<PAGE>
As filed with the Securities and Exchange Commission on April 27, 2000
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. 7 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [X]
MITCHELL HUTCHINS LIR MONEY SERIES
(Exact name of registrant as specified in charter)
51 West 52nd Street
New York, New York 10019-6114
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, ESQ.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, ESQ.
BENJAMIN J. HASKIN, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
[X] On May 1, 2000, pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] On pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On pursuant to Rule 485(a)(2)
Title of Securities Being Registered: Shares of Beneficial Interest of LIR
Premier Money Market Fund and LIR Premier Tax-Free Money Market Fund.
<PAGE>
LIR Premier Money Market Fund
LIR Premier Tax-Free Money Market Fund
----------------------------
PROSPECTUS
MAY 1, 2000
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This prospectus offers shares of these money market funds through firms that
have arrangements with Correspondent Services Corporation (csc) and certain
other financial services firms for the benefit of their clients.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the funds' shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
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LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
Contents
THE FUNDS
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
What every investor 3 Premier Money Market Fund
should know about 6 Premier Tax-Free Money Market
the funds Fund
9 More About Risks and
Investment Strategies
YOUR INVESTMENT
- ---------------------------------------------------------------------------------------------------------
Information for 11 Managing Your Fund Account
managing your fund -- Buying Shares
account -- Selling Shares
-- Additional Information
-- Pricing and Valuation
ADDITIONAL INFORMATION
- ---------------------------------------------------------------------------------------------------------
Additional important 15 Management
information about 15 Dividends and Taxes
the funds 17 Financial Highlights
- ---------------------------------------------------------------------------------------------------------
Where to learn more Back Cover
about the funds
</TABLE>
The funds are not a complete or
balanced investment program.
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2
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LIR Premier Money Market Fund
Premier Money Market Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
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FUND OBJECTIVE
High level of current income consistent with the preservation of capital and the
maintenance of liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. To do this, the fund invests in a diversified portfolio of high
quality money market instruments of governmental and private issuers.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests in foreign money market instruments only if they are
denominated in U.S. dollars.
Mitchell Hutchins Asset Management Inc., the fund's investment adviser, selects
money market instruments for the fund based on its assessment of relative values
and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risk. When short-term interest rates rise, the value of
the fund's investments generally will fall, and its yield will tend to lag
behind prevailing rates. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers.
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 the current
annual/semi-annual reports for the fund or the fund's predecessor, Correspondent
Cash Reserves Money Market Portfolio, a series of The Infinity Mutual Funds,
Inc. (see back cover for information on ordering those reports).
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3
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LIR Premier Money Market Fund
PERFORMANCE
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RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about Premier Money Market
Fund's performance and thus give some indication of the risks of an investment
in the fund by showing how the fund's performance has varied from year to year.
The bar chart and table reflect the performance of the fund's predecessor,
Correspondent Cash Reserves Money Market Portfolio, a series of The Infinity
Mutual Funds, Inc., which reorganized into the fund on January 21, 2000.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
PREMIER MONEY MARKET FUND -- TOTAL RETURN (1992 IS THE FUND'S FIRST FULL
CALENDAR YEAR OF OPERATIONS)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
3.11% 2.48% 3.45% 5.24% 4.72% 4.77% 4.75% 4.40%
</TABLE>
Best quarter during years shown: 2nd quarter, 1995 -- 1.31%
Worst quarter during years shown: 2nd quarter, 1993 -- 0.59%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999
<TABLE>
<S> <C>
One Year................................................ 4.40%
Five Years.............................................. 4.78%
Life of Fund (5/20/91).................................. 4.16%
</TABLE>
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4
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LIR Premier Money Market 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
percentage of offering price)............................... None
Maximum Deferred Sales Charge (Load) (as a percentage of
offering price)............................................. None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees(1).......................................... 0.20%
Distribution and/or Service (12b-1) Fees.................... 0.60%
Other Expenses(1)........................................... 0.13%
Total Annual Fund Operating Expenses(1)..................... 0.93%
-----
Expense Reimbursements(2)................................... 0.03%
-----
Net Expenses(2)............................................. 0.90%
-----
-----
</TABLE>
- ---------
(1) Management Fees, Other Expenses and Total Annual Fund Operating Expenses
have been restated to reflect current contractual obligations.
(2) The fund and Mitchell Hutchins have entered into a written expense
reimbursement agreement. Mitchell Hutchins is contractually obligated to
reimburse the fund to the extent that the fund's expenses through the end of
its fiscal year ending December 31, 2000 otherwise would exceed the 'Net
Expenses' rate shown above. The fund has agreed to repay Mitchell Hutchins
for those unreimbursed expenses if it can do so over the following three
years without causing the fund's expenses in any of those three years to
exceed the 'Net Expenses' rate.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same except for the one year period when
the fund's expenses are lower due to its reimbursement agreement with Mitchell
Hutchins. 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>
$92 $293 $512 $1,140
</TABLE>
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5
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LIR Premier Tax-Free Money Market Fund
Premier Tax-Free Money Market Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
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FUND OBJECTIVE
High level of current income exempt from federal income tax consistent with the
preservation of capital and the maintenance of liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality,
municipal money market instruments.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests primarily in money market instruments that are exempt
from federal income tax. The fund may invest up to 20% of its total assets in
securities that are subject to the federal alternative minimum tax.
Mitchell Hutchins Asset Management Inc., the fund's investment adviser, selects
money market instruments for the fund based on its assessment of relative values
and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risks. When short-term interest rates rise, the value
of the fund's investments generally will fall, and its yield will tend to lag
behind prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in 'More About Risks and Investment Strategies.' In particular,
see the following headings:
Credit Risk
Interest Rate Risk
Information on the fund's recent holdings can be found in the current
annual/semi-annual reports for the fund or the fund's predecessor, Correspondent
Cash Reserves Tax Free Money Market Portfolio, a series of The Infinity Mutual
Funds, Inc. (see back cover for information on ordering those reports).
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6
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LIR Premier Tax-Free Money Market Fund
PERFORMANCE
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RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about Premier Tax-Free
Money Market Fund's performance and thus give some indication of the risks of an
investment in the fund by showing how the fund's performance has varied from
year to year. The bar chart and table reflect the performance of the fund's
predecessor, Correspondent Cash Reserves Tax Free Money Market Portfolio, a
series of The Infinity Mutual Funds, Inc., which reorganized into the fund on
January 21, 2000.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
PREMIER TAX-FREE MONEY MARKET FUND -- TOTAL RETURN (1997 IS THE FUND'S FIRST
FULL CALENDAR YEAR OF OPERATIONS)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C>
2.90% 2.83% 2.53%
</TABLE>
Best quarter during years shown: 2nd quarter, 1998 -- 0.75%
Worst quarter during years shown: 1st quarter, 1999 -- 0.55%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999
<TABLE>
<S> <C>
One Year................................................ 2.53%
Life of Fund (10/7/96).................................. 2.75%
</TABLE>
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7
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LIR Premier Tax-Free Money Market Fund
EXPENSES AND FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
<TABLE>
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)............................... None
Maximum Deferred Sales Charge (Load) (as a percentage of
offering price)............................................. None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees(1).......................................... 0.20%
Distribution and/or Service (Rule 12b-1) Fees............... 0.60%
Other Expenses(1)........................................... 0.15%
Total Annual Fund Operating Expenses(1)..................... 0.95%
-----
Expense Reimbursements/Fee Waivers(2)....................... 0.27%
-----
Net Expenses(2)............................................. 0.68%
-----
-----
</TABLE>
- ---------
(1) Management Fees, Other Expenses and Total Annual Fund Operating Expenses
have been restated to reflect current contractual obligations.
(2) The fund, Mitchell Hutchins and csc have entered into a written expense
reimbursement/fee waiver agreement. Csc is contractually obligated to waive
0.17% of the fund's Rule 12b-1 fees through December 31, 2000, making the
effective rate of these fees 0.43%. Mitchell Hutchins is also contractually
obligated to reimburse the fund to the extent that the fund's expenses
through the end of its fiscal year ending December 31, 2000 otherwise would
exceed the 'Net Expenses' rate shown above. The fund has agreed to repay
Mitchell Hutchins for those unreimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those
three years to exceed the 'Net Expenses' rate.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same except for the one year period when
the fund's expenses are lower due to its reimbursement/fee waiver agreement with
Mitchell Hutchins and csc. 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>
$69 $276 $499 $1,142
</TABLE>
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8
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LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
MORE ABOUT RISKS
AND INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
The main risks of investing in the funds are described below. Not all of these
risks apply to each fund. You can find a list of the main risks that apply to
either fund under the 'Investment Objective, Strategies and Risks' heading for
that fund.
Other risks of investing in a fund, along with further details about some of the
risks described below, are discussed in the funds' Statement of Additional
Information ('SAI'). Information on how you can obtain the SAI is on the back
cover of this prospectus.
Credit Risk. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even the highest quality money market
instruments are subject to some credit risk.
Interest Rate Risk. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of a fund's investments will fall. Also, a fund's yield
will tend to lag behind changes in prevailing short-term interest rates. This
means that a fund's income will tend to rise more slowly than increases in
short-term interest rates. Similarly, when short-term interest rates are
falling, a fund's income generally will tend to fall more slowly.
Foreign Securities Risk. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
Political Risk. Political or regulatory developments could adversely affect the
tax-exempt status of interest paid on municipal securities or the tax-exempt
status of Premier Tax-Free Money Market Fund's dividends. These developments
could also cause the value of this fund's municipal money market instruments to
fall.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the funds are subject to maturity, quality and
diversification requirements designed to help them maintain a stable price of
$1.00 per share. In addition, Mitchell Hutchins may use a number of professional
money management techniques to respond to changing economic and money market
conditions and to shifts in fiscal and monetary policy. These techniques include
varying a fund's composition and weighted average maturity based upon its
assessment of the relative values of various money market instruments and future
interest rate patterns. Mitchell Hutchins also may
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9
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LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
buy or sell money market instruments to take advantage of yield differences.
During adverse market conditions, Premier Tax-Free Money Market Fund may
temporarily invest in cash or taxable money market instruments. These
investments may not be consistent with achieving the fund's investment objective
during the relatively short periods that they are held.
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10
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LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
Your Investment
MANAGING YOUR FUND ACCOUNT
- --------------------------------------------------------------------------------
BUYING SHARES
- -------------
The funds offer their shares only to clients of certain securities dealers
(correspondent firms) that have securities clearing or other arrangements with
Correspondent Services Corporation (csc) or certain other financial services
firms. These clients include qualified retirement plans and individual
retirement accounts. You must buy shares through your Investment Representative
at your correspondent firm or other financial services firm.
You may buy shares of the funds at the net asset value per share on the same
business day after receipt and acceptance of the purchase order by the transfer
agent, subject to timely receipt of the purchase order and federal funds for the
purchase as provided below. You can place a purchase order through your
Investment Representative by presenting him or her with a check made out to your
correspondent firm, your financial services firm or csc. Your correspondent firm
or other financial services firm is then responsible for timely depositing that
check and crediting your account so that payment is swept into a fund. Your
purchase order must be received by the transfer agent by noon, Eastern time, and
federal funds must be available to the funds by 4:00 p.m., Eastern time, on a
business day for your purchase to be effective.
Federal funds are funds deposited by a commercial bank in an account at a
Federal Reserve Bank that can be transferred to a similar account of another
bank in one day and thus can be made immediately available to a fund through its
custodian. A business day is any day that the funds' custodian, their transfer
agent, Mitchell Hutchins and your correspondent (or other financial services)
firm's office(s) are open for business.
Federal funds are deemed available to a fund two business days after the deposit
of a personal check and one business day after deposit of a cashier's or
certified check. Your correspondent (or other financial services) firm, csc or
their affiliates may benefit from the temporary use of the proceeds of personal
checks if they are converted to federal funds in less than two business days.
Each fund's shares are sold at net asset value. However, under a Rule 12b-1 plan
adopted by the funds, the funds pay a fee for services and expenses relating to
the sale and distribution of the funds' shares and/or for providing shareholder
services. Because these fees are paid from the funds' assets on an ongoing
basis, over time they will increase the cost of your investment and may cost you
more than paying other types of sales charges. The funds pay Rule 12b-1 plan
fees at the following rates based on average daily net assets:
Premier Money Market Fund..............................................0.60%
Premier Tax-Free Money
Market Fund.........................................................0.43%*
- ---------
* This is the effective rate resulting from csc's contractual waiver, through
December 31, 2000, of 0.17% of its 0.60% Rule 12b-1 plan fee.
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11
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LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
The funds and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of fund shares. The availability of fund shares to
customers of correspondent firms or other financial services firms may vary
depending on the arrangements between csc and those firms.
BUYING SHARES AUTOMATICALLY
All free cash credit balances (that is, immediately available funds) of over
$1.00 in your brokerage account at your correspondent firm or other financial
services firm (including proceeds from securities you have sold) are
automatically invested in the fund you selected as your primary sweep money
market fund on a daily basis for settlement the next business day, when federal
funds normally are available. For cash balances arising from the sale of
securities in your brokerage account, federal funds availability can sometimes
take longer.
Fund shares will be purchased only after debits and other charges to your
brokerage account are satisfied.
MINIMUM INVESTMENTS
To open an Individual Retirement
Account (IRA)..............................................................$25
To open any other (non-IRA) account.......................................$1,000
To add to an account........................................................None
The funds may change their minimum investment requirements at any time.
Correspondent firms or other participating financial services firms may
establish higher minimums for their customers. Your Investment Representative at
your correspondent firm or other financial services firm is responsible for
transmitting orders in a timely manner and may have an earlier cut-off time for
purchase and sale requests. Speak with your Investment Representative for more
information on minimum investments.
SELLING SHARES
- --------------
You may sell your fund shares by check or through the funds' systematic
withdrawal plan. Your fund shares will also be sold automatically to settle any
outstanding securities purchases or debits to your linked or associated
brokerage account, unless you instruct your Investment Representative otherwise.
You may request sales proceeds at any time by following the instructions related
to your account at your correspondent firm or other financial services firm.
Your correspondent firm or other financial services firm is responsible for
transmitting the sales order to the transfer agent and crediting your account on
a timely basis. The funds will not accept requests to sell shares by wire or
telephone from you or your financial institution. Your Investment Representative
may charge a fee for transmitting the sales order. Please contact your
Investment Representative if you have questions about sales order requirements
or closing your account.
SELLING BY CHECK
You may sell your fund shares by using a check drawn on your fund account. You
may obtain a supply of checks from the transfer agent or by contacting your
Investment Representative. When the transfer agent receives the check for
payment, the transfer agent will arrange for the sale of a sufficient amount of
fund shares to cover the amount of the check. You will continue to receive
dividends until the transfer agent receives the check.
You will not receive canceled checks, but you may request photocopies of
canceled checks. If you have insufficient funds in your account to cover a check
you have written, the payee will receive a returned check. You should not
attempt to sell all the shares in your account by writing a
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12
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LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
check because the amount of fund shares is likely to change each day as you earn
dividends. You may not close your account by check.
The transfer agent may impose charges for specially imprinted checks, business
checks, stop payment orders, copies of canceled checks and checks returned for
insufficient funds. You will pay these charges through automatic sales of an
appropriate number of your fund shares.
You may obtain the necessary forms for the checkwriting service from your
Investment Representative. This service generally is not available to persons
who own fund shares through any sub-account or tax-deferred retirement plan
account.
SELLING SHARES AUTOMATICALLY
Csc has instituted an automatic sales procedure applicable to fund shareholders.
Csc may use this procedure if you have outstanding amounts due as a result of
securities purchases or other transactions. Csc may review your securities
account each business day prior to noon, Eastern time, and automatically sell a
sufficient number of fund shares to satisfy any outstanding amounts due from
your account. This procedure will occur on the business day prior to the day you
are obligated to make a payment. Your correspondent firm or other financial
services firm will receive these sales proceeds on the day following the sales
date.
SYSTEMATIC WITHDRAWAL PLAN
You may receive automatic payments from your account on a monthly, quarterly or
semi-annual basis if you maintain a minimum $1,000 balance in your fund account.
The minimum withdrawal is $50. Ordinarily, sales proceeds will be on deposit in
your designated account at an Automatic Clearing House member bank two business
days after the withdrawal. You may request that payment be made by check to
yourself or a third party. You, your correspondent firm (or other financial
services firm), the transfer agent or a fund may request that your participation
in the systematic withdrawal plan end at any time.
If you are a retirement plan participant, you may be eligible for participation
in the systematic withdrawal plan. Such withdrawals are generally taxable as
ordinary income. Generally, withdrawals from an eligible benefit plan will be
taxable as ordinary income and withdrawals will be subject to an additional tax
equal to 10% of the amount distributed (unless the withdrawals are used to pay
certain higher education expenses and certain acquisition costs of first time
home buyers) if made prior to the time the participant:
reaches age 59 1/2;
becomes permanently disabled; or
reaches at least age 55 and is separated from service of the employer who
sponsored the plan.
Please contact your Investment Representative for more information on the
systematic withdrawal plan.
ADDITIONAL INFORMATION
- ----------------------
It costs the funds money to maintain shareholder accounts. Therefore, the funds
reserve the right to repurchase all shares in any account that has a net asset
value of less than $1,000. This requirement will be waived for IRA accounts.
If you want to sell shares that you purchased recently, a fund may delay payment
until it verifies that it has received good payment. If you purchased shares by
check, this can take up to 15 days.
Each fund's shares are bought and sold without charge to the shareholder.
Correspondent firms or
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13
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LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
other financial services firms buying or holding shares for their client
accounts may charge clients for cash management and other services provided in
connection with their accounts.
You should consider the terms of your account with your correspondent firm or
other financial services firm before purchasing shares. A correspondent firm or
other financial services firm buying or selling shares on your behalf is
responsible for transmitting orders to the transfer agent in accordance with its
shareholder agreements and the procedures noted above.
PRICING AND VALUATION
- ---------------------
The price of fund shares is based on net asset value. The net asset value is the
total value of the fund divided by the total number of shares outstanding. In
determining net asset value, each fund values its securities at their amortized
cost. This method uses a constant amortization to maturity of the difference
between the cost of the instrument to the fund and the amount due at maturity.
Each fund's net asset value per share is expected to be $1.00 per share,
although this value is not guaranteed.
The net asset value per share for each fund is determined once each business day
at noon, Eastern time, on days that the New York Stock Exchange is open, except
Columbus Day and Veterans Day. Your price for buying or selling your shares will
be the net asset value that is next calculated after a fund accepts your order.
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14
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LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Mitchell Hutchins Asset Management Inc. is the investment adviser and
administrator of the funds. Mitchell Hutchins is located at 51 West 52nd Street,
New York, New York, 10019 and is a wholly owned asset management subsidiary of
PaineWebber Incorporated, which is wholly owned by Paine Webber Group Inc., a
publicly owned financial services holding company. On February 29, 2000,
Mitchell Hutchins was adviser or sub-adviser of 31 investment companies with 76
separate portfolios and aggregate assets of approximately $54.4 billion.
ADVISORY FEES
Each fund pays advisory and administration fees to Mitchell Hutchins at the
annual rate of 0.20% of its average daily net assets.
- --------------------------------------------------------------------------------
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS
The funds declare dividends daily and pay them monthly. The funds distribute any
net short-term capital gain annually, but may make more frequent distributions
if necessary to maintain their share price at $1.00 per share.
You will receive dividends in additional shares of a fund. Shares earn dividends
on the day they are purchased but not on the day they are sold.
TAXES
Dividends from Premier Tax-Free Money Market Fund generally are not subject to
federal income tax. The dividends that you receive from Premier Money Market
Fund generally are subject to federal income tax regardless of whether you
receive them in additional fund shares or in cash and are expected to be taxed
as ordinary income.
If you hold fund shares through a tax-exempt account or plan such as an IRA or
401(k) plan, dividends on your shares generally will not be subject to tax.
Each fund will tell you annually how you should treat its dividends for tax
purposes. You will not recognize any gain on the sale of your fund shares so
long as the funds maintain a share price of $1.00.
------------
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15
<PAGE>
- --------------------------------------------------------------------------------
------------------------
LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
Each fund is required to withhold 31% of all taxable dividends payable to any
individuals and certain other noncorporate shareholders who
have not provided the funds or their correspondent firm (or other financial
services firm) with
a correct taxpayer identification number on Form W-9 (for U.S. citizens
and resident aliens) or
a properly completed claim for exemption on Form W-8 (for nonresident
aliens and other foreign entities), or
are otherwise subject to backup withholding.
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16
<PAGE>
- --------------------------------------------------------------------------------
------------------------
LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial highlights tables are intended to help you understand
the funds' financial performance for the fiscal periods indicated. Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the funds (assuming reinvestment of all dividends and
distributions).
The information in the financial highlights has been audited by KPMG LLP,
independent auditors for the reported periods of each fund's predecessor, whose
report, along with the predecessor funds' financial statements, are included in
the predecessor funds' Annual Report to Shareholders. The predecessor funds'
Annual Report may be obtained without charge by calling 1-800-442-3809.
<TABLE>
<CAPTION>
PREMIER MONEY MARKET FUND(1)
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 0.9994 $ 0.9992 $ 0.9991 $ 0.9986 $ 0.9975
---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income......................... 0.0431 0.0465 0.0467 0.0462 0.0512
---------- ---------- ---------- ---------- --------
Net realized gains (losses) on investment
transactions................................. 0.0001 0.0002 0.0001 0.0005 0.0011
---------- ---------- ---------- ---------- --------
Total from investment operations.............. 0.0432 0.0467 0.0468 0.0467 0.0523
---------- ---------- ---------- ---------- --------
Dividends to shareholders from net investment
income.......................................... (0.0431) (0.0465) (0.0467) (0.0462) (0.0512)
---------- ---------- ---------- ---------- --------
Net change in net asset value.................... 0.0001 0.0002 0.0001 0.0005 0.0011
---------- ---------- ---------- ---------- --------
Net asset value, end of period................... $ 0.9995 $ 0.9994 $ 0.9992 $ 0.9991 $ 0.9986
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
Total return..................................... 4.40% 4.75% 4.77% 4.72% 5.24%
Ratios/Supplemental Data:
Net assets, end of period (000's)................ $1,778,330 $1,387,903 $1,151,012 $1,007,265 $779,011
Ratio of expenses to average net assets (after
fee waivers).................................... 0.92% 0.93% 0.95% 0.88% 0.85%
Ratio of net investment income to average net
assets (after fee waivers)...................... 4.32% 4.64% 4.68% 4.65% 5.14%
Ratio of expenses to average net assets(2)....... 1.03% 1.04% 1.06% 1.01% 1.03%
</TABLE>
- ---------
(1) The financial highlights for the periods indicated reflect the financial
performance of Correspondent Cash Reserves Money Market Portfolio, which
reorganized into Premier Money Market Fund on January 21, 2000.
(2) During the period, certain fees and expenses were voluntarily waived and/or
reimbursed. If such voluntary waivers and/or reimbursements had not
occurred, the ratios would have been as indicated.
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17
<PAGE>
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------------------------
LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund
FINANCIAL HIGHLIGHTS
(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREMIER TAX-FREE MONEY MARKET FUND(1)
-----------------------------------------------------
YEAR ENDED
DECEMBER 31, PERIOD ENDED
------------------------------------ DECEMBER 31,
1999 1998 1997 1996(2)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 1.0000 $ 1.0000 $ 1.0000 $1.0000
-------- -------- -------- -------
Income from investment operations:
Net investment income........................ 0.0250 0.0279 0.0286 0.0100
-------- -------- -------- -------
Total from investment operations............. 0.0250 0.0279 0.0286 0.0100
-------- -------- -------- -------
Dividends to shareholders from net investment
income......................................... (0.0250) (0.0279) (0.0286) (0.0100)
-------- -------- -------- -------
Net change in net asset value................... -- -- -- --
-------- -------- -------- -------
Net asset value, end of period.................. $ 1.0000 $ 1.0000 $ 1.0000 $1.0000
-------- -------- -------- -------
-------- -------- -------- -------
Total return.................................... 2.53% 2.83% 2.90% 0.66%(3)
Ratios/Supplemental data:
Net assets, end of period (000's)............... $109,701 $102,821 $103,399 $80,409
Ratio of expenses to average net assets (after
fee waivers)................................... 0.74% 0.71% 0.78% 0.74%(4)
Ratio of net investment income to average net
assets (after fee waivers)..................... 2.50% 2.79% 2.86% 2.80%(4)
Ratio of expenses to average net assets(5)...... 1.05% 1.02% 1.18% 1.20%(4)
</TABLE>
- ---------
(1) The financial highlights for the periods indicated reflect the financial
performance of Correspondent Cash Reserves Tax Free Money Market Portfolio,
which reorganized into Premier Tax-Free Money Market Fund on January 21,
2000.
(2) For the period from October 7, 1996, (commencement of operations) through
December 31, 1996.
(3) Not annualized.
(4) Annualized.
(5) During the period, certain fees and expenses were voluntarily waived and/or
reimbursed. If such voluntary waivers and/or reimbursements had not
occurred, the ratios would have been as indicated.
------------
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18
<PAGE>
- -------
<TABLE>
<S> <C>
TICKER SYMBOL: LIR Premier Money Market Fund:
ICCXX
LIR Premier Tax-Free Money Market
Fund: CTFXX
</TABLE>
If you want more information about the funds, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the funds' investments is available in a fund or
its predecessor fund's annual and semi-annual reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the funds and is incorporated
by reference into this prospectus.
You may discuss your questions about the funds by contacting your Investment
Representative. You may obtain free copies of a fund or its predecessor fund's
annual and semi-annual reports and the fund's SAI by contacting the fund
directly at 1-800-442-3809.
You may review and copy information about the funds and their predecessors,
including shareholder reports and the SAI, at the Public Reference Room of the
Securities and Exchange Commission. You may obtain information about the
operations of the SEC's Public Reference Room by calling the SEC at
1-202-942-8090. You can get text-only copies of information about the funds:
For a fee, by electronic request
at [email protected] or by writing the
SEC's Public Reference Room,
Washington, D.C. 20549-0102; or
Free, from the EDGAR Database on the
SEC's Internet website at:
http://www.sec.gov.
Mitchell Hutchins LIR Money Series
-- LIR Premier Money Market Fund
-- LIR Premier Tax-Free Money Market Fund
Investment Company Act File No. 811-08767
'c' 2000 Mitchell Hutchins Asset Management Inc.
All rights reserved.
S747
LIR
PREMIER
MONEY MARKET FUND
TAX-FREE MONEY MARKET FUND
Prospectus
- ----------------------------------------------------
May 1, 2000
STATEMENT OF DIFFERENCES
The copyright symbol shall be expressed as..................................'c'
<PAGE>
LIR PREMIER MONEY MARKET FUND
LIR PREMIER TAX-FREE MONEY MARKET FUND
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
STATEMENT OF ADDITIONAL INFORMATION
Premier Money Market Fund and Premier Tax-Free Money Market Fund are
professionally managed money market funds organized as diversified series of
Mitchell Hutchins LIR Money Series, a Delaware business trust ("Trust").
The funds' investment adviser, administrator and distributor is Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset
management subsidiary of PaineWebber Incorporated ("PaineWebber").
Portions of the Annual Report to Shareholders of the funds' predecessors
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 1-800-442-3809.
This SAI is not a prospectus and should be read only in conjunction with
the funds' current Prospectus, dated May 1, 2000. A copy of the Prospectus may
be obtained by calling your Investment Representative at your correspondent firm
or by calling toll-free 1-800-442-3809. This SAI is dated May 1, 2000.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Funds and Their Investment Policies................................ 2
The Funds' Investments, Related Risks and Limitations.................. 3
Organization of the Trust; Trustees and Officers; Principal Holders
of Securities........................................................ 12
Investment Advisory, Administration and Distribution Arrangements...... 19
Portfolio Transactions................................................. 23
Additional Purchase and Redemption Information; Service Organizations 23
Valuation of Shares.................................................... 24
Performance Information................................................ 25
Taxes.................................................................. 27
Other Information...................................................... 29
Financial Statements................................................... 30
</TABLE>
<PAGE>
THE FUNDS AND THEIR INVESTMENT POLICIES
Each fund's investment objective may not be changed without shareholder
approval. Except where noted, the other investment policies of each fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that a fund will achieve its investment objective.
Each fund is a money market fund that invests in high quality money market
instruments that have, or are deemed to have, remaining maturities of 13 months
or less. Money market instruments are short-term debt-obligations and similar
securities. They also include longer term bonds that have variable interest
rates or other special features that give them the financial characteristics of
short-term debt. Each fund may purchase only those obligations that Mitchell
Hutchins determines, pursuant to procedures adopted by the board, present
minimal credit risks and are "First Tier Securities" as defined in Rule 2a-7
under the Investment Company Act of 1940, as amended ("Investment Company Act").
Each fund generally may invest no more than 5% of its total assets in the
securities of a single issuer (other than U.S. government securities), except
that a fund may invest up to 25% of its total assets in First Tier Securities of
a single issuer for a period of up to three business days. The funds may
purchase only U.S. dollar-denominated obligations of foreign issuers.
PREMIER MONEY MARKET FUND'S investment objective is to provide a high level
of current income consistent with the preservation of capital and the
maintenance of liquidity. The fund invests in a diversified portfolio of money
market instruments. The fund's investments include (1) U.S. and foreign
government securities, (2) obligations of U.S. and foreign banks, (3) commercial
paper and other short-term obligations of U.S. and foreign corporations,
partnerships, trusts and other entities, (4) repurchase agreements and (5)
investment company securities.
The fund may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks having total assets at the time of purchase in excess of $1.5 billion. The
fund's investments in non-negotiable time deposits of these institutions will be
considered illiquid if they have maturities greater than seven days.
The fund may invest up to 10% of its net assets in illiquid securities. The
fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33 1/3% of its total assets. The fund
may borrow up to 15% of the value of its total assets for temporary purposes,
including reverse repurchase agreements. The fund may invest in the securities
of other investment companies.
PREMIER TAX-FREE MONEY MARKET FUND'S investment objective is to provide a
high level of current income exempt from federal income tax consistent with the
preservation of capital and the maintenance of liquidity. The fund invests
substantially all of its assets in money market instruments issued by states,
municipalities, public authorities and other issuers, the interest from which is
exempt from federal income tax ("Municipal Securities"). These instruments
include (1) municipal commercial paper, (2) municipal bonds and notes and (3)
variable and floating rate municipal securities.
Municipal bonds include private activity bonds ("PABs"), moral obligation
bonds, municipal lease obligations and certificates of participation therein and
put bonds. The interest on most PABs is an item of tax preference for purposes
of the federal alternative minimum tax ("AMT"). Under normal market conditions,
the fund intends to invest in Municipal Securities that pay interest that is not
an item of tax preference for purposes of the AMT ("AMT exempt interest"), but
may invest up to 20% of its total assets in such securities if, in Mitchell
Hutchins' judgment, market conditions warrant. In addition, when Mitchell
Hutchins believes that there is an insufficient supply of Municipal Securities
or during other unusual market conditions, the fund may temporarily hold cash
and may invest all or any portion of its net assets in taxable money market
instruments, including repurchase agreements. To the extent that the fund holds
cash, such cash would not earn income and would reduce the fund's yield.
2
<PAGE>
The fund may invest more than 25% of its total assets in Municipal
Securities that are related in such a way that an economic, business or
political development or change affecting one such security also would affect
the other securities; for example, securities the interest upon which is paid
from revenues of similar types of projects such as mass transit or water and
sewer works, or securities whose issuers are located in the same state. As a
result of such investments, the fund's yield may be more affected by factors
pertaining to the economy of the relevant governmental issuer and other factors
specifically affecting the ability of issuers of such securities to meet their
obligations.
The fund may invest up to 10% of its net assets in illiquid securities. The
fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33 1/3% of its total assets. The fund
may borrow up to 15% of its total assets for temporary purposes, including
reverse repurchase agreements. It may invest in the securities of other
investment companies.
THE FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS
The following supplements the information contained in the Prospectus and
above concerning the funds' investments, related risks and limitations. Except
as otherwise indicated in the Prospectus or SAI, the funds have established no
policy limitations on their ability to use the investments or techniques
discussed in these documents.
YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER
SECURITIES. The yields on the money market instruments in which each fund
invests are dependent on a variety of factors, including general money market
conditions, conditions in the particular market for the obligation, the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue. The ratings assigned by rating agencies
represent their opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.
Subsequent to its purchase by the funds, an issue may cease to be rated or
its rating may be reduced. If a security in a fund's portfolio ceases to be a
First Tier Security or Mitchell Hutchins becomes aware that a security has
received a rating below the second highest rating by any 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 is either (1)
rated in the highest short-term rating category by at least two nationally
recognized statistical rating agencies ("rating agencies"), (2) rated in the
highest short-term rating category by a single rating agency if only that rating
agency has assigned the obligation a short-term rating, (3) issued by an issuer
that has received such a short-term rating with respect to a security that is
comparable in priority and security, (4) subject to a guarantee rated in the
highest short-term rating category or issued by a guarantor that has received
the highest short-term rating for a comparable debt obligation or (5) unrated,
but determined by Mitchell Hutchins to be of comparable quality. A First Tier
Security rated in the highest short-term category at the time of purchase that
subsequently receives a rating below the highest rating category from a
different rating agency may continue to be considered a First Tier Security.
Opinions relating to the validity of municipal securities and to the
exemption of interest thereon from federal income tax and (when available) from
the AMT are rendered by bond counsel to the respective issuing authorities at
the time of issuance. Neither Premier Tax-Free Money Market Fund nor Mitchell
Hutchins will review the proceedings relating to the issuance of municipal
securities or the basis for these opinions. An issuer's obligations under its
municipal securities are subject to the bankruptcy, insolvency and other laws
affecting the rights and remedies of creditors (such as the federal bankruptcy
laws) and federal, state and local laws that may be enacted that adversely
affect the tax-exempt status of interest on the municipal securities held by the
fund or the exempt-interest dividends received by the fund's shareholders,
extend the time for payment of principal or interest, or both, or impose other
constraints upon enforcement of such obligations. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of
issuers to meet their obligations for the payment of principal of and interest
on their municipal securities may be materially and adversely affected.
3
<PAGE>
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. Commercial paper
includes short-term obligations issued by corporations, partnerships, trusts or
other entities to finance short-term credit needs. The funds also may purchase
other types of non-convertible debt obligations subject to maturity constraints
imposed by the Securities and Exchange Commission ("SEC"). Descriptions of
certain types of short-term obligations are provided below.
ASSET-BACKED SECURITIES. The funds may invest in securities that are
comprised of financial assets that have been securitized through the use of
trusts or special purpose corporations or other entities. For Premier Money
Market Fund, 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. Certain municipal securities also are structured as
asset-backed securities. Payments or distributions of principal and interest may
be guaranteed up to a certain amount and for a certain time period by a letter
of credit or pool insurance policy issued by a financial institution
unaffiliated with the issuer, or other credit enhancements may be present. See
"The Funds' Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements."
VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. The funds may
purchase variable and floating rate securities with remaining maturities in
excess of 13 months issued by U.S. government agencies or instrumentalities or
guaranteed by the U.S. government. In addition, the funds may purchase variable
and floating rate securities of other issuers, and Premier Tax-Free Money Market
Fund may purchase variable and floating rate securities of municipal issuers,
including tender option bonds. 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 a fund the right to tender them back to a
specified party, usually the issuer or a remarketing agent, prior to maturity. A
fund's investments in variable and floating rate securities must comply with
conditions established by the SEC under which they may be considered to have
remaining maturities of 13 months or less. The funds will purchase variable and
floating rate securities of non-U.S. government issuers that have remaining
maturities of more than 13 months only if the securities are subject to a demand
feature exercisable within 13 months or less. See "The Funds' Investments,
Related Risks and Limitations -- Credit and Liquidity Enhancements."
Generally, a fund may exercise demand features (1) upon a default subject
to 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. Premier Money Market Fund may invest
in variable amount master demand notes, which are unsecured redeemable
obligations that permit investment of varying amounts at
4
<PAGE>
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.
INVESTING IN FOREIGN SECURITIES. Premier Money Market Fund's investments in
U.S. dollar-denominated securities of foreign issuers may involve risks that are
different from investments in U.S. issuers. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect the payment of principal or interest
on the fund's investments. Additionally, there may be less publicly available
information about foreign issuers because they may not be subject to the same
regulatory requirements as domestic issuers.
CREDIT AND LIQUIDITY ENHANCEMENTS. A fund may invest in securities that
have credit or liquidity enhancements or may purchase these types of
enhancements in the secondary market. Such enhancements may be structured as
demand features that permit a 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 a fund and affect its share price. The credit and liquidity enhancements may
have conditions that limit the ability of a 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 a fund has valued the securities and includes,
among other things, repurchase agreements maturing in more than seven days and
restricted securities (including certificates of participation) other than those
Mitchell Hutchins has determined are liquid pursuant to guidelines established
by the board. To the extent a fund invests in illiquid securities, it may not be
able to liquidate such investments readily 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
Securities Act has become effective. Where registration is required, a 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, a 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, which establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
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
a 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
5
<PAGE>
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 each fund's
portfolio and reports periodically on such decisions to the board.
Mitchell Hutchins also monitors each fund's overall holdings of illiquid
securities. If a fund's holdings of illiquid securities comes to exceed 10% of
its net assets for any reason, such as a security ceasing to qualify as liquid,
changes in the relative market values of portfolio securities or shareholder
redemptions, Mitchell Hutchins will consider what action would be in the best
interests of the fund and its shareholders.
In making determinations as to the liquidity of municipal lease
obligations, Mitchell Hutchins will distinguish between direct investments in
municipal lease obligations (or participations therein) and investments in
securities that may be supported by municipal lease obligations or certificates
of participation therein. Since these municipal lease obligation-backed
securities are based on a well-established means of securitization, Mitchell
Hutchins does not believe that investing in such securities presents the same
liquidity issues as direct investments in municipal lease obligations.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
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. A 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 a 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 and
corporate bonds) may be subject to special risks and may not have the benefit of
certain protections in the event of the counterparty's insolvency. If the seller
or guarantor becomes insolvent, a fund may suffer delays, costs and possible
losses in connection with the disposition of collateral. The funds intend to
enter into repurchase agreements only in transactions with counterparties
believed by Mitchell Hutchins to present minimum credit risks.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the
sale of securities held by a fund subject to its agreement to repurchase the
securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to a fund's
limitation on borrowings and may be entered into only with banks and securities
dealers. While a reverse repurchase agreement is outstanding, a 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 Funds' Investments, Related Risks and
Limitations -- Segregated Accounts."
Reverse repurchase agreements involve the risk that the buyer of the
securities sold by a 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 a 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. A 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
6
<PAGE>
normal settlement date for such securities at a stated price and yield. A fund
generally would not pay for such securities or start earning interest on them
until they are received. However, when a 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 a 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 a 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 Funds' Investments, Related Risks and
Limitations -- Segregated Accounts." A 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. Each fund may invest in
securities of other money market funds, subject to Investment Company Act
limitations. Among other things, these limitations currently restrict a fund's
aggregate investments in other investment companies to no more than 10% of its
total assets. A fund's investments in certain private investment vehicles are
not subject to this restriction. The shares of other money market funds are
subject to the management fees and other expenses of those funds. At the same
time, a fund would continue to pay its own management fees and expenses with
respect to all its investments, including shares of other money market funds. A
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. Each fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables a fund to earn additional
income, but could result in a loss or delay in recovering these securities. The
borrower of the fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, at least equal
to the market value of the securities loaned, plus accrued interest and
dividends. Acceptable collateral is limited to cash, U.S. government securities
and irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. Each fund may reinvest any cash collateral in money market
investments or other short-term liquid investments, including other investment
companies. A fund also may reinvest cash collateral in private investment
vehicles similar to money market funds, including one managed by Mitchell
Hutchins. In determining whether to lend securities to a particular
broker-dealer or institutional investor, Mitchell Hutchins will consider, and
during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. Each fund will
retain authority to terminate any of its loans at any time. Each fund may pay
fees in connection with a loan and may pay the borrower or placing broker a
negotiated portion of the interest earned on the reinvestment of cash held as
collateral. Each fund will receive amounts equivalent to any interest, dividends
or other distributions on the securities loaned. Each fund will regain record
ownership of loaned securities to exercise beneficial rights, such as voting and
subscription rights, when regaining such rights is considered to be in the
fund's interest.
Pursuant to procedures adopted by the board governing each fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for each 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 funds' securities
lending program.
SEGREGATED ACCOUNTS. When a fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis or reverse
repurchase agreements, 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 its obligation or commitment under such transactions.
7
<PAGE>
TYPES OF MUNICIPAL SECURITIES. Premier Tax-Free Money Market Fund may
invest in a variety of municipal securities, as described below:
Municipal Bonds. Municipal bonds are debt obligations that are issued by
states, municipalities, public authorities or other issuers and that pay
interest that is exempt from federal income tax in the opinion of issuer's
counsel. The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as from
the user of the facility being financed. The term "municipal bonds" also
includes "moral obligation" issues, which are normally issued by special purpose
authorities. In the case of such issues, an express or implied "moral
obligation" of a related government unit is pledged to the payment of the debt
service, but is usually subject to annual budget appropriations. Custodial
receipts that represent an ownership interest in one or more municipal bonds
also are considered to be municipal bonds. Various types of municipal bonds are
described in the following sections.
Municipal Lease Obligations. Municipal bonds include municipal lease
obligations, such as leases, installment purchase contracts and conditional
sales contracts, and certificates of participation therein. Municipal lease
obligations are issued by state and local governments and authorities to
purchase land or various types of equipment or facilities and may be subject to
annual budget appropriations. The fund generally invests in municipal lease
obligations through certificates of participation.
Although municipal lease obligations do not constitute general obligations
of the municipality for which the municipality's taxing power is pledged, they
ordinarily are backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. The leases underlying
certain municipal lease obligations, however, provide that lease payments are
subject to partial or full abatement if, because of material damage or
destruction of the leased property, there is substantial interference with the
lessee's use or occupancy of such property. This "abatement risk" may be reduced
by the existence of insurance covering the leased property, the maintenance by
the lessee of reserve funds or the provision of credit enhancements such as
letters of credit.
Certain municipal lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Some municipal lease obligations of this type
are insured as to timely payment of principal and interest, even in the event of
a failure by the municipality to appropriate sufficient funds to make payments
under the lease. However, in the case of an uninsured municipal lease
obligation, the fund's ability to recover under the lease in the event of a
non-appropriation or default will be limited solely to the repossession of
leased property without recourse to the general credit of the lessee, and
disposition of the property in the event of foreclosure might prove difficult.
Private Activity Bonds ("PABs"). PABs are issued by or on behalf of public
authorities to finance various privately operated facilities, such as airport or
pollution control facilities. These obligations are considered municipal bonds
if the interest paid thereon is exempt from federal income tax in the opinion of
the bond issuer's counsel. PABs are in most cases revenue bonds and thus are not
payable from the unrestricted revenues of the issuer. The credit quality of PABs
is usually directly related to the credit standing of the user of the facilities
being financed. To the extent the fund invests in certain PABs, shareholders
generally will be required to include a portion of their exempt-interest
dividends from the fund in calculating their liability for the AMT. See "Taxes"
below. The fund may invest more than 25% of its assets in PABs, consistent with
its policy of not investing more than 20% of its total assets in securities
subject to the AMT.
Participation Interests. Participation interests are interests in municipal
bonds, including PABs and floating and variable rate obligations, that are owned
by financial institutions. These interests carry a demand feature permitting the
holder to tender them back to the financial institution, which demand feature
generally is backed by an irrevocable letter of credit or guarantee of the
financial institution. The credit standing of such financial institution affects
the credit quality of the participation interests.
8
<PAGE>
A participation interest gives the fund an undivided interest in a
municipal bond owned by a financial institution. The fund has the right to sell
the instruments back to the financial institution. As discussed above under "The
Funds' Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements," to the extent that payment of an obligation is backed by a letter
of credit, guarantee or liquidity support arrangement from a financial
institution, such payment may be subject to the financial institution's ability
to satisfy that commitment. Mitchell Hutchins will monitor the pricing, quality
and liquidity of the participation interests held by the fund, and the credit
standing of financial institutions issuing letters of credit or guarantees
supporting such participation interests on the basis of published financial
information, reports of rating services and financial institution analytical
services.
Put Bonds. A put bond is a municipal bond that gives the holder the
unconditional right to sell the bond back to the issuer or a third party at a
specified price and exercise date, which is typically well in advance of the
bond's maturity date. The obligation to purchase the bond on the exercise date
may be supported by a letter of credit or other credit support arrangement from
a bank, insurance company or other financial institution, the credit standing of
which affects the credit quality of the obligation.
If the put is a "one time only" put, the fund ordinarily will either sell
the bond or put the bond, depending upon the more favorable price. If the bond
has a series of puts after the first put, the bond will be held as long as, in
the judgment of Mitchell Hutchins, it is in the best interest of the fund to do
so. There is no assurance that the issuer of a put bond acquired by the fund
will be able to repurchase the bond upon the exercise date, if the fund chooses
to exercise its right to put the bond back to the issuer or to a third party.
Tender Option Bonds. Tender option bonds are long-term municipal securities
sold by a bank or other financial institution subject to a demand feature that
gives the purchaser the right to sell them to the bank or other financial
institution at par plus accrued interest at designated times (the "tender
option"). The fund may invest in bonds with tender options that may be
exercisable at intervals ranging from daily to 397 days, and the interest rate
on the bonds is typically reset at the end of the applicable interval in an
attempt to cause the bonds to have a market value that approximates their par
value, plus accrued interest. The tender option may not be exercisable in the
event of a default on, or significant downgrading of, the underlying municipal
securities, and may be subject to other conditions. Therefore, the fund's
ability to exercise the tender option will be affected by the credit standing of
both the bank or other financial institution involved and the issuer of the
underlying securities.
Tax-Exempt Commercial Paper and Short-Term Municipal Notes. Municipal bonds
include tax-exempt commercial paper and short-term municipal notes, such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes and
other forms of short-term securities. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements and other revenues.
Mortgage Subsidy Bonds. The fund also may purchase mortgage subsidy bonds
with a remaining maturity of less than 13 months that are issued to subsidize
mortgages on single family homes and "moral obligation" bonds with a remaining
maturity of less than 13 months that are normally issued by special purpose
public authorities. In some cases the repayment of such bonds depends upon
annual legislative appropriations; in other cases repayment is a legal
obligation of the issuer, and if the issuer is unable to meet its obligations,
repayment becomes a moral commitment of a related government unit (subject,
however, to such appropriations).
STAND-BY COMMITMENTS. Premier Tax-Free Money Market Fund may acquire
stand-by commitments under unusual market conditions to facilitate portfolio
liquidity. Pursuant to a stand-by commitment, a municipal bond dealer agrees to
purchase the securities that are the subject of the commitment at an amount
equal to (1) the acquisition cost (excluding any accrued interest paid on
acquisition), less any amortized market premium and plus any accrued market or
original issue discount, plus (2) all interest accrued on the securities since
the last interest payment date or the date the securities were purchased,
whichever is later.
Premier Tax-Free Money Market Fund will enter into stand-by commitments
only with those banks or other dealers that, in the opinion of Mitchell
Hutchins, present minimal credit risk. The fund's right to exercise stand-by
commitments will be unconditional and unqualified. Stand-by commitments will not
be transferable by the fund, although it may sell the underlying securities to a
third party at any time. The fund may pay for stand-by commitments either
separately in cash or by paying a higher price for the securities that are
acquired subject to such
9
<PAGE>
a commitment (thus reducing the yield to maturity otherwise available for the
same securities). The acquisition of a stand-by commitment will not ordinarily
affect the valuation or maturity of the underlying municipal securities.
Stand-by commitments acquired by the fund will be valued at zero in determining
net asset value. Whether the fund paid directly or indirectly for a stand-by
commitment, its cost will be treated as unrealized depreciation and will be
amortized over the period the commitment is held by the fund.
TEMPORARY AND DEFENSIVE INVESTMENTS. When Mitchell Hutchins believes that
there is an insufficient supply of municipal securities or that other
circumstances warrant a defensive posture, Premier Tax-Free Money Market Fund
may hold cash and may invest all or any portion of its net assets in taxable
money market instruments, including repurchase agreements. To the extent the
fund holds cash, such cash would not earn income and would reduce the fund's
yield.
INVESTMENT LIMITATIONS OF THE FUNDS
FUNDAMENTAL LIMITATIONS. The following investment limitations cannot be
changed with respect to a fund without the affirmative vote of the lesser of (a)
more than 50% of the outstanding shares of the fund or (b) 67% or more of the
shares present at a shareholders' meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy. If a percentage
restriction is adhered to at the time of an investment or transaction, a later
increase or decrease in percentage resulting from changing values of portfolio
securities or amount of total assets will not be considered a violation of any
of the following limitations.
Each fund will not:
(1) purchase securities of any one issuer if, as a result, more than 5% of
the fund's total assets would be invested in securities of that issuer or the
fund would own or hold more than 10% of the outstanding voting securities of
that issuer, except that up to 25% of the fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its agencies
and instrumentalities or to securities issued by other investment companies.
The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.
With respect to Premier Tax-Free Money Market Fund, the following
interpretation applies to, but is not a part of, fundamental limitation (1):
Each state, territory and possession of the United States (including the
District of Columbia and Puerto Rico), each political subdivision, agency,
instrumentality and authority thereof, and each multi-state agency of which a
state is a member is a separate "issuer." When the assets and revenues of an
agency, authority, instrumentality or other political subdivision are separate
from the government creating the subdivision and the security is backed only by
the assets and revenues of the subdivision, such subdivision would be deemed to
be the sole issuer. Similarly, in the case of a PAB, if that bond is backed only
by the assets and revenues of the non-governmental user, then that
non-governmental user would be deemed to be the sole issuer. However, if the
creating government or another entity guarantees a security, then to the extent
that the value of all securities issued or guaranteed by that government or
entity and owned by the fund exceeds 10% of the fund's total assets, the
guarantee would be considered a separate security and would be treated as issued
by that government or entity.
(2) purchase any security if, as a result of that purchase, 25% or more of
the fund's total assets would be invested in securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities or to municipal securities or to certificates of
deposit and bankers' acceptances of domestic branches of U.S. banks.
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<PAGE>
The following interpretations apply to, but are not a part of, this fundamental
restriction: (a) domestic and foreign banking will be considered to be different
industries; and (b) asset-backed securities will be grouped in industries based
upon their underlying assets and not treated as constituting a single, separate
industry.
(3) issue senior securities or borrow money, except as permitted under the
Investment Company Act and then not in excess of 33 1/3% of the fund's total
assets (including the amount of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the time of the issuance or
borrowing, except that the fund may borrow up to an additional 5% of its total
assets (not including the amount borrowed) for temporary or emergency purposes.
(4) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction, the
acquisition of bonds, debentures, other debt securities or instruments or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances or
similar instruments will not be considered the making of a loan.
The following interpretation applies to, but is not a part of, this fundamental
restriction: a fund's investments in master notes and similar instruments will
not be considered to be the making of a loan.
(5) engage in the business of underwriting securities of other issuers,
except to the extent that the fund might be considered an underwriter under the
federal securities laws in connection with its disposition of portfolio
securities.
(6) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by interests
in real estate are not subject to this limitation, and except that the fund may
exercise rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an orderly
manner.
(7) purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but the fund may purchase, sell or enter
into financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without shareholder
approval. If a percentage restriction is adhered to at the time of an investment
or transaction, a later increase or decrease in percentage resulting from
changing values of portfolio securities or amount of total assets will not be
considered a violation of any of the following limitations.
Each fund will not:
(1) purchase securities 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.
11
<PAGE>
(5) invest more than 10% of its net assets in illiquid securities.
ORGANIZATION OF THE TRUST; TRUSTEES AND OFFICERS;
PRINCIPAL HOLDERS OF SECURITIES
The Trust was organized on April 29, 1998, as a business trust under the
laws of Delaware and has five series. The Trust has authority to issue an
unlimited number of shares of beneficial interest of separate series, par value
$0.001 per share. The Trust is governed by a board of trustees, which oversees
the funds' operations. The board is authorized to establish additional series.
The trustees and executive officers of the Trust, their ages, business addresses
and principal occupations during the past five years are:
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Margo N. Alexander*'D'; 53 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 director of
PaineWebber (since March 1984). Mrs. Alexander
is president and a director or trustee of 31
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 30 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**'D'; 73 Director and Chairman of Mr. Bewkes is a director of PW Group
the Board of Trustees (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 34 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.
Richard R. Burt; 53 Trustee Mr. Burt is chairman of IEP Advisors,
1275 Pennsylvania Ave., N.W. LLP (international investments and
Washington, DC 20004 consulting 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), six investment companies
in the Deutsche Bank family of funds,
nine investment companies in the Flag
Investors family of funds, The Central
European Funds, Inc. and The Germany
Fund, Inc., vice chairman of Anchor
Gaming (provides technology to gaming
and wagering industry) (since July 1999)
and chairman of Weirton Steel Corp.
(makes and finishes steel products)
(since April 1996). He was the chief
negotiator in the Strategic Arms
Reduction Talks with the former Soviet
Union (1989-1991) and the U.S.
Ambassador to the Federal Republic of
Germany (1985-1989). Mr. Burt is a
director or trustee of 30 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.
Mary C. Farrell**'D'; 50 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 29 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Meyer Feldberg; 58 Trustee Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of
101 Uris Hall Business, Columbia University. Prior to
New York, NY 10027 1989, he was president of the Illinois
Institute of Technology. Dean Feldberg
is also a director of Primedia Inc.
(publishing), Federated Department
Stores, Inc. (operator of department
stores) and Revlon, Inc. (cosmetics).
Dean Feldberg is a director or trustee
of 33 investment companies for which
Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment
adviser.
George W. Gowen; 70 Trustee Mr. Gowen is a partner in the law firm
666 Third Avenue of Dunnington, Bartholow & Miller. Prior
New York, NY 10017 to May 1994, he was a partner in the law
firm of Fryer, Ross & Gowen. Mr. Gowen
is a director or trustee of 33
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Frederic V. Malek; 63 Trustee Mr. Malek is chairman of Thayer Capital
1455 Pennsylvania Ave., N.W. Partners (merchant bank) and chairman of
Suite 350 Thayer Hotel Investors II and Lodging
Washington, DC 20004 Opportunities Fund (hotel investment
partnerships). From January 1992 to
November 1992, he was campaign manager
of Bush-Quayle '92. From 1990 to 1992,
he was vice chairman and, from 1989 to
1990, he was president of Northwest
Airlines Inc. 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
Aegis Communications, Inc. (tele-
services), American Management Systems,
Inc. (management consulting and computer
related services), Automatic Data
Processing, Inc., (computing services),
CB Richard Ellis, Inc. (real estate
services), FPL Group, Inc. (electric
services), Global Vacation Group
(packaged vacations), HCR/Manor Care,
Inc. (health care), SAGA Systems, Inc.
(software company) and Northwest
Airlines Inc. Mr. Malek is a director or
trustee of 30 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Carl W. Schafer; 64 Trustee Mr. Schafer is president of the Atlantic
66 Witherspoon Street, #1100 Foundation (charitable foundation
Princeton, NJ 08542 supporting mainly oceanographic
exploration and research). He is a
director of Labor Ready, Inc. (temporary
employment), Roadway Express, Inc.
(trucking), The Guardian Group of Mutual
Funds, the Harding, Loevner Funds,
E.I.I. Realty Trust (investment
company), 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 30 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
Brian M. Storms*'D'; 45 Trustee Mr. Storms is president and chief
operating officer of Mitchell Hutchins
(since March 1999). Mr. Storms 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 30 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
Tom Disbrow**, 34 Vice President and Mr. Disbrow is a first vice president
Assistant Treasurer and a senior manager of the mutual fund
finance department of Mitchell Hutchins.
Prior to November 1999, he was a vice
president of Zweig/Glaser Advisers. Mr.
Disbrow is a vice president and
assistant treasurer of 31 investment
companies for which Mitchell Hutchins,
PaineWebber, or one of their affiliates
serves as investment adviser.
Kris L. Dorr*; 36 Vice President Ms. Dorr is a first vice president and a
portfolio manager in the short-term
strategies group of Mitchell Hutchins.
Prior to 1994, Ms. Dorr was a vice
president and portfolio manager in the
money market mutual funds group of
Kidder Peabody Asset Management Inc. Ms.
Dorr is a vice president of one
investment company for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Elbridge T. Gerry III*; 43 Vice President Mr. Gerry is a senior vice president and
a portfolio manager of Mitchell
Hutchins. Prior to January 1996, he was
with J. P. Morgan Private Banking where
he was responsible for managing
municipal assets, including several
municipal bond funds. Mr. Gerry is a
vice president of five investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.
John J. Lee**; 31 Vice President and Mr. Lee is a vice president and a
Assistant Treasurer manager of the mutual fund finance
department of Mitchell Hutchins. Prior
to September 1997, he was an audit
manager in the financial services
practice of Ernst & Young LLP. Mr. Lee
is a vice president and assistant
treasurer of 31 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as an
investment adviser.
Kevin J. Mahoney**; 34 Vice President and Mr. Mahoney is a first vice president
Assistant Treasurer and a senior manager of the mutual fund
finance department of Mitchell Hutchins.
From August 1996 through March 1999, he
was the manager of the mutual fund
internal control group of Salomon Smith
Barney. Prior to August 1996, he was an
associate and assistant treasurer of
BlackRock Financial Management L.P. Mr.
Mahoney is a vice president and
assistant treasurer of 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.
Michael H. Markowitz*; 35 Vice President Mr. Markowitz is a first vice president
and a portfolio manager in the
short-term strategies group of Mitchell
Hutchins. Prior to 1994, Mr. Markowitz
was an assistant treasurer and portfolio
manager in the Global Investment
Management Group at Bankers Trust
Company. Mr. Markowitz is a vice
president of one investment company for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
Dennis McCauley*; 53 Vice President Mr. McCauley is a managing director and
chief investment officer--fixed income
of Mitchell Hutchins. Prior to December
1994, he was director of fixed income
investments of IBM Corporation. Mr.
McCauley is a vice president of 22
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Kevin P. McIntyre*; 33 Vice President Mr. McIntyre is a vice president and a
portfolio manager of Mitchell Hutchins.
Mr. McIntyre is a vice president of one
investment company for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Ann E. Moran**; 42 Vice President and Ms. Moran is a vice president and a
Assistant Treasurer manager of the mutual fund finance
department of Mitchell Hutchins. Ms.
Moran is a vice president and assistant
treasurer of 31 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
Dianne E. O'Donnell**; 47 Vice President and Ms. O'Donnell is a senior vice president
Secretary and deputy general counsel of Mitchell
Hutchins. Ms. O'Donnell is a vice
president and secretary of 30 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*; 40 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 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.
Susan Ryan*; 39 Vice President Ms. Ryan is a senior vice president and
portfolio manager of Mitchell Hutchins
and has been with Mitchell Hutchins
since 1982. Ms. Ryan is a vice president
of five investment companies for which
Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment
adviser.
Paul H. Schubert**; 37 Vice President and Mr. Schubert is a senior vice president
Treasurer and director of the mutual fund finance
department of Mitchell Hutchins. Mr.
Schubert is a vice president and
treasurer of 31 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
Barney A. Taglialatela**; 39 Vice President and Mr. Taglialatela is a vice president and
Assistant Treasurer a manager of the mutual fund finance
department of Mitchell Hutchins. Prior
to February 1995, he was a manager of
the mutual fund finance division of
Kidder Peabody Asset Management, Inc.
Mr. Taglialatela is a vice president and
assistant treasurer of 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Debbie Vermann*; 41 Vice President Ms. Vermann is a vice president and a
portfolio manager of Mitchell Hutchins.
Ms. Vermann is a vice president of three
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Keith A. Weller**; 38 Vice President and Mr. Weller is a first vice 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 30 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
</TABLE>
- -------------------
* This person's business address is 51 West 52nd Street, New York,
New York 10019-6114.
** This person's business address is 1285 Avenue of the Americas, New York,
New York 10019-6028.
'D' Mrs. Alexander, Mr. Bewkes, Ms. Farrell and Mr. Storms are "interested
persons" of the funds as defined in the Investment Company Act by virtue of
their positions with Mitchell Hutchins, PaineWebber and/or PW Group.
The Trust pays each trustee who is not an "interested person" of the Trust
$1,000 annually for each series and up to $150 per series for each board meeting
and each meeting of a board committee. The Trust thus pays each such trustee
$5,000 annually, plus any additional amounts due for board or committee
meetings. Each chairman of the audit and contract review committees of
individual funds within the PaineWebber fund complex receives additional
compensation, aggregating $15,000 annually, from the relevant funds. All
trustees are reimbursed for any expenses incurred in attending meetings. Because
Correspondent Services Corporation (csc) and Mitchell Hutchins perform
substantially all the services necessary for the operation of the Trust, the
Trust requires no employees. No officer, director or employee of Mitchell
Hutchins or PaineWebber presently receives any compensation from the Trust for
acting as a trustee or officer.
The table below includes certain information relating to the compensation
of the Trust's current board members and the compensation of those board members
from all PaineWebber funds during the periods indicated:
COMPENSATION TABLE'D'
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
NAME OF PERSON, POSITION FROM THE TRUST* THE FUND COMPLEX**
------------------------ ---------------------- -----------------------
<S> <C> <C>
Richard Q. Armstrong, Trustee................ $8,780 $104,650
Richard R. Burt, Trustee..................... $8,750 $102,850
Meyer Feldberg, Trustee...................... $8,780 $119,650
George W. Gowen, Trustee..................... $9,177 $119,650
Frederic V. Malek, Trustee................... $8,780 $104,650
Carl W. Schafer, Trustee..................... $8,780 $104,650
</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 estimated to be paid to each board member during the funds'
fiscal year ending December 31, 2000.
18
<PAGE>
** Represents total compensation paid during the calendar year ended December
31, 1999, to each board member by 31 investment companies (34 in the case of
Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or one
of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.
PRINCIPAL HOLDERS AND MANAGEMENT OWNERSHIP OF SECURITIES
As of March 31, 2000, trustees and officers owned in the aggregate less
than 1% of the outstanding shares of either fund.
As of March 31, 2000, no shareholder owned 5% or more of either fund's
shares.
INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. Mitchell Hutchins acts
as each fund's investment adviser and administrator pursuant to a contract
("Advisory and Administration Contract") under which each fund pays Mitchell
Hutchins an annual fee, computed daily and paid monthly, at the rate of 0.20% of
average daily net assets.
Services provided by Mitchell Hutchins under the Advisory and
Administration Contract, as discussed below, include the provision of a
continuous investment program for the funds and supervision of all matters
relating to the administration and operation of the funds.
Correspondent Cash Reserves Money Market Portfolio and Correspondent Cash
Reserves Tax Free Money Market Portfolio reorganized into Premier Money Market
Fund and Premier Tax-Free Money Market Fund, respectively, on January 21, 2000.
Premier Money Market Fund and Premier Tax-Free Money Market Fund had no
investment operations prior to the reorganizations. During each of the periods
indicated, Mitchell Hutchins was paid the fees indicated below under a
substantially similar advisory agreement with the predecessor entity to each
Premier fund:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31
--------------------------------------------------
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
Correspondent Cash Reserves Money Market Portfolio ................. $1,669,144 $1,328,616 $1,088,088
Correspondent Cash Reserves Tax Free Money Market Portfolio......... 115,099 113,647 79,470*
</TABLE>
- -----------------
* Pursuant to an undertaking by Mitchell Hutchins, $14,024 of the $93,494
advisory fee payable for the fiscal year ended December 31, 1997 was
waived, resulting in the net payment of $79,470.
Under a contract with BISYS Fund Services Ohio, Inc. ("BISYS") ("BISYS
Administration Contract"), BISYS served as the administrator to Correspondent
Cash Reserves Money Market Portfolio and Correspondent Cash Reserves Tax Free
Money Market Portfolio, the predecessor entities to Premier Money Market Fund
and Premier Tax-Free Money Market Fund. Under the BISYS Administration Contract,
each fund paid BISYS a fee, computed daily and paid monthly, at an annual rate
of 0.10% of the value of each fund's average daily net assets. For the fiscal
years ended December 31, 1999, 1998 and 1997. Correspondent Cash Reserves Money
Market Portfolio and Correspondent Cash Reserves Tax Free Money Market Portfolio
paid BISYS fees in the amount of $1,669,144, $1,328,616 and $1,088,088; and
$115,099, $66,199 and $26,487; respectively. However, BISYS waived $46,040 of
its fees for the fiscal year ended December 31, 1999 with respect to
Correspondent Cash Reserves Tax Free Portfolio, resulting in a net payment of
$69,059.
Pursuant to the terms of a Special Management Services Agreement with
Mitchell Hutchins and BISYS, Correspondent Cash Reserves Money Market Portfolio
and Correspondent Cash Reserves Tax Free Money Market Portfolio had agreed to
pay Mitchell Hutchins and BISYS each a monthly fee at the annual rate of 0.05%
of each
19
<PAGE>
fund's average daily net asset value. The fees payable to Mitchell Hutchins by
Correspondent Cash Reserves Money Market Portfolio under the Special Management
Services Agreement for the fiscal years ended December 31, 1999, 1998 and 1997,
amounted to $834,572, $664,308 and $544,044 respectively; however, pursuant to
an undertaking, Mitchell Hutchins waived its fee in its entirety for each such
fiscal year. The fees payable to Mitchell Hutchins by Correspondent Cash
Reserves Tax Free Money Market Portfolio under the Special Management Services
Agreement for the fiscal years ended December 31, 1999, 1998 and 1997, amounted
to $57,550, $56,824 and $46,747, respectively, which amounts were waived in
their entirety pursuant to an undertaking. The fees payable to BISYS by
Correspondent Cash Reserves Money Market Portfolio under the Special Management
Services Agreement for the fiscal years ended December 31 1999, 1998 and 1997
amounted to $834,572, $664,308 and $544,044, respectively; however, pursuant to
an undertaking, BISYS waived its fee in its entirety for each such fiscal year.
The fees payable to BISYS by Correspondent Cash Reserves Tax Free Money Market
Portfolio under the Special Management Services Agreement for the fiscal years
ended December 31, 1999, 1998 and 1997 amounted to $57,550, $56,823 and,
$46,747, respectively, which amounts were waived in their entirety pursuant to
an undertaking.
Under the Advisory and Administration Contract, Mitchell Hutchins will not
be liable for any error of judgment of mistake of law or for any loss suffered
by the funds in connection with the performance of the Advisory and
Administration Contract, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of Mitchell Hutchins in the performance of
its duties or from reckless disregard of its duties and obligations thereunder.
The Advisory and Administration Contract terminates automatically upon
assignment and is terminable at any time without penalty by the board or by vote
of the holders of a majority of the funds' outstanding voting securities on 60
days' written notice to Mitchell Hutchins, or by Mitchell Hutchins on 60 days'
written notice to the funds.
Under the terms of the Advisory and Administration Contract, each fund
bears all expenses incurred in its operation that are not specifically assumed
by Mitchell Hutchins. General expenses of the Trust not readily identifiable as
belonging to a specific fund or to the Trust's other series are allocated among
series by or under the direction of the board of trustees in such manner as the
board deems fair and equitable. Expenses borne by the Trust include the
following (or each fund's share of the following): (1) the cost (including
brokerage commissions) of securities purchased or sold by a fund and any losses
incurred in connection therewith; (2) fees payable to and expenses incurred on
behalf of a fund by Mitchell Hutchins under the contract; (3) expenses of
organizing the Trust and each fund; (4) filing fees and expenses relating to the
registration and qualification of a fund's shares and the Trust under federal
and/or state securities laws and maintaining such registration and
qualifications; (5) fees and salaries payable to the Trust's trustees and
officers who are not interested persons of the Trust or Mitchell Hutchins; (6)
all expenses incurred in connection with the trustees' services, including
travel expenses; (7) taxes (including any income or franchise taxes) and
governmental fees; (8) costs of any liability, uncollectible items of deposit
and other insurance and fidelity bonds; (9) any costs, expenses or losses
arising out of a liability of or claim for damages or other relief asserted
against the Trust or a fund for violation of any law; (10) legal, accounting and
auditing expenses, including legal fees of special counsel for those trustees of
the Trust who are not interested persons of the Trust; (11) charges of
custodians, transfer agents and other agents (including any lending agent); (12)
costs of preparing share certificates (if any); (13) expenses of setting in type
and printing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials for existing
shareholders; (14) costs of mailing prospectuses and supplements thereto,
statements of additional information and supplements thereto, reports and proxy
materials to existing shareholders; (15) any extraordinary expenses (including
fees and disbursements of counsel, costs of actions, suits or proceedings to
which the Trust is a party and the expenses the Trust may incur as a result of
its legal obligation to provide indemnification to its officers, trustees,
agents and shareholders) incurred by the Trust or a fund; (16) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations; (17) the cost of mailing and tabulating
proxies and costs of meetings of shareholders, the board and any committees
thereof; (18) the cost of investment company literature and other publications
provided by the Trust to its trustees and officers; (19) costs of mailing,
stationery and communications equipment; (20) expenses incident to any dividend,
withdrawal or redemption options; (21) charges and expenses of any outside
pricing service used to value portfolio securities; and (22) interest on
borrowings of a fund.
Mitchell Hutchins, csc and the funds have entered into a fee waiver and
reimbursement agreement pursuant to which csc will waive 12b-1 fees (described
below) in an amount equal to 0.17% of Premier Tax-Free Money Market Fund's
average daily net assets during the fund's fiscal year ending December 31, 2000.
Mitchell Hutchins
20
<PAGE>
has also agreed to reimburse the Trust on behalf of each fund for the fund's
operating expenses (excluding management fees, 12b-1 fees, interest expenses,
taxes, brokerage commissions and extraordinary expenses) to the extent that its
aggregate net operating expenses exceed the following amounts per annum during
its fiscal year ending December 31, 2000:
<TABLE>
<S> <C>
Premier Money Market Fund..............0.90%
Premier Tax-Free Money Market Fund. ...0.68% (including csc's 12b-1 fee waiver)
</TABLE>
(Each of these amounts is the "Maximum Permitted Rate" for the applicable
fund.) The Trust has agreed to repay the aggregate amount of Mitchell Hutchins'
expense reimbursements out of the assets of the fund for which the expense
reimbursements were made if the reimbursements would not cause the fund's
aggregate net operating expenses to exceed the Maximum Permitted Rate for that
fund. The Trust will only pay these reimbursements, if any, during the three
years following December 31, 2000.
NET ASSETS. The following table shows the approximate net assets as of
February 29, 2000, 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) .............. $9,931.5
Global.......................................... $4,757.8
Equity/Balanced................................. $10,115.9
Fixed Income (excluding Money Market) .......... $4,573.4
Taxable Fixed Income ...................... $3,146.1
Tax-Free Fixed Income ..................... $1,427.3
Money Market Funds ............................. $39,977.1
</TABLE>
FUND ACCOUNTING ARRANGEMENTS. Pursuant to a Fund Accounting Agreement with
each Fund, BISYS provides accounting services to the funds, such as maintaining
their books and records, calculating each fund's daily net asset value,
obtaining prices of securities, and providing periodic and special accounting
reports. For these services, BISYS will receive the following fees, which will
be computed daily and paid monthly: 0.005% of each fund's average daily net
assets up to $1 billion, 0.0025% of each fund's average daily net assets in
excess of $1 billion up to $2 billion, and 0.001% in excess of $2 billion.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of
each fund's shares under a distribution contract with the Trust ("Distribution
Contract"), which requires Mitchell Hutchins to use its best efforts, consistent
with its other business, to sell shares of the funds. No separate compensation
is payable by either fund to Mitchell Hutchins or its affiliates under the
Distribution Contract. Instead, Mitchell Hutchins or an affiliate shall receive
service and distribution fees under the funds' plan of distribution, as
described below. Shares of the funds are offered continuously, except that the
Trust and Mitchell Hutchins or its affiliates reserve the right to reject any
purchase order and to suspend the offering of fund shares for a period of time.
Under a plan of distribution pertaining to each fund's shares adopted by
the Trust in the manner prescribed under Rule 12b-1 under the Investment Company
Act ("12b-1 Plan"), each fund pays csc a distribution and service fee, accrued
daily and payable monthly, at the annual rate of 0.60% of the average daily net
assets of each fund. However, csc has agreed to waive 0.17% of Premier Tax-Free
Money Market Fund's Rule 12b-1 fee through December 31, 2000, making the
effective rate of this fee 0.43% until then. Csc is a wholly owned subsidiary
of PaineWebber.
Csc uses the amounts that it receives under the 12b-1 Plan to pay certain
correspondent firms and other financial services firms (together with csc, the
"Securities Firms") with which it has entered into clearing agreements under
which the Securities Firms have agreed to perform certain services for their
clients who are shareholders of a fund. Csc receives no special compensation
from either of the funds or investors at the time shares are bought.
21
<PAGE>
Csc also uses the 12b-1 Plan fee to:
Spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of fund shares.
Offset each fund's marketing costs, such as preparation, printing and
distribution of sales literature, advertising and prospectuses to
prospective investors and related overhead expenses, such as employee
salaries and bonuses.
The 12b-1 Plan and the related Distribution Contract for each fund's shares
specify that the funds must pay service and distribution fees to csc for their
activities, not as reimbursement for specific expenses incurred. Therefore, even
if csc's expenses exceed the fees it receives, the funds will not be obligated
to pay more than those fees. On the other hand, if csc's expenses are less than
such fees, it will retain its full fees and realize a profit. Expenses in excess
of fees received or accrued through the termination date of the 12b-1 Plan will
be csc's sole responsibility and not that of the funds. Annually, the board
reviews the 12b-1 Plan and csc's corresponding expenses for each fund.
Among other things, the 12b-1 Plan provides that (1) csc will submit to the
board at least quarterly, and the trustees will review, reports regarding all
amounts expended under the 12b-1 Plan and the purposes for which such
expenditures were made, (2) the 12b-1 Plan will continue in effect only so long
as it is approved at least annually, and any material amendment thereto is
approved, by the board, including those trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the 12b-1 Plan or any agreement related to the 12b-1 Plan,
acting in person at a meeting called for that purpose, (3) payments by the funds
under the 12b-1 Plan shall not be materially increased without the affirmative
vote of the holders of a majority of the outstanding shares of the funds and (4)
while the 12b-1 Plan remains in effect, the selection and nomination of trustees
who are not "interested persons" of the Trust shall be committed to the
discretion of the trustees who are not "interested persons" of the Trust.
The funds' predecessors, Correspondent Cash Reserves Money Market Portfolio
and Correspondent Cash Reserves Tax Free Money Market Portfolio, operated under
a separate Rule 12b-1 plan with csc. Under this Rule 12b-1 plan, $10,014,988 was
payable to csc by Correspondent Cash Reserves Money Market Portfolio for the
fiscal year ended December 31, 1999. However, pursuant to an undertaking, this
amount was reduced by $186,666, resulting in a net amount paid by Correspondent
Cash Reserves Money Market Fund of $9,828,322. For the fiscal year ended
December 31, 1999, the amount payable pursuant to the Rule 12b-1 plan by
Correspondent Cash Reserves Tax Free Money Market Portfolio was $690,600;
however, pursuant to an undertaking, the amount was reduced by $195,668,
resulting in a net amount paid by Correspondent Cash Reserves Tax Free Money
Market Portfolio of $494,932. All of the above amounts were paid to
broker-dealers in connection with the sale of fund shares.
On January 21, 2000, when the predecessor entities reorganized into the
funds, the new 12b-1 Plan with csc took effect.
In approving the 12b-1 Plan, the board considered all the features of the
distribution system, including (1) the reasonableness of csc's fees, (2) the
likelihood that the 12b-1 Plan would facilitate distribution of fund shares, (3)
the structural continuity of the 12b-1 Plan with the plan of distribution of the
funds' predecessor entities, (4) the advantage to the shareholders of economies
of scale resulting from growth in the funds' assets and potential continued
growth and other possible benefits to shareholders of the 12b-1 Plan, (5) the
services provided to the funds and their shareholders by csc, (6) the services
provided by Securities Firms pursuant to their clearing agreements with csc, (7)
csc's shareholder service- and distribution-related expenses and costs and (8)
the similarity of the 12b-1 Plan to plans of distribution adopted by competitor
money market funds.
With respect to the 12b-1 Plan, the board considered all compensation that
csc would receive under the Plan. The board also considered the benefits that
would accrue to csc under the Plan in that csc would receive a
22
<PAGE>
service and distribution fee that is calculated based upon a percentage of the
average net assets of each fund and would increase if the 12b-1 Plan were
successful and the funds attained and maintained significant asset levels.
PORTFOLIO TRANSACTIONS
The funds purchase portfolio securities from dealers and underwriters as
well as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter. [During the fiscal years ended December 31, 1997, 1998 and
1999, neither fund's predecessor entity paid any brokerage commissions;
therefore, neither predecessor entity has allocated any brokerage transactions
for research, analysis, advice and similar services.]
For purchases or sales with broker-dealer firms that act as principal,
Mitchell Hutchins seeks best execution. Although Mitchell Hutchins may receive
certain research or execution services in connection with these transactions,
Mitchell Hutchins will not purchase securities at a higher price or sell
securities at a lower price than would otherwise be paid, if no weight was
attributed to the services provided by the executing dealer. Mitchell Hutchins
may engage in agency transactions in over-the-counter securities in return for
research and execution services. These transactions are entered into only in
compliance with procedures ensuring that the transaction (including commissions)
is at least as favorable as it would have been if effected directly with a
market-maker that did not provide research or execution services.
Research services and information received from brokers or dealers are
supplemental to Mitchell Hutchins' own research efforts and, when utilized, are
subject to internal analysis before being incorporated into its investment
processes. Information and research services furnished by brokers or dealers
through which or with which the funds effect securities transactions may be used
by Mitchell Hutchins in advising other funds or accounts and, conversely,
research services furnished to Mitchell Hutchins by brokers or dealers in
connection with other funds or accounts that it advises may be used in advising
the funds.
Investment decisions for the funds and for other investment accounts
managed by Mitchell Hutchins are made independently of each other in light of
differing considerations for the various accounts. However, the same investment
decision may occasionally be made for the funds and one or more of such
accounts. In such cases, simultaneous transactions are inevitable. Purchases or
sales are then averaged as to price and allocated between that fund and such
other account(s) as to amount according to a formula deemed equitable to the
fund and the other account(s). While in some cases this practice could have a
detrimental effect upon the price or value of the security as far as the funds
are concerned, or upon its ability to complete its entire order, in other cases
it is believed that coordination and the ability to participate in volume
transactions will benefit the fund.
ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION; SERVICE ORGANIZATIONS
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION. Each fund may suspend
redemption privileges or postpone the date of payment during any period (1) when
the New York Stock Exchange is closed or trading on the New York Stock Exchange
is restricted as determined by the SEC, (2) when an emergency exists, as defined
by the SEC, that makes it not reasonably practicable for the fund to dispose of
securities owned by it or fairly to determine the value of its assets or (3) as
the SEC may otherwise permit. The redemption price may be more or less than the
shareholder's cost, depending on the market value of each fund's portfolio at
the time; although the funds attempt to maintain a constant net asset value of
$1.00 per share.
Under normal circumstances, the funds' shares may be redeemed by a
shareholder's check or through the funds' systematic withdrawal plan. Such a
redemption order will be executed at the net asset value next determined
23
<PAGE>
after the order is received by Mitchell Hutchins. Redemptions of each fund's
shares effected through a broker-dealer or other financial institution may be
subject to a service charge by that broker-dealer or other financial
institution.
The transfer agent may modify or terminate the funds' checkwriting service
at any time or impose service fees for checkwriting.
SERVICE ORGANIZATIONS. The funds may authorize service organizations, and
their agents, to accept on their behalf purchase and redemption orders that are
in "good form." The funds will be deemed to have received these purchase and
redemption orders when a service organization or its agent accepts them. Like
all customer orders, these orders will be priced based on each fund's net asset
value next computed after receipt of the order by the service organizations or
their agents. Service organizations may include retirement plan service
providers who aggregate purchase and redemption instructions received from
numerous retirement plans or plan participants.
VALUATION OF SHARES
Each fund uses its best efforts to maintain its net asset value at $1.00
per share. Each fund's net asset value per share is determined as of 12:00 noon,
Eastern time, on each Business Day. As defined in the Prospectus, "Business Day"
means any day on which the offices of BONY, the funds' transfer agent, BISYS,
Mitchell Hutchins and the relevant correspondent (or other financial services)
firm are all open for business. One or more of these institutions will be closed
on the observance of the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Each fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ("Rule") under the Investment Company
Act. To use amortized cost to value its portfolio securities, the funds must
adhere to certain conditions under the Rule relating to its investments, some of
which are discussed in this 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, a fund might have to
sell portfolio securities prior to maturity and at a price that might not be
desirable.
The board has established procedures for the purpose of maintaining a
constant net asset value of $1.00 per share, which include a review of the
extent of any deviation of net asset value per share, based on available market
quotations, from the $1.00 amortized cost per share. If that deviation exceeds
1/2 of 1% for a fund, the board will promptly consider whether any action should
be initiated to eliminate or reduce material dilution or other unfair results to
shareholders. Such action may include redeeming shares in kind, selling
portfolio securities prior to maturity, reducing or withholding dividends and
utilizing a net asset value per share as determined by using available market
quotations. Each fund will maintain a dollar-weighted average portfolio maturity
of 90 days or less and will not purchase any instrument having, or deemed to
have, a remaining maturity of more than 397 days, will limit portfolio
investments, including repurchase agreements, to those U.S. dollar-denominated
instruments that are of high quality under the Rule and that Mitchell Hutchins,
acting pursuant to the procedures, determines present minimal credit risks, and
will comply with certain reporting and recordkeeping procedures. There is no
assurance that constant net asset value per share will be maintained. If
amortized cost ceases to represent fair value per share, the board will take
appropriate action.
In determining the approximate market value of portfolio investments, each
fund may employ outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board.
24
<PAGE>
PERFORMANCE INFORMATION
The funds' performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represent past performance and are not
intended to indicate future performance. The investment return will fluctuate.
All performance shown is that of the funds' predecessors.
TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in each fund's Performance Advertisements are
calculated according to the following formula:
P(1 + T)'pp'n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares
T = average annual total return of shares
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of that period.
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. All dividends are assumed to have been reinvested at net asset value.
The funds may also advertise other performance data, which may consist of
the annual or cumulative return (including short-term capital gain, if any)
earned on a hypothetical investment in the fund since it began operations or for
shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).
The following tables show performance information for the funds' shares
outstanding for the periods indicated. All returns for periods of more than one
year are expressed as an average annual return.
PREMIER MONEY MARKET FUND
<TABLE>
<S> <C>
Year ended December 31, 1999:
Standardized Return................. 4.40%
Five Years ended December 31, 1999:
Standardized Return................. 4.78%
Inception* to December 31, 1999:
Standardized Return................. 4.16%
</TABLE>
- --------------
* The inception date for the predecessor fund is May 20, 1991.
PREMIER TAX-FREE MONEY MARKET FUND
<TABLE>
<S> <C>
Year ended December 31, 1999: 2.53%
Standardized Return.................
Inception* to December 31, 1999: 2.75%
Standardized Return.................
</TABLE>
- --------------
* The inception date for the predecessor fund is October 7, 1996.
YIELD. Each fund computes its yield and effective yield quotations using
standardized methods required by the SEC. Each fund from time to time advertises
(1) its current yield based on a recently ended seven-day period, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return and then
multiplying the base period return by (365/7), with the resulting yield figure
carried to at least the nearest hundredth of one percent; and (2) their
effective yield based on the same seven-day period by compounding the base
period return by adding 1, raising the sum to a power equal to (365/7) and
subtracting 1 from the result, according to the following formula:
25
<PAGE>
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)'pp'365/7] - 1
Premier Tax-Free Money Market Fund from time to time also advertises its
tax-equivalent yield and tax-equivalent effective yield, also based on a
recently ended seven-day period. These quotations are calculated by dividing
that portion of the fund's yield (or effective yield, as the case may be) that
is tax-exempt by 1 minus a stated income tax rate and adding the product to that
portion, if any, of the fund's yield that is not tax-exempt, according to the
following formula:
E
TAX EQUIVALENT YIELD = [ ------- ] + t
1 - p
E = tax-exempt yield of shares
p = stated income tax rate
t = taxable yield of shares
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of each fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
The following yields are for the seven-day period ended December 31, 1999:
<TABLE>
<CAPTION>
YIELD EFFECTIVE YIELD
----- ---------------
<S> <C> <C>
Premier Money Market Fund 4.79% 4.90%
Premier Tax-Free Money Market Fund 3.59%* 3.66%
</TABLE>
- ----------------
* For the seven-day yield as of December 31, 1999, the predecessor fund's
service providers voluntarily waived a portion of their fees. If the service
providers had not waived a portion of their fees, the predecessor funds'
seven-day yield for this period would have been 4.68% for Premier Money Market
Fund and 3.28% for Premier Tax-Free Money Market Fund.
The following tax equivalent yields are based, in each case, on the maximum
individual tax rates and are also for the seven-day period ended December 31,
1999:
<TABLE>
<CAPTION>
YIELD EFFECTIVE YIELD
----- ---------------
<S> <C> <C>
Premier Tax-Free Money Market Fund 5.94% 6.06%
</TABLE>
The funds may also advertise other performance data, which may consist of
the annual or cumulative return (including net short-term capital gain, if any)
earned on a hypothetical investment in each fund since they or their
predecessors began operations or for shorter periods. This return data may or
may not assume reinvestment of dividends (compounding).
OTHER INFORMATION. The funds' performance data quoted in advertising and
other promotional materials ("Performance Advertisements") represent past
performance and are not intended to predict or indicate future results. The
return on an investment in each fund will fluctuate. In Performance
Advertisements, the funds may compare its yield with data published by Lipper
Analytical Services, Inc. for money funds ("Lipper"), CDA Investment
Technologies, Inc. ("CDA"), IBC Financial Data, Inc. ("IBC"), Wiesenberger
Investment Companies Service ("Wiesenberger") or Investment Company Data Inc.
("ICD"), or with the performance of recognized stock and other indexes,
including the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Morgan Stanley Capital International World Index, the
Lehman Brothers Treasury Bond Index, the Lehman Brothers Government/Corporate
Bond Index, the Salomon Smith Barney Government Bond Index and
26
<PAGE>
changes in the Consumer Price Index as published by the U.S. Department of
Commerce. The funds also may refer in such materials to mutual fund performance
rankings and other data, such as comparative asset, expense and fee levels,
published by Lipper, CDA, IBC, Wiesenberger or ICD. Performance Advertisements
also may refer to discussions of the funds and comparative mutual fund data and
ratings reported in independent periodicals, including THE WALL STREET JOURNAL,
MONEY MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE
NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER
LETTERS. Comparisons in Performance Advertisements may be in graphic form.
Each fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on fund shares are reinvested by being paid in additional
fund shares, any future income of a fund would increase the value, not only of
the original investment in the fund, but also of the additional fund shares
received through reinvestment. As a result, the value of the investment in the
fund would increase more quickly than if dividends had been paid in cash.
Each fund may also compare its performance with the performance of bank
certificates of deposit ("CDs") as measured by the CDA Certificate of Deposit
Index and the Bank Rate Monitor National Index and the average of yields of CDs
of major banks published by Banxquotes(R) Money Markets. In comparing a fund's
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Bank accounts are insured in whole or in part by an agency of
the U.S. government and may offer a fixed rate of return. Fund shares are not
insured or guaranteed by the U.S. government and returns thereon will fluctuate.
While the funds seek to maintain a stable net asset value of $1.00 per share,
there can be no assurance that they will be able to do so.
TAXES
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to qualify for
treatment as a regulated investment company ("RIC") under the Internal Revenue
Code, each fund must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of
taxable net investment income and net short-term capital gain, if any) plus, in
the case of Premier Tax-Free Money Market Fund, its net interest income
excludable from gross income under section 103(a) of the Internal Revenue Code,
and must meet several additional requirements. For each fund, these requirements
include the following: (1) the fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of securities and certain other
income; (2) at the close of each quarter of the fund's taxable year, at least
50% of the value of its total assets must be represented by cash and cash items,
U.S. government securities and other securities, with these other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the fund's total assets; and (3) at the close of each quarter of
the fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities) of any one
issuer.
By qualifying for treatment as a RIC, a fund (but not its shareholders)
will be relieved of federal income tax on the part of its investment company
taxable income that it distributes to its shareholders. If a fund failed to
qualify for treatment as a RIC for any taxable year, (a) it would be taxed as an
ordinary corporation on the full amount of its taxable income for that year
without being able to deduct the distributions it makes to its shareholders and
(b) the shareholders would treat all those distributions, including
distributions that otherwise would be "exempt-interest dividends" described in
the following paragraph, as dividends (that is, ordinary income) to the extent
of the fund's earnings and profits. In addition, a fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying for RIC treatment.
Dividends paid by Premier Tax-Free Money Market Fund will qualify as
"exempt-interest dividends," and thus will be excludable from gross income by
its shareholders, if it satisfies the additional requirement that, at the close
of each quarter of its taxable year, at least 50% of the value of its total
assets consists of securities the interest on which is excludable from gross
income under section 103(a). The fund intends to continue to satisfy this
requirement. The aggregate amount annually designated by the fund as
exempt-interest dividends may not exceed its
27
<PAGE>
interest for the year that is excludable under section 103(a) over certain
amounts disallowed as deductions. The shareholders' treatment of dividends from
the fund under state and local income tax laws may differ from the treatment
thereof under the Internal Revenue Code.
Tax-exempt interest attributable to certain PABs (including, in the case of
Premier Tax-Free Money Market Fund, a proportionate part of the exempt-interest
dividends paid by that fund that is attributable thereto) is an item of tax
preference for purposes of the AMT. Exempt-interest dividends received by a
corporate shareholder also may be indirectly subject to the AMT without regard
to whether the fund's tax-exempt interest was attributable to those bonds. PABs
are issued by or on behalf of public authorities to finance various privately
operated facilities and are described above in this SAI.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by PABs should consult their tax
advisers before purchasing shares of Premier Tax-Free Money Market Fund because,
for users of certain of these facilities, the interest on those bonds is not
exempt from federal income tax. For these purposes, the term "substantial user"
is defined generally to include a "non-exempt person" who regularly uses in
trade or business a part of a facility financed from the proceeds of PABs.
Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as Premier Tax-Free Money Market Fund) plus
50% of their benefits exceeds certain base amounts. Exempt-interest dividends
from that fund still are tax-exempt to the extent described above; they are only
included in the calculation of whether a recipient's income exceeds the
established amounts.
If Premier Tax-Free Money Market Fund invests in any instruments that
generate taxable income, under the circumstances described in the discussion of
its investment policies above and in the discussion of municipal market discount
bonds below, the portion of any fund dividend attributable to the interest
earned thereon will be taxable to its shareholders as ordinary income to the
extent of its earnings and profits and only the remaining portion will qualify
as an exempt-interest dividend. The respective portions will be determined by
the "actual earned" method, under which the portion of any dividend that
qualifies as an exempt-interest dividend may vary, depending on the relative
proportions of tax-exempt and taxable interest earned during the dividend
period. Moreover, if the fund realizes capital gain as a result of market
transactions, any distribution of that gain will be taxable to its shareholders.
Premier Tax-Free Money Market Fund may invest in municipal bonds that are
purchased, generally not on their original issue, with market discount (that is,
at a price less than the principal amount of the bond or, in the case of a bond
that was issued with original issue discount, a price less than the amount of
the issue price plus accrued original issue discount) ("municipal market
discount bonds"). If a bond's market discount is less than the product of (1)
0.25% of the redemption price at maturity times (2) the number of complete years
to maturity after the taxpayer acquired the bond, then no market discount is
considered to exist. Gain on the disposition of a municipal market discount bond
(other than a bond with a fixed maturity date within one year from its issuance)
generally is treated as ordinary (taxable) income, rather than capital gain, to
the extent of the bond's accrued market discount at the time of disposition.
Market discount on such a bond generally is accrued ratably, on a daily basis,
over the period from the acquisition date to the date of maturity. In lieu of
treating the disposition gain as above, the fund may elect to include market
discount in its gross income currently, for each taxable year to which it is
attributable.
Dividends from investment company taxable income paid to a shareholder who,
as to the United States, is a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation or foreign partnership
("foreign shareholder") generally are subject to a 30% withholding tax, unless
the applicable tax rate is reduced by a treaty between the United States and the
shareholder's country of residence. Withholding does not apply to a dividend
paid to a foreign shareholder that is "effectively connected with the
[shareholder's] conduct of a trade or business within the United States," in
which case the withholding requirements applicable to domestic taxpayers apply.
Exempt-interest dividends paid by Premier Tax-Free Money Market Fund are not
subject to withholding.
Each fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all its
ordinary (i.e., taxable) income for that year and any capital gain net income
for the one-year period ending October 31 of that year, plus certain other
amounts.
28
<PAGE>
TAX-FREE INCOME VS. TAXABLE INCOME--PREMIER TAX-FREE MONEY MARKET FUND. The
table below illustrates approximate equivalent taxable and tax-free yields at
the 2000 federal individual income tax rates in effect on the date of this SAI.
For example, a couple with taxable income of $90,000 in 2000, or a single
individual with annual taxable income of $55,000 in 2000, whose investments earn
a 3% tax-free yield, would have to earn a 4.17% taxable yield to receive the
same benefit.
FEDERAL TAXABLE VS. TAX-FREE YIELDS*
<TABLE>
<CAPTION>
TAXABLE INCOME (000'S) A TAX-FREE YIELD OF
------------------------------ FEDERAL --------------------------------------------
SINGLE JOINT TAX 3.00% 4.00% 5.00% 6.00%
RETURN RETURN BRACKET IS EQUAL TO A TAXABLE YIELD OF APPROXIMATELY
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 0 - 26.3 $ 0 - 43.9 15.00% 3.53% 4.71% 5.88% 7.06%
26.3 - 63.6 43.9 - 106.0 28.00 4.17 5.56 6.94 8.33
63.6 - 132.6 106.0 -161.5 31.00 4.35 5.80 7.25 8.70
132.6 - 288.4 161.5 -288.4 36.00 4.69 6.25 7.81 9.38
Over 288.4 Over 288.4 39.60 4.97 6.62 8.28 9.93
</TABLE>
- ----------------
* The yields listed are for illustration only and are not necessarily
representative of Premier Tax-Free Money Market Fund's yield. The fund
invests primarily in obligations the interest on which is exempt from
federal income tax; however, some of its investments may generate taxable
income. The tax rates might change after the date of this SAI. Certain
simplifying assumptions have been made. Any particular taxpayer's rate may
differ. The rates reflect the highest tax bracket within each range of
income listed. The figures set forth above do not reflect the AMT,
limitations on federal or state itemized deductions and personal exemptions
or any state or local taxes payable on fund distributions.
OTHER INFORMATION
DELAWARE BUSINESS TRUST. Although Delaware law statutorily limits the
potential liabilities of a Delaware business trust's shareholders to the same
extent as it limits the potential liabilities of a Delaware corporation,
shareholders of the funds could, under certain conflicts of laws jurisprudence
in various states, be held personally liable for the obligations of the Trust or
a fund. However, the Trust Instrument of the Trust disclaims shareholder
liability for acts or obligations of the Trust or its series (the funds). The
Trust Instrument provides for indemnification from a fund's property for all
losses and expenses of a 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 a fund
itself would be unable to meet its obligations, a possibility which Mitchell
Hutchins believes is remote and not material. Upon payment of any liability
incurred by a shareholder solely by reason of being or having been a shareholder
of a fund, the shareholder paying such liability will be entitled to
reimbursement from the general assets of that fund. The trustees intend to
conduct the operations of the funds in such a way as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the funds.
PRIOR NAMES. Prior to July 28, 1999, the name of the Trust was "Mitchell
Hutchins Institutional Series."
VOTING RIGHTS. Shareholders of the funds are entitled to one vote for each
full share held and fractional votes for fractional shares held. Voting rights
are not cumulative and, as a result, the holders of more than 50% of all the
shares of the Trust may elect all its board members. The shares of each series
of the Trust will be voted separately, except when an aggregate vote of all the
series is required by law.
The Trust does not hold annual meetings. There normally will be no meetings
of shareholders to elect trustees unless fewer than a majority of the trustees
holding office have been elected by shareholders. Shareholders of record of no
less than two-thirds of the outstanding shares of the Trust may remove a trustee
by vote cast in person or by proxy at a meeting called for that purpose. The
trustees are required to call a meeting of shareholders when requested in
writing to do so by the shareholders of record holding at least 10% of the
Trust's outstanding shares.
CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. The Bank of
New York, located at 48 Wall Street, New York, NY 10286, serves as custodian and
recordkeeping agent for the funds. BISYS, located at 3435 Stelzer Road,
Columbus, OH 43219, serves as the funds' transfer and dividend disbursing agent.
29
<PAGE>
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the funds.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for the funds.
FINANCIAL STATEMENTS
The Annual Report to Shareholders for the last fiscal year ended December
31, 1999 of each fund's predecessor 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.
30
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION. THE FUNDS AND THEIR
DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN
OFFER TO SELL SHARES OF THE FUNDS IN ANY JURISDICTION WHERE THE FUNDS OR THEIR
DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.
-----------
LIR PREMIER MONEY
MARKET FUND
LIR PREMIER TAX-FREE
MONEY MARKET FUND
------------------------------------------
Statement of Additional Information
May 1, 2000
------------------------------------------
'c' 2000 Mitchell Hutchins Asset Management Inc. All rights reserved.
31
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<S> <C>
(1) (a) Trust Instrument(1)
(b) Amendment to Trust Instrument effective July 28, 1999 (2)
(2) By-Laws (1)
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (3)
(4) (a) Investment Advisory and Administration Contract for Mitchell Hutchins LIR Select Money Fund (2)
(b) Investment Advisory and Administration Contract for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (filed herewith)
(c) Form of Investment Advisory and Administration Contract for LIR Cash Reserves Fund (4)
(d) Form of Investment Advisory and Administration Contract for LIR Liquid Assets Fund (4)
(5) (a) Distribution Contract for Mitchell Hutchins LIR Select Money Fund (2)
(b) Distribution Contract for LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market
Fund (filed herewith)
(c) Form of Distribution Contract for LIR Cash Reserves Fund and LIR Liquid Assets Fund (5)
(6) Bonus, profit sharing or pension plans - none
(7) (a) Custodian Agreement for LIR Select Money Fund (2)
(b) Custodian Agreement for LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market
Fund (filed herewith)
(c) Form of Custodian Contract for LIR Cash Reserves Fund and LIR Liquid Assets Fund (5)
(8) (a) (i) Form of Transfer Agency Agreement for LIR Select Money Fund (2)
(ii) Transfer Agency Agreement for LIR Premier Money Market Fund and LIR Premier Tax-
Free Money Market Fund (filed herewith)
(iii) Form of Transfer Agency and Related Services Agreement for LIR Cash Reserves Fund (5)
(iv) Form of Transfer Agency and Related Services Agreement for LIR Liquid Assets Fund (5)
-
(b) Shareholder Service Plan (2)
(c) Shareholder Service Agreement (2)
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Auditors' consent (filed herewith)
(11) Omitted Financial Statements - none
(12) Letter of investment intent (1)
(13) (a) Plan of Distribution pursuant to Rule 12b-1 (filed herewith)
(b) Plan Agreement for LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market Fund
(filed herewith)
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 (1)
</TABLE>
C-1
<PAGE>
(16) Code of Ethics (not applicable because Registrant consists of only money
market funds)
- -----------------
(1) Incorporated by reference from Pre-Effective Amendment No. 1 to the
registration statement, SEC File No. 333-52965, filed July 29, 1998.
(2) Incorporated by reference from Post-Effective Amendment No. 3 to the
registration statement, SEC File No. 333-52965, filed September 1, 1999.
(3) Incorporated by reference from Articles IV, VI and X of Registrant's Trust
Instrument and from Articles VI and IX of Registrant's By-Laws.
(4) Incorporated by reference from Post-Effective Amendment No. 5 to the
registration statement, SEC File No. 333-52965, filed October 21, 1999.
(5) Incorporated by reference from Post-Effective Amendment No. 6 to the
registration statement, SEC File No. 333-52965, filed November 9, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant
None.
Item 25. Indemnification
Section 2 of Article IX of the Trust Instrument, "Indemnification,"
provides that the appropriate series of the Registrant will indemnify the
trustees and officers of the Registrant to the fullest extent permitted by law
against claims and expenses asserted against or incurred by them by virtue of
being or having been a trustee or officer; provided that no such person shall be
indemnified where there has been an adjudication or other determination, as
described in Article IX, that such person is liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office or
did not act in good faith in the reasonable belief that his action was in the
best interest of the Registrant. Section 2 of Article IX also provides that the
Registrant may maintain insurance policies covering such rights of
indemnification.
Additionally, "Limitation of Liability" in Section 1 of Article IX of
the Trust Instrument provides that the trustees or officers of the Registrant
shall not be personally liable to any person extending credit to, contracting
with or having a claim against the Registrant or a particular series; and that,
provided they have exercised reasonable care and have acted under the reasonable
belief that their actions are in the best interest of the Registrant, the
trustees and officers shall not be liable for neglect or wrongdoing by them or
any officer, agent, employee, investment adviser or independent contractor of
the Registrant.
Section 9 of each 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 or 11 of each 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 each Distribution Contract provides that the Trust will
indemnify PaineWebber or Mitchell Hutchins 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
C-2
<PAGE>
in reliance upon and in conformity with information furnished by PaineWebber or
Mitchell Hutchins 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 each Distribution Contract also provides that PaineWebber
or Mitchell Hutchins 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 or Mitchell Hutchins for use in the
Registration Statement or arising out of an agreement between PaineWebber or
Mitchell Hutchins and any retail dealer, or arising out of supplementary
literature or advertising used by PaineWebber or Mitchell Hutchins in connection
with the Contract. Section 10 of each Distribution Contract contains provisions
similar to Section 10 or 11 of the Investment Advisory and Administration
Contracts, with respect to Mitchell Hutchins and PaineWebber, as appropriate.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to trustees, officers and controlling
persons of the Registrant, pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding or payment pursuant to any insurance policy) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
Mitchell Hutchins, a Delaware corporation, is a registered investment
adviser and is a wholly owned subsidiary of PaineWebber which is, in turn, a
wholly owned subsidiary of Paine Webber Group Inc. Mitchell Hutchins is
primarily engaged in the investment advisory business. Information as to the
officers and directors of Mitchell Hutchins is included in its Form ADV, as
filed with the Securities and Exchange Commission (registration number
801-13219), and is incorporated herein by reference.
Item 27. Principal Underwriters
a) Mitchell Hutchins or PaineWebber serves as principal underwriter
and/or investment adviser for the following investment companies:
2002 TARGET TERM TRUST INC.
ALL AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICPAL INCOME FUND INC.
LIQUID INSTITUTIONAL RESERVES
MANAGED HIGH YIELD FUND INC.
MANAGED HIGH YIELD PLUS FUND INC.
MITCHELL HUTCHINS LIR MONEY SERIES
MITCHELL HUTCHINS PORTFOLIOS
MITCHELL HUTCHINS SECURITIES TRUST
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER CASHFUND, INC.
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
C-3
<PAGE>
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MANAGED MUNICIPAL TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL MONEY MARKET SERIES
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER RMA MONEY FUND, INC.
PAINEWEBBER RMA TAX-FREE FUND, INC.
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
b) Mitchell Hutchins and PaineWebber serve as the Registrant's
principal underwriters. The directors and officers of
PaineWebber, their principal business addresses, and their
positions and offices with PaineWebber are identified in its Form
ADV, as filed with the Securities and Exchange Commission
(registration number 801-7163). The directors and officers of
Mitchell Hutchins, their principal business addresses and their
positions and offices with Mitchell Hutchins are identified in
its Form ADV, as filed with the Securities and Exchange
Commission (registration number 801-13219). The foregoing
information is hereby incorporated herein by reference. The
information set forth below is furnished for those directors and
officers of PaineWebber or Mitchell Hutchins who also serve as
trustees or officers of the Trust.
<TABLE>
<CAPTION>
Positions and Offices With Underwriter
Name Positions and Offices With Registrant or Exclusive Dealer
---- ------------------------------------- -------------------
<S> <C> <C>
Margo N. Alexander* Trustee and President Chairman, Chief Executive Officer and a
Director of Mitchell Hutchins and an
Executive Vice President and a Director
of PaineWebber
Mary C. Farrell** Trustee Managing Director, Senior Investment
Strategist and member of the Investment
Policy Committee of PaineWebber
Brian M. Storms* Trustee President and Chief Operating Officer of
Mitchell Hutchins
Tom Disbrow** Vice President and Assistant Treasurer First Vice President and a Senior
Manager of the Mutual Fund Finance
Department of Mitchell Hutchins
Kris L. Dorr* Vice President First Vice President and a Portfolio
Manager in the Short-Term Strategies
Group of Mitchell Hutchins
Elbridge T. Gerry, III* Vice President Senior Vice President and a Portfolio
Manager of Mitchell Hutchins
John J. Lee** Vice President and Assistant Treasurer Manager of the Mutual Fund Finance
Department of Mitchell Hutchins
Kevin J. Mahoney** Vice President and Assistant Treasurer First Vice President and a Senior
Manager of the Mutual Fund Finance
Department of Mitchell Hutchins
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices With Underwriter
Name Positions and Offices With Registrant or Exclusive Dealer
---- ------------------------------------- -------------------
<S> <C> <C>
Michael H. Markowitz* Vice President First Vice President and a Portfolio
Manager in the Short-Term Strategies
Group of Mitchell Hutchins
Dennis McCauley* Vice President Managing Director and Chief Investment
Officer - Fixed Income of Mitchell
Hutchins
Kevin P. McIntyre* Vice President Vice President and a Portfolio Manager
of Mitchell Hutchins
Ann E. Moran** Vice President and Assistant Treasurer Vice President and a Manager of the Mutual
Fund Finance Department of Mitchell Hutchins
Dianne E. O'Donnell** Vice President and Secretary Senior Vice President and Deputy General
Counsel of Mitchell Hutchins
Emil Polito* Vice President Senior Vice President and Director of
Operations and Control of Mitchell
Hutchins
Susan Ryan* Vice President Senior Vice President and a Portfolio
Manager of Mitchell Hutchins
Paul H. Schubert** Vice President and Treasurer Senior Vice President and Director of
the Mutual Fund Finance Department of
Mitchell Hutchins
Barney A. Taglialatela** Vice President and Assistant Treasurer Vice President and a Manager of the
Mutual Fund Finance Department of
Mitchell Hutchins
Debbie Vermann* Vice President Vice President and a Portfolio Manager
of Mitchell Hutchins
Keith A. Weller** Vice President and Assistant Secretary First Vice President and Associate
General Counsel of Mitchell Hutchins
</TABLE>
- ------------------
* The business address of this person is 51 West 52nd Street, New York, New
York 10019-6114.
** The business address of this person is 1285 Avenue of the Americas, New
York, New York 10019
c) None
C-5
<PAGE>
Item 28. Location of Accounts and Records
The books and other documents required by paragraphs (b)(4), (c) and
(d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Registrant's investment adviser, Mitchell Hutchins, 1285
Avenue of the Americas, New York, New York 10019 and Mitchell Hutchins, 51 West
52nd Street, New York, New York 10019-6114. 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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement under Rule 485(b) of the Securities Act of 1933 and has
duly caused this Post-Effective Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York, on the 27th day of April, 2000.
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 April 27, 2000
Margo N. Alexander* (Chief Executive Officer)
/s/ E. Garrett Bewkes, Jr.
- ---------------------------- Trustee and Chairman April 27, 2000
E. Garrett Bewkes, Jr.* of the Board of Trustees
/s/ Richard Q. Armstrong Trustee April 27, 2000
- ----------------------------
Richard Q. Armstrong*
/s/ Richard R. Burt Trustee April 27, 2000
- ----------------------------
Richard R. Burt*
/s/ Mary C. Farrell Trustee April 27, 2000
- ----------------------------
Mary C. Farrell*
/s/ Meyer Feldberg Trustee April 27, 2000
- ----------------------------
Meyer Feldberg*
/s/ George W. Gowen Trustee April 27, 2000
- ----------------------------
George W. Gowen*
/s/ Frederic V. Malek Trustee April 27, 2000
- ----------------------------
Frederic V. Malek*
/s/ Carl W. Schafer Trustee April 27, 2000
- ----------------------------
Carl W. Schafer*
/s/ Brian M. Storms Trustee April 27, 2000
- ----------------------------
Brian M. Storms**
/s/ Paul H. Schubert Vice President and Treasurer April 27, 2000
- ---------------------------- (Chief Financial and
Paul H. Schubert Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES (CONTINUED)
* Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated
May 13, 1998 and incorporated by reference from the Initial Registration
Statement of Mitchell Hutchins 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.
<PAGE>
MITCHELL HUTCHINS LIR MONEY SERIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C>
(1) (a) Trust Instrument(1)
(b) Amendment to Trust Instrument effective July 28, 1999 (2)
(2) By-Laws (1)
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (3)
(4) (a) Investment Advisory and Administration Contract for Mitchell Hutchins LIR Select Money Fund (2)
(b) Investment Advisory and Administration Contract for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (filed herewith)
(c) Form of Investment Advisory and Administration Contract for LIR Cash Reserves Fund (4)
(d) Form of Investment Advisory and Administration Contract for LIR Liquid Assets Fund (4)
(5) (a) Distribution Contract for Mitchell Hutchins LIR Select Money Fund (2)
(b) Distribution Contract for LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market
Fund (filed herewith)
(c) Form of Distribution Contract for LIR Cash Reserves Fund and LIR Liquid Assets Fund (5)
(6) Bonus, profit sharing or pension plans - none
(7) (a) Custodian Agreement for LIR Select Money Fund (2)
(b) Custodian Agreement for LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market
Fund (filed herewith)
(c) Form of Custodian Contract for LIR Cash Reserves Fund and LIR Liquid Assets Fund (5)
(8) (a) (i) Form of Transfer Agency Agreement for LIR Select Money Fund (2)
(ii) Transfer Agency Agreement for LIR Premier Money Market Fund and LIR Premier Tax-
Free Money Market Fund (filed herewith)
(iii) Form of Transfer Agency and Related Services Agreement for LIR Cash Reserves Fund (5)
(iv) Form of Transfer Agency and Related Services Agreement for LIR Liquid Assets Fund (5)
-
(b) Shareholder Service Plan (2)
(c) Shareholder Service Agreement (2)
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Auditors' consent (filed herewith)
(11) Omitted Financial Statements - none
(12) Letter of investment intent (1)
(13) (a) Plan of Distribution pursuant to Rule 12b-1 (filed herewith)
(b) Plan Agreement for LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market Fund
(filed herewith)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 (1)
(16) Code of Ethics (not applicable because Registrant consists of only money
market funds)
</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 Post-Effective Amendment No. 3 to the
registration statement, SEC File No. 333-52965, filed September 1, 1999.
(3) Incorporated by reference from Articles IV, VI and X of Registrant's Trust
Instrument and from Articles VI and IX of Registrant's By-Laws.
(4) Incorporated by reference from Post-Effective Amendment No. 5 to the
registration statement, SEC File No. 333-52965, filed October 21, 1999.
(5) Incorporated by reference from Post-Effective Amendment No. 6 to the
registration statement, SEC File No. 333-52965, filed November 9, 1999.
STATEMENT OF DIFFERENCES
------------------------
The copyright symbol shall be expressed as ........................... 'c'
The dagger symbol shall be expressed as .............................. 'D'
Characters normally expressed as superscript shall be preceded by .... 'pp'
<PAGE>
Exhibit No. 4(b)
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of January 12, 2000 between MITCHELL HUTCHINS LIR
MONEY SERIES, a Delaware business trust ("Trust"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered as a
broker-dealer under the Securities Exchange Act of 1934, as amended ("1934
Act"), and as an investment adviser under the Investment Advisers Act of 1940,
as amended.
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end investment management company, and
intends to offer for public sale two distinct series of shares of beneficial
interest, LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market
Fund, each corresponding to a distinct portfolio; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment
adviser and administrator to furnish certain administrative, investment advisory
and portfolio management services to the Trust with respect to LIR Premier Money
Market Fund and LIR Premier Tax-Free Money Market Fund and any other series to
which this Contract may hereafter be made applicable (each a "Series"), and
Mitchell Hutchins is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints Mitchell Hutchins as
investment adviser and administrator of the Trust with respect to each Series
for the period and on the terms set forth in this Contract. Mitchell Hutchins
accepts such appointment and agrees to render the services herein set forth, for
the compensation herein provided.
2. DUTIES AS INVESTMENT ADVISER.
(a) Subject to the supervision of the Trust's Board of Trustees
("Board"), Mitchell Hutchins will provide a continuous investment program for
each Series, including investment research and management with respect to all
securities and investments and cash equivalents in each Series. Mitchell
Hutchins will determine from time to time what securities and other investments
will be purchased, retained or sold by each Series.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it
will attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of any Series, Mitchell Hutchins may, in its
discretion, use brokers who provide the Series with research, analysis, advice
and similar services to execute portfolio transactions on behalf of the Series,
and Mitchell Hutchins, pursuant to Board authorization, may pay to those brokers
in return for brokerage and research services a higher commission than may be
charged by other brokers, subject to Mitchell Hutchins' determining in good
faith that such commission is reasonable in terms either of the particular
transaction or of the overall responsibility of Mitchell Hutchins to such Series
and its other clients and that the total commissions paid by such Series will be
reasonable in relation to the
<PAGE>
benefits to the Series over the long term. In no instance will portfolio
securities be purchased from or sold to Mitchell Hutchins, or any affiliated
person thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder. Whenever Mitchell Hutchins simultaneously
places orders to purchase or sell the same security on behalf of a Series and
one or more other accounts advised by Mitchell Hutchins, such orders will be
allocated as to price and amount among all such accounts in a manner believed to
be equitable to each account. The Trust recognizes that in some cases this
procedure may adversely affect the results obtained for the Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series, and will
furnish the Board with such periodic and special reports as the Board reasonably
may request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Mitchell Hutchins hereby agrees that all records which it maintains for the
Trust are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Trust and which are required to be maintained by Rule 31a-1 under the 1940
Act and further agrees to surrender promptly to the Trust any records which it
maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset
value and the net income of each Series as described in the currently effective
registration statement of the Trust under the Securities Act of 1933, as
amended, and the 1940 Act and any supplements thereto ("Registration Statement")
or as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or
person associated with Mitchell Hutchins which is a member of a national
securities exchange to effect any transaction on such exchange for the account
of any Series, which transaction is permitted by Section 11(a) of the 1934 Act,
and the Trust hereby consents to the retention of compensation by Mitchell
Hutchins or any person or entity associated with Mitchell Hutchins.
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the
affairs of the Trust with respect to each Series subject to the supervision of
the Board and the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of
the Trust and each Series, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Trust and
each Series.
(b) Mitchell Hutchins will provide the Trust and each Series with such
corporate, administrative and clerical personnel (including officers of the
Trust) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Trust and
each Series.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Trust's
Registration Statement, proxy material, tax
- 2 -
<PAGE>
returns and required reports to each Series' shareholders and the Securities and
Exchange Commission and other appropriate federal or state regulatory
authorities.
(d) Mitchell Hutchins will provide the Trust and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Trust Instrument,
By-Laws and Registration Statement of the Trust and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
5. DELEGATION OF MITCHELL HUTCHINS' DUTIES AS INVESTMENT ADVISER AND
ADMINISTRATOR. With respect to any or all Series, Mitchell Hutchins may enter
into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
a sub-adviser or sub-administrator in which Mitchell Hutchins delegates to such
sub-adviser or sub-administrator any or all its duties specified in Paragraphs 2
and 3 of this Contract, provided that each Sub-Advisory or Sub-Administration
Contract imposes on the sub-adviser or sub-administrator bound thereby all
applicable duties and conditions to which Mitchell Hutchins is subject by
Paragraphs 2, 3 and 4 of this Contract, and further provided that each
Sub-Advisory or Sub-Administration Contract meets all requirements of the 1940
Act and rules thereunder.
6. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a Trustee, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
7. EXPENSES.
(a) During the term of this Contract, each Series will bear all
expenses, not specifically assumed by Mitchell Hutchins, incurred in its
operations and the offering of its shares.
(b) Expenses borne by each Series will include but not be limited to
the following (or each Series' proportionate share of the following): (i) the
cost (including brokerage commissions) of securities purchased or sold by the
Series and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Series by Mitchell Hutchins under this
Contract; (iii) expenses of organizing the Trust and the Series; (iv) filing
fees and expenses relating
- 3 -
<PAGE>
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; (v) fees and salaries payable to the Trust's Trustees and
officers who are not interested persons of the Trust or Mitchell Hutchins; (vi)
all expenses incurred in connection with the Trustees' services, including
travel expenses; (vii) taxes (including any income or franchise taxes) and
governmental fees; (viii) costs of any liability, uncollectible items of deposit
and other insurance and fidelity bonds; (ix) any costs, expenses or losses
arising out of a liability of or claim for damages or other relief asserted
against the Trust or Series for violation of any law; (x) legal, accounting and
auditing expenses, including legal fees of special counsel for those Trustees of
the Trust who are not interested persons of the Trust; (xi) charges of
custodians, transfer agents and other agents (including any lending agent);
(xii) costs of preparing share certificates; (xiii) expenses of setting in type
and printing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials for existing
shareholders; (xiv) costs of mailing prospectuses and supplements thereto,
statements of additional information and supplements thereto, reports and proxy
materials to existing shareholders; (xv) any extraordinary expenses (including
fees and disbursements of counsel, costs of actions, suits or proceedings to
which the Trust is a party and the expenses the Trust may incur as a result of
its legal obligation to provide indemnification to its officers, Trustees,
agents and shareholders) incurred by the Trust or Series; (xvi) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations; (xvii) the cost of mailing and tabulating
proxies and costs of meetings of shareholders, the Board and any committees
thereof; (xviii) the cost of investment company literature and other
publications provided by the Trust to its Trustees and officers; (xix) costs of
mailing, stationery and communications equipment; (xx) expenses incident to any
dividend, withdrawal or redemption options; (xxi) charges and expenses of any
outside pricing service used to value portfolio securities; and (xxii) interest
on borrowings of the Series.
(c) The Trust or a Series may pay directly any expenses incurred by it
in its normal operations and, if any such payment is consented to by Mitchell
Hutchins and acknowledged as otherwise payable by Mitchell Hutchins pursuant to
this Contract, the Series may reduce the fee payable to Mitchell Hutchins
pursuant to paragraph 8 hereof by such amount. To the extent that such
deductions exceed the fee payable to Mitchell Hutchins on any monthly payment
date, such excess shall be carried forward and deducted in the same manner from
the fee payable on succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those Trustees who are interested persons of the Trust.
(e) The payment or assumption by Mitchell Hutchins of any expenses of
the Trust or a Series that Mitchell Hutchins is not required by this Contract to
pay or assume shall not obligate Mitchell Hutchins to pay or assume the same or
any similar expense of the Trust or a Series on any subsequent occasion.
- 4 -
<PAGE>
8. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to LIR Premier Money Market Fund and LIR Premier Tax-Free
Money Market Fund, the Trust will pay to Mitchell Hutchins a fee, computed daily
and paid monthly, at an annual rate of 0.20% of each such Series' average daily
net assets.
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any Series as to which this Contract hereafter is made
applicable, the Trust will pay to Mitchell Hutchins from the assets of such
Series a fee in an amount to be agreed upon in a written fee agreement ("Fee
Agreement") executed by the Trust on behalf of such Series and by Mitchell
Hutchins. All such Fee Agreements shall provide that they are subject to all
terms and conditions of this Contract.
(c) The fee shall be computed daily and paid monthly to Mitchell
Hutchins on or before the first business day of the next succeeding calendar
month.
(d) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective day to the end of the month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
9. LIMITATION OF LIABILITY OF MITCHELL HUTCHINS. Mitchell Hutchins and
its delegates, including any Sub-Adviser or Sub-Administrator to any Series or
the Trust, shall not be liable for any error of judgment or mistake of law or
for any loss suffered by any Series, the Trust or any of its shareholders, in
connection with the matters to which this Contract relates, except to the extent
that such a loss results from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract. Any person, even though also an
officer, director, employee, or agent of Mitchell Hutchins, who may be or become
an officer, Trustee, employee or agent of the Trust shall be deemed, when
rendering services to any Series or the Trust or acting with respect to any
business of such Series or the Trust, to be rendering such service to or acting
solely for the Series or the Trust and not as an officer, director, employee, or
agent or one under the control or direction of Mitchell Hutchins even though
paid by it.
10. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove
written provided that, with respect to any Series, this Contract shall not take
effect unless it has first been approved (i) by a vote of a majority of those
Trustees of the Trust who are not parties to this Contract or interested persons
of any such party cast in person at a meeting called for the purpose of voting
on such approval, and (ii) by vote of a majority of that Series' outstanding
voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is
- 5 -
<PAGE>
specifically approved at least annually (i) by a vote of a majority of those
Trustees of the Trust who are not parties to this Contract or interested persons
of any such party, cast in person at a meeting called for the purpose of voting
on such approval, and (ii) by the Board or, with respect to any given Series, by
vote of a majority of the outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the board or by a vote of a majority of the outstanding voting
securities of such Series on sixty days' written notice to Mitchell Hutchins or
by Mitchell Hutchins at any time, without the payment of any penalty, on sixty
days' written notice to the Trust. Termination of this Contract with respect to
any given Series shall in no way affect the continued validity of this Contract
or the performance thereunder with respect to any other Series. This Contract
will automatically terminate in the event of its assignment.
11. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE
TRUST. The Trustees of the Trust and the shareholders of any Series shall not be
liable for any obligations of any Series or the Trust under this Contract, and
Mitchell Hutchins agrees that, in asserting any rights or claims under this
Contract, it shall look only to the assets and property of the Trust in
settlement of such right or claim, and not to such Trustees or shareholders.
12. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract as to any
given Series shall be effective until approved by vote of a majority of such
Series' outstanding voting securities.
13. GOVERNING LAW. This Contract shall be construed in accordance with
the laws of the State of Delaware, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act. To the extent that
the applicable laws of the State of Delaware conflict with the applicable
provisions of the 1940 Act, the latter shall control.
14. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities", "affiliated person",
"interested person", "assignment", "broker", "investment adviser", "national
securities exchange", "net assets", "prospectus", "sale", "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission. Where the effect of a requirement of the
1940 Act reflected in any provision of this Contract is relaxed by a rule,
regulation, order or other action of the Securities and Exchange Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation, order or other action.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers and delivered as of the day and year first above
written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/ Andrew S. Novak By /s/ Keith A. Weller
- --------------------------- ---------------------------------
Vice President First Vice President
Attest: MITCHELL HUTCHINS LIR MONEY SERIES
/s/ Cristina Paradiso By /s/ Dianne E. O'Donnell
- --------------------------- ----------------------------------
Assistant Secretary Secretary and Vice President
- 7 -
<PAGE>
Exhibit No. 5(b)
MITCHELL HUTCHINS LIR MONEY SERIES
DISTRIBUTION CONTRACT
CONTRACT made as of January 12, 2000, between MITCHELL HUTCHINS LIR MONEY
SERIES, a Delaware business trust ("Trust"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins").
WHEREAS the Trust is registered under the Investment Company Act of l940,
as amended ("l940 Act"), as an open-end management investment company, and has
established distinct series of shares of beneficial interest, two of which
correspond to distinct portfolios designated as LIR Premier Money Market Fund
and LIR Premier Tax-Free Money Market Fund; and
WHEREAS the Trust's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of the above-referenced series
(together with shares of any series of the Trust to which this Contract
hereafter is made applicable ("Shares"); and
WHEREAS the Trust has adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act for the Shares ("Plan") and desires to retain Mitchell
Hutchins as principal distributor in connection with the offering and sale of
the Shares of the above-referenced Series and of such other Series as to which
this Contract hereafter is made applicable (each a "Series"); and
WHEREAS Mitchell Hutchins is willing to act as principal distributor of
the Shares of each such Series on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints Mitchell Hutchins as its
exclusive agent to be the principal distributor to sell and to arrange for the
sale of the Shares on the terms and for the period set forth in this Contract.
Mitchell Hutchins hereby accepts such appointment and agrees to act hereunder.
As used in this Contract, the term "Registration Statement" shall mean the
currently effective registration statement of the Trust, and any supplements
thereto, under the Securities Act of 1933, as amended ("1933 Act"), and the 1940
Act.
2. SERVICES AND DUTIES OF MITCHELL HUTCHINS.
(a) Mitchell Hutchins agrees to sell Shares on a best efforts basis
from time to time during the term of this Contract as agent for the Trust and
upon the terms described in the Registration Statement.
<PAGE>
(b) Upon the later of the date of this Contract or the initial
offering of the Shares to the public by a Series, Mitchell Hutchins will hold
itself available to receive purchase orders, satisfactory to Mitchell Hutchins,
for Shares of that Series and will accept such orders on behalf of the Trust as
of the time of receipt of such orders and promptly transmit such orders as are
accepted to the Trust's transfer agent with respect to the Series. Purchase
orders shall be deemed effective at the time and in the manner set forth in the
Registration Statement.
(c) Mitchell Hutchins in its discretion may enter into agreements to
sell Shares to such registered and qualified retail dealers, including but not
limited to PaineWebber Incorporated ("PaineWebber"), as it may select. In making
agreements with such dealers, Mitchell Hutchins shall act only as principal and
not as agent for the Trust.
(d) The offering price of the Shares of each Series shall be the net
asset value per Share as next determined by the Trust following receipt of an
order at the Series' transfer agent. The Trust shall promptly furnish Mitchell
Hutchins with a statement of each computation of net asset value.
(e) Mitchell Hutchins shall not be obligated to sell any certain
number of Shares.
(f) To facilitate redemption of Shares by shareholders directly or
through dealers, Mitchell Hutchins is authorized but not required on behalf of
the Trust to repurchase Shares presented to it by shareholders and dealers at
the price determined in accordance with, and in the manner set forth in, the
Registration Statement.
(g) Mitchell Hutchins or an affiliate shall provide or arrange for
the provision of ongoing shareholder services, which include responding to
shareholder inquiries, providing shareholders with information on their
investments in the Shares and any other services.
(h) Mitchell Hutchins shall have the right to use any list of
shareholders of the Trust or any other list of investors which it obtains in
connection with its provision of services under this Contract; provided,
however, that Mitchell Hutchins shall not sell or knowingly provide such list or
lists to any unaffiliated person.
3. AUTHORIZATION TO ENTER INTO DEALER AGREEMENTS AND TO DELEGATE DUTIES AS
DISTRIBUTOR. With respect to the Shares of any or all Series, Mitchell Hutchins
may enter into dealer agreements with PaineWebber or any other registered and
qualified dealer with respect to sales of the Shares or the provision of service
activities. In a separate contract or as part of any such dealer agreement,
Mitchell Hutchins also may delegate to PaineWebber or another registered and
qualified dealer ("sub-distributor") any or all of its duties specified in this
Contract, provided that such separate contract or exclusive dealer agreement
imposes on the sub-distributor bound thereby all applicable duties and
conditions to which Mitchell Hutchins is subject under this Contract, and
further provided that such separate contract or exclusive dealer agreement meets
all requirements of the 1940 Act and rules thereunder.
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<PAGE>
4. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a trustee, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar or a dissimilar nature.
5. COMPENSATION.
(a) As compensation for its activities under this contract with
respect to the distribution of the Shares, Mitchell Hutchins or an affiliate
shall receive from the Trust such service and distribution fees at the rate and
under the terms and conditions of the Plan adopted by the Trust with respect to
the Shares of the Series, as such Plan is amended from time to time, and subject
to any further limitations on such fees as the Board may impose.
(b) Mitchell Hutchins or an affiliate may reallow any or all of the
service and distribution fees which it is paid under this Contract to such
dealers as Mitchell Hutchins or an affiliate may from time to time determine.
6. DUTIES OF THE TRUST.
(a) The Trust reserves the right at any time to withdraw offering
Shares of any or all Series by written notice to Mitchell Hutchins at its
principal office.
(b) The Trust shall determine in its sole discretion whether
certificates shall be issued with respect to the Shares. If the Trust has
determined that certificates shall be issued, the Trust will not cause
certificates representing Shares to be issued unless so requested by
shareholders. If such request is transmitted by Mitchell Hutchins, the Trust
will cause certificates evidencing Shares to be issued in such names and
denominations as Mitchell Hutchins shall from time to time direct.
(c) The Trust shall keep Mitchell Hutchins fully informed of its
affairs and shall make available to Mitchell Hutchins copies of all information,
financial statements, and other papers which Mitchell Hutchins may reasonably
request for use in connection with the distribution of Shares, including,
without limitation, certified copies of any financial statements prepared for
the Trust by its independent public accountant and such reasonable number of
copies of the most current prospectus, statement of additional information, and
annual and interim reports of any Series as Mitchell Hutchins may request, and
the Trust shall cooperate fully in the efforts of Mitchell Hutchins to sell and
arrange for the sale of the Shares of the Series and in the performance of
Mitchell Hutchins under this Contract.
(d) The Trust shall take, from time to time, all necessary action,
including payment of the related filing fee, as may be necessary to register the
Shares under the 1933 Act to the end that there will be available for sale such
number of Shares as Mitchell Hutchins may be expected to sell. The Trust agrees
to file, from time to time, such amendments, reports, and other
3
<PAGE>
documents as may be necessary in order that there will be no untrue statement of
a material fact in the Registration Statement, nor any omission of a material
fact which omission would make the statements therein misleading.
(e) The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of Shares of each Series for sale under
the securities laws of such states or other jurisdictions as Mitchell Hutchins
and the Trust may approve, and, if necessary or appropriate in connection
therewith, to qualify and maintain the qualification of the Trust as a broker or
dealer in such jurisdictions; provided that the Trust shall not be required to
amend its Trust Instrument or By-Laws to comply with the laws of any
jurisdiction, to maintain an office in any jurisdiction, to change the terms of
the offering of the Shares in any jurisdiction from the terms set forth in its
Registration Statement, to qualify as a foreign corporation in any jurisdiction,
or to consent to service of process in any jurisdiction other than with respect
to claims arising out of the offering of the Shares. Mitchell Hutchins shall
furnish such information and other material relating to its affairs and
activities as may be required by the Trust in connection with such
qualifications.
7. EXPENSES OF THE TRUST. The Trust shall bear all costs and expenses of
registering the Shares with the Securities and Exchange Commission and
qualifying the Shares with state and other regulatory bodies, and shall assume
expenses related to communications with shareholders of each Series, including
(i) fees and disbursements of its counsel and independent public accountant;
(ii) the preparation, filing and printing of registration statements and/or
prospectuses or statements of additional information required under the federal
securities laws; (iii) the preparation and mailing of annual and interim
reports, prospectuses, statements of additional information and proxy materials
to shareholders; and (iv) the qualifications of Shares for sale and of the Trust
as a broker or dealer under the securities laws of such jurisdictions as shall
be selected by the Trust and Mitchell Hutchins pursuant to Paragraph 6(e)
hereof, and the costs and expenses payable to each such jurisdiction for
continuing qualification therein.
8. EXPENSES OF MITCHELL HUTCHINS. Mitchell Hutchins shall bear all costs
and expenses of (i) preparing, printing and distributing any materials not
prepared by the Trust and other materials used by Mitchell Hutchins in
connection with the sale of Shares under this Contract, including the additional
cost of printing copies of prospectuses, statements of additional information,
and annual and interim shareholder reports other than copies thereof required
for distribution to existing shareholders or for filing with any federal or
state securities authorities; (ii) any expenses of advertising incurred by
Mitchell Hutchins in connection with such offering; (iii) the expenses of
registration or qualification of Mitchell Hutchins as a broker or dealer under
federal or state laws and the expenses of continuing such registration or
qualification; and (iv) all compensation paid to Mitchell Hutchins' employees
and others for selling Shares, and all expenses of Mitchell Hutchins, its
employees and others who engage in or support the sale of Shares as may be
incurred in connection with their sales efforts. For the purposes of this
paragraph 8, references to Mitchell Hutchins shall include any of its delegates.
4
<PAGE>
9. INDEMNIFICATION.
(a) The Trust agrees to indemnify, defend and hold Mitchell
Hutchins, its officers and directors, and any person who controls, within the
meaning of Section 15 of the 1933 Act, is controlled by, or is under common
control with Mitchell Hutchins ("Indemnified Parties"), free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Indemnified Parties may
incur under the 1933 Act, or under common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in the
Registration Statement or arising out of or based upon any alleged omission to
state a material fact required to be stated in the Registration Statement or
necessary to make the statements therein not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by an
Indemnified Party to the Trust for use in the Registration Statement; provided,
however, that this indemnity agreement shall not inure to the benefit of any
person who is also an officer or trustee of the Trust or who controls the Trust
within the meaning of Section 15 of the 1933 Act, unless a court of competent
jurisdiction shall determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy as expressed in
the 1933 Act; and further provided, that in no event shall anything contained
herein be so construed as to protect an Indemnified Party against any liability
to the Trust or to the shareholders of any Series to which and Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations under this Contract. The Trust shall not be liable
to an Indemnified Party under this indemnity agreement with respect to any claim
made against Indemnified Party unless that Indemnified Party shall have notified
the Trust in writing of the claim within a reasonable time after the summons or
other first written notification giving information of the nature of the claim
shall have been served upon the Indemnified Party (or after the Indemnified
Party shall have received notice of service on any designated agent). However,
failure to notify the Trust of any claim shall not relieve the Trust from any
liability which it may have to an Indemnified Party against whom such action is
brought otherwise than on account of this indemnity agreement. The Trust shall
be entitled to participate at its own expense in the defense or, if it so
elects, to assume the defense of any suit brought to enforce any claims subject
to this indemnity agreement. If the Trust elects to assume the defense of any
such claim, the defense shall be conducted by counsel chosen by the Trust and
satisfactory to indemnified defendants in the suit whose approval shall not be
unreasonably withheld. In the event that the Trust elects to assume the defense
of any suit and retain counsel, the indemnified defendants shall bear the fees
and expenses of any additional counsel retained by them. If the Trust does not
elect to assume the defense of a suit, it will reimburse the indemnified
defendants for the reasonable fees and expenses of any counsel retained by the
indemnified defendants. The Trust agrees to notify Mitchell Hutchins as
representative of the Indemnified Parties promptly of the commencement of any
litigation or proceedings against it or any of its officers or trustees in
connection with the issuance or sale of any of its Shares.
(b) Mitchell Hutchins agrees to indemnify, defend, and hold the
Trust, its officers and trustees and any person who controls the Trust within
the meaning of Section 15 of
5
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the 1933 Act, free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending
against such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which the Trust, its trustees or officers, or any such
controlling person may incur under the 1933 Act or under common law or otherwise
arising out of or based upon any alleged untrue statement of a material fact
contained in information furnished in writing by Mitchell Hutchins to the Trust
for use in the Registration Statement, arising out of or based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement necessary to make such information
not misleading, or arising out of any agreement between Mitchell Hutchins and
any retail dealer, or arising out of any supplemental sales literature or
advertising used by Mitchell Hutchins in connection with its duties under this
Contract. Mitchell Hutchins shall be entitled to participate, at its own
expense, in the defense or, if it so elects, to assume the defense of any suit
brought to enforce the claim, but if Mitchell Hutchins elects to assume the
defense, the defense shall be conducted by counsel chosen by Mitchell Hutchins
and satisfactory to the indemnified defendants whose approval shall not be
unreasonably withheld. In the event that Mitchell Hutchins elects to assume the
defense of any suit and retain counsel, the defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them. If Mitchell
Hutchins does not elect to assume the defense of any suit, it will reimburse the
indemnified defendants in the suit for the reasonable fees and expenses of any
counsel retained by them.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE TRUST.
The trustees of the Trust and the shareholders of any Series shall not be liable
for any obligations of the Trust or any Series under this Contract, and Mitchell
Hutchins agrees that, in asserting any rights or claims under this Contract, it
shall look only to the assets and property of the Trust or the particular Series
in settlement of such right or claims, and not to such trustees or shareholders.
11. SERVICES PROVIDED TO THE TRUST BY EMPLOYEES OF MITCHELL HUTCHINS. Any
person, even though also an officer, director, employee or agent of Mitchell
Hutchins, who may be or become an officer, trustee, employee or agent of the
Trust, shall be deemed, when rendering services to the Trust or acting in any
business of the Trust, to be rendering such services to or acting solely for the
Trust and not as an officer, director, employee or agent or one under the
control or direction of Mitchell Hutchins even though paid by Mitchell Hutchins.
12. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date written
above, provided that, with respect to any Series, this Contract shall not take
effect unless such action has first been approved by vote of a majority of the
Board and by vote of a majority of those trustees of the Trust who are not
interested persons of the Trust, and have no direct or indirect financial
interest in the operation of the Plan relating to the Series or in any
agreements related thereto (all such trustees collectively being referred to
herein as the "Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Contract
6
<PAGE>
shall continue automatically for successive periods of twelve months each,
provided that such continuance is specifically approved at least annually (i) by
a vote of a majority of the Independent Trustees, cast in person at a meeting
called for the purpose of voting on such approval, and (ii) by the Board or with
respect to any given Series by vote of a majority of the outstanding voting
securities of the Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board, by vote of a majority of the Independent Trustees or by vote
of a majority of the outstanding voting securities of the Shares of such Series
on sixty days' written notice to Mitchell Hutchins or by Mitchell Hutchins at
any time, without the payment of any penalty, on sixty days' written notice to
the Trust or such Series. This Contract will automatically terminate in the
event of its assignment.
(d) Termination of this Contract with respect to any given Series
shall in no way affect the continued validity of this Contract or the
performance thereunder with respect to any other Series.
13. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
14. GOVERNING LAW. This Contract shall be construed in accordance with the
laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the l940 Act, the latter shall control.
15. NOTICE. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient upon receipt in writing at the other
party's principal offices.
16. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meaning as such terms have in the l940 Act.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: MITCHELL HUTCHINS LIR MONEY SERIES
/s/ Cristina Paradiso By: /s/ Dianne E. O'Donnell
---------------------------- --------------------------------
Assistant Secretary Secretary and Vice President
ATTEST:
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
/s/ Andrew S. Novak By: /s/ Keith A. Weller
--------------------------- --------------------------------------
Vice President First Vice President
8
<PAGE>
Exhibit No. 7(b)
CUSTODY AGREEMENT
Agreement made as of this 12th day of January, 2000, between MITCHELL
HUTCHINS LIR MONEY 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 51 West 52nd Street, New York, New York 10019-6114 (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.
- 2 -
<PAGE>
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
30. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and money at any time owned by the Fund with respect to the
Series during the period of this Agreement. (This Agreement pertains only to
those Series of the Fund identified on Appendix B hereto.)
31. 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 the Series, 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) of
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 indorsed to the Fund or Series and have not been indorsed 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.
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(c) References in this Agreement to the deposit or maintenance of
Securities or other financial assets with or in the Book-Entry System, the
Depository or a sub-custodian (including any Foreign Sub-Custodian) refer to the
deposit and maintenance of financial assets of the Custodian that correspond to
the security entitlements established in favor of the Series and do not alter
the obligation of the Custodian, as a securities intermediary for the Fund and
its Series, to credit those Securities to the custody account maintained by the
Custodian for the appropriate Series pursuant to this Agreement. For purposes of
this Agreement, "receipt" or "delivery" of a Security or other financial asset
by or to the Custodian includes the acquisition by the Custodian of a security
entitlement with respect to such financial asset.
(d) The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is not
finally collected; provided that if such reversal is thirty (30) days or more
after the credit was issued, the Custodian will give five (5) days prior notice
of such reversal.
(e) The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Appendix 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
Appendix A 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
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<PAGE>
Fund's Board of Trustees, substantially in the form of Appendix A hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate actually
received by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series. All
Securities are to be held or disposed of by the Custodian for, and subject at
all times to the instructions of, the Fund pursuant to the terms of this
Agreement. The Custodian shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any Securities except as provided by
the terms of this Agreement, and shall have the sole right to release and
deliver Securities held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be subject to
draft, orders, or charges of the Custodian pursuant to this Agreement and shall
be disbursed by the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address
of the person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses
and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day.
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
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<PAGE>
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or
indirectly through the use of the Book-Entry System or the Depository with
respect to Securities maintained hereunder, shall with respect to all Securities
held for the Fund hereunder in accordance with preceding paragraph 4:
(a) promptly collect all income, dividends and distributions due
or payable;
(b) promptly give notice to the Fund and promptly present payment
and collect the amount payable upon such Securities which are called, but only
if either (i) the Custodian receives a written notice of such call, or (ii)
notice of such call appears in one or more of the publications listed in
Appendix C annexed hereto, which may be amended at any time by the Custodian
without the prior notification or consent of the Fund;
(c) promptly present for payment and collect the amount payable
upon all Securities which mature;
(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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<PAGE>
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 instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of
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<PAGE>
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
32. Promptly after each purchase of Securities by the Fund, other than
a purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (i) the Series to
which such Securities are to be specifically allocated; (ii) the name of the
issuer and the title of the Securities; (iii) the number of shares or the
principal amount purchased and accrued interest, if any; (iv) the date of
purchase and settlement; (v) the purchase price per unit; (vi) the total amount
payable upon such purchase; (vii) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (viii) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the money held for the account of
such Series the total amount payable upon such purchase, provided that the
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same conforms to the total amount payable as set forth in such Certificate or
Oral Instructions.
33. 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
34. 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.
35. 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;
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(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.
36. 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.
37. 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.
38. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total
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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.
39. 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.
40. 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.
41. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall,
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<PAGE>
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.
42. 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.
43. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certificate.
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<PAGE>
44. 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.
45. 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.
46. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
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<PAGE>
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 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
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<PAGE>
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
47. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (i) the Series to which such
Option is specifically allocated; (ii) the type of Futures Contract Option (put
or call); (iii) the type of Futures Contract and such other information as may
be necessary to identify the Futures Contract underlying the Futures Contract
Option purchased; (iv) the expiration date; (v) the exercise price; (vi) the
dates of purchase and settlement; (vii) the amount of premium to be paid by the
Fund upon such purchase; (viii) the name of the broker or futures commission
merchant through whom such option was purchased; and (ix) the name of the
broker, or futures commission merchant, to whom payment is to be made. The
Custodian shall pay out of the money specifically allocated to such Series, the
total amount to be paid upon such purchase to the broker or futures commissions
merchant through whom
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the purchase was made, provided that the same conforms to the amount set forth
in such Certificate.
48. 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.
49. 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.
50. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any, as specified in
the Certificate. The
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<PAGE>
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.
51. 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.
52. 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.
53. Whenever the Fund purchases any Futures Contract Option identical to
a previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the
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<PAGE>
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.
54. 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.
55. 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.
56. 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
57. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
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<PAGE>
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.
58. 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
59. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the
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delivery to the broker or dealer, and the deposits, if any, to the Senior
Security Account, specified in such Certificate or Oral Instructions.
60. 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
61. 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.
62. 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,
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<PAGE>
(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
63. 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.
64. 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.
65. 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.
66. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
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<PAGE>
67. 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.
68. 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
69. 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.
70. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay out of
the money held for the account of each Series the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
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ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and price;
and
(b) the amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares 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 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
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privilege out of the money held in the separate account of the Series of the
Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
71. 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.
72. 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
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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, 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,
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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 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
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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 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.
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(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 of any claim or infringement against any patent, copyright, license or
other property right arising out or by reason of the Fund's use of the Software
in the form provided under this Section. Custodian at its own expense will
defend such action or claim brought against Fund to the extent that it is based
on a claim that the Software in the form provided by Custodian infringes any
patents, copyrights, license or other property right, provided that Custodian is
provided with reasonable written notice of such claim, provided that the Fund
has not settled, compromised or confessed any such claim without the Custodian's
written consent, in which event Custodian shall have no liability or obligation
hereunder, and provided Fund cooperates with and assists Custodian in the
defense of such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Custodian is enjoined from using the Software, or if Custodian believes that the
System is likely to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses procure the
right for the Fund to continue to use the Software, or (b), replace or modify
the Software so as to make it non-infringing, or (c) may discontinue the license
granted herein upon written notice to Customer.
12. The Custodian agrees that it will, on behalf of itself and its
affiliates, agents, officers and employees, treat all information relating to
transactions affected by the Fund as confidential and not to be disclosed to any
person, other than the Fund and its other service providers or as may be
disclosed in the examination of any books or records
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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
73. 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.
74. 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.
75. 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.
76. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.
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77. 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.
78. 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.
79. 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.
80. 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
81. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (i) the Series to which such FX Transaction
is specifically allocated; (b) the type and amount of Currency to be purchased
by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date on
which the Currency to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the Custodian shall
deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to
be sold on the date on which such delivery is to be made, as set
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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.
82. 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.
83. 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 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,
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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
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
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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 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.
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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 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
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<PAGE>
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 reasonable attorney's fees, howsoever arising or incurred because of
or in connection with this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of Article XIII as part of any
check redemption privilege program of the Fund, except for any such liability,
claim, loss and demand arising out of the Custodian's own negligence or willful
misconduct.
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<PAGE>
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
84. 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 sixty (60) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Fund, certified by the
Secretary or any Assistant Secretary, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000 aggregate capital, surplus and
undivided profits. In the event such notice is given by the Custodian, the Fund
shall, on or before the termination date, deliver to the Custodian a copy of a
resolution of the Board of Trustees of the Fund, certified by the Secretary or
any Assistant Secretary, designating a successor custodian or custodians. In the
absence of such designation by the Fund, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall upon receipt
of a notice of acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and money then owned by the
Fund and held by it as Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall then be entitled.
85. 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
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<PAGE>
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.
86. 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
87. Annexed hereto as Appendix A is a Certificate signed by a present
Authorized Person 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.
88. 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.
89. 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
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<PAGE>
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.
90. 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.
91. 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.
92. 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.
93. 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.
94. A copy of the Certificate of Trust 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.
95. 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 LIR MONEY
SERIES
on behalf of its series
LIR PREMIER MONEY MARKET FUND
LIR PREMIER TAX-FREE MONEY MARKET FUND
By: /s/ Dianne E. O'Donnell
------------------------
Name: Dianne E. O'Donnell
Title: Secretary and Vice President
[SEAL]
Attest:
/s/ Keith A. Weller
- --------------------------------------
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/ Richard A. Yacavone
- -----------------------
Title: Vice President
- 41 -
<PAGE>
APPENDIX B
SERIES
LIR Premier Money Market Fund
LIR Premier Tax-Free Money Market Fund
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<PAGE>
APPENDIX C
I, Richard A. Yacovone, a Vice President with THE BANK OF NEW YORK do
hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
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<PAGE>
APPENDIX D
The undersigned, _____________________, hereby certifies that he or she
is the duly elected and acting of ____________________, a _______________
business trust (the "Fund"), further certifies that the following resolutions
were adopted by the Board of Trustees of the Fund at a meeting duly held on
, 2000, at which a quorum was at all times present and that such
resolutions have not been modified or rescinded and are in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the
Custody Agreement between The Bank of New York and the Fund dated as of , 2000
(the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on Instructions (as defined
in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant
use of such access codes only to Authorized Persons of the Fund as defined in
the Custody Agreement, shall establish internal safekeeping procedures to
safeguard and protect the confidentiality and availability of user and access
codes, passwords and authentication keys, and shall use Instructions only in a
manner that does not contravene the Investment Company Act of 1940, as amended,
or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
___________________________________, as of the day of , 2000.
[SEAL]
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<PAGE>
Exhibit No. 8(a)(ii)
TRANSFER AGENCY AGREEMENT
AGREEMENT made this 12th day of January, 2000, between MITCHELL
HUTCHINS LIR MONEY SERIES (the "Company"), a Delaware business trust having its
principal place of business at 51 West 52nd Street, New York, New York
10019-6114 and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation
having its principal place of business at 3435 Stelzer Road, Columbus, Ohio
43219.
WHEREAS, the Company desires that BISYS perform certain services for
each series of the Company set forth in Schedule A hereto (individually referred
to herein as a "Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES.
BISYS shall perform for the Company the transfer agent services set
forth in Schedule B hereto. BISYS also agrees to perform for the Company such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. BISYS shall perform such
additional services as are provided on an amendment to Schedule B hereof, in
consideration of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the
Company (individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Company or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. FEES.
The Company shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in,
Schedule C hereto. Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule B hereto shall be subject to mutual
agreement at the time such amendment to Schedule B is proposed.
3. REIMBURSEMENT OF EXPENSES.
<PAGE>
In addition to paying BISYS the fees described in Section 2 hereof,
the Company agrees to reimburse BISYS for BISYS' reasonable out-of-pocket
expenses in providing services hereunder, including without limitation, the
following:
(a) All freight and other delivery and bonding charges
incurred by BISYS in delivering materials to and from the
Company and in delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy
or other electronic transmission expenses incurred by
BISYS in communication with the Company, the Company's
investment adviser or custodian, dealers, shareholders or
others as required for BISYS to perform the services to be
provided hereunder;
(c) Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other forms of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials;
(e) All systems-related expenses associated with the provision
of special reports and services pursuant to Schedule D,
Item 8, attached hereto, provided that the Company
receives an estimate of those expenses before they are
incurred and approves the additional expenses in advance;
(f) Electronic processing charges (CPU time) levied by SunGard
up to a maximum of $7,500 per month, but only if the
Company's investment adviser has recouped all that it has
waived under its expense waiver/reimbursement agreement
with the Company and the expense ratio of each Fund would
be lower than the net Fund operating expenses indicated in
the fee table in the prospectus dated November 12, 1999,
as revised January 12, 2000; and
(g) Any expenses BISYS shall incur at the written direction of
an officer of the Company thereunto duly authorized.
4. EFFECTIVE DATE.
This Agreement shall become effective as of the date first written
above (the "Effective Date").
5. TERM.
2
<PAGE>
This Agreement shall have an initial term of six (6) months
commencing on the date of this Agreement indicated above, unless terminated
earlier for cause. Either party may terminate this Agreement, without penalty,
upon the provision of at least sixty (60) days' written notice to the other
party that the Agreement shall terminate as of a specified date, which date
shall be no earlier than the expiration of the initial term. In the absence of
such termination notice, this Agreement shall continue in full force and effect
until it is terminated as provided herein.
For purposes of this Agreement, "cause" shall mean (a) a material
breach of this Agreement that has not been remedied for thirty (30) days
following written notice of such breach from the non-breaching party; (b) a
final, unappealable judicial, regulatory or administrative ruling or order in
which the party to be terminated has been found guilty of criminal or unethical
behavior in the conduct of its business; or (c) financial difficulties on the
part of the party to be terminated which are evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent or
acquiescence in, a voluntary or involuntary case under Title 11 of the United
States Code, as from time to time is in effect, or any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors.
After such termination, for so long as BISYS, with the written
consent of the Company, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees and
out-of-pocket expenses incurred by BISYS but unpaid by the Company upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Company, in addition to
the fees and disbursements provided by Sections 2 and 3 hereof, the amount of
all of BISYS' cash disbursements in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Company and/or its distributor or investment adviser and/or other parties, of
the Company's property, records, instruments and documents.
6. UNCONTROLLABLE EVENTS.
BISYS assumes no responsibility hereunder, and shall not be liable
for any damage, loss of data, delay or any other loss whatsoever caused by
events beyond its reasonable control.
7. LEGAL ADVICE.
BISYS shall notify the Company at any time BISYS believes that it is
in need of the advice of counsel (other than counsel in the regular employ of
BISYS or any affiliated companies) with regard to BISYS' responsibilities and
duties pursuant to this Agreement; and after so notifying the Company, BISYS, at
its discretion, shall be entitled to seek, receive and act
3
<PAGE>
upon advice of legal counsel of its choosing. BISYS shall in no event be liable
to the Company or any Fund or any shareholder or beneficial owner of the Company
for any action reasonably taken pursuant to such advice.
8. INSTRUCTIONS.
Whenever BISYS is requested or authorized to take action hereunder
pursuant to instructions from a shareholder, or a properly authorized agent of a
shareholder ("shareholder's agent"), concerning an account in a Fund, BISYS
shall be entitled to rely upon any certificate, letter or other instrument or
communication, believed by BISYS to be genuine and to have been properly made,
signed or authorized by an officer or other authorized agent of the Company or
by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Company or
any other person authorized by the Company's Board of Trustees (hereafter
referred to as the "Trustees") or by the shareholder or shareholder's agent, as
the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the then-current Prospectuses and Statement of
Additional Information of the Company (with any supplement(s) thereto) relating
to the Funds to the extent that such services are described therein unless BISYS
receives written instructions to the contrary in a timely manner from the
Company.
9. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Company agrees to indemnify and hold harmless BISYS, its employees,
agents, trustees, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Company, the investment adviser and on any records provided
by any fund accountant or custodian thereof; provided that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties; and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Company written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
4
<PAGE>
10. RECORD RETENTION AND CONFIDENTIALITY.
BISYS shall keep and maintain on behalf of the Company all books and
records which the Company or BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees that
all such books and records shall be the property of the Company and to make such
books and records available for inspection by the Company or by the Securities
and Exchange Commission (the "Commission") at reasonable times and otherwise to
keep confidential all books and records and other information relative to the
Company and its shareholders, except when requested to divulge such information
by duly-constituted authorities or court process, or requested by a shareholder
or shareholder's agent with respect to information concerning an account as to
which such shareholder has either a legal or beneficial interest or when
requested by the Company, the shareholder, or shareholder's agent, or the dealer
of record as to such account.
11. REPORTS.
BISYS will furnish to the Company and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Company in writing,
such reports at such times as are prescribed in Schedule D attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
D. To the extent that it possesses actual knowledge of the information contained
in such report, the Company agrees to examine each such report or copy promptly
and will report or cause to be reported any errors or discrepancies therein of
which it is aware.
12. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Company and all such other records and data will be
furnished to the Company in appropriate form as soon as practicable after
termination of this Agreement for any reason.
13. RETURN OF RECORDS.
BISYS may at its option at any time, and shall promptly upon the
Company's demand, turn over to the Company and cease to retain BISYS' files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Company, such documents and
records will be retained by BISYS for six years from the year of
5
<PAGE>
creation. At the end of such six-year period, such records and documents will be
turned over to the Company unless the Company authorizes in writing the
destruction of such records and documents.
14. BANK ACCOUNTS.
The Company and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Company, as are
necessary in order that BISYS may perform the services required to be performed
hereunder. To the extent that the performance of such services shall require
BISYS directly to disburse amounts for payment of dividends, redemption proceeds
or other purposes, the Company and Funds shall provide such bank or banks with
all instructions and authorizations necessary for BISYS to effect such
disbursements.
15. REPRESENTATIONS OF THE COMPANY.
The Company certifies to BISYS that: (a) as of the close of business
on the Effective Date, each Fund which is in existence as of the Effective Date
has authorized unlimited shares, and (b) by virtue of its Declaration of Trust
shares of each Fund which are redeemed by the Company may be sold by the Company
from its treasury, and (c) this Agreement has been duly authorized by the
Company and, when executed and delivered by the Company, will constitute a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
16. REPRESENTATIONS OF BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and shall
continue to be in, substantial compliance with all provisions of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), required in connection with the performance of its duties under this
Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Company and BISYS' records, data, equipment, facilities and other property used
in the performance of its obligations hereunder are adequate and that it will
make such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
17. INSURANCE.
BISYS shall maintain a fidelity bond covering larceny and
embezzlement and an insurance policy with respect to directors and officers
errors and omissions coverage in amounts that are appropriate in light of its
duties and responsibilities hereunder. BISYS shall notify the Company should its
insurance coverage with respect to professional liability or errors and
6
<PAGE>
omissions coverage be canceled or reduced. Such notification shall include the
date of change and the reasons therefor. BISYS shall notify the Company of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Company from time to time as may be appropriate of the total outstanding claims
made by BISYS under its insurance coverage.
18. INFORMATION TO BE FURNISHED BY THE COMPANY AND FUNDS.
The Company will furnish to BISYS the following upon its
request:
(a) Copies of the Trust Instrument of the Company and of any
amendments thereto, certified by the proper official of the
state in which such Declaration or Articles has been filed.
(b) Copies of the following documents:
1. The Company's Bylaws and any amendments thereto;
2. Certified copies of resolutions of the Trustees covering
the following matters:
A. Approval of this Agreement and authorization of a
specified officer of the Company to execute and
deliver this Agreement and authorization for specified
officers of the Company to instruct BISYS hereunder;
and
B. Authorization of BISYS to act as Transfer Agent for
the Company on behalf of the Funds.
(c) A list of all officers of the Company, together with
specimen signatures of those officers who are authorized to
instruct BISYS in all matters.
(d) Two copies of the following (if such documents are employed
by the Company):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Company or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
7
<PAGE>
19. INFORMATION FURNISHED BY BISYS.
BISYS has furnished to the Company the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement;
2. Authorization of BISYS to act as Transfer Agent for the
Company.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed
with the Commission pursuant to Rule 17Ad-13 under the
Exchange Act.
20. AMENDMENTS TO DOCUMENTS.
The Company shall furnish BISYS written copies of any amendments
to, or changes in, any of the items referred to in Section 18 hereof forthwith
upon such amendments or changes becoming effective. In addition, the Company
agrees that no amendments will be made to the Prospectuses or Statement of
Additional Information of the Company which might have the effect of changing
the procedures employed by BISYS in providing the services agreed to hereunder
or which amendment might affect the duties of BISYS hereunder unless the Company
first obtains BISYS' approval of such amendments or changes.
21. RELIANCE ON AMENDMENTS.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Company pursuant to Sections 18
and 20 of this Agreement and the Company hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes other
than those occasioned by BISYS's own bad faith, willful misfeasance, negligence
or from reckless disregard by it of its obligations and duties. Although BISYS
is authorized to rely on the above-mentioned amendments to and changes in the
documents and other items to be provided pursuant to Sections 18 and 20 hereof,
BISYS shall be under no duty to comply with or take any action as a result of
any of such amendments or changes unless the Company first obtains BISYS'
written consent to and approval of such amendments or changes.
8
<PAGE>
22. COMPLIANCE WITH LAW.
Except for the obligations of BISYS set forth in Section 10 hereof,
the Company assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Company as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction; provided, however, that the Company may rely
upon information furnished by BISYS for inclusion therein. BISYS shall perform
the services described herein in accordance with all applicable laws, rules and
regulations including, to the extent applicable to BISYS's duties and
responsibilities hereunder, federal and state laws relating to the sale of the
Company's shares. The Company represents and warrants that no shares of the
Company will be offered to the public until the Company's registration statement
under the 1933 Act and the 1940 Act has been declared or becomes effective.
23. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice at the following address: if to BISYS, at 3435 Stelzer Road, Columbus,
Ohio 43219, (Attn: President); if to the Company, at 51 West 52nd Street, New
York, New York 10019-6114 (Attn: Secretary); or at such other address as such
party may from time to time specify in writing to the other party pursuant to
this Section.
24. HEADINGS.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
25. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
26. GOVERNING LAW.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
9
<PAGE>
27. COMPANY TRUSTEES, OFFICERS, AGENTS & SHAREHOLDERS.
The Company's Trustees, officers, agents and shareholders, or any
Fund thereof, whether past, present, or future, shall not be liable for any
obligations of the Company, or any such Fund, under this Agreement and BISYS
agrees that in asserting any rights or claims under this Agreement, it shall
look only to the assets and property of the particular Fund in settlement of
such rights or claims and not to such Trustees, officers, agents or
shareholders. BISYS agrees that it will look only to the assets and property of
a particular Fund in asserting any right or claims under this Agreement with
respect to services rendered with respect to that Fund and will not seek to
obtain settlement of such rights or claims from the assets of any other
portfolio of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed all as of the day and year first above written.
MITCHELL HUTCHINS LIR MONEY SERIES
on behalf of its:
LIR PREMIER MONEY MARKET FUND
LIR PREMIER TAX-FREE MONEY MARKET FUND
By: /s/ Dianne E. O'Donnell
------------------------
Title: Secretary and Vice President
BISYS FUND SERVICES OHIO, INC.
By: /s/ William J. Tomko
--------------------------
Title: President
10
<PAGE>
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MITCHELL HUTCHINS LIR MONEY SERIES AND
BISYS FUND SERVICES OHIO, INC.
SERIES OF THE COMPANY
LIR Premier Money Market Fund
LIR Premier Tax-Free Money Market Fund
A-1
<PAGE>
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MITCHELL HUTCHINS LIR MONEY SERIES
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENCY SERVICES
1. SHAREHOLDER TRANSACTIONS
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. SHAREHOLDER INFORMATION SERVICES
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
B-1
<PAGE>
3. COMPLIANCE REPORTING
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and capital
gains.
c. Issue tax-withholding reports to the Internal Revenue Service.
4. DEALER/LOAD PROCESSING (IF APPLICABLE)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load
Fund.
5. SHAREHOLDER ACCOUNT MAINTENANCE
a. Maintain all shareholder records for each account in the
Company.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
B-2
<PAGE>
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MITCHELL HUTCHINS LIR MONEY SERIES
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENT FEES
ANNUAL PER ACCOUNT FEE:
Open Accounts: 0-24,999 = $16.00 per account
25,000-100,000 = $14.00 per account
over 100,000 = $12.00 per account
Closed Accounts $3.00 per account
ADDITIONAL SERVICES:
Additional services such as IRA processing, development of interface
capabilities, servicing of 403(b) and 408(c) accounts, management of cash sweeps
between DDAs and mutual fund accounts and coordination of the printing and
distribution of prospectuses, annual reports and semi-annual reports are subject
to additional fees which will be quoted upon request. Programming costs or
database management fees for special reports or specialized processing will be
quoted upon request.
MULTIPLE CLASSES OF SHARES:
Classes of shares which have different net asset values or pay different daily
dividends will be treated as separate classes, and the fee schedule above,
including the appropriate minimums, will be charged for each separate class.
OUT-OF-POCKET EXPENSES:
BISYS shall be entitled to be reimbursed for all reasonable out-of-pocket
expenses including, but not limited to, the expenses set forth in Section 3 of
the Transfer Agency Agreement to which this Schedule C is attached.
C-1
<PAGE>
SCHEDULE D
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MITCHELL HUTCHINS LIR MONEY SERIES
AND
BISYS FUND SERVICES OHIO, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
8. Such special reports and additional information that the parties may
agree upon, from time to time.
D-1
<PAGE>
Exhibit No. 9
[LETTERHEAD OF KIRKPATRICK & LOCKHART LLP]
April 27, 2000
Mitchell Hutchins LIR Money Series
51 West 52nd Street
New York, New York 10019-6114
Ladies and Gentlemen:
You have requested our opinion, as counsel to Mitchell Hutchins LIR
Money Series ("Trust"), as to certain matters regarding the issuance of certain
Shares of the Trust. As used in this letter, the term "Shares" means the shares
of beneficial interest of the series of the Trust listed below that may be
issued during the time that Post-Effective Amendment No. 7 to the Trust's
Registration Statement on Form N-1A ("PEA") is effective and has not been
superseded by another post-effective amendment. The series of the Trust are LIR
Premier Money Market Fund and LIR Premier Tax-Free Money Market Fund.
As such counsel, we have examined certified or other copies, believed
by us to be genuine, of the Trust's Trust Instrument and by-laws and such
resolutions and minutes of meetings of the Trust's Board of Trustees as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) of the State of Delaware that in
our experience are normally applicable to the issuance of shares by investment
companies organized as business trusts in that State and to the Securities Act
of 1933, as amended, ("1933 Act"), the Investment Company Act of 1940, as
amended, ("1940 Act") and the regulations of the Securities and Exchange
Commission ("SEC") thereunder.
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by the Trust and that, when sold in accordance
with the terms contemplated by the PEA, including receipt by the Trust of full
payment for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been validly issued, fully paid and non-assessable.
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>
Exhibit No. 10
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees of
Mitchell Hutchins LIR Money Series, on behalf of LIR Premier Money Market
Fund and LIR Premier Tax-Free Money Market Fund:
We consent to the use of our report dated January 28, 2000 for The Infinity
Mutual Funds, Inc. -- Correspondent Cash Reserves Money Market Portfolio and
Correspondent Cash Reserves Tax Free Money Market Portfolio (predecessor
entities to LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market
Fund, respectively), as incorporated by reference herein, and to the reference
to our firm under the heading "Financial Highlights" in the Prospectus.
/s/ KPMG LLP
- -------------------
KPMG LLP
Columbus, Ohio
April 27, 2000
<PAGE>
Exhibit No. 13(a)
MITCHELL HUTCHINS LIR MONEY SERIES --
LIR PREMIER MONEY MARKET FUND
LIR PREMIER TAX-FREE MONEY MARKET FUND
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, Mitchell Hutchins LIR Money Series ("Fund") is registered under
the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and has established distinct series of shares of
beneficial interest, two of which correspond to distinct portfolios designated
as LIR PREMIER MONEY MARKET FUND and LIR PREMIER TAX-FREE MONEY MARKET FUND; and
WHEREAS, the Fund wishes to adopt a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act with respect to the above-referenced Series and such
other Series to which this Plan may hereafter be made applicable ("Series"); and
WHEREAS, the Fund intends to enter into a Plan Agreement ("Plan
Agreement") with Correspondent Services Corporation ("CSC") which has, in turn,
entered into clearing agreements with certain correspondent firms (together with
CSC, the "Securities Firms") under which the Securities Firms have agreed to
perform certain services for their clients who are shareholders of a Series
("Shareholders");
NOW, THEREFORE, the Fund hereby adopts this Plan with respect to the
shares of each Series ("Shares") in accordance with Rule 12b-1 under the 1940
Act.
1. A. Each Series is authorized to pay to CSC, as compensation for its
distribution and other services on behalf of each Series' shares of beneficial
interest ("Shares"), fees at the rate of 0.60%, on an annualized basis, of the
average daily net assets of the Series' Shares. Such fees shall be calculated
and accrued daily and paid monthly or at such other intervals as the Board shall
determine. Such fees will be paid only in accordance with the Plan Agreement
between the Series and CSC.
B. Any Series may pay a fee to CSC at a lesser rate than the fees
specified above, as agreed upon by the Fund's Board of Trustees ("Board") and
CSC.
2. As Plan agent for the Shares of each Series, CSC may spend such amounts
as it deems appropriate on any activities or expenses primarily intended to
result in the sale of the Shares of the Series or the servicing and maintenance
of Shareholder accounts, including, but not limited to, compensation to
employees of CSC; compensation to and expenses of, including overhead and
telephone and other communication expenses, CSC and Securities Firms who engage
in or support the distribution of Shares or who service Shareholder accounts;
expenses related to: providing telephone and other communications facilities,
answering Shareholder
<PAGE>
inquiries about the Fund or any Series; assisting Shareholders in changing
dividend options, account designations and addresses; performing sub-accounting
or other services; establishing and maintaining Shareholder accounts and
records; processing Shareholder transactions; transmitting Fund communications
to Shareholders; providing prospectuses, statements of additional information,
and reports to other than existing Shareholders; preparing, printing and
distributing sales literature and advertising materials; investing Shareholder
account cash balances automatically in Shares; providing periodic statements
showing a Shareholder's account balance and integrating such statements with
those of other transactions and balances in the Shareholder's other accounts
serviced by the Securities Firm; arranging for bank wires; and providing such
other information and services as the Shareholders reasonably may request, to
the extent the Securities Firm is permitted by applicable statute, rule or
regulation.
3. The amounts payable under this Plan will be paid in accordance with the
Plan Agreement between the Fund and CSC.
4. If adopted with respect to Shares of a Series after any public offering
of those shares, this Plan shall not take effect with respect to those shares
unless it has first been approved by a majority of the voting securities of the
Shares of that Series. This provision does not apply to adoption as an amended
Plan of Distribution where the prior Plan of Distribution either was approved by
a vote of a majority of the voting securities of the Shares of the applicable
Series or such approval was not required under Rule 12b-1.
5. This Plan shall not take effect with respect to the Shares of any
Series unless it first has been approved, together with any related agreements,
by votes of a majority of both (a) the Board and (b) those Board members of the
Fund who are not "interested persons" of the Fund (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related thereto ("Independent Board Members"), cast in person
at a meeting (or meetings) called for the purpose of voting on such approval;
and until the Board members who approve the Plan's taking effect with respect to
such Series' Shares have reached the conclusion required by Rule 12b-1(e) under
the 1940 Act.
6. After approval as set forth in Paragraph 4 (if applicable) and
Paragraph 5, this Plan shall take effect and continue in full force and effect
for so long as such continuance is specifically approved at least annually in
the manner provided for approval of this Plan in Paragraph 5.
7. CSC shall provide to the Board and the Board shall review, at least
quarterly, a written report of the amounts expended with respect to the Shares
of each Series by CSC under this Plan and the Plan Agreement and the purposes
for which such expenditures were made. Such report shall include any amounts
paid by CSC to other Securities Firms and the purposes for which such payments
were made.
8. This Plan may be terminated with respect to the Shares of any Series at
any time by vote of the Board, by vote of a majority of the Independent Board
Members, or by vote of a majority of the outstanding voting securities of the
Shares of that Series.
2
<PAGE>
9. This Plan may not be amended to increase materially the amount of fees
provided for in Paragraph 1 hereof unless such amendment is approved by a
majority of the outstanding voting securities of the Shares of the affected
Series, and no material amendment to the Plan shall be made unless approved in
the manner provided for initial approval in Paragraph 4 hereof.
10. The amount of the fees payable by the Series to CSC under Paragraph 1A
hereof is not related directly to expenses incurred by CSC on behalf of such
Series, and Paragraph 2 hereof and the Plan Agreement do not obligate the Series
to reimburse CSC for such expenses. The fees set forth in Paragraph 1A hereof
will be paid by the Series to CSC until the Plan is terminated or not renewed.
If the Plan is terminated or not renewed with respect to the Shares of any
Series, any distribution expenses incurred by CSC on behalf of the Shares of the
Series in excess of payments of the fees specified in Paragraph 1A hereof which
CSC has received or accrued through the termination date are the sole
responsibility and liability of CSC, and are not obligations of the Series.
11. While this Plan is in effect, the selection and nomination of the
Board members who are not interested persons of the Fund shall be committed to
the discretion of the Board members who are not interested persons of the Fund.
12. As used in this Plan, the terms "majority of the outstanding voting
securities" and "interested person" shall have the same meaning as those terms
have in the 1940 Act.
13. The Fund shall preserve copies of this Plan (including any amendments
thereto) and any related agreements and all reports made pursuant to Paragraph 7
hereof for a period of not less than six years from the date of this Plan, the
first two years in an easily accessible place.
14. The Board members of the Fund and the shareholders of each Series
shall not be liable for any obligations of the Fund or any Series under this
Plan, and CSC or any other person, in asserting any rights or claims under this
Plan, shall look only to the assets and property of the Fund or such Series in
settlement of such right or claim, and not to such Board members or
shareholders.
IN WITNESS WHEREOF, the Fund has executed this Plan of Distribution on the
day and year set forth below in New York, New York.
Date: January 12, 2000
ATTEST: MITCHELL HUTCHINS LIR MONEY SERIES
/S/ Keith A. Weller By: /s/ Dianne E. O'Donnell
- ------------------- -----------------------
Vice President and Assistant Secretary and Vice President
Secretary
3
<PAGE>
Exhibit No. 13(b)
PLAN AGREEMENT
Mitchell Hutchins LIR Money Series
51 West 52nd Street
New York, NY 10019-6114
Ladies and Gentlemen:
We wish to enter into an Agreement with MITCHELL HUTCHINS LIR
MONEY SERIES (the "Fund") to provide the services described below to
shareholders of each series of the Fund set forth on Exhibit A hereto
("Shareholders"), as such Exhibit may be revised from time to time (each, a
"Series").
The terms and conditions of this Agreement are as follows:
1. We agree to enter into agreements with certain correspondent
firms and other financial services firms ("Securities Firms") which are expected
to engage in activities or incur expenses primarily intended to result in the
sale of the Shares of the Series or the servicing and maintenance of Shareholder
accounts, including for their Shareholders who own shares of any Series
("Shares"), which services or activities may include, without limitation:
providing telephone and other communications facilities, answering Shareholder
inquiries about the Fund or any Series; assisting Shareholders in changing
dividend options, account designations and addresses; performing sub-accounting
or other services; establishing and maintaining Shareholder accounts and
records; processing Shareholder transactions; transmitting Fund communications
to Shareholders; providing prospectuses, statements of additional information,
and reports to other than existing Shareholders; preparing, printing and
distributing sales literature and advertising materials; investing Shareholder
account cash balances automatically in Shares; providing periodic statements
showing a Shareholder's account balance and integrating such statements with
those of other transactions and balances in the Shareholder's other accounts
serviced by the Securities Firm; arranging for bank wires; and providing such
other information and services as the Shareholders reasonably may request, to
the extent the Securities Firm is permitted by applicable statute, rule or
regulation. We will advise each Securities Firm to provide to Shareholders a
schedule of the services the Securities Firm will provide and of any fees that
the Security Firm may charge directly to them for such services.
2. We shall provide such office space and equipment, telephone
facilities and personnel (which may be all or any part of the space, equipment
and facilities currently used in our business, or all or any personnel employed
by us) as is necessary or beneficial for providing the services contemplated
hereby. We shall transmit promptly to each Securities Firm for transmission to
its clients all communications sent to us for transmission to Shareholders by or
on behalf of any Series, the Fund's investment adviser, distributor, custodian
or transfer or dividend disbursing agent.
3. We agree that neither we nor any of our employees or agents are
authorized to make any representation concerning any Shares, except those
contained in the then-current
<PAGE>
Prospectus and Statement of Additional Information for such Series, copies of
which will be supplied to us. We shall have no authority to act as the Fund's
agent or for the Fund's distributor.
4. In consideration of the services and facilities described
herein, we shall be entitled to receive from the Fund, and the Fund agrees to
pay to us with respect to each Series, the fees set forth opposite such Series'
name on Exhibit A hereto. We agree to pay a portion of the aggregate fee paid
hereunder to the Securities Firms. We understand that the payment of these fees
has been authorized and will be paid pursuant to a Plan of Distribution approved
as required by Rule 12b-1 of the Investment Company Act of 1940, as amended (the
"1940 Act") (the "Plan"), and any payments pursuant to this Agreement shall be
paid only so long as the Plan is in effect.
5. The Fund reserves the right, at its discretion and without
notice, to suspend then sale of Shares or withdraw the sale of any Series'
Shares.
6. We acknowledge that this Agreement shall become effective, as
to a Series, only when approved by vote of a majority of (i) the Fund's Board of
Trustees and (ii) Trustees who are not "interested persons" (as defined in the
1940 Act) of the Fund and who have no direct or indirect financial interest in
this Agreement ("Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such approval.
7. As to each Series, this Agreement shall continue for a period
of one year from the date of this Agreement, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
approved specifically at least annually by a vote of a majority of (i) the
Fund's Board of Trustees and (ii) the Funds' Independent Trustees, or by vote of
the holders of a majority of such Series' Shares. Notwithstanding anything
contained herein, if, as to one or more Series, the Plan is terminated by the
Fund's Board of Trustees, or the Plan, or any part thereof, is found invalid or
is ordered terminated by any regulatory or judicial authority, or we fail to
perform the services contemplated herein, this Agreement shall be terminable, as
to the relevant Series, effective upon receipt of notice thereof by us. This
Agreement also shall terminate automatically, as to the relevant Series, in the
event of its assignment (as defined in the 1940 Act).
8. All communications to the Fund shall be sent to the Fund at the
address set forth above. Any notice to us shall be duly given if mailed or
telegraphed to us at the following address: Correspondent Services Corporation
[csc], 1000 Harbor Blvd., 7th Floor, Weehawken, NJ 07087.
9. This Agreement shall be construed in accordance with the
internal laws of the State of New York, without giving effective to principles
of conflict of laws.
2
<PAGE>
Very truly yours,
CORRESPONDENT SERVICES CORPORATION
Date 1/20/00 By: /s/ Gregory Jeddis
-------------------
Authorized Signature
NOTE: Please return both signed copies of this Agreement to the Fund. Upon
acceptance one countersigned copy will be returned for your files.
Accepted:
MITCHELL HUTCHINS LIR MONEY SERIES
Date:__________________ By: /s/ Keith A. Weller
--------------------
Vice President and
Assistant Secretary
January 12, 2000
3
<PAGE>
EXHIBIT A
Plan Agreement
between
MITCHELL HUTCHINS LIR MONEY SERIES
and
CORRESPONDENT SERVICES CORPORATION
MONTHLY FEE AT AN ANNUAL
RATE AS A PERCENTAGE
OF AVERAGE DAILY NET
ASSET VALUE OF SERIES'
NAME OF SERIES SHARES OWNED BY CLIENTS*
- -------------- ------------------------
LIR Premier
Money Market Fund .60 of 1%
LIR Premier
Tax-Free Money Market Fund .60 of 1%
- ------------
* For purposes of determining the fees payable hereunder, the average daily net
asset value of Series' Shares shall be computed in the manner specified in the
Fund's Trust Instrument and then-current Prospectus and Statement of Additional
Information.
- --------------------------------------------------------------------------------
