<PAGE>
As filed with the Securities and Exchange Commission on July 31, 1998
1933 Act Registration No. 2-60655
1940 Act Registration No. 811-2802
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. 37 [ X ]
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REGISTRATION STATEMENT UNDER INVESTMENT COMPANY ACT OF 1940 [ X ]
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Amendment No. 33
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PAINEWEBBER CASHFUND, INC.
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, Esq.
BENJAMIN J. HASKIN, Esq.
Kirkpatrick & Lockhart LLP 1800 Massachusetts
Avenue, N.W.
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
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[ x ] On August 1, 1998 pursuant to Rule 485(b)
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[ ] 60 days after filing pursuant to Rule 485(a)(1)
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[ ] On pursuant to Rule 485(a)(1)
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[ ] 75 days after filing pursuant to Rule 485(a)(2)
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[ ] On pursuant to Rule 485(a)(2)
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Title of Securities Being Registered: Shares of Common Stock.
<PAGE>
PaineWebber Cashfund, Inc.
Contents of Registration Statement
This registration statement consists of the following papers and
documents.
Cover Sheet
Contents of Registration Statement
Cross Reference Sheets
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
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PaineWebber Cashfund, Inc.
Form N-1A Cross Reference Sheet
<TABLE>
<CAPTION>
Part A Item No. and Caption Prospectus Caption
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<S> <C>
1. Cover Page Cover Page
2. Synopsis Highlights
3. Condensed Financial Information Financial Highlights; Performance Information
4. General Description of Registrant Highlights; Investment Objective and Policies;
General Information
5. Management of the Fund Management; General Information
5A. Management's Discussion of Fund Performance Not Applicable
6. Capital Stock and other Securities Cover Page; Dividends & Taxes; General Information
7. Purchase of Securities Being Offered Purchases; Management, Valuation of Shares; General
Information
8. Redemption or Repurchase Redemptions
9. Pending Legal Proceedings Not Applicable
Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Policies and Restrictions
14. Management of the Fund Directors and Officers; Principal Holders of
Securities
15. Control Persons and Principal Holders of Directors and Officers; Principal Holders of
Securities Securities
16. Investment Advisory and Other Services Investment Advisory Services
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities Not Applicable
19. Purchase, Redemption and Pricing of Securities Valuation of Shares; Additional Information Regarding
Being Offered Redemptions
20. Tax Status Taxes
21. Underwriters Investment Advisory Services
22. Calculation of Performance Data Calculation of Yield
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
Part C
Information required to be included in Part C is set forth
under the appropriate item, so numbered, in Part C of this
Registration Statement.
<PAGE>
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PAINEWEBBER AUGUST 1, 1998
CASHFUND, INC.
1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
A PROFESSIONALLY MANAGED MONEY MARKET FUND, INVESTING IN HIGH QUALITY
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, 1998 (which is
incorporated by reference herein) has been filed with the Securities and
Exchange Commission ('SEC' or 'Commission'). The Statement of Additional
Information can be obtained without charge, and further inquiries can be made,
by contacting the Fund, your PaineWebber Investment Executive or PaineWebber's
correspondent firms or by calling toll-free 1-800-441-7756. In addition, the
Commission maintains a website (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference
and other information regarding registrants that file electronically with the
Commission.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION NOR HAS
THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Table of Contents
Highlights................................ 2
Financial Highlights...................... 4
Investment Objective and Policies......... 5
Purchases................................. 9
Redemptions............................... 10
Valuation of Shares....................... 13
Dividends and Taxes....................... 13
Management................................ 14
Performance Information................... 15
General Information....................... 15
<PAGE>
PAINEWEBBER CASHFUND, INC.
HIGHLIGHTS
See elsewhere in 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.
Investment Objective Current income, stability of principal and high
and Policies: liquidity; invests primarily in high quality money market
instruments.
Total Net Assets: Over $5.5 billion as of June 30, 1998.
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 Free credit cash balances in an investor's PaineWebber
Sweep: brokerage account of $500 or more are automatically
invested in Fund shares daily; $1 or more on the next to
last Business Day of each month.
Check Writing: Available to qualified shareholders upon request.
Unlimited number of checks. Minimum amount per check:
$500.
Public Offering Net asset value, which the Fund seeks to maintain at
Price: $1.00 per share.
</TABLE>
2
<PAGE>
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. While the types of money market instruments in which the
Fund invests generally are considered to have low risk of loss to principal or
interest, these securities are not completely risk free. The Fund may invest in
U.S. dollar-denominated securities of foreign issuers, which may present a
greater degree of risk than investments in securities of domestic issuers.
During periods when interest rates are declining or rising, the Fund's yield
will tend to lag behind prevailing short-term interest rates. 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
<TABLE>
<S> <C>
Sales charge on purchases of shares....... None
Sales charge on reinvested dividends...... None
Redemption fee or deferred sales charge... None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C>
Management fees........................... 0.36%
12b-1 fees................................ None
Other expenses............................ 0.20%
-----
Total Operating Expenses.................. 0.56%
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</TABLE>
EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- -------- ----------- ---------- ---------
<S> <C> <C> <C>
$6 $18 $31 $70
</TABLE>
This Example assumes that all dividends are reinvested and that the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in the years shown. The above tables and the assumption in the Example of a 5%
annual return are required by regulations of the SEC applicable to all mutual
funds; the assumed 5% annual return is not a prediction of, and does not
represent, the Fund's projected or actual performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
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.
3
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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, accompanying notes and the report of Ernst &
Young LLP, independent auditors, which appear in the
Fund's Annual Report to Shareholders for the fiscal year
ended March 31, 1998, and 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, 1998, have been audited by Ernst & Young LLP,
independent auditors. The Annual Report to Shareholders
may be obtained without charge by calling 1-800-647-1568.
The information appearing below for each of the five
years in the period ended March 31, 1993 also has been
audited by Ernst & Young LLP, whose reports thereon were
unqualified.
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...................... $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ----------
Net investment income................................... 0.0511 0.0482 0.0523 0.0433 0.0272
Dividends from net investment income.................... (0.0511) (0.0482) (0.0523) (0.0433) (0.0272)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year............................ $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (1)............................. 5.23% 4.93% 5.36% 4.44% 2.75%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of year (000's)......................... $5,683,262 $5,260,468 $5,308,558 $3,700,678 $3,436,278
Expenses to average net assets.......................... 0.56% 0.63% 0.60% 0.62% 0.61%
Net investment income to average net assets............. 5.11% 4.82% 5.24% 4.35% 2.73%
<CAPTION>
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...................... $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ----------
Net investment income................................... 0.0317 0.0509 0.0743 0.0846 0.0761
Dividends from net investment income.................... (0.0317) (0.0509) (0.0743) (0.0846) (0.0761)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year............................ $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (1)............................. 3.17% 5.09% 7.43% 8.46% 7.61%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of year (000's)......................... $3,774,298 $4,234,968 $5,122,338 $5,236,560 $4,416,667
Expenses to average net assets.......................... 0.57% 0.56% 0.53% 0.54% 0.57%
Net investment income to average net assets............. 3.17% 5.09% 7.43% 8.46% 7.61%
</TABLE>
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year 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 year reported.
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4
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CASHFUND
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<S> <C>
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 quality money market
instruments having or deemed to have remaining maturities
of 13 months or less. These instruments include (1) U.S.
government securities, (2) obligations of U.S. and
foreign banks, (3) commercial paper and other short-term
obligations of U.S. and foreign companies, governments
and similar entities, including variable and floating
rate securities and participation interests, and (4)
repurchase agreements involving any of the foregoing. The
Fund maintains a dollar-weighted average portfolio
maturity of 90 days or less.
The Fund invests The Fund may invest in obligations (including
exclusively in high certificates of deposit, bankers' acceptances, time
quality money market deposits and similar obligations) of U.S. and foreign
instruments having banks having total assets at the time of purchase in
or deemed to have excess of $1.5 billion. The Fund may invest in
remaining maturities non-negotiable time deposits of U.S. banks, savings
of 13 months or associations and similar depository institutions having
less. total assets in excess of $1.5 billion at the time of
purchase only if the time deposits have maturities of
seven days or less.
The securities purchased by the Fund consist only of
obligations that Mitchell Hutchins determines, pursuant
to procedures adopted by the Fund's board of directors
('board'), present minimal credit risks and are 'First
Tier Securities' as defined in Rule 2a-7 under the
Investment Company Act of 1940. As so defined, First Tier
Securities include securities that are rated in the
highest short-term rating category by at least two
nationally recognized statistical rating organizations
('NRSROs') or by one NRSRO if only one NRSRO has assigned
the obligation a short-term rating. First Tier Securities
also include unrated securities if Mitchell Hutchins has
determined the obligations to be of comparable quality to
rated securities that so qualify. The Fund may also
purchase 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
weighted average maturity of the portfolio based upon its
assessment of the relative values of various money market
instruments and future interest rate patterns, in order
to respond to
</TABLE>
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5
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PAINEWEBBER
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<TABLE>
<S> <C>
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 markets.
While the types of money market instruments in which the
Fund invests generally are considered to have low risk of
loss of principal or interest, they are not completely
risk free. An issuer or guarantor may be unable or
unwilling to pay interest or repay principal on its
obligations for many reasons, including adverse changes
in its own financial condition or in economic conditions
generally.
In periods of During periods when interest rates are declining or
declining interest rising, the Fund's yield will tend to lag behind
rates, the Fund's prevailing short-term market rates. This means that in
yield will tend to periods of declining interest rates, the Fund's yield
be somewhat higher will tend to be somewhat higher than prevailing market
than prevailing rates, and in periods of rising interest rates, its yield
market rates, and in generally will be somewhat lower. Also, when interest
periods of rising rates are falling, net cash inflows from the continuous
rates, lower. sale of Fund shares are likely to be invested in
portfolio instruments that produce lower yields than the
balance of the Fund's portfolio, thereby reducing its
yield. In periods of rising interest rates, the opposite
can be true.
There can be no assurance that the Fund will achieve its
investment objective.
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, including
securities that are supported by the full faith and
credit of the United States (such as Government National
Mortgage Association certificates ('GNMAs'), securities
supported primarily or solely by the creditworthiness of
the issuer (such as securities of the Resolution Funding
Corporation and the Tennessee Valley Authority) and
securities that are supported primarily or solely by
specific pools of assets and the creditworthiness of a
U.S. government-related issuer (such as mortgage-backed
securities issued by Fannie Mae, also known as the
Federal National Mortgage Association, and Freddie Mac,
also known as the Federal Home Loan Mortgage
Corporation).
The Fund 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
</TABLE>
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6
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CASHFUND
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<TABLE>
<S> <C>
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.
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
guaranteed by the U.S. government. In addition, the Fund
may purchase variable and floating rate securities of
other issuers with remaining maturities in excess of 13
months if the securities are subject to a demand feature
exercisable within 13 months or less. The yields on these
securities are adjusted in relation to changes in
specific rates, such as the prime rate, and different
securities may have different adjustment rates. 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 be backed by letters of credit or other
liquidity support arrangements provided by banks or other
financial institutions, whose credit standing affects the
credit quality of the obligation. Changes in the credit
quality of these institutions could cause losses to the
Fund and affect its share price.
VARIABLE AMOUNT MASTER DEMAND NOTES. Securities
purchased by the Fund may include variable amount master
demand notes, which are unsecured redeemable obligations
that permit investment of varying amounts at fluctuating
interest rates under a direct agreement between the Fund
and the issuer. The principal amount of these notes may
be increased from time to time by the parties (subject to
specified maximums) or decreased by the Fund or the
issuer. These notes are payable on demand and may or may
not be rated.
REPURCHASE AGREEMENTS. Repurchase agreements are
transactions in which the Fund purchases obligations from
a bank or securities dealer (or its affiliate) and
simultaneously commits to resell the obligations to that
counterparty at an agreed-upon date or upon demand and at
a price reflecting a market rate of interest unrelated to
the coupon rate or maturity of the purchased obligations.
Repurchase agreements carry certain risks not associated
with direct investments in obligations, including
possible decline in the market value of the underlying
obligations. Repurchase agreements involving obligations
other than U.S. government securities (such as commercial
</TABLE>
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7
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PAINEWEBBER
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<TABLE>
<S> <C>
paper and corporate bonds) may be subject to special
risks and may not have the benefit of certain protections
in the event of the counterparty's insolvency. If the
seller or guarantor becomes insolvent, the Fund may
suffer delays, costs and possible losses in connection
with the disposition of collateral. The Fund intends to
enter into repurchase agreements only with counterparties
in transactions believed by Mitchell Hutchins to present
minimal credit risks in accordance with guidelines
established by the board.
FOREIGN SECURITIES. The Fund may invest in U.S.
dollar-denominated securities of foreign issuers,
including debt securities of foreign banks, corporations,
governments and similar entities. Such investments may
consist of obligations of foreign and domestic branches
of foreign banks and foreign branches of domestic banks.
Such investments may involve risks that are different
from investments in U.S. issuers. These risks may include
future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits,
currency controls, interest limitations or other
governmental restrictions that might affect the payment
of principal or interest on the securities held by the
Fund. Additionally, there may be less publicly available
information about foreign issuers, as these issuers may
not be subject to the same regulatory requirements as
domestic issuers.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend its
securities to qualified broker-dealers or institutional
investors in an amount up to 33 1/3% of its total assets.
Lending securities enables the Fund to earn additional
income but could result in a loss or delay in recovering
these securities.
OTHER INFORMATION. The Fund may borrow money for
temporary purposes, but not in excess of 10% of its total
assets, including reverse repurchase agreements involving
up to 5% of its net assets.
The Fund may purchase securities on a 'when-issued'
basis, that is, for delivery beyond the normal settlement
date at a stated price and yield. The Fund generally
would not pay for such securities or start earning
interest on them until they are received. However, when
the Fund purchases securities on a when-issued basis, it
immediately assumes the risks of ownership, including the
risk of price fluctuation. Failure by the issuer to
deliver a security purchased on a when-issued basis may
result in a loss or missed opportunity to make an
alternative investment.
The Fund may invest no more than 10% of its net assets in
illiquid securities, including repurchase agreements with
maturities in excess of seven days.
</TABLE>
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CASHFUND
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<TABLE>
<S> <C>
New forms of money market instruments continue to be
developed. The Fund may invest in such instruments
consistent with its investment objective.
The Fund's investment objective may not be changed
without the approval of its shareholders. Certain
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 board without shareholder approval.
YEAR 2000 RISKS. Like other mutual funds, financial and
business organizations around the world, the Fund could
be adversely affected if the computer systems used by
Mitchell Hutchins, other service providers and entities
with computer systems that are linked to the fund's
records do not properly process and calculate
date-related information and data from and after January
1, 2000. This is commonly known as the 'Year 2000 Issue.'
Mitchell Hutchins is taking steps that it believes are
reasonably designed to address the Year 2000 Issue with
respect to the computer systems that it uses and to
obtain satisfactory assurances that comparable steps are
being taken by the Fund's other major service providers.
However, there can be no assurance that these steps will
be sufficient to avoid any adverse impact on the Fund.
Purchases
The minimum initial GENERAL. Shares of the Fund are available through
investment is PaineWebber and its correspondent firms. Investors may
$1,000. Free credit contact a local PaineWebber office to open an account.
cash balances of The minimum initial investment in the Fund is $1,000, and
$500 or more are the minimum for additional purchases is $500, except as
invested daily and described below. All free credit cash balances in an
those of $1 or more investor's PaineWebber brokerage account (including
are invested at each proceeds from securities sold) of $500 or more are
month end. automatically invested or 'swept' into shares of the Fund
daily for settlement on the next Business Day, and all
remaining free credit cash balances of $1 or more are
'swept' on the next to last Business Day of each month
for settlement on the last Business Day of that month.
An order to purchase Fund shares will be executed on the
Business Day on which federal funds become available to
the Fund, at the Fund's next determined net asset value
per share. 'Federal funds' are funds deposited by a
commercial bank in an account at a Federal Reserve Bank
that can be transferred to a similar account of another
bank in one day and thus may be made immediately
available to the Fund through its custodian. A 'Business
Day' is any day on which the Boston offices of the Fund's
custodian, State Street Bank and Trust Company, and the
New York City offices of PaineWebber and PaineWebber's
bank, The
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9
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PAINEWEBBER
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<TABLE>
<S> <C>
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.
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 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
purchased by wire, shares by placing an order through their PaineWebber
check or with funds Investment Executives or correspondent firms and
held at PaineWebber. instructing their banks to transfer 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 Brokerage 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 Shareholders may redeem (sell) any number of shares from
redeem any number of their Fund accounts by wire, check, telephone or mail. In
shares from their addition, unless shareholders otherwise instruct their
Fund accounts by PaineWebber Investment Executives, any securities
wire, check, purchase or other debit in their PaineWebber brokerage
telephone or mail. accounts will be paid for automatically on 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
</TABLE>
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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.
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,
Shareholders who are checks returned 'nonsufficient funds' and checks returned
interested in the because they are written for less than $500; these
check redemption charges will be paid by redeeming automatically an
service should appropriate number of Fund shares. PaineWebber reserves
obtain the necessary the right to modify or terminate the checkwriting service
forms from their at any time or to impose a service charge in connection
PaineWebber with it.
Investment
Executives or Shareholders who are interested in the check redemption
correspondent firms. service should obtain the necessary forms from their
Checks may be PaineWebber Investment Executives or correspondent firms.
written in amounts Checkwriting generally is not available to persons who
of $500 or more. hold Fund shares through any sub-account or tax-deferred
retirement plan account.
REDEMPTIONS BY TELEPHONE OR MAIL. Shareholders may
submit redemption requests in person or by telephone or
mail to their PaineWebber Investment Executives or
correspondent firms; PaineWebber Investment Executives in
local branches throughout the
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country and correspondent firms are responsible for
promptly 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.
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 and (c) other
supporting legal documents for estates, trusts,
guardianships, custodianships, partnerships and
corporations.
A signature guarantee may be obtained from a domestic
bank or trust company, broker, dealer, clearing agency or
savings association which is a participant in a medallion
program recognized by the Securities Transfer
Association. The three recognized medallion programs are
Securities Transfer Agents Medallion Program (STAMP),
Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP).
Signature guarantees which are not part of these programs
will not be accepted.
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. 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 requests redemption
of shares that were purchased recently, the Fund may
delay payment until it is assured that it has received
good payment for the purchase of the shares. In the case
of purchases by check, this can take up to 15 days.
Shareholders should
maintain minimum
balances of at least
$500.
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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 less all
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 straight-line basis over its remaining
life. All cash, receivables and current payables are
carried at their face value. Other assets are valued at
fair value as determined in good faith by or under the
direction of the board.
Dividends and Taxes
Dividends accrue to DIVIDENDS. Each Business Day, the Fund declares as
shareholder accounts dividends all of its net investment income. Shares begin
daily and are earning dividends on the day they are purchased;
automatically paid dividends are accrued to shareholder accounts daily and
in additional Fund are automatically paid in additional Fund shares monthly.
shares monthly. Shares do not earn dividends on the day they are
redeemed. 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 it
distributes to its shareholders.
Dividends paid by the Fund generally are taxable to its
shareholders as ordinary income, notwithstanding that the
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.
The Fund notifies its shareholders following the end of
each calendar year of the amount of all dividends paid
that year.
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The Fund is required to withhold 31% of all dividends
payable to any individuals and certain other noncorporate
shareholders who (1) have not provided the Fund or
PaineWebber with a correct taxpayer identification number
on Form W-9 (for U.S. citizens and resident aliens) or a
properly completed claim for exemption on Form W-8 (for
nonresident aliens and other foreign entities) or (2)
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 Management
oversee various
organizations The board, as part of its overall management
responsible for the responsibility, oversees various organizations
Fund's day-to-day responsible for the Fund's day-to-day management.
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, 1998, the Fund's
effective advisory and administration fee paid to
PaineWebber was equal to 0.36% 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.
In accordance with procedures adopted by the board, the
Fund may pay fees to PaineWebber for its services as
lending agent in its portfolio securities lending
program. Mitchell Hutchins investment personnel may
engage in securities transactions for their own accounts
pursuant to a code of ethics that establishes procedures
for personal investing and restricts certain
transactions.
PaineWebber and Mitchell Hutchins are located at 1285
Avenue of the Americas, New York, New York 10019. Michell
Hutchins is a wholly owned asset management subsidiary of
PaineWebber, which is in turn wholly owned by Paine
Webber Group Inc., a publicly owned financial services
holding company. At June 30, 1998, Mitchell Hutchins was
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adviser or sub-adviser to 31 registered investment
companies with 69 separate portfolios and aggregate
assets of approximately $40.3 billion.
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 The performance of shareholder accounts with small
advertise its balances will differ from the quoted performance because
'yield' and daily income for each shareholder account is rounded to
'effective yield.' the nearest whole penny. Accordingly, very small
The 'effective shareholder accounts (approximately $35 or lower at
yield' assumes current interest rates) that generate less than 1/2cents
dividends are per day of income will earn no dividends.
reinvested.
General Information
The Fund is registered with the SEC as a diversified,
open-end management investment 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. Shareholders of the Fund
are entitled to one vote for each full share held and
fractional votes for fractional shares held. Voting
rights are not cumulative, and as a result, the holders
of more than 50% of the shares of the Fund may elect all
of its directors.
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.
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To avoid additional CERTIFICATES. To avoid additional operating expense and
expense, share for investor convenience, share certificates are not
certificates are not issued. Ownership of Fund shares is recorded on a stock
issued. register by the Transfer Agent, and shareholders have the
same rights of ownership with respect to such shares as
if certificates had been issued.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and
Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, is custodian of the Fund's assets.
PFPC Inc. ('PFPC'), a subsidiary of PNC Bank, N.A., 400
Bellevue Parkway, 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 semiannual financial statements.
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Cashfund, Inc.
o Current Income
o Stability of Principal
o High Liquidity
o Professional Management
o Dividend Reinvestment
o Check Writing Privileges
Investors should rely on the information contained or referred to in this
prospectus. The Fund and its distributor have not authorized anyone to provide
investors with information that is different. The prospectus is not an offer to
sell shares of the Fund in any jurisdiction where the Fund or its distributor
may not lawfully sell those shares.
(Copyright) 1998 PaineWebber Incorporated
PaineWebber
Prospectus
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Cashfund, Inc.
August 1, 1998
<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
asset management 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, 1998. A copy of the Prospectus may be obtained by
contacting any PaineWebber Investment Executive or correspondent firm or by
calling toll-free 1-800-647-1568. This Statement of Additional Information is
dated August 1, 1998.
INVESTMENT POLICIES AND RESTRICTIONS
The following supplements the information contained in the Prospectus
concerning the Fund's investment policies and limitations.
YIELDS AND RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER SECURITIES. The
yields on the money market instruments in which the Fund invests (such as U.S.
government securities, 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.
The Fund may only purchase securities that are 'First Tier Securities.' To
qualify as a First Tier Security, a security must either be (1) rated in the
highest short-term rating category by at least two NRSROs, (2) rated in the
highest short-term rating category by a single NRSRO if only that NRSRO has
assigned the obligation a short-term rating, (3) issued by an issuer that has
received such a short-term rating with respect to a security that is comparable
in terms of priority and security, (4) subject to a guarantee rated in the
highest short-term rating category or issued by a guarantor that has received
the highest short-term rating for a comparable debt obligation or (5) unrated,
but determined by Mitchell Hutchins to be of comparable quality. Subsequent to
its purchase by the Fund, an issue may cease to be rated or its rating may be
reduced. If a security in the Fund's portfolio ceases to be a First Tier
Security, 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 ('board'), will consider whether the
Fund should continue to hold the obligation. A First Tier Security rated in the
highest short-term rating category by a single NRSRO at the time of purchase
that subsequently receives a rating below the highest rating category from a
different NRSRO may continue to be considered a First Tier Security.
<PAGE>
VARIABLE AND FLOATING RATE DEMAND INSTRUMENTS. The Fund may invest in
variable and floating rate securities with demand features. A demand feature
gives the Fund the right to sell the securities back to a specified party,
usually a remarketing agent, on a specified date, at a price equal to their
amortized cost value plus accrued interest. A demand feature is often backed by
a letter of credit, guarantee or other liquidity support arrangement from a bank
or other financial institution that may be drawn upon demand, after specified
notice, for all or any part of the exercise price of the demand feature.
Generally, the Fund intends to exercise demand features (1) upon a default under
the terms of the underlying security, (2) to maintain its portfolio in
accordance with its investment objective and policies or applicable legal or
regulatory requirements or (3) as needed to provide liquidity to the Fund in
order to meet redemption requests. The ability of a bank or other financial
institution to fulfill its obligations under a letter of credit, guarantee or
other liquidity arrangement might be affected by possible financial difficulties
of its borrowers, adverse interest rate or economic conditions, regulatory
limitations or other factors. The interest rate on floating rate or variable
rate securities ordinarily is readjusted on the basis of the prime rate of the
bank that originated the financing or some other index or published rate, such
as the 90-day U.S. Treasury bill rate, or is otherwise reset to reflect market
rates of interest. Generally, these interest rate adjustments cause the market
value of floating rate and variable rate securities to fluctuate less than the
market value of fixed rate obligations.
REPURCHASE AGREEMENTS. 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 counterparty to pay the repurchase price
on the date agreed to or upon demand 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 counterparty must provide additional
collateral so that at all times the collateral is at least equal to the
repurchase price plus any agreed upon additional amount. The difference between
the total amount to be received upon repurchase of the securities 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 counterparties in transactions believed by Mitchell Hutchins to
present minimal credit risks in accordance with guidelines established by the
board. 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 with banks and securities dealers up to an aggregate value of not
more than 5% of its net assets. Such agreements involve the sale of securities
held by the Fund subject to its obligation to repurchase the securities at an
agreed-upon date or upon demand and at a 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's custodian segregates assets to cover the
Fund's obligations under the reverse repurchase agreement. See 'Investment
Policies and Restrictions--Segregated Accounts.'
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
board.
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To the extent the Fund invests in illiquid securities, it may not be able to
readily liquidate such investments and may have to sell other investments if
necessary to raise cash to meet its obligations.
Restricted securities are not registered under the Securities Act of 1933
('1933 Act') and may be sold only in privately negotiated or other exempted
transactions or after a 1933 Act registration statement has become effective.
Where registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the time
of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
However, not all restricted securities are illiquid. A large institutional
market has developed for many U.S. and foreign securities that are not
registered under the 1933 Act. Institutional investors generally will not seek
to sell these instruments to the general public, but instead will often depend
either on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a 'safe harbor' from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers, providing both readily ascertainable values for restricted
securities and the ability to liquidate an investment in order to satisfy share
redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
the Fund, however, could affect adversely the marketability of such portfolio
securities, and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
The board has delegated the function of making day-to-day determinations of
liquidity to Mitchell Hutchins, pursuant to guidelines approved by the board.
Mitchell Hutchins takes into account a number of factors in reaching liquidity
decisions, including (1) the frequency of trades for the security, (2) the
number of dealers that make quotes for the security, (3) the number of dealers
that have undertaken to make a market in the security, (4) the number of other
potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities held by the Fund and reports periodically on such
decisions to the board.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
securities on a 'when-issued' or 'delayed delivery' basis. A security purchased
on a when-issued or delayed delivery basis is recorded as an asset on the
commitment date and is subject to changes in market value, generally based upon
changes in the level of interest rates. Thus, fluctuation in the value of the
security from the time of the commitment date will affect the Fund's net asset
value. When the Fund commits to purchase securities on a when-issued or delayed
delivery basis, its custodian segregates assets to cover the amount of the
commitment. See 'Investment Policies and Restrictions--Segregated Accounts.'
SEGREGATED ACCOUNTS. When the Fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis or reverse
repurchase agreements, the Fund will maintain with an approved custodian in a
segregated account
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cash or liquid securities, marked to market daily, in an amount at least equal
to the Fund's obligation or commitment under such transactions.
LENDING OF PORTFOLIO SECURITIES. The Fund is authorized to lend up to
33 1/3% of its total assets to broker-dealers or institutional investors that
Mitchell Hutchins deems qualified, but only when the borrower maintains
acceptable collateral with the Fund's custodian, marked to market daily, at
least equal to the market value of the securities loaned, plus accrued interest
and dividends. Acceptable collateral is limited to cash, U.S. government
securities and irrevocable letters of credit that meet certain guidelines
established by Mitchell Hutchins. The Fund may reinvest cash collateral in money
market instruments or other short-term liquid investments. In determining
whether to lend securities to a particular broker-dealer or institutional
investor, Mitchell Hutchins will consider, and during the period of the loan
will monitor, all relevant facts and circumstances, including the
creditworthiness of the borrower. The Fund will retain authority to terminate
any of its loans at any time. The Fund may pay reasonable fees in connection
with a loan and may pay the borrower or placing broker a negotiated portion of
the interest earned on the reinvestment of cash held as collateral. The Fund
will receive amounts equivalent to any dividends, interest or other
distributions on the securities loaned. The Fund will regain record ownership of
loaned securities to exercise beneficial rights, such as voting and subscription
rights, when regaining such rights is considered to be in the Fund's interest.
Pursuant to procedures adopted by the board governing the Fund's securities
lending program, PaineWebber has been retained to serve as lending agent for the
Fund. The board also has authorized the payment of fees (including fees
calculated as a percentage of invested cash collateral) to PaineWebber for these
services. The board periodically reviews all portfolio securities loan
transactions for which PaineWebber acted as lending agent.
INVESTMENT LIMITATIONS OF THE FUND
FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations
cannot be changed without the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of the Fund or (2) 67% or more of the shares
present at a shareholders' meeting if more than 50% of the outstanding shares
are represented at the meeting in person or by proxy. If a percentage
restriction is adhered to at the time of an investment or transaction, later
changes in percentage resulting from a change in values of portfolio securities
or amount of total assets will not be considered a violation of any of the
following limitations.
The Fund will not:
(1) purchase securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in securities of
that issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to
25% of the Fund's total assets may be invested without regard to
this limitation, and except that this limitation does not apply to
securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities or to securities issued by other
investment companies.
The following interpretation applies to, but is not a part of,
this fundamental restriction: Mortgage-and asset-backed securites
will not be considered to have been issued by the same issuer by
reason of the securities having the same sponsor, and mortgage-
and asset-backed securities issued by a finance or other special
purpose subsidiary that are not guaranteed by the parent company
will be considered to be issued by a separate issuer from the
parent company.
4
<PAGE>
(2) purchase any security if, as a result of that purchase, 25% or
more of the Fund's total assets would be invested in securities of
issuers having their principal business activities in the same
industry, except that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities or to municipal securities or to certificates of
deposit and bankers' acceptances of domestic branches of U.S.
banks.
The following interpretations apply to, but are not a part of,
this fundamental restriction: (a) domestic and foreign banking
will be considered to be different industries; and (b)
asset-backed securities will be grouped in industries based upon
their underlying assets and not treated as constituting a
single, separate industry.
(3) issue senior securities or borrow money, except as permitted under
the Investment Company Act of 1940 ('1940 Act'), and then not in
excess of 33 1/3% of the Fund's total assets (including the amount
of the senior securities issued but reduced by any liabilities not
constituting senior securities) at the time of the issuance or
borrowing, except that the Fund may borrow up to an additional 5%
of its total assets (not including the amount borrowed) for
temporary or emergency purposes.
(4) make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt
securities or instruments, or participations or other interests
therein and investments in government obligations, commercial
paper, certificates of deposit, bankers' acceptances or similar
instruments will not be considered the making of a loan.
(5) engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with
its disposition of portfolio securities.
(6) purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments
in mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject
to this limitation, and except that the Fund may exercise rights
under agreements relating to such securities, including the right
to enforce security interests and to hold real estate acquired by
reason of such enforcement until that real estate can be
liquidated in an orderly manner.
(7) purchase or sell physical commodities unless acquired as a result
of owning securities or other instruments, but the Fund may
purchase, sell or enter into financial options and futures,
forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are not
fundamental and may be changed by the board without shareholder approval.
The Fund will not:
(1) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that
the Fund may make margin deposits in connection with its use of
financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or
derivative instruments.
5
<PAGE>
(2) engage in short sales of securities or maintain a short position,
except that the Fund may (a) sell short 'against the box' and (b)
maintain short positions in connection with its use of financial
options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative
instruments.
(3) purchase securities of other investment companies, except to the
extent permitted by the 1940 Act (and except that the Fund will
not purchase securities of registered open-end investment
companies or registered unit investment trusts in reliance on
sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act) and except
that this limitation does not apply to securities received or
acquired as dividends, through offers of exchange, or as a result
of reorganization, consolidation, or merger.
(4) purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding.
DIRECTORS AND OFFICERS; PRINCIPAL HOLDERS OF SECURITIES
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>
Margo N. Alexander**; 51 Director and Mrs. Alexander is president, chief executive officer and a director of Mitchell
President Hutchins (since January 1995) and an executive vice president and director of
PaineWebber (since March 1984). Mrs. Alexander is a president and a director
or trustee of 31 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Richard Q. Armstrong; 63 Director Mr. Armstrong is chairman and principal of RQA Enterprises (management
78 West Brother Drive consulting firm) (since April 1991 and principal occupation since March 1995).
Greenwich, CT 06830 Mr. Armstrong was chairman of the board, chief executive officer and co-owner
of Adirondack Beverages (producer and distributor of soft drinks and spar-
kling/still waters) (October 1993-March 1995). He was a partner of the New
England Consulting Group (management consulting firm) (December 1992-September
1993). He was managing director of LVMH U.S. Corporation (U.S. subsidiary of
the French luxury goods conglomerate, Louis Vuitton Moet Hennessey Corpora-
tion) (1987-1991) and chairman of its wine and spirits subsidiary, Schieffelin
& Somerset Company (1987-1991). Mr. Armstrong is a director or trustee of 30
investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- ------------------ --------------------------------------------------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**; 71 Director and Mr. Bewkes is a director of Paine Webber Group Inc. ('PW Group') (holding
Chairman of the company of PaineWebber and Mitchell Hutchins). Prior to December 1995, he was
Board of Directors a consultant to PW Group. Prior to 1988, he was chairman of the board,
president and chief executive officer of American Bakeries Company. Mr. Bewkes
is a director of Interstate Bakeries Corporation and NaPro Bio-Therapeutics,
Inc. Mr. Bewkes is a director or trustee of 31 investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
Richard R. Burt; 51 Director Mr. Burt is chairman of IEP Advisors, Inc. (international investments and
1101 Connecticut Avenue, N.W. consulting firm) (since March 1994) and a partner of McKinsey & Company (man-
Washington, D.C. 20036 agement consulting firm) (since 1991). He is also a director of
Archer-Daniels-Midland Co. (agricultural commodities), Hollinger International
Co. (publishing), Homestake Mining Corp., Powerhouse Technologies Inc. and
Wierton Steel Corp. He was the chief negotiator in the Strategic Arms
Reduction Talks with the former Soviet Union (1989-1991) and the U.S.
Ambassador to the Federal Republic of Germany (1985-1989). Mr. Burt is a
director or trustee of 30 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Mary C. Farrell**; 48 Director Ms. Farrell is a managing director, senior investment strategist, and member of
the Investment Policy Committee of PaineWebber. Ms. Farrell joined PaineWeb-
ber in 1982. She is a member of the Financial Women's Association and Women's
Economic Roundtable, and appears as a regular panelist on Wall $treet Week
with Louis Rukeyser. She also serves on the Board of Overseers of New York
University's Stern School of Business. Ms. Farrell is a director or trustee of
30 investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- ------------------ --------------------------------------------------------------------------------
<S> <C> <C>
Meyer Feldberg; 56 Director Mr. Feldberg is Dean and Professor of Management of the Graduate School of
Columbia University Business, Columbia University. Prior to 1989, he was president of the Illinois
101 Uris Hall Institute of Technology. Dean Feldberg is also a director of Primedia Inc.,
New York, New York 10027 Federated Department Stores, Inc. and Revlon, Inc. Dean Feldberg is a director
or trustee of 30 other investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
George W. Gowen; 68 Director Mr. Gowen is a partner in the law firm of Dunnington, Bartholow & Miller. Prior
666 Third Avenue to May 1994, he was a partner in the law firm of Fryer, Ross & Gowen. Mr.
New York, New York 10017 Gowen is a director of Columbia Real Estate Investments, Inc. Mr. Gowen is a
director or trustee of 30 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Frederic V. Malek; 61 Director Mr. Malek is chairman of Thayer Capital Partners (merchant bank). From January
1455 Pennsylvania Avenue, 1992 to November 1992, he was campaign manager of Bush-Quayle '92. From 1990
N.W. to 1992, he was vice chairman and, from 1989 to 1990, he was president of
Suite 350 Northwest Airlines Inc., NWA Inc. (holding company of Northwest Airlines Inc.)
Washington, D.C. 20004 and Wings Holdings Inc. (holding company of NWA Inc.). Prior to 1989, he was
employed by the Marriott Corporation (hotels, restaurants, airline catering
and contract feeding), where he most recently was an executive vice president
and president of Marriott Hotels and Resorts. Mr. Malek is also a director of
American Management Systems, Inc., (management consulting and computer related
services), Automatic Data Processing, Inc., CB Commercial Group, Inc. (real
estate services), Choice Hotels International (hotel and hotel franchising),
FPL Group, Inc. (electric services), Manor Care, Inc. (health care) and
Northwest Airlines Inc. Mr. Malek is a director or trustee of 30 investment
companies for which Mitchell Hutchins or PaineWebber serves as investment
adviser.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- ------------------ --------------------------------------------------------------------------------
<S> <C> <C>
Carl W. Schafer; 62 Director Mr. Schafer is president of the Atlantic Foundation (charitable foundation
66 Witherspoon Street #1100 supporting mainly oceanographic exploration and research). He is a director of
Princeton, NJ 08542 Base Ten Systems, Inc. (software), Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, the Harding, Loevner Funds, Evans Systems,
Inc. (motor fuels, convenience store and diversified company), Electronic
Clearing House, Inc. (financial transactions processing), Frontier Oil
Corporation and Nutraceutix, Inc. (biotechnology company). Prior to January
1993, he was chairman of the Investment Advisory Committee of the Howard
Hughes Medical Institute. Mr. Schafer is a director or trustee of 30 in-
vestment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
John J. Lee; 29 Vice President and Mr. Lee is a vice president and a manager of the mutual fund finance department
Assistant of Mitchell Hutchins. Prior to September 1997, he was an audit manager in the
Treasurer financial services practice of Ernst & Young LLP. Mr. Lee is a vice president
and assistant treasurer of 31 investment companies for which Mitchell Hutch-
ins or PaineWebber serves as investment adviser.
Dennis McCauley; 51 Vice President Mr. McCauley is a managing director and chief investment officer--fixed income
of Mitchell Hutchins. Prior to December 1994, he was director of fixed
income investments of IBM Corporation. Mr. McCauley is a vice president of 21
investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Ann E. Moran; 41 Vice President and Ms. Moran is a vice president and a manager of the mutual fund finance
Assistant department of Mitchell Hutchins. Ms. Moran is a vice president and assistant
Treasurer treasurer of 31 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- ------------------ --------------------------------------------------------------------------------
<S> <C> <C>
Dianne E. O'Donnell; 46 Vice President and Ms. O'Donnell is a senior vice president and deputy general counsel of Mitchell
Secretary Hutchins. Ms. O'Donnell is a vice president and secretary of 30 investment
companies and vice president and assistant secretary of one investment company
for which Mitchell Hutchins or PaineWebber serves as investment adviser.
Emil Polito; 37 Vice President Mr. Polito is a senior vice president and director of operations and control for
Mitchell Hutchins. From March 1991 to September 1993 he was director of the
mutual funds sales support and service center for Mitchell Hutchins and
PaineWebber. Mr. Polito is
vice president of 31 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Susan Ryan; 38 Vice President Ms. Ryan is a senior vice president and portfolio manager of Mitchell Hutchins
and has been with Mitchell Hutchins since 1982. Ms. Ryan is a vice president
of five investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Victoria E. Schonfeld; 47 Vice President Ms. Schonfeld is a managing director and general counsel of Mitchell Hutchins.
Prior to May 1994, she was a partner in the law firm of Arnold & Porter. Ms.
Schonfeld is a vice president of 30 investment companies and vice president
and secretary of one investment company for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Paul H. Schubert; 35 Vice President and Mr. Schubert is a senior vice president and the director of the mutual fund
Treasurer finance department of Mitchell Hutchins. From August 1992 to August 1994, he
was a vice president of BlackRock Financial Management, L.P. Mr. Schubert is a
vice president and treasurer of 31 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE FUND OTHER DIRECTORSHIPS
- ----------------------------- ------------------ --------------------------------------------------------------------------------
<S> <C> <C>
Barney A. Taglialatela; 37 Vice President and Mr. Taglialatela is a vice president and a manager of the mutual fund finance
Assistant department of Mitchell Hutchins. Prior to February 1995, he was a manager of
Treasurer the mutual fund finance division of Kidder Peabody Asset Management, Inc. Mr.
Taglialatela is a vice president and assistant treasurer of 31 investment
companies for which Mitchell Hutchins or PaineWebber serves as investment
adviser.
Keith A. Weller; 36 Vice President and Mr. Weller is a first vice president and associate general counsel of Mitchell
Assistant Hutchins. Prior to May 1995, he was an attorney in private practice. Mr.
Secretary Weller is a vice president and assistant secretary of 30 investment companies
for which Mitchell Hutchins or PaineWebber serves as investment adviser.
</TABLE>
- ------------------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are 'interested persons' of the
Fund as defined in the 1940 Act by virtue of their positions with Mitchell
Hutchins, PaineWebber and/or PW Group.
The Fund pays directors who are not 'interested persons' of the Fund $1,000
annually and $150 for each board meeting and each meeting of a board committee
(other than committee meetings held on the same day as a board meeting). Each
chairman of the audit and contract review committees of individual funds within
the PaineWebber fund complex receives additional compensation aggregating
$15,000 annually from the relevant funds. All directors are reimbursed for any
expenses incurred in attending meetings. Directors and officers of the Fund own
in the aggregate less than 1% of the Fund's shares. Because 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.
11
<PAGE>
The table below includes certain information relating to the compensation
of the current directors of the Fund who held office with the Fund or with other
PaineWebber funds during the Fund's last fiscal year.
COMPENSATION TABLE+
<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM THE
FROM FUND AND THE
NAME OF PERSON, POSITION THE FUND* FUND COMPLEX**
- ------------------------- ------------ --------------
<S> <C> <C>
Richard Q. Armstrong,
Director............... $2,050 $ 94,885
Richard R. Burt,
Director............... 1,900 87,085
Meyer Feldberg,
Director............... 2,050 117,853
George W. Gowen,
Director............... 2,346 101,567
Frederic V. Malek,
Director............... 2,050 95,845
Carl W. Schafer,
Director............... 2,050 94,885
</TABLE>
- ------------------
+ Only independent board members are compensated by the Fund and identified
above; directors who are 'interested persons,' as defined by the 1940 Act, do
not receive compensation.
* Represents fees paid to each director during the fiscal year ended March 31,
1998.
** Represents total compensation paid to each director during the calendar year
ended December 31, 1997; no fund within the fund complex has a bonus,
pension, profit sharing or retirement plan.
PRINCIPAL HOLDERS OF SECURITIES
PaineWebber, 1285 Avenue of the Americas, New York, New York 10019, owned
of record all of the Fund's shares as of July 21, 1998. None of the persons on
whose behalf those shares were held was known by the Fund to own beneficially 5%
or more of those shares.
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:
<TABLE>
<CAPTION>
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- ----------------------------------------------- ------
<S> <C>
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
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- ----------------------------------------------- ------
<S> <C>
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
</TABLE>
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, 1998, 1997 and
1996, the Fund paid (or accrued) to PaineWebber investment advisory and
administrative fees in the amount of $19,457,916, $19,013,158 and $16,998,964,
respectively. During the fiscal year ended March 31, 1998, the Fund did not pay
fees to PaineWebber for its services as lending agent because the Fund did not
engage in any securities lending activities.
Under a contract with PaineWebber dated July 23, 1987 ('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 Sub-Advisory Contract, PaineWebber (not the Fund) pays Mitchell Hutchins an
annual fee, computed daily and paid monthly, according to the following
schedule:
<TABLE>
<CAPTION>
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- ----------------------------------------------- ------
<S> <C>
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
</TABLE>
Under the Sub-Advisory Contract, during the fiscal years ended March 31,
1998, 1997 and 1996, PaineWebber paid (or accrued) to Mitchell Hutchins fees in
the amount of $1,734,233, $1,715,007 and $1,593,013, 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
13
<PAGE>
Sub-Advisory Contract. During the fiscal years ended March 31, 1998, 1997 and
1996, PaineWebber paid (or accrued) to Mitchell Hutchins sub-administration fees
of $2,157,350, $2,087,625 and $1,806,780, respectively.
Prior to August 1, 1997, PaineWebber provided certain services to the Fund
not otherwise provided by the Fund's transfer agent. Pursuant to an agreement
relating to those services, PaineWebber earned (or accrued) $1,002,742 for the
period April 1, 1997 to July 31, 1997; $2,893,343 for the fiscal year ended
March 31, 1997; and $2,762,836 for the fiscal year ended March 31, 1996.
Effective August 1, 1997, PFPC (not the Fund) pays PaineWebber for certain
transfer agency related services that PFPC has delegated to PaineWebber.
Each of the advisory, sub-advisory and sub-administration contracts noted
above provides that PaineWebber or Mitchell Hutchins, 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 PaineWebber or Mitchell Hutchins, 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 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 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 PaineWebber
or Mitchell Hutchins, as the case may be. Each of the advisory and sub-advisory
contracts may also be terminated by PaineWebber or Mitchell Hutchins, as the
case may be, on 90 days' written notice to the Fund. The sub-administration
contract may also be terminated by Mitchell Hutchins 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.
14
<PAGE>
The following table shows the approximate net assets as of June 30, 1998,
sorted by category of investment objective, of the investment companies as to
which Mitchell Hutchins serves as adviser or sub-adviser. An investment company
may fall into more than one of the categories below.
<TABLE>
<CAPTION>
NET ASSETS
INVESTMENT CATEGORY ($ MIL)
- ---------------------------------------- ----------
<S> <C>
Domestic (excluding Money Market)....... $ 7,856.5
Global.................................. 3,875.8
Equity/Balanced......................... 6,513.6
Fixed Income (excluding Money Market)... 5,218.7
Taxable Fixed Income............... 3,641.0
Tax-Free Fixed Income.............. 1,577.7
Money Market Funds...................... 28,628.1
</TABLE>
PERSONNEL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to a code of ethics that describes
the fiduciary duty owed to shareholders of the PaineWebber mutual funds and
other Mitchell Hutchins' advisory accounts by all Mitchell Hutchins' directors,
officers and employees, establishes procedures for personal investing and
restricts certain transactions. For example, employee accounts generally must be
maintained at PaineWebber, personal trades in most securities require pre-
clearance and short-term trading and participation in initial public offerings
generally are prohibited. In addition, the code of ethics puts restrictions on
the timing of personal investing in relation to trades by PaineWebber funds and
other Mitchell Hutchins advisory clients.
PORTFOLIO TRANSACTIONS
The Fund purchases portfolio securities from dealers and underwriters as
well as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a 'spread,' which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.
The 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 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 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
15
<PAGE>
three fiscal years, the Fund has not paid any brokerage commissions; therefore,
it has not allocated any brokerage transactions for research, analysis, advice
and similar services.
Mitchell Hutchins may engage in agency transactions in over-the-counter
equity and debt securities in return for research and execution services. These
transactions are entered into only in compliance with procedures ensuring that
the transaction (including commissions) is at least as favorable as it would
have been if effected directly with a market-maker that did not provide research
or execution services. These procedures include Mitchell Hutchins' receiving
multiple quotes from dealers before executing the transactions on an agency
basis.
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.
HOLDINGS OF REGULAR BROKER-DEALERS. As of March 31, 1998, the Fund held
the following securities issued by entities which are regular broker-dealers for
the Fund:
<TABLE>
<CAPTION>
ISSUER TYPE OF SECURITY VALUE
- -------------------------------------- -------------------------------------- ------------
<S> <C> <C>
Bear Stearns Companies, Inc. Short-Term Corporate Obligations $200,300,000
Goldman Sachs Group L.P. Commercial Paper $180,226,549
Merrill Lynch & Company Inc. Commercial Paper $153,750,579
Merrill Lynch & Company Inc. Short-Term Corporate Obligations $ 50,000,000
Morgan Stanley Group Inc. Short-Term Corporate Obligations $ 70,000,000
</TABLE>
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
The Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange ('NYSE') is closed or
trading on the NYSE is restricted as determined by the SEC, (2) when an
emergency exists, as defined by the SEC, that makes it not reasonably
practicable for the Fund to dispose of securities owned by it or 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 State Street Bank
and Trust Company ('State Street') as of 2:00 p.m., Eastern time, on each
Business Day. As defined in the Prospectus, 'Business Day' means any day on
which State Street's Boston offices, and the New York City offices of
PaineWebber and PaineWebber's bank, The Bank of New
16
<PAGE>
York, are all open for business. One or more of these institutions will be
closed on the observance of the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
The Fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ('Rule') under the 1940 Act. To use
amortized cost to value its portfolio securities, the Fund must adhere to
certain conditions under the Rule relating to the Fund's investments, some of
which are discussed in the Prospectus and this Statement of Additional
Information. 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. If a large number of redemptions take place
at a time when interest rates have increased, the Fund might have to sell
portfolio securities prior to maturity and at a price that might not be
desirable.
The Fund's board has established procedures for the purpose of maintaining
a constant net asset value of $1.00 per share, which include a review of the
extent of any deviation of net asset value per share, based on available market
quotations, from the $1.00 amortized cost per share. If that deviation exceeds
1/2 of 1%, the board will promptly consider whether any action should be
initiated to eliminate or reduce material dilution or other unfair results to
shareholders. Such action may include redeeming shares in kind, selling
portfolio securities prior to maturity, reducing or withholding dividends and
utilizing a net asset value per share as determined by using available market
quotations. The Fund will maintain a dollar-weighted average portfolio maturity
of 90 days or less and except as otherwise indicated herein 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 Mitchell
Hutchins determines (pursuant to delegated authority from the board) present
minimal credit risks and will comply with certain reporting and recordkeeping
procedures. There is no assurance that constant net asset value per share will
be maintained. If amortized cost ceases to represent fair value, the board will
take appropriate action.
In determining the approximate market value of portfolio investments, the
Fund may employ outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used.
TAXES
To continue to qualify for treatment as a regulated investment company
('RIC') under the Internal Revenue Code, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gain, if any) and must meet several additional requirements. Among these
requirements are the following: (1) the Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of securities and
certain other income; (2) at the close of each quarter of the Fund's taxable
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. government securities, securities of other RICs and other
securities that are limited, in respect of any one issuer, to an amount that
does not exceed 5% of the value of the Fund's total assets; and (3) at the close
of each quarter of the Fund's taxable year, not more than 25% of the value of
its total assets may be
17
<PAGE>
invested in securities (other than U.S. government securities or securities of
other RICs) of any one issuer. If the Fund failed to qualify for treatment as a
RIC for any taxable year, it would be taxed as an ordinary corporation on its
taxable income for that year (even if that income was distributed to its
shareholders) and all distributions out of its earnings and profits would be
taxable to its shareholders as dividends (that is, ordinary income).
Dividends paid to a shareholder who, as to the United States, is a
nonresident alien, nonresident alien fiduciary of a trust or estate, foreign
corporation or foreign partnership ('foreign shareholder') generally will be
subject to a U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that is 'effectively connected with the conduct of a U.S. trade or
business,' in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. A distribution of net capital gain by a
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
'effectively connected' or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
CALCULATION OF YIELD
The Fund computes its yield and effective yield quotations using
standardized methods required by the SEC. The Fund from time to time advertises
(1) its current yield based on a recently ended seven-day period, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return and then
multiplying the base period return by (365/7), with the resulting yield figure
carried to at least the nearest hundredth of one percent; and (2) its effective
yield based on the same seven-day period by compounding the base period return
by adding 1, raising the sum to a power equal to (365/7) and subtracting 1 from
the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7] - 1
The Fund may also advertise other performance data, which may consist of
the annual or cumulative return (including net short-term capital gain, if any)
earned on a hypothetical investment in the fund since it began operations or for
shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of the Fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
The Fund's yield and effective yield for the seven-day period ended March
31, 1998 were 5.10% and 5.22%, 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'),
18
<PAGE>
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 the Standard &
Poor's 500 Composite Stock Price 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 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 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 Certificate of Deposit
Index and the Bank Rate Monitor National Index and the averages of yields of CDs
of major banks published by Banxquotes(Registered) 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 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the Fund.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as the Fund's independent auditors.
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders for the fiscal year ended March
31, 1998 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 by reference in this
Statement of Additional Information.
19
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this 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
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Policies and Restrictions............ 1
Directors and Officers; Principal Holders of
Securities.................................... 6
Investment Advisory Services.................... 12
Portfolio Transactions.......................... 15
Additional Information Regarding Redemptions.... 16
Valuation of Shares............................. 16
Taxes........................................... 17
Calculation of Yield............................ 18
Other Information............................... 19
Financial Statements............................ 19
</TABLE>
(Copyright) 1998 PaineWebber Incorporated
PaineWebber
Cashfund, Inc.
-----------------------------------------------------------
Statement of Additional Information
<PAGE>
August 1, 1998
-----------------------------------------------------------
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(1) Restated Articles of Incorporation 1/
(2) Restated By-Laws (filed herewith)
(3) Instruments defining the rights of holders of Registrant's
common stock 2/
(4) (a) Investment Advisory and Administration and
Distribution Contract between Registrant and
PaineWebber (filed herewith)
(b) Sub-Advisory Contract between PaineWebber and Mitchell
Hutchins (filed herewith)
(c) Sub-Administration Contract between PaineWebber and
Mitchell Hutchins (filed herewith)
(5) Underwriting Contract - See Exhibit 4(a)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Contract (filed herewith)
(8) Transfer Agency Agreement (filed herewith)
(9) Opinion and consent of counsel (filed herewith)
(10) Auditors' Consent (filed herewith)
(11) Financial statements omitted from Part B - none
(12) Letter of investment intent (filed herewith)
(13) Plan pursuant to Rule 12b-1 - none
(14) and
(27) Financial Data Schedule (filed herewith)
(15) Plan pursuant to Rule 18f-3 - None
--------------
1/ Incorporated by reference from Post-Effective Amendment
No. 35 to the Registration Statement, SEC File No. 2-60655,
filed July 31, 1996.
2/ Incorporated by reference from Articles Sixth, Eighth, Ninth
and Twelfth of the Registrant's Restated Articles of
Incorporation and Articles II, III, VIII, X, and XI of the
Registrant's Restated By-Laws.
C-1
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant
None.
Item 25. Indemnification
Article Eleventh of the Articles of Incorporation provides
that the directors and officers of the Registrant shall not be liable
to the Registrant or to any of its stockholders for money damages to
the maximum extent permitted by applicable law. Article Eleventh also
provides that any repeal or modification of Article Eleventh or
adoption, or modification of any other provision of the Articles or
By-Laws inconsistent with Article Eleventh shall be prospective only,
to the extent that any such repeal or modification would, if applied
retroactively, adversely affect any limitation on the liability of any
director or officer of the Registrant or indemnification available to
any person covered by these provisions with respect to any act or
omission which occurred prior to such repeal, modification or
adoption.
Section 10.01 of Article 10 of the By-Laws provides that the
Registrant shall indemnify its present and past directors, officers,
employees and agents, and any persons who are serving or have served
at the request of the Registrant as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or
enterprise, to the fullest extent permitted by law.
Section 10.02 of Article 10 of the By-Laws further provides
that the Registrant may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Registrant, or is or was serving at the request of the Registrant as a
director, officer or employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the
Registrant would have the power to indemnify him against such
liability.
Section 9 of the Investment Advisory, Administration and
Distribution Contract between Registrant and PaineWebber Incorporated
("PaineWebber") provides that PaineWebber shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the
Registrant in connection with the matters to which the Contract
relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under the
Contract.
Section 7 of the Sub-Advisory Contract between PaineWebber
and Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins")
provides that Mitchell Hutchins will not be liable for any error of
judgment or mistake of law or for any loss suffered by PaineWebber or
by the Registrant or its shareholders in connection with the
performance of the Contract, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations or duties under the Contract.
Section 8 of the Sub-Administration Contract between
PaineWebber and Mitchell Hutchins contains provisions similar to
Section 9 of the Investment Advisory, Administration and Distribution
Contract between the Registrant and PaineWebber.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be provided to directors,
officers and controlling persons of the Registrant, pursuant to the
foregoing provisions or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling persons of the Registrant in connection with the
successful defense of any action, suit or proceeding or payment
pursuant to any insurance policy) is asserted against the Registrant
by such director, officer or
C-2
<PAGE>
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
PaineWebber, a Delaware corporation, is a registered
investment adviser and is wholly owned by Paine Webber Group Inc.
PaineWebber is primarily engaged in the financial services business.
Information as to the officers and directors of PaineWebber is
included in its Form ADV, as filed with the Securities and Exchange
Commission (registration number 801-7163) and is incorporated herein
by reference.
Mitchell Hutchins, a Delaware corporation, is a registered
investment adviser and is a wholly owned subsidiary of PaineWebber.
Mitchell Hutchins is primarily engaged in the investment advisory
business. Information as to the officers and directors of Mitchell
Hutchins is included in its Form ADV, as filed with the Securities and
Exchange Commission (registration number 801-13219) and is
incorporated herein by reference.
Item 27. Principal Underwriters
(a) PaineWebber serves as principal underwriter and/or
investment adviser for the following other investment companies:
LIQUID INSTITUTIONAL RESERVES
PAINEWEBBER RMA MONEY FUND, INC.
PAINEWEBBER RMA TAX-FREE FUND, INC.
PAINEWEBBER MUNICIPAL MONEY MARKET SERIES
PAINEWEBBER MANAGED MUNICIPAL TRUST
(b) PaineWebber is the principal underwriter of the Fund. The
directors and officers of PaineWebber, their principal business
addresses and their positions and offices with PaineWebber are
identified in its Form ADV, as filed with the Securities and Exchange
Commission (registration number 801-7163) and such information is
hereby incorporated herein by reference. The information set forth
below is furnished for those directors and officers of PaineWebber who
also serve as directors or officers of the Fund. Unless otherwise
indicated, the principal business address of each person named is 1285
Avenue of the Americas, New York, NY 10019.
<TABLE>
<CAPTION>
Position and Offices With
Name Position With Registrant Underwriter or Exclusive Dealer
---- ------------------------ -------------------------------
<S> <C> <C>
Margo N. Alexander Director and President Director, President and Chief Executive
Officer of Mitchell Hutchins and
Executive Vice President of PaineWebber
Mary C. Farrell Director Managing Director, Senior Investment
Strategist and Member of Investment
Policy Committee of PaineWebber
</TABLE>
(c) None.
C-3
<PAGE>
Item 28. Location of Accounts and Records
The books and other documents required by paragraphs (b)(4),
(c) and (d) of Rule 31a-1 under the Investment Company Act of 1940 are
maintained in the physical possession of Registrant's Portfolio
Manager, Mitchell Hutchins Asset Management Inc., 1285 Avenue of the
Americas, New York, New York 10019. All other accounts, books and
documents required by Rule 31a-1 are maintained in the physical
possession of Registrant's transfer agent and custodian.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
None.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 24th day of July, 1998.
PAINEWEBBER CASHFUND, INC.
By: /s/ Dianne E. O'Donnell
----------------------------
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander President and Director July 24, 1998
-------------------------- (Chief Executive Officer)
Margo N. Alexander*
/s/ E. Garrett Bewkes, Jr. Director and Chairman July 24, 1998
-------------------------- of the Board of Directors
E. Garrett Bewkes, Jr.*
/s/ Richard Q. Armstrong Director July 24, 1998
--------------------------
Richard Q. Armstrong*
/s/ Richard R. Burt Director July 24, 1998
--------------------------
Richard R. Burt*
/s/ Mary C. Farrell Director July 24, 1998
--------------------------
Mary C. Farrell*
/s/ Meyer Feldberg Director July 24, 1998
--------------------------
Meyer Feldberg*
/s/ George W. Gowen Director July 24, 1998
--------------------------
George W. Gowen*
/s/ Frederic V. Malek Director July 24, 1998
--------------------------
Frederic V. Malek*
/s/ Carl W. Schafer Director July 24, 1998
--------------------------
Carl W. Schafer*
/s/ Paul H. Schubert Vice President and Treasurer (Chief July 24, 1998
-------------------------- Financial and Accounting Officer)
Paul H. Schubert
</TABLE>
<PAGE>
SIGNATURES (Continued)
Signature affixed by Elinor W. Gammon pursuant to powers of attorney
dated May 21, 1996 and incorporated by reference from Post-Effective
Amendment No. 25 to the registration statement of PaineWebber RMA
Tax-Free Fund, Inc., SEC File 2-78310, filed June 27, 1996.
<PAGE>
PAINEWEBBER CASHFUND, INC.
EXHIBIT INDEX
Exhibit
Number
(1) Restated Articles of Incorporation 1/
(2) Restated By-Laws (filed herewith)
(3) Instruments defining the rights of holders of
Registrant's common stock 2/
(4) (a) Investment Advisory and Administration and
Distribution Contract between Registrant and
PaineWebber (filed herewith)
(b) Sub-Advisory Contract between PaineWebber and Mitchell
Hutchins (filed herewith)
(c) Sub-Administration Contract between PaineWebber and
Mitchell Hutchins (filed herewith)
(5) Underwriting Contract - See Exhibit 4(a)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Contract (filed herewith)
(8) Transfer Agency Agreement (filed herewith)
(9) Opinion and consent of counsel (filed herewith)
(10) Auditors' Consent (filed herewith)
(11) Financial statements omitted from Part B - none
(12) Letter of investment intent (filed herewith)
(13) Plan pursuant to Rule 12b-1 - none
(14) and
(27) Financial Data Schedule (filed herewith)
(15) Plan pursuant to Rule 18f-3 - None
--------------
1/ Incorporated by reference from Post-Effective Amendment No.
35 to the Registration Statement, SEC File No. 2-60655,
filed July 31, 1996.
2/ Incorporated by reference from Articles Sixth, Eighth, Ninth
and Twelfth of the Registrant's Restated Articles of
Incorporation and Articles II, III, VIII, X, and XI of the
Registrant's Restated By-Laws.
<PAGE>
Exhibit No. 2
PAINEWEBBER CASHFUND, INC.
A Maryland Corporation
BY-LAWS
As Restated
May 13, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I NAME OF CORPORATION, LOCATION OF OFFICES
AND SEAL.................................................1
Section 1.01. Name:...........................................1
Section 1.02. Principal Offices:..............................1
Section 1.03. Seal............................................1
ARTICLE II STOCKHOLDERS...................................................1
Section 2.01. Annual Meetings:................................1
Section 2.02. Special Meetings:...............................1
Section 2.03. Place of Meetings:..............................2
Section 2.04. Notice of Meetings:.............................2
Section 2.05. Voting - In General:............................2
Section 2.06. Stockholders Entitled to Vote:..................2
Section 2.07. Voting - Proxies:...............................3
Section 2.08. Quorum:.........................................3
Section 2.09. Absence of Quorum:..............................3
Section 2.10. Stock Ledger and List of Stockholders:..........3
Section 2.11. Action Without Meeting:.........................4
ARTICLE III BOARD OF DIRECTORS.............................................4
Section 3.01. Number and Term of Office:......................4
Section 3.02. Qualification of Directors:.....................4
Section 3.03. Election of Directors:..........................4
Section 3.04. Removal of Directors:...........................5
Section 3.05. Vacancies and Newly Created Directorships:......5
Section 3.06. General Powers:.................................5
Section 3.07. Power to Issue and Sell Stock:..................5
Section 3.08. Power to Declare Dividends:.....................5
Section 3.09. Annual and Regular Meetings:....................6
Section 3.10. Special Meetings:...............................6
Section 3.11. Notice:.........................................7
Section 3.12. Waiver of Notice:...............................7
Section 3.13. Quorum and Voting:..............................7
Section 3.14. Compensation:...................................7
Section 3.15. Action Without a Meeting:.......................7
i
<PAGE>
Page
ARTICLE IV EXECUTIVE COMMITTEE AND OTHER COMMITTEES.......................7
Section 4.01. How Constituted:................................7
Section 4.02. Powers of the Executive Committee:..............8
Section 4.03. Other Committees of the Board of Directors:.....8
Section 4.04. Proceedings, Quorum and Manner of Acting:.......8
Section 4.05. Other Committees:...............................8
ARTICLE V OFFICERS.......................................................8
Section 5.01. Officers:.......................................8
Section 5.02. Election, Term of Office and Qualifications:....9
Section 5.03. Resignation:....................................9
Section 5.04. Removal:........................................9
Section 5.05. Vacancies and Newly Created Offices:............9
Section 5.06. Chairman of the Board:..........................9
Section 5.07. President:.....................................10
Section 5.08. Vice President:................................10
Section 5.09. Treasurer and Assistant Treasurers:............10
Section 5.10. Secretary and Assistant Secretaries:...........10
Section 5.11. Subordinate Officers:..........................11
Section 5.12. Remuneration:..................................11
Section 5.13. Surety Bonds:..................................11
ARTICLE VI CUSTODY OF SECURITIES.........................................11
Section 6.01. Employment of a Custodian:.....................11
Section 6.02. Action Upon Termination of Custodian Agreement.12
Section 6.03. Provisions of Custodian Contract:..............12
Section 6.04. Other Arrangements:............................13
ARTICLE VII EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES................12
Section 7.01. General:.......................................12
Section 7.02. Checks, Notes, Drafts, Etc.:...................13
Section 7.03. Voting of Securities:..........................13
ARTICLE VIII CAPITAL STOCK.................................................13
Section 8.01. Certificates of Stock:.........................13
Section 8.02. Transfer of Capital Stock:.....................14
Section 8.03. Transfer Agents and Registrars:................14
Section 8.04. Transfer Regulations:..........................14
ii
<PAGE>
Page
Section 8.05. Fixing of Record Date:.........................14
Section 8.06. Lost Stolen or Destroyed Certificates:.........15
ARTICLE IX FISCAL YEAR, ACCOUNTANT.......................................15
Section 9.01. Fiscal Year:...................................16
Section 9.02. Accountant:....................................16
ARTICLE X INDEMNIFICATION AND INSURANCE.................................17
Section 10.01. Indemnification of Officers, Directors,
Employees and Agents:.......................17
Section 10.02. Insurance of Officers, Directors, Employees
and Agents:.................................17
Section 10.03. Amendment:....................................17
ARTICLE XI AMENDMENTS....................................................17
Section 11.01. General:......................................17
iii
<PAGE>
ARTICLE I
NAME OF CORPORATION, LOCATION OF OFFICES
AND SEAL
Section 1.01. Name:
The name of the Corporation is PaineWebber Cashfund, Inc.
Section 1.02. Principal Offices:
The principal office of the Corporation in the State of Maryland
shall be located in the City of Baltimore. The Corporation shall also maintain
a principal office in the City of New York, New York. The Corporation may
establish and maintain such other offices and places of business as the board
of directors may, from time to time, determine.
Section 1.03. Seal
The corporate seal of the Corporation shall be circular in form and
shall bear the name of the Corporation, the year of its incorporation, and the
words "Corporate Seal, Maryland." The form of the seal shall be subject to
alteration by the board of directors and the seal may be used by causing it or
a facsimile to be impressed or affixed or printed or otherwise reproduced. Any
officer or director of the Corporation shall have authority to affix the
corporate seal of the Corporation to any document requiring the same.
ARTICLE II
STOCKHOLDERS
Section 2.01. Annual Meetings:
There shall be no stockholder meetings for the election of directors
and the transaction of other proper business except as required by law or as
hereinafter provided.
Section 2.02. Special Meetings:
Special meetings of the stockholders may be called at any time by the
chairman of the board, the president or by any vice president, or by a
majority of the board of directors. Special meetings of the stockholders shall
be called by the secretary upon the written request of the holders of shares
entitled to cast not less than 25% of all the votes entitled to be cast at
such meeting, provided that (a) such request shall state the purposes of such
meeting and the matters proposed to be acted on, and (b) the stockholders
requesting such meeting shall have paid to the Corporation the reasonably
estimated cost of preparing and mailing the notice thereof, which the
secretary shall determine and specify to such stockholders. No special meeting
shall be called upon the request of the stockholders to consider any matter
which is substantially the same as a matter voted upon at any special meeting
of the stockholders held during the preceding twelve months, unless requested
by holders of a majority of all shares entitled to be voted at such meeting.
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Section 2.03. Place of Meetings:
All stockholders' meetings shall be held at 1285 Avenue of the
Americas, New York, New York, except that the board of directors may fix a
different place of meeting, within the United States, and keep the books of
the Corporation at any other place within the United States as they may from
time to time determine, or, in the case of meetings as shall be specified in
each notice or waiver of notice of the meeting.
Section 2.04. Notice of Meetings:
The secretary or an assistant secretary shall cause notice of the
place, date and hour, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, to be mailed, postage prepaid not
less than 10 nor more than 90 days before the date of the meeting, to each
stockholder entitled to vote at such meeting, at his address as it appears on
the records of the Corporation at the time of such mailing. Notice shall be
deemed given when deposited in the United States mail addressed to the
stockholders as aforesaid. Notice of any stockholders' meeting need not be
given to any stockholder who shall sign a written waiver of such notice
whether before or after the time of such meeting, which waiver shall be filed
with the record of such meeting, or to any stockholder who shall attend such
meeting in person or by proxy. Notice of adjournment of a stockholders'
meeting to another time or place need not be given, if such time and place are
announced at the meeting. Irregularities in the notice of any meeting to, or
the nonreceipt of any such notice by, any of the stockholders shall not
invalidate any action otherwise properly taken by or at any such meeting.
Section 2.05. Voting - In General:
At each stockholders' meeting each stockholder shall be entitled to
one vote for each share and a fractional vote for each fraction of a share of
stock of the Corporation validly issued and outstanding, held by such
stockholder irrespective of the series thereof and standing in his name on the
books of the Corporation on the record date fixed in accordance with Section
8.05 of Article VIII hereof, either in person or by proxy appointed by
instrument in writing subscribed by such stockholder or his or her duly
authorized attorney, except that no shares held by the Corporation shall be
entitled to a vote. Except as otherwise specifically provided in the Articles
of Incorporation, these By-Laws or the Investment Company Act of 1940, as
amended, all matters shall be decided by a vote of the majority of the shares
of stock of the Corporation outstanding and entitled to vote, validly cast at
a meeting at which a quorum is present. The vote upon any question shall be by
ballot whenever requested by any person entitled to vote, but, unless such a
request is made, voting may be conducted in any way approved by the meeting.
Section 2.06. Stockholders Entitled to Vote:
If, pursuant to Section 8.05 hereof, a record date has been fixed for
the determination of stockholders entitled to notice of or to vote at any
stockholders' meeting, each stockholder of the Corporation shall be entitled
to vote, in person or by proxy, each share of stock and fraction of a share of
stock standing in his name on the books of the Corporation on such record date
and outstanding at the time of the meeting. If no record date has been fixed,
the record date for the
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determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the later of the close of business on the day on which
the notice of the meeting is mailed or the thirtieth day before the meeting;
or, if notice is waived by all stockholders, at the close of business on the
tenth day next preceding the day on which the meeting is held.
Section 2.07. Voting - Proxies:
The right to vote by proxy shall exist only if the proxy is
authorized to act by (1) a written instrument, dated not more than eleven
months prior to the meeting and executed either by the stockholder or by his
or her duly authorized attorney in fact (who may be so authorized by a writing
or by any non-written means permitted by the laws of the State of Maryland) or
(2) such electronic, telephonic, computerized or other alternative means as
may be approved by a resolution adopted by the Directors. Proxies shall be
delivered to the secretary of the Corporation or person acting as secretary of
the meeting before being voted, who shall decide all questions concerning
qualification of voters, the validity of proxies, and the acceptance or
rejection of votes. If inspectors of election have been appointed by the
chairman of the meeting, such inspectors shall decide all such questions. A
proxy with respect to stock held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of such proxy
the Corporation receives from one of them a specific written notice to the
contrary and a copy of the instrument or order that so provides. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed
valid unless challenged at or prior to its exercise.
Section 2.08. Quorum:
The presence at any stockholders' meeting, in person or by proxy, of
stockholders entitled to cast a majority of the votes thereat shall be
necessary and sufficient to constitute a quorum for the transaction of
business.
Section 2.09. Absence of Quorum:
In the absence of a quorum, the holders of a majority of the shares
entitled to vote at the meeting and present in person or by proxy, or, if no
stockholder entitled to vote is present in person or by proxy, any officer
present entitled to preside or act as secretary of such meeting, may adjourn
the meeting without determining the date of the new meeting or, from time to
time, without further notice to a date not more than 120 days after the
original record date. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.
Section 2.10. Stock Ledger and List of Stockholders:
It shall be the duty of the secretary or assistant secretary of the
Corporation to cause an original or duplicate stock ledger to be maintained at
the office of the Corporation's transfer agent. Such stock ledger may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection. Any one or more persons, each
of whom has been a stockholder of record of the Corporation for more than six
months next preceding such request, who owns in the aggregate 5% or more of
the outstanding capital stock
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of any class of the Corporation, may submit (unless the Corporation at the
time of the request maintains a duplicate stock ledger at its principal office
in Maryland) a written request to any officer of the Corporation or its
resident agent in Maryland for a list of the stockholders of the Corporation.
Within 20 days after such a request, there shall be prepared and filed at the
Corporation's principal office in Maryland a list containing the names and
addresses of all stockholders of the Corporation and the number of shares of
each class held by each stockholder, certified as correct by an officer of the
Corporation, by its stock transfer agent, or by its registrar.
Section 2.11. Action Without Meeting:
Any action to be taken by stockholders may be taken without a meeting
if all stockholders entitled to vote on the matter consent to the action in
writing and the written consents are filed with the records of the meetings of
stockholders. Such consent shall be treated for all purposes as a vote at a
meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. Number and Term of Office:
The board of directors shall consist of nine directors, which number
may be increased or decreased by a resolution of a majority of the entire
board of directors, provided that the number of directors shall not be less
than three or more than fifteen. Each director (whenever re-elected) shall
hold office until his successor is elected and qualified or until his earlier
death, resignation or removal.
Section 3.02. Qualification of Directors:
Except for the initial board of directors, at least one of the
members of the board of directors shall be a person who is not an interested
person of the Corporation, as defined in the Investment Company Act of 1940,
as amended. All other directors may be interested persons of the Corporation
if the requirements of Section 10(d) of the Investment Company Act of 1940, as
amended, are met by the Corporation and its investment adviser. Directors need
not be stockholders of the Corporation. All acts done by any meeting of the
directors or by any person acting as a director, so long as his successor
shall not have been duly elected or appointed, shall, notwithstanding that it
be afterwards discovered that there was some defect in the election of the
directors or of such person acting as aforesaid or that they or any of them
were disqualified, be as valid as if the directors or such other person, as
the case may be, had been duly elected and were or was qualified to be
directors or a director of the Corporation.
Section 3.03. Election of Directors:
Initially the directors of the Corporation shall be that person or
those persons named as such in the Articles of Incorporation. Thereafter,
except as otherwise provided in Section 3.04 and 3.05 hereof, the directors
shall be elected at the an annual stockholders' meeting. In the event that the
directors are not elected at the annual stockholders' meeting, then directors
may be
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elected at a special stockholders' meeting. A plurality of all the votes cast
at a meeting at which a quorum is present in person or by proxy is sufficient
to elect a director.
Section 3.04. Removal of Directors:
At any stockholders' meeting duly called, provided a quorum is
present, any director may be removed (either with or without cause) by the
vote of the holders of a majority of the shares represented at the meeting,
and at the same meeting a duly qualified person may be elected in his stead by
a majority of the votes validly cast.
Section 3.05. Vacancies and Newly Created Directorships:
If any vacancies shall occur in the board of directors by reason of
death, resignation, removal or otherwise, or if the authorized number of
directors shall be increased, the directors then in office shall continue to
act, and such vacancies (if not previously filled by the stockholders) may be
filled by a majority of the directors then in office, although less than a
quorum, except that a newly created directorship may be filled only by a
majority vote of the entire board of directors, provided that in either case
immediately after filling such vacancy, at least two-thirds of the directors
then holding office shall have been elected to such office by the stockholders
of the Corporation. In the event that at any time, other than the time
preceding the first stockholders' meeting, less than a majority of the
directors of the Corporation holding office at that time were so elected by
the stockholders, a meeting of the stockholders shall be held promptly and in
any event within 60 days for the purpose of electing directors to fill any
existing vacancies in the board of directors unless the Securities and
Exchange Commission shall by order extend such period.
Section 3.06. General Powers:
The property, affairs and business of the Corporation shall be
managed by or under the direction of the board of directors, which may
exercise all the powers of the Corporation except those powers vested solely
in the stockholders of the Corporation by statute, by the Articles of
Incorporation or by these By-Laws.
Section 3.07. Power to Issue and Sell Stock:
The board of directors may from time to time issue and sell or cause
to be issued and sold any of the Corporation's authorized shares to such
persons and for such consideration as the board of directors shall deem
advisable, subject to the provisions of Article SEVENTH of the Articles of
Incorporation.
Section 3.08. Power to Declare Dividends:
(a) The board of directors, from time to time as it may deem
advisable, may declare and pay dividends in stock, cash or other property of
the Corporation, out of any source available for dividends, to the
stockholders according to their respective rights and interests in accordance
with the applicable provisions of the Article TENTH (7) of the Articles of
Incorporation.
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(b) The board of directors may prescribe from time to time that
dividends declared may be payable at the election of any of the stockholders
(exercisable before of after the declaration of the dividend), either in cash
or in shares of the Corporation, provided that the sum of the cash dividend
actually paid to any stockholder and the asset value of the shares received
(determined as of such time as the board of directors shall have prescribed,
pursuant to Section 1.02 or Article SEVENTH of the Articles of Incorporation,
with respect to shares sold on the date of such election) shall not exceed the
full amount of cash to which the stockholder would be entitled if he elected
to receive only cash.
(c) The board of directors shall cause to be accompanied by a written
statement any dividend payment wholly or partly from any source other than:
(i) the Corporation's accumulated undistributed net income
(determined in accordance with good accounting practice and
the rules and regulations of the Securities and Exchange
Commission then in effect) and not including profits or
losses realized upon the sale of securities or other
properties; or
(ii) the Corporation's net income so determined for the current
or preceding fiscal year. Such statement shall adequately
disclose the source or sources of such payment and the basis
of calculation, and shall be in such form as the Securities
and Exchange Commission may prescribe.
Section 3.09. Annual and Regular Meetings:
The annual meeting of the board of directors for choosing officers
and transacting other proper business shall be held at such time and place as
the board may determine. The board of directors from time to time may provide
by resolution for the holding of regular meetings and fix their time and place
within or outside the State of Maryland. Except as otherwise provided under
the Investment Company Act of 1940, as amended, notice of such annual and
regular meetings need not be given, provided that notice of any change in the
time or place of such meetings shall be sent promptly to each director not
present at the meeting at which such change was made in the manner provided
for notice of special meetings. Except as otherwise provided under the
Investment Company Act of 1940, as amended, members of the board of directors
or any committee designated thereby may participate in a meeting of such board
or committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time, and participation by such means shall constitute
presence in person at a meeting.
Section 3.10. Special Meetings:
Special meetings of the board of directors shall be held whenever
called by the chairman of the board, the president (or, in the absence or
disability of the president, by any vice president), the treasurer, or two or
more directors, at the time and place (within or outside the State of
Maryland) specified in the respective notices or waivers of notice of such
meetings.
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Section 3.11. Notice:
Notice of any special meetings, stating the time and place, shall be
mailed to each director at his residence or regular place of business at least
three days before the day on which the special meeting is to be held or caused
to be delivered to him personally or to be transmitted to him by telegraph,
cable or wireless at least one day before the meeting.
Section 3.12. Waiver of Notice:
No notice of any meeting need be given to any director who attends
such meeting in person or to any director who waives notice of such meeting in
writing (which waiver shall be filed with the records of such meeting),
whether before or after the time of the meeting.
Section 3.13. Quorum and Voting:
At all meetings of the board of directors the presence of one-half or
more of the number of directors then in office shall constitute a quorum for
the transaction of business, provided that there shall be present no fewer
than two directors. In the absence of a quorum, a majority of the directors
present may adjourn the meeting, from time to time, until a quorum shall be
present. The action of a majority of the directors present at a meeting at
which a quorum is present shall be the action of the board of directors unless
the concurrence of a greater proportion is required for such action by law, by
the Articles of Incorporation or by these By-Laws.
Section 3.14. Compensation:
Each director may receive such remuneration for his services as shall
be fixed from time to time by resolution of the board of directors.
Section 3.15. Action Without a Meeting:
Except as otherwise provided under the Investment Company Act of
1940, as amended, any action required or permitted to be taken at any meeting
of the board of directors or any committee thereof may be taken without a
meeting if a written consent to such action is signed by all members of the
board or of such committee, as the case may be, and such written consents are
filed with the minutes of proceedings of the board or committee.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 4.01. How Constituted:
By resolution adopted by the board of directors, the board may
designate one or more committees, including an executive committee, each
consisting of at least two directors. Each member of a committee shall be a
director and shall hold office during the pleasure of the board. The board of
directors shall have the power at any time to change the members of such
committees and to fill vacancies in the committees. The chairman of the board,
if any, shall be a member of the executive committee.
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Section 4.02. Powers of the Executive Committee:
Unless otherwise provided by resolution of the board of directors,
when the board of directors is not in session the executive committee shall
have and may exercise all powers of the board of directors in the management
of the business and affairs of the Corporation that may lawfully be exercised
by an executive committee, except the power to declare a dividend, to
authorize the issuance of stock, to recommend to stockholders any matter
requiring stockholders' approval, to amend the By-Laws, approve any merger or
share exchange which does not require shareholder approval or approve or
terminate any contract with the investment adviser or principal underwriter,
as those terms are defined in the Investment Company Act of 1940, as amended,
or to take any other action required by the Investment Company Act of 1940, as
amended, to be taken by the board of directors.
Section 4.03. Other Committees of the Board of Directors:
To the extent provided by resolution of the board, other committees
of the board of directors shall have an may exercise any of the powers that
may lawfully be granted to the executive committee.
Section 4.04. Proceedings, Quorum and Manner of Acting:
In the absence of an appropriate resolution of the board of
directors, each committee may adopt such rules and regulations governing its
proceedings, quorum and manner of acting as it shall deem proper and
desirable, provided that the quorum shall not be less than two directors. In
the absence of any member of any such committee, the members thereof present
at any meeting, whether or not they constitute a quorum, may appoint a member
of the board of directors to act in the place of such absent member.
Section 4.05. Other Committees:
The board of directors may appoint other committees, each consisting
of one or more persons, who need not be directors. Each such committee shall
have such powers and perform such duties as may be assigned to it from time to
time by the board of directors, but shall not exercise any power which may
lawfully be exercised only by the board of directors or a committee thereof.
ARTICLE V
OFFICERS
Section 5.01. Officers:
The officers of the Corporation shall be a president, a secretary and
a treasurer, and may include one or more vice presidents, assistant
secretaries or assistant treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 5.11 hereof. The board
of directors may elect, but shall not be required to elect, a chairman of the
board.
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Section 5.02. Election, Term of Office and Qualifications:
The officers of the Corporation (except those appointed pursuant to
Section 5.11 hereof) shall be chosen by the board of directors at its first
meeting or such subsequent meetings as shall be held prior to its first annual
meeting, and thereafter annually at its annual meeting. If any officers are
not elected at any annual meeting, such officers may be elected at any
subsequent regular or special meeting of the board. Except as provided in
Sections 5.03, 5.04 and 5.05 hereof, each officer chosen by the board of
directors shall hold office until the next annual meeting of the board of
directors and until his successor shall have been elected and qualified. Any
person may hold one or more offices of the Corporation except that the
president may not hold the office of vice president and provided further that
a person who holds more than one office may not act in more than one capacity
to execute, acknowledge or verify an instrument required by law to be
executed, acknowledged or verified by more than one officer. The chairman of
the board shall be elected from among the directors of the Corporation and may
hold such office only so long as he continues to be a director.
Section 5.03. Resignation:
Any officer may resign his or her office at any time by delivering a
written resignation to the board of directors, the president, the secretary,
or any assistant secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 5.04. Removal:
Any officer may be removed from office whenever in the board's
judgment the best interest of the Corporation will be served thereby, by the
vote of a majority of the board of directors given at the regular meeting or
any special meeting called for such purpose. In addition, any officer or agent
appointed in accordance with the provisions of Section 5.11 hereof may be
removed, either with or without cause, by any officer upon whom such power of
removal shall have been conferred by the board of directors.
Section 5.05. Vacancies and Newly Created Offices:
If any vacancy shall occur in any office by reason of death,
resignation, removal, disqualification or other cause, or if any new office
shall be created, such vacancies or newly created offices may be filled by the
board of directors at any regular or special meeting or, in the case of any
office created pursuant to Section 5.11 hereof, by any officer upon whom such
power shall have been conferred by the board of directors.
Section 5.06. Chairman of the Board:
The chairman of the board, if there be such an officer, shall be the
senior officer of the Corporation, shall preside at all stockholders' meetings
and at all meetings of the board of directors and shall be ex officio a member
of all committees of the board of directors. He shall have such other powers
and perform such other duties as may be assigned to him from time to time by
the board of directors.
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Section 5.07. President:
The president shall be the chief executive officer of the Corporation
and, in the absence of the chairman of the board or if no chairman of the
board has been chosen, he shall preside at all stockholders' meetings and at
all meetings of the board of directors and shall in general exercise the
powers and perform the duties of the chairman of the board. Subject to the
supervision of the board of directors, he shall have general charge of the
business, affairs and property of the Corporation and general supervision over
its officers, employees and agents. Except as the board of directors may
otherwise order, he may sign in the name and on behalf of the Corporation all
deeds, bonds, contracts or agreements. He shall exercise such other powers and
perform such duties as from time to time may be assigned to him by the board
of directors.
Section 5.08. Vice President:
The board of directors may from time to time designate and elect one
or more vice presidents who shall have such powers and perform such duties as
from time to time may be assigned to them by the board of directors or the
president. At the request or in the absence or disability of the president,
the vice president (or, if there are two or more vice presidents, the then
senior of the vice presidents present and able to act) may perform all the
duties of the president and, when so acting, shall have all the powers of and
be subject to all the restrictions upon the president.
Section 5.09. Treasurer and Assistant Treasurers:
The treasurer shall be the principal financial and accounting officer
of the Corporation and shall have general charge of the finances and books of
account of the Corporation. Except as otherwise provided by the board of
directors, he shall have general supervision of the funds and property of the
Corporation and of the performance by the custodian of its duties with respect
thereto. He shall render to the board of directors, whenever directed by the
board, an account of the financial condition of the Corporation and of all his
transactions as treasurer; and as soon as possible after the close of each
financial year he shall make and submit to the board of directors a like
report for such financial year. He shall cause to be prepared annually a full
and correct statement of the affairs of the Corporation, including a balance
sheet and a financial statement of operations for the preceding fiscal year,
which shall be submitted at the annual meeting of stockholders and filed
within 20 days thereafter at the principal office of the Corporation in the
State of Maryland. He shall perform all the acts incidental to the office of
treasurer, subject to the control of the board of directors.
Any assistant treasurer may perform such duties of the treasurer as
the treasurer or the board of directors may assign, and, in the absence of the
treasurer, may perform all the duties of the treasurer.
Section 5.10. Secretary and Assistant Secretaries:
The secretary shall attend to the giving and serving of all notices
of the Corporation and shall record all proceedings of the meetings of the
stockholders and directors in the books to be
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kept for that purpose. He shall keep in safe custody the seal of the
Corporation, and shall have charge of the records of the Corporation,
including the stock books and such other books and papers as the board of
directors may direct and such books, reports, certificates and other documents
required by law to be kept, all of which shall at all reasonable times be open
to inspection by any director. He shall perform such other duties as appertain
to his office or as may be required by the board of directors.
Any assistant secretary may perform such duties of the secretary as
the secretary or the board of directors may assign, and, in the absence of the
secretary, may perform all the duties of the secretary.
Section 5.11. Subordinate Officers:
The board of directors from time to time may appoint such other
officers or agents as it may deem advisable, each of whom shall have such
title, hold office for such period, have such authority and perform such
duties as the board of directors may determine. The board of directors from
time to time may delegate to one or more officers or agents the power to
appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 5.12. Remuneration:
The salaries or other compensation of the officers of the Corporation
shall be fixed from time to time by resolution of the board of directors,
except that the board of directors may by resolution delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
Section 5.11 hereof.
Section 5.13. Surety Bonds:
The board of directors may require any officer or agent of the
Corporation to execute a bond (including, without limitation, any bond
required by the Investment Company Act of 1940, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder)
to the Corporation in such sum and with such surety or sureties as the board
of directors may determine, conditioned upon the faithful performance of his
duties to the Corporation, including responsibility for negligence and for the
accounting of any of the Corporation's property, funds or securities that may
come into his or her hands.
ARTICLE VI
CUSTODY OF SECURITIES
Section 6.01. Employment of a Custodian:
The Corporation shall place and at all times maintain in the custody
of a custodian (including any sub-custodian for the custodian) all funds,
securities and similar investments owned by the Corporation. The custodian
(and any sub-custodian) shall be a bank or similar financial
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institution having not less than $2,000,000 aggregate capital, surplus and
undivided profits and shall be appointed from time to time by the board of
directors, which shall fix its remuneration.
Section 6.02. Action Upon Termination of Custodian Agreement:
Upon termination of a custodian agreement or inability of the
custodian to continue to serve, the board of directors shall promptly appoint
a successor custodian, but in the event that no successor custodian can be
found who has the required qualifications and is willing to serve, the board
of directors shall call as promptly as possible a special meeting of the
stockholders to determine whether the Corporation shall function without a
custodian or shall be liquidated. If so directed by vote of the holders of a
majority of the outstanding shares of stock of the Corporation, the custodian
shall deliver and pay over all property of the Corporation held by it as
specified in such vote.
Section 6.03. Provisions of Custodian Contract:
The following provisions shall apply to the employment of a custodian
and to any contract entered into with the custodian so employed:
The board of directors shall cause to be delivered to the custodian
all securities owned by the Corporation or to which it may become entitled,
and shall order the same to be delivered by the custodian only in completion
of a sale, exchange, transfer, pledge, or other disposition thereof, all as
the board of directors may generally or from time to time require or approve
or to a successor custodian; and the board of directors shall cause all funds
owned by the Corporation or to which it may become entitled to be paid to the
custodian, and shall order the same disbursed only for investment against
delivery of the securities acquired, or in payment of expenses, including
management compensation, and liabilities of the Corporation, including
distributions to shareholders, or to a successor custodian.
Section 6.04. Other Arrangements:
The Corporation may make such other arrangements for the custody of
its assets (including deposit arrangements) as may be required by any
applicable law, rule or regulation.
ARTICLE VII
EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES
Section 7.01. General:
Subject to the provisions of Sections 5.07, 7.02 and 8.03 hereof, all
deeds, documents, transfers, contracts, agreements and other instruments
requiring execution by the Corporation shall be signed by the president or a
vice president and by the treasurer or secretary or an assistant treasurer or
an assistant secretary, or as the board of directors may otherwise, from time
to time, authorize. Any such authorization may be general or confined to
specific instances.
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Section 7.02. Checks, Notes, Drafts, Etc.:
So long as the Corporation shall employ a custodian to keep custody
of the cash and securities of the Corporation, all checks and drafts for the
payment of money by the Corporation may be signed in the name of the
Corporation by the custodian. Except as otherwise authorized by the board of
directors, all requisitions or orders for the assignment of securities
standing in the name of the custodian or its nominee, or for the execution of
powers to transfer the same, shall be signed in the name of the Corporation by
the president or a vice president and by the treasurer or an assistant
treasurer. Promissory notes, checks or drafts payable to the Corporation may
be endorsed only to the order of the custodian or its nominee and only by the
treasurer or president or a vice president or by such other person or persons
as shall be authorized by the board of directors.
Section 7.03. Voting of Securities:
Unless otherwise ordered by the board of directors, the president or
any vice president shall have full power and authority on behalf of the
Corporation to attend and to act and to vote, or in the name of the
Corporation to execute proxies to vote, at any meeting of stockholders of any
company in which the Corporation may hold stock. At any such meeting such
officer shall possess and may exercise (in person or by proxy) any and all
rights, powers and privileges incident to the ownership of such stock. The
board of directors may by resolution from time to time confer like powers upon
any other person or persons.
ARTICLE VIII
CAPITAL STOCK
Section 8.01. Certificate of Stock:
(a) No certificates certifying the ownership of shares shall be
issued except as the directors may otherwise authorize. In the event that the
directors authorize the issuance of share certificates, certificates of stock
shall be in the form approved by the board of directors, signed in the name of
the Corporation by the president of any vice president and by the treasurer or
any assistant treasurer or the secretary or any assistant secretary, sealed
with the seal of the Corporation and certifying the number and kind of shares
owned by the stockholder in the Corporation. Such signatures and seal may be a
facsimile and may be mechanically reproduced thereon. The certificates
containing such facsimiles shall be valid for all intents and purposes.
(b) In case any officer who shall have signed any such certificate,
or whose facsimile signature has been placed thereon, shall cease to be such
officer (because of death, resignation or otherwise) before such certificate
is issued, such certificates may be issued an delivered by the Corporation
with the same effect as if he were such officer at the date of issue.
(c) The number of each certificate issued, the name of the person
owning the shares represented thereby, the number of such shares and the date
of issuance shall be entered upon the stock ledger of the Corporation at the
time of issuance.
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(d) Every certificate exchanged, surrendered for redemption or
otherwise returned to the Corporation shall be marked "Canceled" with the date
of cancellation.
(e) The directors may at any time discontinue the issuance of share
certificates and may, by written notice to each stockholder, require the
surrender of share certificates to the Corporation for cancellation. Such
surrender and cancellation shall not affect the ownership of shares of the
Corporation.
Section 8.02. Transfer of Capital Stock:
(a) Transfers of shares of the stock of the Corporation shall be made
on the books of the Corporation by the holder of record thereof (in person or
by his attorney thereunto duly authorized by a power of attorney duly executed
in writing and filed with the secretary of the Corporation) (i) if a
certificate or certificates have been issued, upon the surrender of the
certificate or certificates, properly endorsed or accompanied by proper
instruments of transfer, representing such shares, or (ii) as otherwise
prescribed by the board of directors.
(b) The Corporation shall be entitled to treat the holder of record
of any share of stock as the absolute owner thereof for all purposes, and
accordingly shall not be bound to recognize any legal, equitable or other
claim or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise
expressly provided by the statutes of the State of Maryland.
Section 8.03. Transfer Agents and Registrars:
The board of directors may, from time to time, appoint or remove
transfer agents or registrars of shares of stock of the Corporation, and it
may appoint the same person as both transfer agent and registrar. Upon any
such appointment being made all certificates representing shares of capital
stock thereafter issued shall be countersigned by one of such transfer agents
or registrars or by one of such registrars of transfer or by both and shall
not be valid unless so countersigned. If the same person shall be both
transfer agent and registrar, only one countersignature by such person shall
be required.
Section 8.04. Transfer Regulations:
Except as provided in Section II of Article SEVENTH of the Articles
of Incorporation, the shares of stock of the Corporation may be freely
transferred, subject to the charging of customary transfer fees, and the board
of directors may, from time to time, adopt rules and regulations with
reference to the method of transfer of the shares of stock of the Corporation.
Section 8.05. Fixing of Record Date:
The board of directors may fix in advance a date as a record date for
the determination of the stockholders entitled to notice of or to vote at any
stockholders' meeting or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful
14
<PAGE>
action; provided that such record date shall be a date not more than 90 days
prior to the date on which the particular action requiring such determination
of stockholders of record will be taken except that a meeting of stockholders
convened on the date for which it was called may be adjourned from time to
time without further notice to a date not more than 120 days after the
original record date. In the case of a meeting of stockholders, the record
date shall be at least ten days before the date of the meeting.
Section 8.06. Lost Stolen or Destroyed Certificates:
Before issuing a new certificate for stock of the Corporation alleged
to have been lost, stolen or destroyed, the board of directors or any officer
authorized by the board may, in its discretion, require the owner of the lost,
stolen or destroyed certificate (or his legal representative) to give the
Corporation a bond or other indemnity, in such form and in such amount as the
board or any such officer may direct and with such surety or sureties as may
be satisfactory to the board or any such officer, sufficient to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
ARTICLE IX
FISCAL YEAR, ACCOUNTANT
Section 9.01. Fiscal Year:
The fiscal year of the Corporation shall, unless otherwise
ordered by the board of directors, be twelve calendar months beginning on the
1st day of April each year and ending on the 31st day of the following March.
Section 9.02. Accountant:
(a) The Corporation shall employ and independent public accountant or
firm of independent public accountants as its accountant to examine the
accounts of the Corporation and to sign and certify financial statements filed
by the Corporation. The accountant's certificates and reports shall be
addressed both to the board of directors and to the stockholders. The
employment of the accountant shall be conditioned upon the right of the
Corporation to terminate the employment forthwith without any penalty by vote
of a majority of the outstanding voting securities at any stockholders'
meeting called for that purpose.
(b) A majority of the members of the board of directors who are not
interested persons (as such term is defined in the Investment Company Act of
1940, as amended) of the Corporation shall select the accountant at any
meeting held within 90 days before or after the beginning of the fiscal year
of the Corporation or before the annual stockholders' meeting in that year.
Such selection shall be submitted for ratification or rejection at the next
succeeding annual stockholders' meeting. If the stockholders at such meeting
shall reject such selection, the accountant shall be selected by majority vote
of the Corporation's outstanding voting securities, either at the meeting at
which the rejection occurred or at a subsequent meeting of stockholders called
for the purpose of selecting an accountant.
15
<PAGE>
(c) Any vacancy occurring between annual meetings, due to the death
or resignation of the accountant, may be filled by a majority vote of the
members of the board of directors who are not interested persons.
ARTICLE X
INDEMNIFICATION AND INSURANCE
Section 10.01. Indemnification of Officers, Directors, Employees and
Agents:
The Corporation shall indemnify its present and past directors,
officers, employees and agents, and any persons who are serving or have served
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, or enterprise, to the
full extent provided and allowed by Section 2-418 of the Annotated Code of
Maryland concerning corporations, as amended from time to time or any other
applicable provision of law. Notwithstanding anything herein to the contrary,
no director, officer, investment adviser or principal underwriter of the
Corporation shall be indemnified in violation of Section 17(h) and (i) of the
Investment Company Act of 1940, as amended.
Section 10.02. Insurance of Officers, Directors, Employees and Agents:
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the Corporation would have the power to
indemnify him against such liability.
Section10.03. Amendment:
No amendment, alteration or repeal of this Article or the adoption,
alteration or amendment of any other provision of the Articles of
Incorporation or By-Laws inconsistent with this Article shall adversely affect
any right or protection of any person under this Article with respect to any
act or failure to act which occurred prior to such amendment, alteration,
repeal or adoption.
ARTICLE XI
AMENDMENTS
Section 11.01. General:
All By-Laws of the Corporation, whether adopted by the board of
directors or the stockholders, shall be subject to amendment, alteration or
repeal, and new By-Laws may be made, by the affirmative vote of a majority of
either:
16
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(a) the holders of record of the outstanding shares of stock of the
Corporation entitled to vote, at any annual or special meeting, the notice or
waiver of notice of which shall have specified or summarized the proposed
amendment, alteration, repeal or new By-Law; or
(b) the directors, at any regular or special meeting.
END OF BY-LAWS
17
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Exhibit No. 4(a)
INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION CONTRACT
Agreement made as of July 23, 1987 between PAINEWEBBER CASHFUND,
INC., a Maryland corporation (the "Fund"), and PAINEWEBBER INCORPORATED
("PaineWebber");
WHEREAS, the Fund is engaged in business as an open-end, diversified
management investment company and is so registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain PaineWebber as investment adviser
and administrator to furnish administrative, investment advisory and portfolio
management services to the Fund and as distributor to provide for the
distribution of the shares of the Fund's capital stock, par value $.001 per
share ("Shares") and PaineWebber is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PaineWebber as investment
adviser, administrator, and distributor of the Fund for the period and on the
terms set forth in this Contract. PaineWebber accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. Duties as Investment Adviser. Subject to the supervision of the
Fund's board of directors, PaineWebber will provide a continuous investment
program for the Fund's portfolio, including investment research and management
with respect to all securities and investments and cash equivalents in the
portfolio, and will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. PaineWebber will
provide the services under this Contract in accordance with the Fund's
investment objective, policies and restrictions as stated in the Fund's
current prospectus (the "Prospectus"). PaineWebber further agrees that it:
(a) will conform with all applicable rules and regulations of
the Securities and Exchange Commission (the "SEC");
(b) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers and dealers PaineWebber will
attempt to obtain the best net price and the most favorable execution
of its orders. Consistent with this obligation, when the execution
and price offered by two or more brokers or dealers are comparable,
PaineWebber may, in its discretion, purchase and sell portfolio
securities to and from brokers and dealers who provide the Fund with
research, advice and other services. In no instance will portfolio
securities be purchased from or sold to PaineWebber, Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), Provident
Institutional Management Corporation ("PIMC") or any affiliated
person thereof except in accordance with the rules
<PAGE>
and regulations promulgated by the Securities and Exchange Commission
pursuant to the 1940 Act;
(c) will maintain all books and records with respect to the
Fund's securities transactions, will keep its books of account and
will furnish the Fund's board of directors such periodic and special
reports as the board may request; and
(d) will compute the net asset value and the net income of the
Fund as described in the Prospectus or as more frequently requested
by the Fund;
provided, however, that the functions specified in subparagraphs (b), (c) and
(d) hereof may be performed by Mitchell Hutchins, PIMC or another appropriate
party.
3. Duties as Administrator. PaineWebber will assist in administering
the Fund's affairs subject to the supervision of the Fund's board of directors
and the following understandings:
(a) PaineWebber will supervise all aspects of the Fund's
operation except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the
board of directors of the Fund of its responsibility for and control
of the conduct of the Fund's affairs;
(b) In all matters relating to the performance of this Contract,
PaineWebber will act in conformity with the Articles of
Incorporation, By-Laws and the Prospectus and Statement of Additional
Information of the Fund and with the instructions and directions of
the Fund's board of directors and will conform to and comply with the
requirements of the 1940 Act and all other applicable Federal or
Estate laws and regulations;
(c) PaineWebber will provide the Fund with such administrative
and clerical services as are deemed necessary or advisable by the
Fund's board of directors, including the maintenance of certain of
the Fund's corporate books and records;
(d) PaineWebber will arrange, but not pay for, the periodic
updating of prospectuses, statements of additional information and
supplements thereto, proxy material, tax returns and reports to the
Fund's shareholders and the SEC;
(e) PaineWebber will provide the Fund with, or obtain for it,
adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery
supplies and similar items;
(f) PaineWebber will provide the board of directors of the Fund
on a regular basis with economic and investment analyses and reports
and make available to the board upon request any economic,
statistical and investment services normally available to
institutional or other customers of PaineWebber;
(g) PaineWebber will hold itself available to receive orders for
the purchase of Shares and will accept or reject such orders on
behalf of the Fund in accordance with the
2
<PAGE>
Prospectus, and will transmit such orders as are so accepted to the
Fund's transfer agent as promptly as practicable; provided, however,
that PaineWebber is not obligated to sell any certain number of the
Shares; and
(h) PaineWebber will make itself available to receive requests
for redemption from holders of Shares and will transmit such
redemption requests to the transfer agent of the Fund as promptly as
practicable.
4. Duties as Distributor. Except as otherwise provided herein, the
Fund agrees to offer and sell Shares through PaineWebber from time to time
during the term of this Contract (whether authorized but unissued or treasury
shares, in the Fund's sole discretion) at the current offering price as
described in the Prospectus. PaineWebber will act only in its own behalf as
principal in making agreements with selected dealers or others and will offer
and sell the Shares subject to the following understanding. In all matters
relating to the offer and sale of Shares, PaineWebber will act in conformity
with the Articles of Incorporation, By-Laws and the Prospectus and Statement
of Additional Information of the Fund and will conform to and comply with the
requirements of the Securities Act of 1933, the 1940 Act and all other
applicable Federal or state laws and regulations.
5. Services Not Exclusive. The services furnished by PaineWebber
hereunder are not to be deemed exclusive and PaineWebber shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby.
6. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, PaineWebber hereby agrees that all records which it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's request.
PaineWebber further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act.
7. Expenses. During the term of this Contract, the Fund will bear all
expenses, not specifically assumed by PaineWebber, incurred in its operations
and the offering of Shares. That is, the Fund will pay (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; (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
3
<PAGE>
prospectuses, statements of additional information and supplements thereto for
existing shareholders, reports and statements to shareholders and proxy
material; (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.
The Fund may pay directly any expense incurred by it in its normal
operations and, if any such payment is consented to by PaineWebber and
acknowledged otherwise payable by PaineWebber pursuant to this Contract, the
Fund may reduce the fee payable to PaineWebber pursuant to paragraph 8 hereof
by such amount. To the extent that such deductions exceed the fee payable to
PaineWebber on any monthly payment date, such excess shall be carried forward
and deducted in the same manner from the fee payable on succeeding monthly
payment dates.
In addition, if the expenses borne by the Fund in any fiscal year
exceed the applicable expense limitations imposed by the securities
regulations of any state in which Shares are registered or qualified for sale
to the public, PaineWebber will reimburse the Fund for any excess up to the
amount of the fee payable to it during that fiscal year pursuant to paragraph
8 hereof.
8. Compensation. For the services provided and the expenses assumed
pursuant to this Contract, effective July 23, 1987, the Fund will pay to
PaineWebber a fee, computed daily and paid monthly, at the following annual
rates of the Fund's average net assets:
Fund's Average Fee As %
Net Assets of Fund's Average
In Billions Net Assets
Up to $500 million....................................... .500%
In excess of $500 million up to $1.0 billion............. .425%
In excess of $1.0 billion up to $1.5 billion............. .390%
In excess of $1.5 billion up to $2.0 billion............. .380%
In excess of $2.0 billion up to $2.5 billion............. .350%
In excess of $2.5 billion up to $3.5 billion............. .345%
In excess of $3.5 billion up to $4.0 billion............. .325%
In excess of $4.0 billion up to $4.5 billion............. .315%
In excess of $4.5 billion up to $5.0 billion............. .300%
In excess of $5.0 billion up to $5.5 billion............. .290%
In excess of $5.5 billion................................ .280%
9. Limitation of Liability of PaineWebber. PaineWebber 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 matters to which this Contract relates
(including any loss arising out of the receipt by PaineWebber of inadequate
consideration in connection with an order to purchase shares whether in the
form of
4
<PAGE>
fraudulent check, draft or wire; a check returned for insufficient funds; or
any other inadequate consideration (hereinafter "Check Loss")), except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Contract; provided, however, that the Fund
shall not be liable for Check Loss resulting from willful misfeasance, bad
faith or negligence on the part of PaineWebber. Any person, even though also
an officer, partner, employee, or agent of PaineWebber, who may be or become
an officer, director, employee or agent of the Fund shall be deemed, when
rendering services to the Fund or acting in any business of the Fund, to be
rendering such services to or acting solely for the Fund and not as an
officer, partner, employee, or agent or one under the control or direction of
PaineWebber even though paid by it.
10. Duration and Termination. This Contract, unless sooner terminated
as provided herein, shall continue in effect for two years from the above
written date. Thereafter, if not terminated, this Contract shall continue
automatically for periods of twelve months each, provided, such continuance is
specifically approved at least annually (a) by a vote of a majority of those
members of the Fund's board of directors who are not parties to this Contract
or interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (b) by the Fund's board of
directors or by vote of a majority of the outstanding voting securities of the
Fund. Notwithstanding the foregoing, this Contract may be terminated by the
Fund at any time, without the payment of any penalty, by vote of the Fund's
board of directors or by vote of a majority of the outstanding voting
securities of the Fund on 60 days' written notice to PaineWebber or by
PaineWebber at any time, without the payment of any penalty, on 90 days'
written notice to the Fund. This Contract will automatically and immediately
terminate in the event of its assignment. (As used in this Contract, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meaning as such terms have in the 1940 Act.)
11. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract shall be
effective until approved by vote of the holders of a majority of the Fund's
outstanding voting securities.
12. Name of Fund. The Fund may use the name "PaineWebber Cashfund,
Inc." or any name derived from the name "PaineWebber, Jackson & Curtis
Incorporated" or "PaineWebber Incorporated" only for so long as this Contract
or any extension, renewal or amendment hereof remains in effect, including any
similar agreement with any organization which shall have succeeded to the
business of PaineWebber. At such time as such an agreement shall no longer be
in effect, the Fund will (to the extent that it lawfully can) cease to use
such a name or any other name connected with PaineWebber or any organization
which shall have so succeeded to the business of PaineWebber.
13. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a
5
<PAGE>
court decision, statute, rule or otherwise, the remainder of this Contract
shall not be affected thereby. This Contract shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
PAINEWEBBER CASHFUND, INC.
Attest
/s/ Douglas J. Scheidt By /s/ Dianne E. O'Donnell
- ---------------------- -----------------------
PAINEWEBBER INCORPORATED
Attest
/s/ (?) By /s/ Donald E. Nickelson
- ---------------------- -----------------------
6
<PAGE>
Exhibit No. 4(b)
SUB-ADVISORY CONTRACT
Contract made as of July 23, 1987 between PAINEWEBBER INCORPORATED
("PaineWebber"), a Delaware corporation registered as a broker/dealer under
the Securities Exchange Act of 1934 and as an investment adviser under the
Investment Advisers Act of 1940 and MITCHELL HUTCHINS ASSET MANAGEMENT INC.
("Mitchell Hutchins"), a Delaware corporation registered as an investment
adviser under the Investment Advisers Act of 1940 and a wholly-owned
subsidiary of PaineWebber;
WHEREAS, PaineWebber wishes to retain Mitchell Hutchins as
sub-adviser to provide certain investment advisory services to PaineWebber in
connection with PaineWebber's services as investment adviser to PaineWebber
Cashfund, Inc. (the "Fund"), an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, Mitchell Hutchins is willing to render such sub-advisory
services as described herein to PaineWebber upon the terms and for the
compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, it is agreed between the parties as follows:
1. Appointment. PaineWebber hereby appoints Mitchell Hutchins its
sub-adviser and Mitchell Hutchins accepts such appointment and agrees that it
will furnish the services set forth in paragraph 2 below.
2. Services. Subject to the supervision of the Fund's board of
directors, Mitchell Hutchins will provide a continuous investment program for
the Fund's portfolio, including investment research and management with
respect to all securities and investments and cash equivalents in the
portfolio. Mitchell Hutchins will determine from time to time what securities
and other investments will be purchased, retained or sold by the Fund,
Mitchell Hutchins will provide the services under this Contract in accordance
with the Fund's investment objective, policies and restrictions as stated in
the Fund's current prospectus. Mitchell Hutchins further agrees that it:
(a) will conform with all applicable rules and regulations
of the Securities and Exchange Commission;
(b) will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with
any broker or dealer. In placing orders with brokers and dealers
Mitchell Hutchins will attempt to obtain the best net price and the
most favorable execution of its orders. Consistent with this
obligation, when the execution and price offered by two or more
brokers or dealers are comparable, Mitchell Hutchins may, in its
discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Fund with research, advice and
other services. In no instance will portfolio securities be purchased
from or sold to PaineWebber, Mitchell Hutchins, Provident
Institutional Management Corporation ("PIMC") or any affiliated
person
<PAGE>
thereof except in accordance with the rules and regulations
promulgated by the Securities and Exchange Commission pursuant to the
1940 Act.
(c) will maintain all books and records with respect to the
Fund's securities transactions and will furnish the Fund's board of
directors such periodic and special reports as PaineWebber or the
Fund's board may request.
3. Services Not Exclusive. Mitchell Hutchins' services hereunder are
not deemed to be exclusive, and Mitchell Hutchins is free to render advisory,
administrative or other services to other funds or clients so long as Mitchell
Hutchins' services under this Contract are not impaired thereby.
4. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, Mitchell Hutchins agrees that all records it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund any such records upon the Fund's request.
Mitchell Hutchins agrees to maintain for the Fund the records the Fund is
required to maintain under Rule 31a-1(b)(1) (but limited to maintaining
original confirmations of purchase and sales of securities showing for each
such transaction the name and quantity of securities, the unit and aggregate
purchase or sale price, commission paid, the market on which effected, the
trade date, the settlement date, and the name of the person through or from
whom purchased or received or to whom sold or delivered) and the records the
Fund is required to maintain under Rule 31a-1(b)(5), (6), (9) and (10) and to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records it maintains for the Fund.
5. Expenses. During the term of this Contract, Mitchell Hutchins will
pay all expenses incurred by it in connection with its services under this
Contract.
6. Compensation. For the services provided and expenses assumed
pursuant to this Contract, effective the date of this Contract, PaineWebber
will pay Mitchell Hutchins and Mitchell Hutchins will accept as full
compensation a fee, computed daily and paid monthly, at the following annual
rates of the Fund's average net assets:
Fund's Average Fee As %
Net Assets of Fund's Average
In Billions Net Assets
-------------- -----------------
Up to $500 million.............................. .090
In excess of $500 million up to $1.0 billion.... .050
In excess of $1.0 billion up to $1.5 billion.... .040
In excess of $1.5 billion up to $2.0 billion.... .030
In excess of $2.0 billion up to $2.5 billion.... .025
In excess of $2.5 billion up to $3.5 billion.... .025
In excess of $3.5 billion up to $4.5 billion.... .020
In excess of $4.5 billion up to $5.5 billion ... .0125
Over $5.5 billion............................... .010
7. Limitation of Liability. Mitchell Hutchins will not be liable for any error
of judgment or mistake of law or for any loss suffered by PaineWebber or by
the Fund or its
2
<PAGE>
shareholders in connection with the performance of this Contract, except a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations or duties under this Contract.
8. Duration and Termination. This Contract will become effective upon
the date hereabove written and, unless sooner terminated as provided herein,
will continue in effect for two years from the above written date. Thereafter,
if not terminated, this Contract will continue automatically for successive
periods of 12 months each, provided, such continuance is specifically approved
at least annually (a) by a vote of a majority of those members of the Fund's
board of directors who are not parties to this Contract or interested persons
of any such party, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Fund's board of directors or by vote
of a majority of the outstanding voting securities of the Fund.
Notwithstanding the foregoing, this Contract may be terminated by either party
hereto at any time, without the payment of any penalty, on 90 days' written
notice to the other party, and will be terminated automatically upon any
termination of the Investment Advisory, Administration and Distribution
Contract between the Fund and PaineWebber. In addition, notwithstanding the
foregoing, this Contract may be terminated by the Fund at any time, without
the payment of any penalty, by vote of the Fund's board of directors or by
vote of a majority of the outstanding voting securities of the Fund on 60
days' written notice to Mitchell Hutchins.
9. Amendment of This Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract shall be
effective until approved by vote of the holders of a majority of the Fund's
outstanding voting securities.
10. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be
affected thereby. This contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
PAINEWEBBER INCORPORATED
Attest
/s/ Douglas J. Scheidt By /s/ Dianne E. O'Donnell
- ----------------------------- ----------------------------------
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
Attest
/s/ Douglas J. Scheidt By /s/ Ellen R. Harris
- ----------------------------- ----------------------------------
4
<PAGE>
Exhibit No. 4(c)
SUB-ADMINISTRATION CONTRACT
Agreement made as of May 24, 1988 between PAINEWEBBER INCORPORATED
("PaineWebber") and MITCHELL HUTCHINS ASSET MANAGEMENT INC. ("Mitchell
Hutchins"), each being a Delaware corporation.
WHEREAS, PaineWebber has entered into an Investment Advisory,
Administration and Distribution Contract dated July 23, 1987 ("Advisory
Contract") with PaineWebber Cashfund, Inc. ("Fund"), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, under the Advisory Contract PaineWebber has agreed to
provide certain administrative services to the Fund; and
WHEREAS, PaineWebber wishes to retain Mitchell Hutchins as a
sub-administrator to provide such administrative services to PaineWebber and
the Fund, and Mitchell Hutchins is willing to render such services as
described herein upon the terms set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties as follows:
1. Appointment. PaineWebber hereby appoints Mitchell Hutchins as
sub-administrator and Mitchell Hutchins accepts such appointment and agrees
that it will furnish the services set forth in paragraph 2 below.
2. Services and Duties of Mitchell Hutchins. Mitchell Hutchins will
assist in administering the affairs of the Fund, subject to the supervision of
the Fund's Board of Directors ("Board") and PaineWebber, and further subject
to the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operation of
the Fund except as hereinafter set forth; provided, however, that nothing
herein contained shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of affairs of the Fund.
(b) In all matters relating to the performance of this Contract,
Mitchell Hutchins will act in conformity with the Fund's Articles of
Incorporation, By-Laws, and with the instructions and directions of the Fund's
Board and PaineWebber and will conform to and comply with the requirements of
the 1940 Act, the rules thereunder, and all other applicable federal or state
laws and regulations.
(c) Mitchell Hutchins will provide the Fund with such administrative
and clerical personnel (including officers of the Fund) as are reasonably
deemed necessary or advisable by the Board and PaineWebber, and Mitchell
Hutchins will pay the salaries of all such personnel.
<PAGE>
(d) Mitchell Hutchins will provide the Fund with such administrative
and clerical services as are reasonably deemed necessary or advisable by the
Board and PaineWebber, including the maintenance of certain of the books and
records of the Fund.
(e) Mitchell Hutchins will arrange, but not pay for, the periodic
preparation, updating, filing and dissemination (as applicable) of the Fund's
Registration Statement, proxy material, tax returns and reports to
shareholders of the Fund and the Securities and Exchange Commission. As used
in this Contract, the term "Registration Statement" shall mean the currently
effective registration statement of the Fund and any supplements thereto under
the Securities Act of 1933, as amended, and 1940 Act.
(f) Mitchell Hutchins will provide the Fund with, or obtain for it,
adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and similar
items.
3. Administrative Duties Retained By PaineWebber. PaineWebber will
continue to provide to the Fund the services described in subparagraphs 3(f),
3(g) and 3(h) of the Advisory Contract.
4. Services Not Exclusive. Mitchell Hutchins' services hereunder are
not deemed to be exclusive, and Mitchell Hutchins is free to render advisory,
administrative or other services to other funds or clients so long as Mitchell
Hutchins' services under this Contract are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, Mitchell Hutchins agrees that all records it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund any such records upon the Fund's request.
6. Expenses. During the term of this Contract, Mitchell Hutchins will
pay all expenses incurred by it in connection with its services under this
Contract.
7. Compensation. For the services provided and expenses assumed
pursuant to this Contract, PaineWebber will pay Mitchell Hutchins and Mitchell
Hutchins will accept as full compensation 20% of the fee received by
PaineWebber under the Advisory Contract, such compensation to be paid monthly
and to be reduced by any amount paid by PaineWebber in each such month to
Mitchell Hutchins under the Sub-Advisory Contract dated July 23, 1987 between
PaineWebber and Mitchell Hutchins.
8. Limitation of Liability. Mitchell Hutchins will not be liable for
any error of judgment or mistake of law or for any loss suffered by
PaineWebber or by the Fund or the shareholders of the Fund in connection with
the performance of this Contract, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or from reckless disregard by it of its obligations or duties under
this Contract.
2
<PAGE>
9. Duration and Termination. This Contract will become effective upon
the date hereabove written and shall continue in effect thereafter until
terminated by PaineWebber, Mitchell Hutchins, or the Fund upon 60 days'
written notice to the others. This Contract will terminate automatically upon
any termination of the Advisory Contract between PaineWebber and the Fund.
10. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, or rule or otherwise, the remainder of this Contract shall not be
affected thereby. This Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
Attest: PAINEWEBBER INCORPORATED
/s/ Dwayne H. McKinley By: /s/ Peter Schulz
- --------------------------- ---------------------------
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT
INC.
/s/ Dwayne H. McKinley By: Dianne E. O'Donnell
- --------------------------- ---------------------------
3
<PAGE>
Exhibit No. 7
CUSTODIAN CONTRACT
Between
PAINEWEBBER CASHFUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
PWCASH.CUS
21E593
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By It............1
2. Duties of the Custodian with Respect to Property of the
Fund Held by the Custodian in the United States..................1
2.1 Holding Investments...........................................1
2.2 Delivery of Securities........................................2
2.3 Registration of Securities....................................4
2.4 Bank Accounts.................................................4
2.5 Availability of Federal Funds.................................5
2.6 Collection of Income..........................................5
2.7 Payment of Fund Monies........................................5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased.........................................6
2.9 Appointment of Agents.........................................7
2.10 Deposit of Fund Assets in Securities System...................7
2.11 Fund Assets Held in the Custodian's Direct Paper System.......8
2.12 Segregated Account............................................9
2.13 Ownership Certificates for Tax Purposes.......................9
2.14 Proxies......................................................10
2.15 Communications Relating to Portfolio Securities..............10
3. Payments for Sales or Repurchases or Redemptions of Shares
of the Fund.....................................................10
4. Proper Instructions.............................................11
5. Actions Permitted Without Express Authority.....................11
6. Evidence of Authority...........................................11
7. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income...............12
8. Records.........................................................12
9. Opinion of Fund's Independent Accountants.......................12
10. Reports to Fund by Independent Public Accountants...............13
11. Compensation of Custodian.......................................13
12. Responsibility of Custodian.....................................13
13. Mitigation by Custodian.........................................14
<PAGE>
14. Notification of Litigation; Right to Proceed....................14
15. Effective Period, Termination and Amendment.....................15
16. Successor Custodian.............................................15
17. Interpretive and Additional Provisions..........................16
18. Massachusetts Law to Apply......................................16
19. Confidentiality.................................................17
20. Assignment......................................................17
21. Severability....................................................17
22. Prior Contracts.................................................17
23. Shareholder Communications Election.............................17
<PAGE>
CUSTODIAN CONTRACT
This Contract between PaineWebber Cashfund, Inc., a corporation
organized and existing under the laws of Maryland, having its principal place
of business at 1285 Avenue of the Americas, New York, New York, 10019
hereinafter called the "Fund" and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian".
WITNESSETH:
WHEREAS, the Fund desires to engage the Custodian to act as custodian
of its assets;
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held By It
The Fund hereby employs the Custodian as the custodian of the assets
of the Fund, pursuant to the provisions of the Articles of Incorporation. The
Fund agrees to deliver to the Custodian all securities and cash of the Fund,
and all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new or treasury
shares of beneficial interest of the Fund ("Shares") as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of
the Fund held or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
4), the Custodian shall on behalf of the Fund from time to time employ one or
more sub-custodians, located in the United States but only in accordance with
an applicable vote by the Board of Directors of the Fund, and provided that
the Custodian shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held by
the Custodian in the United States
2.1 Holding Investments. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, to be
held by it in the United States including all domestic securities
owned by the Fund, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies, (each,
a "U.S. Securities System") and (b) commercial paper of an issuer for
<PAGE>
which State Street Bank and Trust Company acts as issuing and paying
agent ("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian (the "Direct Paper System")
pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System
Account") only upon receipt of Proper Instructions from the Fund,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into
by the Fund;
3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.9 or into the name or
nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the
Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise
from the Custodian' s own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such
2
<PAGE>
securities, or pursuant to any deposit agreement; provided
that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned
by the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but
only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance
with the rules of The Options Clearing Corporation and of
any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time to
time in the currently effective prospectus and statement of
additional information of the Fund ("Prospectus"), in
satisfaction of requests by holders of Shares for repurchase
or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions from the
Fund, a certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an officer
of the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities of the
3
<PAGE>
Fund to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned exclusively to the
Fund, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment
companies having the same investment adviser as the Fund, or in the
name or nominee name of any agent appointed pursuant to Section 2.9
or in the name or nominee name of any sub-custodian appointed
pursuant to Article 1. All securities accepted by the Custodian on
behalf of the Fund under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund
directs the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely collect
income due the Fund on such securities and to notify the Fund on a
best efforts basis only of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or exchange
offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund,
which shall contain only property held by the Custodian as custodian
for the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"). Funds held by the Custodian for the Fund
may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to
act as a custodian under the 1940 Act and that each such bank or
trust company and the funds to be deposited with each such bank or
trust company shall on behalf of the Fund be approved by vote of a
majority of the Board of Directors of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions from the Fund, make federal funds available to the Fund
as of specified times agreed upon from time to time by the Fund and
the Custodian in the amount of checks received in payment for Shares
of the Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic
4
<PAGE>
securities held hereunder to which the Fund shall be entitled either
by law or pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments with respect
to bearer domestic securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder.
Income due the Fund on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the Fund is
properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of the Fund in the
following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Fund but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian
(or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under the
1940 Act, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in
the name of the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper
form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case
of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.11
hereof; (d) in the case of repurchase agreements entered
into between the Fund and the Custodian, or another bank, or
a broker-dealer which is a member of NASD, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund as defined in
Article 4 hereof;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
5
<PAGE>
3) For the redemption or repurchase of Shares issued by the Fund
as set forth in Article 3 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments
for the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be
in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Fund
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short; and
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund, a certified
copy of a resolution of the Board of Directors or of the
Executive Committee of the Fund signed by an officer of the
Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting
forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming
the person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act, to act as
a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder. In the
event of any loss, damage or expense suffered or incurred by the Fund
caused by or resulting from the negligence or willful misconduct of
any agent appointed by the Custodian pursuant to this Section 2.9,
the Custodian shall promptly reimburse the Fund in the amount of such
loss, damage or expense.
2.10 Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Exchange Act, which acts as a securities
6
<PAGE>
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "U.S. Securities Systems" in accordance with
applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Fund in a U.S.
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the U.S. Securities System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of
the Fund which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to
the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon
(i) receipt of advice from the U.S. Securities System that
payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of
the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the U.S.
Securities System of transfers of securities for the account
of the Fund shall identify the Fund, be maintained for the
Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the
Fund in the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities
System for the account of the Fund;
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the U.S.
Securities System;
5) The Custodian shall have received from the Fund the initial
certificate required by Article 15 hereof; and
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the U.S. Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it
may have against the U.S. Securities System; at the election
of the Fund, it shall
7
<PAGE>
be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the U.S. Securities System
or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or
damage. The Custodian agrees to cooperate with Fund in
connection with the enforcement of the Fund's subrogation
rights.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by the Fund in
the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions from the Fund;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of
the Fund which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to
the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the
records of the Custodian to reflect such payment and
transfer of securities to the account of the Fund. The
Custodian shall transfer securities sold for the account of
the Fund upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment
for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of
a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to
the Fund copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account
of the Fund; and
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund establish and maintain a segregated
account or accounts for and on behalf of the Fund, into which account
or accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
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<PAGE>
futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or
the Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by
the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund, a certified copy of a
resolution of the Board of Directors or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of the Fund held by it
and in connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise
than in the name of the Portfolio or a nominee of the Fund, all
proxies, without indication of the manner in which such proxies are
to be voted, and shall promptly deliver to the Fund such proxies, all
proxy soliciting materials and all notices relating to such
securities.
2.15 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund all written information (including, without limitation,
pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the Fund.
With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund all written information received by the
Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to
any tender offer, exchange offer or any other similar transaction,
the Fund shall notify the Custodian at least three business days
prior to the date on which the Custodian is to take such action.
3. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
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The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent of the Fund and deposit into the account of the Fund
such payments as are received for Shares of the Fund issued or sold from time
to time by the Fund. The Custodian will provide timely notification to the
Fund and the Transfer Agent of any receipt by it of payments for Shares of the
Fund.
From such funds as may be available for the purpose but subject to
the limitations of the Articles of Incorporation and any applicable votes of
the Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares, the Custodian shall honor checks drawn
on the Custodian by a holder of Shares, which checks have been furnished by
the Fund to the holder of Shares, when presented to the Custodian in
accordance with such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
4. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialed by two or more persons as the Board of Directors shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested and may be in the
form of standing instructions. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Directors of the Fund
accompanied by a detailed description of procedures approved by the Board of
Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.12.
5. Actions Permitted Without Express Authority
The Custodian may in its discretion, without express authority from
the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund;
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2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of
Directors of the Fund.
6. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of Directors of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or
of any action by the Board of Directors pursuant to the Articles of
Incorporation as described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written notice to the
contrary.
7. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information
to the entity or entities appointed by the Board of Directors of the Fund to
keep the books of account of the Fund and/or compute the net asset value per
share of the outstanding shares of the Fund or, if directed in writing to do
so by the Fund, shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian shall also calculate
daily the net income of the Fund as described in the Fund's currently
effective prospectus and shall advise the Fund and the Transfer Agent daily of
the total amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The calculations
of the net asset value per share and the daily income of the Fund shall be
made at the time or times described from time to time in the Fund's currently
effective prospectus.
8. Records
The Custodian shall with respect to the Fund create, maintain and
retain all records relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the Fund under the
1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly
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<PAGE>
authorized officers, employees or agents of the Fund, attorneys for and
auditors employed by the Fund, and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Fund's request, supply the
Fund with a tabulation of securities owned by the Fund and held by the
Custodian and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations.
9. Opinion of Fund's Independent Accountants
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-lA, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
10. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund
for any action taken or omitted by it in good faith without negligence. It
shall be entitled to rely on and
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<PAGE>
may act upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned
to the Fund being liable for the payment of money or incurring liability of
some other form, the Fund, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an amount and
form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) including the purchase or sale of foreign exchange or of contracts
for foreign exchange ("Advance") or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct ("Liability"), then in such
event property equal in value to not more than 125% of such Advance and
accrued interest on the Advance or the anticipated amount of such Liability,
held at any time for the account of the Fund by the Custodian or sub-custodian
may be held as security for such Liability or for such Advance and accrued
interest on the Advance. The Custodian shall designate the security or
securities constituting security for an Advance or Liability (the "Designated
Securities") by notice in writing to the Fund (which may be sent by tested
telefax or telex). In the event the value of the Designated Securities shall
decline to less than 110% of the amount of such Advance and accrued interest
on the Advance or the anticipated amount of such Liability, then the Custodian
may designate in the same manner an additional security for such obligation
("Additional Securities"), but the aggregate value of the Designated
Securities and Additional Securities shall not be in excess of 125% of the
amount of such Advance and the accrued interest on the Advance or the
anticipated amount of such Liability. At the request of the Fund, on behalf of
a Portfolio, the Custodian shall agree to substitution of a security or
securities which have a value equal to the value of the Designated or
Additional Securities which the Fund desires be released from their status as
security, and such release from status as security shall be effective upon the
Custodian and the Fund agreeing in writing as to the identity of the
substituted security or securities, which shall thereupon become Designated
Securities.
Notwithstanding the above, the Custodian shall, at the request of the
Fund, immediately release from their status as security any or all of the
Designated Securities or Additional Securities upon the Custodian's receipt
from the Fund of cash or cash equivalents in an amount equal to 100% of the
value of the Designated Securities or Additional Securities that the Fund
desires to be released from their status as security pursuant to this Article.
Interest, dividends and other distributions paid or received on the Designated
Securities and Additional Securities, other than payments of principal or
payments upon retirement, redemption or repurchase, shall remain the property
of the Fund and shall not be subject to this Article.
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13. Mitigation by Custodian
Upon the occurrence of any event connected with the duties of the
Custodian under this Contract which causes or may cause any loss, damage or
expense to the Fund, (i) the Custodian shall, and (ii) shall exercise
reasonable efforts to cause any sub-custodian to, use reasonable efforts and
take all reasonable steps under the circumstances to mitigate the effect of
such event and to avoid continuing harm to the Fund.
14. Notification of Litigation; Right to Proceed
The Fund shall not be liable for indemnification under this Contract
to the extent that the Fund's ability to defend against any litigation or
proceeding brought against the Custodian in respect of which indemnity may be
sought under this Contract is prejudiced by the Custodian's failure to give
prompt notice of the commencement of any such litigation or proceeding. With
respect to claims in such litigation or proceeding for which indemnity by the
Fund may be sought and, subject to applicable law and the ruling of any court
of competent jurisdiction, the Fund shall be entitled to participate in any
such litigation or proceeding and, after written notice from the Fund to the
Custodian, the Fund may assume the defense of such litigation or proceeding
with counsel of its choice at its own expense in respect of that portion of
the litigation for which the Fund may be subject to an indemnification
obligation; provided, however, that the Custodian shall be entitled to
participate in the defense of any such litigation or proceeding. If the Fund
has acknowledged in writing its obligation to indemnify the Custodian with
respect to such litigation or proceeding, the Custodian's participation shall
be at its own expense and the Fund shall control the defense of the litigation
or proceeding. If the Fund is not permitted to participate in or control such
litigation or proceeding under applicable law or by a ruling of a court of
competent jurisdiction, the Custodian shall reasonably prosecute such
litigation or proceeding. The Custodian shall not consent to the entry of any
judgment or enter into any settlement in any such litigation or proceeding
without providing the Fund with adequate notice of any such settlement or
judgment, and without the Fund's prior written consent. The Custodian shall
submit written evidence to the Fund with respect to any cost or expense for
which it is seeking indemnification in such form and detail as the Fund may
reasonably request.
15. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and may
be terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt
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<PAGE>
of an initial certificate of the Secretary or an Assistant Secretary that the
Board of Directors of the Fund has approved the initial use of a particular
Securities System by the Fund, as required by Rule 17f-4 under the 1940 Act
and that the Custodian shall not act under Section 2.11 hereof in the absence
of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors has approved the initial use of the
Direct Paper System by the Fund; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Articles of
Incorporation, and further provided, that the Fund may at any time by action
of its Board of Directors (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
16. Successor Custodian
If a successor custodian for the Fund shall be appointed by the Board
of Directors of the Fund, the Custodian shall, upon termination, deliver to
such successor custodian at the office of the Custodian, duly endorsed and in
the form for transfer, all securities of the Fund then held by it hereunder
and shall transfer to an account of the successor custodian all of the
securities of the Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Directors of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Directors shall have been
delivered to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the 1940 Act, doing business
in Boston, Massachusetts, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of not
less than $25,000,000, all securities, funds and other properties held by the
Custodian on behalf of the Fund and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract on
behalf of the Fund and to transfer to an account of such successor custodian
all of the securities of the Fund held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or
of the Board of Directors to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period as
the Custodian retains possession of such securities, funds and other
properties and the
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provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
17. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall
be annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
19. Confidentiality
The Custodian agrees that all books records, information and data
pertaining to the business of the Fund which are exchanged or received
pursuant to the negotiation or carrying out of this Contract shall remain
confidential, shall not be voluntarily disclosed to any other person, except
as may be required by law, and shall not be used by the Custodian for any
purpose not directly related to the business of the Fund, except with the
Fund's prior written consent.
20. Assignment
Neither the Fund nor the Custodian shall have the right to assign any
of its rights or obligations under this Contract without the prior written
consent of the other party.
21. Severability
If any provision of this Contract is held to be unenforceable as a
matter of law, the other terms and provisions of this Contract shall not be
affected thereby and shall remain in full force and effect.
22. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
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23. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by issuers
of securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to
requesting companies whose securities the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either
"yes" or "no" below, the Custodian is required by the rule to treat the Fund
as consenting to disclosure of this information for all securities owned by
the Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's
name and address for any purpose other than corporate communications. Please
indicate below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address and share positions.
NO [X ] The Custodian is not authorized to release the Fund's name,
address and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 1st day of April, 1996 .
PAINEWEBBER CASHFUND, INC.
By: /s/ Dianne E. O'Donnell
--------------------------
DIANNE E. O'DONNELL
SECRETARY AND VICE PRESIDENT
STATE STREET BANK AND TRUST COMPANY
By: /s/
--------------------------
Executive Vice President
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Exhibit No. 8
TRANSFER AGENCY AND RELATED SERVICES AGREEMENT
THIS AGREEMENT is made as of August 1, 1997 by and between PFPC INC.,
a Delaware corporation ("PFPC"), and PAINEWEBBER CASHFUND, INC., a Maryland
corporation (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to the Fund's
Portfolios (as hereinafter defined) and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Definitions. As Used in this Agreement:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Authorized Person" means any officer of the Fund and
any other person duly authorized by the Fund's Board of Directors or Trustees
("Board") to give Oral Instructions and Written Instructions on behalf of the
Fund and listed on the Authorized Persons Appendix attached hereto and made a
part hereof or any amendment thereto as may be received by PFPC. An Authorized
Person's scope of authority may be limited by the Fund by setting forth such
limitation in the Authorized Persons Appendix.
<PAGE>
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by
PFPC from an Authorized Person.
(f) "Portfolio" means a series or investment portfolio of
the Fund identified on Annex A hereto, as the same may from time to time be
amended, if the Fund consists of more than one series or investment portfolio;
however, if the Fund does not have separate series or investment portfolios,
then this term shall be deemed to refer to the Fund itself.
(g) "SEC" means the Securities and Exchange Commission.
(h) "Securities Laws" mean the 1933 Act, the 1934 Act, the
1940 Act and the CEA.
(i) "Shares" mean the shares of common stock or beneficial
interest of any series or class of the Fund.
(j) "Written Instructions" mean written instructions signed
by an Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile sending
device.
2. Appointment. The Fund hereby appoints PFPC to serve as transfer
agent, registrar, dividend disbursing agent and related services agent to the
Fund, and should the Fund have separate Portfolios, those Portfolios which are
listed on Annex A hereto, in accordance with the terms set forth in this
Agreement. PFPC accepts such appointment and agrees to furnish such services.
3. Delivery of Documents. The Fund (or a particular Portfolio, as
appropriate) has provided or, where applicable, will provide PFPC with the
following:
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<PAGE>
(a) Certified or authenticated copies of the resolutions of the
Fund's Board approving the appointment of PFPC to provide
services to the Fund and approving this Agreement;
(b) A copy of each executed broker-dealer agreement with respect
to each Fund; and
(c) Copies (certified or authenticated if requested by PFPC) of
any post-effective amendment to the Fund's registration
statement, advisory agreement, distribution agreement,
shareholder servicing agreement and all amendments or
supplements to the foregoing upon request.
4. Compliance with Rules and Regulations. PFPC undertakes to comply
with all applicable requirements of the Securities Laws and any laws, rules
and regulations of governmental authorities having jurisdiction with respect
to the duties to be performed by PFPC hereunder. Except as specifically set
forth herein, PFPC assumes no responsibility for such compliance by the Fund
or any of its Portfolios.
5. Instructions.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or of any vote, resolution or proceeding of the
Fund's Board or of the Fund's shareholders, unless and until PFPC receives
Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the next day after such Oral Instructions are
received. The fact that such confirming Written Instructions
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are not received by PFPC shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions. Where
Oral Instructions or Written Instructions reasonably appear to have been
received from an Authorized Person, PFPC shall incur no liability to the Fund
in acting upon such Oral Instructions or Written Instructions provided that
PFPC's actions comply with the other provisions of this Agreement.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including
Oral Instructions or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question
of law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from the Fund, and the advice it receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral
Instructions or Written Instructions it receives from the Fund or from counsel
and which PFPC believes, in good faith, to be consistent with those
directions, advice or Oral Instructions or Written Instructions. Nothing in
this section shall
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be construed so as to impose an obligation upon PFPC (i) to
seek such directions, advice or Oral Instructions or Written Instructions, or
(ii) to act in accordance with such directions, advice or Oral Instructions or
Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PFPC's properly taking or not taking
such action. Nothing in this subsection shall excuse PFPC when an action or
omission on the part of PFPC constitutes willful misfeasance, bad faith,
negligence or reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
7. Records; Visits. PFPC shall prepare and maintain in complete and
accurate form all books and records necessary for it to serve as transfer
agent, registrar, dividend disbursing agent and related services agent to each
Portfolio, including (a) all those records required to be prepared and
maintained by the Fund under the 1940 Act, by other applicable Securities
Laws, rules and regulations and by state laws and (b) such books and records
as are necessary for PFPC to perform all of the services it agrees to provide
in this Agreement and the appendices attached hereto, including but not
limited to the books and records necessary to effect the conversion of Class B
shares, the calculation of any contingent deferred sales charges and the
calculation of front-end sales charges. The books and records pertaining to
the Fund, which are in the possession or under the control of PFPC, shall be
the property of the Fund. The Fund and Authorized Persons shall have access to
such books and records in the possession or under the control of PFPC at all
times during PFPC's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records in the possession or under the
control of PFPC shall be provided by PFPC to the Fund or to an Authorized
Person. Upon reasonable notice by the Fund, PFPC shall make available during
regular business hours its facilities and premises employed in connection with
its performance of this Agreement for reasonable visits by the
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Fund, any agent or person designated by the Fund or any regulatory agency
having authority over the Fund.
8. Confidentiality. PFPC agrees to keep confidential all records of
the Fund and information relating to the Fund and its shareholders (past,
present and future), its investment adviser and its principal underwriter,
unless the release of such records or information is otherwise consented to,
in writing, by the Fund prior to its release. The Fund agrees that such
consent shall not be unreasonably withheld and may not be withheld where PFPC
may be exposed to civil or criminal contempt proceedings or when required to
divulge such information or records to duly constituted authorities.
9. Cooperation with Accountants. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the expression
of their opinion, as required by the Fund.
10. Disaster Recovery. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for periodic backup of computer files and data with respect to the
Fund and emergency use of electronic data processing equipment. In the event
of equipment failures, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. PFPC shall have no
liability with respect to the loss of data or service interruptions caused by
equipment failure, provided such loss or interruption is not caused by PFPC's
own willful misfeasance, bad faith, negligence or reckless disregard of its
duties or obligations under this Agreement and provided further that PFPC has
complied with the provisions of this paragraph 10.
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11. Compensation. As compensation for services rendered by PFPC
during the term of this Agreement, the Fund will pay to PFPC a fee or fees as
may be agreed to from time to time in writing by the Fund and PFPC.
12. Indemnification.
(a) The Fund agrees to indemnify and hold harmless PFPC and its
affiliates from all taxes, charges, expenses, assessments, penalties, claims
and liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements, arising directly or indirectly from (i) any
action or omission to act which PFPC takes (a) at the request or on the
direction of or in reliance on the advice of the Fund or (b) upon Oral
Instructions or Written Instructions or (ii) the acceptance, processing and/or
negotiation of checks or other methods utilized for the purchase of Shares.
Neither PFPC, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of PFPC's
or its affiliates' own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement. The Fund's
liability to PFPC for PFPC's acceptance, processing and/or negotiation of
checks or other methods utilized for the purchase of Shares shall be limited
to the extent of the Fund's policy(ies) of insurance that provide for coverage
of such liability, and the Fund's insurance coverage shall take precedence.
(b) PFPC agrees to indemnify and hold harmless the Fund from all
taxes, charges, expenses, assessments, penalties, claims and liabilities
arising from PFPC's obligations pursuant to this Agreement (including, without
limitation, liabilities arising under the Securities Laws, and any state and
foreign securities and blue sky laws, and amendments thereto) and expenses,
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including (without limitation) reasonable attorneys' fees and disbursements
arising directly or indirectly out of PFPC's or its nominee's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
(c) In order that the indemnification provisions contained in this
Paragraph 12 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion, and shall keep the
other party advised with respect to all developments concerning such claim.
The party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense of such
claim. The party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
(d) The members of the Board of the Fund, its officers and
Shareholders, or of any Portfolio thereof, shall not be liable for any
obligations of the Fund, or any such Portfolio, under this Agreement, and PFPC
agrees that in asserting any rights or claims under this Agreement, it shall
look only to the assets and property of the Fund or the particular Portfolio
in settlement of such rights or claims and not to such members of the Board,
its officers or Shareholders. PFPC further agrees that it will look only to
the assets and property of a particular Portfolio of the Fund, should the Fund
have established separate series, in asserting any rights or claims under this
Agreement with respect to services rendered with respect to that Portfolio and
will not seek to obtain settlement of such rights or claims from the assets of
any other Portfolio of the Fund.
13. Insurance. PFPC shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of
insurance may provide for coverage of claims for liability or indemnity by the
parties set forth in this Agreement, the contracts of
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<PAGE>
insurance shall take precedence, and no provision of this Agreement shall be
construed to relieve an insurer of any obligation to pay claims to the Fund,
PFPC or other insured party which would otherwise be a covered claim in the
absence of any provision of this Agreement.
14. Security.
(a) PFPC represents and warrants that, to the best of its knowledge,
the various procedures and systems which PFPC has implemented with regard to
the safeguarding from loss or damage attributable to fire, theft or any other
cause (including provision for twenty-four hours a day restricted access) of
the Fund's blank checks, certificates, records and other data and PFPC's
equipment, facilities and other property used in the performance of its
obligations hereunder are adequate, and that it will make such changes therein
from time to time as in its judgment are required for the secure performance
of its obligations hereunder. PFPC shall review such systems and procedures on
a periodic basis, and the Fund shall have reasonable access to review these
systems and procedures.
(b) Y2K Compliance. PFPC further represents and warrants that any and
all electronic data processing systems and programs that it uses or retains in
connection with the provision of services hereunder on or before January 1,
1999 will be year 2000 compliant.
15. Responsibility of PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed
to by PFPC in writing. PFPC shall be obligated to exercise care and diligence
in the performance of its duties hereunder, to act in good faith and to use
its best efforts in performing services provided for under this Agreement.
PFPC shall be liable for any damages arising out of PFPC's failure to perform
its duties under
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<PAGE>
this Agreement to the extent such damages arise out of PFPC's willful
misfeasance, bad faith, negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC shall not be under any duty or obligation to
inquire into and shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instruction or Written Instruction,
notice or other instrument which conforms to the applicable requirements of
this Agreement, and which PFPC reasonably believes to be genuine; or (B)
subject to Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur
or suffer by or as a consequence of PFPC's or its affiliates' performance of
the services provided hereunder, whether or not the likelihood of such losses
or damages was known by PFPC or its affiliates.
(d) Notwithstanding anything in this Agreement to the contrary, the
Fund shall not be liable to PFPC nor its affiliates for any consequential,
special or indirect losses or damages which PFPC or its affiliates may incur
or suffer by or as a consequence of PFPC's performance of the services
provided hereunder, whether or not the likelihood of such losses or damages
was known by the Fund.
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16. Description of Services.
(a) Services Provided on an Ongoing Basis, If Applicable.
(i) Calculate 12b-1 payments to financial
intermediaries, including brokers, and financial
intermediary trail commissions;
(ii) Develop, monitor and maintain, in consultation with
the Fund, all systems necessary to implement and
operate the four-tier distribution system,
including Class B conversion feature, as described
in the registration statement and related documents
of the Fund, as they may be amended from time to
time;
(iii) Calculate contingent deferred sales charge amounts
upon redemption of Fund shares and deduct such
amounts from redemption proceeds;
(iv) Calculate front-end sales load amounts at time of
purchase of shares;
(v) Determine dates of Class B conversion and effect the
same;
(vi) Establish and maintain proper shareholder
registrations;
(vii) Review new applications and correspond with
shareholders to complete or correct information;
(viii) Direct payment processing of checks or wires;
(ix) Prepare and certify stockholder lists in conjunction
with proxy solicitations;
(x) Prepare and mail to shareholders confirmation of
activity;
(xi) Provide toll-free lines for direct shareholder use,
plus customer liaison staff for on-line inquiry
response;
(xii) Send duplicate confirmations to broker-dealers of
their clients' activity, whether executed through
the broker-dealer or directly with PFPC;
(xiii) Provide periodic shareholder lists, outstanding
share calculations and related statistics to the
Fund;
(xiv) Provide detailed data for underwriter/broker
confirmations;
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(xv) Prepare and mail required calendar and taxable
year-end tax and statement information (including
forms 1099-DIV and 1099-B and accompanying
statements);
(xvi) Notify on a daily basis the investment adviser,
accounting agent, and custodian of fund activity;
(xvii) Perform, itself or through a delegate, all of the
services, whether or not included within the scope
of another paragraph of this Paragraph 16(a),
specified on Annex B hereto; and
(xviii) Perform other participating broker-dealer
shareholder services as may be agreed upon from
time to time.
(b) Services Provided by PFPC Under Oral Instructions or Written
Instructions.
(i) Accept and post daily Fund and class purchases and
redemptions;
(ii) Accept, post and perform shareholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Cancel certificates.
(c) Purchase of Shares. PFPC shall issue and credit an account of an
investor, in the manner described in the Fund's prospectus, once it receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder
account; and
(iii) Confirmation of receipt or crediting of funds for
such order to the Fund's custodian.
(d) Redemption of Shares. PFPC shall redeem Shares only if that
function is properly authorized by the Fund's organizational documents or
resolutions of the Fund's Board. Shares shall be redeemed and payment therefor
shall be made in accordance with the Fund's or Portfolio's prospectus.
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(i) Broker-Dealer Accounts.
When a broker-dealer notifies PFPC of a redemption
desired by a customer, and the Fund's or
Portfolio's custodian (the "Custodian") has
provided PFPC with funds, PFPC shall (a) transfer
by Fedwire or other agreed upon electronic means
such redemption payment to the broker-dealer for
the credit to, and for the benefit of, the
customer's account or (b) shall prepare and send a
redemption check to the broker-dealer, made payable
to the broker-dealer on behalf of its customer.
(ii) Fund-Only Accounts.
If Shares (or appropriate instructions) are
received in proper form, at the Fund's request
Shares may be redeemed before the funds are
provided to PFPC from the Custodian. If the
recordholder has not directed that redemption
proceeds be wired, when the Custodian provides PFPC
with funds, the redemption check shall be sent to
and made payable to the recordholder, unless:
(a) the surrendered certificate is drawn to
the order of an assignee or holder and
transfer authorization is signed by the
recordholder; or
(b) transfer authorizations are signed by the
recordholder when Shares are held in
book-entry form.
(e) Dividends and Distributions. Upon receipt of a resolution of the
Fund's Board authorizing the declaration and payment of dividends and
distributions, PFPC shall issue dividends and distributions declared by the
Fund in Shares, or, upon shareholder election, pay such dividends and
distributions in cash, if provided for in the appropriate Fund's or
Portfolio's prospectus. Such issuance or payment, as well as payments upon
redemption as described above,
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<PAGE>
shall be made after deduction and payment of the required amount of funds to
be withheld in accordance with any applicable tax law or other laws, rules or
regulations. PFPC shall mail to the Fund's shareholders and the IRS and other
appropriate taxing authorities such tax forms, or permissible substitute
forms, and other information relating to dividends and distributions paid by
the Fund (including designations of the portions of distributions of net
capital gain that are 20% rate gain distributions and 28% rate gain
distributions pursuant to IRS Notice 97-64) as are required to be filed and
mailed by applicable law, rule or regulation within the time required thereby.
PFPC shall prepare, maintain and file with the IRS and other appropriate
taxing authorities reports relating to all dividends above a stipulated amount
paid by the Fund to its shareholders as required by tax or other law, rule or
regulation.
(f) Shareholder Account Services.
(i) PFPC will arrange, in accordance with the
appropriate Fund's or Portfolio's prospectus, for
issuance of Shares obtained through:
- The transfer of funds from shareholders'
accounts at financial institutions,
provided PFPC receives advance Oral or
Written Instruction of such transfer;
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders,
checks and applications.
(ii) PFPC will arrange, in accordance with the
appropriate Fund's or Portfolio's prospectus, for a
shareholder's:
- Exchange of Shares for shares of another
fund with which the Fund has exchange
privileges;
Automatic redemption from an account where
that shareholder participates in a
systematic withdrawal plan; and/or
- Redemption of Shares from an account with a
checkwriting privilege.
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<PAGE>
(g) Communications to Shareholders. Upon timely Written Instructions,
PFPC shall mail all communications by the Fund to its shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax forms (including substitute forms) and
accompanying information containing the information
required by paragraph 16(e).
If requested by the Fund, PFPC will receive and tabulate the proxy
cards for the meetings of the Fund's shareholders and supply personnel to
serve as inspectors of election.
(h) Records. PFPC shall maintain those records required by the
Securities Laws and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be performed by
PFPC hereunder with respect to shareholder accounts or by transfer agents
generally, including records of the accounts for each shareholder showing the
following information:
(i) Name, address and United States Taxpayer
Identification or Social Security number;
(ii) Number and class of Shares held and number and
class of Shares for which certificates, if any,
have been issued, including certificate numbers and
denominations;
(iii) Historical information regarding the account of
each shareholder, including dividends and
distributions paid, their character (e.g. ordinary
income, net capital gain (including 20% rate gain
and 28% rate gain), exempt-interest, foreign
tax-credit and dividends received deduction
eligible) for federal income tax purposes and the
date and price for all transactions on a
shareholder's account;
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<PAGE>
(iv) Any stop or restraining order placed against a
shareholder's account;
(v) Any correspondence relating to the current
maintenance of a shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer
agent to perform any calculations contemplated or
required by this Agreement.
(i) Lost or Stolen Certificates. PFPC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. The lost or stolen certificate will be canceled and
uncertificated Shares will be issued to a shareholder's account only upon:
(i) The shareholder's pledge of a lost instrument bond
or such other appropriate indemnity bond issued by
a surety company approved by PFPC; and
(ii) Completion of a release and indemnification
agreement signed by the shareholder to protect PFPC
and its affiliates.
(j) Shareholder Inspection of Stock Records. Upon a request from any
Fund shareholder to inspect stock records, PFPC will notify the Fund, and the
Fund will issue instructions granting or denying each such request. Unless
PFPC has acted contrary to the Fund's instructions, the Fund agrees and does
hereby release PFPC from any liability for refusal of permission for a
particular shareholder to inspect the Fund's shareholder records.
(k) Withdrawal of Shares and Cancellation of Certificates. Upon
receipt of Written Instructions, PFPC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by
the number of shares surrendered by the Fund.
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<PAGE>
17. Duration and Termination.
(a) This Agreement shall be effective on the date first written above
and shall continue for a period of three (3) years (the "Initial Term"). Upon
the expiration of the Initial Term, this Agreement shall automatically renew
for successive terms of one (1) year ("Renewal Terms") each provided that it
may be terminated by either party during a Renewal Term upon written notice
given at least ninety (90) days prior to termination. During either the
Initial Term or the Renewal Terms, this Agreement may also be terminated on an
earlier date by either party for cause.
(b) With respect to the Fund, cause includes, but is not limited to,
(i) PFPC's material breach of this Agreement causing it to fail to
substantially perform its duties under this Agreement. In order for such
material breach to constitute "cause" under this Paragraph, PFPC must receive
written notice from the Fund specifying the material breach and PFPC shall not
have corrected such breach within a 15-day period; (ii) financial difficulties
of PFPC evidenced by the authorization or commencement of a voluntary or
involuntary bankruptcy under the U.S. Bankruptcy Code or any applicable
bankruptcy or similar law, or under any applicable law of any jurisdiction
relating to the liquidation or reorganization of debt, the appointment of a
receiver or to the modification or alleviation of the rights of creditors; and
(iii) issuance of an administrative or court order against PFPC with regard to
the material violation or alleged material violation of the Securities Laws or
other applicable laws related to its business of performing transfer agency
services;
(c ) With respect to PFPC, cause includes, but is not limited to, the
failure of the Fund to pay the compensation set forth in writing pursuant to
Paragraph 11 of this Agreement.
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<PAGE>
(d) Any notice of termination for cause in conformity with
subparagraphs (a), (b) and (c ) of this Paragraph by the Fund shall be
effective thirty (30) days from the date of any such notice. Any notice of
termination for cause by PFPC shall be effective 90 days from the date of such
notice.
(e) Upon the termination hereof, the Fund shall pay to PFPC such
compensation as may be due for the period prior to the date of such
termination. In the event that the Fund designates a successor to any of
PFPC's obligations under this Agreement, PFPC shall, at the direction and
expense of the Fund, transfer to such successor all relevant books, records
and other data established or maintained by PFPC hereunder including, a
certified list of the shareholders of the Fund or any Portfolio thereof with
name, address, and if provided, taxpayer identification or Social Security
number, and a complete record of the account of each shareholder. To the
extent that PFPC incurs expenses related to a transfer of responsibilities to
a successor, other than expenses involved in PFPC's providing the Fund's books
and records described in the preceding sentence to the successors, PFPC shall
be entitled to be reimbursed for such extraordinary expenses, including any
out-of-pocket expenses reasonably incurred by PFPC in connection with the
transfer.
(f) Any termination effected pursuant to this Paragraph shall not
affect the rights and obligations of the parties under Paragraph 12 hereof.
(g) Notwithstanding the foregoing, this Agreement shall terminate
with respect to the Fund or any Portfolio thereof upon the liquidation,
merger, or other dissolution of the Fund or Portfolio or upon the Fund's
ceasing to be a registered investment company.
18. Registration as a Transfer Agent. PFPC represents that it is
currently registered with the appropriate federal agency for the registration
of transfer agents, or is otherwise
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permitted to lawfully conduct its activities without such registration and
that it will remain so registered or able to so conduct such activities for
the duration of this Agreement. PFPC agrees that it will promptly notify the
Fund in the event of any material change in its status as a registered
transfer agent. Should PFPC fail to be registered with the SEC as a transfer
agent at any time during this Agreement, and such failure to register does not
permit PFPC to lawfully conduct its activities, the Fund may, on written
notice to PFPC, terminate this Agreement upon five days written notice to
PFPC.
19. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at the
address of the Fund or (c) if to neither of the foregoing, at such other
address as shall have been given by like notice to the sender of any such
notice or other communication by the other party. If notice is sent by
confirming telegram, cable, telex or facsimile sending device during regular
business hours, it shall be deemed to have been given immediately; if sent at
a time other than regular business hours, such notice shall be deemed to have
been given at the opening of the next business day. If notice is sent by
first-class mail, it shall be deemed to have been given three days after it
has been mailed. If notice is sent by messenger, it shall be deemed to have
been given on the day it is delivered. All postage, cable, telegram, telex and
facsimile sending device charges arising from the sending of a notice
hereunder shall be paid by the sender.
20. Amendments. This Agreement, or any term thereof, may be changed
or waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
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<PAGE>
21. Additional Portfolios. In the event that the Fund establishes one
or more investment series in addition to and with respect to which it desires
to have PFPC render services as transfer agent, registrar, dividend disbursing
agent and related services agent under the terms set forth in this Agreement,
it shall so notify PFPC in writing, and PFPC shall agree in writing to provide
such services, and such investment series shall become a Portfolio hereunder,
subject to such additional terms, fees and conditions as are agreed to by the
parties.
22. Delegation; Assignment.
(a) PFPC may, at its own expense, assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC
Bank, National Association or PNC Bank Corp., provided that (i) PFPC gives the
Fund thirty (30) days' prior written notice; (ii) the delegate (or assignee)
agrees with PFPC and the Fund to comply with all relevant provisions of the
Securities Laws; and (iii) PFPC and such delegate (or assignee) promptly
provide such information as the Fund may request, and respond to such
questions as the Fund may ask, relative to the delegation (or assignment),
including (without limitation) the capabilities of the delegate (or assignee).
The assignment and delegation of any of PFPC's duties under this subparagraph
(a) shall not relieve PFPC of any of its responsibilities or liabilities under
this Agreement.
(b) PFPC may delegate to PaineWebber Incorporated its obligation to
perform the services described on Annex B hereto. In addition, PFPC may assign
its rights and delegate its other duties hereunder to PaineWebber Incorporated
or Mitchell Hutchins Asset Management Inc. or an affiliated person of either,
provided that (i) PFPC gives the Fund thirty (30) days' prior written notice;
(ii) the delegate (or assignee) agrees with PFPC and the Fund to comply with
all relevant provisions of the Securities Laws; and (iii) PFPC and such
delegate (or assignee)
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<PAGE>
promptly provide such information as the Fund may request, and respond to such
questions as the Fund may ask, relative to the delegation (or assignment),
including (without limitation) the capabilities of the delegate (or assignee).
In assigning its rights and delegating its duties under this paragraph, PFPC
may impose such conditions or limitations as it determines appropriate
including the condition that PFPC be retained as a sub-transfer agent.
(c ) In the event that PFPC assigns its rights and delegates its
duties under this section, no amendment of the terms of this Agreement shall
become effective without the written consent of PFPC.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
25. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the
parties may embody in one or more separate documents their agreement, if any,
with respect to services to be performed and fees payable under this
Agreement.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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<PAGE>
(c) Governing Law. This Agreement shall be deemed to be a
contract made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
PFPC INC.
By: /s/ Robert F. Crouse
----------------------------
Title: Vice President
PAINEWEBBER MASTER SERIES, INC.
By: /s/ Dianne E. O'Donnell
----------------------------
Title: Secretary and Vice President
22
<PAGE>
ANNEX A
Portfolios
23
<PAGE>
AUTHORIZED PERSONS APPENDIX
Name (Type) Signature
- ------------ -----------
- ------------ -----------
- ------------ -----------
- ------------ -----------
- ------------ -----------
- ------------ -----------
24
<PAGE>
ANNEX B
a. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all
shareholder inquiries received by telephone, mail or in-person
regarding the Funds and their accounts
b. Provide timely execution of redemptions, exchanges and non-financial
transactions directed to investment executives and specifically
requested by Fund shareholders
c. Issue checks from proceeds of Fund share redemptions to shareholders
as directed by the shareholders or their agents
d. Process and maintain shareholder account registration information
e. With respect to customer accounts maintained through PaineWebber
Incorporated ("PaineWebber"), review new applications and correspond
with shareholders to complete or correct information
f. Prepare and mail monthly or quarterly consolidated account statements
that reflect PaineWebber Mutual Fund balances and transactions (such
information to be combined with other activity and holdings in
investors' brokerage accounts if this responsibility is delegated to
PaineWebber)
g. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all branch
inquiries regarding operational issues and performance
h. Capture, process and mail required tax information to shareholders
and report this information to the Internal Revenue Service
i. Provide the capability to margin PaineWebber Mutual Funds held within
the client's brokerage account (if this responsibility is delegated
to PaineWebber)
j. Prepare and provide shareholder registrations for mailing of proxies,
reports and other communications to shareholders
k. Develop, maintain and issue checks from the PaineWebber systematic
withdrawal plan offered within the client's brokerage account (if
this responsibility is delegated to PaineWebber)
l. Maintain duplicate shareholder records and reconcile those records
with those at the transfer agent (if this responsibility is delegated
to PaineWebber)
25
<PAGE>
m. Process and mail duplicate PaineWebber monthly or quarterly
statements to PaineWebber Investment Executives
n. Establish and maintain shareholder distribution options (i.e.,
election to have dividends paid in cash, rather than reinvested in
Fund shares)
o. Process and mail purchase, redemption and exchange confirmations to
Fund shareholders and PaineWebber Investment Executives
p. Issue dividend checks to shareholders that select cash distributions
to their brokerage account (if this responsibility is delegated to
PaineWebber)
q. Develop and maintain the automatic investment plan offered within the
client's brokerage account (if this responsibility is delegated to
PaineWebber)
r. Provide bank-to-bank wire transfer capabilities related to
transactions in Fund shares
s. Maintain computerized compliance programs for blue sky and
non-resident alien requirements (only with respect to PaineWebber
Cashfund, Inc.)
26
<PAGE>
Exhibit No. 9
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
Telephone 202-778-9000
www.kl.com
July 28, 1998
PaineWebber Cashfund, Inc.
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
You have requested our opinion, as counsel to PaineWebber Cashfund,
Inc. ("Fund"), as to certain matters regarding the issuance of certain Shares
of the Fund. As used in this letter, the term "Shares" means the shares of
common stock of the Fund during the time that Post-Effective Amendment No. 37
to the Fund's Registration Statement on Form N-1A ("PEA") is effective and has
not been superseded by another post-effective amendment.
As such counsel, we have examined certified or other copies, believed
by us to be genuine, of the Fund's Articles of Incorporation and by-laws and
such resolutions and minutes of meetings of the Fund's Board of Directors as
we have deemed relevant to our opinion, as set forth herein. Our opinion is
limited to the laws and facts in existence on the date hereof, and it is
further limited to the laws (other than the conflict of law rules) in the
State of Maryland that in our experience are normally applicable to the
issuance of shares by registered investment companies organized as
corporations under the laws of that State and to the Securities Act of 1933
("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.
Based on the foregoing, we are of the opinion that the issuance of
the Shares has been duly authorized by the Fund and that, when sold in
accordance with the terms contemplated by the PEA, including receipt by the
Fund of full payment for the Shares and compliance with the 1933 Act and the
1940 Act, the Shares will have been validly issued, fully paid and
non-assessable.
<PAGE>
PaineWebber Cashfund, Inc.
July 28, 1998
Page 2
We hereby consent to this opinion accompanying the PEA when it is
filed with the SEC and to the reference to our firm in the statement of
additional information that is being filed as part of the PEA.
Very truly yours,
/s/ Kirkpatrick & Lockhart LLP
KIRKPATRICK & LOCKHART LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference of our report dated May 13,
1998 on PaineWebber Cashfund, Inc., in this Registration Statement (Form N-1A
No. 2-60655) of PaineWebber Cashfund, Inc.
ERNST & YOUNG LLP
New York, New York
July 29, 1998
<PAGE>
Exhibit No. 12
PAINE
WEBBER
JACKSON
& CURTIS
INCORPORATED
Established 1879 Members New York Stock Exchange, Inc. and other
Principal Exchanges
140 Broadway, New York, N.Y. 10005 (212) 437-2121
April 13, 1978
Paine Webber CASHFUND, Inc.
815 Connecticut Avenue, N.W.
Washington, D. C. 20006
Re: Paine, Webber, Jackson & Curtis Incorporated
Letter of Investment Intent Pursuant to
Section 14(a) of the Investment Company Act
of 1940
--------------------------------------------
Gentlemen:
Please be advised that the 100,000 shares of capital stock of Paine
Webber CASHFUND, Inc. which we have today purchased from you were purchased as
an investment with no present intention of redeeming or reselling such shares,
and that we do not now have any intention of redeeming or reselling such
shares.
Very truly yours,
Paine, Webber, Jackson & Curtis Incorporated
By /s/ John F. Curley, Jr.
---------------------------------------
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<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 5,714,351
<INVESTMENTS-AT-VALUE> 5,714,351
<RECEIVABLES> 25,055
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<OTHER-ITEMS-ASSETS> 347
<TOTAL-ASSETS> 5,740,038
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<DISTRIBUTIONS-OF-INCOME> (274,604)
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<NUMBER-OF-SHARES-SOLD> 22,110,093
<NUMBER-OF-SHARES-REDEEMED> (21,952,533)
<SHARES-REINVESTED> 265,123
<NET-CHANGE-IN-ASSETS> 422,794
<ACCUMULATED-NII-PRIOR> 129
<ACCUMULATED-GAINS-PRIOR> (1,414)
<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30,104
<AVERAGE-NET-ASSETS> 5,373,862
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.051
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.051)
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.56
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<AVG-DEBT-PER-SHARE> 0
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