Filed Pursuant to Rule 497 (c)
Registration Nos. 2-60655
811-2802
PAINEWEBBER AUGUST 1, 1995
CASHFUND, INC.
1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
A PROFESSIONALLY MANAGED MONEY MARKET FUND, INVESTING IN HIGH-GRADE MONEY MARKET
INSTRUMENTS, DESIGNED TO PROVIDE:
/X/ Current Income
/X/ Stability of Principal
/X/ High Liquidity
This Prospectus concisely sets forth information about the Fund a prospective
investor should know before investing. Please retain this Prospectus for future
reference.
A Statement of Additional Information dated August 1, 1995 (which is
incorporated by reference herein) has been filed with the Securities and
Exchange Commission ("SEC"). The Statement of Additional Information can be
obtained without charge, and further inquiries can be made, by contacting the
Fund, your PaineWebber investment executive or PaineWebber's correspondent firms
or by calling toll-free 1-800-441-7756.
Table of Contents
AN INVESTMENT IN THE FUND IS NEITHER Highlights.................. 2
INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. WHILE THE FUND SEEKS TO Financial Highlights........ 4
MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE, THERE CAN BE NO Investment Objective and
ASSURANCE THAT IT WILL BE ABLE TO DO SO. Policies.................... 4
THESE SECURITIES HAVE NOT BEEN APPROVED Purchases................... 8
OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE Redemptions................. 9
SECURITIES COMMISSION NOR HAS
ANY SUCH COMMISSION PASSED UPON Valuation of Shares......... 11
THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY Dividends and Taxes......... 12
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. Management.................. 13
Performance Information..... 14
General Information......... 15
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PAINEWEBBER CASHFUND, INC.
HIGHLIGHTS
See the body of the Prospectus for more information on the topics discussed
in these highlights.
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The Fund: PaineWebber Cashfund, Inc. ("Fund") is a professionally managed,
diversified no-load money market fund that started operations on May
1, 1978.
Investment Objective Current income, stability of principal and high liquidity; invests
and Policies: primarily in high-grade money market instruments.
Total Net Assets: Over $3.9 billion as of June 30, 1995.
Distributor and
Investment Adviser: PaineWebber Incorporated ("PaineWebber"). See "Management."
Sub-adviser: Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins").
Purchases: Shares of common stock are available exclusively through PaineWebber
and its correspondent firms. See "Purchases."
Redemptions: Shares may be redeemed through PaineWebber or its correspondent
firms. See "Redemptions."
Yield: Based on current money market rates; quoted in the financial section
of most newspapers.
Dividends: Declared daily and paid monthly. See "Dividends and Taxes."
Reinvestment: All dividends are automatically paid in Fund shares.
Minimum Purchase: $1,000 for initial purchase.
Automatic Investment $500 daily investment, $1 or more on the next to last Business Day
Sweep: of each month.
Checkwriting: Available to qualified shareholders upon request. Unlimited number
of checks. Minimum amount per check: $500.
Public Offering Price: Net asset value, which the Fund seeks to maintain at $1.00 per
share.
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WHO SHOULD INVEST. The Fund is designed for investors seeking safety,
liquidity and current income. The Fund provides a convenient means for investors
to enjoy current income at money market rates with minimal risk of fluctuation
of principal.
RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective. In periods of declining interest rates the Fund's yield
will tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates the Fund's yield generally will be somewhat lower. See
"Investment Objective and Policies."
EXPENSES OF INVESTING IN THE FUND. The following tables are intended to
assist investors in understanding the expenses associated with investing in the
Fund.
SHAREHOLDER TRANSACTION EXPENSES
Sales charge on purchases of shares........................... None
Sales charge on reinvested dividends.......................... None
Redemption fee or deferred sales charge....................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees.............................................. 0.39%
12b-1 fees................................................... None
Other expenses............................................... 0.23%
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Total Operating Expenses..................................... 0.62%
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EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- ----------------- ----------------- ----------------- -----------------
$6 $20 $35 $77
This Example assumes that all dividends are reinvested and that the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in the years shown. The above tables and the assumption in the Example of a 5%
annual return are required by regulations of the SEC applicable to all mutual
funds; the assumed 5% annual return is not a prediction of, and does not
represent, the Fund's projected or actual performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN. The actual expenses of the Fund will depend upon, among other things, the
level of average net assets and the extent to which the Fund incurs variable
expenses, such as transfer agency costs.
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PaineWebber
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Financial Highlights
The table below provides selected per share data and ratios for
one share of the Fund for the periods shown. This information is
supplemented by the financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the
fiscal year ended March 31, 1995, which are incorporated by
reference into the Statement of Additional Information. The
financial statements and notes, as well as the information in
the table appearing below insofar as it relates to each of the
five years in the period ended March 31, 1995, have been audited
by Ernst & Young LLP, independent auditors, whose report thereon
is included in the Annual Report to Shareholders. The
information appearing below for each of the five years in the
period ended March 31, 1990 also has been audited by Ernst &
Young LLP, whose reports thereon were unqualified.
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FOR THE YEARS ENDED MARCH 31,
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1995 1994 1993 1992 1991 1990 1989 1988
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Net asset value,
beginning of
period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income............ 0.0433 0.0272 0.0317 0.0509 0.0743 0.0846 0.0761 0.0638
LESS
DISTRIBUTIONS:
Dividends from net
investment
income............ (0.0433) (0.0272) (0.0317) (0.0509) (0.0743) (0.0846) (0.0761) (0.0638)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total return
(1)............... 4.44% 2.75% 3.17% 5.09% 7.43% 8.46% 7.61% 6.38%
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RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)... $3,700,678 $3,436,278 $3,774,298 $4,234,968 $5,122,338 $5,236,560 $4,416,667 $4,071,212
Ratio of expenses
to average net
assets............ 0.62% 0.61% 0.57% 0.56% 0.53% 0.54% 0.57% 0.58%
Ratio of net
investment income
to average net
assets............ 4.35% 2.73% 3.17% 5.09% 7.43% 8.46% 7.61% 6.38%
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1987 1986
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Net asset value,
beginning of
period............ $ 1.00 $ 1.00
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NET INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income............ 0.0581 0.0743
LESS
DISTRIBUTIONS:
Dividends from net
investment
income............ (0.0581) (0.0743)
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Net asset value,
end of period.... $ 1.00 $ 1.00
---------- ----------
---------- ----------
Total return
(1)............... 5.81% 7.43%
---------- ----------
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RATIOS/SUPPLEMENTA
DATA:
Net assets, end of
period (000's)... $4,251,408 $4,187,938
Ratio of expenses
to average net
assets............ 0.56% 0.57%
Ratio of net
investment income
to average net
assets............ 5.81% 7.43%
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(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates and a sale at net asset value on the last
day of each period reported.
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Investment Objective and Policies
The Fund's investment objective is to provide current income,
stability of principal and high liquidity. The Fund invests
exclusively in high-grade money market instruments with
remaining maturities of 13 months or less. These instruments
include U.S. government securities, obligations of U.S. banks,
commercial paper and other short-term corporate obligations,
variable and floating rate securities and participation
interests or repurchase agreements involving any of the
foregoing. The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less.
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The Fund invests The Fund may invest in obligations (including certificates of
exclusively in high- deposit, bankers' acceptances and similar obligations) of U.S.
grade money market banks having total assets in excess of $1.5 billion at the time
instruments with of purchase. The Fund may also invest in interest-bearing
remaining maturities of savings deposits in U.S. commercial and savings banks, provided
13 months or less. that the principal amounts at each such bank are fully insured
by the Federal Deposit Insurance Corporation and the aggregate
amount of such deposits does not exceed 5% of the value of the
Fund's assets.
The commercial paper and other short-term corporate obligations
purchased by the Fund consist only of obligations that Mitchell
Hutchins determines, pursuant to procedures adopted by the
Fund's board of directors, present minimal credit risks and are
either (1) rated in the highest short-term rating category by at
least two nationally recognized statistical rating organizations
("NRSROs"), (2) rated in the highest short-term rating category
by a single NRSRO if only that NRSRO has assigned the
obligations a short-term rating or (3) unrated, but determined
by Mitchell Hutchins to be of comparable quality ("First Tier
Securities"). The Fund may also purchase bonds and notes with
remaining maturities of 13 months or less, and participation
interests in any of the securities in which it is permitted to
invest. Participation interests are pro rata interests in
securities held by others. The Fund generally may invest no more
than 5% of its total assets in the securities of a single issuer
(other than securities issued by the U.S. government, its
agencies or instrumentalities).
In managing the Fund's portfolio, Mitchell Hutchins may employ a
number of professional money management techniques, including
varying the composition and the average weighted maturity of the
Fund's portfolio based upon its assessment of the relative
values of various money market instruments and future interest
rate patterns in order to respond to changing economic and money
market conditions and to shifts in fiscal and monetary policy.
Mitchell Hutchins may also seek to improve the Fund's yield by
purchasing or selling securities to take advantage of yield
disparities among similar or dissimilar money market instruments
that regularly occur in the money market.
There can be no assurance that the Fund will achieve its
investment objective. In periods of declining interest rates the
Fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of
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rising interest rates the opposite will be true. Also, when
interest rates are falling, net cash inflows from the continuous
sale of Fund shares are likely to be invested in portfolio
instruments producing lower yields than the balance of the
Fund's portfolio, thereby reducing the Fund's yield. In periods
of rising interest rates, the opposite can be true.
U.S. GOVERNMENT SECURITIES. The U.S. government securities in
which the Fund may invest include direct obligations of the U.S.
Treasury (such as Treasury bills, notes and bonds) and
obligations issued or guaranteed by U.S. government agencies and
instrumentalities. The Fund may invest in U.S. government
securities that are supported by the full faith and credit of
the U.S. government (such as Government National Mortgage
In periods of declining Association certificates), securities supported primarily or
interest rates, the solely by the creditworthiness of the issuer (such as securities
Fund's yield will tend of the Resolution Funding Corporation and the Tennessee Valley
to be somewhat higher Authority) and securities that are supported primarily or solely
than prevailing market by specific pools of assets and the creditworthiness of a U.S.
rates, and in periods of government-related issuer (such as mortgage-backed securities
rising rates, lower. issued by the Federal Home Loan Mortgage Corporation).
The Fund may also acquire securities issued or guaranteed as to
principal and interest by the U.S. government in the form of
custodial receipts that evidence ownership of future interest
payments, principal payments or both on certain U.S. Treasury
notes or bonds. Such notes and bonds are held in custody by a
bank on behalf of the owners of such notes or bonds. These
custodial receipts are known by various names, including
"Treasury Investment Growth Receipts" ("TIGRs") and
"Certificates of Accrual on Treasury Securities" ("CATS"). The
Fund also may invest in separately traded principal and interest
components of securities issued or guaranteed by the U.S.
Treasury. The principal and interest components of selected
securities are traded independently under the Separate Trading
of Registered Interest and Principal of Securities ("STRIPS")
program. Under the STRIPS program, the principal and interest
components are individually numbered and separately issued by
the U.S. Treasury at the request of depository financial
institutions, which then trade the component parts
independently.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase
variable and floating rate securities with remaining maturities
in excess of 13 months issued by U.S. government agencies or
instrumentalities or
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guaranteed by the U.S. government, or (if subject to a demand
feature exercisable within 13 months or less) issued by U.S.
companies. The yield on these securities is adjusted in relation
to changes in specific rates such as the prime rate, and
different securities may have different adjustment rates. The
Fund's investment in these securities must comply with
conditions established by the SEC under which they may be
considered to have remaining maturities of 13 months or less.
Certain of these obligations carry a demand feature that gives
the Fund the right to tender them back to the issuer or a
remarketing agent and receive the principal amount of the
security prior to maturity. The demand feature may or may not be
backed by a letter of credit or other credit support arrangement
provided by a bank or other financial institution, the credit
quality of which affects the credit quality of the obligation.
Securities purchased by the Fund may include variable amount
master demand notes, which are unsecured redeemable obligations
that permit investment of varying amounts at fluctuating
interest rates under a direct agreement between the issuer and
the Fund. 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 are typically unrated.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in
which the Fund purchases securities from a bank or recognized
securities dealer and simultaneously commits to resell the
securities to that bank or dealer at an agreed-upon date and
price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Although
repurchase agreements carry certain risks not associated with
direct investments in securities, including possible decline in
the market value of the underlying securities and delays and
costs to the Fund if the other party to the repurchase agreement
becomes insolvent, the Fund intends to enter into repurchase
agreements only with banks and dealers in transactions believed
by Mitchell Hutchins to present minimal credit risks in
accordance with guidelines established by the Fund's board of
directors.
OTHER INFORMATION. The Fund may borrow money for temporary pur-
poses, but not in excess of 10% of its total assets and may engage
in reverse repurchase agreements with respect to up to 5% of its
total assets. The Fund may not invest more than 10% of its net
assets in illiquid
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PaineWebber
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securities, including repurchase agreements
with maturities in excess of seven days.
The Fund's investment objective may not be changed without the
approval of the Fund's shareholders. Certain other investment
limitations, as described in the Statement of Additional
Information, also may not be changed without shareholder
approval. All other investment policies may be changed by the
Fund's board of directors without shareholder approval.
Purchases
GENERAL. Shares of the Fund are available through PaineWebber
and its correspondent firms. Investors may contact a local
PaineWebber office to open an account. The minimum initial
investment in the Fund is $1,000 and the minimum for additional
purchases is $500, except as described below. All free credit
cash balances in the investor's PaineWebber account (including
The minimum initial proceeds from securities sold) of $500 or more are automatically
investment is $1,000. invested or "swept" into shares of the Fund daily for settlement
Automatic investment on the next Business Day and all remaining free credit cash balances
daily of $500 or more of $1 or more are "swept" on the next to last Business Day of the
and remaining $1 or month for settlement on the last Business Day of each month. A
more at each month end. "Business Day" is any day on which the Philadelphia offices of
the Fund's custodian, PNC Bank, National Association
("Custodian"), and the New York City offices of PaineWebber and
PaineWebber's bank, The Bank of New York, are all open for
business. The Fund and PaineWebber reserve the right to reject
any purchase order and to suspend the offering of Fund shares
for a period of time.
On any Business Day, the Fund will accept purchase orders and
credit shares to investors' accounts as follows:
PURCHASES BY CHECK. Investors may purchase Fund shares by
placing an order with their PaineWebber investment executives or
correspondent firms and forwarding checks drawn on a U.S. bank.
Checks should be made payable to PaineWebber Cashfund, Inc. and
should include the investor's PaineWebber account number on the
check.
As noted above, Fund shares will be purchased when federal funds
are available. Federal funds are deemed available to the Fund
two Business Days after deposit of a personal check and one
Business Day after
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deposit of a cashier's or certified check. PaineWebber may benefit
from the temporary use of the proceeds of personal checks to the
extent those checks are converted to federal funds in fewer than
two Business Days.
Fund shares may be PURCHASES BY WIRE. Investors may also purchase Fund shares by
purchased by wire, check placing an order through their PaineWebber investment executives
or with funds held at or correspondent firms and instructing their banks to transfer
PaineWebber. federal funds by wire to: The Bank of New York, ABA 021-000018,
PaineWebber Cashfund, Inc., A/C 890-0114-061, OBI=FBO [Account
Name]/[PaineWebber Account Number]. The wire must include the
investor's name and PaineWebber account number. If PaineWebber
receives a notice from an investor's bank of a wire transfer of
federal funds for a purchase of Fund shares by 2:00 p.m.,
eastern time, on a Business Day, the purchase will be executed
on that Business Day; otherwise the order will be executed at
2:00 p.m., eastern time, on the next Business Day. PaineWebber
and/or an investor's bank may impose a service charge for wire
purchases.
Redemptions
Shareholders may redeem any number of shares from their Fund
Shareholders may redeem accounts by wire, check, telephone or mail. In addition, unless
any number of shares shareholders otherwise instruct their PaineWebber investment
from their Fund accounts executives, any securities purchase or other debit in their
by wire, check, PaineWebber brokerage accounts will be paid for automatically on
telephone or mail. settlement date by redeeming Fund shares held in such accounts.
WIRE REDEMPTIONS. Shareholders who wish to redeem $5,000 or more
may request that redemption proceeds be paid in federal funds
and wired directly to a pre-designated bank account. To take
advantage of this service, shareholders should obtain an
authorization form from their PaineWebber investment executives
or correspondent firms. If a wire redemption order is received
by PaineWebber's New York City offices prior to 12:00 noon,
eastern time, on any Business Day, the redemption proceeds will
be wired to the shareholder's bank on the same Business Day.
Proceeds of all other wire redemption orders will be wired to
the shareholder's bank on the next Business Day. PaineWebber
reserves the right to charge a fee for wiring funds and to
redeem automatically an appropriate number of Fund shares to pay
that fee.
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CHECK REDEMPTIONS. Shareholders may redeem Fund shares by
drawing a check, a supply of which may be obtained through
PaineWebber, for $500 or more against their Fund accounts. When
the check is presented to the Fund's transfer agent ("Transfer
Agent") for payment, the Transfer Agent will cause the Fund to
redeem sufficient shares to cover the amount of the check. The
shareholder will continue to receive dividends on those shares
until the check is presented to the Transfer Agent for payment.
Cancelled checks are not returned; however, shareholders may
obtain photocopies of their cancelled checks upon request. If a
shareholder has insufficient shares to cover a check, the check
will be returned to the payee marked "nonsufficient funds."
Checks written in amounts less than $500 will also be returned.
Because the amount of Fund shares owned by a shareholder is
likely to change each day, shareholders should not attempt to
redeem all shares held in their accounts by writing a check.
Charges may be imposed for specially imprinted checks, business
checks, copies of cancelled checks, stop payment orders, checks
returned "nonsufficient funds" and checks returned because they
are written for less than $500; these charges will be paid by
redeeming automatically an appropriate number of Fund shares.
PaineWebber reserves the right to modify or terminate the
checkwriting service at any time or to impose a service charge
in connection with it.
Shareholders who are interested in the check redemption service
should obtain the necessary forms from their PaineWebber investment
Shareholders who are executives or correspondent firms. Checkwriting generally is not
interested in the check available to persons who hold Fund shares through any
redemption service sub-account or tax-deferred retirement plan account.
should obtain the
necessary forms from REDEMPTIONS BY TELEPHONE OR MAIL. Shareholders may submit
their PaineWebber redemption requests in person or by telephone or mail to their
investment executives or PaineWebber investment executives or correspondent firms;
correspondent firms. PaineWebber investment executives in local branches throughout
Checks may be written in the country and correspondent firms are responsible for promptly
amounts of $500 or more. forwarding orders to PaineWebber's New York City offices. Such
redemption orders will be executed at the net asset value per
share next determined after receipt by PaineWebber's New York
City offices, and redemption proceeds will be paid promptly by
check. Under certain circumstances, PaineWebber may impose an
administrative service fee of up to $5.00 for processing
redemptions paid by check.
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Shareholders who send redemption orders to their PaineWebber
investment executives or correspondent firms by mail are
responsible for ensuring that the request for redemption is
received in good order. "Good order" means that the request must
be accompanied by (a) a letter of instruction or a stock
assignment specifying the number of shares or amount of
investment to be redeemed (or that all shares credited to a Fund
account be redeemed), signed by all registered owners of the
shares in the exact names in which they are registered, (b) a
guarantee of the signature of each registered owner by an
eligible institution acceptable to the Transfer Agent and in
accordance with SEC rules, such as a commercial bank, trust
company or member of a recognized stock exchange and (c) other
supporting legal documents for estates, trusts, guardianships,
custodianships, partnerships and corporations.
ADDITIONAL INFORMATION ON REDEMPTIONS. Shareholders with
questions about redemption requirements should consult their
PaineWebber investment executives or correspondent firms.
Shareholders who redeem all their shares will receive cash
credits to their PaineWebber accounts for dividends earned on
those shares through the day before redemption. The redemption
price may be more or less than the purchase price, although the
Fund anticipates that its net asset value per share will
normally be $1.00 per share. Because the Fund incurs certain
fixed costs in maintaining shareholder accounts, the Fund
reserves the right to redeem all Fund shares in any shareholder
account of less than $500 net asset value. If the Fund elects to
do so, it will notify the shareholder and provide the
shareholder with an opportunity to increase the amount invested
to $500 or more within 60 days of the notice. This notice may
appear on the shareholder's account statement. If a shareholder
Shareholders should requests redemption of shares which were purchased recently, the
maintain minimum Fund may delay payment until it is assured that it has received
balances of at least good payment for the purchase of the shares. In the case of
$500. purchases by check, this can take up to 15 days.
Valuation of Shares
The Fund uses its best efforts to maintain its net asset value
at $1.00 per share. Net asset value per share is determined by
dividing the value of the securities held by the Fund plus any
cash or other assets minus all
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liabilities by the number of Fund shares outstanding. The Fund's
net asset value is computed once each Business Day at 2:00 p.m.,
eastern time.
The Fund values its portfolio securities using the amortized
cost method of valuation, under which market value is
approximated by amortizing the difference between the
acquisition cost and value at maturity of an instrument on a
Dividends accrue to straight-line basis over its remaining life. All cash,
shareholder accounts receivables and current payables are carried at their face
daily and are value. Other assets are valued at fair value as determined in
automatically paid in good faith by or under the direction of the Fund's board of
additional Fund shares directors.
monthly.
Dividends and Taxes
DIVIDENDS. Each Business Day, the Fund declares as dividends all
of its net investment income. Shares begin earning dividends on
the day of purchase; dividends are accrued to shareholder
accounts daily and are automatically paid in additional Fund
shares monthly. Shares do not earn dividends on the day of
redemption. Net investment income includes accrued interest and
earned discount (including both original issue and market
discounts), less amortization of premium and accrued expenses.
The Fund distributes any net short-term capital gain annually,
but may make more frequent distributions of such gain if
necessary to maintain its net asset value per share at $1.00 or
to avoid income or excise taxes. The Fund does not expect to
realize net long-term capital gain and thus does not anticipate
payment of any long-term capital gain distributions.
TAXES. The Fund intends to continue to qualify for treatment as
a regulated investment company under the Internal Revenue Code
so that it will be relieved of federal income tax on that part
of its investment company taxable income (consisting generally
of net investment income and net short-term capital gain, if
any) that is distributed to its shareholders.
Dividends paid by the Fund generally are taxable to its
shareholders as ordinary income, notwithstanding that such
dividends are paid in additional Fund shares. Shareholders not
subject to tax on their income generally will not be required to
pay tax on amounts distributed to them.
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The Fund notifies its shareholders following the end of each
calendar year of the amount of all dividends paid that year.
The Fund is required to withhold 31% of all dividends payable to
any individuals and certain other noncorporate shareholders who
do not provide the Fund with a correct taxpayer identification
number. Withholding at that rate also is required from dividends
payable to such shareholders who otherwise are subject to backup
withholding.
The foregoing is only a summary of some of the important federal
income tax considerations generally affecting the Fund and its
shareholders; see the Statement of Additional Information for a
further discussion. There may be other federal, state or local
tax considerations applicable to a particular investor.
Prospective shareholders are urged to consult their tax
advisers.
The Fund's directors
oversee various Management
organizations
responsible for the The Fund's board of directors, as part of its overall management
Fund's day-to day responsibility, oversees various organizations responsible for
management. the Fund's day-to-day management. PaineWebber, the Fund's
investment adviser and administrator, provides a continuous
investment program for the Fund and supervises all aspects of
its operations. As sub-adviser to the Fund, Mitchell Hutchins
makes and implements investment decisions and, as
sub-administrator, is responsible for the day-to-day
administration of the Fund.
PaineWebber receives a monthly fee for these services and, for
the fiscal year ended March 31, 1995, the Fund's effective
advisory and administration fee paid to PaineWebber was equal to
0.39% of the Fund's average daily net assets. PaineWebber (not
the Fund) pays Mitchell Hutchins fees for its sub-advisory and
sub-administrative services, in an aggregate annual amount equal
to 20% of the fee received by PaineWebber from the Fund for
advisory and administrative services.
The Fund pays PaineWebber an annual fee of $4.00 per active Fund
account, plus certain out-of-pocket expenses, for certain
services not performed by the Transfer Agent. The Fund also
incurs other expenses. For the fiscal year ended March 31, 1995,
the Fund's ratio of expenses as a percentage of average net
assets was 0.62%.
- ----------------------- ----------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE><CAPTION>
PaineWebber
- ----------------------- ----------------------------------------------------------------
<S> <C>
PaineWebber and Mitchell Hutchins are located at 1285 Avenue of
the Americas, New York, New York 10019. Michell Hutchins is a
wholly owned subsidiary of PaineWebber, which is in turn wholly
owned by Paine Webber Group Inc., a publicly owned financial
services holding company. At June 30, 1995, PaineWebber or
Mitchell Hutchins was investment adviser to 41 registered
investment companies with 86 separate portfolios and aggregate
assets exceeding $27.9 billion.
Mitchell Hutchins investment personnel may engage in securities
transactions for their own accounts pursuant to a code of ethics
that establishes procedures for personal investing and restricts
certain transactions.
Performance Information
From time to time the Fund may advertise its "yield" and
"effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance.
The "yield" of the Fund is the income on an investment in the
Fund over a specified seven-day period. This income is then
"annualized" (that is, assumed to be earned each week over a
52-week period) and shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized,
the income earned is assumed to be reinvested. The "effective
yield" will be higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Fund may also advertise other performance data, which may
consist of the annual or cumulative return (including realized
net short-term capital gain, if any) earned on a hypothetical
investment in the Fund since it began operations on May 1, 1978,
or for shorter periods. This return data may or may not assume
reinvestment of dividends (compounding).
The Fund may advertise The performance of shareholder accounts with small balances will
its "yield" and differ from the quoted performance because daily income for each
"effective yield." The shareholder account is rounded to the nearest whole penny.
"effective yield" Accordingly, very small shareholder accounts (approximately $33
assumes dividends are or lower at current interest rates) which generate less than 1/2
reinvested. per day of income will earn no dividends.
- ----------------------- ----------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE><CAPTION>
Cashfund
- ----------------------- ----------------------------------------------------------------
<S> <C>
General Information
The Fund is registered with the SEC as a diversified, open-end
management in vestment company and was incorporated in Maryland
on January 20, 1978. The Fund has an authorized capitalization
of 20 billion shares of $0.001 par value common stock. Each
share has one vote with respect to matters upon which a
shareholder vote is required; voting rights are non-cumulative.
The Fund does not hold annual shareholder meetings. There
normally will be no meetings of shareholders to elect directors
unless fewer than a majority of the directors holding office
have been elected by shareholders. The directors are required to
call a meeting of shareholders when requested in writing to do
so by the shareholders of record holding at least 25% of the
Fund's outstanding shares. Each share of the Fund has equal
voting, dividend and liquidation rights.
CERTIFICATES. To avoid additional operating expenses and for
investor convenience, share certificates are not issued. Ownership of
To avoid additional Fund shares is recorded on a stock register by the Transfer
expense, share Agent, and shareholders have the same rights of ownership with
certificates are not respect to such shares as if certificates had been issued.
issued.
CUSTODIAN AND TRANSFER AGENT. PNC Bank, National Association
("PNC"), whose principal business address is Broad & Chestnut
Streets, Land Title Bldg., Philadelphia, Pennsylvania 19101, is
custodian of the Fund's assets. PFPC, Inc., a subsidiary of PNC
whose principal business address is 400 Bellevue Parkway,
Bellevue Corporate Center, Wilmington, Delaware 19809, is the
Fund's transfer and dividend disbursing agent.
PRINCIPAL UNDERWRITER. PaineWebber serves as principal
underwriter of the Fund's shares.
CONFIRMATIONS AND STATEMENTS. Shareholders receive confirmations
of initial purchases of Fund shares, and subsequent transactions
are reported on account statements sent to PaineWebber clients.
These statements are sent monthly except that, if a
shareholder's only Fund activity in a quarter was reinvestment
of dividends, the activity may be reported on a quarterly rather
than monthly statement. Shareholders also receive audited annual
and unaudited semi-annual financial statements.
- ----------------------- ----------------------------------------------------------------
</TABLE>
15
<PAGE>
PAINEWEBBER
CASHFUND, INC.
. Current Income
. Stability of Principal
. High Liquidity
. Professional Management
. Dividend Reinvestment
. Checkwriting Privileges
PROSPECTUS
AUGUST 1, 1995
-----------------------------------
No person has been authorized to give
any information or to make any
representations not contained in this
Prospectus in connection with the offering
made by this Prospectus and, if given
or made, such information or [ART WORK]
representations must not be relied upon
as having been authorized by the Fund or
its distributor. This Prospectus does
not constitute an offering by the Fund or
by the distributor in any jurisdiction in
which such offering may not lawfully be made.
(C)1995 PaineWebber Incorporated
[RECYCLE
LOGO] Recycled
Paper
<PAGE>
PAINEWEBBER CASHFUND, INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
PaineWebber Cashfund, Inc. ("Fund") is a professionally managed, no load
money market fund designed to provide investors with current income, stability
of principal and high liquidity. The Fund's investment adviser, administrator
and distributor is PaineWebber Incorporated ("PaineWebber"); its sub-adviser is
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
subsidiary of PaineWebber. Mitchell Hutchins also serves as the Fund's
sub-administrator. This Statement of Additional Information is not a prospectus
and should be read only in conjunction with the Fund's current Prospectus, dated
August 1, 1995. A copy of the Prospectus may be obtained by contacting any
PaineWebber investment executive or correspondent firm or by calling toll-free
1-800-441-7756. This Statement of Additional Information is dated August 1,
1995.
INVESTMENT POLICIES AND RESTRICTIONS
The following supplements the information contained in the Prospectus
concerning the Fund's investment policies and limitations.
YIELDS AND RATINGS OF MONEY MARKET INSTRUMENTS. The yields on the money
market instruments in which the Fund invests (such as commercial paper and bank
obligations) are dependent on a variety of factors, including general money
market conditions, conditions in the particular market for the obligation, the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue. The ratings of nationally recognized
statistical rating organizations ("NRSROs") represent their opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are general
and are not absolute standards of quality. Consequently, obligations with the
same rating, maturity and interest rate may have different market prices.
Subsequent to its purchase by the Fund, an issue may cease to be rated or its
rating may be reduced. In the event that a security in the Fund's portfolio
ceases to be a "First Tier Security," as defined in the Prospectus, or Mitchell
Hutchins becomes aware that a security has received a rating below the second
highest rating by any NRSRO, Mitchell Hutchins, and, in certain cases, the
Fund's board of directors, will consider whether the Fund should continue to
hold the obligation. A First Tier security rated in the highest short-term
rating category by a single NRSRO at the time of purchase that subsequently
receives a rating below the highest rating category from a different NRSRO will
continue to be considered a First Tier security.
REPURCHASE AGREEMENTS. As stated in the Prospectus, the Fund may enter into
repurchase agreements with respect to any security in which it is authorized to
invest, except that securities subject to repurchase agreements may have
maturities in excess of 13 months. The Fund maintains custody of the underlying
securities prior to their repurchase; thus, the obligation of the bank or
securities dealer to pay the repurchase price on the date agreed to is, in
effect, secured by such securities. If the value of these securities is less
than the repurchase price, plus any agreed-upon additional amount, the other
party to the agreement must provide additional collateral so that at all
<PAGE>
times the collateral is at least equal to the repurchase price, plus any
agreed-upon additional amount. The difference between the total amount to be
received upon repurchase of the securities and the price that was paid by the
Fund upon acquisition is accrued as interest and included in the Fund's net
investment income.
Repurchase agreements carry certain risks not associated with direct
investments in securities. The Fund intends to enter into repurchase agreements
only with banks and dealers in transactions believed by Mitchell Hutchins to
present minimal credit risks in accordance with guidelines established by the
Fund's board of directors. Mitchell Hutchins will review and monitor the
creditworthiness of those institutions under the board's general supervision.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements up to an aggregate value of not more than 5% of its assets. Such
agreements involve the sale of securities held by the Fund subject to its
agreement to repurchase the securities at an agreed-upon date and price
reflecting a market rate of interest. Such agreements are considered to be
borrowings and may be entered into only for temporary or emergency purposes.
While a reverse repurchase agreement is outstanding, the Fund will maintain with
its custodian in a segregated account cash, U.S. government securities or other
liquid, high-grade debt obligations, marked to market daily, in an amount at
least equal to the Fund's obligation under the reverse repurchase agreement.
ILLIQUID SECURITIES. The Fund will not invest more than 10% of its net
assets in illiquid securities. The term "illiquid securities" for this purpose
means securities that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued the
securities and includes, among other things, repurchase agreements maturing in
more than seven days and restricted securities other than those Mitchell
Hutchins has determined to be liquid pursuant to guidelines established by the
Fund's board of directors. Commercial paper issues in which the Fund may invest
include securities issued by major corporations without registration under the
Securities Act of 1933 ("1933 Act") in reliance on the exemption from such
registration afforded by Section 3(a)(3) thereof and commercial paper issued in
reliance on the so-called "private placement" exemption from registration which
is afforded by section 4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2)
paper is restricted as to disposition under the federal securities laws in that
any resale must similarly be made in an exempt transaction. Section 4(2) paper
is normally resold to other institutional investors through or with the
assistance of investment dealers who make a market in Section 4(2) paper, thus
providing liquidity.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the 1933 Act, including private placements, repurchase
agreements, commercial paper, foreign securities and corporate bonds and notes.
These instruments are often restricted securities because the securities are
sold in transactions not requiring registration. 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.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for
2
<PAGE>
restricted securities have developed as a result of Rule 144A, providing both
readily ascertainable values for restricted securities and the ability to
liquidate an investment to satisfy share redemption orders. Such markets include
automated systems for the trading, clearance and settlement of unregistered
securities, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. ("NASD"). An insufficient number of qualified
institutional buyers interested in purchasing Rule 144A-eligible restricted
securities held by the Fund, however, could affect adversely the marketability
of such portfolio securities and the Fund might be unable to dispose of such
securities promptly or at favorable prices.
The Fund's board of directors has delegated the function of making
day-to-day determinations of liquidity to Mitchell Hutchins, pursuant to
guidelines approved by the board. Mitchell Hutchins takes into account a number
of factors in reaching liquidity decisions, including (1) the frequency of
trades for the security, (2) the number of dealers that make quotes for the
security, (3) the number of dealers that have undertaken to make a market in the
security, (4) the number of other potential purchasers and (5) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). Mitchell
Hutchins monitors the liquidity of restricted securities in the Fund's portfolio
and reports periodically on such decisions to the board of directors.
INVESTMENT LIMITATIONS. The Fund may not: 1) purchase any securities other
than money market instruments, including but not limited to U.S. Treasury bills
and other obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities, certificates of deposit of U.S. banks, bankers'
acceptances, and commercial paper, including variable amount master notes and
repurchase agreements secured thereby; 2) borrow money, except from banks for
temporary purposes and except for reverse repurchase agreements, and then in an
aggregate amount not in excess of 10% of the value of the Fund's assets at the
time of such borrowing, provided that the Fund will not purchase portfolio
securities while borrowings, including reverse repurchase agreements, exceed 5%
of the Fund's assets; 3) make loans, except that the Fund may purchase or hold
debt instruments in accordance with its investment objective and policies and
may enter into repurchase agreements with respect to commercial paper,
certificates of deposit and obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities; 4) purchase any securities if
immediately after such purchase more than 25% of the value of its total assets
would be invested in the securities of one or more issuers conducting their
principal business activities in the same industry, provided that there is no
limitation with respect to investments in U.S. Treasury bills, other obligations
issued or guaranteed by the U.S. government, its agencies and instrumentalities,
certificates of deposit of U.S. banks, and bankers' acceptances and provided
further that neither all finance companies as a group, nor all utility companies
as a group, are considered a single industry for purposes of this policy; 5)
purchase securities of any one issuer, other than the U.S. government, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer; 6) purchase or sell real estate, provided that
the Fund may purchase commercial paper issued by companies, including real
estate investment trusts, which invest in real estate or interests therein; 7)
purchase securities on margin, make short sales of securities or maintain a
short position; 8) act as an underwriter of securities; 9) purchase or sell
commodities or commodity contracts, or invest in oil, gas or mineral exploration
or development programs; and 10) acquire voting securities of any issuer or
acquire securities of other investment companies.
3
<PAGE>
The foregoing fundamental investment limitations cannot be changed 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 foregoing limitations.
The Fund will continue to interpret fundamental investment limitation (6) to
prohibit investment in real estate limited partnerships.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their ages, business
addresses and principal occupations during the past five years are:
<TABLE><CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- -------------------- ------------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**; 68 Director and Mr. Bewkes is a director of Paine Webber
Chairman of the Group Inc. ("PW Group") (holding company
Board of Directors of PaineWebber and Mitchell Hutchins)
and a consultant to PW Group. Prior to
1988, he was chairman of the board,
president and chief executive officer of
American Bakeries Company. Mr. Bewkes is
also a director of Interstate Bakeries
Corporation and NaPro BioTherapeutics,
Inc. and a director or trustee of 26
other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
Meyer Feldberg; 53 Director 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, New York 10027 1989, he was president of the Illinois
Institute of Technology. Dean Feldberg
is also a director of AMSCO
International Inc., Federated Department
Stores, Inc., Inco Homes Corporation and
New World Communications Group
Incorporated and a director or trustee
of 18 other investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
4
<PAGE>
<TABLE><CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- -------------------- ------------------------------------------
<S> <C> <C>
George W. Gowen; 65 Director Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to
New York, New York 10017 May 1994, he was a partner in the law
firm of Fryer, Ross & Gowen. Mr. Gowen
is also a director of Columbia Real
Estate Investments, Inc. and a director
or trustee of 16 other investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Frederic V. Malek; 58 Director Mr. Malek is chairman of Thayer Capital
901 15th Street, N.W. Partners (investment bank) and a co-
Suite 300 chairman and director of CB Commercial
Washington, DC 20005 Group Inc. (real estate). 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., NWA Inc.
(holding company of Northwest Airlines
Inc.) and Wings Holdings Inc. (holding
company of NWA Inc.). Prior to 1989, he
was employed by the Marriott Corporation
(hotels, restaurants, airline catering
and contract feeding), where he most
recently was an executive vice president
and president of Marriott Hotels and
Resorts. Mr. Malek is also a director of
American Management Systems, Inc.,
Automatic Data Processing, Inc., Avis,
Inc., FPL Group, Inc., ICF
International, Manor Care, Inc. and
National Education Corporation, and a
director or trustee of 16 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Frank P. L. Minard**; 50 Director Mr. Minard is chairman and a director of
Mitchell Hutchins, chairman of the board
of Mitchell Hutchins Institutional
Investors Inc. and a director of
PaineWebber. Prior to 1993, Mr. Minard
was managing director of Oppenheimer
Capital in New York and Director of
Oppenheimer Capital Ltd. in
</TABLE>
5
<PAGE>
<TABLE><CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- -------------------- ------------------------------------------
<S> <C> <C>
London. Mr. Minard is also a director or
trustee of 27 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Judith Davidson Moyers; 60 Director Mrs. Moyers is president of Public Affairs
Public Affairs Television Television, Inc., an educational
356 W. 58th Street consultant and a home economist. Mrs.
New York, New York 10019 Moyers is also a director of Columbia
Real Estate Investments, Inc. and Ogden
Corporation and a director or trustee of
16 other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
Thomas F. Murray; 84 Director Mr. Murray is a real estate and financial
400 Park Avenue consultant. Mr. Murray is also a
New York, New York 10022 director and chairman of American
Continental Properties, Inc., a trustee
of Prudential Realty Trust and a
director or trustee of 16 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Margo N. Alexander; 48 President Ms. Alexander is president, chief
executive officer and a director of
Mitchell Hutchins. Prior to January
1995, Ms. Alexander was an executive
vice president of PaineWebber. Ms.
Alexander is also a trustee of one and
president of 39 other investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Teresa M. Boyle; 36 Vice President Ms. Boyle is a first vice president and
manager--advisory administration of
Mitchell Hutchins. Prior to November
1993, she was compliance manager of
Hyperion Capital Management, Inc., an
investment advisory firm. Prior to April
1993, Ms. Boyle was a vice president and
manager-legal administration of Mitchell
Hutchins. Ms. Boyle is also a vice
president of 39 other investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>
6
<PAGE>
<TABLE><CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- -------------------- ------------------------------------------
<S> <C> <C>
Joan L. Cohen; 31 Vice President Ms. Cohen is a vice president and attorney
Assistant Secretary of Mitchell Hutchins. Prior to December
1993, she was an associate at the law
firm of Seward & Kissel. Ms. Cohen is
also a vice president and assistant
secretary of 26 other investment
companies for which Mitchell and
Hutchins or PaineWebber serves as
investment adviser.
Ellen R. Harris; 49 Vice President Ms. Harris is chief domestic equity
strategist and a managing director of
Mitchell Hutchins. Ms. Harris is also a
vice president of 19 other investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
C. William Maher; 34 Vice President and Mr. Maher is a first vice president and
Assistant Treasurer the senior manager of the Fund
Administration Division of Mitchell
Hutchins. Mr. Maher is also a vice
president and assistant treasurer of 39
other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
Ann E. Moran; 38 Vice President and Ms. Moran is a vice president of Mitchell
Assistant Treasurer Hutchins. Ms. Moran is also a vice
president and assistant treasurer of 39
other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
Dianne E. O'Donnell; 43 Vice President and Ms. O'Donnell is a senior vice president
Secretary and deputy general counsel of Mitchell
Hutchins. Ms. O'Donnell is also a vice
president and secretary of 39 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Victoria E. Schonfeld; 44 Vice President Ms. Schonfeld is a managing director and
general counsel of Mitchell Hutchins.
From April 1990 to May 1994, she was a
partner in the law firm of Arnold &
Porter. Prior to April 1990, she was a
partner in the law firm of Shereff,
Friedman, Hoffman & Goodman. Ms
Schonfeld is also a vice president of 39
other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.
</TABLE>
7
<PAGE>
<TABLE><CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- -------------------- ------------------------------------------
<S> <C> <C>
Paul H. Schubert; 32 Vice President and Mr. Schubert is a vice president of
Assistant Treasurer Mitchell Hutchins. From August 1992 to
August 1994, he was a vice president at
BlackRock Financial Management, Inc.
Prior to August 1992, he was an audit
manager with Ernst & Young LLP. Mr.
Schubert is also a vice president and
assistant treasurer of 39 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Martha J. Slezak; 33 Vice President and Ms. Slezak is a vice president of Mitchell
Assistant Treasurer Hutchins. From September 1991 to April
1992, she was a fundraising director for
a U.S. Senate campaign. Prior to
September 1991, she was a tax manager
with Arthur Andersen LLP. Ms. Slezak is
also a vice president and assistant
treasurer of 39 other investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Julian F. Sluyters; 35 Vice President and Mr. Sluyters is a senior vice president
Treasurer and the director of the mutual fund
finance division of Mitchell Hutchins.
Prior to 1991, he was an audit senior
manager with Ernst & Young LLP. Mr.
Sluyters is also a vice president and
treasurer of 39 other investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Gregory K. Todd; 38 Vice President and Mr. Todd is a first vice president and
Assistant Secretary associate general counsel of Mitchell
Hutchins. Prior to 1993, he was a
partner in the law firm of Shereff,
Friedman, Hoffman & Goodman. Mr. Todd is
also a vice president and assistant
secretary of 39 other investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>
- ---------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Messrs. Bewkes and Minard are "interested persons" of the Fund as defined in
the Investment Company Act of 1940 ("1940 Act") by virtue of their positions
with PW Group, PaineWebber and/or Mitchell Hutchins.
8
<PAGE>
The Fund pays directors who are not "interested persons" of the Fund $8,000
annually and $500 per meeting of the board or any committee thereof. Directors
are reimbursed for any expenses incurred in attending meetings. Directors of the
Fund who are not "interested persons" of the Fund receive no compensation from
the Fund. Directors and officers of the Fund own in the aggregate less than 1%
of the Fund's shares. Since PaineWebber and Mitchell Hutchins perform
substantially all of the services necessary for the operation of the Fund, the
Fund requires no employees. No officer, director or employee of PaineWebber or
Mitchell Hutchins presently receives any compensation from the Fund for acting
as a director or officer. The table below includes certain information relating
to the compensation of the Fund's directors who held office during the fiscal
year ended March 31, 1995.
<TABLE><CAPTION>
PENSION OR
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACCRUED AS ESTIMATED COMPENSATION
COMPENSATION PART OF THE ANNUAL FROM THE
FROM FUND'S BENEFITS UPON FUND AND THE
NAME OF PERSONS, POSITION THE FUND* EXPENSES RETIREMENT FUND COMPLEX**
- ---------------------------------------- ------------ ----------- ------------- --------------
<S> <C> <C> <C> <C>
E. Garrett Bewkes, Jr.,
Trustee and Chairman of the Board of
Directors............................... -- -- -- --
Meyer Feldberg,
Director.............................. $9,500 -- -- $86,050
George W. Gowen,
Director $9,000 -- -- 71,425
Frederic V. Malek,
Director.............................. $9,500 -- -- 77,875
Frank P.L. Minard,
Director.............................. -- -- -- --
Judith Davidson Moyers,
Director.............................. $8,500 -- -- 71,125
Thomas F. Murray,
Director.............................. $9,000 -- -- 71,925
</TABLE>
- ---------
* Represents fees paid to each director during the fiscal year ended March 31,
1995.
** Represents total compensation paid to each director during the calendar year
ended December 31, 1994.
9
<PAGE>
INVESTMENT ADVISORY SERVICES
PaineWebber acts as the Fund's investment adviser and administrator pursuant
to a contract with the Fund dated July 23, 1987 ("PaineWebber Contract"). Under
the PaineWebber Contract, the Fund pays PaineWebber an annual fee, computed
daily and paid monthly, according to the following schedule:
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- -------------------------------------------------------------- ------
Up to $500 million............................................ 0.500 %
In excess of $500 million up to $1.0 billion.................. 0.425
In excess of $1.0 billion up to $1.5 billion.................. 0.390
In excess of $1.5 billion up to $2.0 billion.................. 0.380
In excess of $2.0 billion up to $2.5 billion.................. 0.350
In excess of $2.5 billion up to $3.5 billion.................. 0.345
In excess of $3.5 billion up to $4.0 billion.................. 0.325
In excess of $4.0 billion up to $4.5 billion.................. 0.315
In excess of $4.5 billion up to $5.0 billion.................. 0.300
In excess of $5.0 billion up to $5.5 billion.................. 0.290
In excess of $5.5 billion..................................... 0.280
Services provided by PaineWebber under the PaineWebber Contract, some of which
may be delegated to Mitchell Hutchins, as discussed below, include the provision
of a continuous investment program for the Fund and supervision of all matters
relating to the operation of the Fund. Under the PaineWebber Contract,
PaineWebber is also obligated to distribute the Fund's shares on an agency, or
"best efforts," basis under which the Fund only issues such shares as are
actually sold. Shares of the Fund are offered continuously. Under the
PaineWebber Contract, during the fiscal years ended March 31, 1995, March 31,
1994 and March 31, 1993, the Fund paid (or accrued) to PaineWebber investment
advisory and administrative fees in the amount of $13,839,569, $13,665,261 and
$14,947,948, respectively.
Provident Institutional Management Corporation ("PIMC") has served as a
sub-adviser to the Fund pursuant to a contract dated July 23, 1987 between
PaineWebber and PIMC (the "PIMC Contract"). Under the PIMC Contract, PIMC
provided certain recordkeeping services and also provided research and analysis
if requested to do so by PaineWebber or Mitchell Hutchins. For these services,
PaineWebber (not the Fund) paid PIMC an annual fee of $150,000. As of July 1992,
by mutual agreement of the parties, PaineWebber ceased making payments under the
PIMC Contract and PIMC ceased providing any services under that contract.
Services previously provided by PIMC are either provided by PaineWebber or
Mitchell Hutchins or are provided by PNC and PFPC Inc. ("PFPC") under other
contractual arrangements with the Fund. For the fiscal years ended March 31,
1995, March 31, 1994 and March 31, 1993, PIMC received from PaineWebber fees of
$0, $0 and $50,000, respectively.
Under a service agreement that is reviewed annually by the Fund's board of
directors, PaineWebber provides certain services to the Fund not otherwise
provided by the Fund's transfer
10
<PAGE>
agent. Pursuant to the service agreement, during the fiscal years ended March
31, 1995, March 31, 1994 and March 31, 1993, the Fund paid (or accrued) to
PaineWebber $2,551,016, $2,379,604 and $2,206,141, respectively.
Under a contract with PaineWebber dated July 23, 1987 ("MH Sub-Advisory
Contract"), Mitchell Hutchins is responsible for the actual investment
management of the Fund's assets, including the responsibility for making
decisions and placing orders to buy, sell or hold particular securities. Under
the MH Sub-Advisory Contract, PaineWebber (not the Fund) pays Mitchell Hutchins
an annual fee, computed daily and paid monthly, according to the following
schedule:
ANNUAL
AVERAGE DAILY NET ASSERTS RATE
- ------------------------------------------------------------- ------
Up to $500 million........................................... 0.0900%
In excess of $500 million up to $1.0 billion................. 0.0500
In excess of $1.0 billion up to $1.5 billion................. 0.0400
In excess of $1.5 billion up to $2.0 billion................. 0.0300
In excess of $2.0 billion up to $2.5 billion................. 0.0250
In excess of $2.5 billion up to $3.5 billion................. 0.0250
In excess of $3.5 billion up to $4.5 billion................. 0.0200
In excess of $4.5 billion up to $5.5 billion................. 0.0125
In excess of $5.5 billion.................................... 0.0100
Under the MH Sub-Advisory Contract, during the fiscal years ended March 31,
1995, March 31, 1994 and March 31, 1993, PaineWebber paid (or accrued) to
Mitchell Hutchins fees in the amount of $1,435,247, $1,424,776 and $1,503,434,
respectively.
Under a contract with PaineWebber dated May 24, 1988 ("Sub-Administration
Contract"), Mitchell Hutchins also serves as the Fund's sub-administrator. Under
the Sub-Administration Contract, PaineWebber (not the Fund) pays Mitchell
Hutchins 20% of the fees received by PaineWebber under the PaineWebber Contract,
such amount to be paid monthly and reduced by any amount paid by PaineWebber in
each such month under the MH Sub-Advisory Contract. During the fiscal years
ended March 31, 1995, March 31, 1994 and March 31, 1993, PaineWebber paid (or
accrued) to Mitchell Hutchins sub-administration fees of $1,332,667, $1,308,276
and $1,486,156, respectively.
Each of the advisory, sub-advisory and sub-administration contracts noted
above provides that the respective adviser, sub-adviser or sub-administrator, as
the case may be, shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the performance of the
contract, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of such adviser, sub-adviser or sub-administrator in the
performance of its duties or from reckless disregard of its duties and
obligations thereunder. The PaineWebber Contract also provides that PaineWebber
shall not be liable for losses arising out of the receipt by PaineWebber of
inadequate consideration in connection with an order to purchase Fund shares
whether in the form of a fraudulent check, draft or wire; a check returned for
insufficient funds; or any other such
11
<PAGE>
inadequate consideration (hereinafter "check losses"), except under the
circumstances noted above, but the Fund shall not be liable for check losses
resulting from negligence on the part of PaineWebber. Each of the advisory,
sub-advisory and sub-administration contracts is terminable by vote of the
Fund's board of directors or by the holders of a majority of the outstanding
voting securities of the Fund at any time without penalty, on 60 days' written
notice to the respective adviser, sub-adviser or sub-administrator, as the case
may be. Each of the advisory and sub-advisory contracts may also be terminated
by the respective adviser or sub-adviser on 90 days' written notice to the Fund.
The sub-administration contract may also be terminated by the sub-administrator
on 60 days' written notice to the Fund. Each of the advisory, sub-advisory and
sub-administration contracts terminates automatically upon its assignment.
Under the terms of the PaineWebber Contract, the Fund bears all expenses
incurred in its operation that are not specifically assumed by PaineWebber.
Expenses borne by the Fund include the following: (a) the cost (including
brokerage commissions, if any) of securities purchased or sold by the Fund or
any losses incurred in connection therewith; (b) fees payable to and expenses
incurred on behalf of the Fund by PaineWebber; (c) filing fees and expenses
relating to the registration and qualification of the Fund's shares under
federal or state securities laws and maintaining such registrations and
qualifications; (d) fees and salaries payable to the Fund's directors and
officers who are not officers or employees of PaineWebber or interested persons
(as defined in the 1940 Act) of any investment adviser or underwriter of the
Fund ("Independent Directors"); (e) taxes (including any income or franchise
taxes) and governmental fees; (f) costs of any liability, uncollectible items of
deposit and other insurance or fidelity bonds; (g) any costs, expenses or losses
arising out of any liability of or claim for damage or other relief asserted
against the Fund for violation of any law; (h) legal, accounting and auditing
expenses, including legal fees of special counsel for the Independent Directors;
(i) charges of custodians, transfer agents and other agents; (j) costs of
preparing share certificates; (k) expenses of setting in type and printing
prospectuses, statements of additional information and supplements thereto for
existing shareholders, reports and statements to shareholders and proxy
materials; (l) any extraordinary expenses (including fees and disbursements of
counsel) incurred by the Fund; and (m) fees and other expenses incurred in
connection with membership in investment company organizations.
As required by various state regulations, PaineWebber will reimburse the
Fund if and to the extent that the aggregate operating expenses of the Fund
exceed applicable limits for the fiscal year. Currently, the most restrictive
such limit applicable to the Fund is 2.5% of the first $30 million of the Fund's
average daily net assets, 2.0% of the next $70 million of its average daily net
assets and 1.5% of its average daily net assets in excess of $100 million.
Certain expenses, such as brokerage commissions, taxes, interest and
extraordinary items are excluded from this limitation. No reimbursement pursuant
to such limitation was required for the fiscal years ended March 31, 1995, March
31, 1994 and March 31, 1993.
12
<PAGE>
The following table shows the approximate net assets as of June 30, 1995,
sorted by category of investment objective, of the investment companies as to
which Mitchell Hutchins serves as adviser or sub-adviser. An investment
companymay fall into more than one of the categories below.
NET ASSETS
INVESTMENT CATEGORY ($ MIL)
- ------------------------------------------------------------- ----------
Domestic (excluding Money Market)............................ $ 5,655.1
Global....................................................... 3,266.9
Equity/Balanced.............................................. 2,731.9
Fixed Income (excluding Money Market)........................ 6,190.1
Taxable Fixed Income..................................... 4,435.2
Tax-Free Fixed Income.................................... 1,754.9
Money Market Funds........................................... 19,093.6
Mitchell Hutchins personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders of the PaineWebber and Mitchell Hutchins/Kidder, Peabody ("MH/KP")
mutual funds and other Mitchell Hutchins' advisory accounts by all Mitchell
Hutchins' directors, officers and employees, establishes procedures for personal
investing and restricts certain transactions. For example, employee accounts
generally must be maintained at PaineWebber, personal trades in most securities
require pre-clearance and short-term trading and participation in initial public
offerings generally are prohibited. In addition, the code of ethics puts
restrictions on the timing of personal investing in relation to trades by
PaineWebber and MH/KP mutual funds and other Mitchell Hutchins advisory clients.
PORTFOLIO TRANSACTIONS
The Fund purchases only securities with remaining maturities of 13 months or
less, except for securities subject to repurchase agreements. The Fund may
purchase variable rate and floating rate securities with remaining maturities of
more than 13 months so long as such securities comply with conditions
established by the Securities and Exchange Commission ("SEC") under which they
may be considered to have remaining maturities of 13 months or less.
The MH Sub-Advisory Contract authorizes Mitchell Hutchins (with the approval
of the Fund's board) to select brokers and dealers to execute purchases and
sales of the Fund's portfolio securities. It directs Mitchell Hutchins to use
its best efforts to obtain the best available price and the most favorable
execution with respect to all transactions for the Fund. To the extent that the
execution and price offered by more than one dealer are comparable, Mitchell
Hutchins may, in its discretion, effect transactions in portfolio securities
with dealers who provide the Fund with research, analysis, advice and similar
services. Although Mitchell Hutchins may receive certain research or execution
services in connection with these transactions, Mitchell Hutchins will not
purchase securities at a higher price or sell securities at a lower price than
would otherwise be paid if no weight was attributed to the services provided by
the executing dealer. Moreover, Mitchell Hutchins will not enter into any
explicit soft dollar arrangements relating to principal transactions and will
not receive in principal transactions the
13
<PAGE>
types of services which could be purchased for hard dollars. Research services
furnished by the dealers through which or with which the Fund effects securities
transactions may be used by Mitchell Hutchins in advising other funds or
accounts they advise and, conversely, research services furnished to Mitchell
Hutchins in connection with other funds or accounts that Mitchell Hutchins
advises may be used in advising the Fund. During its past three fiscal years,
the Fund has not paid any brokerage commissions, nor has it allocated any
transactions to dealers for research, analysis, advice and similar services.
Mitchell Hutchins may engage in agency transactions in OTC equity and debt
securities in return for research and execution services. These transactions are
entered into only in compliance with procedures ensuring that the transaction
(including commissions) is at least as favorable as it would have been if
effected directly with a market-maker that did not provide research or execution
services. These procedures include Mitchell Hutchins receiving multiple quotes
from dealers before executing the transactions on an agency basis.
The Fund purchases portfolio securities from dealers and underwriters as
well as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.
Investment decisions for the Fund and for other investment accounts managed
by Mitchell Hutchins are made independently of each other in light of differing
considerations for the various accounts. However, the same investment decision
may occasionally be made for the Fund and one or more of such accounts. In such
cases, simultaneous transactions are inevitable. Purchases or sales are then
averaged as to price and allocated between the Fund and such other account(s) as
to amount according to a formula deemed equitable to the Fund and such
account(s). While in some cases this practice could have a detrimental effect
upon the price or value of the security as far as the Fund is concerned or upon
its ability to complete its entire order, in other cases it is believed that
coordination and the ability to participate in volume transactions will be
beneficial to the Fund.
Mitchell Hutchins may seek to obtain an undertaking from issuers of
commercial paper or dealers selling commercial paper to consider the repurchase
of such securities from the Fund prior to their maturity at their original cost
plus interest (sometimes adjusted to reflect the actual maturity of the
securities), if it believes that the Fund's anticipated need for liquidity makes
such actions desirable. Any such repurchase prior to maturity reduces the
possibility that the Fund would incur a capital loss in liquidating commercial
paper for which there is no established market, especially if interest rates
have risen since acquisition of the particular commercial paper.
14
<PAGE>
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
The Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange, Inc. ("NYSE") is closed
or trading on the NYSE is restricted as determined by the SEC, (2) when an
emergency exists, as defined by the SEC, which makes it not reasonably
practicable for the Fund to dispose of securities owned by it or to determine
fairly the market value of its assets or (3) as the SEC may otherwise permit.
The redemption price may be more or less than the shareholder's cost, depending
on the market value of the Fund's portfolio at the time, although the Fund
attempts to maintain a constant net asset value of $1.00 per share.
Under normal circumstances, the Fund will redeem shares when so requested by
a shareholder's broker-dealer other than PaineWebber by telegram or telephone to
PaineWebber. Such a redemption order will be executed at the net asset value
next determined after the order is received by PaineWebber. Redemptions of Fund
shares effected through a broker-dealer other than PaineWebber may be subject to
a service charge by that broker-dealer.
VALUATION OF SHARES
The Fund uses its best efforts to maintain its net asset value at $1.00 per
share. The Fund's net asset value per share is determined by PFPC as of 2:00
p.m., eastern time, on each Business Day. As defined in the Prospectus,
"Business Day" means any day on which PNC's Philadelphia offices, and the New
York City offices of PaineWebber and PaineWebber's bank, The Bank of New York,
are all open for business. One or more of these institutions will be closed on
the observance of the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
The Fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 under the 1940 Act. To use amortized
cost to value its portfolio securities, the Fund must adhere to certain
conditions under that Rule relating to the Fund's investments, some of which are
discussed in the Prospectus. Amortized cost is an approximation of market value,
whereby the difference between acquisition cost and value at maturity of the
instrument 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. In the event that a large number of
redemptions take place at a time when interest rates have increased, the Fund
might have to sell portfolio securities prior to maturity and at a price that
might not be as desirable.
The Fund's board of directors 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. Should
that deviation exceed 1/2 of 1%, the board of directors will promptly consider
whether any action should be initiated to eliminate or reduce material dilution
or other unfair results to
15
<PAGE>
shareholders. Such action may include redeeming shares in kind, selling
portfolio securities prior to maturity, reducing or withholding dividends and
utilizing a net asset value per share as determined by using available market
quotations. The Fund will maintain a dollar-weighted average portfolio maturity
of 90 days or less and will not purchase any instrument with a remaining
maturity greater than 13 months, will limit portfolio investments, including
repurchase agreements, to those U.S. dollar-denominated instruments that are of
high quality and that the directors determine present minimal credit risks as
advised by Mitchell Hutchins, and will comply with certain reporting and
recordkeeping procedures. There is no assurance that constant net asset value
per share will be maintained. In the event amortized cost ceases to represent
fair value, the board will take appropriate action.
In determining the approximate market value of portfolio investments, the
Fund may employ outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board of directors.
TAXES
In order to continue to qualify for treatment as a regulated investment
company under the Internal Revenue Code, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gain, if any) and must meet several additional requirements. Among these
requirements are the following: (1) the Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of securities and
certain other income; (2) the Fund must derive less than 30% of its gross income
each taxable year from the sale or other disposition of securities held for less
than three months; (3) 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 (4) 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.
CALCULATION OF YIELD
The Fund computes its yield and effective yield quotations using
standardized methods required by the SEC. The Fund from time to time advertises
(1) its current yield based on a recently ended seven-day period, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the
16
<PAGE>
difference by the value of the account at the beginning of the base period to
obtain the base period return and then multiplying the base period return by
(365/7), with the resulting yield figure carried to at least the nearest
hundredth of one percent; and (2) its effective yield based on the same
seven-day period by compounding the base period return by adding 1, raising the
sum to a power equal to (365/7) and subtracting 1 from the result, according to
the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7] - 1
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of the Fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
The Fund's yield and effective yield for the seven-day period ended March
31, 1995 were 5.48% and 5.63%, respectively.
OTHER INFORMATION. The Fund's performance data quoted in advertising and
other promotional materials ("Performance Advertisements") represent past
performance and are not intended to predict or indicate future results. The
return on an investment in the Fund will fluctuate. In Performance
Advertisements, the Fund may compare its yield with data published by Lipper
Analytical Services, Inc. for money funds ("Lipper"), CDA Investment
Technologies, Inc. ("CDA"), IBC/Donoghue's Money Market Fund Report
("Donoghue"), Wiesenberger Investment Companies Service ("Wiesenberger"),
Investment Company Data Inc. ("ICD") or Morningstar Mutual Funds
("Morningstar"), or with the performance of recognized stock and other indexes,
including (but not limited to) the Standard & Poor's 500 Composite Stock Index,
the Dow Jones Industrial Average, the Morgan Stanley Capital World Index, the
Lehman Brothers Treasury Bond Index, the Lehman Brothers Government-Corporate
Bond Index, the Salomon Brothers Non-U.S. World Government Bond Index and the
Consumer Price Index as published by the U.S. Department of Commerce. The Fund
also may refer in such materials to mutual fund performance rankings and other
data, such as comparative asset, expense and fee levels, published by Lipper,
CDA, Donoghue, Wiesenberger, ICD or Morningstar. Performance Advertisements also
may refer to discussions of the Fund and comparative mutual fund data and
ratings reported in independent periodicals, including (but not limited to) 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.
The Fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on a Fund investment are reinvested by being paid in
additional Fund shares, any future income of the Fund would increase the value,
not only of the original Fund investment, but also of the additional Fund shares
received
17
<PAGE>
through reinvestment. As a result, the value of the Fund investment would
increase more quickly than if dividends had been paid in cash.
The Fund may also compare its performance with the performance of bank
certificates of deposit (CDs) as measured by the CDA Investment Technologies,
Inc. Certificate of Deposit Index and the Bank Rate Monitor National Index and
the averages of yields of CDs of major banks published by Banxquotes (R) Money
Markets. In comparing the Fund's performance to CD performance, investors should
keep in mind that bank CDs are insured in whole or in part by an agency of the
U.S. government and offer fixed principal and fixed or variable rates of
interest, and that bank CD yields may vary depending on the financial
institution offering the CD and prevailing interest rates. Fund shares are not
insured or guaranteed by the U.S. government and returns will fluctuate. While
the Fund seeks to maintain a stable net asset value of $1.00 per share, there
can be no assurance that it will be able to do so.
OTHER INFORMATION
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 M Street, N.W.,
Washington, D.C. 20036-5891, counsel to the Fund, has passed upon the legality
of the shares offered by the Prospectus. 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 the Fund's independent auditors.
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders for the fiscal year ended March 31,
1995 is a separate document supplied with this Statement of Additional
Information and the financial statements accompanying notes and report of
independent auditors appearing therein are incorporated herein by this
reference.
18
<PAGE>
No person has been authorized to give any
information or to make any representations PAINEWEBBER
not contained in the Prospectus or in this CASHFUND, INC.
Statement of Additional Information in --------------
connection with the offering made by the
Prospectus and, if given or made, such
information or representations must not
be relied upon as having been authorized
by the Fund or its distributor. The
Prospectus and this Statement of Additional
Information do not constitute an offering by
the Fund or by the distributor in any
jurisdiction in which such offering may
not lawfully be made.
TABLE OF CONTENTS -----------------------------------
Statement of Additional Information
Page August 1, 1995
----
Investment Policies and
Restrictions....................... 1
Directors and Officers............. 4
Investment Advisory Services....... 10
Portfolio Transactions............. 13
Additional Information Regarding
Redemptions...................... 15
Valuation of Shares................ 15
Taxes.............................. 16
Calculation of Yield............... 16
Other Information.................. 18
Financial Statements............... 18
---
-----------------------------------
(C)1995 PaineWebber Incorporated
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