<PAGE>
As filed with the Securities and Exchange Commission on July 30, 1999
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. ________ [ ]
Post-Effective Amendment No. 39 [ X ]
REGISTRATION STATEMENT UNDER INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 35 [ X ]
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)
[ X ] On August 1, 1999, pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] On ___________ pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On ___________ pursuant to Rule 485(a)(2)
Title of Securities Being Registered: Shares of Common Stock.
<PAGE>
PaineWebber
Cashfund
------------------------------------
PROSPECTUS
AUGUST 1, 1999
------------------------------------
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
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PaineWebber Cashfund
Contents
THE FUND
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------
What every investor 3 Cashfund
should know about 6 More About Risks and
the fund Investment Strategies
YOUR INVESTMENT
---------------------------------------------------------------------------------------------
Information for 8 Managing Your Fund Account
managing your fund -- Buying Shares
account -- Selling Shares
-- Pricing and Valuation
ADDITIONAL INFORMATION
---------------------------------------------------------------------------------------------
Additional important 11 Management
information about 12 Dividends and Taxes
the fund 13 Financial Highlights
---------------------------------------------------------------------------------------------
Where to learn more Back Cover
about the fund
</TABLE>
The fund is not a complete or
balanced investment program.
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PaineWebber Cashfund
PaineWebber Cashfund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
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FUND OBJECTIVE
Current income, stability of principal and high liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality money
market instruments of governmental and private issuers.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests in foreign money market instruments only if they are
denominated in U.S. dollars.
PaineWebber Incorporated, the fund's investment adviser, has appointed Mitchell
Hutchins Asset Management Inc. to serve as the fund's sub-adviser. Mitchell
Hutchins selects money market instruments for the fund based on its assessment
of relative values and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risk. When short-term interest rates rise, the value of
the fund's investments generally will fall, and its yield will tend to lag
behind prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in 'More About Risks and Investment Strategies.' In particular,
see the following headings:
Credit Risk
Interest Rate Risk
Foreign Securities Risk
Information on the fund's recent holdings can be found in its current
annual/semi-annual reports (see back cover for information on ordering those
reports).
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PaineWebber Cashfund
PERFORMANCE
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RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
table that follows the bar chart shows the average annual returns over several
time periods for the fund's shares.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.03% 7.97% 5.87% 3.44% 2.78% 3.76% 5.46% 4.95% 5.15% 5.15%
</TABLE>
Calendar year total return as of June 30, 1999 -- 2.23%
Best quarter during years shown: 4th quarter, 1989 -- 2.21%
Worst quarter during years shown: 3rd quarter, 1993 -- 0.68%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<S> <C>
One Year................................................ 5.15%
Five Years.............................................. 4.89%
Ten Years............................................... 5.34%
</TABLE>
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PaineWebber Cashfund
EXPENSES AND FEE TABLES
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FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)
<TABLE>
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)............................................. None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)............................................. None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
fund assets)
Management Fees............................................. 0.36%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses.............................................. 0.16
----
Total Annual Fund Operating Expenses........................ 0.52%
----
----
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$53 $167 $291 $653
</TABLE>
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PaineWebber Cashfund
MORE ABOUT RISKS
AND INVESTMENT STRATEGIES
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PRINCIPAL RISKS
The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further detail about some of the risks
described below, are discussed in the fund's Statement of Additional Information
('SAI'). Information on how you can obtain the SAI is on the back cover of this
prospectus.
Credit Risk. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even the highest quality money market
instruments are subject to some credit risk.
Interest Rate Risk. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of the fund's investments will fall. Also, the fund's
yield will tend to lag behind changes in prevailing short-term interest rates.
This means that the fund's income will tend to rise more slowly than increases
in short-term interest rates. Similarly, when short-term interest rates are
falling, the fund's income will tend to fall more slowly.
Foreign Securities Risk. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
Year 2000 Risk. The fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.
Similarly, the issuers whose money market instruments are bought by the fund and
the trading systems used by the fund could be adversely affected by this issue.
The ability of an issuer or trading system to respond successfully to the issue
requires both technological sophistication and diligence, and there can be no
assurance that any steps taken will be sufficient to avoid an adverse impact on
the fund.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the fund is subject to maturity, quality and
diversification requirements designed to help it maintain a stable price of
$1.00 per share. Mitchell Hutchins may use a number of professional money
management techniques to respond to changing economic and money market
conditions and to shifts in fiscal and monetary policy. These techniques include
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PaineWebber Cashfund
varying the fund's composition and weighted average maturity based upon its
assessment of the relative values of various money market instruments and future
interest rate patterns. Mitchell Hutchins also may buy or sell money market
instruments to take advantage of yield differences.
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PaineWebber Cashfund
Your Investment
MANAGING YOUR FUND ACCOUNT
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BUYING SHARES
You must be a PaineWebber client or a client of a PaineWebber correspondent firm
to purchase fund shares. You can purchase fund shares by contacting your
Financial Advisor.
Your order to purchase fund shares will be effective on the business day on
which federal funds become available to the fund. Federal funds are funds
deposited by a commercial bank in an account at a Federal Reserve Bank that can
be transferred to a similar account of another bank in one day and thus can be
made immediately available to the fund. A business day is any day that the
Boston offices of the fund's custodian and the New York City offices of
PaineWebber and its bank, The Bank of New York, are open for business.
The fund and PaineWebber reserve the right to reject a purchase order or suspend
the offering of fund shares.
MINIMUM INVESTMENTS:
<TABLE>
<S> <C>
To open a fund account...............................................$1,000
To add to a fund account..............................................$ 500
</TABLE>
The minimum to add to a fund account is waived for automatic purchases made with
free cash credit balances in your PaineWebber brokerage account, as described
below.
The fund may change its minimum investment requirements at any time.
BUYING SHARES AUTOMATICALLY
You must open your fund account with an initial investment of $1,000 or more.
Once your fund account is opened, all free cash credit balances (that is,
immediately available funds) of $500 or more in your PaineWebber brokerage
account (including proceeds from securities you have sold) are automatically
invested in the fund on a daily basis. These purchases are made daily for
settlement the next business day. All remaining free credit cash balances of $1
or more are invested in fund shares on the next to last business day of each
month for settlement on the last business day of that month.
BUYING SHARES BY CHECK
You may purchase fund shares by placing an order with your Financial Advisor and
providing a check from a U.S. bank. You should make your check payable to
PaineWebber Cashfund, Inc. and should include your PaineWebber account number on
the check.
Federal funds are deemed available to the fund two business days after the
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 if they are converted to federal funds in less than two
business days.
BUYING SHARES BY WIRE
You may purchase fund shares by placing an order through your Financial Advisor
and
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PaineWebber Cashfund
instructing your bank 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]/[Brokerage Account Number.]
The wire must include your name and PaineWebber account number.
If PaineWebber receives a notice from your bank of wire transfer of federal
funds for a purchase of fund shares by 2:00 p.m., Eastern time, PaineWebber will
execute the purchase on that day. Otherwise, PaineWebber will execute the order
on the next business day. PaineWebber and/or your bank may impose a service
charge for wire purchases.
SELLING SHARES
You may sell your shares by contacting your Financial Advisor in person or by
telephone or mail. You may also use the checkwriting service to sell your
shares. Your fund shares will be sold automatically to settle any outstanding
securities purchases or debits to your PaineWebber brokerage account, unless you
instruct your Financial Advisor otherwise.
SELLING BY TELEPHONE OR MAIL OR IN PERSON
You may submit a request to sell fund shares in person or by telephone or mail
to your Financial Advisor. Your proceeds will be mailed to you by check unless
you choose a wire transfer as described below. PaineWebber may charge an
administrative service fee of up to $5.00 for processing sales orders by check.
If you mail an order to sell your shares to PaineWebber or its correspondent
firms, your request must include:
Your name and address;
The fund's name;
Your fund account number;
The dollar amount or number of shares you want to sell; and
A guarantee of each registered owner's signature. A signature guarantee may be
obtained from a financial institution, broker, dealer or clearing agency that
is a participant in one of the medallion programs recognized by the Securities
Transfer Agents Association. These are: Securities Transfer Agents Medallion
Program (STAMP), Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP). The fund and its transfer
agent will not accept signature guarantees that are not a part of these
programs.
Sales by mail may also need to include additional supporting documents for sales
by estates, trusts, guardianships, custodianships, partnerships and
corporations.
WIRE TRANSFER OF SALE PROCEEDS
If you sell $5,000 or more of your fund shares, you may request that the sale
proceeds be paid in federal funds and wired directly to a pre-designated bank
account. To take advantage of this service, you must complete an authorization
form that can be obtained from your Financial Advisor. If PaineWebber's New York
City offices receive your wire sales order prior to noon, Eastern time, on any
business day, the sales proceeds will be wired to your bank account on that day.
Otherwise, your sales proceeds will be wired to your bank account on the next
business day. PaineWebber may impose a fee for wiring sales proceeds and may
sell automatically an appropriate number of fund shares to pay that fee.
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PaineWebber Cashfund
CHECKWRITING SERVICE
You may sell fund shares by writing a check for $500 or more against your fund
account. You may obtain a supply of checks from PaineWebber. When the fund's
transfer agent receives the check for payment, the transfer agent will arrange
for the sale of a sufficient amount of fund shares to cover the amount of the
check. You will continue to receive dividends until the transfer agent receives
the check.
You will not receive canceled checks, but you may request photocopies of
canceled checks. If you have insufficient funds in your account, the check will
be returned to the payee. Checks written in amounts less than $500 will also be
returned. You should not attempt to redeem all the shares in your account by
writing a check because the amount of fund shares in your account is likely to
change each day.
You may be charged for specially imprinted checks, business checks, stop payment
orders, copies of canceled checks, checks returned for insufficient funds, and
checks written for less than $500. You will pay these charges through automatic
redemption of an appropriate number of your fund shares. PaineWebber may modify
or terminate the checkwriting service at any time or impose service fees for
checkwriting.
You may obtain the necessary forms for the checkwriting service from your
Financial Advisor. This service generally is not available to persons who own
fund shares through any sub-account or tax-deferred retirement plan account.
ADDITIONAL INFORMATION
It costs the fund money to maintain shareholder accounts. Therefore, the fund
reserves the right to repurchase all shares in any account that has a net asset
value of less than $500. If the fund elects to do this with your account, it
will notify you that you can increase the amount invested to $500 or more within
60 days. This notice may appear on your account statement.
If you want to sell shares that you purchased recently, the fund may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.
PRICING AND VALUATION
The price of fund shares is based on net asset value. The net asset value is the
total value of the fund divided by the total number of shares outstanding. In
determining net asset value, the fund values its securities at their amortized
cost. This method uses a constant amortization to maturity of the difference
between the cost of the instrument to the fund and the amount due at maturity.
The fund's net asset value per share is expected to be $1.00 per share, although
this value is not guaranteed.
The fund calculates net asset value once each business day at 2:00 p.m., Eastern
time. Your price for buying or selling shares will be the net asset value that
is next calculated after the fund accepts your order. Your Financial Advisor is
responsible for making sure that your order is promptly sent to the fund.
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PaineWebber Cashfund
MANAGEMENT
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INVESTMENT ADVISER AND SUB-ADVISER
PaineWebber is the investment adviser and administrator of the fund. Mitchell
Hutchins Asset Management Inc. is its sub-adviser and sub-administrator.
PaineWebber and Mitchell Hutchins are located at 1285 Avenue of the Americas,
New York, New York, 10019. Mitchell Hutchins is a wholly owned asset management
subsidiary of PaineWebber, which is wholly owned by Paine Webber Group Inc., a
publicly owned financial services holding company. On June 30, 1999, PaineWebber
or Mitchell Hutchins was the adviser or sub-adviser of investment
companies with 75 separate portfolios and aggregate assets of approximately
$47.2 billion.
ADVISORY FEES
The fund paid advisory and administration fees to PaineWebber for the most
recent fiscal year (that ended March 31, 1999) at the annual rate of 0.36% of
its average daily net assets.
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PaineWebber Cashfund
DIVIDENDS AND TAXES
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DIVIDENDS
The fund declares dividends daily and pays them monthly. The fund distributes
any net short-term capital gain annually, but may make more frequent
distributions if necessary to maintain its share price at $1.00.
You will receive dividends in additional shares of the fund unless you elect to
receive them in cash. Contact your Financial Advisor at PaineWebber or one of
its correspondent firms if you prefer to receive dividends in cash.
TAXES
The dividends that you receive from the fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. If you hold fund shares through a tax-exempt account or plan, such as
an IRA or 401(k) plan, dividends on your shares generally will not be subject to
tax.
The fund expects that its dividends will be taxed as ordinary income. The fund
will tell you how you should treat its dividends for tax purposes.
The fund is required to withhold 31% of all dividends payable to any individuals
and certain other noncorporate shareholders who
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
are otherwise subject to backup withholding.
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PaineWebber Cashfund
FINANCIAL HIGHLIGHTS
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The following financial highlights table is intended to help you understand the
fund's financial performance for the past 5 years. Certain information reflects
financial results for a single fund share. In the tables, 'total investment
return' represents the rate that an investor would have earned on an investment
in the fund (assuming reinvestment of all dividends).
The information in the financial highlights has been audited by Ernst & Young
LLP, independent auditors, whose report, along with the fund's financial
statements, are included in the fund's annual report to shareholders. The annual
report may be obtained without charge by calling 1-800-647-1568.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<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................................. 0.0487 0.0511 0.0482 0.0523 0.0433
Dividends from net investment income.................. (0.0487) (0.0511) (0.0482) (0.0523) (0.0433)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return(1)............................ 4.98% 5.23% 4.93% 5.36% 4.44%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratios/Supplemental Data:
Net assets, end of year (000's)....................... $6,112,559 $5,683,262 $5,260,468 $5,308,558 $3,700,678
Expenses to average net assets........................ 0.52% 0.56% 0.63% 0.60% 0.62%
Net investment income to average net assets........... 4.86% 5.11% 4.82% 5.24% 4.35%
</TABLE>
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(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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PaineWebber Cashfund
If you want more information about the fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the fund's investments is available in its annual
and semi-annual reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about the fund by contacting your Financial
Advisor. You may obtain free copies of annual and semi-annual reports and the
SAI by contacting the fund directly at 1-800-441-7756.
You may review and copy information about the fund, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You can get text-only copies of reports and other information about
the fund and information about the operations of the SEC's public reference
room:
For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
Free, from the SEC's Internet website at: http://www.sec.gov
PaineWebber Cashfund, Inc.
Investment Company Act File No. 811-2802
'c' 1999 PaineWebber Incorporated
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<PAGE>
PAINEWEBBER CASHFUND, INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
PaineWebber Cashfund, Inc. 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.
Portions of the fund's Annual Report to Shareholders are incorporated
by reference into this Statement of Additional Information ("SAI"). The Annual
Report accompanies this SAI. You may obtain an additional copy of the Annual
Report by calling toll-free 1-800-417-7756.
This SAI is not a prospectus and should be read only in conjunction
with the fund's current Prospectus, dated August 1, 1999. A copy of the
Prospectus may be obtained by calling any PaineWebber Financial Advisor or
correspondent firm or by calling toll-free 1-800-441-7756. This SAI is dated
August 1, 1999.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Fund and Its Investment Policies................................... 2
The Fund's Investments, Related Risks and Limitations.................. 2
Organization of the Fund; Directors and Officers and
Principal Holders of Securities..................................... 9
Investment Advisory, Administration and
Distribution Arrangements........................................... 16
Portfolio Transactions................................................. 18
Additional Information Regarding Redemptions;
Service Organizations............................................... 19
Valuation of Shares.................................................... 19
Performance Information................................................ 20
Taxes.................................................................. 22
Other Information...................................................... 23
Financial Statements................................................... 23
</TABLE>
<PAGE>
THE FUND AND ITS INVESTMENT POLICIES
The fund's investment objective may not be changed without shareholder
approval. Except where noted, the other investment policies of the fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that the fund will achieve its investment objective.
The fund's investment objective is to provide current income, stability
of principal and high liquidity. The fund invests in high quality money market
instruments that have, or are deemed to have, remaining maturities of 13 months
or less. Money market instruments are short-term debt obligations and similar
securities. These instruments include (1) U.S. and foreign government
securities, (2) obligations of U.S. and foreign banks, (3) commercial paper and
other short-term obligations of U.S. and foreign corporations, partnerships,
trusts and similar entities, (4) repurchase agreements regarding any of the
foregoing and (5) investment company securities. Money market instruments also
include longer term bonds that have variable interest rates or other special
features that give them the financial characteristics of short-term debt.
The fund may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks only if the institution has total assets at the time of purchase in excess
of $1.5 billion. The fund's investments in non-negotiable time deposits of these
institutions will be considered illiquid if they have maturities greater than
seven days.
The fund may purchase only those obligations that Mitchell Hutchins
determines, pursuant to procedures adopted by the board, present minimal credit
risks and are "First Tier Securities" as defined in Rule 2a-7 under the
Investment Company Act of 1940, as amended ("Investment Company Act"). A First
Tier Security is either (1) rated in the highest short-term rating category by
at least two nationally recognized statistical rating agencies ("rating
agencies"), (2) rated in the highest short-term rating category by a single
rating agency if only that rating agency has assigned the obligation a
short-term rating, (3) issued by an issuer that has received such a short-term
rating with respect to a security that is comparable in priority and security,
(4) subject to a guarantee rated in the highest short-term rating category or
issued by a guarantor that has received the highest short-term rating for a
comparable debt obligation or (5) unrated, but determined by Mitchell Hutchins
to be of comparable quality.
The fund generally may invest no more than 5% of its total assets in
the securities of a single issuer (other than U.S. government securities). The
fund may purchase only U.S. dollar-denominated obligations of foreign issuers.
The fund may invest up to 10% of its net assets in illiquid securities.
It may purchase securities on a when-issued or delayed delivery basis. The fund
may lend its portfolio securities to qualified broker-dealers or institutional
investors in an amount up to 33 1/3% of its total assets. The fund may borrow up
to 10% of its total assets for temporary purposes, including reverse repurchase
agreements. It may invest in the securities of other investment companies.
THE FUND'S INVESTMENTS, RELATED RISKS AND LIMITATIONS
The following supplements the information contained in the Prospectus
and above concerning the fund's investments, related risks and limitations.
Except as otherwise indicated in the Prospectus or the SAI, the fund has
established no policy limitations on its ability to use the investments or
techniques discussed in these documents.
YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER
SECURITIES. The yields on the money market instruments in which the fund invests
are dependent on a variety of factors, including general money market
conditions, conditions in the particular market for the obligation, the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue. The ratings assigned by rating agencies
represent their opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.
2
<PAGE>
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 rating agency, Mitchell
Hutchins and, in certain cases, the fund's board, will consider whether the fund
should continue to hold the obligation. A First Tier Security rated in the
highest short-term category at the time of purchase that subsequently receives a
rating below the highest rating category from a different rating agency may
continue to be considered a First Tier Security.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S.
Treasury (such as Treasury bills, notes or bonds) and obligations issued or
guaranteed as to principal and interest (but not as to market value) by the U.S.
government, its agencies or its instrumentalities. U.S. government securities
include mortgage-backed securities issued or guaranteed by government agencies
or government-sponsored enterprises. Other U.S. government securities may be
backed by the full faith and credit of the U.S. government or supported
primarily or solely by the creditworthiness of the government-related issuer or,
in the case of mortgage-backed securities, by pools of assets.
U.S. government securities also include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury,
which are traded independently under the Separate Trading of Registered Interest
and Principal of Securities ("STRIPS") program. Under the STRIPS programs, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury.
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The fund may
purchase commercial paper, which includes short-term obligations issued by
corporations, partnerships, trusts or other entities to finance short-term
credit needs. The fund also may purchase other types of non-convertible debt
obligations subject to maturity constraints imposed by Rule 2a-7 under the
Investment Company Act. Descriptions of certain types of short-term obligations
are provided below.
ASSET-BACKED SECURITIES. The fund may invest in securities that are
comprised of financial assets. Such assets may include motor vehicle and other
installment sales contracts, home equity loans, leases of various types of real
and personal property and receivables from revolving credit (credit card)
agreements or other types of financial assets. Such assets are securitized
through the use of trusts or special purpose corporations or other entities.
Payments or distributions of principal and interest may be guaranteed up to a
certain amount and for a certain time period by a letter of credit or pool
insurance policy issued by a financial institution unaffiliated with the issuer,
or other credit enhancements may be present. See "The Fund's Investments,
Related Risks and Limitations -- Credit and Liquidity Enhancements."
VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. The fund
may purchase variable and floating rate securities with remaining maturities in
excess of 13 months issued by U.S. government agencies or instrumentalities or
guaranteed by the U.S. government. In addition, the fund may purchase variable
and floating rate securities of other issuers with remaining maturities in
excess of 13 months 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 Securities
and Exchange Commission ("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 a specified
party, usually the issuer or a remarketing agent, prior to maturity. See "The
Fund's Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements."
Generally, the fund may exercise demand features (1) upon a default
under the terms of the underlying security, (2) to maintain its portfolio in
accordance with its investment objective and policies or applicable legal or
regulatory requirements or (3) as needed to provide liquidity to the fund in
order to meet redemption requests. The ability of a bank or other financial
institution to fulfill its obligations under a letter of credit, guarantee or
other liquidity arrangement might be affected by possible financial difficulties
of its borrowers, adverse interest rate or economic conditions, regulatory
limitations or other factors. The interest rate on floating rate or variable
rate securities ordinarily is readjusted on the basis of the prime rate of the
bank that originated the financing or some other index or published rate, such
as the 90-day U.S. Treasury bill rate, or is otherwise reset to reflect market
rates of interest. Generally, these
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<PAGE>
interest rate adjustments cause the market value of floating rate and variable
rate securities to fluctuate less than the market value of fixed rate
securities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The fund may invest in variable
amount master demand notes, which are unsecured redeemable obligations that
permit investment of varying amounts at fluctuating interest rates under a
direct agreement between the fund and an issuer. The principal amount of these
notes may be increased from time to time by the parties (subject to specified
maximums) or decreased by the fund or the issuer. These notes are payable on
demand (after any requisite notice period specified in related documentation)
and may or may not be rated.
INVESTING IN FOREIGN SECURITIES. The fund's investments in U.S.
dollar-denominated securities of foreign issuers may involve risks that are
different from investments in U.S. issuers. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect the payment of principal or interest
on the fund's investments. Additionally, there may be less publicly available
information about foreign issuers because they may not be subject to the same
regulatory requirements as domestic issuers.
CREDIT AND LIQUIDITY ENHANCEMENTS. The fund may invest in securities
that have credit or liquidity enhancements or the fund may purchase these types
of enhancements in the secondary market. Such enhancements may be structured as
demand features that permit the fund to sell the instrument at designated times
and prices. These credit and liquidity enhancements may be backed by letters of
credit or other instruments provided by banks or other financial institutions
whose credit standing affects the credit quality of the underlying obligation.
Changes in the credit quality of these financial institutions could cause losses
to the fund. The credit and liquidity enhancements may have conditions that
limit the ability of the fund to use them when the fund wishes to do so.
ILLIQUID SECURITIES. The term "illiquid securities" for purposes of the
Prospectus and SAI means securities that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount at which the fund
has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days and restricted securities other than
those Mitchell Hutchins has determined are liquid pursuant to guidelines
established by the board. To the extent the fund invests in illiquid securities,
it may not be able readily to liquidate such investments and may have to sell
other investments if necessary to raise cash to meet its obligations.
Restricted securities are not registered under the Securities Act of
1933, as amended ("Securities Act"), and may be sold only in privately
negotiated or other exempted transactions or after a registration statement
under the Securities Act has become effective. Where registration is required,
the fund may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the fund might obtain a less favorable price than prevailed when it
decided to sell.
However, not all restricted securities are illiquid. A large
institutional market has developed for many U.S. and foreign securities that are
not registered under the Securities Act. Institutional investors generally will
not seek to sell these instruments to the general public but instead will often
depend either on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Institutional markets for restricted securities also have developed as
a result of Rule 144A under the Securities Act, which establishes a "safe
harbor" from the registration requirements of that Act for resales of certain
securities to qualified institutional buyers. These 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.
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<PAGE>
The board has delegated the function of making day-to-day
determinations of liquidity to Mitchell Hutchins pursuant to guidelines approved
by the board. Mitchell Hutchins takes into account a number of factors in
reaching liquidity decisions, which may include (1) the frequency of trades for
the security, (2) the number of dealers that make quotes for the security, (3)
the nature of the security and how trading is effected (e.g., the time needed to
sell the security, how bids are solicited and the mechanics of transfer) and (4)
the existence of demand features or similar liquidity enhancements. Mitchell
Hutchins monitors the liquidity of restricted securities in the fund's portfolio
and reports periodically on such decisions to the board.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which
the fund purchases securities or other obligations from a bank or securities
dealer (or its affiliate) and simultaneously commits to resell them to the
counterparty at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased obligations. Securities or other obligations subject to repurchase
agreements may have maturities in excess of 13 months. The fund maintains
custody of the underlying obligations prior to their repurchase, either through
its regular custodian or through a special "tri-party" custodian or
sub-custodian that maintains separate accounts for both the fund and its
counterparty. Thus, the obligation of the counterparty to pay the repurchase
price on the date agreed to or upon demand is, in effect, secured by such
obligations. Repurchase agreements carry certain risks not associated with
direct investments in securities, including a possible decline in the market
value of the underlying obligations. If their value becomes less than the
repurchase price, plus any agreed-upon additional amount, the counterparty must
provide additional collateral so that at all times the collateral is at least
equal to the repurchase price plus any agreed-upon additional amount. The
difference between the total amount to be received upon repurchase of the
obligations and the price that was paid by the fund upon acquisition is accrued
as interest and included in its net investment income. Repurchase agreements
involving obligations other than U.S. government securities (such as commercial
paper 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 minimum credit risks.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve
the sale of securities held by the fund subject to its agreement to repurchase
the securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to the fund's
limitation on borrowings and may be entered into only with banks and securities
dealers. While a reverse repurchase agreement is outstanding, the fund will
maintain, in a segregated account with its custodian, cash or liquid securities,
marked to market daily, in an amount at least equal to its obligations under the
reverse repurchase agreement. See "The Fund's Investments, Related Risks and
Limitations -- Segregated Accounts."
Reverse repurchase agreements involve the risk that the buyer of the
securities sold by the fund might be unable to deliver them when the fund seeks
to repurchase. If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, such buyer or trustee or receiver may
receive an extension of time to determine whether to enforce that fund's
obligation to repurchase the securities, and the fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The fund may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery, i.e., for issuance or delivery to or by the fund later than
the normal settlement date for such securities at a stated price and yield. The
fund generally would not pay for such securities or start earning interest on
them until they are received. However, when the fund undertakes a when-issued or
delayed delivery obligation, it immediately assumes the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by the fund on a when-issued or delayed delivery basis may
result in the fund's incurring a loss or missing an opportunity to make an
alternative investment.
A security purchased on a when-issued or delayed delivery basis is
recorded as an asset on the commitment date and is subject to changes in market
value, generally based upon changes in the level of interest rates. Thus,
fluctuation in the value of the security from the time of the commitment date
will affect the fund's net asset value. When the fund commits to purchase
securities on a when-issued or delayed delivery basis, its custodian segregates
5
<PAGE>
assets to cover the amount of the commitment. See "The Fund's Investments,
Related Risks and Limitations--Segregated Accounts." The fund may sell the right
to acquire the security prior to delivery if Mitchell Hutchins deems it
advantageous to do so, which may result in a gain or loss to the fund.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The fund may invest in
securities of other money market funds, subject to Investment Company Act
limitations, which at present restrict these investments in the aggregate to no
more than 10% of the fund's total assets. The shares of other money market funds
are subject to the management fees and other expenses of those funds. At the
same time, the fund would continue to pay its own management fees and expenses
with respect to all its investments, including shares of other money market
funds. The fund may invest in the securities of other money market funds when
Mitchell Hutchins believes that (1) the amounts to be invested are too small or
are available too late in the day to be effectively invested in other money
market instruments, (2) shares of other money market funds otherwise would
provide a better return than direct investment in other money market instruments
or (3) such investments would enhance the fund's liquidity.
LENDING OF PORTFOLIO SECURITIES. The fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables the fund to earn additional
income, but could result in a loss or delay in recovering these securities. The
borrower of the fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, at least equal
to the market value of the securities loaned, plus accrued interest and
dividends. Acceptable collateral is limited to cash, U.S. government securities
and irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. The fund may reinvest any cash collateral in money market
investments or other short-term liquid investments. In determining whether to
lend securities to a particular broker-dealer or institutional investor,
Mitchell Hutchins will consider, and during the period of the loan will monitor,
all relevant facts and circumstances, including the creditworthiness of the
borrower. The fund will retain authority to terminate any of its loans at any
time. The fund may pay reasonable fees in connection with a loan and may pay the
borrower or placing broker a negotiated portion of the interest earned on the
reinvestment of cash held as collateral. The fund will receive amounts
equivalent to any interest, dividends or other distributions on the securities
loaned. The fund will regain record ownership of loaned securities to exercise
beneficial rights, such as voting and subscription rights, when regaining such
rights is considered to be in the fund's interest.
Pursuant to procedures adopted by the board governing the fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for the fund. The board also has authorized the payment of fees (including
fees calculated as a percentage of invested cash collateral) to PaineWebber for
these services. The board periodically reviews all portfolio securities loan
transactions for which PaineWebber acted as lending agent. PaineWebber also has
been approved as a borrower under the fund's securities lending program.
SEGREGATED ACCOUNTS. When the fund enters into certain transactions
that involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis or reverse
repurchase agreements, it will maintain with an approved custodian in a
segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the fund's obligation or commitment under such
transactions.
INVESTMENT LIMITATIONS OF THE FUND
FUNDAMENTAL LIMITATIONS. The following fundamental investment
limitations cannot be changed for the fund without the affirmative vote of the
lesser of (a) more than 50% of the outstanding shares of the fund or (b) 67% or
more of the shares of the fund present at a shareholders' meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy. If a percentage restriction is adhered to at the time of an investment or
transaction, later changes in percentage resulting from a change in values of
portfolio securities or amount of total assets will not be considered a
violation of any of the following limitations.
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<PAGE>
The fund will not:
(1) purchase securities of any one issuer if, as a result, more than 5%
of the fund's total assets would be invested in securities of that issuer or the
fund would own or hold more than 10% of the outstanding voting securities of
that issuer, except that up to 25% of the fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its agencies
and instrumentalities or to securities issued by other investment companies.
The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.
(2) purchase any security if, as a result of that purchase, 25% or more
of the fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to municipal securities or to
certificates of deposit and bankers' acceptances of domestic branches of U.S.
banks.
The following interpretations apply to, but are not a part of, this
fundamental restriction: (a) domestic and foreign banking will be considered to
be different industries; and (b) asset-backed securities will be grouped in
industries based upon their underlying assets and not treated as constituting a
single, separate industry.
(3) issue senior securities or borrow money, except as permitted under
the Investment Company Act and then not in excess of 33 1/3% of the fund's total
assets (including the amount of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the time of the issuance or
borrowing, except that the fund may borrow up to an additional 5% of its total
assets (not including the amount borrowed) for temporary or emergency purposes.
(4) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances or
similar instruments will not be considered the making of a loan.
The following interpretation applies to, but is not a part of, this
fundamental restriction: the fund's investments in master notes and similar
instruments will not be considered to be the making of a loan.
(5) engage in the business of underwriting securities of other issuers,
except to the extent that the fund might be considered an underwriter under the
federal securities laws in connection with its disposition of portfolio
securities.
(6) purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by interests
in real estate are not subject to this limitation, and except that the fund may
exercise rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an orderly
manner.
(7) purchase or sell physical commodities unless acquired as a result
of owning securities or other instruments, but the fund may purchase, sell or
enter into financial options and futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative instruments.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions
are non-fundamental and may be changed by the vote of the board without
shareholder approval.
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<PAGE>
The fund will not:
(1) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the fund may
make margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(2) engage in short sales of securities or maintain a short position,
except that the fund may (a) sell short "against the box" and (b) maintain short
positions in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments.
(3) purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act and except that this limitation
does not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of reorganization, consolidation, or merger 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 Investment Company Act.
(4) purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding.
ORGANIZATION OF THE FUND; DIRECTORS AND OFFICERS
AND PRINCIPAL HOLDERS OF SECURITIES
The fund was organized on January 20, 1978 as a Maryland corporation.
The fund has authority to issue 20 billion shares of common stock, par value
$.001 per share. The fund is governed by a board of directors, which oversees
its operations.
The directors and executive officers of the fund, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------ ----------------------------------------
<S> <C> <C>
Margo N. Alexander**; 52 Director and President Mrs. Alexander is chairman (since March
1999), chief executive officer and a
director of Mitchell Hutchins (since
January 1995), and an executive vice
president and a director of PaineWebber
(since March 1984). Mrs. Alexander is
president and a director or trustee of
32 investment companies for which
Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment
adviser.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------ ----------------------------------------
<S> <C> <C>
Richard Q. Armstrong; 64 Director Mr. Armstrong is chairman and principal of
R.Q.A. Enterprises R.Q.A. Enterprises (management consulting
One Old Church Road firm) (since April 1991 and principal
Unit #6 occupation since March 1995). Mr. Armstrong
Greenwich, CT 06830 was chairman of the board, chief executive
officer and co-owner of Adirondack Beverages
(producer and distributor of soft drinks and
sparkling/still waters) (October 1993-March
1995). He was a partner of The New England
Consulting Group (management consulting firm)
(December 1992-September 1993). He was
managing director of LVMH U.S. Corporation
(U.S. subsidiary of the French luxury goods
conglomerate, Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman of its
wine and spirits subsidiary, Schieffelin &
Somerset Company (1987-1991). Mr. Armstrong is
a director or trustee of 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.
E. Garrett Bewkes, Jr.**; 72 Director and Chairman of the Mr. Bewkes is a director of Paine Webber Group
Board of Directors Inc. ("PW Group") (holding company of
PaineWebber and Mitchell Hutchins). Prior to
December 1995, he was a consultant to PW
Group. Prior to 1988, he was chairman of the
board, president and chief executive officer
of American Bakeries Company. Mr. Bewkes is a
director of Interstate Bakeries Corporation.
Mr. Bewkes is a director or trustee of 35
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Richard R. Burt; 52 Director Mr. Burt is chairman of IEP Advisors, Inc.
1275 Pennsylvania Ave, N.W. (international investments and consulting
Washington, DC 20004 firm) (since March 1994) and a partner of
McKinsey & Company (management consulting
firm) (since 1991). He is also a director of
Archer-Daniels-Midland Co. (agricultural
commodities), Hollinger International Co.
(publishing), Homestake Mining Corp.,
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 31 investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------ ----------------------------------------
<S> <C> <C>
Mary C. Farrell**; 49 Director Ms. Farrell is a managing director, senior
investment strategist and member of the
Investment Policy Committee of PaineWebber.
Ms. Farrell joined PaineWebber in 1982. She is
a member of the Financial Women's Association
and Women's Economic Roundtable and appears as
a regular panelist on Wall $treet Week with
Louis Rukeyser. She also serves on the Board
of Overseers of New York University's Stern
School of Business. Ms. Farrell is a director
or trustee of 31 investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
Meyer Feldberg; 57 Director Mr. Feldberg is Dean and Professor of Management
Columbia University of the Graduate School of Business, Columbia
101 Uris Hall University. Prior to 1989, he was president of
New York, NY 10027 the Illinois Institute of Technology. Dean Feldberg
is also a director of Primedia, Inc., Federated
Department Stores, Inc. and Revlon, Inc. Dean
Feldberg is a director or trustee of 34 investment
companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
George W. Gowen; 69 Director Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to May
New York, NY 10017 1994, he was a partner in the law firm of
Fryer, Ross & Gowen. Mr. Gowen is a director
or trustee of 34 investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------ ----------------------------------------
<S> <C> <C>
Frederic V. Malek; 62 Director Mr. Malek is chairman of Thayer Capital
1455 Pennsylvania Ave, N.W. Partners (merchant bank). From January 1992 to
Suite 350 November 1992, he was campaign manager of
Washington, DC 20004 Bush-Quayle `92. From 1990 to 1992, he was
vice chairman and, from 1989 to 1990, he was
president of Northwest Airlines Inc., NWA Inc.
(holding company of Northwest Airlines Inc.)
and Wings Holdings Inc. (holding company of
NWA Inc.). Prior to 1989, he was employed by
the Marriott Corporation (hotels, restaurants,
airline catering and contract feeding), where
he most recently was an executive vice
president and president of Marriott Hotels and
Resorts. Mr. Malek is also a director of
American Management Systems, Inc. (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 31 investment companies
for which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as investment
adviser.
Carl W. Schafer; 63 Director Mr. Schafer is president of the Atlantic
66 Witherspoon Street, #1100 Foundation (charitable foundation supporting
Princeton, NJ 08542 mainly oceanographic exploration and
research). He is a director of Base Ten
Systems, Inc. (software), Roadway Express,
Inc. (trucking), The Guardian Group of Mutual
Funds, the Harding, Loevner Funds, Evans
Systems, Inc. (motor fuels, convenience store
and diversified company), Electronic Clearing
House, Inc. (financial transactions
processing), Frontier Oil Corporation and
Nutraceutix, Inc. (biotechnology company).
Prior to January 1993, he was chairman of the
Investment Advisory Committee of the Howard
Hughes Medical Institute. Mr. Schafer is a
director or trustee of 31 investment companies
for which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as investment
adviser.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------ ----------------------------------------
<S> <C> <C>
Brian M. Storms;** 44 Trustee Mr. Storms is president and chief operating
officer of Mitchell Hutchins (since March
1999). Prior to March 1999, he was president
of Prudential Investments (1996-1999). Prior
to joining Prudential, he was a managing
director at Fidelity Investments. Mr. Storms
is a director or trustee of 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.
John J. Lee; 30 Vice President and Mr. Lee is a vice president and a manager of
Assistant Treasurer the mutual fund finance department of Mitchell
Hutchins. Prior to September 1997, he was an
audit manager in the financial services
practice of Ernst & Young LLP. Mr. Lee is a
vice president and assistant treasurer of 32
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as an investment adviser.
Kevin J. Mahoney; 33 Vice President and Mr. Mahoney is a first vice president and a
Assistant Treasurer senior manager of the mutual fund finance
department of Mitchell Hutchins. From August
1996 through March 1999, he was the manager of
the mutual fund internal control group of
Salomon Smith Barney. Prior to August 1996, he
was an associate and assistant treasurer of
BlackRock Financial Management L.P. Mr.
Mahoney is a vice president and assistant
treasurer of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Dennis McCauley; 52 Vice President Mr. McCauley is a managing director and chief
investment officer--fixed income of Mitchell
Hutchins. Prior to December 1994, he was
director of fixed income investments of IBM
Corporation. Mr. McCauley is a vice president
of 22 investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Ann E. Moran; 41 Vice President and Ms. Moran is a vice president and a manager of
Assistant Treasurer the mutual fund finance department of Mitchell
Hutchins. Ms. Moran is a vice president and
assistant treasurer of 32 investment companies
for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------ ----------------------------------------
<S> <C> <C>
Dianne E. O'Donnell; 47 Vice President and Secretary Ms. O'Donnell is a senior vice president and
deputy general counsel of Mitchell Hutchins.
Ms. O'Donnell is a vice president and
secretary of 31 investment companies and a
vice president and assistant secretary of one
investment company for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Emil Polito; 38 Vice President Mr. Polito is a senior vice president and
director of operations and control for
Mitchell Hutchins. Mr. Polito is a vice
president of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Susan Ryan; 39 Vice President Ms. Ryan is a senior vice president and
portfolio manager of Mitchell Hutchins and has
been with Mitchell Hutchins since 1982. Ms.
Ryan is a vice president of five investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser
Victoria E. Schonfeld; 48 Vice President Ms. Schonfeld is a managing director and
general counsel of Mitchell Hutchins (since
May 1994) and a senior vice president of
PaineWebber (since July 1995). Ms. Schonfeld
is a vice president of 31 investment companies
and a vice president and secretary of one
investment company for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Paul H. Schubert; 36 Vice President and Treasurer Mr. Schubert is a senior vice president and
director of the mutual fund finance department
of Mitchell Hutchins. Mr. Schubert is a vice
president and treasurer of 32 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.
Barney A. Taglialatela; 38 Vice President and Mr. Taglialatela is a vice president and a
Assistant Treasurer manager of the mutual fund finance department
of Mitchell Hutchins. Prior to February 1995,
he was a manager of the mutual fund finance
division of Kidder Peabody Asset Management, Inc.
Mr. Taglialatela is a vice president and assistant
treasurer of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------ ----------------------------------------
<S> <C> <C>
Keith A. Weller; 37 Vice President and Mr. Weller is a first vice president and
Assistant Secretary associate general counsel of Mitchell
Hutchins. Prior to May 1995, he was an
attorney in private practice. Mr. Weller is a
vice president and assistant secretary of 31
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>
- -------------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Mrs. Alexander, Mr. Bewkes, Ms. Farrell and Mr. Storms are "interested
persons" of the fund as defined in the Investment Company Act by virtue of
their positions with Mitchell Hutchins, PaineWebber, and/or PW Group.
The fund pays each board member who is not an "interested person" of
the fund $1,000 annually and up to $150 for each board meeting and each separate
meeting of a board committee. 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 board members are reimbursed for any expenses incurred in attending
meetings. Board members and officers of the fund own in the aggregate less than
1% of the outstanding shares of the fund. Because PaineWebber and Mitchell
Hutchins perform substantially all the services necessary for the operation of
the fund, the fund requires no employees. No officer, director or employee of
Mitchell Hutchins or PaineWebber presently receives any compensation from the
fund for acting as a board member or officer.
14
<PAGE>
The table below includes certain information relating to the
compensation of the current board members who held office with the fund during
the fiscal year ended March 31, 1999 and the compensation of those board members
from all PaineWebber Funds during the 1998 calendar year.
COMPENSATION TABLE'D'
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION FROM THE FUND AND THE FUND
NAME OF PERSON, POSITION THE FUND* COMPLEX**
------------------------ ----------------- -----------------------
<S> <C> <C>
Richard Q. Armstrong,
Director................................... $ 1,935 $ 101,372
Richard R. Burt,
Director................................... 1,905 101,372
Meyer Feldberg,
Director................................... 2,098 116,222
George W. Gowen,
Director................................... 2,133 108,272
Frederic V. Malek,
Director................................... 1,935 101,372
Carl W. Schafer,
Director................................... 1,935 101,372
</TABLE>
- --------------------
'D' Only independent board members are compensated by the funds and identified
above; board members who are "interested persons," as defined by the
Investment Company Act, do not receive compensation from the funds.
* Represents fees paid to each board member for the fiscal year ended March
31, 1999.
** Represents total compensation paid during the calendar year ended December
31, 1998, to each board member by 31 investment companies (33 in the case of
Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or one
of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.
PRINCIPAL HOLDERS OF SECURITIES
PaineWebber, 1285 Avenue of the Americas, New York, New York 10019,
owned of record all of the fund's shares as of June 30, 1999. 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.
15
<PAGE>
INVESTMENT ADVISORY, ADMINISTRATION AND
DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY ARRANGEMENTS. 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>
AVERAGE DAILY NET ASSETS ANNUAL 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
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, 1999, 1998 and
1997, the Fund paid (or accrued) to PaineWebber investment advisory and
administrative fees in the amount of $20,847,408, $19,457,916 and $19,013,158,
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>
AVERAGE DAILY NET ASSETS ANNUAL 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, 1999, 1998 and 1997, PaineWebber paid (or accrued) to Mitchell Hutchins fees
in the amount of $1,786,515, $1,734,233 and $1,715,007, respectively.
16
<PAGE>
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 Sub-Advisory Contract. Under
the Sub-Administration Contract, during the fiscal years ended March 31, 1999,
1998 and 1997, PaineWebber paid (or accrued) to Mitchell Hutchins fees in the
amount of $2,382,967, $2,157,350 and $2,087,625, respectively.
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 Investment Company 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.
Prior to August 1, 1997, PaineWebber provided certain services to the
fund not otherwise provided by its transfer agent. Pursuant to a separate
agreement between PaineWebber and the fund relating to those services,
PaineWebber earned (or accrued) $1,002,742 for the period April 1, 1997 to July
31, 1997; and $2,893,343 for the fiscal year ended March 31, 1997. Effective
August 1, 1997, PFPC, the fund's transfer agent, (not the fund) pays PaineWebber
for certain transfer agency related services that PFPC has delegated to
PaineWebber.
17
<PAGE>
NET ASSETS. The following table shows the approximate net assets as of
June 30, 1999, sorted by category of investment objective, of the investment
companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An
investment company may fall into more than one of the categories below.
<TABLE>
<CAPTION>
NET ASSETS
INVESTMENT CATEGORY ($MIL)
------------------- ----------
<S> <C>
Domestic (excluding Money Market).................... $ 8,339.4
Global............................................... 4,552.9
Equity/Balanced...................................... 7,961.5
Fixed Income (excluding Money Market)................ 4,930.8
Taxable Fixed Income........................ 3,401.3
Tax-Free Fixed Income....................... 1,529.5
Money Market Funds................................... 34,337.7
</TABLE>
PERSONAL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to a code of ethics that describes
the fiduciary duty owed to shareholders of PaineWebber funds and other Mitchell
Hutchins advisory accounts by all Mitchell Hutchins' directors, officers and
employees, establishes procedures for personal investing and restricts certain
transactions. For example, employee accounts generally must be maintained at
PaineWebber, personal trades in most securities require pre-clearance and
short-term trading and participation in initial public offerings generally are
prohibited. In addition, the code of ethics puts restrictions on the timing of
personal investing in relation to trades by PaineWebber funds and other Mitchell
Hutchins advisory clients.
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 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 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 or Mitchell Hutchins 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 had no services been provided by the executing
dealer. Agency transactions in over-the-counter securities 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 a requirement that Mitchell Hutchins obtain multiple quotes
from dealers before executing the transaction on an agency basis. 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 that could be purchased for hard dollars.
Research services furnished by the dealers 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. Information and research received from dealers will
be in addition to, and not in lieu of, the services required to be performed by
Mitchell Hutchins under the Sub-Advisory Contract.
18
<PAGE>
During the last three fiscal years, the fund paid no brokerage
commissions. Therefore, the fund has not allocated any brokerage transactions
for research, analysis, advice and similar services.
Investment decisions for the fund and for other investment accounts
managed by Mitchell Hutchins are made independently of each other in light of
differing considerations for the various accounts. However, the same investment
decision may occasionally be made for the fund and one or more of such accounts.
In such cases, simultaneous transactions are inevitable. Purchases or sales are
then averaged as to price and allocated between the fund and such other
account(s) as to amount according to a formula deemed equitable to the fund and
such account(s). While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as the fund is concerned,
or upon its ability to complete its entire order, in other cases it is believed
that coordination and the ability to participate in volume transactions will be
beneficial to the fund.
As of March 31, 1999, the fund owned securities issued by the following
companies which are regular broker-dealers for the fund:
<TABLE>
<CAPTION>
ISSUER TYPE OF SECURITY VALUE
------ ---------------- -----
<S> <C> <C>
Bear Stearns Companies Incorporated short-term corporate obligation $ 80,300,000
Bear Stearns Companies Incorporated commercial paper 24,837,257
Credit Suisse First Boston Incorporated short-term corporate obligation 53,400,000
Goldman Sachs Group L.P. commercial paper 50,000,000
Merrill Lynch & Company Incorporated short-term corporate obligation 105,002,062
Morgan Stanley, Dean Witter & Company commercial paper 124,661,806
</TABLE>
ADDITIONAL INFORMATION REGARDING REDEMPTIONS;
SERVICE ORGANIZATIONS
ADDITIONAL REDEMPTION INFORMATION. The fund may suspend redemption
privileges or postpone the date of payment during any period (1) when the New
York Stock Exchange is closed or trading on the New York Stock Exchange is
restricted as determined by the SEC, (2) when an emergency exists, as defined by
the SEC, that makes it not reasonably practicable for the fund to dispose of
securities owned by it or fairly to determine the value of its assets or (3) as
the SEC may otherwise permit. The redemption price may be more or less than the
shareholder's cost, depending on the market value of the fund's portfolio at the
time; although the fund attempts to maintain a constant net asset value of $1.00
per share.
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.
SERVICE ORGANIZATIONS. The fund may authorize service organizations,
and their agents, to accept on its behalf purchase and redemption orders that
are in "good form" in accordance with the policies of those service
organizations The fund will be deemed to have received these purchase and
redemption orders when a service organization or its agent accepts them. Like
all customer orders, these orders will be priced based on the fund's net asset
value next computed after receipt of the order by the service organizations or
their agents. Service organizations may include retirement plan service
providers who aggregate purchase and redemption instructions received from
numerous retirement plans or plan participants.
VALUATION OF SHARES
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
19
<PAGE>
offices, and the New York City offices of PaineWebber and PaineWebber's bank,
The Bank of New York, are all open for business. One or more of these
institutions will be closed on the observance of the following holidays: New
Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veteran's 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 Investment
Company Act. To use amortized cost to value its portfolio securities, the fund
must adhere to certain conditions under the Rule relating to its investments,
some of which are discussed in this SAI. Amortized cost is an approximation of
market value of an instrument, whereby the difference between its acquisition
cost and value at maturity is amortized on a straight-line basis over the
remaining life of the instrument. The effect of changes in the market value of a
security as a result of fluctuating interest rates is not taken into account,
and thus the amortized cost method of valuation may result in the value of a
security being higher or lower than its actual market value. If a large number
of redemptions take place at a time when interest rates have increased, the fund
might have to sell portfolio securities prior to maturity and at a price that
might not be desirable.
The board has established procedures for the purpose of maintaining a
constant net asset value of $1.00 per share, which include a review of the
extent of any deviation of net asset value per share, based on available market
quotations, from the $1.00 amortized cost per share. If that deviation exceeds
1/2 of 1% for the fund, the board will promptly consider whether any action
should be initiated to eliminate or reduce material dilution or other unfair
results to shareholders. Such action may include redeeming shares in kind,
selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less and will not purchase any instrument
having, or deemed to have, a remaining maturity of more than 397 days, will
limit portfolio investments, including repurchase agreements, to those U.S.
dollar-denominated instruments that are of high quality under the Rule and that
Mitchell Hutchins, acting pursuant to the procedures, determines present minimal
credit risks, and will comply with certain reporting and recordkeeping
procedures. There is no assurance that constant net asset value per share will
be maintained. If amortized cost ceases to represent fair value per share, the
board will take appropriate action.
In determining the approximate market value of portfolio investments,
the fund may employ outside organizations, which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board.
PERFORMANCE INFORMATION
The fund's performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represent past performance and are not
intended to indicate future performance. The investment return will fluctuate.
TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in the fund's Performance Advertisements are
calculated according to the following formula:
<TABLE>
<S> <C> <C>
P(1 + T)'pp'n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase
shares of a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of that period.
</TABLE>
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the
20
<PAGE>
value of an initial $1,000 investment over the period. All dividends are assumed
to have been reinvested at net asset value.
The fund also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The fund calculates Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in fund shares
and assuming the reinvestment of all dividends distributions. The rate of return
is determined by subtracting the initial value of the investment from the ending
value and by dividing the remainder by the initial value.
The following table shows performance information for the fund's shares
outstanding for the periods indicated. All returns for periods of more than one
year are expressed as an average annual return.
<TABLE>
<S> <C>
Year ended March 31, 1999:
Standardized Return................. 4.98%
Five Years ended March 31, 1999:
Standardized Return................. 4.98%
Ten Years ended March 31, 1999:
Standardized Return................. 5.25%
</TABLE>
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)'pp'365/7] - 1
The fund may also advertise other performance data, which may consist
of the annual or cumulative return (including net short-term capital gain, if
any) earned on a hypothetical investment in the fund since it began operations
or for shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of the fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
The fund's yield and effective yield for the seven-day period ended
March 31, 1999 were 4.39% and 4.49%, 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 Financial Data, Inc. ("IBC"), Wiesenberger
Investment Companies Service ("Wiesenberger") or Investment Company Data Inc.
("ICD"), or with the performance of recognized stock
21
<PAGE>
and other indexes, including the Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average, the Morgan Stanley Capital
International World Index, the Lehman Brothers Treasury Bond Index, the Lehman
Brothers Government/Corporate Bond Index, the Salomon Brothers Government Bond
Index and changes in the Consumer Price Index as published by the U.S.
Department of Commerce. The fund also may refer in such materials to mutual fund
performance rankings and other data, such as comparative asset, expense and fee
levels, published by Lipper, CDA, IBC, Wiesenberger or ICD. Performance
Advertisements also may refer to discussions of the fund and comparative mutual
fund data and ratings reported in independent periodicals, including THE WALL
STREET JOURNAL, MONEY MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD,
BARRON'S, FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST
and THE KIPLINGER LETTERS. Comparisons in Performance Advertisements may be in
graphic form.
The fund may also compare its performance with the performance of bank
certificates of deposit ("CDs") as measured by the CDA Certificate of Deposit
Index and the Bank Rate Monitor National Index and the average of yields of CDs
of major banks published by Banxquotes'r' Money Markets. In comparing the fund's
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Bank accounts are insured in whole or in part by an agency of
the U.S. government and may offer a fixed rate of return. Fund shares are not
insured or guaranteed by the U.S. government and returns thereon will fluctuate.
While the fund seeks to maintain a stable net asset value of $1.00 per share,
there can be no assurance that it will be able to do so.
The fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on the fund's shares are reinvested, any future income of the
fund would increase the value, not only of the original fund investment, but
also of the additional fund shares received through reinvestment. As a result,
the value of the fund investment would increase more quickly than if dividends
had been paid in cash. The fund may also make available to shareholders a daily
accrual factor or "mil rate" representing dividends accrued to shareholder
accounts on a given day or days. Certain shareholders may find that this
information facilitates accounting or recordkeeping.
TAXES
To continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code, the fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gains, if any) and must meet several additional requirements. Among
these requirements are the following: (1) the fund must derive at least 90% of
its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities and certain other income; (2) at the close of each quarter of the
fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities that are limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the fund's total assets;
and (3) at the close of each quarter of the fund's taxable year, not more than
25% of the value of its total assets may be invested in securities (other than
U.S. government securities or the securities of other RICs) of any one issuer.
If the fund failed to qualify for treatment as a RIC for any taxable year, (a)
it would be taxed as an ordinary corporation on the full amount of its taxable
income for that year without being able to deduct the distributions it makes to
its shareholders and (b) the shareholders would treat all those distributions as
dividends (that is, ordinary income) to the extent of the fund's earnings and
profits. In addition, the fund could be required to recognize unrealized gains,
pay substantial taxes and interest, and make substantial distributions before
requalifying for RIC treatment.
OTHER INFORMATION
VOTING RIGHTS. Shareholders of the fund are entitled to one vote for
each full share held and fractional votes for fractional shares held. Voting
rights are not cumulative, and as a result the holders of more than 50% of all
the shares of the fund may elect all its board members.
22
<PAGE>
The fund does not hold annual 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.
CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. State
Street Bank and Trust Company, located at One Heritage Drive, North Quincy,
Massachusetts 02171, serves as custodian and recordkeeping agent for the fund.
PFPC Inc., a subsidiary of PNC Bank, N.A., serves as the fund's transfer and
dividend disbursing agent. It is located at 400 Bellevue Parkway, Wilmington, DE
19809.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the fund.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, serves as independent auditors for the fund.
FINANCIAL STATEMENTS
The fund's Annual Report to Shareholders for its last fiscal year ended March
31, 1999 is a separate document supplied with this SAI, and the financial
statements, accompanying notes and report of independent auditors appearing
therein are incorporated herein by this reference.
23
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION. THE FUND AND ITS
DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN
OFFER TO SELL SHARES OF THE FUND IN ANY JURISDICTION WHERE THE FUND OR ITS
DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.
-----------
PaineWebber
Cashfund, Inc.
------------------------------------------
Statement of Additional Information
August 1, 1999
------------------------------------------
PAINEWEBBER
'c' 1999 PaineWebber Incorporated
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(1) Restated Articles of Incorporation(1)
(2) Restated By-Laws(2)
(3) Instruments defining the rights of holders of Registrant's
common stock(3)
(4) (a) Investment Advisory and Administration and
Distribution Contract between Registrant and
PaineWebber(2)
(b) Sub-Advisory Contract between PaineWebber and
Mitchell Hutchins(2)
(c) Sub-Administration Contract between PaineWebber and
Mitchell Hutchins(2)
(5) Underwriting Contract - See Exhibit 4(a)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Contract(2)
(8) Transfer Agency Agreement(2)
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Auditors'
consent (filed herewith)
(11) Financial statements omitted from Part B - none
(12) Letter of investment intent(2)
(13) Plan pursuant to Rule 12b-1 - none
(14) and
(27) Financial Data Schedule (not applicable)
(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 Post-Effective Amendment No. 37 to the
registration statement, SEC File No. 2-60655, filed July 31, 1998.
(3) 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
MITCHELL HUTCHINS INSTITUTIONAL SERIES
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>
Name Position With Registrant Position and Offices With Underwriter
- ---- ------------------------ -------------------------------------
<S> <C> <C>
Margo N. Alexander Director and President Chairman, Chief Executive Officer and a
Director of Mitchell Hutchins and Executive
Vice President and a Director of PaineWebber
Mary C. Farrell Director Managing Director, Senior Investment
Strategist and member of the 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 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 29th day of July, 1999.
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 29, 1999
- ---------------------------- (Chief Executive Officer)
Margo N. Alexander*
/s/ E. Garrett Bewkes, Jr. Director and Chairman July 29, 1999
- ---------------------------- of the Board of Directors
E. Garrett Bewkes, Jr.*
/s/ Richard Q. Armstrong Director July 29, 1999
- ----------------------------
Richard Q. Armstrong*
/s/ Richard R. Burt Director July 29, 1999
- ----------------------------
Richard R. Burt*
/s/ Mary C. Farrell Director July 29, 1999
- ----------------------------
Mary C. Farrell*
/s/ Meyer Feldberg Director July 29, 1999
- ----------------------------
Meyer Feldberg*
/s/ George W. Gowen Director July 29, 1999
- ----------------------------
George W. Gowen*
/s/ Frederic V. Malek Director July 29, 1999
- ----------------------------
Frederic V. Malek*
/s/ Carl W. Schafer Director July 29, 1999
- ----------------------------
Carl W. Schafer*
/s/ Brian M. Storms Director July 29, 1999
- ----------------------------
Brian M. Storms**
/s/ Paul H. Schubert Vice President and Treasurer July 29, 1999
- ---------------------------- (Chief Financial and
Paul H. Schubert Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES (Continued)
* Signature affixed by Elinor W. Gammon pursuant to powers of attorney
dated May 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.
** Signature affixed by Elinor W. Gammon pursuant to power of attorney
dated May 14, 1999 and filed herewith as Exhibit 16.
<PAGE>
PAINEWEBBER CASHFUND, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
(1) Restated Articles of Incorporation(1)
(2) Restated By-Laws(2)
(3) Instruments defining the rights of holders of Registrant's
common stock(3)
(4) (a) Investment Advisory and Administration and
Distribution Contract between Registrant and
PaineWebber(2)
(b) Sub-Advisory Contract between PaineWebber and
Mitchell Hutchins(2)
(c) Sub-Administration Contract between PaineWebber and
Mitchell Hutchins(2)
(5) Underwriting Contract - See Exhibit 4(a)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Contract(2)
(8) Transfer Agency Agreement(2)
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Auditors' consent
(filed herewith)
(11) Financial statements omitted from Part B - none
(12) Letter of investment intent(2)
(13) Plan pursuant to Rule 12b-1 - none
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan pursuant to Rule 18f-3 - None
</TABLE>
- --------------
(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 Post-Effective Amendment No. 37 to the
registration statement, SEC File No. 2-60655, filed July 31, 1998.
(3) 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.
STATEMENT OF DIFFERENCES
------------------------
The copyright symbol shall be expressed as ........................... 'c'
The registered trademark symbol shall be expressed as ................ 'r'
The dagger symbol shall be expressed as .............................. 'D'
Characters normally expressed as superscript shall be preceded by .... 'pp'
<PAGE>
Exhibit No. 9
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE 202-778-9000
July 29, 1999
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 that may be issued during the time that Post-Effective Amendment No.
39 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) of 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, the Shares will
have been validly issued, fully paid and non-assessable, provided that (1) the
Shares are 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, and (2) the aggregate number of Shares issued, when
combined with all other then-outstanding shares, does not exceed the number of
shares that the Fund is authorized to issue.
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 14,
1999 on PaineWebber Cashfund, Inc., in this Registration Statement (Form N-1A
No. 2-60655) of PaineWebber Cashfund, Inc.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
July 26, 1999
