As filed with the Securities and Exchange Commission on May 28, 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. 38 [ X ]
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REGISTRATION STATEMENT UNDER INVESTMENT COMPANY ACT OF 1940 [ X ]
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Amendment No. 34 [ X ]
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PAINEWEBBER CASHFUND, INC.
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, ESQ.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, ESQ.
BENJAMIN J. HASKIN, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.
It is proposed that this filing will become effective:
[___] Immediately upon filing pursuant to Rule 485(b)
[___] On __________ pursuant to Rule 485(b)
[___] 60 days after filing pursuant to Rule 485(a)(1)
[ X ] On August 1, 1999, 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.
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Painewebber Cashfund
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PROSPECTUS
AUGUST 1, 1999
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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
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CONTENTS
THE FUND
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What every investor 3 Cashfund
should know about 6 More About Risks and Investment Strategies
the fund
YOUR INVESTMENT
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Information for 7 Managing Your Fund Account
managing your fund 7 Buying Shares
account 7 Selling Shares
8 Pricing and Valuation
ADDITIONAL INFORMATION
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Additional important 9 Management
information about 10 Dividends and Taxes
the fund 11 Financial Highlights
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Where to learn more Back Cover
about the fund
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The fund is not a complete or
balanced investment program.
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Painewebber Cashfund
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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. It seeks to maintain a stable price of $1.00
per share. To do this, the fund invests in a diversified portfolio of high
quality, short-term money market instruments. These investments include
o commercial paper and other short-term obligations of corporations,
partnerships, trusts and other entities
o U.S. government securities
o certificates of deposit and other bank obligations
o repurchase agreements
The fund may invest in foreign money market instruments, but only if they are
denominated in U.S. dollars. The fund's investments may include variable and
floating rate securities and participation interests.
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 credit quality and market interest rates. Because the fund buys and sells its
portfolio securities based on considerations of safety of principal and
liquidity, the fund may not buy securities that pay the highest yield. The fund
may attempt to increase its yield by trading to take advantage of short-term
market variations.
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.
While the fund's investments in money market instruments generally are
considered to have low risk of loss of principal or interest, they are not
completely risk free. Issuers may not make principal or interest payments when
due. The fund is subject to interest rate risk, which means that the value of
its investments generally will fall when interest rates rise. When short-term
interest rates rise, its yield will tend to lag behind prevailing money market
rates. The fund's investments in money market instruments of foreign issuers may
present greater risk than investments in the money market instruments of U.S.
issuers.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies" under the
following headings:
o Credit Risk
o Interest Rate Risk
o 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).
3
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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.
CASHFUND -- TOTAL RETURN
[INSERT BAR CHART]
NOTE: Calendar year total return as of June 30, 1999- %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
One Year
Five Years
Ten Years
Life of Fund (5/1/78)
4
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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)
Maximum Sales Charge (Load)
Imposed on Purchases (as a % None
of offering price)
Maximum Contingent Deferred
Sales Charge (Load) (as a % of None
offering price)
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
Management Fees
Distribution and/or Service
(12b-1) Fees None
Other Expenses
Total Annual Fund Operating
Expenses
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
5
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Painewebber Cashfund
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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. If a ratings agency downgrades the
rating of a money market instrument or the instrument otherwise is considered
subject to greater credit risk, the fund may have difficulty selling the
instrument at the time and price the fund desires.
INTEREST RATE RISK. The value of money market instruments generally can be
expected to fall when interest rates rise and to rise when 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. In addition, changes in the fund's yield
will tend to lag behind changes in prevailing short-term interest rates. This
means that when interest rates are rising, the fund's income will tend to
increase more slowly than money market interest rates. Similarly, when interest
rates are falling, the fund's income generally will tend to fall more slowly.
FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
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 In addition, Mitchell Hutchins may employ a number of
professional money management techniques to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. These
techniques include varying the composition and the weighted average maturity of
the portfolio based upon its assessment of the relative values of various money
market instruments and future interest rate patterns. Mitchell Hutchins also may
seek to improve the fund's yield by purchasing or selling securities to take
advantage of yield disparities among similar or dissimilar money market
instruments that regularly occur in the money markets.
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Painewebber Cashfund
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YOUR INVESTMENT
MANAGING YOUR FUND ACCOUNT
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BUYING SHARES
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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.
BUYING SHARES AUTOMATICALLY
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 PaineWebber 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 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.
MINIMUM INVESTMENTS:
To open an account ................................... $1,000
To add to an account ................................. $ 500
The minimum to add to an account is waived for automatic purchases made with
free cash credit balances in your PaineWebber brokerage account, as described
above.
The fund may change its minimum investment requirements at any time.
7
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SELLING SHARES
You can sell your fund shares at any time. You may sell your shares by
contacting your Financial Advisor in person or by telephone or mail. You may
also sell your shares by wire or check. Your fund shares will also be redeemed
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 redemption requests in person or by telephone or mail to your
PaineWebber 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.
7A
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If you send an order to sell your shares by mail to PaineWebber or its
correspondent firms, your request must include:
o Your name and address;
o The fund's name;
o Your account number;
o The dollar amount or number of shares you want to sell; and
o 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.
SELLING BY WIRE
If you sell $5,000 or more of your fund shares, you may request that the sales
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 PaineWebber Financial Advisor. If
PaineWebber's New York City offices receive your wire sales order prior to 12:00
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.
SELLING BY CHECK
You may sell $500 or more of your shares by using a check drawn on your fund
account (minimum $500). 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 the fund shares is likely to change each
day.
PaineWebber may impose charges 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.
8
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PRICING AND VALUATION
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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 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.
8A
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Painewebber Cashfund
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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 __ separate portfolios and aggregate assets of approximately $__._ 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 [ ]% of its
average daily net assets.
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Painewebber Cashfund
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DIVIDENDS AND TAXES
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 prices at $1.00 per share.
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 corresponding 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 primarily as ordinary income.
The fund will tell you how you should treat its dividends for tax purposes.
10
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PaineWebber Cashfund
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FINANCIAL HIGHLIGHTS
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 accountants, 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.
CASHFUND
[FINANCIAL HIGHLIGHTS TO BE PROVIDED]
11
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[BACK COVER]
TICKER SYMBOL: 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 the fund's
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 PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting the fund directly at 1-800-647-1568.
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:
o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov
PaineWebber Cashfund, Inc.
Investment Company Act File No. 811-2802
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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. The Annual Report
accompanies this Statement of Additional Information. You may obtain an
additional copy of the fund's Annual Report by calling toll-free 1-800-647-1568.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the fund's current Prospectus, dated August 1,
1999. A copy of the Prospectus may be obtained by calling any PaineWebber
Financial Advisor or correspondent firm or by calling toll-free 1-800-647-1568.
This Statement of Additional Information is dated August 1, 1999.
TABLE OF CONTENTS
PAGE
The Fund and Its Investment Policies............ 2
The Fund's Investments, Related Risks and
Limitations.....................................
Organization of the Fund; Directors and Officers
and Principal Holders of Securities..........
Investment Advisory and Distribution Arrangements
Portfolio Transactions..........................
Additional Purchase and Redemption Information;
Service Organizations........................
Valuation of Shares.............................
Performance Information.........................
Taxes...........................................
Other Information...............................
Financial Statements............................
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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. These instruments include (1) U.S. government securities, (2)
obligations of U.S. and foreign banks, (3) commercial paper and other short-term
obligations of U.S. and foreign companies, governments and similar entities,
including variable and floating rate securities and participation interests and
(4) repurchase agreements regarding any of the foregoing. The fund also may
purchase participation interests in any of the securities in which it is
permitted to invest. Participation interests are pro rata interests in
securities held by others. The fund maintains a dollar-weighted average
portfolio maturity of 90 days or less.
The fund may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks having total assets at the time of purchase in excess of $1.5 billion. The
fund may invest in non-negotiable time deposits of U.S. banks, savings
associations and similar depository institutions only if the institution has
total assets at the time of purchase in excess of $1.5 billion and the time
deposits have a maturity of seven days or less.
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.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33-1/3% of its total assets. The fund
may borrow up to 10% of its total assets for temporary purposes, including
reverse repurchase agreements involving up to 5% of its total assets. The fund
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 Statement of Additional
Information, 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
(such as U.S. government securities, commercial paper and bank obligations) are
dependent on a variety of factors, including general money market conditions,
conditions in the particular market for the obligation, the financial condition
of the issuer, the size of the offering, the maturity of the obligation and the
ratings of the issue. The ratings assigned by rating agencies represent their
opinions as to the quality of the obligations they undertake to rate. Ratings,
2
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however, are general and are not absolute standards of quality. Consequently,
obligations with the same rating, maturity and interest rate may have different
market prices.
Subsequent to its purchase by the fund, an issue may cease to be rated or
its rating may be reduced. If a security in the fund's portfolio ceases to be a
First Tier Security (as defined above) 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.
ASSET-BACKED SECURITIES. The fund may invest in securities that are
comprised of financial assets. Such assets may include a motor vehicle
installment sales contracts, 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, 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.
Changes in the credit quality of institutions providing these credit
enhancements could cause losses to the fund and affect its share price.
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
issuer, usually the issuer or a remarketing agent, prior to maturity. The demand
feature may be backed by letters of credit or other liquidity support
arrangements provided by banks or other financial institutions whose credit
standing affects the credit quality of the obligations. Changes in the credit
quality of these institutions could cause losses to the fund and affect its
share price.
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 interest rate adjustments cause the market
3
<PAGE>
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 and may or may not be rated.
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 non-convertible debt obligations with no more than 397
days remaining to maturity at the time of purchase. The fund may invest in
funding agreements and guaranteed investment contracts issued by insurance
companies which are obligations of the insurance company or its separate
account. Funding agreements permit the investment of varying amounts under a
direct agreement between the fund and an insurance company and provide that the
principal amount may be increased from time to time (subject to specified
maximums) by agreement of the parties or decreased by either party. The fund
expects to invest primarily in funding agreements and guaranteed investment
contracts with floating or variable rates that are subject to demand features
that permit the fund to tender its interest back to the issuer. To the extent
the fund invests in funding agreements and guaranteed investment contracts that
either do not have demand features or have demand features that may be exercised
more than seven days after the date of acquisition, these investments will be
subject to the fund's limitation on investments in illiquid securities. See "The
Fund's Investments, Related Risks and Limitations -- Illiquid Securities."
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.
ILLIQUID SECURITIES. The term "illiquid securities" for purposes of the
Prospectus and Statement of Additional Information 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.
4
<PAGE>
Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
the fund, however, could affect adversely the marketability of such portfolio
securities, and the fund might be unable to dispose of such securities promptly
or at favorable prices.
The board has delegated the function of making day-to-day determinations
of liquidity to Mitchell Hutchins pursuant to guidelines approved by the board.
Mitchell Hutchins takes into account a number of factors in reaching liquidity
decisions, which may include (1) the frequency of trades for the security, (2)
the number of dealers that make quotes for the security, (3) the number of
dealers that have undertaken to make a market in the security, (4) the number of
other potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how bids are solicited and
the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities in the fund's portfolio and reports periodically on such
decisions to the board.
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 in accordance with guidelines established by the
board.
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.
5
<PAGE>
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 a fund's net asset value. When the fund commits to purchase
securities on a when-issued or delayed delivery basis, its custodian segregates
assets to cover the amount of the commitment. See "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 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.
6
<PAGE>
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.
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, funding
agreements 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
7
<PAGE>
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.
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 the
fund's operations.
The directors and executive officers of the fund, their ages, business
addresses and principal occupations during the past five years are:
8
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER
---------------------- ------------------ --------------------------
DIRECTORSHIPS
-------------
Margo N. Alexander**; 52 Director and Mrs. Alexander is chairman
President (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.
Richard Q. Armstrong; 64 Director Mr. Armstrong is chairman and
R.Q.A. Enterprises principal of R.Q.A. Enterprises
One Old Church Road (management consulting firm)
Unit #6 (since April 1991 and principal
Greenwich, CT 06830 occupation since March 1995).
Mr. Armstrong 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, Director and Mr. Bewkes is a director of
Jr.**; 72 Chairman of the Paine Webber Group Inc. ("PW
Board of Directors 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.
9
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER
---------------------- ------------------ --------------------------
DIRECTORSHIPS
-------------
Richard R. Burt; 52 Director Mr. Burt is chairman of IEP
1275 Pennsylvania Ave, Advisors, Inc. (international
N.W. 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.
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
Columbia University Professor of Management of the
101 Uris Hall Graduate School of Business,
New York, NY 10027 Columbia University. Prior to
1989, he was president of 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
666 Third Avenue law firm of Dunnington,
New York, NY 10017 Bartholow & Miller. Prior to
May 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.
10
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER
---------------------- ------------------ --------------------------
DIRECTORSHIPS
-------------
Frederic V. Malek; 62 Director Mr. Malek is chairman of Thayer
1455 Pennsylvania Ave, Capital Partners (merchant
N.W. bank). From January 1992 to
Suite 350 November 1992, he was campaign
Washington, DC 20004 manager of Bush-Quayle `92.
From 1990 to 1992, he was vice
chairman and, from 1989 to
1990, he was president of
Northwest Airlines Inc., NWA
Inc. (holding company of
Northwest Airlines Inc.) and
Wings Holdings Inc. (holding
company of NWA Inc.). Prior to
1989, he was employed by the
Marriott Corporation (hotels,
restaurants, airline catering
and contract feeding), where he
most recently was an executive
vice president and president
of Marriott Hotels and Resorts.
Mr. Malek is also a director of
American Management Systems,
Inc. (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
66 Witherspoon Street, Atlantic Foundation (charitable
#1100 foundation supporting mainly
Princeton, NJ 08542 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.
11
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER
---------------------- ------------------ --------------------------
DIRECTORSHIPS
-------------
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
Assistant Treasurer a manager of the mutual fund
finance department of Mitchell
Hutchins. Prior to September
1997, he was an audit manager in
the financial services practice
of Ernst & Young LLP. Mr. Lee is
a vice president and assistant
treasurer of 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
Assistant Treasurer president and a senior manager
of the mutual fund finance
department of Mitchell
Hutchins. From August 1996
through March 1999, he was the
manager of the mutual fund
internal control group of
Salomon Smith Barney. Prior to
August 1996, he was an
associate and assistant
treasurer of BlackRock
Financial Management L.P. Mr.
Mahoney is a vice president and
assistant treasurer of 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
Assistant Treasurer and a manager of 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.
12
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER
---------------------- ------------------ --------------------------
DIRECTORSHIPS
-------------
Dianne E. O'Donnell; 47 Vice President and Ms. O'Donnell is a senior vice
Secretary 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 Mr. Schubert is a senior vice
Treasurer 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
Assistant Treasurer president and a manager of the
mutual fund finance department
of Mitchell Hutchins. Prior to
February 1995, he was a manager
of the mutual fund finance
division of Kidder Peabody
Asset Management, Inc. Mr.
Taglialatela is a vice
president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
13
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH FUND BUSINESS EXPERIENCE; OTHER
---------------------- ------------------ --------------------------
DIRECTORSHIPS
-------------
Keith A. Weller; 37 Vice President and Mr. Weller is a first vice
Assistant Secretary president and 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.
- -------------
* 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 of 1940 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 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 any class 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.
The table below includes certain information relating to the compensation
of the current board members who held office with the fund or with other
PaineWebber funds during the fund's fiscal year ended March 31, 1999.
COMPENSATION TABLE+
AGGREGATE TOTAL COMPENSATION
--------- ------------------
COMPENSATION FROM THE FUND AND
------------ -----------------
NAME OF PERSON, POSITION FROM THE FUND* THE FUND COMPLEX**
------------------------ ---------------------------------
Richard Q. Armstrong,
Director
Richard R. Burt,
Director
Meyer Feldberg,
Director
George W. Gowen,
Director
Frederic V. Malek,
Director
Carl W. Schafer,
Director
- --------------------
+ Only independent board members are compensated by the fund and identified
above; board members who are "interested persons," as defined by the
Investment Company Act, do not receive compensation.
* Represents fees paid to each board member for the fiscal year ended March 31,
1999.
14
<PAGE>
** 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
As of __________, 1999, the fund's records showed no shareholders as
owning 5% or more of any class of the fund's shares.
INVESTMENT ADVISORY 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:
Annual
Average Daily Net Assets Rate
- ------------------------ ----
Up to $500 million........................................................0.500%
In excess of $500 million up to $1.0 billion .............................0.425
In excess of $1.0 billion up to $1.5 billion..............................0.390
In excess of $1.5 billion up to $2.0 billion..............................0.380
In excess of $2.0 billion up to $2.5 billion..............................0.350
In excess of $2.5 billion up to $3.5 billion..............................0.345
In excess of $3.5 billion up to $4.0 billion..............................0.325
In excess of $4.0 billion up to $4.5 billion..............................0.315
In excess of $4.5 billion up to $5.0 billion..............................0.300
In excess of $5.0 billion up to $5.5 billion..............................0.290
In excess of $5.5 billion.................................................0.280
Services provided by PaineWebber under the PaineWebber Contract, some of
which may be delegated to Mitchell Hutchins, as discussed below, include the
provision of a continuous investment program for the Fund and supervision of all
matters relating to the operation of the Fund. Under the PaineWebber Contract,
PaineWebber is also obligated to distribute the Fund's shares on an agency, or
"best efforts," basis under which the Fund only issues such shares as are
actually sold. Shares of the Fund are offered continuously. Under the
PaineWebber Contract, during the fiscal years ended March 31, 1999, 1998 and
1997, the Fund paid (or accrued) to PaineWebber investment advisory and
administrative fees in the amount of $___________, $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 the 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:
Annual
Average Daily Net Assets Rate
- ------------------------ ----
Up to $500 million ......................................................0.0900%
In excess of $500 million up to $1.0 billion.............................0.0500
In excess of $1.0 billion up to $1.5 billion.............................0.0400
In excess of $1.5 billion up to $2.0 billion.............................0.0300
In excess of $2.0 billion up to $2.5 billion.............................0.0250
In excess of $2.5 billion up to $3.5 billion.............................0.0250
15
<PAGE>
Annual
Average Daily Net Assets Rate
- ------------------------ ----
In excess of $3.5 billion up to $4.0 billion.......................0.0200
In excess of $4.5 billion up to $5.0 billion.......................0.0125
In excess of $5.5 billion..........................................0.0100
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-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
$1,734,233 and $1,715,007, respectively.
Prior to August 1, 1997, PaineWebber provided certain services to the Fund
not otherwise provided by the Fund's transfer agent. Pursuant to an agreement
relating to those services, PaineWebber earned (or accrued) $1,002,742 for the
period April 1, 1997 to July 31, 1997; $2,893,343 for the fiscal year ended
March 31, 1997; and $2,762,836 for the fiscal year ended March 31, 1996.
Effective August 1, 1997, PFPC, the Fund's transfer agent, (not the Fund) pays
PaineWebber for certain transfer agency related services that PFPC has delegated
to PaineWebber.
Each of the advisory, sub-advisory and sub-administration contracts noted
above provides that PaineWebber or Mitchell Hutchins, as the case may be, shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of the contract, except
a loss resulting from willful misfeasance, bad faith or gross negligence on the
part of PaineWebber or Mitchell Hutchins, in the performance of its duties or
from reckless disregard of its duties and obligations thereunder. The
PaineWebber Contract also provides that PaineWebber shall not be liable for
losses arising out of the receipt by PaineWebber of inadequate consideration in
connection with an order to purchase Fund shares whether in the form of a
fraudulent check, draft or wire; a check returned for insufficient funds; or any
other such inadequate consideration (hereinafter "check losses"), except under
the circumstances noted above, but the Fund shall not be liable for check losses
resulting from negligence on the part of PaineWebber. Each of the advisory,
sub-advisory and sub-administration contracts is terminable by vote of the
Fund's board or by the holders of a majority of the outstanding voting
securities of the Fund at any time without penalty, on 60 days' written notice
to PaineWebber or Mitchell Hutchins, as the case may be. Each of the advisory
and sub-advisory contracts may also be terminated by PaineWebber or Mitchell
Hutchins, as the case may be, on 90 days' written notice to the Fund. The
sub-administration contract may also be terminated by Mitchell Hutchins on 60
days' written notice to the Fund. Each of the advisory, sub-advisory and
sub-administration contracts terminates automatically upon its assignment.
Under the terms of the PaineWebber Contract, the Fund bears all expenses
incurred in its operation that are not specifically assumed by PaineWebber.
Expenses borne by the Fund include the following: (a) the cost (including
brokerage commissions, if any) of securities purchased or sold by the Fund or
any losses incurred in connection therewith; (b) fees payable to and expenses
incurred on behalf of the Fund by PaineWebber; (c) filing fees and expenses
relating to the registration and qualification of the Fund's shares under
federal or state securities laws and maintaining such registrations and
qualifications; (d) fees and salaries payable to the Fund's directors and
officers who are not officers or employees of PaineWebber or interested persons
(as defined in the 1940 Act) of any investment adviser or underwriter of the
Fund ("Independent Directors"); (e) taxes (including any income or franchise
taxes) and governmental fees; (f) costs of any liability, uncollectible items of
deposit and other insurance or fidelity bonds; (g) any costs, expenses or losses
arising out of any liability of or claim for damage or other relief asserted
against the Fund for violation of any law; (h) legal, accounting and auditing
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.
16
<PAGE>
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
$2,893,343 for the fiscal year ended March 31, 1997. Effective August 1, 1997,
PFPC, the Fund's transfer agent, (not the fund) pays PaineWebber for certain
transfer agency related services that PFPC has delegated to PaineWebber.
NET ASSETS. The following table shows the approximate net assets as of
_________, 1999, sorted by category of investment objective, of the investment
companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An
investment company may fall into more than one of the categories below.
Net Assets
Investment Category ($mil)
------------------- ------
Domestic (excluding Money Market).....................................
Global................................................................
Equity/Balanced.......................................................
Fixed Income (excluding Money Market).................................
Taxable Fixed Income............................................
Tax-Free Fixed Income...........................................
Money Market Funds....................................................
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 mutual funds and other
Mitchell Hutchins advisory accounts by all Mitchell Hutchins' directors,
officers and employees, establishes procedures for personal investing and
restricts certain transactions. For example, employee accounts generally must be
maintained at PaineWebber, personal trades in most securities require
pre-clearance and short-term trading and participation in initial public
offerings generally are prohibited. In addition, the code of ethics puts
restrictions on the timing of personal investing in relation to trades by
PaineWebber Funds and other Mitchell Hutchins advisory clients.
PORTFOLIO TRANSACTIONS
The 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 on
behalf of the fund 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. 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 it advises 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.
During the last [three] fiscal years, the fund paid [no] brokerage
commissions.
Mitchell Hutchins may engage in agency transactions in over-the-counter
debt securities in return for research and execution services. These
17
<PAGE>
transactions are entered into only in compliance with procedures ensuring that
the transaction (including commissions) is at least as favorable as it would
have been if effected directly with a market-maker that did not provide research
or execution services. These procedures include a requirement that Mitchell
Hutchins obtain multiple quotes from dealers before executing the transactions
on an agency basis.
The fund purchases portfolio securities from dealers and underwriters as
well as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.
Investment decisions for the fund and for other investment accounts
managed by Mitchell Hutchins are made independently of each other in light of
differing considerations for the various accounts. However, the same investment
decision may occasionally be made for the fund and one or more of such accounts.
In such cases, simultaneous transactions are inevitable. Purchases or sales are
then averaged as to price and allocated between the fund and such other
account(s) as to amount according to a formula deemed equitable to the fund and
such account(s). While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as the fund is concerned,
or upon its ability to complete its entire order, in other cases it is believed
that coordination and the ability to participate in volume transactions will be
beneficial to the fund.
As of March 31, 1999, the fund owned securities issued by the following
companies which are regular broker-dealers for the fund:
ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION; SERVICE ORGANIZATIONS
ADDITIONAL PURCHASE AND 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." 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 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
18
<PAGE>
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 Statement of Additional Information. 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.
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:
P(1 + T)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.
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. All dividends are assumed to have been reinvested at net asset value.
19
<PAGE>
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 tables show 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.
Year ended March 31, 1999:
Standardized Return.................
Non-Standardized Return...........
Five Years ended March 31, 1999:
Standardized Return.................
Non-Standardized Return...........
Ten Years ended March 31, 1999:
Standardized Return...................
Non-Standardized Return...........
Inception* to March 31, 1999:
Standardized Return.................
Non-Standardized Return...........
- --------------
* The inception date for the fund is ____________, 1978.
CALCULATION OF YIELD. The fund computes its yield and effective yield
quotations using standardized methods required by the SEC. The fund from time to
time advertises (1) its current yield based on a recently ended seven-day
period, computed by determining the net change, exclusive of capital changes, in
the value of a hypothetical pre-existing account having a balance of one share
at the beginning of the period, subtracting a hypothetical charge reflecting
deductions from that shareholder account, dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return and then multiplying the base period return by (365/7), with the
resulting yield figure carried to at least the nearest hundredth of one percent;
and (2) its effective yield based on the same seven-day period by compounding
the base period return by adding 1, raising the sum to a power equal to (365/7)
and subtracting 1 from the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7] - 1
The fund may also advertise other performance data, which may consist of
the annual or cumulative return (including net short-term capital gain, if any)
earned on a hypothetical investment in the fund since it began operations or for
shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of the fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
The fund's yield and effective yield for the seven-day period ended March
31, 1999 were _________________ and __________________, respectively.
20
<PAGE>
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 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 investment are reinvested by being paid in
additional Fund shares, any future income of the fund would increase the value,
not only of the original fund investment, but also of the additional fund shares
received through reinvestment. As a result, the value of the fund investment
would increase more quickly than if dividends had been paid in cash. The fund
may also 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
BACKUP WITHHOLDING. The fund is required to withhold 31% of all dividends
and redemption proceeds payable to individuals and certain other non-corporate
shareholders who do not provide the fund or PaineWebber with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
payable to those shareholders who otherwise are subject to backup withholding.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to qualify
for treatment as a 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)
21
<PAGE>
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.
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.
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 accountants 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 Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing therein are incorporated herein by this
reference.
22
<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.
-----------
(C)1999 PaineWebber Incorporated
PaineWebber
Cashfund, Inc.
------------------------------------------
Statement of Additional Information
August 1, 1999
------------------------------------------
PAINEWEBBER
<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 (to be filed)
(10) Other opinions, appraisals, rulings and consents:
Auditors' consent (to be filed)
(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 (to be filed)
(15) Plan pursuant to Rule 18f-3 - None
(16) Power of Attorney dated May 14, 1999 for Brian M. Storms
(filed herewith)
- --------------
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.
<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 controlling person in connection
with the securities being registered, the Registrant will, unless in the
<PAGE>
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.
Position and Offices With
Name Position With Registrant Underwriter
---- ------------------------ -------------------------
Margo N. Alexander Director and Chairman, Chief Executive
President 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 Investment
Policy Committee of
PaineWebber
(c) None.
<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.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement 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 28th day of May, 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:
Signature Title Date
- --------- ----- ----
/s/ Margo N. Alexander President and Director May 28, 1999
- ------------------------------- (Chief Executive Officer)
Margo N. Alexander*
/s/ E. Garrett Bewkes, Jr. Director and Chairman May 28, 1999
- ------------------------------- of the Board of Directors
E. Garrett Bewkes, Jr.*
/s/ Richard Q. Armstrong Director May 28, 1999
- -------------------------------
Richard Q. Armstrong*
/s/ Richard R. Burt Director May 28, 1999
- -------------------------------
Richard R. Burt*
/s/ Mary C. Farrell Director May 28, 1999
- -------------------------------
Mary C. Farrell*
/s/ Meyer Feldberg Director May 28, 1999
- -------------------------------
Meyer Feldberg*
/s/ George W. Gowen Director May 28, 1999
- -------------------------------
George W. Gowen*
/s/ Frederic V. Malek Director May 28, 1999
- -------------------------------
Frederic V. Malek*
/s/ Carl W. Schafer Director May 28, 1999
- -------------------------------
Carl W. Schafer*
/s/ Brian M. Storms Director May 28, 1999
- -------------------------------
Brian M. Storms**
/s/ Paul H. Schubert Vice President and May 28, 1999
- ------------------------------- Treasurer (Chief Financial
Paul H. Schubert and Accounting Officer)
<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
Exhibit
Number
------
(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 (to be filed)
(10) Other opinions, appraisals, rulings and consents:
Auditors' consent (to be filed)
(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 (to be filed)
(15) Plan pursuant to Rule 18f-3 - None
(16) Power of Attorney dated May 14, 1999 for Brian M. Storms (filed
herewith)
--------------
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.
Exhibit No. 16
POWER OF ATTORNEY
I, Brian M. Storms, Director of PaineWebber Cashfund, Inc., PaineWebber
Financial Services Growth Fund Inc., PaineWebber Master Series, Inc.,
PaineWebber RMA Money Fund, Inc., PaineWebber RMA Tax-Free Fund, Inc.,
All-American Term Trust Inc., Global High Income Dollar Fund Inc., Global Small
Cap Fund Inc., Insured Municipal Income Fund Inc., Investment Grade Municipal
Income Fund Inc., Managed High Yield Fund Inc., Managed High Yield Plus Fund
Inc., Strategic Global Income Fund, Inc. and 2002 Target Term Trust Inc. (each a
"Fund"), hereby constitute and appoint Dianne E. O'Donnell, Keith A. Weller,
Arthur J. Brown, Elinor W. Gammon and Robert A. Wittie, and each of them singly,
my true and lawful attorneys, with full power to sign for me, in my name and in
my capacity as Director for each Fund, any and all amendments to each of the
particular registration statements of the Fund and all instruments necessary or
desirable in connection therewith, filed with the Securities and Exchange
Commission, hereby ratifying and confirming my signature as it may be signed by
said attorneys to any and all amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this
instrument has been signed below by the following in the capacity and on the
date indicated.
Signature Title Date
- --------- ----- -----
/s/ Brian M. Storms Director May 14, 1999
- ------------------------------------
Brian M. Storms
