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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
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PAINEWEBBER CASHFUND, INC.
HIGHLIGHTS
See elsewhere in the Prospectus for more information on the topics
discussed in these highlights.
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.
2
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WHO SHOULD INVEST. The Fund is designed for investors seeking safety,
liquidity and current income. The Fund provides a convenient means for investors
to enjoy current income at money market rates with minimal risk of fluctuation
of principal.
RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective. 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, 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
Sales charge on purchases of shares....... None
Sales charge on reinvested dividends...... None
Redemption fee or deferred sales charge... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees........................... 0.36%
12b-1 fees................................ None
Other expenses............................ 0.20%
-----
Total Operating Expenses.................. 0.56%
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EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
$6 $18 $31 $70
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>
<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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CASHFUND
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Investment Objective and Policies
The Fund's investment objective is to provide current
income, stability of principal and high liquidity. The
Fund invests exclusively in high 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
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5
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PAINEWEBBER
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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 rising, the Fund's yield will tend to lag behind
interest rates, the prevailing short-term market rates. This means that in
Fund's periods of declining interest rates, the Fund's yield
yield will tend to will tend to be somewhat higher than prevailing market
be rates, and in periods of rising interest rates, its yield
somewhat higher than generally will be somewhat lower. Also, when interest
prevailing market rates are falling, net cash inflows from the continuous
rates, sale of Fund shares are likely to be invested in
and in periods of portfolio instruments that produce lower yields than the
rising balance of the Fund's portfolio, thereby reducing its
rates, lower. 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
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6
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CASHFUND
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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
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PAINEWEBBER
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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.
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8
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CASHFUND
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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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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
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10
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CASHFUND
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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 charges will be paid by redeeming automatically an
redemption service appropriate number of Fund shares. PaineWebber reserves
should obtain the the right to modify or terminate the checkwriting service
necessary forms from at any time or to impose a service charge in connection
their 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 Checkwriting generally is not available to persons who
amounts of $500 or hold Fund shares through any sub-account or tax-deferred
more. 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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11
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PAINEWEBBER
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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
Shareholders should of shares that were purchased recently, the Fund may
maintain minimum delay payment until it is assured that it has received
balances of at least good payment for the purchase of the shares. In the case
$500. of purchases by check, this can take up to 15 days.
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12
<PAGE>
CASHFUND
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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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13
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PAINEWEBBER
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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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14
<PAGE>
CASHFUND
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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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15
<PAGE>
PAINEWEBBER
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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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16
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<PAGE>
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<PAGE>
o Current Income
PaineWebber
Prospectus
o Stability of Principal
o High Liquidity ----------------------------
o Professional Management Cashfund, Inc.
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 AUGUST 1, 1998
