Series for whose
account the payment is to be made.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) promptly execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any Securities held by
the Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) promptly deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in exchange for other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any right, warrant or conversion privilege and
receive and hold hereunder specifically allocated to such Series any cash or
other Securities received in exchange;
(c) promptly deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold hereunder specifically allocated
to such Series such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such delivery;
(d) promptly make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as shall be
stated in such Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) promptly present for payment and collect the amount payable
upon Securities not described in preceding paragraph 5(b) of this Article which
may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such
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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.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other
than a purchase of an Option, a Futures Contract, or a Futures Contract Option,
the Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (i) the Series to
which such Securities are to be specifically allocated; (ii) the name of the
issuer and the title of the Securities; (iii) the number of shares or the
principal amount purchased and accrued interest, if any; (iv) the date of
purchase and settlement; (v) the purchase price per unit; (vi) the total amount
payable upon such purchase; (vii) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (viii) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or
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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.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate or
Oral Instructions, specifying with respect to each such sale: (i) the Series to
which such Securities were specifically allocated; (ii) the name of the issuer
and the title of the Security; (iii) the number of shares or principal amount
sold, and accrued interest, if any; (iv) the date of sale; (v) the sale price
per unit; (vi) the total amount payable to the Fund upon such sale; (vii) the
name of the broker through whom or the person to whom the sale was made, and the
name of the clearing broker, if any; and (viii) the name of the broker to whom
the Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Certificate
against payment of the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Custodian a Certificate specifying with respect to each
Option purchased: (a) the Series to which such Option is specifically allocated;
(b) the type of Option (put or call); (c) the name of the issuer and the title
and number of shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the number of Stock
Index Options purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing Member through
whom such Option was purchased; and (i) the name of the broker to whom payment
is to be made. The Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Custodian (or any duly appointed and registered nominee
of the Custodian) as custodian for the Fund, out of money held for the account
of the Series to which such Option is to be 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.
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2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) the Series to which
such Option was specifically allocated; (b) the type of Option (put or call);
(c) the name of the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options sold; (d) the date of sale;
(i) the sale price; (e) the date of settlement; (f) the total amount payable to
the Fund upon such sale; and (g) the name of the Clearing Member through whom
the sale was made. The Custodian shall consent to the delivery of the Option
sold by the Clearing Member which previously supplied the confirmation described
in preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the money held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Option was exercised.
The Custodian shall, upon receipt of the amount payable upon the exercise of the
Put Option, deliver or direct the Depository to deliver the Securities
specifically allocated to such Series, provided the same conforms to the amount
payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated;
(b) the type of Stock Index
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Option (put or call); (c) the number of Options being exercised; (d) the stock
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described
in the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series;
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and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the money held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among
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Clearing Members in Stock Index Options and make the deposits into the
Collateral Account specified in the Certificate, or (2) make the deposits into
the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to any Option purchased or written by the Fund
and described in this Article, the Custodian shall delete such Option from the
statements delivered to the
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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.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e) the
date the Futures Contract(s) was (were) entered into and the maturity date; (f)
whether the Fund is buying (going long) or selling (going short) on such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such Series; (h) the
name of the broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or commission, if
any, to be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make the
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment out
of the money specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security Account for
such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement 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
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cash settlement amount to be paid or received, and with respect to a Financial
Futures Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant to or from whom
payment or delivery is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Senior Security Account for such Series. The
Custodian shall make the payment or delivery specified in the Certificate, and
delete such Futures Contract from the statements delivered to the Fund pursuant
to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each
delivery of such a Certificate by the Fund shall constitute (x) a representation
and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized,
executed and delivered by the Fund and the futures commission merchant and
complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian
shall not be liable for the acts or omissions of any such futures commission
merchant.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (i) the Series to which such
Option is specifically allocated; (ii) the type of Futures Contract Option (put
or call); (iii) the type of Futures Contract and such other information as may
be necessary to identify the Futures Contract underlying the Futures Contract
Option purchased; (iv) the expiration date; (v) the exercise price; (vi) the
dates of purchase and settlement; (vii) the amount of premium to
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be paid by the Fund upon such purchase; (viii) the name of the broker or futures
commission merchant through whom such option was purchased; and (ix) the name of
the broker, or futures commission merchant, to whom payment is to be made. The
Custodian shall pay out of the money specifically allocated to such Series, the
total amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such sale: (a) the
Series to which such Futures Contract Option was specifically allocated; (i) the
type of Futures Contract Option (put or call); (ii) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (iii) the date of sale; (iv) the sale
price; (v) the date of settlement; (vi) the total amount payable to the Fund
upon such sale; and (vii) the name of the broker or futures commission merchant
through whom the sale was made. The Custodian shall consent to the cancellation
of the Futures Contract Option being closed against payment to the Custodian of
the total amount payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant
to paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the money and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund;
(g) the name of the broker or futures commission
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merchant through whom the premium is to be received; and (h) the amount of cash
and/or the amount and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon receipt of the
premium specified in the Certificate, make out of the money and Securities
specifically allocated to such Series the deposits into the Senior Security
Account, if any, as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund
and which is a put is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying such Futures Contract Option; (d)
the name of the broker or futures commission merchant through whom such Futures
Contract Option is exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in, the Senior Security Account for such Series, if
any. The Custodian shall, upon its receipt of the net total amount payable to
the Fund, if any, specified in the Certificate, make out of the money and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical
to a previously written Futures Contract Option described in this Article in
order to liquidate its position as a writer of such Futures Contract Option, the
Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to the Futures Contract Option
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being purchased: (a) the Series to which such Option is specifically allocated;
(b) that the transaction is a closing transaction; (c) the type of Futures
Contract and such other information as may be necessary to identify the Futures
Contract underlying the Futures Option Contract; (d) the exercise price; (e) the
premium to be paid by the Fund; (f) the expiration date; (g) the name of the
broker or futures commission merchant to whom the premium is to be paid; and (h)
the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account for such Series. The Custodian shall
effect the withdrawals from the Senior Security Account specified in the
Certificate. The withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each
delivery of such a Certificate by the Fund shall constitute (x) a representation
and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized,
executed and delivered by the Fund and the futures commission merchant and
complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian
shall not be liable for the acts or omissions of any such futures commission
merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the
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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.
2. In connection with the closing-out of any short sale, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
each such closing-out: (a) the Series for which such transaction is being made;
(b) the name of the issuer and the title of the Security; (c) the number of
shares or the principal amount, and accrued interest or dividends, if any,
required to effect such closing-out to be delivered to the broker; (d) the dates
of closing-out and settlement; (e) the purchase price per unit; (f) the net
total amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the money held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior Security
Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund 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
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to such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described
in preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the 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.
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2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions
with respect to Securities deposited in any Margin Account shall be dealt with
in accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest
in and to any property at any time held by the Custodian in any Collateral
Account described herein. In accordance with applicable law the Custodian may
enforce its lien and realize on any such property whenever the Custodian has
made payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by
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the Custodian. In the event the Custodian should realize on any such property
net proceeds which are less than the Custodian's obligations under any Put
Option guarantee letter or similar document or any receipt, such deficiency
shall be a debt owed the Custodian by the Fund within the scope of Article XIV
herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate specifying the then market value of the Securities described in
such statement. In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put Option guarantee
letter or similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution
of the Board of Trustees of the Fund, certified by the Secretary or any
Assistant Secretary, either (i) setting forth with respect to the Series
specified therein the date of the declaration of a dividend or distribution, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on
the payment date, or (ii) authorizing with respect to the Series specified
therein the declaration of dividends and distributions on a daily basis and
authorizing the Custodian to rely on Oral Instructions or a Certificate setting
forth the date of the declaration of such dividend or distribution, the date of
payment thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent on the payment date.
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<PAGE>
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay out of
the money held for the account of each Series the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and price;
and
(b) the amount of money to be received by the Custodian for the
sale of such Shares and specifically allocated to the separate account in the
name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of the money
held for the account of such Series, all original issue or other taxes required
to be paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth
the Series and number of Shares 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.
6. Notwithstanding the above provisions regarding the redemption of
any Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege
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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.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the money held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason 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.
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<PAGE>
2. 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
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.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund
or its agents in order for the Fund or its agents to transmit Instructions to
the Custodian (the "Software"), the Custodian grants to such Fund and its agents
a personal, nontransferable and nonexclusive license to use the Software solely
for the purpose of transmitting Instructions to, and receiving communications
from, the Custodian in connection with its account(s). The Fund shall use the
Software solely for its own internal and proper business purposes, and not in
the operation of a service bureau, and agrees not to sell,
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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.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.
3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases relating
solely to the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure (except as provided above) without the prior
written consent of the Custodian. Upon termination of this Agreement or the
Software license granted hereunder for any reason, the Fund shall return to the
Custodian all copies of the Information which are in its possession or under its
control or which the Fund distributed to third parties. The provisions of this
Article shall not affect the copyright status of any
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of the Information which may be copyrighted and shall apply to all Information
whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own expense,
the Software from time to time 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.
5. THE CUSTODIAN AND ITS MANUFACTURERS AND SUPPLIERS MAKE NO
WARRANTIES OR REPRESENTATIONS OF ANY KIND WITH REGARD TO THE SOFTWARE OR THE
METHOD(S) BY WHICH THE FUND MAY TRANSMIT INSTRUCTIONS TO THE CUSTODIAN, EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY
UNITED STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES
RESELL, DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY
FORM) IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE
FUND OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES
IN ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S.
LAWS PROHIBITED. The Fund hereby authorizes Custodian to report its name and
address to government agencies to which Custodian is required to provide such
information by law.
7. Where the method for transmitting Instructions by the Fund
involves an automatic systems acknowledgment by the Custodian of its receipt of
such Instructions, then in the absence of such acknowledgment the Custodian
shall not be liable for any failure to act pursuant to such Instructions, the
Fund may not claim that such Instructions were received by the Custodian, and
the Fund shall deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Custodian. The Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and authorizes the Custodian to act in
accordance with and rely upon Instructions received by it pursuant hereto,
provided, however, that upon notification from the Fund of a breach in security
or
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errors in the Software, the Custodian will follow such Instructions as the Fund
may provide and its authority to act upon Instructions received through the
Software shall be revoked until Custodian received a hard copy signed
Certificate.
(b) The Fund hereby represents, acknowledges and agrees that it is
fully informed of the protections and risks associated with the various methods
of transmitting Instructions to the Custodian.
9. The Fund hereby represents, warrants and covenants to the
Custodian that this Agreement has been duly approved by a resolution of its
Board of Trustees, and that its transmission of Instructions pursuant hereto
shall at all times comply with the Investment Company Act.
10. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.
11. Custodian will indemnify and hold harmless the Fund with respect
to any liability, damages, loss or claim incurred by or brought against Fund by
reason any claim or infringement against any patent, copyright, license or other
property right arising out or by reason of the Fund's use of the Software in the
form provided under this Section. Custodian at its own expense will defend such
action or claim brought against Fund to the extent that it is based on a claim
that the Software in the form provided by Custodian infringes any patents,
copyrights, license or other property right, provided that Custodian is provided
with reasonable written notice of such claim, provided that the Fund has not
settled, compromised or confessed any such claim without the Custodian's written
consent, in which event Custodian shall have no liability or obligation
hereunder, and provided Fund cooperates with and assists Custodian in the
defense of such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Custodian is enjoined from using the Software, or if Custodian believes that the
System is likely to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses procure the
right for the Fund to continue to use the Software, or (b), replace or modify
the Software so as to make it non-infringing, or (c) may discontinue the license
granted herein upon written notice to Customer.
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12. The Custodian agrees that it will, on behalf of itself and its
affiliates, agents, officers and employees, treat all information relating to
transactions affected by the Fund as confidential and not to be disclosed to any
person, other than the Fund and its other service providers or as may be
disclosed in the examination of any books or records by any person lawfully
entitled to examine the same, except as may be authorized by the Fund by way of
a Certificate. Notwithstanding the foregoing, Custodian may disclose any such
information to its counsel, its regulators, its auditors and to any other person
when it is advised by its counsel that it may be liable for a failure to do so.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Securities for which the primary market is
outside the United States ("Foreign Securities") and other assets, the foreign
banking institutions and foreign securities depositories and clearing agencies
designated on Schedule I hereto ("Foreign Sub-Custodians"). The Fund may
designate any additional foreign sub-custodian with which the Custodian has an
agreement for such entity to act as the Custodian's agent, as its sub-custodian
and any such additional foreign sub-custodian shall be deemed added to Schedule
I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the
employment of any one or more Foreign Sub-Custodians for maintaining custody of
the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from
Schedule I.
2. Each delivery of a Certificate to the Custodian in connection with
a transaction involving the use of a Foreign Sub-Custodian shall constitute a
representation and warranty by the Fund that its Board of Trustees, or its third
party foreign custody manager as defined in Rule 17f-5 under the Investment
Company Act of 1940, as amended, if any, has determined that use of such Foreign
Sub-Custodian satisfies the requirements of such Investment Company Act of 1940
and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of
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any Foreign Sub-Custodian insofar as such books and records relate to the
performance of such Foreign Sub-Custodian under its agreement with the Custodian
on behalf of the Fund.
5. Until the Fund has entered into a Delegation Agreement with the
Custodian pursuant to Rule 17f-5 (as amended on May 15, 1997) under the
Investment Company Act of 1940 or similar agreement, the Custodian shall furnish
annually to the Fund, as mutually agreed upon, information concerning the
Foreign Sub-Custodians employed by the Custodian. Such Information shall be
similar in kind and scope to that furnished to the Fund in connection with the
Fund's initial approval of such Foreign Sub-Custodian. The Custodian also agrees
to use reasonable and diligent efforts to enforce its rights under the relevant
Foreign Sub-Custodian Agreement.
6. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating to
any actions or omissions of any Foreign Sub-Custodian the sole responsibility
and liability of the Custodian shall be to take appropriate action at the Fund's
expense to recover such loss or damage from the Foreign Sub-Custodian. It is
expressly understood and agreed that the Custodian's sole responsibility and
liability shall be limited to amounts so recovered from the Foreign
Sub-Custodian.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund
shall promptly deliver to the Custodian a Certificate or Oral Instructions
specifying with respect to such FX Transaction: (i) the Series to which such FX
Transaction is specifically allocated; (b) the type and amount of Currency to be
purchased by the Fund; (c) the type and amount of Currency to be sold by the
Fund; (d) the date on which the
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Currency to be purchased is to be delivered; (e) the date on which the Currency
to be sold is to be delivered; and (f) the name of the person from whom or
through whom such currencies are to be purchased and sold. Unless otherwise
instructed by a Certificate or Oral Instructions, the Custodian shall deliver,
or shall instruct a Foreign Sub-Custodian to deliver, the Currency to be sold on
the date on which such delivery is to be made, as set forth in the Certificate,
and shall receive, or instruct a Foreign Sub-Custodian to receive, the Currency
to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day
as the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt and
delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such receipts and deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with
this Agreement may be entered with the Custodian, any office, branch or
subsidiary of The Bank of New York Company, Inc., or any Foreign Sub-Custodian
acting as principal or otherwise through customary banking channels. The Fund
may issue a standing Certificate with respect to FX Transactions but the
Custodian may establish rules or limitations concerning any foreign exchange
facility made available to the Fund. The Fund shall bear all risks of investing
in Securities or holding Currency. Without limiting the foregoing, the Fund
shall bear the risks that rules or procedures imposed by a Foreign Sub-Custodian
or foreign depositories, exchange controls, asset freezes or other laws, rules,
regulations or orders shall prohibit or impose burdens or costs on the transfer
to, by or for the account of the Fund of Securities or any cash held outside the
Fund's jurisdiction or denominated in Currency other than its home jurisdiction
or the conversion of cash from one Currency into another currency. The Custodian
shall not be obligated to substitute another Currency for a Currency (including
a Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its
duties hereunder, and except as hereinafter provided neither the Custodian nor
its nominee shall
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be liable for any loss or damage, including reasonable counsel fees, resulting
from its action or omission to act or otherwise, either hereunder or under any
Margin Account Agreement, except for any such loss or damage arising out of its
own negligence or willful misconduct. In no event shall the Custodian be liable
to the Fund or any third party for special, indirect or consequential damages or
lost profits or loss of business, arising under or in connection with this
Agreement, even if previously informed of the possibility of such damages and
regardless of the form of action. The Custodian may, with respect to questions
of law arising hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund (at the Fund's expense), or
of its own counsel (at its expense) and shall be fully protected with respect to
anything done or omitted by it in good faith in conformity with such advice or
opinion. The Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any Depository arising by
reason of any negligence or willful misconduct on the part of the Custodian or
any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold,
or written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any dividend by
the Fund;
(d) the legality of any borrowing by the Fund using Securities as
collateral;
(e) the legality of any loan of portfolio Securities, nor shall
the Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or held
by it at any time as a result of such loan of portfolio Securities of the Fund
is adequate collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or 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
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termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) the sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of Custodian's account at the Book-Entry System or the
Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities held in
the Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action, suit or proceeding in respect to any Securities held by the
Depository which in its reasonable opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all expense and liability
be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution by
the Transfer Agent of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are
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in default, or if payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a Certificate and (ii)
it shall be assured to its satisfaction of reimbursement of its costs and
expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and money at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (i) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (ii) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all reasonable out-of-pocket expenses and such compensation
as may be agreed upon in writing from time to time between the Custodian and the
Fund. The Custodian may charge such compensation as is agreed to in writing and
any expenses with respect to a Series incurred by the Custodian in the
performance of its duties pursuant to such agreement against any money
specifically allocated to such Series. Unless and until the Fund instructs the
Custodian by a Certificate to apportion any loss, damage, liability or expense
among the Series in a specified manner, the Custodian shall also be entitled to
charge against any money held by it for the account of a Series such Series' pro
rata share (based on such Series, net asset value at the time of the charge to
the aggregate net asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees, for which it shall
be entitled to reimbursement under the provisions of this Agreement. The
expenses for which the Custodian shall be entitled to reimbursement hereunder
shall include, but are not limited to, the expenses of sub-custodians and
foreign branches of the Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions actually received by the Custodian
hereinabove provided for. The Fund
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<PAGE>
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.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, including the
Fund's independent accountants shall have access to such books and records
during the Custodian's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by the Custodian to
the Fund or the Fund's authorized representative, and the Fund shall reimburse
the Custodian its reasonable expenses of providing such copies. Upon reasonable
request of the Fund, the Custodian shall provide in hard copy or on micro-film,
whichever the Custodian elects, any records included in any such delivery which
are maintained by the Custodian on a computer disc, or are similarly maintained,
and the Fund shall reimburse the Custodian for its reasonable expenses of
providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the Book-Entry
System, the Depository or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including
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reasonable attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.
16. Upon the occurrence of any event which causes or may cause any
loss, damage or expense to the Fund or a Series the Custodian shall exercise its
rights and remedies under the related agreement.
17. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not 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
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terminate, and the Custodian shall upon receipt of a notice of acceptance by the
successor custodian on that date deliver directly to the successor custodian all
Securities and money then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and money then owned by
the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book-Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this
Agreement upon the date specified in a written notice in the event of the
"Bankruptcy" of The Bank of New York. As used in this sub-paragraph, the term
"Bankruptcy" shall mean The Bank of New York's making a general assignment,
arrangement or composition with or for the benefit of its creditors, or
instituting or having instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or the entry of an order for relief under any
applicable bankruptcy law or any relief under any bankruptcy or insolvency law
or other similar law affecting creditors rights, or if a petition is presented
for the winding up or liquidation of the party or the resolution is passed for
its winding up or liquidation, or it seeks, or becomes subject to, the
appointment of an administrator, receiver, trustee, custodian or other similar
official for it or for all or substantially all of its assets or its taking any
action in furtherance of, or indicating its consent to approval of, or
acquiescence in any of the foregoing.
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Authorized Persons of the Fund under its seal, setting forth the names
and the signatures of the present Authorized Persons. The Fund agrees to furnish
to the Custodian a new Certificate in similar form in the event that any such
present Authorized Person ceases to be an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the Authorized Persons as set forth in the last delivered Certificate.
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<PAGE>
2. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its office at the address
for the Fund first above written, or at such other place as the Fund may from
time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund without the written
consent of the Custodian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of the Fund's Board of Trustees.
6. This Agreement and any account established thereunder shall be
construed in accordance with the laws of the State of New York without giving
effect to conflict of laws principles thereof. Each party hereby consents to the
jurisdiction of a state or federal court situated in New York City, New York in
connection with any dispute arising hereunder and hereby waives its right to
trial by jury.
7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
8. A copy of the Trust Instrument of the Fund is on file with the
Secretary of the State of Delaware, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund.
9. With respect to any obligation of the Fund, on behalf of any
Series, arising out of this Agreement, the Custodian shall look for payment or
satisfaction of such obligation solely to the assets and property of the Series
to which such obligation relates as though the Series had separately contracted
with the Custodian by separate written instrument with respect to each Series.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
MITCHELL HUTCHINS
INSTITUTIONAL SERIES
By: /s/ Dianne E. O'Donnell
---------------------------------------
Name: Dianne E. O'Donnell
Title: Secretary and Vice President
[SEAL]
Attest:
/s/ Keith A. Weller
- ---------------------------------------
Name: Keith A. Weller
Title: Vice President and
Assistant Secretary
THE BANK OF NEW YORK
[SEAL]
By: /s/ Stephen E. Grunston
---------------------------------------
Name: Stephen E. Grunston
Title: Vice President
Attest:
/s/
- ---------------------------------------
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<PAGE>
APPENDIX B
SERIES
Mitchell Hutchins LIR Select Money Fund
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<PAGE>
Exhibit No. 8(a)
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 3rd day of August, 1998 between
MITCHELL HUTCHINS INSTITUTIONAL SERIES (the "Fund"), a Delaware business trust
having its principal place of business at 1285 Avenue of the Americas, New York,
NY 10019 and FIRST DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts
corporation with principal offices at 4400 Computer Drive, Westboro,
Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund initially intends to offer Shares in that Portfolio
identified in the attached Exhibit 1, such Portfolio, together with all other
Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund, on behalf of the Portfolios, desires to appoint
FDISG as its transfer agent, dividend disbursing agent and agent in connection
with certain other activities and FDISG desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and FDISG agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give
Oral Instructions or Written Instructions on behalf of the Fund as
indicated in writing to FDISG from time to time.
(c) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Custodian" refers to any custodian or subcustodian of
securities and other
<PAGE>
property which the Fund may from time to time deposit, or cause to be
deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(f) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(g) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(h) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by FDISG from a person
reasonably believed by FDISG to be an Authorized Person;
(i) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio of
securities and other assets;
(j) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto, if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(k) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(l) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(m) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FDISG to be an Authorized
Person and actually received by FDISG. Written Instructions shall
include manually executed originals and authorized electronic
transmissions, including telefacsimile of a manually executed original
or other process.
Article 2 Appointment of FDISG.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
FDISG as transfer agent and dividend disbursing agent for Shares of each
respective Portfolio of the Fund and as shareholder servicing agent for the
Fund, and FDISG hereby accepts such appointments and agrees to perform the
duties hereinafter set forth. (As used herein, "shareholder servicing agent"
refers to the services contemplated by this Agreement and not to those described
in the Prospectus as being provided by financial intermediaries, such as banks
and savings associations, to the holders of the Fund's Financial Intermediary
shares.)
Article 3 Duties of FDISG.
2
<PAGE>
3.1 FDISG shall be responsible for:
(a) Administering and/or performing the customary services of
a transfer agent; acting as service agent in connection with dividend
and distribution functions; and performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of FDISG annexed hereto as Schedule A and
incorporated herein, and in accordance with the terms of the Prospectus
of the Fund on behalf of the applicable Portfolio, applicable law and
the procedures established from time to time between FDISG and the
Fund.
(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Portfolio which are authorized, based upon data provided
to it by the Fund, and issued and outstanding. FDISG shall provide the
Fund on a regular basis with the total number of Shares of each
Portfolio which are authorized and issued and outstanding and shall
have no obligation, when recording the issuance of Shares, to monitor
the issuance of such Shares or to take cognizance of any laws relating
to the issue or sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, FDISG shall be under no duty or obligation to inquire into,
and shall not be liable for: (i) the legality of the issuance or sale
of any Shares or the sufficiency of the amount to be received therefor;
(ii) the legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor; (iii) the legality of the declaration
of any dividend by the Board of Directors, or the legality of the
issuance of any Shares in payment of any dividend; or (iv) the legality
of any recapitalization or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to FDISG in writing those
transactions and assets to be treated as exempt from blue sky reporting for each
State and (ii) verify the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily activity for each
State. The responsibility of FDISG for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions subject to
blue sky compliance by the Fund and the reporting of such transactions to the
Fund as provided above.
3.3 In addition to the duties set forth herein, FDISG shall perform
such other duties and functions, and shall be paid such amounts therefor, as may
from time to time be agreed upon in writing between the Fund and FDISG.
3.4 FDISG shall cooperate with the Fund's independent public
accountants and shall take all reasonable actions in the performance of its
obligations under this Agreement to ensure that the necessary information is
made available to such accountants for the expression of their opinion, as
required by the Fund. The Fund agrees to reimburse FDISG for all reasonable out
of
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pocket expenses incurred by FDISG in connection with FDISG's compliance with
this Section 3.4.
3.5 In addition to performing the foregoing services, the Fund hereby
engages FDISG as its non-exclusive service provider with respect to the
Print/Mail Services as set forth in Schedule B for the fees also identified in
Schedule B. FDISG agrees to perform the services and its obligations subject to
the terms and conditions of this Agreement, recognizing that certain of such
communications with Shareholders will originate directly from PaineWebber and
not be subject to the charges set forth in Schedule B.
Article 4 Recordkeeping and Other Information.
4.1 FDISG shall create and maintain all records required of it pursuant
to its duties hereunder and as set forth in Schedule A in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the 1940 Act. Where applicable, such records shall be maintained by
FDISG for the periods and in the places required by Rule 31a-2 under the 1940
Act.
4.2 To the extent required by Section 31 of the 1940 Act, FDISG agrees
that all such records prepared or maintained by FDISG relating to the services
to be performed by FDISG hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such section, and
will be surrendered promptly to the Fund on and in accordance with the Fund's
request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, FDISG will endeavor to notify the Fund of such
request and secure Written Instructions as to the handling of such request.
FDISG reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to comply with such request.
Article 5 Fund Instructions.
5.1 FDISG will have no liability when acting upon Written or Oral
Instructions reasonably believed by FDISG to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. FDISG will also have no liability when processing Share
certificates which it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper countersignature of FDISG.
5.2 At any time, FDISG may request Written Instructions from the Fund
and may seek advice from legal counsel for the Fund, or its own legal counsel,
with respect to any matter arising in connection with this Agreement, and it
shall not be liable for any action taken or not taken or suffered by it in good
faith in accordance with such Written Instructions or in accordance with the
opinion of counsel for the Fund or for FDISG, except that FDISG remains liable
for any action taken or not taken by it which constitutes willful misfeasance,
bad faith or
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negligence by FDISG or its employees or the reckless disregard by FDISG or its
employees of its duties and obligations under this Agreement. Written
Instructions requested by FDISG will be provided by the Fund within a reasonable
period of time.
5.3 FDISG, its officers, agents or employees, shall accept Oral
Instructions or Written Instructions given to them by any person representing or
acting on behalf of the Fund only if said representative is an Authorized
Person. The Fund agrees that all Oral Instructions shall be followed within one
business day by confirming Written Instructions, and that the Fund's failure to
so confirm shall not impair in any respect FDISG's right to rely on Oral
Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate FDISG
for the performance of its obligations hereunder in accordance with the fees set
forth in the written Fee Schedule annexed hereto as Schedule B and incorporated
herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed separately
for, reasonable out-of-pocket expenses incurred by FDISG in the performance of
its duties hereunder. Out-of-pocket expenses shall include, but shall not be
limited to, the items specified in the written schedule of out-of-pocket charges
annexed hereto as Schedule C and incorporated herein. Schedule C may be modified
by written agreement between the parties. Unspecified out-of-pocket expenses
shall be limited to those out-of-pocket expenses reasonably incurred by FDISG in
the performance of its obligations hereunder and pre-approved by the Fund.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all fees
and out-of-pocket expenses within fifteen (15) days following the receipt of the
respective invoice.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule B a revised Fee Schedule executed and dated by the
parties hereto.
Article 7 Documents.
In connection with the appointment of FDISG, the Fund shall, on or
before the date this Agreement goes into effect, but in any case within a
reasonable period of time for FDISG to prepare to perform its duties hereunder,
deliver or caused to be delivered to FDISG the documents set forth in the
written schedule of Fund Documents annexed hereto as Schedule D.
Article 8 Transfer Agent System.
8.1 FDISG shall retain title to and ownership of any and all data
bases, computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by FDISG in connection with the services
provided by FDISG to the Fund herein (the "FDISG System") provided, however, it
is
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understood that the Fund shall retain ownership of all Shareholder records
and information maintained by FDISG on the FDISG System.
8.2 FDISG hereby grants to the Fund a limited license to the FDISG
System for the sole and limited purpose of having FDISG provide the services
contemplated hereunder and nothing contained in this Agreement shall be
construed or interpreted otherwise and such license shall immediately terminate
with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund, or any third party acting on behalf of the Fund is provided with direct
access to the FDISG System for either account inquiry or to transmit transaction
information, including but not limited to maintenance, exchanges, purchases and
redemptions, such direct access capability shall be limited to direct entry to
the FDISG System by means of on-line mainframe terminal entry or PC emulation of
such mainframe terminal entry and any other non-conforming method of
transmission of information to the FDISG System is strictly prohibited without
the prior written consent of FDISG.
8.4 In the event that the Fund, including any affiliate or agent of the
Fund, or any third party desires to transmit certain transaction instructions
directly to the FDISG System and produce reports associated with these
transactions from a remote location, FDISG agrees to make available its
proprietary Remote Trade Entry ("RTE") Software. The Fund's use of RTE shall be
in accordance with the terms of this Agreement. Any third party utilizing RTE
shall execute and be bound by the terms and conditions of the Remote Trade Entry
License Agreement attached hereto as Exhibit 1 or such other agreement that is
acceptable to both the Fund and FDISG. FDISG hereby acknowledges that
Shareholders which utilize RTE shall in no event be deemed to be agents of the
Fund.
Article 9 Representations and Warranties.
9.1 FDISG represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
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9.2 The Fund represents and warrants to FDISG that:
(a) it is duly organized, existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933,
as amended, and the 1940 Act on behalf of each of the Portfolios is
currently effective and will remain effective, and all appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
and
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable.
Article 10 Indemnification.
10.1 Except as set forth in Sections 10.2 and 10.3 below, FDISG shall
not be responsible for and the Fund on behalf of each Portfolio shall indemnify
and hold FDISG harmless from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), losses, damages, charges, payments and
liabilities of any sort or kind which may be asserted against FDISG or for which
FDISG may be held to be liable (a "Claim") arising out of or attributable to any
of the following:
(a) any actions of FDISG required to be taken pursuant to this
Agreement;
(b) FDISG's reasonable reliance on, or reasonable use of
information, data, records and documents (including but not limited to
magnetic tapes, computer printouts, hard copies and microfilm copies)
received by FDISG from the Fund, or any authorized third party acting
on behalf of the Fund in the performance of FDISG's duties and
obligations hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to
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<PAGE>
the offer or sale of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence
or misconduct or the breach of any representation or warranty of the
Fund made herein.
10.2 FDISG shall not be indemnified under Section 10.1 against any
liability (or any expense incidental to such liability) arising out of the
willful misfeasance, bad faith or negligence of FDISG or its employees or the
reckless disregard by FDISG or its employees of its duties and obligations under
this Agreement.
10.3 FDISG shall indemnify and hold the Fund, on behalf of each
Portfolio, harmless from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), losses, damages, charges, payments and
liabilities of any sort or kind which may be asserted against the Fund or for
which the Fund may be held to be liable (a "Claim") arising out of or
attributable to the willful misfeasance, bad faith or negligence of FDISG or its
employees or the reckless disregard by FDISG or its employees of it duties and
obligations under this Agreement.
10.4 In any case in which a party may be asked to indemnify or hold the
other party harmless, the party seeking indemnification ("Indemnified Party")
will notify the other party promptly after identifying any situation which it
believes presents or appears to present a claim for indemnification against the
other party, although the failure to do so shall not prevent recovery by the
Indemnified Party, and shall keep the other party advised with respect to all
developments concerning such situation. The party who may be required to
indemnify ("Indemnifying Party") shall have the option to defend the Indemnified
Party against any Claim which may be the subject of this indemnification and in
the event that the Indemnifying Party so elects, such defense shall be conducted
by counsel chosen by the Indemnifying Party and satisfactory to the Indemnified
Party, and thereupon the Indemnifying Party shall take over complete defense of
the Claim and the Indemnified Party shall sustain no further legal or other
expenses in respect of such Claim. The Indemnified Party will not confess any
Claim or make any compromise in any case in which the Indemnifying Party will be
asked to provide indemnification, except with the Indemnifying Party's prior
written consent. The obligations of the parties hereto under this Article 10
shall survive the termination of this Agreement.
10.5 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Indemnifying Party becomes aware of
the event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.6 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
the sole and exclusive remedy for
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claims or other actions or proceedings to which a party's indemnification
obligations pursuant to this Article 10 may apply.
Article 11 Standard of Care and Limitation of Liability
11.1 FDISG shall at all times act in good faith and agrees to use its
best efforts within commercially reasonable limits to ensure the accuracy of all
services performed under this Agreement, but assumes no responsibility for loss
or damage to the Fund unless said errors are caused by FDISG's own negligence,
bad faith, willful misconduct or that of its employees, or the reckless
disregard by FDISG or its employees of its duties and obligations under this
Agreement.
11.2 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.3 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
11.4 The members of the Board of Directors of the Fund and the
Shareholders of any Portfolio shall not be liable for any obligations of the
Fund or the Portfolios under this Agreement, and FDISG agrees, that in asserting
any rights or claims under this Agreement, it shall look only to the assets and
property of the Fund or the particular Portfolio in settlement of such right or
claims, and not to such members of the Board of Directors or Shareholders. FDISG
further agrees that it will look only to the assets and property of a particular
Portfolio in asserting any right or claims under this Agreement with respect to
services rendered with respect to that Portfolio and will not seek to obtain
settlement of such rights or claims from the assets of any other Portfolio of
the Fund.
Article 12 Consequential Damages.
12.1 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL EITHER PARTY TO THIS AGREEMENT, ITS AFFILIATES OR ANY OF ITS OR
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER
ANY THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE
THEORY TO THE OTHER CONTRACTING PARTY FOR LOST PROFITS, EXEMPLARY, PUNITIVE,
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY
EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE
FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of five (5) years (the "Initial Term").
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13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each
provided that it may be terminated by either party during a Renewal Term upon
written notice given at least sixty (60) days prior to termination.
13.3 In the event a termination notice is given by the Fund, it shall
be accompanied by a resolution of the Board of Directors, certified by the
Secretary of the Fund, designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Fund, FDISG will deliver
to such successor a certified list of shareholders of the Fund (with names and
addresses), and all other relevant books, records, correspondence and other Fund
records or data in the possession of FDISG, and FDISG will cooperate with the
Fund and any successor transfer agent or agents in the substitution process.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If FDISG is the Non-Defaulting Party, its termination of
this Agreement shall not constitute a waiver of any other rights or remedies of
FDISG with respect to services performed prior to such termination or rights of
FDISG to be reimbursed for out-of-pocket expenses. In all cases, termination by
the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting
Party of any other rights it might have under this Agreement or otherwise
against the Defaulting Party.
Article 14 Additional Portfolios.
14.1 In the event that the Fund establishes one or more Portfolios in
addition to the Portfolio identified in Exhibit 1, with respect to which the
Fund desires to have FDISG render services as transfer agent under the terms
hereof, the Fund shall so notify FDISG in writing, and if FDISG agrees in
writing to provide such services, Exhibit 1 shall be amended to include such
additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and FDISG shall exercise at least the same degree of care, but not less than
reasonable care, to safeguard the confidentiality of the Confidential
Information of the other as it would exercise to protect its own confidential
information of a similar nature. The Fund and FDISG shall not duplicate, sell or
disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party, except as may be
required by applicable law or at the request of the Commission or other
governmental agency. The parties further agree that a breach of this
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Section 15.1 would irreparably damage the other party and accordingly agree that
each of them is entitled, without bond or other security, to an injunction or
injunctions to prevent breaches of this provision. The Fund and FDISG may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Fund and FDISG may also disclose the Confidential
Information to independent contractors, auditors, and professional advisors.
Notwithstanding the previous sentence, in no event shall either the Fund or
FDISG disclose the Confidential Information to any competitor of the other
without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, the
Fund's shareholders, sales estimates, business plans, and internal
performance results relating to the past, present or future business
activities of the Fund or FDISG, their respective subsidiaries and
affiliated companies (including, with respect to the Fund, its
investment adviser and principal underwriter) and the customers,
clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or FDISG
a competitive advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
Article 16 Security and Disaster Recovery
16.1 FDISG represents and warrants that, to the best of its knowledge,
the various procedures and systems which FDISG has implemented with regard to
the safeguarding from loss or damage attributable to fire, theft or any other
cause (including provision for 24 hours a day restricted access) of the Fund's
blank checks, certificates, records and other data and FDISG's equipment,
facilities and other property used in the performance of its obligations
hereunder are adequate, and that it will make such changes therein from time to
time as in its
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judgment are required for the secure performance of its obligations hereunder.
FDISG shall review such systems and procedures on a periodic basis and the
Fund shall have access to review these systems and procedures.
16.2 FDISG, or an affiliate of FDISG, shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provision for periodic backup of computer files and data with respect
to the Fund and emergency use of electronic data processing equipment. In the
event of equipment failures, FDISG shall, at no additional expense to the Fund,
take all reasonable steps to minimize service interruptions. FDISG shall have no
liability with respect to the loss of data or service interruptions caused by
equipment failures, provided such loss or interruption is not caused by the
negligence of FDISG and provided further that FDISG has complied with the
provisions of this Article 16.
Article 17 Force Majeure.
17.1 Subject to the provisions of Article 16, no party shall be liable
for any default or delay in the performance of its obligations under this
Agreement if and to the extent such default or delay is caused, directly or
indirectly, by (i) fire, flood, elements of nature or other acts of God; (ii)
any outbreak or escalation of hostilities, war, riots or civil disorders in any
country, (iii) any act or omission of the other party or any governmental
authority; (iv) any labor disputes (whether or not the employees' demands are
reasonable or within the party's power to satisfy); or (v) nonperformance by a
third party or any similar cause beyond the reasonable control of such party,
including without limitation, failures or fluctuations in telecommunications or
other equipment. In any such event, the non-performing party shall be excused
from any further performance and observance of the obligations so affected only
for as long as such circumstances prevail and such party continues to use
commercially reasonable efforts to recommence performance or observance as soon
as practicable.
Article 18 Assignment and Subcontracting.
18.1 This Agreement, its benefits and obligations shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned or otherwise
transferred by either party hereto, without the prior written consent of the
other party, which consent shall not be unreasonably withheld; provided,
however, that FDISG may, in its sole discretion, assign all its right, title and
interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. FDISG may, in its sole
discretion, engage subcontractors to perform any of the obligations contained in
this Agreement to be performed by FDISG; however, such subcontractors shall be
bound by the terms of this Agreement as though an original party hereto, and
FDISG shall be responsible for the performance of such subcontractors under the
terms and conditions of this Agreement as if such performance were its own,
unless such subcontractors are PaineWebber Incorporated, Mitchell Hutchins Asset
Management, Inc. or an affiliated person of either.
18.2 Notwithstanding Section 18.1 above, FDISG may assign its rights
and delegate its
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duties under the Agreement to PaineWebber Incorporated or Mitchell Hutchins
Asset Management Inc., or an affiliated person of either, upon mutual prior
written acknowledgment of such assignment by FDISG and the Fund.
Article 19 Arbitration.
19.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
National Association of Securities Dealers in New York, New York in accordance
with its applicable rules, except that the Federal Rules of Evidence and the
Federal Rules of Civil Procedure with respect to the discovery process shall
apply.
19.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
19.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 19.
Article 20 Notice.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or FDISG, shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To the Fund:
Mitchell Hutchins Institutional Series
1285 Avenue of the Americas
New York, NY 10019
Attention: Colleen McDermott
with copies to: Dianne E. O'Donnell, Secretary
To FDISG:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to FDISG's General Counsel
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Article 21 Governing Law/Venue.
The laws of the State of New York, excluding the laws on conflicts of
laws, shall govern the interpretation, validity, and enforcement of this
Agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in New York City, and FDISG and
the Fund hereby submit themselves to the exclusive jurisdiction of those courts.
Article 22 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 23 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 24 Publicity.
Neither FDISG nor the Fund shall release or publish news releases,
public announcements, advertising or other publicity relating to this Agreement
or to the transactions contemplated by it without the prior review and written
approval of the other party; provided, however, that either party may make such
disclosures as are required by legal, accounting or regulatory requirements.
Article 25 Relationship of Parties.
25.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
25.2 Upon reasonable notice by the Fund, FDISG shall make available
during regular business hours such of its facilities and premises employed in
connection with the performance of its duties under this Agreement for
reasonable visitation by the Fund, or any person retained by the Fund, as may be
necessary for the Fund to evaluate the quality of the services performed by
FDISG pursuant hereto.
Article 26 Entire Agreement; Severability.
26.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
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<PAGE>
effective as against FDISG unless said writing is executed by a Senior Vice
President, Executive Vice President, or President of FDISG. A party's waiver of
a breach of any term or condition in the Agreement shall not be deemed a waiver
of any subsequent breach of the same or another term or condition.
26.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
MITCHELL HUTCHINS INSTITUTIONAL SERIES
By: /s/ Dianne E. O'Donnell
------------------------------------
Title: Secretary and Vice President
---------------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ Gerald G. Kokos
------------------------------------
Title: Executive Vice President
---------------------------------
15
<PAGE>
Exhibit 1
LIST OF PORTFOLIOS
Mitchell Hutchins LIR Select Money Fund
16
<PAGE>
Schedule A
DUTIES OF FDISG
1. Shareholder Information. FDISG shall maintain a record of the number
of Shares held by each Shareholder of record which shall include name, address
and taxpayer identification number. FDISG has been informed by the Fund that it
has not and does not intend to issue share certificates.
2. Shareholder Services. FDISG shall respond as appropriate to all
inquiries and communications from Shareholders relating to Shareholder accounts
with respect to its duties hereunder and as may be from time to time mutually
agreed upon between FDISG and the Fund. As part of these services, FDISG shall
provide toll-free lines (at the expense of the Fund) for direct shareholder use,
plus customer liaison staff for on-line inquiry response.
3. Mailing Communications to Shareholders; Proxy Materials. FDISG will
address and mail to Shareholders whose Fund accounts are not linked to a
PaineWebber account (each a "Fund-only account"), all reports to such
Shareholders, and dividend and distribution notices. At the expense of the Fund,
FDISG shall provide such Shareholder account information as is reasonably
necessary to facilitate the mailing and tabulation of proxy material for the
Fund's meetings of Shareholders. FDISG understands that the Fund normally
retains the services of other service providers in connection with proxy
solicitations. However, in connection with meetings of Shareholders, if
requested in advance by the Fund, FDISG will prepare Shareholder lists, mail and
certify as to the mailing of proxy materials, process and tabulate returned
proxy cards, report on proxies voted prior to meetings, act as inspector of
election at meetings and certify Shares voted at meetings. If the Fund retains a
third party in connection with a proxy solicitation, FDISG agrees to take
reasonable steps to facilitate such party's activities.
4. Sales of Shares
(a) FDISG shall not be required to issue any Shares of the
Fund where it has received a Written Instruction from the Fund or official
notice from any appropriate authority that the sale of the Shares of the Fund
has been suspended or discontinued. The existence of such Written Instructions
or such official notice shall be conclusive evidence of the right of FDISG to
rely on such Written Instructions or official notice. FDISG recognizes that the
Fund and PaineWebber reserve the right to reject any purchase order and to
suspend the offering of Fund Shares for a period of time as provided in the
Prospectus; the Fund will provide FDISG with Written Instructions in connection
with the exercise of this right.
(b) In the event that any wire of Federal Funds for the
payment of money in connection with the sale of Shares is not received or voided
or reversed for any reason, FDISG will endeavor to: (I) give prompt notice of
such occurrence to the Fund or its designee; (ii) place a stop transfer order
against all Shares issued as a result of such order, if any; and (iii) take such
actions as FDISG may from time to time deem appropriate.
17
<PAGE>
(c) FDISG shall maintain necessary communication with the
Fund's custodian in order to report daily sales activity and transmit sales
proceeds to such custodian on a daily basis for those days on which the Fund is
open for business.
5. Transfer and Repurchase
(a) FDISG shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in the
Fund's Prospectus.
(b) FDISG will transfer or repurchase Shares upon receipt of
Oral or Written Instructions accompanied by such documents as FDISG reasonably
may deem necessary or otherwise pursuant to the Prospectus.
(c) FDISG reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the instructions
is valid and genuine. FDISG also reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the requested transfer or
repurchase is legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers or repurchases which FDISG, in its
good judgment, deems improper or unauthorized, or until it is reasonably
satisfied that there is no basis to any claims adverse to such transfer or
repurchase.
(d) When Shares are redeemed, FDISG shall, upon receipt of the
instructions and documents in proper form, deliver to the Custodian and the Fund
or its designee a notification setting forth the number of Shares to be
repurchased. Such repurchased shares shall be reflected on appropriate accounts
maintained by FDISG reflecting outstanding Shares of the Fund and Shares
attributed to individual accounts.
(e) FDISG shall, upon receipt of the monies provided to it by
the Custodian for the repurchase of Shares, pay such monies as are received from
the Custodian, all in accordance with the procedures described in the written
instruction received by FDISG from the Fund.
(f) FDISG shall not process or effect any repurchase with
respect to Shares of the Fund after receipt by FDISG or its agent of
notification of the suspension of the determination of the net asset value of
the Fund.
6. Dividends
(a) Upon the declaration of each dividend and each capital
gains distribution by the Board of Directors of the Fund with respect to Shares
of the Fund, the Fund shall furnish or cause to be furnished to FDISG Written
Instructions setting forth the date of the declaration of such dividend or
distribution, the ex-dividend date, the date of payment thereof, the record date
as of which Shareholders entitled to payment shall be determined, the amount
payable per Share to the Shareholders of record as of that date, the total
amount payable on the payment date and whether such dividend or distribution is
to be paid in Shares at net asset value.
18
<PAGE>
(b) On or before the payment date specified in such resolution
of the Board of Directors, the Fund will provide FDISG with sufficient cash to
make payment to the Shareholders of record as of such payment date.
(c) If FDISG does not receive sufficient cash from the Fund to
make total dividend and/or distribution payments to all Shareholders of the Fund
as of the payable date, FDISG will, upon notifying the Fund, withhold payment to
all such Shareholders until sufficient cash is provided to FDISG.
7. Additional Services.
(a) Calculate Shareholder Servicing Fee payments and broker
trail commissions.
(b) Monitor and maintain all systems necessary to implement
and operate the multi-class distribution system, as described in the Prospectus,
provided, however, that such systems shall not be materially different from
those used by FDISG in connection with providing services to its other clients
utilizing a multi-class structure.
(c) Send duplicate confirmations and statements to brokers of
their clients' activity, whether executed through the broker-dealer or directly
with FDISG if requested by the Fund to do so with regard to Fund-only accounts
only.
8. In addition to and neither in lieu nor in contravention of the
services set forth above, FDISG shall: (i) perform all the customary services of
a transfer agent, registrar, dividend and distribution disbursing agent and
agent of the dividend reinvestment plan as described in the Fund's prospectus
and herein consistent with those requirements in effect as at the date of this
Agreement. The detailed definition, frequency, limitations and associated costs
(if any) set out in the attached fee schedule, include but are not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies (if requested by the Fund), tabulating proxies (if requested by
the Fund), mailing Shareholder reports to current Shareholders (unless the Fund
selects another service provider for this task and so informs FDISG),
withholding taxes on U.S. resident and non-resident alien accounts for "Fund-
only accounts" where applicable, preparing and filing U.S. Treasury Department
Forms 1099 and other appropriate forms required with respect to dividends and
distributions by federal authorities for all Fund-only account Shareholders.
If the Fund retains another service provider with respect to a Shareholder
mailing, FDISG agrees to take reasonable steps, at the expense of the Fund, to
facilitate such other service provider's activities, including providing
Shareholder account information.
19
<PAGE>
Exhibit No. 8(b)
MITCHELL HUTCHINS INSTITUTIONAL SERIES
FINANCIAL INTERMEDIARY SHARES
SHAREHOLDER SERVICES PLAN AND AGREEMENT
This Shareholder Services Plan and Agreement ("Plan") is adopted by
Mitchell Hutchins Institutional Series ("Trust"), a business trust organized
under the laws of the State of Delaware pursuant to a Trust Instrument dated
April 29, 1998, as amended from time to time, with respect to the Trust's
Financial Intermediary shares, a class of shares issued by the Trust's current
Series, Mitchell Hutchins LIR Select Money Fund, and such other series of the
Trust as may be established in the future with Financial Intermediary shares
(collectively, "Funds"), and is entered into by PaineWebber Incorporated
("PaineWebber") and the Trust, subject to the following terms and conditions:
Section 1. Service Arrangements.
PaineWebber, in respect of each Fund, may enter into a shareholder
service agreement ("Service Agreement"), substantially in the form attached
hereto as Appendix A, with each financial intermediary that purchases Financial
Intermediary shares. Each Service Agreement will require the financial
intermediary to provide support services to its customers ("Customers") who are
the beneficial owners of Financial Intermediary shares. Such services may
include, without limitation: (i) assisting Customers in changing dividend
options, account designations and addresses; (ii) aggregating and processing
purchase and redemption requests from Customers and placing net purchase and
redemption orders with PaineWebber; (iii) transmitting and receiving funds in
connection with Customer orders to purchase and redeem Financial Intermediary
shares; (iv) processing dividend payments on behalf of Customers; (v) providing
information periodically to Customers showing their position in Financial
Intermediary shares; (vi) arranging for bank wires; (vii) responding to Customer
inquiries regarding account status and history, the manner in which purchases
and redemptions of Financial Intermediary shares may be made and other matters;
(viii) providing sub-accounting with respect to Financial Intermediary shares
beneficially owned by Customers or the information to the Trust necessary for
sub-accounting; (ix) forwarding communications from the Trust (for example,
proxies, shareholder reports, annual and semiannual financial statements and
dividend, distribution and tax notices) to Customers; (x) providing the
necessary personnel and facilities to establish and maintain shareholder
accounts and records; and (xi) such other similar services as PaineWebber or a
Customer may reasonably request from time to time, to the extent the Financial
Intermediary is permitted to perform such services under Federal and state
statutes, rules and regulations.
Section 2. Compensation.
Each Fund will pay PaineWebber an annual fee which PaineWebber will pay
over to each financial intermediary (the "Service Payment") for the services
provided by the financial intermediary. The Service Payment will be calculated
daily and paid monthly by the Trust at the annual rate of 0.25% of the average
daily net asset value of the Financial Intermediary shares held by a financial
intermediary that has entered into a Service Agreement with PaineWebber on
<PAGE>
behalf of the financial intermediary's Customers. All expenses incurred by a
Fund in respect of Service Payments shall be borne entirely by the holders of
Financial Intermediary shares of that Fund.
Section 3. Approval by Board of Trustees.
This Plan will not take effect until approved by a majority of both (i)
the full Board of Trustees of the Trust ("Board"), and (ii) those Trustees who
are not "interested persons" of the Trust (as defined in the Investment Company
Act of 1940, as amended ("1940 Act")) and who have no direct or indirect
financial interest in the operation of this Plan (the "Disinterested Trustees").
Section 4. Continuance of the Plan.
The Plan will continue in effect from year to year so long as such
continuance is specifically approved annually by the Board in accordance with
the procedure specified in Section 3 above.
Section 5. Termination.
The Plan may be terminated at any time, without penalty, by vote of a
majority of the Disinterested Trustees. The Plan will terminate automatically in
the event of its assignment, as defined in the 1940 Act.
Section 6. Amendment.
The Plan may be amended from time to time by the Board, provided,
however, that all material amendments of the Plan must be approved in accordance
with the procedures specified in Section 3 above.
Section 7. Shareholder Voting.
To the extent that matters pertaining to the Plan or to the Financial
Intermediary shares are submitted to shareholders for approval, only the holders
of Financial Intermediary shares shall be entitled to vote thereon.
Section 8. Reports to the Trustees and Records.
(a) While the Plan is in effect, PaineWebber shall provide to the
Board, at such times as the Board shall request and in no event less frequently
than annually, and the Board shall review, a written report of the amounts
expended by PaineWebber under Service Agreements with financial intermediaries
and the purposes for which such expenditures were made.
(b) The Trust shall preserve copies of the Plan and any Service
Agreements, any other agreements relating to the Plan and any reports made
pursuant to Section 8(a) above for a period of not less than six years from the
date of the Plan, each Service Agreement, agreement or report, the first two
years in an easily accessible place.
2
<PAGE>
Section 9. Limitation of Liability of the Trustees, Officers and
Shareholders of the Trust.
The Trustees and officers of the Trust and the shareholders of any Fund
shall not be liable for any obligation of the Trust or any Fund under this Plan,
and PaineWebber agrees that, in asserting any rights or claims under this Plan,
it shall look only to the assets and property of the Trust or the particular
Fund in settlement of such right or claims, and not to such Trustees, officers
or shareholders.
Section 10. Governing Law.
This Plan shall be construed in accordance with the laws of the State
of New York and the 1940 Act, provided, however, that Section 9 above will be
construed in accordance with the laws of the State of Delaware. To the extent
the applicable laws of the State of New York or the State of Delaware conflict
with the applicable provisions of the 1940 Act, the latter shall control.
Section 11. Effective Date.
The Plan will become effective as of July 31, 1998.
MITCHELL HUTCHINS INSTITUTIONAL SERIES
By /s/ Dianne E. O'Donnell
------------------------------------
PAINEWEBBER INCORPORATED
By /s/ Victoria E. Schonfeld
------------------------------------
3
<PAGE>
Exhibit No. 8(c)
MITCHELL HUTCHINS INSTITUTIONAL SERIES
FINANCIAL INTERMEDIARY SHARES
SHAREHOLDER SERVICE AGREEMENT
PaineWebber Incorporated ("Firm"), as distributor of the Financial
Intermediary shares of Mitchell Hutchins Institutional Series ("Trust") and the
counterparty named below ("Financial Intermediary") wish to enter into an
agreement ("Agreement") pursuant to which the Financial Intermediary will
provide services to certain shareholders of, and administer certain shareholder
accounts in, Financial Intermediary shares ("Shares") of the Trust.
In consideration of the mutual covenants herein contained, it is agreed
by and between the Firm and the Financial Intermediary as follows:
Section 1. Services to Be Provided. The Financial Intermediary will
provide shareholder and administrative services for its customers ("Customers")
who own Shares. Such services may include, without limitation: (i) assisting
Customers in changing dividend options, account designations and addresses; (ii)
aggregating and processing purchase and redemption requests from Customers and
placing net purchase and redemption orders with the Firm; (iii) transmitting and
receiving funds in connection with Customer orders to purchase and redeem
Shares; (iv) processing dividend payments on behalf of Customers; (v) providing
information periodically to Customers showing their position in Shares; (vi)
arranging for bank wires; (vii) responding to Customer inquiries regarding
account status and history, the manner in which purchases and redemptions of
Shares may be made and other matters pertaining to the Shares; (viii) providing
sub-accounting with respect to Shares beneficially owned by Customers or the
information to the Trust necessary for sub-accounting; (ix) forwarding
shareholder communications from the Trust (for example, proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Customers; (x) providing necessary personnel and facilities
to establish and maintain shareholder accounts and records; and (xi) such other
similar services as the Firm or a Customer may reasonably request from time to
time to the extent the Financial Intermediary is permitted to perform such
services under Federal and state statutes, rules and regulations.
Section 2. Financial Intermediary as Agent for Its Customers. The
Financial Intermediary agrees that, in all activities covered by this Agreement;
the Financial Intermediary will act as agent for its customers; it is not
authorized to act as agent for the Firm or the Trust. This Agreement shall not
make either party the legal representative of the other, nor shall either party
have the right or authority to assume, create or incur any liability or any
obligation of any kind, express or implied, against or in the name of or on
behalf of the other party.
Section 3. Information Concerning the Trust and the Shares. The
Financial Intermediary agrees that neither it nor any of its employees or agents
are authorized to make any representation concerning the Shares or the Trust,
except those contained in the then-current Prospectus and Statement of
Additional Information for the Trust, copies of which will be
<PAGE>
supplied by the Firm in reasonable quantities upon request, or in other material
approved in writing by the Firm.
Section 4. Compensation. The Firm will pay the Financial Intermediary
an annual fee (the "Service Payment") for its services in connection with the
Shares beneficially owned by its Customers. The Service Payment will be
calculated daily and paid monthly by the Firm at the annual rate of 0.25% of the
average daily net asset value of the Shares held by the Financial Intermediary
for its Customers. For purposes of calculating the fee payable to the Financial
Intermediary, the average daily net asset value of the Shares will be calculated
in accordance with the procedure set forth in the Trust's then current
Prospectus and Statement of Additional Information. The Financial Intermediary
agrees that no trustee, officer or shareholder of the Trust (or any of its
series) shall be liable for the performance of the Firm's obligations hereunder
or for the Service Payment.
Section 5. Right to Suspend Sales. The Firm and the Trust reserve the
right, at their discretion, to suspend the sale of Shares of any series or
withdraw the Shares of any series from sale.
Section 6. Other Duties of the Financial Intermediary. (a) The
Financial Intermediary agrees to provide the Firm and the Trust such information
relating to its services hereunder as may be required to be maintained by the
Firm and the Trust under applicable regulatory and self-regulatory agencies or
authorities, and to cooperate with the Firm in providing information to the
Trust and its Board of Trustees with respect to amounts expended and services
provided under this Agreement.
(b) In the event an issue pertaining to the Shares is submitted for
shareholder approval, the Financial Intermediary will vote any Shares of a
series held for its own account, or over which it otherwise has discretion to
vote, in the same proportions as the votes cast by those Shares of the same
series held for its Customer's accounts for which instructions have been
received from the beneficial owners or other persons entitled to vote.
Section 7. Representations of Financial Intermediary. (a) The Financial
Intermediary represents and warrants that its Customers are aware of and have
agreed to the arrangements provided for in this Agreement and that the
compensation payable to the Financial Intermediary hereunder, together with any
other compensation payable to the Financial Intermediary in connection with the
investment of their assets in the Shares, will be properly disclosed by the
Financial Intermediary to its Customers and authorized by them.
(b) The Financial Intermediary represents and warrants that, in
providing services hereunder, it will act in accordance with federal and state
law, and rules and regulations thereunder, applicable to it and its Customer's
accounts.
Section 8. Customer Lists. Each party agrees that it (and/or its
affiliates) will not use any list of customers of the other party that may be
obtained in connection with this Agreement for the purpose of solicitation of
any product or service without the express written consent of the other party.
However, nothing in this Agreement shall be deemed to prohibit or restrict
either
2
<PAGE>
party (or its affiliates) in any way from solicitations of any product or
service directed at, without limitation, the general public, any segment
thereof, or any specific individual, provided such solicitation is not based
upon such list.
Section 9. Indemnification. (a) The Financial Intermediary will
indemnify and hold the Firm and the Trust harmless from any claim, demand, loss,
expense or cause of action resulting from the misconduct or negligence, as
measured by industry standards, of the Financial Intermediary, its agents or
employees, in carrying out the Financial Intermediary's obligations under this
Agreement. Such indemnification will survive the termination of this Agreement.
(b) The Firm will indemnify and hold the Financial Intermediary
harmless from any claim, loss, expense or cause of action resulting from the
misconduct or negligence, as measured by industry standards, of the Firm, its
agents or employees, in carrying out the Firm's obligations under this
Agreement.
Section 10. Duration of Agreement. This Agreement will continue in
effect for one year from its Effective Date, and thereafter will continue
automatically for successive annual periods; provided, however, that the
Agreement is subject to termination as provided below and subject to termination
at any time without penalty with respect to the Trust or a particular series
thereof if a majority of the Trust's Trustees who are not interested persons of
the Trust (as defined in the Investment Company Act of 1940 ("1940 Act")), or a
majority of the Shares of the Trust or a particular series thereof (as defined
in the 1940 Act) vote to terminate the Agreement.
Section 11. Amendment and Termination of the Agreement. This Agreement
may be amended upon written agreement of the parties. Either party to the
Agreement may terminate the Agreement, without cause or penalty, by giving the
other party at least thirty (30) days' written notice of its intention to
terminate. This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
Section 12. Effective Date. This Agreement will become effective on
the date set forth below.
Section 13. Notices. All notices required or permitted to be given
under this Agreement shall be given in writing and delivered by personal
delivery, by postage prepaid mail, or by facsimile machine or a similar means of
same day delivery (with a confirming copy by mail). All notices to the Firm
shall be given or sent to its offices located at 1285 Avenue of the Americas,
New York, New York 10019, ATTN: Colleen McDermott, with a copy to Dianne E.
O'Donnell, Legal Department, at the same address. All notices to the Financial
Intermediary shall be given or sent to it at the address specified by it below.
Either party may change the address to which notices shall be sent by giving
notice to the other party in accordance with this paragraph 13.
Section 14. Miscellaneous. (a) This Agreement shall be construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of law provisions thereof, and the 1940 Act. To the extent that the
applicable laws of the State of New York conflict with the applicable provisions
of the 1940 Act, the latter shall control.
3
<PAGE>
(b) The captions in this Agreement are included for convenience of
reference only and in no way defined or limit any of the provisions of this
Agreement or otherwise affect their construction or effect.
(c) In the case that any provision in this Agreement shall be found by
a court of competent jurisdiction to be invalid, illegal or unenforceable, such
provision shall be construed and enforced as if it had been more narrowly drawn
so as not to be invalid, illegal or unenforceable, and the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
PAINEWEBBER INCORPORATED
By:_______________________________
PLEASE RETURN TWO SIGNED COPIES OF THIS AGREEMENT TO PAINEWEBBER
INCORPORATED. UPON ACCEPTANCE BY PAINEWEBBER, ONE COUNTERSIGNED COPY WILL BE
RETURNED TO YOU FOR YOUR FILES.
Name of Financial Intermediary:_________________________________________________
Address:_______________________________________________________________________
________________________________________________________________________
By:_____________________________________________________________________________
Authorized Representative
_____________________________________________________________________________
(Name and Title; please print or type)
ACCEPTED AND AGREED:
PAINEWEBBER INCORPORATED
By: ___________________________
Dated:_________________________
4
<PAGE>
Exhibit No. 9
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE 202-778-9000
FACSIMILE 202-778-9100
www.kl.com
August 30, 1999
Mitchell Hutchins LIR Money Series
1285 Avenue of the Americas
New York, New York 10019
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
Institutional and Financial Intermediary shares of beneficial interest of the
series of the Trust listed below that may be issued during the time that
Post-Effective Amendment No. 3 to the Trust's Registration Statement on Form
N-1A ("PEA") is effective and has not been superseded by a post-effective
amendment. The series of the Trust is Mitchell Hutchins LIR Select Money Fund.
As such counsel, we have examined certified or other copies, believed
by us to be genuine, of the Trust's Trust Instrument and by-laws and such
resolutions and minutes of meetings of the Trust's Board of Trustees as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) 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 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by the Trust and that, when sold in accordance
with the terms contemplated by the PEA, including receipt by the Trust of full
payment for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been validly issued, fully paid and non-assessable.
<PAGE>
Mitchell Hutchins LIR Money Series
August 30, 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
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference of our report dated June
23, 1999 on Mitchell Hutchins LIR Select Money Fund, in this Registration
Statement (Form N-1A No. 333-52965) of Mitchell Hutchins LIR Money Series
(formerly Mitchell Hutchins Institutional Series).
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
August 31, 1999
<PAGE>
Exhibit No. 10(b)
CONSENT OF DUFF & PHELPS RATING CO.
We consent to the references to our firm and our rating of Mitchell Hutchins LIR
Select Money Fund in the statement of additional information for that fund filed
as part of this post-effective amendment to the registration statement of
Mitchell Hutchins LIR Money Series (SEC File No. 333-52965).
/s/ Daryl R. Leehaug
-------------------------------------
DUFF & PHELPS CREDIT RATING CO.
August 24, 1999
Chicago, Illinois
