This Prospectus concisely sets forth information about the Funds a prospective
investor should know before investing. Please retain this Prospectus for future
reference. With respect to all the Funds except Connecticut Municipal Money
Fund and New Jersey Municipal Money Fund, a Statement of Additional Information
dated August 29, 1995 (which is incorporated by reference herein) has been filed
with the Securities and Exchange Commission ("SEC"). With respect to Connecticut
Municipal Money Fund and New Jersey Municipal Money Fund, a Statement of
Additional Information dated March 1, 1996, as revised March 5, 1996 (which
is incorporated by reference herein) has been filed with the SEC. The Statements
of Additional Information can be obtained without charge, and further inquiries
can be made, by contacting the Funds, your PaineWebber investment executive
or PaineWebber's correspondent firms, or by calling toll-free 1-800-762-1000.
- ------------------------------------------
The Money Market Portfolio and U.S. Government Portfolio are series of
PaineWebber RMA Money Fund, Inc. PaineWebber RMA Money Fund, Inc. and
PaineWebber RMA Tax-Free Fund, Inc. are Maryland corporations (each a
"Corporation"). PaineWebber RMA California Municipal Money Fund and PaineWebber
RMA New York Municipal Money Fund are series of PaineWebber Managed Municipal
Trust, a Massachusetts business trust, and PaineWebber RMA Connecticut Municipal
Money Fund and PaineWebber RMA New Jersey Municipal Money Fund are series of
PaineWebber Municipal Money Market Series, a Massachusetts
business trust (each a "Trust").
An investment in a Fund is neither insured nor guaranteed by the U.S.
government. While each 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.
__________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PaineWebber RMA
Money Market Portfolio
U.S. Government Portfolio
Tax-Free Fund
California Municipal
Money Fund
Connecticut Municipal
Money Fund
New Jersey Municipal
Money Fund
New York Municipal
Money Fund
1285 Avenue of the Americas
New York, New York 10019
- -----------------------------------
Professionally managed money
market funds seeking:
/x/ Maximum Current Income
/x/ High Liquidity
/x/ Conservation of Capital
/x/ Income Free from Federal Income Tax for the RMA Tax-Free Fund
/x/ California Double Tax-Free Income for the RMA California Municipal
Money Fund
/x/ Connecticut Double Tax-Free Income for the RMA Connecticut Municipal
Money Fund
/x/ New Jersey Double Tax-Free Income for the RMA New Jersey Municipal
Money Fund
/x/ New York State Double Tax-Free Income or New York City Triple Tax-Free
Income for the RMA New York Municipal Money Fund
- -----------------------------------
Prospectus dated March 1, 1996 (as revised March 5, 1996) with respect to
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund and
August 29, 1995 (as revised March 5, 1996) with respect to the other Funds.
<PAGE>
HIGHLIGHTS
See the body of the Prospectus for more information on the topics discussed
in these highlights.
<TABLE>
<S> <C>
The Funds: Professionally managed money market funds (each a "Fund") offered
primarily to participants in the PaineWebber Resource Management
Account ("RMA")(R) program. The Funds also are offered to
participants in the PaineWebber Business Services Account
("BSA")SM program.
Investment Objectives PaineWebber RMA Money Market Portfolio ("Money Market
and Policies: Portfolio")--A diversified money market fund seeking maximum
current income consistent with liquidity and conservation of
capital; invests in high-grade money market instruments.
PaineWebber RMA U.S. Government Portfolio ("U.S. Government
Portfolio")--A diversified money market fund seeking maximum
current income consistent with liquidity and conservation of
capital; invests in short-term U.S. government securities.
PaineWebber RMA Tax-Free Fund, Inc. ("Tax-Free Fund")--A
diversified money market fund seeking maximum current income
exempt from federal income tax consistent with liquidity and
conservation of capital; invests in high-grade municipal money
market instruments.
PaineWebber RMA California Municipal Money Fund ("California
Municipal Money Fund")--A non-diversified money market fund
seeking maximum current income exempt from federal income tax and
California personal income tax, consistent with liquidity and
conservation of capital; invests in high-grade municipal money
market instruments.
PaineWebber RMA Connecticut Municipal Money Fund ("Connecticut
Municipal Money Fund")--A non-diversified money market fund
seeking the maximization of current income exempt from federal
income tax and Connecticut personal income tax to the extent
consistent with the preservation of capital and the maintenance of
liquidity; invests primarily in debt securities of the State of
Connecticut, its political subdivisions, authorities and
corporations.
PaineWebber RMA New Jersey Municipal Money Fund ("New Jersey
Municipal Money Fund")--A non-diversified money market fund
seeking the maximization of current income exempt from federal
income tax and New Jersey personal income tax to the extent
consistent with the preservation of capital and the maintenance of
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
liquidity; invests primarily in debt securities of the State of
New Jersey, its political subdivisions, authorities and
corporations.
PaineWebber RMA New York Municipal Money Fund ("New York Municipal
Money Fund")--A non-diversified money market fund seeking maximum
current income exempt from federal income tax and New York State
and New York City personal income taxes, consistent with liquidity
and conservation of capital; invests in high-grade municipal money
market instruments.
Total Net Assets at Money Market Portfolio--$6.3 billion.
January 31, 1996: U.S. Government Portfolio--$1.1 billion.
Tax-Free Fund--$2.2 billion.
California Municipal Money Fund--$477 million.
Connecticut Municipal Money Fund--$23.6 million.
New Jersey Municipal Money Fund--$41.1 million.
New York Municipal Money Fund--$290 million.
Distributor and PaineWebber Incorporated ("PaineWebber"). See "Management."
Investment Adviser:
Sub-Adviser: Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins").
Purchases: Shares are available exclusively through PaineWebber and its
correspondent firms. See "Purchases."
Redemptions: Shares may be redeemed through PaineWebber or its correspondent
firms. See "Redemptions."
Yield: Based on current money market rates; quoted in the financial
section of most newspapers.
Dividends: Declared daily and paid monthly. See "Dividends and Taxes."
Reinvestment: All dividends are automatically paid in Fund shares.
Minimum Purchase: No minimum.
Public Offering Price: Net asset value, which each Fund seeks to maintain at $1.00 per
share.
</TABLE>
WHO SHOULD INVEST. Each Fund has its own suitability considerations and risk
factors, as summarized below and described in detail under "Investment
Objectives and Policies." The Funds are designed for investors seeking liquidity
and current income. The Funds provide a convenient means for investors to enjoy
current income at money market rates with minimal risk of fluctuation of
principal.
Shares of the Funds are offered primarily to clients of PaineWebber and its
correspondent firms who are participants in the RMA and BSA programs. Shares of
the Funds may be offered to PaineWebber clients with other types of accounts
under certain limited circumstances.
Tax-Free Fund, California Municipal Money Fund, Connecticut Municipal Money
Fund, New Jersey Municipal Money Fund and New York Municipal Money Fund
(referred to collectively in this Prospectus as the "Municipal Funds") are not
suitable for tax-exempt institutions or qualified
3
<PAGE>
retirement plans, because those investors cannot take advantage of the
tax-exempt character of these Funds' dividends.
MONEY MARKET PORTFOLIO AND U.S. GOVERNMENT PORTFOLIO are designed for
investors seeking liquidity and current income. They provide a convenient means
for investors to enjoy current income at money market rates with minimal risk of
fluctuation of principal.
TAX-FREE FUND is designed for investors seeking liquidity and current income
that is exempt from federal income tax. It provides a convenient means for
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.
CALIFORNIA MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and California
personal income tax. The Fund provides a convenient means for California
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.
CONNECTICUT MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and Connecticut
personal income tax. The Fund provides a convenient means for Connecticut
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.
NEW JERSEY MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and New Jersey
personal income tax. The Fund provides a convenient means for New Jersey
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.
NEW YORK MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and New York State and
New York City personal income taxes. The Fund provides a convenient means for
New York investors to enjoy current tax-free income at money market rates with
minimal risk of fluctuation of principal.
RISK FACTORS. There can be no assurance that any Fund will achieve its
investment objective. In periods of declining interest rates, a Fund's yield
will tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, a Fund's yield generally will be somewhat lower. See
"Investment Objectives and Policies" for more information about this risk factor
and those described below.
The concentration of the investments of California Municipal Money Fund, New
York Municipal Money Fund, Connecticut Municipal Money Fund and New Jersey
Municipal Money Fund in California Municipal Securities (defined below), New
York Municipal Securities (defined below), Connecticut Municipal Securities
(defined below) and New Jersey Municipal Securities (defined below),
respectively, may subject those Funds to greater risks than an investment
company that has a broader range of investments. The States of California and
New York and many of their agencies and local governments have been
experiencing, and continue to experience, significant financial difficulties and
the credit standings of those States and of certain local governments (including
New York City) have been, and could be further, reduced.
4
<PAGE>
The status of California Municipal Money Fund, New York Municipal Money
Fund, Connecticut Municipal Money Fund and New Jersey Municipal Money Fund as
"non-diversified" investment companies and the ability of each of the Municipal
Funds to invest more than 25% of its total assets in securities the interest on
which is paid from similar types of projects, may further increase the risk of
an investment in those Funds.
EXPENSES OF INVESTING IN THE FUNDS. The following tables are intended to
assist investors in understanding the expenses associated with investing in each
Fund.
SHAREHOLDER TRANSACTION EXPENSES
FOR ALL FUNDS
<TABLE>
<S> <C>
Sales charge on purchases of shares.................................... None
Sales charge on reinvested dividends................................... None
Redemption fee or deferred sales charge................................ None
</TABLE>
ANNUAL FUND OPERATING EXPENSES*
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE><CAPTION>
CALIFORNIA CONNECTICUT NEW JERSEY NEW YORK
MONEY U.S. MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
MARKET GOVERNMENT TAX- MONEY MONEY MONEY MONEY
PORTFOLIO PORTFOLIO FREE FUND FUND FUND FUND FUND
--------- ---------- --------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Management fees.......... 0.50% 0.45% 0.48% 0.50% 0.50% 0.50% 0.50%
12b-1 fees............... None 0.08% 0.08% 0.08% 0.12% 0.12% 0.08%
Other expenses........... 0.09% 0.10% 0.07% 0.11% 0.39% 0.31% 0.13%
----- ---- ---- ---- ---- ---- ----
Total Operating
Expenses................. 0.59% 0.63% 0.63% 0.69% 1.01% 0.93% 0.71%
------ ---- ---- ---- ---- ---- ----
------ ---- ---- ---- ---- ---- ----
</TABLE>
- ---------
* See "Management" for additional information. The fees and expenses shown are
those actually incurred for each Fund's most recent fiscal year and, in the
case of New York Municipal Money Fund, "Management Fees" and "Total
Operating Expenses" are those which would have been incurred by that Fund
had PaineWebber not waived a portion of its fees during the fiscal year.
PaineWebber currently charges an annual $85 account charge for the RMA
program including the Gold MasterCard without the Bank One Line of Credit.
The fee for clients who choose the Line of Credit for their Gold MasterCard
is $125. The annual account charge for the BSA program, including the
MasterCard Business Card, is $125 ($165 with a MasterCard Line of Credit).
The account charges are not included in the table because certain non-RMA
and non-BSA participants are permitted to purchase shares of the Funds.
5
<PAGE>
EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in each Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Portfolio..................................... $ 6 $19 $33 $ 74
U.S. Government Portfolio.................................. $ 6 $20 $35 $ 79
Tax-Free Fund.............................................. $ 6 $20 $35 $ 79
California Municipal Money Fund............................ $ 7 $22 $38 $ 86
New York Municipal Money Fund.............................. $ 7 $23 $40 $ 88
Connecticut Municipal Money Fund........................... $ 10 $32 $56 $124
New Jersey Municipal Money Fund............................ $ 9 $30 $51 $114
</TABLE>
This Example assumes that all dividends are reinvested and that the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in the years shown. The above tables and the assumption in the Example of a 5%
annual return are required by regulations of the Securities and Exchange
Commission ("SEC") applicable to all mutual funds; the assumed 5% annual return
is not a prediction of, and does not represent, any Fund's projected or actual
performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND EACH FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN. The actual expenses of each Fund will depend upon, among other things,
the level of average net assets and the extent to which each Fund incurs
variable expenses, such as transfer agency costs.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below provide selected per share data and ratios for one share of
each Fund for each of the periods shown. This information is supplemented by the
financial statements and accompanying notes appearing in each Fund's Annual
Report to Shareholders for the fiscal years ended June 30, 1995 (in the case of
Tax-Free Fund, Money Market Portfolio, U.S. Government Portfolio, California
Municipal Money Fund and New York Municipal Money Fund) and October 31, 1995 (in
the case of Connecticut Municipal Money Fund and New Jersey Municipal Money
Fund), which are incorporated by reference into their respective Statements of
Additional Information and which may be obtained without charge by calling
1-800-647-1568. The financial statements and notes, as well as the information
in the tables appearing below insofar as it relates to the each of the five
fiscal years in the period ended June 30, 1995 (in the case of Tax-Free Fund,
Money Market Portfolio and U.S. Government Portfolio) and the six fiscal periods
ended June 30, 1995 (in the case of California Municipal Money Fund and New York
Municipal Money Fund), have been audited by Ernst & Young LLP, independent
auditors, whose unqualified reports thereon are incorporated by reference into
the Funds' Statement of Additional Information. The information appearing below
for the years ended prior to June 30, 1991 or November 30, 1990, as applicable,
also have been audited by Ernst & Young LLP, whose reports thereon were
unqualified. The financial statements and notes, as well as the information in
the tables appearing below for the fiscal year ended October 31, 1995 in the
case of Connecticut Municipal Money Fund and New Jersey Municipal Money Fund
have been audited by Ernst & Young LLP; financial information for prior periods
was audited by other auditors whose reports thereon were unqualified.
<TABLE><CAPTION>
TAX-FREE FUND
------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Net investment
income............... 0.030 0.019 0.021 0.033 0.047 0.053 0.056 0.042 0.037
Dividends from net
investment income.... (0.030) (0.019) (0.021) (0.033) (0.047) (0.053) (0.056) (0.042) (0.037)
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Net asset value, end
of period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ========== ========== ========== ======== ========
Total Investment
Return (1)........... 3.03% 1.88% 2.07% 3.30% 4.74% 5.30% 5.60% 4.20% 3.70%
========== ========== ========== ========== ========== ========== ========== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's)....... $1,562,040 $1,427,724 $1,248,702 $1,183,719 $1,190,073 $1,097,787 $912,865 $941,169 $942,668
Ratio of expenses to
average net assets... 0.63% 0.64% 0.65% 0.62% 0.67% 0.67% 0.60% 0.61% 0.62%
Ratio of net
investment income to
average net assets... 3.00% 1.90% 2.06% 3.30% 4.66% 5.33% 5.49% 4.20% 3.70%
<CAPTION>
1986
--------
<S> <C>
Net asset value,
beginning of
period................$1.00
--------
Net investment
income............... 0.044
Dividends from net
investment income.... (0.044)
--------
Net asset value, end
of period............ $1.00
--------
--------
Total Investment
Return (1)........... 4.40%
--------
--------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000's)....... $885,308
Ratio of expenses to
average net assets... 0.60%
Ratio of net
investment income to
average net assets... 4.43%
</TABLE>
- ---------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable date, and a sale at net asset value on the last
day of each period reported.
7
<PAGE>
<TABLE><CAPTION>
MONEY MARKET PORTFOLIO
----------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment
income............ 0.049 0.030 0.029 0.046 0.069 0.081 0.084 0.064 0.055
Dividends from net
investment
income............ (0.049) (0.030) (0.029) (0.046) (0.069) (0.081) (0.084) (0.064) (0.055)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Investment
Return (1)........ 5.00% 2.95% 2.98% 4.56% 6.88% 8.10% 8.40% 6.40% 5.50%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's).... $5,398,146 $4,337,009 $4,031,398 $4,054,344 $4,208,467 $3,765,953 $2,637,820 $2,509,372 $2,163,807
Ratio of expenses
to average net
assets............ 0.59% 0.59% 0.59% 0.59% 0.61% 0.58% 0.59% 0.76% 0.79%
Ratio of net
investment income
to average net
assets............ 4.91% 2.98% 2.95% 4.57% 6.89% 8.07% 8.48% 6.37% 5.54%
<CAPTION>
1986
----------
<S> <C>
Net asset value,
beginning of
period............. $1.00
----------
Net investment
income............. 0.069
Dividends from net
investment
income............. (0.069)
----------
Net asset value,
end of period..... $1.00
----------
----------
Total Investment
Return (1)......... 6.90%
----------
----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's).... $1,740,660
Ratio of expenses
to average net
assets............. 0.78%
Ratio of net
investment income
to average net
assets............. 6.90%
</TABLE>
- ---------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable date, and a sale at net asset value on the last
day of each period reported.
<TABLE><CAPTION>
U.S. GOVERNMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment
income............ 0.046 0.027 0.028 0.044 0.066 0.077 0.078 0.059 0.053
Dividends from net
investment
income............ (0.046) (0.027) (0.028) (0.044) (0.066) (0.077) (0.078) (0.059) (0.053)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Investment
Return (1)........ 4.67% 2.74% 2.83% 4.36% 6.59% 7.70% 7.80% 5.90% 5.30%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's).... $815,781 $854,928 $880,834 $838,023 $937,943 $488,577 $327,437 $316,349 $241,148
Ratio of expenses
to average net
assets............ 0.63% 0.62% 0.61% 0.62% 0.64% 0.68% 0.60% 0.74% 0.75%
Ratio of net
investment income
to average net
assets............ 4.55% 2.75% 2.80% 4.37% 6.46% 7.67% 7.77% 5.92% 5.31%
<CAPTION>
1986
----------
<S> <C>
Net asset value,
beginning of
period............ $1.00
----------
Net investment
income............ 0.066
Dividends from net
investment
income............ (0.066)
----------
Net asset value,
end of period..... $1.00
----------
----------
Total Investment
Return (1)........ 6.60%
----------
----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's).... $204,660
Ratio of expenses
to average net
assets............ 0.82%
Ratio of net
investment income
to average net
assets............ 6.56%
</TABLE>
- ---------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable date, and a sale at net asset value on the last
day of each period reported.
8
<PAGE>
<TABLE><CAPTION>
CALIFORNIA MUNICIPAL MONEY FUND
--------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEARS ENDED FOR THE SEVEN FOR THE YEARS ENDED NOVEMBER 7, 1988
JUNE 30, MONTHS NOVEMBER 30, (COMMENCEMENT
----------------------------- ENDED ---------------------------- OF OPERATIONS) TO
1995 1994 1993 JUNE 30, 1992 1991 1990 1989 NOVEMBER 30, 1988
-------- -------- -------- ------------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------- -------- -------- -------- ---------
Net investment income......... 0.029 0.018 0.019 0.016 0.038 0.050 0.056 0.004
Dividends from net investment
income....................... (0.029) (0.018) (0.019) (0.016) (0.038) (0.050) (0.056) (0.004)
-------- -------- -------- ------- -------- -------- -------- ---------
Net asset value, end of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------- -------- -------- -------- ---------
-------- -------- -------- ------- -------- -------- -------- ---------
Total Investment Return (1)... 2.91% 1.78% 1.88% 1.61% 3.81% 4.95% 5.56% 0.35%
-------- -------- -------- ------- -------- -------- -------- ---------
-------- -------- -------- ------- -------- -------- -------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)...................... $330,937 $295,183 $290,367 $259,183 $261,902 $300,516 $234,605 $53,745
Ratio of expenses to average
net assets**................. 0.69% 0.69% 0.72% 0.69%* 0.75% 0.70% 0.67% 0.67%*
Ratio of net investment income
to average net assets**...... 2.87% 1.79% 1.86% 2.75%* 3.83% 4.96% 5.52% 5.24%*
</TABLE>
- ---------
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable date, and a sale at net asset value on the last
day of each period reported. Total investment returns for periods of less
than one year have not been annualized.
** For the year ended November 30, 1989, PaineWebber waived fees and/or
reimbursed the Fund for a portion of its operating expenses. If such fee
waivers and/or expense reimbursements had not been made, the annualized
ratio of expenses to average net assets and the annualized ratio of net
investment income to average net assets would have been 0.73% and 5.46%
respectively.
<TABLE><CAPTION>
NEW YORK MUNICIPAL MONEY FUND
------------------------------------------------------------------------
FOR THE FOR THE PERIOD
FOR THE YEARS ENDED SEVEN FOR THE YEARS ENDED NOVEMBER 10, 1988
JUNE 30, MONTHS ENDED NOVEMBER 30, (COMMENCEMENT
----------------------------- JUNE 30, --------------------------- OF OPERATIONS) TO
1995 1994 1993 1992 1991 1990 1989 NOVEMBER 30, 1988
-------- -------- -------- ------------ -------- -------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------ -------- -------- ------- ---------
Net investment income......... 0.028 0.017 0.018 0.016 0.037 0.049 0.055 0.003
Dividends from net investment
income....................... (0.028) (0.017) (0.018) (0.016) (0.037) (0.049) (0.055) (0.003)
-------- -------- -------- ------- -------- -------- ------- ---------
Net asset value, end of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------ -------- -------- ------- ---------
-------- -------- -------- ------ -------- -------- ------- ---------
Total investment return (1)... 2.80% 1.70% 1.82% 1.62% 3.74% 4.92% 5.51% 0.29%
-------- -------- -------- ------ -------- -------- ------- ---------
-------- -------- -------- ------ -------- -------- ------- ---------
RATIOS/SUPPLEMENTAL data:
Net assets, end of period
(000's)..................... $192,799 $165,111 $116,604 $129,687 $121,347 $113,885 $78,497 $24,237
Ratio of expenses to average
net assets:
Before waiver from
adviser.................. 0.71% 0.75% 0.79% 0.73%* 0.89% 0.85% 0.89% 1.09%*
After waiver from
adviser.................. 0.68% 0.68% 0.68% 0.68%* 0.68% 0.64% 0.37% 0.27%*
Ratio of net investment
income to average net
assets:
Before waiver from
adviser.................. 2.79% 1.67% 1.70% 2.54%* 3.52% 4.67% 5.04% 4.07%*
After waiver from
adviser.................. 2.81% 1.74% 1.81% 2.59%* 3.73% 4.88% 5.56% 4.89%*
</TABLE>
- ---------
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates, and a sale at net asset value on the last
day of each period reported. Total investment returns for periods of less
than one year have not been annualized.
9
<PAGE>
<TABLE><CAPTION>
CONNECTICUT MUNICIPAL MONEY FUND
-----------------------------------------------------------------
FOR THE YEARS FOR THE PERIOD
ENDED OCTOBER 31, NOVEMBER 6, 1990+
------------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------
Net investment income.......................... 0.026 0.017 0.015 0.022 0.040
Dividends from net investment income........... (0.026) (0.017) (0.015) (0.022) (0.040)
------- ------- ------- ------- ------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------
------- ------- ------- ------- ------
Total investment return (1).................... 2.62% 1.74% 1.49% 2.25% 4.04%
------- ------- ------- ------- ------
------- ------- ------- ------- ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).............. $22,209 $25,763 $27,937 $28,063 $40,078
Ratio of expenses to average net assets**...... 1.01% 0.90% 0.97% 0.86% 0.36%*
Ratio of net investment income to average net
assets**....................................... 2.63% 1.71% 1.47% 2.28% 3.96%*
</TABLE>
- ------------
* Annualized
+ Commencement of operations
(1) Total investment return is calculated assuming a $1,000 investment in fund
shares on the first day of each period reported, reinvestment of all
dividends at net asset value on the payable dates, and a sale at net asset
value on the last day of each period reported. Total investment returns for
periods less than one year have not been annualized.
** For the period November 6, 1990 to October 31, 1991, the predecessor adviser
waived and/or reimbursed the Fund for a portion of its operating expenses.
If such fee waivers and/or expense reimbursements had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income to average net assets would have been 0.82% and
3.50%, respectively.
<TABLE><CAPTION>
NEW JERSEY MUNICIPAL MONEY FUND
--------------------------------------------------------------------
FOR THE YEARS FOR THE PERIOD
ENDED OCTOBER 31, FEBRUARY 1, 1991+
------------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
------- ------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------
Net investment income.......................... 0.027 0.018 0.016 0.025 0.032
Dividends from net investment income........... (0.027) (0.018) (0.016) (0.025) (0.032)
------- ------- ------- ------- ------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------
------- ------- ------- ------- ------
Total investment return (1).................... 2.75% 1.76% 1.65% 2.49% 3.19%
------- ------- ------- ------- ------
------- ------- ------- ------- ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).............. $36,206 $31,981 $36,473 $27,625 $ 41,504
Ratio of expenses to average net assets**...... 0.93% 0.85% 0.93% 0.86% 0.27%*
Ratio of net investment income to average net
assets**....................................... 2.73% 1.74% 1.63% 2.51% 4.20%*
</TABLE>
- ------------
* Annualized
+ Commencement of operations
(1) Total investment return is calculated assuming a $1,000 investment in fund
shares on the first day of each period reported, reinvestment of all
dividends at net asset value on the payable dates, and a sale at net asset
value on the last day of each period reported. Total investment returns for
periods less than one year have not been annualized.
** For the period February 1, 1991 to October 31, 1991, the predecessor adviser
waived and/or reimbursed the Fund for a portion of its operating expenses.
If such fee waivers and/or expense reimbursements had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income to average net assets would have been 0.83% and
3.64%, respectively.
10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of both the Money Market Portfolio and the U.S.
Government Portfolio is to provide maximum current income consistent with
liquidity and conservation of capital. Each Fund seeks to meet this objective by
following different investment policies. The Tax-Free Fund's investment
objective is to provide maximum current income exempt from federal income tax
consistent with liquidity and conservation of capital. The California Municipal
Money Fund's investment objective is to provide maximum current income exempt
from federal income tax and California personal income tax consistent with
liquidity and conservation of capital. The New York Municipal Money Fund's
investment objective is to provide maximum current income exempt from federal
income tax and New York State and New York City personal income taxes consistent
with liquidity and conservation of capital. The Con-necticut Municipal Money
Fund's objective is the maximization of current income exempt from federal
income tax and Connecticut personal income tax for residents of the state of
Connecticut, consistent with the preservation of capital and the maintenance of
liquidity. The New Jersey Municipal Money Fund's objective is the maximization
of current income exempt from federal income tax and New Jersey personal income
tax for residents of the state of New Jersey, consistent with the preservation
of capital and the maintenance of liquidity.
Each Fund maintains a dollar-weighted average portfolio maturity of 90 days
or less. In managing each Fund's portfolio, Mitchell Hutchins may employ a
number of professional money management techniques, including varying the
composition and the average weighted maturity of each Fund's portfolio based
upon its assessment of the relative values of various money market instruments
and future interest rate patterns, in order to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. Mitchell
Hutchins may also seek to improve a Fund's yield by purchasing or selling
securities to take advantage of yield disparities among similar or dissimilar
money market instruments that regularly occur in the money market.
There can be no assurance that the Funds will achieve their investment
objectives. In periods of declining interest rates, the Funds' yields will tend
to be somewhat higher than prevailing market rates, and in periods of rising
interest rates the opposite will be true. Also, when interest rates are falling,
net cash inflows from the continuous sale of a Fund's shares are likely to be
invested in portfolio instruments producing lower yields than the balance of
that Fund's portfolio, thereby reducing its yield. In periods of rising interest
rates, the opposite can be true.
MONEY MARKET PORTFOLIO
The Money Market Portfolio invests in high-grade money market instruments
with remaining maturities of 13 months or less. These instruments include U.S.
government securities, obligations of U.S. banks, commercial paper and other
short-term corporate obligations, corporate bonds and notes, variable and
floating rate securities and participation interests or repurchase agreements
involving any of the foregoing securities. Participation interests are pro rata
interests in securities held by others.
The U.S. government securities in which the Money Market Portfolio may
invest include direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and obligations issued or guaranteed by U.S. government
agencies and instrumentalities, including securities that are supported by the
full faith and credit of the United States (such as Government National Mortgage
Association certificates
11
<PAGE>
("GNMAs")), securities supported primarily or solely by the creditworthiness of
the issuer (such as securities of the Resolution Funding Corporation and the
Tennessee Valley Authority) and securities that are supported primarily or
solely by specific pools of assets and the creditworthiness of a U.S.
government-related issuer (such as mortgage-backed securities issued by the
Federal National Mortgage Association).
The Money Market Portfolio may invest in obligations (including certificates
of deposit, time deposits, bankers' acceptances and similar obligations) of U.S.
banks, including foreign branches of domestic banks and domestic branches of
foreign banks, having total assets in excess of $1.5 billion at the time of
purchase. The Fund may invest in interest-bearing savings deposits in U.S.
commercial and savings banks having total assets of $1.5 billion or less,
provided that the principal amounts at each such bank are fully insured by the
Federal Deposit Insurance Corporation and the aggregate amount of such deposits
(plus interest earned) does not exceed 5% of the value of the Fund's assets.
The commercial paper and other short-term corporate obligations purchased by
the Money Market Portfolio consist only of obligations that Mitchell Hutchins
determines, pursuant to procedures adopted by the Corporation's board of
directors, present minimal credit risks and are either (1) rated in the highest
short-term rating category by at least two nationally recognized statistical
rating organizations ("NRSROs"), (2) rated in the highest short-term rating
category by a single NRSRO if only that NRSRO has assigned the obligations a
short-term rating or (3) unrated, but determined by Mitchell Hutchins to be of
comparable quality ("First Tier Securities"). The Money Market Portfolio
generally may invest no more than 5% of its total assets in the securities
of a single issuer (other than securities issued
by the U.S. government, its agencies or instrumentalities).
U.S. GOVERNMENT PORTFOLIO
The U.S. Government Portfolio invests in U.S. government securities with
remaining maturities of 13 months or less and repurchase agreements secured by
U.S. government securities. Under investment guidelines adopted by the
Corporation's board of directors, the U.S. Government Portfolio currently
invests only in securities, such as U.S. Treasury bills, Treasury notes and
GNMAs, that are backed by the full faith and credit of the United States and
repurchase agreements secured by such securities. These guidelines may be
modified by the directors without shareholder approval, but there is no present
intention to do so. U.S. government securities in which the Fund would otherwise
be authorized to invest include obligations supported primarily or solely by the
creditworthiness of the issuer.
TAX-FREE FUND
The Tax-Free Fund invests substantially all of its assets in money market
instruments with remaining maturities of 13 months or less issued by states,
municipalities and public authorities, the interest from which is exempt from
federal income tax ("Municipal Securities"). The Fund purchases only those
Municipal Securities that are First Tier Securities. These Municipal Securities
include municipal notes, municipal commercial paper, municipal bonds, floating
and variable rate municipal obligations and participation interests in municipal
bonds and floating and variable rate obligations. Municipal bonds include
industrial development bonds ("IDBs"), private activity bonds ("PABs"), moral
obligation bonds, municipal lease obligations and certificates of participation
therein
12
<PAGE>
and put bonds. The interest on most PABs is an item of tax preference for
purposes of the federal alternative minimum tax ("AMT"). Under normal market
conditions, the Fund intends to invest in Municipal Securities that pay interest
that is not an item of tax preference for purposes of the AMT ("AMT exempt
interest"), but may invest up to 20% of its total assets in such securities if,
in Mitchell Hutchins' judgment, market conditions warrant. The principal
municipal obligations in which the Fund invests are described in the Appendix to
this Prospectus.
CALIFORNIA MUNICIPAL MONEY FUND
Except for temporary purposes, the California Municipal Money Fund will
invest at least 80% and will seek to invest 100% of its net assets in Municipal
Securities issued by the State of California, its municipalities and public
authorities and other issuers if such obligations pay interest that is exempt
from federal income tax as well as California personal income tax ("California
Municipal Securities").
The California Municipal Money Fund invests in high-grade California
Municipal Securities with remaining maturities of 13 months or less. These
instruments include the types of Municipal Securities identified above for the
Tax-Free Fund and further described in the Appendix to this Prospectus. Under
normal market conditions, the Fund intends to invest in California Municipal
Securities that pay AMT exempt interest, but may invest without limit in
securities that pay interest that is subject to the AMT if, in Mitchell
Hutchins' judgment, market conditions warrant. The California Municipal
Securities purchased by the Fund consist only of First Tier Securities.
NEW YORK MUNICIPAL MONEY FUND
Except for temporary purposes, the New York Municipal Money Fund will invest
at least 80% and will seek to invest 100% of its net assets in Municipal
Securities issued by the State of New York, its municipalities and public
authorities and other issuers if such obligations pay interest that is exempt
from federal income tax as well as New York State and New York City personal
income taxes ("New York Municipal Securities").
The New York Municipal Money Fund invests in high-grade New York Municipal
Securities with remaining maturities of 13 months or less. These instruments
include the types of Municipal Securities identified above for the Tax-Free Fund
and further described in the Appendix to this Prospectus. Under normal market
conditions, the Fund intends to invest in New York Municipal Securities that pay
AMT exempt interest, but may invest without limit in securities that pay
interest that is subject to the AMT if, in Mitchell Hutchins' judgment, market
conditions warrant. The New York Municipal Securities purchased by the Fund
consist only of First Tier Securities.
CONNECTICUT MUNICIPAL MONEY FUND
Except for temporary purposes, the Connecticut Municipal Money Fund invests
primarily in Municipal Securities issued by the State of Connecticut, its
political subdivisions, authorities and corporations, the interest from which is
exempt from federal income tax as well as Connecticut personal income tax
("Connecticut Municipal Securities"). The Fund invests at least 80% of the value
of its net assets (except when maintaining a temporary defensive position) in
Municipal Securities. At least 65% of the value of the Fund's net assets will be
invested in Connecticut Municipal Securities.
The Connecticut Municipal Money Fund invests in high-grade Connecticut
Municipal Securities with remaining maturities of 13
13
<PAGE>
months or less. These instruments include the types of Municipal Securities
identified above for Tax-Free Fund and further described in the Appendix to this
Prospectus. Under normal market conditions, the Fund intends to invest in
Connecticut Municipal Securities that pay AMT exempt interest, but may invest
without limit in securities that pay interest that is subject to the AMT if, in
Mitchell Hutchins's judgment, market conditions warrant. The Connecticut
Municipal Securities purchased by the Fund consist only of First Tier
Securities.
NEW JERSEY MUNICIPAL MONEY FUND
Except for temporary defensive purposes, the New Jersey Municipal Money Fund
invests primarily in Municipal Securities issued by the State of New Jersey, its
political subdivisions, authorities and corporations, the interest from which is
exempt from federal income tax as well as New Jersey personal income tax ("New
Jersey Municipal Securities"). The Fund invests at least 80% of the value of its
net assets (except when maintaining a temporary defensive position) in Municipal
Securities. At least 65% of the value of the Fund's net assets will be invested
in New Jersey Municipal Securities.
The New Jersey Municipal Money Fund invests in high-grade New Jersey
Municipal Securities with remaining maturities of 13 months or less. These
instruments include the types of Municipal Securities identified above for
Tax-Free Fund and further described in the Appendix to this Prospectus. Under
normal market conditions, the Fund intends to invest in New Jersey Municipal
Securities that pay AMT exempt interest, but may invest without limit in
securities that pay interest that is subject to the AMT if, in Mitchell
Hutchins's judgment, market conditions warrant. The New Jersey Municipal
Securities purchased by the Fund consist only of First Tier Securities.
OTHER INVESTMENT POLICIES AND RISK FACTORS
U.S. GOVERNMENT SECURITIES. The Money Market and U.S. Government Portfolios
may also acquire securities issued or guaranteed as to principal and interest by
the U.S. government in the form of custodial receipts that evidence ownership of
future interest payments, principal payments or both on certain U.S. Treasury
notes or bonds. Such notes and bonds are held in custody by a bank on behalf of
the owners of such notes or bonds. These custodial receipts are known by various
names, including "Treasury Investment Growth Receipts" ("TIGRs") and
"Certificates of Accrual on Treasury Securities" ("CATS"). The Funds may also
invest in separately traded principal and interest components of securities
issued or guaranteed by the U.S. Treasury. The principal and interest components
of selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently. The
staff of the SEC currently takes the position that "stripped" U.S. government
securities that are not issued through the U.S. Treasury STRIPS program are not
U.S. government securities.
VARIABLE AND FLOATING RATE SECURITIES. The Funds 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 (Money Market and U.S. Government Portfolios), or (if subject to a
demand feature exercisable within 13 months or less)
14
<PAGE>
issued by U.S. companies (Money Market Portfolio) or municipal issuers
(Municipal Funds). The yield on these securities is adjusted in relation to
changes in specific rates, such as the prime rate, and different securities may
have different adjustment rates. The Funds' investments in these securities must
comply with conditions established by the SEC under which they may be considered
to have remaining maturities of 13 months or less. Certain of these obligations
carry a demand feature that gives the Fund the right to tender them back to the
issuer or a remarketing agent and receive the principal amount of the security
prior to maturity. The demand feature may or may not be backed by letters of
credit or other credit support arrangements provided by banks or other financial
institutions, the credit standing of which affects the credit quality of the
obligation.
Securities purchased by the Money Market Portfolio may include variable
amount master demand notes, which are unsecured redeemable obligations that
permit investment of varying amounts at fluctuating interest rates under a
direct agreement between the Fund and the issuer. The principal amount of these
notes may be increased from time to time by the parties (subject to specified
maximums) or decreased by the Fund or the issuer. These notes are payable on
demand and are typically unrated.
REPURCHASE AGREEMENTS. The Money Market Portfolio and the U.S. Government
Portfolio each may enter into repurchase agreements with U.S. banks and dealers
with respect to any security in which that Fund is authorized to invest. Each
Municipal Fund may enter into repurchase agreements with such institutions with
respect to U.S. government securities, commercial paper, bank certificates of
deposit and bankers' acceptances. Repurchase agreements are transactions in
which a Fund purchases securities from a bank or recognized securities dealer
and simultaneously commits to resell the securities to that bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Although repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible decline in the market value of the underlying
securities and delays and costs to the Fund if the other party to the repurchase
agreement becomes insolvent, the Funds intend to enter into repurchase
agreements only with banks and dealers in transactions believed by Mitchell
Hutchins to present minimal credit risks in accordance with guidelines
established by the applicable Corporation's board of directors or Trust's board
of trustees. The Municipal Funds do not intend to enter into repurchase
agreements except as a temporary measure and under unusual circumstances.
SPECIAL RISK CONSIDERATIONS--CALIFORNIA MUNICIPAL MONEY FUND, CONNECTICUT
MUNICIPAL MONEY FUND, NEW JERSEY MUNICIPAL MONEY FUND AND NEW YORK MUNICIPAL
MONEY FUND.
Each of these Funds may invest more than 25% of the value of its total
assets in Municipal Securities that are related in such a way that an economic,
business or political development or change affecting one such security would
also affect the other securities, such as securities the interest on which is
paid from revenues of similar types of projects. The Funds may be subject to
greater risk than other funds that do not follow this practice.
These Funds are "non-diversified," as that term is defined in the Investment
Company Act of 1940 ("1940 Act"), but each intends to continue to qualify as a
"regulated investment company" for federal income tax purposes. See "Dividends
and Taxes." This means, in general,
15
<PAGE>
that more than 5% of each Fund's total assets may be invested in securities of
one issuer, but only if, at the close of each quarter of the Fund's taxable
year, the aggregate amount of such holdings does not exceed 50% of the value of
its total assets and no more than 25% of the value of its total assets is
invested in the securities of a single issuer. Although Mitchell Hutchins
anticipates that normally each Fund's portfolio will include the securities of a
number of different issuers, each Fund may be subject to greater risk with
respect to its portfolio securities than a "diversified" investment company,
because changes in the financial condition or market assessment of a single
issuer may cause greater fluctuation in that Fund's yield or affect that Fund's
ability to maintain a constant net asset value per share.
RISKS OF CALIFORNIA MUNICIPAL SECURITIES. The California Municipal Money
Fund's investment concentration in California Municipal Securities involves
greater risks than if it selected its investments from a broader geographic
region. The Fund's yield and ability to maintain a constant net asset value per
share can be affected by political and economic developments within the State of
California ("California") and by the financial condition of California, its
public authorities and political subdivisions. California suffered a severe eco-
nomic recession between 1990-1993, which resulted in broad-based revenue
shortfalls for the State and many local governments. California's fiscal
condition has improved as its economy has been in a sustained recovery since
1994. During the recession, the State substantially reduced local assistance,
and further reductions could adversely affect the financial conditions of
cities, counties, and other government agencies facing constraints in their own
revenue collections. California's long-term credit rating has been reduced in
the past several years.
In the past, California voters have passed amendments to the California
Constitution and other measures that limit the taxing and spending authority of
California governmental entities and future voter initiatives could result in
adverse consequences affecting California Municipal Securities. These factors,
among others (including the outcome of related pending litigation), could reduce
the credit standing of certain issuers of California Municipal Securities. A
more detailed discussion of the risks of investing in California Municipal
Securities is included in the Statement of Additional Information.
RISKS OF CONNECTICUT MUNICIPAL MONEY FUND. Connecticut's economy relies in
part on activities that may be adversely affected by cyclical change and recent
declines in defense spending have had an impact on unemployment levels. Although
the State recorded General Fund surpluses in its 1986 and 1987 fiscal years,
Connecticut reported deficits from its General Fund operations for the fiscal
years 1988 through 1991. Together with the deficit carried forward from the
State's 1990 fiscal year, the total General Fund deficit for the 1991 fiscal
year was $965.7 million. The total deficit was funded by the issuance of General
Obligation Economic Recovery Notes. The State Comptroller's annual reports for
the fiscal years ended June 30, 1993, 1994 and 1995 reflected General Fund
operating surpluses of $113.5 million, $19.7 million and $80.5 million,
respectively. In February 1996, the Comptroller estimated a General Fund deficit
of $22.1 million for the fiscal year end. To the extent there is a deficit, it
may be funded by a transfer from the $80.5 million Budget Reserve Fund. As a
result of recurring budgetary problems in the early 1990s, Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P"), downgraded the State's
general obligation bonds
16
<PAGE>
from AA+ to AA in April 1990 and, in September 1991, to AA-. Moody's Investors
Service, Inc. ("Moody's") and Fitch Investors Service, L.P. ("Fitch") rate
Connecticut's bonds Aa and AA+, respectively.
RISKS OF NEW JERSEY MUNICIPAL MONEY FUND. Although New Jersey enjoyed a
period of economic growth with unemployment levels below the national average
during the mid-1980s, New Jersey's economy slowed down well before the onset of
the national recession, which, according to the National Bureau of Economic
Research, began in July 1990. Reflecting the economic downturn, New Jersey's
unemployment rate rose from a low of 3.6% in the first quarter of 1989 to a
recessionary peak of 8.4% during 1992. Since then, the State's unemployment rate
fell to 6.4% during the first ten months of 1995. As a result of New Jersey's
recent fiscal weakness, in July 1991, S&P lowered its rating of the State's AAA
general obligation debt to AA+.
RISKS OF NEW YORK MUNICIPAL SECURITIES. The New York Municipal Money Fund's
investment concentration in New York Municipal Securities involves greater risks
than if it selected its investments from a broader geographic region. The Fund's
yield and ability to maintain a constant net asset value per share can be
affected by political and economic developments within the State of New York
(the "State") and by the financial condition of the State, its public
authorities and political subdivisions, particularly the City of New York (the
"City"). Although the State reduced its accumulated General Fund deficits and
experienced operating surpluses in fiscal year ("FY") 1991-92 through 1993-94,
it experienced an operating deficit of $1.426 billion for FY 1994-95. The State
continues to experience substantial financial difficulties related to the recent
recession, resulting in, among other things, reductions in General Fund
receipts. Currently the 1995-96 State Financial Plan shows a cash balance in the
General Fund, and projects a moderate operating surplus, but prolonged
interruptions in the State's receipt of federal grants could create adverse
developments. Similarly, although the Governor's proposed FY 1996-97 budget
projects a cash balance in the General Fund, it anticipates closing an
approximate $3.9 billion budget gap to arrive at such balance. Approximately $2
billion of such savings are expected to derive from Federal policy changes. The
likelihood that a balanced budget for FY 1996-97 will be achieved depends in
part on a Federal budget resolution as well as the implementation of numerous
and substantial corrective measures assumed in the Governor's proposed budget.
The City (which is constrained in its fiscal flexibility by an already heavy
local tax burden, urgent social needs and its extensive and deteriorating
infrastructure) and most suburban county governments have experienced serious
fiscal problems related to the recessionary performance of the regional economy,
which has caused substantial, broad-based and recurring revenue shortfalls. Both
the State of New York's credit rating and the City's credit rating have been,
and could be further, reduced; and their ability to provide assistance to public
authorities and political subdivisions has been, and could be further, impaired.
A more detailed discussion of the risks of investing in New York Municipal
Securities is included in the Statement of Additional Information.
OTHER INVESTMENT POLICIES.
During unusual market conditions, including when, in the opinion of Mitchell
Hutchins there are insufficient suitable Municipal Securities available, each of
the Municipal Funds temporarily may invest more than 20% of its net assets in
other Municipal Securities. For this purpose, "suitable Municipal Securities"
means,
17
<PAGE>
in the case of the Tax-Free Fund, Municipal Securities that pay AMT exempt
interest; in the case of California Municipal Money Fund, California Municipal
Securities; in the case of Connecticut Municipal Money Fund, Connecticut
Municipal Securities; in the case of New Jersey Municipal Money Fund, New Jersey
Municipal Securities; and, in the case of New York Municipal Money Fund, New
York Municipal Securities. "Other Municipal Securities" means, in the case of
the Tax-Free Fund, Municipal Securities that pay interest subject to the AMT
and, in the case of California Municipal Money Fund, Connecticut Municipal Money
Fund, New Jersey Municipal Money Fund and New York Municipal Money Fund,
Municipal Securities other than California Municipal Securities, Connecticut
Municipal Securities, New Jersey Municipal Securities and New York Municipal
Securities, respectively.
Under normal circumstances, each Municipal Fund must invest at least 80% of
its net assets in securities that pay interest which is exempt from federal
income tax. However, when Mitchell Hutchins believes unusual circumstances
warrant a defensive posture, including when, in the opinion of Mitchell
Hutchins, neither suitable Municipal Securities nor other Municipal Securities
are available, each Municipal Fund may hold cash and may invest any portion or
all of its net assets in taxable money market instruments, including repurchase
agreements. To the extent a Fund holds cash, such cash would not earn income and
would reduce the Fund's yield.
Each Fund may borrow money for temporary purposes, but not in excess of 10%
of its total assets (except that each of Connecticut Municipal Money Fund and
New Jersey Municipal Money Fund may borrow up to 15% of its net assets).
Borrowings by the Money Market Portfolio and U.S. Government Portfolio may
include reverse repurchase agreements involving up to 5% of each Fund's assets.
The Municipal Funds may purchase Municipal Securities on a "when-issued" basis,
that is, for delivery beyond the normal settlement date at a stated price and
yield. A Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
Municipal Securities on a when-issued basis, it immediately assumes the risks of
ownership, including the risk of price fluctuation. Failure by the issuer to
deliver a security purchased on a when-issued basis may result in a loss or
missed opportunity to make an alternative investment. Each Fund expects that
commitments to purchase when-issued securities normally will not exceed 25% of
its assets (20% in the case of Connecticut Municipal Money Fund and New Jersey
Municipal Money Fund).
No Fund will invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days.
Future federal, state and local laws may adversely affect the tax-exempt
status of interest on Municipal Securities held by one of the Municipal Funds or
of the exempt-interest dividends paid by the Municipal Funds, extend the time
for payment of principal or interest or otherwise constrain enforcement of such
obligations. Opinions relating to the validity of Municipal Securities and the
tax-exempt status of interest thereon are rendered by the issuer's bond counsel
at the time of issuance; Mitchell Hutchins will rely on such opinions without
independent verification.
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A Fund's investment objective may not be changed without the approval of its
shareholders. The California Municipal Money Fund's investment policy of
investing at least 80% of its net assets in California Municipal Securities and
the similar investment policy of the New York Municipal Money Fund, Connecticut
Municipal Money Fund and New Jersey Municipal Money Fund relating to investments
in New York Municipal Securities, Connecticut Municipal Securities and New
Jersey Municipal Securities, respectively, may not be changed without approval
of the appropriate Fund's shareholders. Certain other investment limitations, as
described in the Statement of Additional Information, also may not be changed
without shareholder approval. All other investment policies may be changed by
the applicable Corporation's board of directors or the applicable Trust's board
of trustees without shareholder approval.
PURCHASES
THE RMA AND BSA PROGRAMS. Shares of each Fund are available primarily
through the RMA and BSA programs. RMA and BSA participants are asked to select
one of the Funds as their designated portfolio ("Primary Sweep Money Fund").
Investors will have all free credit cash balances (including proceeds from
securities sold) in the account invested in the Primary Sweep Money Fund.
Balances of $1 or more are invested daily. Each Fund and PaineWebber reserve the
right to reject any purchase order and to suspend the offering of Fund shares
for a period of time.
Investors who choose one Fund as their Primary Sweep Money Fund may also
purchase shares of another Fund by contacting their PaineWebber investment
executives or correspondent firms. Minimum purchase and maintenance
requirements, however, may apply to purchases of shares of a Fund other than the
investor's Primary Sweep Money Fund.
Certain features available to RMA and BSA participants are summarized in the
Appendices to the Statement of Additional Information. The RMA program is more
fully described in the brochure, "Facts about Your PaineWebber Resource
Management Account" and the BSA program is more fully described in the brochure,
"Facts about Your Business Services Account". The availability of Fund shares to
customers of PaineWebber's correspondent firms varies depending on the
arrangements between PaineWebber and such firms.
An order to purchase shares of a Fund will be executed on the Business Day
on which federal funds become available to the Fund, at the Fund's
next-determined net asset value per share. A "Business Day" is any day on which
the Boston offices of the Fund's custodian, State Street Bank and Trust Company
("Custodian"), and the New York City offices of PaineWebber and PaineWebber's
bank are all open for business. "Federal funds" are funds deposited by a
commercial bank in an account at a Federal Reserve Bank that can be transferred
to a similar account of another bank in one day and thus may be made immediately
available to a Fund through its Custodian.
RMA and BSA participants may change their Primary Sweep Money Fund at any
time by notifying their PaineWebber investment executives or correspondent
firms. However, RMA and BSA participants may not have more than one Primary
Sweep Money Fund at a time.
On any Business Day, a Fund will accept purchase orders and credit shares to
investors' accounts as follows.
PURCHASES WITH FUNDS HELD AT PAINEWEBBER. All deposits to RMA and BSA
participants' brokerage accounts and any free credit cash balances that may
arise in such brokerage
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accounts will be automatically invested in shares of their Primary Sweep Money
Fund, as described above under "The RMA and BSA Programs," provided that federal
funds are available for the investment. Federal funds normally are available for
cash balances arising from the sale of securities held in a brokerage account on
the Business Day following settlement, but in some cases can take longer.
PURCHASES BY CHECK OR ELECTRONIC FUNDS TRANSFER CREDIT. RMA and BSA
participants may purchase Fund shares by depositing into their account checks
drawn on a U.S. bank. The RMA or BSA participant's brokerage account number
should be included on the check.
As noted above, shares of the participant's Primary Sweep Money Fund will be
purchased when federal funds are available. RMA or BSA participants wishing to
invest amounts deposited in their accounts by check in one of the other Funds
should so instruct their PaineWebber investment executives or correspondent
firms. Federal funds are deemed available to a Fund two Business Days after
deposit of a personal check and/or an Electronic Funds Transfer credit 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 and Electronic
Funds Transfer credits to the extent those funds are converted to federal funds
in fewer than two Business Days.
PURCHASES BY WIRE. RMA and BSA participants may also purchase shares of
their Primary Sweep Money Fund or another Fund by instructing their banks to
transfer federal funds by wire to their RMA or BSA account. Wire transfers
should be directed to: The Bank of New York, ABA 021000018, PaineWebber Inc.,
A/C 890-0114-088, OBI=FBO [Account Name]/[Brokerage Account Number]. The wire
must include the investor's name and RMA or BSA brokerage account number. RMA or
BSA participants wishing to transfer federal funds into their accounts should
contact their PaineWebber investment executives or correspondent firms to
determine the appropriate wire instructions.
To the extent that the amounts transferred by wire create a cash balance in
an investor's account, that cash balance will be automatically invested in the
investor's Primary Sweep Money Fund, as described above under "Purchases with
Funds Held at PaineWebber." RMA or BSA participants wishing to invest amounts
transferred by wire in one of the other Funds should so instruct their
PaineWebber investment executives or correspondent firms.
If PaineWebber receives a notice from an investor's bank of a wire transfer
of federal funds by 12:00 noon, Eastern time, on a Business Day, the automatic
investment will be executed on that Business Day. Otherwise, the automatic
investment will be executed at 12:00 noon, Eastern time, on the next Business
Day. PaineWebber and/or an investor's bank may impose a service charge for wire
transfers.
REDEMPTIONS
Shareholders may redeem any number of shares from their Fund accounts by
wire, by telephone or by mail. Shares will be redeemed at the net asset value
per share next determined after receipt by the Funds' transfer agent ("Transfer
Agent") of instructions from PaineWebber to redeem. PaineWebber delivers such
instructions to the Transfer Agent prior to the determination of net asset value
at 12:00 noon, Eastern time, on any Business Day.
AUTOMATIC REDEMPTIONS. Under the RMA and BSA programs, PaineWebber will
redeem Fund shares automatically to satisfy outstanding "Debits" and "Charges."
"Debits" are amounts due PaineWebber on settlement date
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for securities purchases and other debits in the investor's RMA or BSA brokerage
account, including margin loans, any federal funds wires arranged by PaineWebber
($5,000 and over) and fees for such wires and PaineWebber (not RMA or BSA)
checks and fees for such checks. "Charges" are RMA or BSA checks, Gold and
Business MasterCard purchases, cash advances, Bill Payment Service checks and
Automated Clearing House transfers including Electronic Funds Transfer Debits.
Shares are redeemed to cover Debits on the day the Debit is generated. Shares
are redeemed to cover RMA or BSA checks and Gold and Business MasterCard cash
advances on the day they are paid. Shares are redeemed to cover Gold and
Business MasterCard purchases at the end of the MasterCard monthly billing
period. Shares are also redeemed to cover interest due on and credit extended
and outstanding under the Bank One Line of Credit at the end of the MasterCard
monthly billing cycle. Securities purchases are automatically paid for on
settlement date. Fund shares will not be purchased until all Debits and Charges
in a shareholder's RMA or BSA brokerage account are satisfied.
ORDER OF REDEMPTION. If a shareholder owns shares of more than one Fund,
shares of the Primary Sweep Money Fund are always redeemed first; thereafter,
shares held in the other Funds will be redeemed, if necessary, in the following
order: first, Money Market Portfolio; second, U.S. Government Portfolio; third,
Tax-Free Fund; and fourth, New York Municipal Money Fund, California Municipal
Money Fund, Connecticut Municipal Money Fund or New Jersey Municipal Money Fund.
ADDITIONAL INFORMATION ON REDEMPTIONS. Shareholders with questions about
redemption requirements should consult their PaineWebber investment executives
or correspondent firms. Shareholders who redeem all their shares will receive
cash credits to their RMA or BSA brokerage accounts for dividends earned on
those shares to (but not including) the day of redemption. The redemption price
may be more or less than the purchase price, depending on the market value of
the Fund's portfolio; however, each Fund anticipates that its net asset value
per share will normally be $1.00 per share. See "Valuation of Shares."
Because each Fund incurs certain fixed costs in maintaining shareholder
accounts, each Fund reserves the right to establish minimum initial purchase
requirements and to redeem Fund shares in any shareholder account of less than
$500 net asset value. If a Fund elects to do so, it will notify the shareholder
and provide the shareholder with an opportunity to increase the amount invested
to $500 or more within 60 days of the notice. This notice may appear on the
shareholder's account statement. If a shareholder requests redemption of shares
that were purchased recently, a Fund may delay payment until it is assured that
it has received good payment for the purchase of the shares. In the case of
purchases by check, this can take up to 15 days.
PaineWebber has the right to terminate an RMA or BSA brokerage account for
any reason. In such event, all Fund shares held in the shareholder's RMA or BSA
brokerage account will be redeemed and the proceeds sent to the shareholder
within three Business Days.
VALUATION OF SHARES
Each Fund uses its best efforts to maintain its net asset value at $1.00 per
share. Each Fund's net asset value per share is determined by dividing the
Fund's net assets by the number of Fund shares outstanding. A Fund's net assets
are equal to the value of its investments and other assets minus its
liabilities. Each Fund's net asset value is determined once each Business Day at
12:00 noon, Eastern time.
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Each Fund values its portfolio securities using the amortized cost method of
valuation, under which market value is approximated by amortizing the difference
between the acquisition cost and value at maturity of an instrument on a
straight-line basis over its remaining life. All cash, receivables and current
payables are carried at their face value. Other assets are valued at fair value
as determined in good faith by or under the direction of the board of directors
of the applicable Corporation or the board of trustees of the applicable Trust.
DIVIDENDS AND TAXES
DIVIDENDS. Each Business Day, each Fund declares as dividends all of its net
investment income. Shares begin earning dividends on the day of purchase;
dividends are accrued to shareholder accounts daily and are automatically paid
in additional Fund shares monthly. Shares do not earn dividends on the day of
redemption. Net investment income includes accrued interest and earned discount
(including original issue discount and, except for Municipal Securities acquired
by the Municipal Funds prior to May 1, 1993, market discount), less amortization
of market premium and accrued expenses. Daily dividends declared by each
Municipal Fund do not include any net investment income attributable to the
accretion of market discount on Municipal Securities. Any such amounts, which
are taxable to each Fund's shareholders, are distributed annually, unless more
frequent distributions are necessary to maintain a Fund's net asset value per
share at $1.00 or to avoid income or excise taxes.
Each Fund distributes its net short-term capital gain, if any, annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The Funds
do not expect to realize net long-term capital gain and thus do not anticipate
payment of any long-term capital gain distributions.
FEDERAL TAX. Each Fund intends to continue to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code so that it
will be relieved of federal income tax on that part of its investment company
taxable income (consisting generally of taxable net investment income and net
short-term capital gain, if any) that is distributed to its shareholders.
Dividends paid by the Money Market Portfolio and the U.S. Government
Portfolio generally are taxable to their shareholders as ordinary income,
notwithstanding that such dividends are paid in additional Fund shares.
Shareholders not subject to tax on their income, however, generally are not
required to pay tax on amounts distributed to them. Distributions by a Municipal
Fund that it designates as "exempt-interest dividends" generally may be excluded
from gross income by a shareholder. Interest on indebtedness incurred by a
shareholder to purchase or carry shares of a Municipal Fund is not deductible.
Each Fund notifies its shareholders following the end of each calendar year
of the tax status of all distributions paid (or deemed paid) during that year.
The notice sent by each Municipal Fund specifies the amount of exempt-interest
dividends (and the portion thereof, if any, that is not AMT exempt interest) and
the amount of any taxable dividends.
Each Fund is required to withhold 31% of all taxable dividends payable to
any individuals and certain other noncorporate shareholders who (1) do not
provide the Fund with a correct taxpayer identification number or (2) otherwise
are subject to backup withholding.
CALIFORNIA TAXES. If the California Municipal Money Fund qualifies as a RIC
under the Internal Revenue Code and at least 50% of the
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value of its total assets consists of California Municipal Securities,
exempt-interest dividends derived from interest on qualifying California
Municipal Securities will be exempt from California personal income tax
("California exempt-interest dividends"), but not California franchise tax.
Dividends derived from interest on other Municipal Securities, taxable income
and net capital gain are taxable under California law at ordinary income rates.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of the Fund is not deductible for purposes of California personal income tax.
California exempt-interest dividends may affect the calculation of certain
adjustments to alternative minimum taxable income for shareholders that are
corporations. Shareholders receive notification annually stating the portion of
the Fund's exempt-interest dividends attributable to issuers in California and
other states. The Fund itself will not be subject to California franchise or
corporate income tax on interest income distributed to its shareholders.
NEW YORK STATE AND NEW YORK CITY TAXES. If the New York Municipal Money Fund
qualifies as a RIC under the Internal Revenue Code and at the end of each
quarter of the Fund's taxable year at least 50% of its assets are invested in
New York Municipal Securities, exempt-interest dividends paid by the Fund that
are derived from interest on qualifying New York Municipal Securities will be
exempt from New York State and New York City personal income taxes, but not
corporate franchise taxes. Dividends derived from interest on other Municipal
Securities, taxable income and net capital gain are not exempt from New York
State and New York City taxes. Interest on indebtedness incurred by a
shareholder to purchase or carry shares of the Fund is not deductible for
purposes of New York State or New York City personal income tax. Shareholders
receive notification annually stating the portion of the Fund's exempt-interest
dividends attributable to issuers in New York State, New York City and other
states.
CONNECTICUT TAXES. Dividends paid by the Connecticut Municipal Money Fund
that qualify as exempt-interest dividends for federal income tax purposes are
not subject to the Connecticut income tax imposed on individuals, trusts and
estates, to the extent that such dividends are derived from income received by
the Fund as interest from Connecticut Municipal Securities, or as interest from
obligations with respect to which Connecticut is prohibited by federal law from
taxing. Dividends derived from other sources are subject to Connecticut income
tax, except that dividends qualifying as capital gains dividends for federal
income tax purposes are not subject to Connecticut income tax to the extent
derived from Connecticut Municipal Securities. In the case of a shareholder
subject to the Connecticut income tax and required to pay AMT, the portion of
exempt-interest dividends paid by the Fund that is derived from income received
by the Fund as interest from Connecticut Municipal Securities or obligations the
interest with respect to which Connecticut is prohibited by federal law from
taxing is not subject to the net Connecticut minimum tax, even though treated as
a preference item for purposes of the AMT.
Dividends qualifying as exempt-interest dividends for federal income tax
purposes that are distributed by the Fund to entities taxed as corporations
under the Connecticut corporation business tax are not exempt from the tax.
Connecticut Municipal Money Fund's shares are not subject to property
taxation by the State of Connecticut or its political subdivisions.
NEW JERSEY TAXES. New Jersey Municipal Money Fund anticipates that
substantially all
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dividends paid by the New Jersey Municipal Money Fund will not be subject to New
Jersey gross income tax. In accordance with the provisions of New Jersey law as
currently in effect, distributions paid by a "qualified investment fund" will
not be subject to the New Jersey gross income tax to the extent the
distributions are attributable to income received as interest or gain from New
Jersey Municipal Securities or direct U.S. government obligations or certain
other specified obligations. To be classified as a qualified investment fund, at
least 80% of the Fund's investments must consist of such obligations.
Distributions by a qualified investment fund that are attributable to most other
sources will be subject to the New Jersey gross income tax. If the New Jersey
Municipal Money Fund continues to qualify as a qualified investment fund, any
gain on the redemption of its shares will not be subject to the New Jersey gross
income tax. To the extent a shareholder of the New Jersey Municipal Money Fund
is obligated to pay state or local taxes outside of New Jersey, dividends earned
by such shareholder may represent taxable income.
The shares of New Jersey Municipal Money Fund are not subject to property
taxation by New Jersey or its political subdivisions.
ADDITIONAL INFORMATION. The foregoing is only a summary of some of the
important federal, state and local income tax considerations generally affecting
the Funds and their shareholders; see the Statement of Additional Information
for a further discussion. There may be other federal, state and local tax
considerations applicable to a particular investor. Prospective shareholders are
urged to consult their tax advisers.
MANAGEMENT
Each Corporation's board of directors, and each Trust's board of trustees,
as part of their overall management responsibility, oversee various
organizations responsible for the Funds' day-to-day management. PaineWebber, the
Funds' investment adviser and administrator, provides a continuous investment
program for each Fund and supervises all aspects of its operations. As
sub-adviser to the Funds, Mitchell Hutchins makes and implements investment
decisions and, as sub-administrator, is responsible for the day-to-day
administration of the Funds.
PaineWebber receives a monthly fee for these services. For the fiscal year
ended June 30, 1995, the effective advisory and administration fees paid to
PaineWebber by the Money Market Portfolio, the U.S. Government Portfolio, the
Tax-Free Fund, California Municipal Money Fund and New York Municipal Money Fund
were equal to 0.50%, 0.45%, 0.48%, 0.50%, and 0.50%, respectively, of the Fund's
average daily net assets. For the fiscal year ended October 31, 1995, the
effective advisory and administration fees paid to PaineWebber by the
Connecticut Municipal Money Fund and the New Jersey Municipal Money Fund were
equal to 0.50% and 0.50%, respectively, of the Fund's average daily net assets.
PaineWebber (not the Funds) pays Mitchell Hutchins a fee for its sub-advisory
and sub-administration services, at an annual rate of 20% of the fee received by
PaineWebber from each Fund for advisory and administrative services.
Each Fund except Connecticut Municipal Money Fund and New Jersey Municipal
Money Fund pays PaineWebber an annual fee of $4.00 per active Fund account, plus
certain out-of-pocket expenses, for certain services not performed by the
Transfer Agent. Each Fund also incurs other expenses. For the fiscal year ended
June 30, 1995, the ratio of expenses as a percentage of average net assets of
the Money Market Portfolio, the U.S. Government Portfolio, the Tax-Free Fund,
California Municipal
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Money Fund and New York Municipal Money Fund were 0.59%, 0.63%, 0.63%, 0.69% and
0.68%, respectively. PaineWebber waived a portion of its advisory and
administration fees for New York Municipal Money Fund. If such waivers had not
been made, the Fund's ratio of expenses stated as a percentage of average net
assets would have been 0.71%. For the fiscal year ended October 31, 1995, the
ratio of expenses as a percentage of average net assets of the Connecticut
Municipal Money Fund and New Jersey Municipal Money Fund were 1.01% and 0.93%,
respectively.
PaineWebber and Mitchell Hutchins are located at 1285 Avenue of the
Americas, New York, New York 10019. Mitchell Hutchins is a wholly owned
subsidiary of PaineWebber, which is in turn wholly owned by Paine Webber Group
Inc., a publicly owned financial services holding company. At January 31, 1996,
PaineWebber or Mitchell Hutchins was investment adviser or sub-adviser to 34
registered investment companies with 68 separate portfolios and aggregate assets
in excess of $30.3 billion.
Mitchell Hutchins investment personnel may engage in securities transactions
for their own accounts pursuant to a code of ethics that establishes procedures
for personal investing and restricts certain transactions.
DISTRIBUTION ARRANGEMENTS. PaineWebber is the distributor of each Fund's
shares. Under separate plans of distribution ("Plans"), the U.S. Government
Portfolio, Tax-Free Fund, California Municipal Money Fund and New York Municipal
Money Fund each is authorized to pay PaineWebber a 12b-1 service fee at the
annual rate of up to 0.15% of the Fund's average daily net assets. Each of these
Funds currently pays PaineWebber a 12b-1 service fee at the annual rate of 0.08%
of its average daily net assets. Any increase in this annual rate would require
prior approval by the applicable Corporation's board of directors or Trust's
board of trustees.
Under each Plan, PaineWebber uses the 12b-1 service fee to pay PaineWebber
investment executives and correspondent firms for shareholder servicing,
currently at the annual rate of 0.06% of the Fund's average daily net assets
held in accounts serviced by such investment executives and correspondent firms.
The fee is also used to offset PaineWebber's other expenses in servicing and
maintaining shareholder accounts. These expenses may include the costs of the
PaineWebber branch office in which the investment executive is based, such as
rent, communications equipment, employee salaries and other overhead costs.
During the period they are in effect, each Plan and a related distribution
contract ("Distribution Contract") obligate the affected Fund to pay the 12b-1
service fee to PaineWebber as compensation for its service activities and not as
reimbursement for specific expenses incurred. Thus, even if PaineWebber's
expenses exceed the 12b-1 fee, the Fund will not be obliged to pay more than the
fee and, if PaineWebber's expenses are less than the fee, it will retain its
full fee and realize a profit. Each Fund will pay the 12b-1 fee to PaineWebber
until either the Plan or the Distribution Contract is terminated or not renewed
for that Fund. In that event, PaineWebber's service expenses in excess of fees
received or accrued through the termination date will be PaineWebber's sole
responsibility and not obligations of the Fund.
Under a separate plan of distribution ("Plan of Distribution"), the
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund are
authorized to reimburse PaineWebber its expenses for distribution of each Fund's
shares at the annual rate of up to 0.12% of each Fund's average daily net
assets. The expenses which may be reimbursed include
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compensation to investment executives and other employees of PaineWebber,
printing of prospectuses and reports for other than existing shareholders, and
the preparation, printing and distribution of sales literature and advertising
materials. It is not anticipated that items reimbursable under the Plan of
Distribution will generally include any profit to PaineWebber. The Fund is not
authorized to reimburse PaineWebber for expenses incurred more than 12 months
prior to the date of such reimbursement. PaineWebber anticipates that there will
be no carryover of expenses from one year to the next. The expenses to be
reimbursed are for activities primarily intended to result in the sale of each
Fund's shares and the maintenance of Fund accounts and account balances, and
there will be no reimbursement for the expenses relative to PaineWebber's
overhead. PaineWebber currently intends that approximately 0.10% per annum of
each Fund's daily net assets will be paid to its investment executives
proportionately in respect of Fund share balances maintained by their respective
clients and the balance on other activities.
PERFORMANCE INFORMATION
From time to time each Fund may advertise its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of a Fund is the income on an
investment in that Fund over a specified seven-day period. This income is then
"annualized" (that is, assumed to be earned each week over a 52-week period) and
shown as a percentage of the investment. The "effective yield" is calculated
similarly, but when annualized the income earned is assumed to be reinvested.
The "effective yield" will be higher than the "yield" because of the compounding
effect of this assumed reinvestment.
The Municipal Funds may also advertise "tax-equivalent yield" and
"tax-equivalent effective yield." "Tax-equivalent yield" shows the taxable yield
that would produce the same income after a stated rate of taxes as the
respective Fund's tax-exempt yield (yield excluding taxable income).
"Tax-equivalent effective yield" shows the taxable effective yield that would
produce the same income after a stated rate of taxes as the respective Fund's
tax-exempt effective yield (effective yield excluding taxable income).
Each Fund may also advertise other performance data, which may consist of
the annual or cumulative return (including realized net short-term capital gain,
if any) earned on a hypothetical investment in the Fund since it began
operations or for shorter periods. This return data may or may not assume
reinvestment of dividends (compounding).
The performance of shareholder accounts with small balances will differ from
the quoted performance because daily income for each shareholder account is
rounded to the nearest whole penny. Accordingly, very small shareholder accounts
(at current interest rates, approximately $33 or less in the case of the Money
Market Portfolio and the U.S. Government Portfolio, and approximately $53 or
less in the case of the Municipal Funds) that generate less than 1/2 per day of
income will earn no dividends.
GENERAL INFORMATION
The Money Market and U.S. Government Portfolios are series of PaineWebber
RMA Money Fund, Inc. ("Money Fund Corporation"). Both the Tax-Free Fund and the
Money Fund Corporation were incorporated in Maryland on July 2, 1982 and each is
registered with the SEC as an open-end, diversified management investment
company. The Money Fund Corporation has an authorized capitalization of
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30 billion shares of $0.001 par value common stock, 15 billion and 5 billion of
which are designated as shares of the Money Market Portfolio and the U.S.
Government Portfolio, respectively. The remaining shares are classified as
shares of the Money Fund Corporation's third series. The Tax-Free Fund has an
authorized capitalization of 20 billion shares of $0.001 par value common stock.
California Municipal Money Fund and New York Municipal Money Fund are series
of PaineWebber Managed Municipal Trust. The Trust is registered as an open-end
management investment company and was organized as a business trust under the
laws of the Commonwealth of Massachusetts by Declaration of Trust dated November
21, 1986. The Trust's board of trustees has authority to issue an unlimited
number of shares of beneficial interest of separate series, par value $0.001 per
share.
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund are
series of PaineWebber Municipal Money Market Series. The Trust is registered as
an open-end management investment company and was organized as a Massachusetts
business trust on September 14, 1990. The Trust's board of trustees has
authority to issue an unlimited number of full and fractional shares of
beneficial interest, $.001 par value per share.
Although each Fund is offering only its own shares, it is possible that a
Fund might become liable for a misstatement in the Prospectus about another
Fund. The board of directors of each Corporation and the board of trustees of
each Trust has considered this factor in approving the use of a single, combined
Prospectus.
The Corporations and the Trusts do not hold annual shareholder meetings.
There normally will be no meetings of shareholders to elect directors or
trustees unless fewer than a majority of the directors or trustees holding
office have been elected by shareholders. The directors are required to call a
meeting of shareholders of a Corporation when requested in writing to do so by
the shareholders of record holding at least 25% of the Corporation's outstanding
shares.
Shareholders of record of no less than two-thirds of the outstanding shares
of the applicable Trust may remove a trustee by vote cast in person or by proxy
at a meeting called for that purpose. The trustees are required to call a
meeting of shareholders of the applicable Trust for the purposes of voting upon
the question of removal of any trustee when requested in writing to do so by the
shareholders of record of not less than 10% of the applicable Trust's
outstanding shares.
Each share of a Fund has equal voting, dividend and liquidation rights. The
shares of each series of the Money Fund Corporation and the Trusts will be voted
separately except when an aggregate vote of all series is required by the
Investment Company Act of 1940.
CERTIFICATES. To avoid additional operating expenses and for investor
convenience, stock certificates are not issued. Ownership of shares of each Fund
is recorded on a stock register by the Transfer Agent, and shareholders have the
same rights of ownership with respect to such shares as if certificates had been
issued.
REPORTS. Shareholders receive audited annual and unaudited semi-annual
financial statements of the Funds. All purchases and redemptions of Fund shares
are reported to shareholders on monthly account statements.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One
Heritage Drive, North Quincy, Massachusetts 02171, is custodian of each Fund's
assets. PFPC Inc., a subsidiary of PNC Bank, National Association, whose
principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809,
is each Fund's transfer and dividend disbursing agent.
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APPENDIX
MUNICIPAL SECURITIES
The following description of the Municipal Securities in which, where
applicable, Tax-Free Fund, California Municipal Money Fund, Con-
necticut Municipal Money Fund, New Jersey Municipal Money Fund and New York
Municipal Money Fund may invest supplements that provided elsewhere in the
prospectus.
MUNICIPAL BONDS. Municipal bonds are debt obligations issued to obtain funds
for various public purposes, the interest on which is exempt from federal income
tax in the opinion of bond counsel. The two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue bonds are payable only
from the revenue derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source such as from the user of the facility being financed. The term
"municipal bonds" also includes "moral obligation" issues, which are normally
issued by special purpose authorities. In the case of such issues, an express or
implied "moral obligation" of a related governmental unit is pledged to the
payment of the debt service, but is usually subject to annual budget
appropriations. The term "municipal bonds" also includes municipal lease
obligations, such as leases, installment purchase contracts and conditional
sales contracts, and certificates of participation therein. Municipal lease
obligations are issued by local and state governments and authorities to
purchase land or various types of equipment or facilities and may be subject to
annual budget appropriations. The Funds generally invest in municipal lease
obligations through certificates of participation. The term "municipal bonds"
also includes custodial receipts that represent an ownership interest in one or
more municipal bonds.
INDUSTRIAL DEVELOPMENT BONDS AND PRIVATE ACTIVITY BONDS. Industrial
development bonds ("IDBs") and private activity bonds ("PABs") are issued by or
on behalf of public authorities to finance various privately operated
facilities, such as airport or pollution control facilities. PABs generally are
such bonds issued after August 15, 1986. These obligations are included within
the term "municipal bonds" if the interest paid thereon is exempt from federal
income tax in the opinion of the bond issuer's counsel. IDBs and PABs are in
most cases revenue bonds and thus are not payable from the unrestricted revenues
of the issuer. The credit quality of IDBs and PABs is usually directly related
to the credit standing of the user of the facilities being financed. Each Fund
is authorized to invest more than 25% of its assets in IDBs and PABs.
PARTICIPATION INTERESTS. Participation interests are interests in municipal
bonds, including IDBs and PABs, and floating and variable rate obligations that
are owned by banks. These interests carry a demand feature permitting the holder
to tender them back to the bank, which demand feature generally is backed by an
irrevocable letter of credit or guarantee of the bank. The credit standing of
such bank affects the credit quality of the participation interest.
PUT BONDS. A put bond is a municipal bond that gives the holder the
unconditional right to sell the bond back to the issuer or a third party at a
specified price and exercise date, which is typically well in advance of the
bond's maturity date.
TAX-EXEMPT COMMERCIAL PAPER AND SHORT-TERM MUNICIPAL NOTES. Tax-exempt
commercial paper and short-term municipal notes include tax anticipation notes,
bond anticipation notes, revenue anticipation notes and other forms of
short-term loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues.
A-1
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------
Table of Contents PAINEWEBBER RMA MONEY MARKET PORTFOLIO
- --------------------------------------------
2 Highlights
----------------------------------- PAINEWEBBER RMA U.S. GOVERNMENT PORTFOLIO
7 Financial Highlights
-----------------------------------
11 Investment Objectives and Policies PAINEWEBBER RMA TAX-FREE FUND
-----------------------------------
19 Purchases
----------------------------------- PAINEWEBBER RMA CALIFORNIA MUNICIPAL MONEY FUND
20 Redemptions
-----------------------------------
21 Valuation of Shares
----------------------------------- PAINEWEBBER RMA CONNECTICUT MUNICIPAL MONEY FUND
22 Dividends and Taxes
-----------------------------------
24 Management PAINEWEBBER RMA NEW JERSEY MUNICIPAL MONEY FUND
-----------------------------------
26 Performance Information
-----------------------------------
26 General Information
-----------------------------------
A-1 Appendix
-----------------------------------
For information on the RMA program
or the RMA Funds, call PaineWebber
toll-free at 1-800-762-1000.
For information on the BSA program,
call PaineWebber toll-free at
1-800-BSA-0140.
</TABLE>
- ------------------------------------------
No person has been authorized to give
any information or to make any
representations not contained in this
Prospectus in connection with the
offering made by the Prospectus and,
if given or made, such information or
representations must not be relied upon
as having been authorized by the Funds or
their Distributor. This Prospectus does
not constitute an offering by the Funds
or by the Distributor in any jurisdiction
in which such offering may not lawfully
be made.
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Paper
(C) 1996 PaineWebber Incorporated
