<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1995
SECURITIES ACT FILE NO. 2-81760
INVESTMENT COMPANY ACT FILE NO. 811-3663
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 14 [x]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 15 [x]
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
1285 AVENUE OF THE AMERICAS 10019
NEW YORK, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 713-2000
DIANNE E. O'DONNELL
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
JOHN E. BAUMGARDNER, JR., ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
BOX)
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485
[x] ON AUGUST 1, 1995 PURSUANT TO PARAGRAPH (B) OF RULE 485
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1) OF RULE 485
[ ] ON PURSUANT TO PARAGRAPH (A)(1) OF RULE 485
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
[ ] ON PURSUANT TO PARAGRAPH (A)(2) OF RULE 485.
---------------------------------
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE REGISTRANT'S MOST RECENT
FISCAL YEAR WAS FILED ON MAY 31, 1995.
________________________________________________________________________________
<PAGE>
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A
ITEM
NO. LOCATION
- ---- ------------------------------------------------------
<S> <C> <C>
PART A
1. Cover Page............................................ Cover Page
2. Synopsis.............................................. Fee Table
3. Condensed Financial Information....................... Financial Highlights
4. General Description of Registrant..................... Cover Page; Investment Objective and Management
Policies; Additional Information About the Fund
5. Management of the Fund................................ Management of the Fund; Portfolio Transactions;
Custodian and Transfer, Dividend and Recordkeeping
Agent
6. Capital Stock and Other Securities.................... Cover Page; Dividends, Distributions and Taxes;
Additional Information About the Fund
7. Purchase of Securities Being Offered.................. Management of the Fund; Purchase of Shares; The
Distributor; Exchange Privilege; Determination of
Net Asset Value
8. Redemption or Repurchase.............................. Redemption of Shares
9. Pending Legal Proceedings............................. Not applicable
PART B
10. Cover Page............................................ Cover Page
11. Table of Contents..................................... Back Page
12. General Information and History....................... Additional Information About the Fund
13. Investment Objectives and Policies.................... Investment Objective and Policies
14. Management of the Fund................................ Management of the Fund
15. Control Persons and Principal Holders of Securities... Management of the Fund
16. Investment Advisory and Other Services................ Investment Advisory and Other Services
17. Brokerage Allocation.................................. Portfolio Transactions
18. Capital Stock and Other Securities.................... Additional Information About the Fund
19. Purchase, Redemption and Pricing of Securities Being
Offered............................................. Redemption of Shares; Exchange of Shares;
Determination of Net Asset Value
20. Tax Status............................................ Dividends, Distributions and Taxes
21. Underwriters.......................................... Investment Advisory and Other Services
22. Calculations of Yield Quotations of Money Market
Funds............................................... Determination of Current and Effective Yields
23. Financial Statements.................................. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
Prospectus August 1, 1995
- --------------------------------------------------------------------------------
PaineWebber/Kidder, Peabody Government Money Fund, Inc.
1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 (800) 647-1568
PaineWebber/Kidder, Peabody Government Money Fund, Inc. (the 'Fund') is a
diversified, open-end management investment company whose objective is the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. It pursues this objective by investing
in short-term money market instruments issued or guaranteed by the U.S.
Government or its agencies or instrumentalities.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. While the Fund seeks to maintain a stable net asset value of $1.00
per share, there can be no assurance that it will be able to do so.
PaineWebber Incorporated ('PaineWebber'), 1285 Avenue of the Americas, New York,
New York 10019, serves as the Fund's investment adviser, administrator and
distributor. Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), 1285
Avenue of the Americas, New York, New York 10019, a wholly owned subsidiary of
PaineWebber, serves as the Fund's sub-adviser and sub-administrator. See
'Management of the Fund -- Investment Adviser and Administrator.' PaineWebber
receives an annual fee of .50% of the Fund's average daily net assets.
PaineWebber pays Mitchell Hutchins an annual fee of 20% of the fee received by
PaineWebber from the Fund.
The Fund's Board of Directors has approved a Plan of Distribution pursuant to
Rule 12b-1 (the 'Plan of Distribution') pursuant to which the Fund pays an
annual fee of .12% of its average daily net assets to PaineWebber. See 'The
Distributor.'
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about the
Fund has been filed with the Securities and Exchange Commission (the 'SEC') in a
Statement of Additional Information dated August 1, 1995, which is hereby
incorporated by reference and is available without charge upon request made to
the Fund at the above address. Shareholder inquiries may be directed to the Fund
at the above address.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER , ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
SUB-ADVISER AND SUB-ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE
The purpose of the Fee Table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For more detailed information on these costs and expenses, see
'Management of the Fund' and 'The Distributor.'
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)....................... 0%
---
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)............ 0
---
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds, as
applicable)..................................................................................... 0
---
Redemption Fees (as a percentage of amount redeemed, if applicable)............................... 0
---
Exchange Fee...................................................................................... 0
---
ANNUAL FUND OPERATING EXPENSES FOR THE FISCAL YEAR ENDED MARCH 31, 1995
(as a percentage of average net assets)
Management Fees................................................................................... .50%
12b-1 Fees........................................................................................ .12
Other Expenses.................................................................................... .10
---
Total Fund Operating Expenses..................................................................... .72%
---
---
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
A shareholder would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return, (2) an operating
expense ratio of .72% and (3) redemption at the end of each
time period:.................................................. $7 $23 $40 $ 89
--
------- ------- ---
</TABLE>
- ------------
The amounts shown in the example assume reinvestment of all dividends and
distributions and should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. The assumed
5% annual return is hypothetical and should not be considered a representation
of past or future annual return. The actual return of the Fund may be greater or
less than the assumed return. See 'The Distributor.'
2
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
- -------------------
The Fund
The Fund is a diversified, open-end, management investment company whose investment objective
is the maximization of current income to the extent consistent with the preservation of capital
and the maintenance of liquidity through investments only in short-term money market
instruments issued or guaranteed by the U.S. Government, or its agencies or instrumentalities.
- ------------------------------------------------------------------------------------------------------------------
- -------------------
Benefits of
Investment
in the
Fund
Mutual funds, such as the Fund, are flexible investment tools that are increasingly
popular -- one of four American households now owns shares of at least one mutual fund -- for
very sound reasons. The Fund offers investors the following important benefits:
Professional Management
By pooling the funds of many investors, the Fund enables shareholders to obtain the benefits
of full-time professional management and a degree of diversification of investment that is
beyond the means of most investors. The Fund's investment adviser reviews the fundamental
characteristics of far more securities than can a typical individual investor and may employ
portfolio management techniques that frequently are not used by an individual investor.
Additionally, the larger denominations of securities in which the Fund invests may result in
better overall prices for the investments. See 'Investment Objective and Management Policies.'
Transaction Savings
By investing in the Fund, a shareholder is able to acquire ownership in a diversified
portfolio of securities without paying the higher transaction costs associated with a series
of small securities purchases.
Convenience
Fund shareholders are relieved of the administrative and recordkeeping burdens and
coordination of maturities normally associated with direct ownership of securities.
Quality
All securities in which the Fund invests will be determined to be of high quality by a
nationally recognized statistical rating organization ('NRSRO'), or determined to be of
comparable quality by the Fund's investment adviser acting under the supervision of the Board
of Directors if not so rated, and will also be determined to present minimal credit risks. Any
purchase of unrated securities or securities that are rated only by a single rating agency
must be approved or ratified by the Directors.
Liquidity
The Fund's convenient purchase and redemption procedures provide shareholders with ready
access to their money and reduce the delays frequently involved in the direct purchase and
sale of securities. See 'Purchase of Shares' and 'Redemption of Shares.'
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Exchange Privilege
Shareholders of the Fund may exchange all or a portion of their shares for shares of
PaineWebber/Kidder, Peabody money market funds. See 'Exchange Privilege.'
- ------------------------------------------------------------------------------------------------------------------
- -------------------
Purchase of
Shares
Shares of the Fund are offered exclusively to existing shareholders of the Fund. The purchase
price for shares of the Fund is the net asset value per share next determined after receipt by
the Fund of a purchase order in proper form. The Fund seeks to maintain a constant net asset
value of $1.00, although there is no assurance it will be able to do so. See 'Purchase of
Shares' and 'Determination of Net Asset Value.'
- ------------------------------------------------------------------------------------------------------------------
- -------------------
Redemption of
Shares
Shares of the Fund may be redeemed at the Fund's net asset value per share next determined
after receipt by the transfer agent of instructions from PaineWebber Incorporated
('PaineWebber'). See 'Redemption of Shares' for a discussion of the various alternative methods
of redeeming shares of the Fund and 'Determination of Net Asset Value.'
- ------------------------------------------------------------------------------------------------------------------
- -------------------
Management PaineWebber serves as investment adviser and administrator of the Fund and receives an annual
Services fee of .50% of the Fund's average daily net assets. Mitchell Hutchins Asset Management Inc.
('Mitchell Hutchins') serves as the Fund's sub-adviser and sub-administrator and receives from
PaineWebber (not the Fund) 20% of the fee received by PaineWebber from the Fund.
- ------------------------------------------------------------------------------------------------------------------
- -------------------
Distributor
PaineWebber serves as distributor of the Fund's shares.
- ------------------------------------------------------------------------------------------------------------------
- -------------------
Dividends
The Fund declares dividends on each day the New York Stock Exchange is open for business of all
of its daily net income to shareholders of record. See 'Dividends, Distributions and Taxes.'
- ------------------------------------------------------------------------------------------------------------------
- -------------------
Risk Factors
The Fund may enter into repurchase agreements. In the event the other party to a repurchase
agreement defaults, the Fund may experience difficulties and incur certain costs in exercising
its rights to the collateral and may lose the interest it expected to receive in respect of the
repurchase agreement.
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial information for shares of the Fund has been presented in the table
below for each of the periods shown. This information is supplemented by the
financial statements and accompanying notes appearing in the Fund's Annual
Report to Shareholders for the fiscal year ended March 31, 1995, which are
incorporated by reference into the Statement of Additional Information. The
financial statements and notes, as well as the information in the table
appearing below, have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereof is included in the Annual Report to Shareholders.
SELECTED DATA FOR A SHARE OF COMMON STOCK
OUTSTANDING THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
YEAR..........$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income........ 0.07 0.06 0.06 0.07 0.08 0.07 0.05 0.03 0.03 0.04
Distributions
to
shareholders
from
Net investment
income........ (0.07) (0.06) (0.06) (0.07) (0.08) (0.07) (0.05) (0.03) (0.03) (0.04)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset
value, end of
year..........$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
return.... 7.32% 5.65% 6.39% 7.52% 8.37% 7.20% 4.78% 2.90% 2.54% 4.23%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of year (in
thousands)....$180,557 $233,518 $343,888 $334,982 $375,270 $638,167 $511,065 $361,278 $356,138 $262,269
RATIOS TO
AVERAGE NET
ASSETS
Expenses,
including
distribution
fees.......... 0.64% 0.62% 0.59% 0.61% 0.70% 0.69% 0.69% 0.71% 0.71% 0.72%
Net investment
income........ 7.07% 5.56% 6.14% 7.36% 8.06% 6.88% 4.69% 2.84% 2.51% 4.07%
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
YIELD
The chart below shows the current and effective yields, calculated in accordance
with rules of the SEC, and the dollar-weighted average portfolio maturity for
the seven-day periods ended March 31, 1995 and June 30, 1995.
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1995 1995
--------- --------
<S> <C> <C>
Current Yield......................................................... 5.30% 5.24%
Effective Yield....................................................... 5.44% 5.37%
Dollar-Weighted Average Portfolio Maturity............................ 25 days 41 days
</TABLE>
From time to time the Fund advertises its 'current yield' and 'effective
yield.' Both yield figures are based on historical earnings and are not intended
to indicate future performance. The 'current yield' of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then 'annualized.'
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The 'effective yield' is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The 'effective yield' will be slightly higher than the 'current
yield' because of the compounding effect of this assumed reinvestment. The
Statement of Additional Information describes in more detail the methods used to
calculate the yields of the Fund.
Performance data for the Fund may, in reports and promotional literature,
be compared to: (i) other mutual funds tracked by IBC/Donoghue's Money Fund
Report and Lipper Analytical Services, widely used independent research firms
which rank mutual funds by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications, or persons who
rank mutual funds on overall performance or other criteria; (ii) unmanaged
indices so that investors may compare the Fund's results with those of a group
of unmanaged securities widely regarded by investors as representative of the
securities markets in general; and (iii) the Consumer Price Index (inflation
measure). Promotional and advertising literature also may refer to discussions
of the Fund and comparative mutual fund data and ratings reported in independent
periodicals.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Fund seeks to maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Fund pursues this
objective by investing only in short-term money market instruments issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
('Eligible Investments'). The Fund's investment objective and its policy of
investing only in Eligible Investments cannot be changed without approval by the
holders of a majority of the outstanding shares of the Fund, as defined in the
Investment Company Act of 1940, as amended (the 'Act'). See 'Additional
Information About the Fund.'
Securities issued or guaranteed by the U.S. Government include a variety of
Treasury securities, which differ only in their interest rates, maturities and
dates of issuance. Treasury Bills have maturities of one year or less. Treasury
Notes have maturities of one to ten years and
6
<PAGE>
- --------------------------------------------------------------------------------
Treasury Bonds generally have maturities of greater than ten years at the date
of issuance. Treasury securities are backed by the full faith and credit of the
United States.
Some obligations of U.S. Government agencies and instrumentalities are
supported by the full faith and credit of the United States, others by the right
of the issuer to borrow from the Treasury, while still others are supported only
by the credit of the instrumentality. Because the U.S. Government is not
obligated by law to provide support to an instrumentality it sponsors, the Fund
will invest in such securities only when Mitchell Hutchins determines that the
credit risk with respect to the instrumentality does not make its securities
unsuitable investments for the Fund.
The Fund may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board or member banks of the Federal
Reserve System. A repurchase agreement is an instrument under which the
purchaser (i.e., the Fund) acquires a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed upon
time and price, thereby determining the yield during the purchaser's holding
period. While the maturities of the underlying securities in repurchase
agreement transactions may be more than one year, the term of each repurchase
agreement will always be less than one year. If the seller defaults, the
underlying security constitutes collateral (whose market value, including
accrued interest, must be at least equal to 100% of the dollar amount invested
by the Fund in each repurchase agreement) for the seller's obligation to pay
although the Fund may experience difficulties and incur certain costs in
exercising its rights to the collateral and may lose the interest it expected to
receive. Repurchase agreements usually are for short periods, such as one week
or less, but may be longer. The Fund will not enter into repurchase agreements
of more than seven days duration if more than 10% of the market value of its
total assets would be so invested together with any other investment the Fund
may hold for which market quotations are not readily available.
The Fund may purchase securities on a when-issued or delayed delivery
basis -- i.e., delivery and payment may take place a month or more after the
date of the transaction. The purchase price and the interest rate payable on the
securities are fixed on the transaction date. The securities so purchased are
subject to market fluctuation; therefore, at the time of delivery and payment
the market price may be higher or lower than the purchase price. No interest
accrues to the Fund until delivery and payment take place. At the time the Fund
makes the commitment to purchase securities on a when-issued or delayed delivery
basis, it will record the transaction and thereafter reflect the value of such
securities in determining its net asset value each day. The Fund will make
commitments for such when-issued transactions only with the intention of
actually acquiring the securities, and, to facilitate such acquisitions, the
Fund's custodian will maintain, in a separate account of the Fund, portfolio
securities having a value equal to or greater than such commitments. On delivery
dates for such transactions, the Fund will meet its obligations from maturities
or sales of the securities held in the separate account, and/or from then
available cash flow. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it could, as with the disposition
of any other portfolio obligation, incur a gain or loss due to market
fluctuation.
The Fund attempts to increase yields by trading to take advantage of
short-term market variations. This policy may result in a high portfolio
turnover rate. See 'Portfolio Transactions.'
7
<PAGE>
- --------------------------------------------------------------------------------
The Fund may lend its portfolio securities to brokers, dealers and
financial institutions, and receive collateral in cash or securities issued or
guaranteed by the U.S. Government which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Such collateral, if cash, will be invested in Eligible Investments,
the income from which will increase the return to the Fund. Such loans will be
terminable at any time. No such loans will be made to PaineWebber. The Fund will
have the right to regain record ownership of loaned securities in order to
exercise beneficial rights. Any gain or loss in the market price of the loaned
securities occurring during the term of the loan inures to the Fund. The Fund
may pay reasonable fees to persons unaffiliated with the Fund in connection with
arranging such loans.
The Fund may not borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests which might otherwise
require the untimely disposition of securities. Borrowing in the aggregate may
not exceed 10%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the value of the Fund's total assets (including the amount
borrowed) valued at the lesser of cost or value less liabilities (not including
the amount borrowed) at the time the borrowing is made. The borrowings will be
repaid before any additional investments are made.
The Fund will maintain a dollar-weighted average portfolio maturity of 90
days or less. All securities in which the Fund invests will have remaining
maturities of 397 days or less on the date of purchase, will be denominated in
U.S. dollars and will have been determined to be of high quality by NRSROs or
determined to be of comparable quality if not so rated. Mitchell Hutchins,
acting under the supervision of and procedures adopted by the Board of
Directors, will determine that unrated securities purchased by the Fund are of
high quality and will determine that all securities purchased by the Fund
present minimal credit risks and any purchase of unrated securities or
securities that are rated only by a single NRSRO will be approved or ratified by
the Board of Directors. Mitchell Hutchins will, under the supervision of the
Board of Directors, cause the Fund to dispose of any security as soon as
practicable if the security is no longer of high quality, unless the Board of
Directors determines that this action would not be in the best interest of the
Fund. High quality, short term instruments may result in a lower yield than
instruments with a lower quality or a longer term.
Further information about the investment policies of the Fund, including a
list of the Fund's investment restrictions which cannot be changed without
approval by the holders of a majority of the outstanding shares of the Fund,
appears in the Statement of Additional Information.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
Overall responsibility for management and supervision of the Fund rests with its
Board of Directors. The day-to-day operations of the Fund are conducted through
or under the direction of its officers. There are five members of the Fund's
Board of Directors, one of whom is employed by Mitchell Hutchins. The Statement
of Additional Information contains general background information regarding each
Director and officer of the Fund.
8
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT
At a special meeting of shareholders on April 13, 1995, shareholders approved a
new investment advisory and administration agreement with PaineWebber and a new
sub-advisory and sub-administration agreement with Mitchell Hutchins.
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 in turn is wholly owned by Paine Webber Group Inc., a
publicly owned financial services holding company. As of June 30, 1995,
PaineWebber or Mitchell Hutchins served as investment adviser or sub-adviser to
41 investment companies with an aggregate of 86 separate portfolios and
aggregate assets of over $27.9 billion.
The Fund pays the same fee for investment advisory and administration
services to PaineWebber as previously paid to Kidder Peabody Asset Management,
Inc. ('KPAM'), the Fund's predecessor investment adviser and administrator.
PaineWebber (not the Fund) pays Mitchell Hutchins a fee for sub-advisory and
sub-administration services at the annual rate of 20% of the fee received by
PaineWebber from the Fund. PaineWebber and Mitchell Hutchins continue to manage
the Fund in accordance with the Fund's investment objective, policies and
restrictions.
As compensation for PaineWebber's services, the Fund pays a fee, computed
daily and paid monthly, at an annual rate of .50% of the Fund's average daily
net assets. For the fiscal year ended March 31, 1995, the Fund's total expenses
represented .72% of its average net assets. From time to time, PaineWebber in
its sole discretion may waive all or a portion of its fee and/or reimburse all
or a portion of the Fund's operating expenses.
Mitchell Hutchins manages the Fund's portfolio in accordance with the
stated policies of the Fund, makes investment decisions for the Fund and places
the purchase and sale orders for portfolio transactions. Although investment
decisions for the Fund are made independently from those of the other accounts
managed by Mitchell Hutchins, investments of the type the Fund may make may also
be made by those other accounts. When the Fund and one or more other accounts
managed by Mitchell Hutchins are prepared to invest in, or desire to dispose of,
the same security, available investments or opportunities for sales are
allocated in a manner believed by Mitchell Hutchins to be equitable to each. In
some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund.
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.
PORTFOLIO TRANSACTIONS
Mitchell Hutchins places the orders for the purchase and sale of the Fund's
portfolio securities. Transactions are allocated to various dealers by Mitchell
Hutchins in its best judgment. The primary consideration is prompt and effective
execution of orders at the most favorable price. Subject to that primary
consideration, dealers may be selected for research, statistical or other
services to enable Mitchell Hutchins to supplement its own research and analysis
with the views and information of other securities firms. No brokerage
commissions have been paid to date.
9
<PAGE>
- --------------------------------------------------------------------------------
Investment decisions for the Fund are made independently from those of any
other fund(s) managed by Mitchell Hutchins. If, however, funds managed by
Mitchell Hutchins are simultaneously engaged in the purchase or sale of the same
security, the transactions are averaged as to price and allocated equitably to
each fund. In some cases, this system might adversely affect the price paid or
received by the Fund or the size of the position obtainable for the Fund.
PURCHASE OF SHARES
GENERAL INFORMATION
PaineWebber serves as the Fund's distributor. Shares of the Fund are offered
exclusively to existing shareholders and must be maintained through a brokerage
account with PaineWebber (an 'Account'). Thus, an investor who wishes to
purchase shares but has no existing Account must establish one. PaineWebber
charges no maintenance fee in connection with an Account through which an
investor purchases or holds shares of the Fund.
Shares are sold on a continuous basis at their net asset value next
determined after an order and good funds (e.g., cash, Federal funds or certified
checks drawn on a United States bank) are received. If an investor does not have
a sufficient credit balance in his Account, payment for shares must be converted
into Federal funds before an order to purchase is effective. Purchase orders
received before 12:00 noon, Eastern time, for which payment has been received by
PaineWebber will be executed at that time and the shareholder will receive the
dividend declared on that day. Purchase orders received after 12:00 noon,
Eastern time, and purchase orders received earlier in the same day for which
payment has not been received by 12:00 noon, Eastern time, will be executed at
the close of regular trading on the New York Stock Exchange, if payment has been
received by PaineWebber by that time and the shareholder will receive the
dividend declared on the following day.
Credit balances of $1 or more in a PaineWebber Resource Management Account
('RMA') or PaineWebber Business Services Account ('BSA') will be swept
automatically into shares of the Fund daily. Credit balances for non-RMA and
non-BSA accounts from $1 to $4,999 will be swept as of the close of business
each Friday for settlement on the next business day and credit balances of
$5,000 or more will be swept daily for settlement on the next business day. The
Fund reserves the right at any time to impose minimum initial and subsequent
purchase amounts.
PURCHASES WITH FUNDS HELD AT PAINEWEBBER
All deposits to a brokerage account and any free credit cash balances that may
arise in a brokerage account will be automatically invested in shares of their
Primary Sweep Money Fund, according to sweep rules described above, 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 WIRE
Shares of the Fund may also be purchased by transferring Federal funds by wire
to a PaineWebber brokerage account. Wire transfers should be directed to: Bank
of New York, ABA
10
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021000018, PaineWebber Inc., for RMAs/BSAs A/C 890-0114-088 and for all other
accounts A/C 890-0114-096 OBI-FBO [Account Name]/[Brokerage Account Number]. The
wire must include the investor's name and PaineWebber brokerage account number.
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.' Participants wishing to invest amounts transferred
by wire in the Fund 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.
REDEMPTION OF SHARES
A shareholder may redeem shares on any day that net asset value is determined by
following the procedures set forth below.
REDEMPTION THROUGH PAINEWEBBER
PaineWebber wires the terms of any redemption request properly received to PFPC
Inc. The price at which a redemption request is executed is the net asset value
per share next determined after proper redemption instructions are received.
Payment for redemption orders, if any, that are received before 12:00 noon,
Eastern time, normally is made on the same business day. Shares redeemed in this
manner will not be entitled to the dividend declared on the day of redemption.
Payment for redemption orders, that are received after 12:00 noon, Eastern time,
will be made on the next business day following the redemption. Shares redeemed
in this manner are entitled to the dividend declared on the day of redemption.
Proceeds of a redemption generally are credited to the shareholder's Account, or
sent to the shareholder, as applicable.
REDEMPTION BY MAIL
Shares may also be redeemed by submitting a written request in 'good order' to
PFPC Inc. at the following address:
PFPC Inc.
P.O. Box 8950
Wilmington, Delaware 19899
Attn: PaineWebber/Kidder, Peabody
Government Money Fund, Inc.
Redemption requests received by PFPC Inc. by mail are processed by PFPC
Inc. which will mail a check in the appropriate redemption amount to the
shareholder the next Business Day after receipt of a redemption request in 'good
order.'
A redemption request is considered to have been received in 'good order' if
the following conditions are satisfied:
11
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(1) the request is in writing, states the number of shares to be
redeemed and identifies the shareholder's Fund account number;
(2) the request is signed by each registered owner exactly as the
shares are registered;
(3) if the shares to be redeemed were issued in certificate form, the
certificates are endorsed for transfer (or are themselves accompanied by an
endorsed stock power) and accompany the redemption request (which should be
sent by registered mail for the protection of shareholders); and
(4) the signatures on the written redemption request have been
guaranteed by a bank, broker-dealer, municipal securities broker or dealer,
government securities dealer or broker, credit union, a member firm of a
national securities exchange, registered securities association or clearing
agency, or savings association (the purpose of a signature guarantee is to
protect shareholders against the possibility of fraud). PFPC Inc. may
reject redemption instructions if the guarantor is neither a member of nor
a participant in a signature guarantee program (currently known as
'STAMP'sm'').
Additional supporting documents may be required for redemptions by
corporations, executors, administrators, trustees and guardians.
OTHER REDEMPTION POLICIES
Signature guarantees (as described above) are required in connection with any
redemption of shares by mail and share ownership transfer requests. These
requirements may be waived by the Fund in certain instances.
If the shares to be redeemed represent an investment for which the Fund has
not yet received good funds, the Fund reserves the right not to honor the
redemption request until such time as it has assured itself that good funds have
been collected, which may take up to 15 days. If purchases are made with good
funds, no redemption delay would occur.
Due to the relatively high cost of maintaining a Fund account, the Fund
reserves the right to redeem, upon not less than 45 days' notice, any Fund
account reduced by a shareholder to a value of $500 or less.
PaineWebber has established procedures pursuant to which shares of the Fund
held by a PaineWebber client having a deficiency (i.e., amount owed to
PaineWebber resulting from Account activity or otherwise and other amounts
authorized by the client to be paid to others from the Account, less the amount
of any free credit cash balance) in his Account will be redeemed automatically
to the extent of that deficiency, unless the client notifies PaineWebber to the
contrary in advance. The amount of the redemption will be the lesser of (a) the
total net asset value of Fund shares held in the client's Account or (b) the
deficiency in the client's cash account at the close of business on the
redemption day adjusted for purchase and sale transactions in other securities
settling on the following business day. Accordingly, a PaineWebber client who
has previously consented to this automatic redemption procedure and who wishes
to pay for a securities transaction other than through such automatic redemption
procedure must do so not later than the day before the settlement date for that
transaction.
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EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the following
PaineWebber/Kidder, Peabody money market funds, to the extent such shares are
offered for sale in the shareholder's state of residence.
PaineWebber/Kidder, Peabody California Tax Exempt Money Fund
PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc.
PaineWebber/Kidder, Peabody Municipal Money Market Series -- Connecticut
Series
PaineWebber/Kidder, Peabody Municipal Money Market Series -- New Jersey
Series
PaineWebber/Kidder, Peabody Municipal Money Market Series -- New York
Series
PaineWebber/Kidder, Peabody Premium Account Fund
PaineWebber/Kidder, Peabody Tax Exempt Money Fund, Inc.
Although the Fund currently imposes no limit on the number of times the
Exchange Privilege may be exercised by any shareholder, the Fund may impose such
limits in the future, in accordance with applicable provisions of the Act and
rules thereunder. In addition, the Exchange Privilege may be terminated or
revised at any time upon 60 days' prior written notice to Fund shareholders, and
is available only to residents of states in which exchanges are permitted under
state law. The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by the
shareholder, so that a shareholder may recognize a taxable gain or loss on an
exchange, although a shareholder's losses may be limited. See 'Dividends,
Distributions and Taxes.'
Upon receipt of proper instructions and all necessary supporting documents,
Fund shares submitted for exchange are redeemed at their current net asset value
next determined and simultaneously invested in shares of the fund being
acquired. Settlement of the exchange would generally occur one business day
after the date on which the request for exchange was received in proper form,
unless the dollar amount of the transaction exceeds 5% of the Fund's total net
assets on any given day, in which case, settlement would occur within five
business days after the date on which the request for exchange was received in
proper form. The proceeds of a redemption of Fund shares made to facilitate the
exchange of those shares for shares of another fund must be equal to at least
(1) the minimum initial investment requirement imposed by the fund into which
the exchange is being sought if the shareholder seeking the exchange has not
previously invested in that fund or (2) the minimum subsequent investment
requirement imposed by the fund into which the exchange is being sought if the
shareholder has previously made an investment in that fund.
A shareholder of the Fund wishing to exercise the Exchange Privilege should
obtain from PaineWebber a copy of the current prospectus of the fund into which
an exchange is being sought and review that prospectus carefully before making
the exchange. PaineWebber reserves the right to reject any exchange request at
any time. Prior to or concurrently with the delivery of a confirmation of a
shareholder's exchange transaction, PaineWebber will deliver to that shareholder
a copy of the prospectus of the fund into which the exchange is being made.
THE DISTRIBUTOR
PaineWebber acts as distributor of the Fund's shares pursuant to a Distribution
Agreement dated April 13, 1995. To reimburse PaineWebber for the services it
provides and for the expenses it bears under the Distribution Agreement, the
Fund has adopted a Plan of Distribution under the Act. The Plan of Distribution
was most recently amended by the Board of Directors of the Fund
13
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on December 16, 1994 to substitute therein the name of the new distributor,
PaineWebber, for the former distributor, Kidder, Peabody & Co. Incorporated
('Kidder Peabody').
The Plan of Distribution provides that the Fund reimburse PaineWebber its
expenses for distribution of the Fund's shares a fee at the annual rate of up to
.12% of the Fund's average daily net assets. The expenses that may be reimbursed
include, but are not limited to, compensation to and expenses of Investment
Executives and other employees of PaineWebber who engage in or support
distribution of the Fund's shares or who service shareholder accounts, and the
preparation, printing and distribution of sales literature and advertising
materials. PaineWebber anticipates that the amount of expenses reimbursed will
not exceed the amount of expenses incurred by PaineWebber and that there will be
no carry over of expenses from one year to the next. The expenses to be
reimbursed are for activities primarily intended to result in the sale of shares
of the Fund and the maintenance of Fund accounts and account balances.
PaineWebber currently intends that approximately .10% per annum of the Fund's
average 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. For the fiscal year ended March 31,
1995, the Fund reimbursed .12% of its average daily net assets to PaineWebber
and Kidder Peabody.
Pursuant to the Plan of Distribution, PaineWebber provides the Fund's
Directors, at least quarterly, with a written report of the amounts expended
under the Plan of Distribution. The report includes an itemization of the
distribution expenses incurred by PaineWebber on behalf of the Fund and the
purpose of such expenditures. In their quarterly review of the Plan of
Distribution, the Directors consider its continued appropriateness and the level
of compensation provided therein. For the fiscal year ended March 31, 1995,
PaineWebber and Kidder Peabody, incurred distribution expenses of approximately
$874,000, of which approximately $363,000 was recovered in the form of
reimbursements made by the Fund to PaineWebber and Kidder Peabody at the rate
provided in the Plan of Distribution.
The Plan of Distribution remains in effect for as long as such continuance
is approved annually by vote of the Directors, including a majority of those
Directors who are not interested persons and who have no direct or indirect
financial interest in the Plan of Distribution ('Rule 12b-1 Directors'), cast in
person at a meeting called for such purpose. The Plan of Distribution may not be
amended to increase materially the amount to be spent for the services described
therein without approval of the shareholders of the Fund, and all material
amendments of the Plan of Distribution must also be approved by the Directors in
the manner described above. The Plan of Distribution may be terminated at any
time, by vote of a majority of the Rule 12b-1 Directors as described above, or
by vote by the holders of a majority of the outstanding voting securities of the
Fund, as defined in the Act. So long as the Plan of Distribution is in effect,
the election and nomination of Directors who are not interested persons of the
Fund shall be committed to the discretion of the Directors who are not
interested persons. The Directors have determined that, in their judgment, there
is a reasonable likelihood that the Plan of Distribution benefits the Fund and
its shareholders.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends daily. Dividends are paid each month and
are reinvested in additional shares or, at the shareholder's option, paid in
cash. Dividends are declared on each day that the Fund is open for business. The
Fund's earnings for Saturdays, Sundays and holidays are declared as dividends on
the preceding business day. If a shareholder redeems all shares in his account
at any time during the month, all dividends to which the shareholder is entitled
are paid to him along with the proceeds of the redemption. Distributions of
realized securities profits, if any, generally are declared and paid at or near
the end of the Fund's fiscal year and at the end of the calendar year and are
reinvested in additional shares or, at the shareholder's option, paid in cash.
The Fund does not expect to realize long-term capital gains. The Fund intends to
maintain a net asset value of $1.00 per share for purposes of sales and
redemptions. To effectuate this policy, the Fund, under certain circumstances,
may consider selling portfolio instruments prior to maturity to realize capital
gains or losses, not declaring dividends and distributions or paying
distributions from capital or capital gains. See also 'Investment Objective and
Management Policies' and 'Determination of Net Asset Value.'
The Fund qualified for its fiscal year ended March 31, 1995, and intends to
remain qualified, as a 'regulated investment company' under the Internal Revenue
Code of 1986, as amended (the 'Code'). As a regulated investment company, the
Fund pays no Federal income tax on its income and gains which it distributes to
shareholders, provided the Fund distributes at least 90% of its net investment
income and net short-term capital gains for each year.
Dividends of net investment income (i.e., interest income, net of expenses)
and distributions of net short-term capital gains are taxable to shareholders as
ordinary income, whether paid in cash or reinvested in additional shares.
Dividends paid by the Fund will not qualify for the dividends received deduction
allowed for corporations because the Fund's income will not consist of dividends
paid by U.S. corporations. Distributions of net long-term capital gains, if any,
are taxable as long-term capital gains regardless of the length of time a
shareholder has held his shares.
Any gain or loss realized upon a sale or redemption of Fund shares by a
shareholder who is not a dealer in securities will generally be treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. Any loss realized by a
shareholder on the sale or redemption of Fund shares held for six months or less
will be treated as long-term capital loss, however, to the extent of any net
long-term capital gain distributions received by the shareholder with respect to
such shares. Any loss realized on a sale, redemption or exchange of shares of
the Fund by a shareholder will be disallowed to the extent the shares are
replaced within a 61-day period (beginning 30 days before the disposition of
shares). Shares purchased pursuant to the reinvestment of a dividend will
constitute a replacement of shares.
The Fund may be required to withhold U.S. Federal income tax at the rate of
31% ('backup withholding') of all taxable distributions, payable to shareholders
who fail to provide the Fund with their correct taxpayer identification number
or to make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Corporate
shareholders and other shareholders specified in the Code are exempt from such
15
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backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against a shareholder's U.S. Federal income tax
liability.
Dividends of net investment income and distributions of net short-term
capital gains made to a non-resident alien individual, a foreign trust or
estate, foreign corporation, or foreign partnership not engaged in a trade or
business in the United States will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually by the Fund's transfer agent. Shareholders are
urged to consult their own tax advisers regarding specific questions as to
Federal, state or local taxes.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share is determined daily at 12:00 noon, Eastern
time, Monday through Friday, except that net asset value is not computed on a
day in which no orders to purchase, sell, exchange or redeem Fund shares have
been received, any day on which there is not sufficient trading in the Fund's
portfolio securities that the Fund's net asset value per share might be
materially affected by changes in the value of such portfolio securities or on
days on which the New York Stock Exchange is not open for trading. The Fund's
net asset value per share is computed by dividing the value of the net assets of
the Fund (i.e., the value of its assets less liabilities) by the total number of
shares outstanding. Expenses and fees of the Fund, including PaineWebber's fee,
are accrued daily and taken into account for the purpose of determining net
asset value. It is the policy of the Fund to attempt to maintain a net asset
value of $1.00 per share for purposes of sales and redemptions; accordingly, the
Fund employs the amortized cost method of valuing its portfolio securities.
There can be no assurance that the Fund will always be able to maintain a
constant net asset value of $1.00 per share. Further information regarding the
Fund's valuation policies is contained in the Statement of Additional
Information.
CUSTODIAN AND TRANSFER, DIVIDEND AND RECORDKEEPING AGENT
IFTC, 127 West 10th Street, Kansas City, Missouri 64105, acts as custodian of
the Fund's investments. PFPC Inc., a subsidiary of PNC Bank, National
Association, whose principal address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, acts as the Fund's transfer, dividend and recordkeeping agent.
COUNSEL AND INDEPENDENT AUDITORS
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, is counsel for
the Fund. Deloitte & Touche LLP, Two World Financial Center, New York, New York
10281, has been selected as independent auditors of the Fund.
ADDITIONAL INFORMATION ABOUT THE FUND
The Fund was incorporated under the laws of the State of Maryland on February 2,
1983 and commenced operations on May 17, 1983.
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The authorized common stock of the Fund consists of 5,000,000,000 shares,
par value of $.01 per share. Each share has one vote and, when issued and paid
for in accordance with the terms of offering, is fully paid and non-assessable.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.
As used in this Prospectus when referring to the approvals to be obtained
from shareholders, the term 'majority' means the vote of the lesser of (1) 67%
of the Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the Fund's outstanding shares.
Unless otherwise required by the Act, ordinarily it will not be necessary
for the Fund to hold meetings of shareholders annually. As a result, Fund
shareholders may not consider each year the election of Directors or the
appointment of independent auditors. However, pursuant to the Fund's By-Laws,
the holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for any purpose. Fund
shareholders may remove a Director by the affirmative vote of a majority of the
Fund's outstanding voting shares. In addition, the Board of Directors will call
a meeting of shareholders for the purpose of electing Directors if, at any time,
less than a majority of the Directors holding office at the time were elected by
shareholders.
17
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in this Prospectus or in the Fund's
Statement of Additional Information incorporated herein by reference
in connection with the offering made by this Prospectus, and, if
given or made, such other information or representations must not be
relied upon as having been authorized by the Fund or its
distributor. This Prospectus does not constitute an offering by the
Fund or by its distributor in any jurisdiction in which such
offering may not lawfully be made.
- --------------------------------------------------------
Contents
- --------------------------------------------------------
Fee Table 2
- --------------------------------------------------------
Highlights 3
- --------------------------------------------------------
Financial Highlights 5
- --------------------------------------------------------
Yield 6
- --------------------------------------------------------
Investment Objective and Management Policies 6
- --------------------------------------------------------
Management of the Fund 8
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Portfolio Transactions 9
- --------------------------------------------------------
Purchase of Shares 10
- --------------------------------------------------------
Redemption of Shares 11
- --------------------------------------------------------
Exchange Privilege 13
- --------------------------------------------------------
The Distributor 13
- --------------------------------------------------------
Dividends, Distributions and Taxes 15
- --------------------------------------------------------
Determination of Net Asset Value 16
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Custodian and Transfer, Dividend and
Recordkeeping Agent 16
- --------------------------------------------------------
Counsel and Independent Auditors 16
- --------------------------------------------------------
Additional Information About the Fund 16
- --------------------------------------------------------
Painewebber/
Kidder,
Peabody
Government
Money
Fund,
Inc.
Prospectus
August 1, 1995
<PAGE>
Statement of Additional Information August 1, 1995
- --------------------------------------------------------------------------------
PaineWebber/Kidder, Peabody Government Money Fund, Inc.
1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 (800) 647-1568
PaineWebber/Kidder, Peabody Government Money Fund, Inc. (the 'Fund') is a
diversified, open-end management investment company whose objective is the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. The Fund attempts to achieve its
objective by investing in short-term money market instruments issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
This Statement of Additional Information relating to the Fund is not a
prospectus and should be read in conjunction with the Fund's prospectus. A copy
of the Fund's prospectus can be obtained from the Fund at the above address. The
date of the prospectus to which this Statement relates is August 1, 1995.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER , ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
SUB-ADVISER AND SUB-ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in the Fund's
prospectus under the heading 'Investment Objective and Management Policies.' The
Fund believes that such description requires no general augmentation as of the
date hereof. However, the Fund has adopted the following investment restrictions
and fundamental policies which are not described in the prospectus and
accordingly are set forth below. These restrictions cannot be changed without
approval by the holders of a majority of the outstanding shares of the Fund, as
defined in the Investment Company Act of 1940, as amended (the 'Act'). See
'Additional Information About the Fund.' The Fund may not:
1. Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds or debentures, state bonds, municipal bonds or
industrial revenue bonds;
2. Enter into repurchase agreements with more than seven days to
maturity if as a result thereof more than 10% of the market value of the
Fund's total assets would be invested in such repurchase agreements
together with any other investment the Fund may hold for which market
quotations are not readily available;
3. Borrow money except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require
the untimely disposition of securities. Borrowing in the aggregate may not
exceed 10%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the value of the Fund's total assets (including the
amount borrowed) valued at the lesser of cost or value less liabilities
(not including the amount borrowed) at the time the borrowing is made. The
borrowings will be repaid before any additional investments are made;
4. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 10% of the value of its net assets but only to
secure borrowings for temporary or emergency purposes;
5. Sell securities short or purchase securities on margin;
6. Write or purchase put or call options;
7. Underwrite the securities of other issuers or purchase securities
with contractual or other restrictions on resale;
8. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas interests;
9. Make loans to others except through the purchase of qualified debt
obligations, loans of portfolio securities and entry into repurchase
agreements referred to under 'Investment Objective and Management Policies'
in the Fund's prospectus;
10. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of
assets;
11. Lend its portfolio securities in excess of 20% of its total
assets, taken at value. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission (the 'SEC') and the Fund's Board of Directors,
2
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including maintenance of collateral of the borrower equal at all times to
the current value of the securities loaned.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of that restriction.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
Directors and officers of the Fund, together with information as to their
principal business occupations during the last five years, are shown below. Each
Director who is an 'interested person' of the Fund, as defined in the Act, is
indicated by an asterisk.
David J. Beaubien, 60, Director. Chairman of Yankee Environmental Systems,
Inc., manufacturer of meteorological measuring instruments. Director of IEC,
Inc., manufacturer of electronic assemblies, Belfort Instruments, Inc.,
manufacturer of environmental instruments, and Oriel Corp., manufacturer of
optical instruments. Prior to January 1991, Senior Vice President of EG&G, Inc.,
a company which makes and provides a variety of scientific and technically
oriented products and services. Mr. Beaubien is a director or trustee of 13
other investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
William W. Hewitt, Jr., 66, Director. Trustee of The Guardian Asset
Allocation Fund, The Guardian Baillie Gifford International Fund, The Guardian
Bond Fund, Inc., The Guardian Cash Fund, Inc., The Guardian Park Ave. Fund, The
Guardian Stock Fund, Inc., The Guardian Cash Management Trust and The Guardian
U.S. Government Trust. Mr. Hewitt is a director or trustee of 13 other
investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Thomas R. Jordan, 66, Director. Principal of The Dilenschneider Group,
Inc., a corporate communications and public policy counseling firm. Prior to
January 1992, Senior Vice President of Hill & Knowlton, a public relations and
public affairs firm. Prior to April 1991, President of The Jordan Group, a
management consulting and strategies development firm. Mr. Jordan is a director
or trustee of 12 other investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
* Frank P.L Minard, 50, Director. Chairman of Mitchell Hutchins, chairman
of the board of Mitchell Hutchins Institutional Investors Inc. and a director of
PaineWebber. Prior to 1993, managing director of Oppenheimer Capital in New York
and Director of Oppenheimer Capital Ltd. in London. Mr. Minard is a director or
trustee of 27 other investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Carl W. Schafer, 59, Director. President of the Atlantic Foundation, a
charitable foundation supporting mainly oceanographic exploration and research.
Director of International Agritech Resources, Inc., an agribusiness investment
and consulting firm, Ardic Exploration and Development Ltd. and Hidden Lake Gold
Mines Ltd., gold mining companies, Wainoco Oil Corporation, Electronic Clearing
House, Inc., a financial transactions processing company, and
3
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BioTechniques Laboratories, Inc., an agricultural biotechnology company. Prior
to January 1993, chairman of the Investment Advisory Committee of the Howard
Hughes Medical Institute and director of Ecova Corporation, a toxic waste
treatment firm. Mr. Schafer is a director or trustee of 12 other investment
companies for which Mitchell Hutchins or PaineWebber serves as investment
adviser.
Margo N. Alexander, 48, President. President, chief executive officer and a
director of Mitchell Hutchins. Prior to January 1995, an executive vice
president of PaineWebber. Ms. Alexander is also a trustee of one other
investment company and president of 38 other investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
Teresa M. Boyle, 36, Vice President. First vice president and
manager -- advisory administration of Mitchell Hutchins. Prior to November 1993,
compliance manager of Hyperion Capital Management, Inc., an investment advisory
firm. Prior to April 1993, a vice president and manager -- legal administration
of Mitchell Hutchins. Ms. Boyle is also a vice president of 38 other investment
companies for which Mitchell Hutchins or PaineWebber serves as investment
adviser.
Scott H. Griff, 29, Vice President and Assistant Secretary. Vice president
and attorney of Mitchell Hutchins. Prior to January 1995, an associate at the
law firm of Cleary, Gottlieb, Steen & Hamilton. Mr. Griff is also a vice
president and assistant secretary of 12 other investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
Dennis L. McCauley, 48, Vice President. Managing Director and Chief
Investment Officer -- Fixed Income of Mitchell Hutchins. Prior to December 1994,
Director of Fixed Income Investments of IBM Corporation. Mr. McCauley is also a
vice president of six other investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Susan P. Messina, 35, Vice President. Senior vice president and portfolio
manager for Mitchell Hutchins. Ms. Messina is also a vice president of three
other investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Ann E. Moran, 38, Vice President and Assistant Treasurer. Vice president of
Mitchell Hutchins. Ms. Moran is also a vice president and assistant treasurer of
38 other investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Dianne E. O'Donnell, 43, Vice President and Secretary. Senior vice
president and deputy general counsel of Mitchell Hutchins. Ms. O'Donnell is also
a vice president and secretary of 38 other investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
Victoria E. Schonfeld, 44, Vice President. Managing director and general
counsel of Mitchell Hutchins. From April 1990 to May 1994, partner in the law
firm of Arnold & Porter. Ms. Schonfeld is also a vice president and assistant
secretary of 38 other investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Paul H. Schubert, 32, Vice President and Assistant Treasurer. Vice
president of Mitchell Hutchins. From August 1992 to August 1994, vice president
at BlackRock Financial Management L.P. Prior to August 1992, an audit manager
with Ernst & Young LLP. Mr. Schubert is also a vice
4
<PAGE>
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president and assistant treasurer of 38 other investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
Martha J. Slezak, 33, Vice President and Assistant Treasurer. Vice
president of Mitchell Hutchins. From September 1991 to April 1992, a fundraising
director for a U.S. Senate campaign. Prior to September 1991, a tax manager with
Arthur Andersen & Co. LLP. Ms. Slezak is also a vice president and assistant
treasurer of 38 other investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Julian F. Sluyters, 35, Vice President and Treasurer. Senior vice president
and the director of the mutual fund finance division of Mitchell Hutchins. Prior
to 1991, an audit senior manager with Ernst & Young LLP. Mr. Sluyters is also a
vice president and treasurer of 38 other investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
Gregory K. Todd, 38, Vice President and Assistant Secretary. First vice
president and associate general counsel of Mitchell Hutchins. Prior to 1993, a
partner with the law firm of Shereff, Friedman, Hoffman & Goodman. Mr. Todd is
also a vice president and assistant secretary of 38 other investment companies
for which Mitchell Hutchins or PaineWebber serves as investment adviser.
Certain of the Directors and officers of the Fund are directors and/or
trustees and officers of other mutual funds managed by PaineWebber or Mitchell
Hutchins. The address of each of the non-interested Directors is: Mr. Beaubien,
Montague Industrial Park, 101 Industrial Road, Box 746, Turners Falls,
Massachusetts 01376; Mr. Hewitt, P.O. Box 2359, Princeton, New Jersey 08543-
2359; Mr. Jordan, 200 Park Avenue, New York, New York 10166; and Mr. Schafer,
P.O. Box 1164, Princeton, New Jersey 08542. The address of Mr. Minard and each
of the officers is 1285 Avenue of the Americas, New York, New York 10019.
By virtue of the responsibilities assumed by PaineWebber under the
Investment Advisory and Administration Agreement (the 'Agreement'), the Fund
requires no executive employees other than its officers, none of whom devotes
full time to the affairs of the Fund. See 'Investment Advisory and Other
Services -- Investment Adviser and Administrator.' Directors and officers of the
Fund, as a group, owned less than 1% of the Fund's outstanding shares as of July
1, 1995. No officer, director or employee of PaineWebber or Mitchell Hutchins or
of any affiliate receives any compensation from the Fund for serving as an
officer or Director of the Fund. The Fund pays each Director who is not an
officer, director or employee of PaineWebber or Mitchell Hutchins or any of its
affiliates an annual retainer of $1,500 and $525 for each Board of Directors
meeting attended, and reimburses the Director for out-of-pocket expenses
associated with attendance at Board meetings. The Chairman of the Board's audit
committee receives an annual fee of $250. No officer, director or employee of
Mitchell Hutchins, or any of its affiliates, receives any compensation from the
Fund for serving as an officer or Director of the Fund. The amount of
compensation paid by the Fund to each Director for the fiscal year ended March
31, 1995, and the aggregate amount of compensation paid to each such Director
for the year ended December 31, 1994 by all funds in the former Kidder Family of
Funds for which such person is a Board member were as follows:
5
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(5)
(3) TOTAL COMPENSATION
(2) PENSION OR (4) FROM FUND AND 12
(1) AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL OTHER INVESTMENT
NAME OF BOARD COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON COMPANIES IN THE
MEMBER FUND* FUND'S EXPENSES RETIREMENT FUND COMPLEX**
----------------- ----------------- ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
David J. Beaubien $ 5,875 None None $ 80,700
William W. Hewitt, Jr. $ 5,625 None None $ 74,425
Thomas R. Jordan $ 5,625 None None $ 83,125
Frank P.L. Minard None None None None
Carl W. Schafer $ 5,625 None None $ 84,575
</TABLE>
- ------------
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to approximately $11,000 for all Directors as a group.
** Represents total compensation paid to each Director during the calendar year
ended December 31, 1994.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER AND ADMINISTRATOR
PaineWebber, the Fund's investment adviser and administrator, and Mitchell
Hutchins, the Fund's sub-adviser and sub-administrator, are located at 1285
Avenue of the Americas, New York, New York 10019.
Mitchell Hutchins manages the Fund's portfolio in accordance with the
stated policies of the Fund, subject to the supervision and direction of the
Fund's Board of Directors. Mitchell Hutchins makes investment decisions for the
Fund and places the purchase and sale orders for portfolio transactions. In
addition, Mitchell Hutchins pays the salaries of all officers and employees who
are employed by both it and the Fund, maintains office facilities, furnishes
statistical and research data, clerical help, accounting, data processing,
bookkeeping, internal auditing and legal services and certain other services
required by the Fund, prepares reports to shareholders of the Fund, tax returns
to and filings with the SEC and state Blue Sky authorities and generally assists
in all aspects of the Fund's operations. Mitchell Hutchins bears all expenses in
connection with the performance of its services.
Expenses incurred in the operation of the Fund, including, but not limited
to, taxes, interest, brokerage fees and commissions, if any, fees of Directors
who are not officers, directors shareholders or employees of PaineWebber, SEC
fees and related expenses, state Blue Sky qualification fees, charges of the
custodian and transfer, dividend and recordkeeping agent, charges and expenses
of any outside service used for pricing of the Fund's portfolio securities and
calculating net asset value, certain insurance premiums, outside auditing and
legal expenses, and costs of maintenance of corporate existence, shareholder
services, printing of prospectuses and statements of additional information for
distribution to shareholders, shareholders' reports and corporate meetings, are
borne by the Fund. Notwithstanding the foregoing, PaineWebber currently bears
the costs of printing and distributing prospectuses and statements of additional
6
<PAGE>
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information (except those used for regulatory purposes or for distribution to
shareholders of the Fund).
The Investment Advisory and Administration Agreement, dated April 13, 1995,
shall continue automatically for successive annual periods, provided such
continuance is specifically approved at least annually by (i) the Board of
Directors of the Fund or (ii) vote of the holders of a majority, as defined in
the Act, of the outstanding voting securities of the Fund, provided that in
either event the continuance is also approved by a majority of the Directors who
are not 'interested persons,' as defined in the Act, of the Fund or PaineWebber
or Mitchell Hutchins, by vote cast in person at a meeting called for the purpose
of voting on such approval. The Investment Advisory and Administration Agreement
is terminable without penalty, on 60 days' notice, by the Board of Directors of
the Fund or by vote of the holders of a majority of the Fund's shares or by
PaineWebber. The Investment Advisory and Administration Agreement will terminate
automatically in the event of its assignment.
As compensation for PaineWebber's services, the Fund pays a fee, computed
daily and paid monthly, at an annual rate of .50% of the Fund's average daily
net assets. The Fund has paid to PaineWebber or Kidder Peabody Asset Management,
Inc., the Fund's predecessor investment adviser and administrator, total
compensation of $2,126,247, $1,832,861 and $1,514,040 for the fiscal years ended
March 31, 1993, 1994 and 1995, respectively. PaineWebber has agreed that if in
any fiscal year the aggregate expenses of the Fund (including fees pursuant to
the Investment Advisory and Administration Agreement but excluding interest,
taxes, brokerage and extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over the Fund, PaineWebber will reimburse the Fund
for such excess expense. This expense reimbursement obligation is not limited to
the amount of PaineWebber's fees. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis. The Fund believes that
currently the most stringent state expense limitations are 2 1/2% of the first
$30 million of the average value of the Fund's net assets, 2% of the next $70
million and 1 1/2% of the remaining net assets of the Fund. During the fiscal
year ended March 31, 1995, the Fund's expenses did not exceed such limitations.
PaineWebber shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the matters to which the
Investment Advisory and Administration Agreement relates, except for a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under the Investment Advisory and Administration
Agreement.
Mitchell Hutchins personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders of the PaineWebber, PaineWebber/Kidder, Peabody ('PW/KP') and
Mitchell Hutchins/Kidder, Peabody ('MH/KP') mutual funds and other Mitchell
Hutchins' advisory accounts by all Mitchell Hutchins' directors, officers and
employees, establishes procedures for personal investing and restricts certain
transactions. For example, employee accounts generally must be maintained at
PaineWebber, personal trades in most securities require pre-clearance and
short-term trading and participation in initial public offerings generally are
prohibited. In addition, the code of ethics puts restrictions on the timing of
personal investing in relation to trades by PaineWebber, PW/KP and MH/KP mutual
funds and other Mitchell Hutchins advisory clients.
7
<PAGE>
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DISTRIBUTOR
PaineWebber, as distributor, conducts a continuous offering of the Fund's shares
and is acting on a best efforts basis. See 'The Distributor' in the Fund's
prospectus.
The Directors believe that the Fund's expenditures under the Fund's Plan of
Distribution pursuant to Rule 12b-1 benefit the Fund and its shareholders by
providing better shareholder services. For the fiscal year ended March 31, 1995,
PaineWebber and Kidder, Peabody & Co. Incorporated, the Fund's predecessor
distributor, received $363,370 from the Fund, of which $143,168 was spent on
payments to Investment Executives and approximately $220,202 was spent on
printing and overhead-related expenses.
CUSTODIAN AND TRANSFER, DIVIDEND AND RECORDKEEPING AGENT
Investors Fiduciary Trust Company ('IFTC'), 127 West 10th Street, Kansas City,
Missouri 64105, serves as the Fund's custodian. PFPC Inc., a subsidiary of PNC
Bank, National Association, whose principal address is 400 Bellevue Parkway,
Wilmington, Delaware 19809, serves as the Fund's transfer, dividend and
recordkeeping agent. As custodian, IFTC maintains custody of the Fund's
portfolio securities. As transfer agent, PFPC Inc. maintains the Fund's official
record of shareholders, as dividend agent, it is responsible for crediting
dividends to shareholders' account, and as recordkeeping agent, it maintains
certain accounting and financial records of the Fund.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281,
acts as independent auditors for the Fund. In such capacity, Deloitte & Touche
LLP audits the Fund's annual financial statements.
COUNSEL
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, acts as counsel
for the Fund.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities usually are principal transactions.
Portfolio securities normally are purchased directly from the issuer or from an
underwriter or market maker for the securities. There usually are no brokerage
commissions paid by the Fund for such purchases. Purchases from dealers serving
as market makers may include the spread between the bid and asked price. While
Mitchell Hutchins generally seeks competitive spreads or commissions, the Fund
may not necessarily pay the lowest spread or commission available on each
transaction. To date, no brokerage commissions have been incurred.
Transactions are allocated to various dealers by Mitchell Hutchins in its
best judgment. The primary consideration is prompt and effective execution of
orders at the most favorable price. Subject to that primary consideration,
dealers may be selected for research, statistical or other services to enable
Mitchell Hutchins to supplement its own research and analysis with the views and
information of other securities firms.
8
<PAGE>
- --------------------------------------------------------------------------------
Information so received supplements but does not replace that to be
provided by Mitchell Hutchins, and the fees of Mitchell Hutchins are not reduced
as a consequence of the receipt of any such supplemental information. Such
information may be useful to Mitchell Hutchins in serving both the Fund and
other clients and, conversely, supplemental information obtained by the
placement of business of other clients may be useful to Mitchell Hutchins in
carrying out its obligations to the Fund.
Investment decisions for the Fund are made independently from those of any
other funds managed by Mitchell Hutchins. If, however, funds managed by Mitchell
Hutchins are simultaneously engaged in the purchase or sale of the same
security, the transactions are averaged as to price and allocated equitably to
each fund. In some cases, this system might adversely affect the price paid or
received by the Fund or the size of the position obtainable for the Fund.
No portfolio transactions are executed through PaineWebber. PaineWebber
engages in transactions in repurchase agreements and acts as a dealer in or
underwriter of securities of the U.S. Government and certain U.S. Government
agencies. PaineWebber's activities may have some effect on the market for the
Fund's portfolio of such securities and PaineWebber may be competing in the
market place with the Fund in the purchase and sale of such securities.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of payment postponed (a)
for any period during which the New York Stock Exchange ('NYSE') is closed other
than for customary weekend and holiday closings, (b) when trading in the markets
the Fund normally utilizes is restricted, or when an emergency, as defined by
the rules and regulations of the SEC, exists, making disposal of the Fund's
investments or determination of its net asset value not reasonably practicable,
or (c) for any other periods as the SEC by order may permit for protection of
the Fund's shareholders.
EXCHANGE OF SHARES
Shares of the Fund may be exchanged for shares of the following
PaineWebber/Kidder, Peabody funds:
PaineWebber/Kidder, Peabody California Tax Exempt Money Fund
PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc.
PaineWebber/Kidder, Peabody Municipal Money Market
Series -- Connecticut Series
PaineWebber/Kidder, Peabody Municipal Money Market Series -- New
Jersey Series
PaineWebber/Kidder, Peabody Municipal Money Market Series -- New York
Series
PaineWebber/Kidder, Peabody Premium Account Fund
PaineWebber/Kidder, Peabody Tax Exempt Money Fund, Inc.
The right of exchange may be suspended or postponed if (a) there is a
suspension of the redemption of Fund shares under Section 22(e) of the Act, or
(b) the Fund temporarily delays or
9
<PAGE>
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ceases the sale of its shares because it is unable to invest amounts effectively
in accordance with its applicable investment objective, policies and
restrictions.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income on each
day that the Fund or IFTC is open for business. The Fund's earnings for
Saturdays, Sundays and holidays are declared as dividends on the preceding
business day. Dividends are paid each month and are reinvested in additional
shares or, at the shareholder's option, paid in cash. If a shareholder redeems
all shares in his account at any time during the month, all dividends to which
the shareholder is entitled are paid to him along with the proceeds of the
redemption. Distributions of realized securities profits, if any, generally are
declared and paid at or near the end of the Fund's fiscal year and at the end of
the calendar year and are reinvested in additional shares or, at the
shareholder's option, paid in cash.
The Fund intends to maintain a net asset value of $1.00 per share for
purposes of sales and redemptions. To effectuate this policy, the Fund, under
certain circumstances, may consider selling portfolio instruments prior to
maturity to realize capital gains or losses, not declaring dividends and
distributions or paying distributions from capital or a capital gain. See
'Determination of Net Asset Value.'
The Fund qualified for its fiscal year ended March 31, 1995, and intends to
remain qualified, as a 'regulated investment company' under the Internal Revenue
Code of 1986, as amended (the 'Code'). As a regulated investment company, the
Fund pays no Federal income tax on its income and gains which it distributes to
shareholders, provided it distributes at least 90% of its net investment income
and net short-term capital gains for each year. To qualify as a regulated
investment company, the Fund must, among other things, (a) derive at least 90%
of its annual gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, and other income derived with respect to the Fund's business of
investing in such stock or securities; (b) derive less than 30% of its annual
gross income from the sale or other disposition of stock or securities held for
less than three months; and (c) diversify its holdings so that, at the end of
each quarter of the taxable year, (i) at least 50% of the value of the Fund's
assets is represented by cash, U.S. Government securities and other securities
limited, in respect of any one issuer, to an amount not greater than 5% of the
value of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of the assets is invested in the
securities of any one issuer (other than U.S. Government securities). The term
'regulated investment company' does not imply the supervision of management or
investment practices or policies by any governmental agency.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
The Code provides that dividends declared in October, November or December
payable in January of the following year will be treated as having been received
by shareholders on December 31 of the year in which declared. Under this rule,
therefore, a shareholder may be taxed in a year on dividends or distributions
actually received in the following year.
10
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The Fund may be subject to state or local tax in certain states where it is
deemed to be doing business. Furthermore, in those states which have such income
tax laws, the tax treatment of the Fund and of shareholders with respect to
distributions by the Fund may differ from Federal tax treatment.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually by the Fund's transfer agent. Shareholders are
urged to consult their own tax advisers regarding specific questions as to
Federal, state or local taxes.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund will not be calculated on the observance by the
NYSE of the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The days on which net asset value is determined are the Fund's business days.
The Fund's net asset value per share is computed by dividing the value of the
net assets of the Fund (i.e., the value of its assets less liabilities) by the
total number of shares outstanding. Expenses and fees of the Fund, including
PaineWebber's fee, are accrued daily and taken into account for the purpose of
determining net asset value. It is the policy of the Fund to attempt to maintain
a net asset value of $1.00 per share for purposes of sales and redemptions
although there can be no assurance that the Fund will always be able to do so.
The Fund maintains a dollar-weighted average portfolio maturity of 90 days
or less, purchases only instruments having remaining maturities of 397 days or
less and invests only in securities which present minimal credit risks and are
of high quality as determined by any major rating service or, in the case of any
instrument that is not rated, of comparable quality as determined by the Board
of Directors.
The valuation of the Fund's portfolio securities is based upon their
amortized cost, which does not take into account unrealized capital gains or
losses. This involves valuing an instrument at its cost and thereafter assuming
a constant accretion or amortization to maturity of any discount or premium,
respectively, regardless of the impact of fluctuating interest rates on the
market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument.
In connection with the utilization of the amortized cost method of
valuation, the Board of Directors has established procedures reasonably
designed, taking into account current market conditions and the Fund's
investment objective, to stabilize net asset value per share at $1.00. These
procedures include periodic review, as the Board of Directors deems appropriate
and at such intervals as are reasonable in light of current market conditions,
of the relationship between the amortized cost per share and the net asset value
per share based upon available indications of value. In such review, investments
for which market quotations are readily available are valued at the most recent
bid or yield equivalent for such securities or for securities of comparable
maturity, quality and type, as obtained from one or more of the major market
makers
11
<PAGE>
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for the securities to be valued. Other investments and assets are valued at fair
value as determined in good faith by the Board of Directors.
The extent of any deviation between the Fund's net asset value based upon
available market quotations or market equivalents and $1.00 per share based on
amortized cost is examined by the Board of Directors. If such deviation exceeds
.50 of 1%, the Board of Directors promptly will consider what action, if any,
will be initiated. In the event the Board of Directors determines that a
deviation exists which may result in material dilution or other unfair results
to shareholders, it has agreed to take such corrective action as it regards as
necessary and appropriate, including: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; not declaring dividends or paying distributions from capital or
capital gains; redeeming shares in kind; or establishing a net asset value per
share by using available market quotations.
DETERMINATION OF CURRENT AND EFFECTIVE YIELDS
The Fund provides current and effective yield quotations based on its daily
dividends. See 'Dividends, Distributions and Taxes' in the Fund's prospectus.
Such quotations are made in reports, sales literature and advertisements
published by the Fund.
Current yield is computed by determining the net change exclusive of
capital changes in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of a seven day calendar period, dividing
the net change in account value by the value of the account at the beginning of
the period and multiplying the return over the seven day period by 365/7. For
purposes of the calculation, net change in account value reflects the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares, but does not
reflect realized gains or losses or unrealized appreciation or depreciation.
Effective yield is computed by annualizing the seven-day return with all
dividends reinvested in additional shares of the Fund.
Current and effective yields fluctuate and are not necessarily
representative of future results. The shareholder should remember that yield is
a function of the type and quality of the instruments in the portfolio,
portfolio maturity and operating expenses. See 'Investment Objective and
Management Policies' in the Fund's prospectus and 'Investment Advisory and Other
Services' above. Current and effective yield information is useful in reviewing
the Fund's performance but because current and effective yields will fluctuate
such information may not provide a basis for comparison with bank deposits,
other investments which pay a fixed yield for a stated period of time or other
investment companies which may use a different method of calculating yield.
A shareholder's principal in the Fund is not guaranteed. See 'Dividends,
Distributions and Taxes' and 'Determination of Net Asset Value' above for a
discussion of the manner in which the Fund's price per share is determined.
Historical and comparative yield information may be presented by the Fund.
ADDITIONAL INFORMATION ABOUT THE FUND
The Fund was incorporated under the laws of the State of Maryland on February 2,
1983 and commenced operations on May 17, 1983.
12
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The authorized common stock of the Fund consists of 5,000,000,000 shares,
par value of $.01 per share. Each share has one vote and, when issued and paid
for in accordance with the terms of offering, is fully paid and non-assessable.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.
As used in this Statement of Additional Information when referring to the
approvals to be obtained from shareholders, the term 'majority' means the vote
of the lesser of (1) 67% of the Fund's shares present at a meeting if the
holders of more than 50% of the outstanding shares are present in person or by
proxy, or (2) more than 50% of the Fund's outstanding shares.
Unless otherwise required by the Act, ordinarily it will not be necessary
for the Fund to hold meetings of shareholders annually. As a result, Fund
shareholders may not consider each year the election of Directors or the
appointment of independent auditors. However, pursuant to the Fund's By-Laws,
the holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for any purpose. Fund
shareholders may remove a Director by the affirmative vote of a majority of the
Fund's outstanding voting shares. In addition, the Board of Directors will call
a meeting of shareholders for the purpose of electing Directors if, at any time,
less than a majority of the Directors holding office at the time were elected by
shareholders.
The prospectus and this Statement of Additional Information do not contain
all the information set forth in the Registration Statement and the exhibits
relating thereto, which the Fund has filed with the SEC under the Securities Act
of 1933 and the Act, to which reference is hereby made.
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders for the fiscal year ended March 31,
1995 is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing therein are incorporated by reference in this
Statement of Additional Information.
13
<PAGE>
- --------------------------------------------------------
Contents
- --------------------------------------------------------
Investment Objective and Policies 2
- --------------------------------------------------------
Management of the Fund 3
- --------------------------------------------------------
Investment Advisory and Other Services 6
- --------------------------------------------------------
Portfolio Transactions 8
- --------------------------------------------------------
Redemption of Shares 9
- --------------------------------------------------------
Exchange of Shares 9
- --------------------------------------------------------
Dividends, Distributions and Taxes 10
- --------------------------------------------------------
Determination of Net Asset Value 11
- --------------------------------------------------------
Determination of Current and Effective Yields 12
- --------------------------------------------------------
Additional Information About the Fund 12
- --------------------------------------------------------
Financial Statements 13
- --------------------------------------------------------
PaineWebber/
Kidder, Peabody
Government
Money
Fund, Inc.
Statement of
Additional
Information
August 1, 1995
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The Financial Statements filed as part of this Registration Statement are
as follows:
Contained in Part A:
Financial Highlights for each of the years in the 10 year period ended
March 31, 1995.
Contained through incorporation by reference in Part B and filed with the
Annual Report to Shareholders with the Securities and Exchange Commission on
June 9, 1995 [File No. 811-3663], and filed herewith as an attachment:
Schedule of Investments at March 31, 1995.
Statement of Assets and Liabilities at March 31, 1995.
Statement of Operations for the year ended March 31, 1995.
Statements of Changes in Net Assets for the years ended March 31, 1994
and March 31, 1995.
Financial Highlights for each of the years in the 5 year period ended
March 31, 1995.
Report of Deloitte & Touche LLP, Independent Auditors, dated May 18,
1995.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
1 -- The Restatement of Articles of Incorporation dated January 17, 1989 is incorporated by reference to
Exhibit 1 of Post-Effective Amendment No. 7 to the Registration Statement on Form N-1A, filed on July 31,
1989.
1a -- Articles of Amendment.
2 -- The Registrant's By-Laws are incorporated by reference to Exhibit 2 of Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1, filed on April 29, 1983.
3 -- None
4 -- The specimen certificate for the Registrant's Common Stock, par value $.01 per share is incorporated by
reference to Exhibit 4 of Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1, filed
on April 29, 1983.
5a -- Form of Investment Advisory and Administration Agreement.
5b -- Form of Sub-Advisory and Sub-Administration Agreement.
6 -- Form of Distribution Agreement.
7 -- None
8 -- The Custody Agreement is incorporated by reference to Exhibit 8 of Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A, filed on July 31, 1989.
9 -- Form of Transfer Agency Agreement.
10 -- The opinion and consent of Sullivan & Cromwell is incorporated by reference to Exhibit 10 of
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1, filed on April 29, 1983.
11 -- Consent of Deloitte & Touche LLP.
12 -- None
13 -- Investment representation letter is incorporated by reference to Exhibit 13 of Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1, filed on April 29, 1983.
14 -- None
15a -- The Plan of Distribution pursuant to Rule 12b-1 ('Plan of Distribution') is incorporated by reference to
Exhibit 15 of Post-Effective Amendment No. 7 to the Registration Statement on Form N-1A, filed on July 31,
1989.
15b -- The amendment effective February 1, 1990 to the Plan of Distribution is incorporated by reference to
Exhibit 15 of Post-Effective Amendment No. 8 to the Registration Statement on Form N-1A, filed on July 30,
1990.
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
15c -- Amendment to the Plan of Distribution.
16 -- Schedule for computation of current and effective yields is incorporated by reference to Exhibit 16 of
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A, filed on July 29, 1991.
17 -- Power of Attorney. Powers of Attorney for Beaubien, Hewitt, Jr., Jordan, Minard and Schafer are
incorporated by reference to Exhibit 17 of Post-Effective Amendment No. 13 to the Registration Statement
on Form N-1A, filed on June 2, 1995.
27 -- Financial Data Schedule.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
No person is controlled by or under common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF RECORDHOLDERS
TITLE OF CLASS ON JULY 1, 1995
- ---------------------------------------------------------------------------------- ------------------------------
<S> <C>
Common Stock, par value $.01 per share 6,610
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Section 2-418 of the General Corporation Law of
Maryland, as amended effective February 8, 1988.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant and the principal underwriter pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person or the principal
underwriter in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See 'Management of the Fund -- Investment Adviser and Administrator' in the
Prospectus and 'Investment Advisory and Other Services -- Investment Adviser and
Administrator' in the Statement of Additional Information.
I. PaineWebber Incorporated ('PaineWebber'), a Delaware corporation, is a
registered investment adviser and is wholly owned by Paine Webber Group Inc.
PaineWebber is primarily engaged in the financial services business. Information
as to the officers and directors of PaineWebber is included in its Form ADV
filed on March 31, 1995, with the Securities and Exchange Commission
(registration number 801-7163) and is incorporated herein by reference.
II. Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), a
Delaware corporation, is a registered investment adviser and is wholly owned by
PaineWebber. Mitchell Hutchins is primarily engaged in the investment advisory
business. Information as to the officers and directors of Mitchell Hutchins is
included in its Form ADV filed on April 3, 1995, with the Securities and
Exchange Commission (registration number 801-13219) and is incorporated herein
by reference.
C-2
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) PaineWebber serves as principal underwriter and/or investment adviser
for the following other investment companies:
PaineWebber CashFund, Inc.
PaineWebber Managed Municipal Trust
PaineWebber RMA Money Fund, Inc.
PaineWebber RMA Tax-Free Fund, Inc.
PaineWebber/Kidder, Peabody California Tax Exempt Money Fund
PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc.
PaineWebber/Kidder, Peabody Municipal Money Market
Series -- Connecticut Series
PaineWebber/Kidder, Peabody Municipal Money Market
Series -- New Jersey Series
PaineWebber/Kidder, Peabody Municipal Money Market
Series -- New York Series
PaineWebber/Kidder, Peabody Premium Account Fund
PaineWebber/Kidder, Peabody Tax Exempt Money Fund, Inc.
(b) PaineWebber is the principal underwriter of the Registrant. The
directors and officers of PaineWebber, their principal business addresses, and
their positions and offices with PaineWebber are identified in its Form ADV
filed March 31, 1995, with the Securities and Exchange Commission (registration
number 801-7163), and such information is hereby incorporated herein by
reference. The information set forth below is furnished for those directors and
officers of PaineWebber who also serve as directors or officers of the
Registrant:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS POSITION AND OFFICES
ADDRESS POSITION WITH REGISTRANT WITH UNDERWRITER
- ---------------------------- ------------------------- -----------------------
<S> <C> <C>
Margo N. Alexander President Director and Executive
1285 Avenue of the Americas Vice President
New York, NY 10019
Frank P.L. Minard Director Director
1285 Avenue of the Americas
New York, NY 10019
</TABLE>
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of Investors Fiduciary Trust Company, 127 West 10th
Street, Kansas City, Missouri 64105, PFPC Inc., 400 Bellevue Parkway,
Wilmington, Delaware 19809, and the Fund, 1285 Avenue of the Americas, New York,
New York 10019.
ITEM 31. MANAGEMENT SERVICES.
Inapplicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS POST-EFFECTIVE AMENDMENT TO THE
REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933
AND HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THIS CITY OF NEW YORK, AND STATE OF NEW YORK, ON THE 24TH DAY OF JULY 1995.
PAINEWEBBER/KIDDER, PEABODY
GOVERNMENT MONEY FUND, INC.
By: /s/ DIANNE E. O'DONNELL
----------------------------------
(DIANNE E. O'DONNELL,
VICE PRESIDENT AND SECRETARY)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment to the Registrant's Registration Statement on Form
N-1A has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------------------- -------------------------------------- -------------
<S> <C> <C>
President (Chief Executive Officer) July 24, 1995
/s/ MARGO N. ALEXANDER*
- -------------------------------------------------------
MARGO N. ALEXANDER
Vice President and Treasurer (Chief July 24, 1995
/s/ JULIAN F. SLUYTERS Financial and Accounting Officer)
- -------------------------------------------------------
JULIAN F. SLUYTERS
Director July 24, 1995
/s/ DAVID J. BEAUBIEN**
- -------------------------------------------------------
DAVID J. BEAUBIEN
Director July 24, 1995
/s/ WILLIAM W. HEWITT, JR.***
- -------------------------------------------------------
WILLIAM W. HEWITT, JR.
Director July 24, 1995
/s/ THOMAS R. JORDAN****
- -------------------------------------------------------
THOMAS R. JORDAN
Director July 24, 1995
/s/ FRANK P.L. MINARD*****
- -------------------------------------------------------
FRANK P.L. MINARD
Director July 24, 1995
/s/ CARL W. SCHAFER******
- -------------------------------------------------------
CARL W. SCHAFER
</TABLE>
- ------------
* Signature affixed by Dianne E. O'Donnell pursuant to power of attorney
dated July 21, 1995 and filed herewith.
** Signature affixed by Dianne E. O'Donnell pursuant to power of attorney
dated March 8, 1995.
*** Signature affixed by Dianne E. O'Donnell pursuant to power of attorney
dated March 8, 1995.
**** Signature affixed by Dianne E. O'Donnell pursuant to power of attorney
dated March 8, 1995.
***** Signature affixed by Dianne E. O'Donnell pursuant to power of attorney
dated May 18, 1995.
****** Signature affixed by Dianne E. O'Donnell pursuant to power of attorney
dated March 8, 1995.
C-4
STATEMENT OF DIFFERENCES
<TABLE>
<S> <C>
The service mark symbol shall be expressed as ........... 'sm'
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------------------------------ ----
<S> <C> <C>
(1a) -- Articles of Amendment...........................................................................
(5a) -- Form of Investment Advisory and Administration Agreement........................................
(5b) -- Form of Sub-Advisory and Sub-Administration Agreement...........................................
(6) -- Form of Distribution Agreement..................................................................
(9) -- Form of Transfer Agency Agreement...............................................................
(11) -- Consent of Deloitte & Touche LLP................................................................
(15c) -- Amendment to the Plan of Distribution...........................................................
(17) -- Power of Attorney...............................................................................
(27 -- Financial Data Schedule.........................................................................
</TABLE>
<PAGE>
KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
ARTICLES OF AMENDMENT
Kidder, Peabody Government Money Fund, Inc., a Maryland corporation ('the
Corporation'), having its principal office in the State of Maryland in the city
of Baltimore, hereby certifies to the State Department of Assessments and
Taxation of Maryland, that:
FIRST: The Restatement of Articles of Incorporation of the Corporation is
hereby amended by striking out Article II in its entirety and inserting in its
place the following:
'ARTICLE II
The name of the corporation (hereinafter called the 'Corporation') is
PaineWebber/Kidder, Peabody Government Money Fund, Inc.'
SECOND: The Corporation is registered as an open-end company under the
Investment Company Act of 1940. The foregoing amendment was approved by a
majority of the entire Board of Directors of the Corporation and such amendment
is limited to a change expressly permitted by Section 2-605 of Title 2 of
Subtitle 6 of the Maryland General Corporation Law to be made without action by
the stockholders.
IN WITNESS WHEREOF, Kidder, Peabody Government Money Fund, Inc. has caused
these Articles of Amendment to be signed in its name and on its behalf by its
President and witnessed by its Secretary, this 22nd day of February, 1995.
The undersigned President acknowledges these Articles of Amendment to be
the corporate act of the Corporation, and states to the best of his/her
knowledge, information and belief that the matters and facts set forth in these
Articles of Amendment with respect to authorization and approval are true in all
material respects and that this statement is made under penalties of perjury.
KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
J. P. Minard
-------------------------------
Name:
President
WITNESS:
DIANNE E. O'DONNELL
- -------------------------------
Name: Dianne E. O'Donnell
Secretary
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
January 30, 1995
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
PaineWebber/Kidder, Peabody Government Money Fund, a Maryland
corporation (the 'Fund'), herewith confirms its agreement with you ('Mitchell
Hutchins') as follows:
The Fund desires to employ its capital by investing and reinvesting the
same in investments of the type and in accordance with the limitations specified
in its Prospectus (including any documents from time to time incorporated by
reference, the 'Prospectus') as from time to time in effect, copies of which
have been or will be submitted to Mitchell Hutchins, and in such manner and to
such extent as may from time to time be approved by the Board of Directors of
the Fund. The Fund desires to employ Mitchell Hutchins to act as its investment
adviser and administrator.
In this connection it is understood that Mitchell Hutchins may from
time to time employ or associate with itself such person or persons as Mitchell
Hutchins may believe to be particularly fitted to assist it in the performance
of this Agreement, it being understood that the compensation of such person or
persons shall be paid by Mitchell Hutchins and that no obligation may be
incurred on the Fund's behalf in any such respect.
Subject to the supervision and approval of the Board of Directors of
the Fund, Mitchell Hutchins will provide investment management of the Fund's
portfolio in accordance with the Fund's investment objective and policies as
stated in its most recent Prospectus delivered to Mitchell Hutchins, upon which
Mitchell Hutchins shall be entitled to rely. In connection therewith, Mitchell
Hutchins will provide investment research and supervision of the Fund's
investments and conduct a continuous program of investment, evaluation and, if
appropriate, sale and reinvestment of the Fund's assets. Mitchell Hutchins will
furnish to the Fund such statistical information, with respect to the
investments which the Fund may hold or contemplate purchasing, as the Fund may
reasonably request. The Fund wishes to be kept in touch with important
developments materially affecting its portfolio and shall expect Mitchell
Hutchins, on its own initiative, to furnish to the Fund from time to time such
information as Mitchell Hutchins may believe appropriate for this purpose.
Mitchell Hutchins shall exercise its best judgment in rendering these services
to the Fund and the Fund agrees as an inducement to Mitchell Hutchins'
<PAGE>
undertaking the same that Mitchell Hutchins shall not be liable hereunder for
any mistake of judgment or in any other event whatsoever, provided that nothing
herein shall be deemed to protect or purport to protect Mitchell Hutchins
against any liability to the Fund or to its securityholders to which Mitchell
Hutchins would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties hereunder, or by reason of
Mitchell Hutchins' reckless disregard of its obligations and duties hereunder.
Mitchell Hutchins shall, at its own expense, maintain such staff and
employ or retain such personnel and consult with such other persons as it shall
from time to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of Mitchell Hutchins shall be deemed to
include persons employed or otherwise retained by Mitchell Hutchins to furnish
statistical and other factual data, advice regarding economic factors and
trends, information with respect to technical and scientific developments, and
such other information, advice and assistance as Mitchell Hutchins may desire.
Mitchell Hutchins shall, as agent for the Fund, maintain the Fund's records and
books of account (other than those maintained by the Fund's transfer agent,
registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor,
Mitchell Hutchins shall surrender to the Fund such of the books and records so
requested.
Mitchell Hutchins shall bear the cost of rendering the investment
management, supervisory and administrative services to be performed by it under
this Agreement, and shall, at its own expense, pay the compensation of the
officers and employees, if any, of the Fund who are employees of Mitchell
Hutchins, and provide such office space, facilities and equipment and such
clerical help and accounting, data processing, bookkeeping, internal auditing
and legal services (other than outside counsel to the Fund and/or its directors)
as the Fund shall reasonably require in the conduct of its business. Mitchell
Hutchins shall also bear the organizational expenses of the Fund and the cost of
telephone service, heat, light, power and other utilities provided to the Fund;
provided, however, that the Fund shall reimburse Mitchell Hutchins for such
organizational expenses up to $100,000, when and if the net assets of the Fund
reach $15,000,000. Other expenses to be incurred in the operation of the Fund
including charges and expenses of any registrar, custodian, stock transfer and
dividend disbursing agent, brokerage commissions; taxes; engraving and printing
stock certificates, if any; registration costs of the Fund and its shares under
federal and state securities laws; the cost and expense of printing, including
typesetting, and distributing prospectuses of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and directors'
meetings
- 2 -
<PAGE>
and of preparing, printing and mailing proxy statements and reports to
shareholders; fees and travel expenses of directors or members of any advisory
board or committee who are not employees of Mitchell Hutchins or any corporate
affiliate of Mitchell Hutchins; all expenses incident to any dividend,
withdrawal or redemption options; charges and expenses of any outside service
used for pricing of the Fund's portfolio securities; fees and expenses of legal
counsel, including counsel to the directors who are not interested persons of
the Fund or of Mitchell Hutchins, and independent accountants; membership dues
of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and directors) of the Fund
which inure to their benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operations will be borne by
the Fund.
In consideration of services rendered pursuant to this Agreement, the
Fund will pay Mitchell Hutchins on the first business day of each month a fee at
the annual rate of .5 of 1% of the Fund's average daily net assets. Net asset
value shall be computed at least once each business day. Upon any termination of
this Agreement before the end of any month, such fee for such part of a month
shall be pro-rated according to the proportion which such period bears to the
full monthly period and shall be payable upon the date of termination of this
Agreement.
For the purpose of determining fees payable to Mitchell Hutchins, the
value of the Fund's net assets shall be computed in the manner specified in the
Fund's Articles of Incorporation for the computation of the value of such net
assets.
If, in any fiscal year, the Fund's total operating expenses, exclusive
of taxes, interest, brokerage fees and extraordinary expenses (to the extent
permitted by applicable state securities laws and regulations), exceed the
lowest applicable annual expense limitation established pursuant to statute or
regulation of any jurisdictions in which shares of the Fund are offered for
sale, Mitchell Hutchins will reimburse the Fund for the amount of such excess.
Such expense reimbursement will be estimated, reconciled and paid on a monthly
basis.
The Fund understands that Mitchell Hutchins now acts and will continue
to act as investment adviser to various fiduciary or other managed accounts, and
the Fund has no objection to Mitchell Hutchins' so acting. In addition, it is
understood that the persons employed by Mitchell Hutchins to assist in the
performance of its duties hereunder will not devote their full time to such
service and nothing contained herein shall be deemed to limit or restrict the
right of Mitchell Hutchins or any affiliate of Mitchell
- 3 -
<PAGE>
Hutchins to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
The Fund understands that from time to time hereafter Mitchell Hutchins
may act as investment adviser to one or more other investment companies, and the
Fund has no objection to Mitchell Hutchins' so acting, provided that when two or
more companies managed by Mitchell Hutchins have available funds for investment
in money market instruments, available money market investments will be
allocated in accordance with a formula believed to be equitable to each company.
It is recognized that in some cases this procedure may adversely affect the size
of the position obtainable for the Fund.
Mitchell Hutchins shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also an officer,
partner, employee, or agent of Mitchell Hutchins, who may be or become an
officer, director, employee or agent of the Fund, shall be deemed, when
rendering services to the Fund or acting on any business of the Fund, to be
rendering such services to, or acting solely for, the Fund and not as an
officer, partner, employee, or agent or one under the control or direction of
Mitchell Hutchins even though paid by it.
This Agreement shall continue until December 31, 19961, and thereafter
shall continue automatically for successive annual periods ending on December
31, of each year, provided such continuance is specifically approved at least
annually by (i) the Board of Directors of the Fund or (ii) by a vote of a
majority (as defined in the Investment Company Act of 1940) of the Fund's
outstanding voting securities; provided that in either event the continuance is
also approved by a majority of the directors who are not 'interested persons'
(as defined in said Act) of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval. This Agreement
is terminable without penalty, on not more than 60 nor less than 30 days'
notice, by the Board of Directors of the Fund or by vote of holders of a
majority of the Fund's shares or by Mitchell Hutchins. This Agreement will also
terminate automatically in the event of its assignment (as defined in said Act).
- 4 -
<PAGE>
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
PAINEWEBBER/KIDDER, PEABODY
GOVERNMENT MONEY FUND
Accepted: DIANNE E. O'DONNELL
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
By: J. P. Minard
----------------------------
- 5 -
<PAGE>
EXHIBIT B
[FORM OF NEW SUB-ADVISORY AGREEMENT WITH MITCHELL HUTCHINS]
SUB-ADVISORY AND SUB-ADMINISTRATION AGREEMENT
Contract made as of , 1995, between PAINEWEBBER INCORPORATED
('PaineWebber'), a Delaware corporation registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended ('1934 Act') and as an investment
adviser under the Investment Advisers Act of 1940, as amended ('Advisers Act'),
and MITCHELL HUTCHINS ASSET MANAGEMENT INC. ('Mitchell Hutchins'), a Delaware
corporation registered as a broker-dealer under the 1934 Act and as an
investment adviser under the Advisers Act.
WHEREAS PaineWebber has entered into an Investment Advisory and
Administration Contract dated [date] ('Advisory Contract') with [Name of Fund]
('Fund'), an open-end investment company registered under the Investment Company
Act of 1940, as amended ('1940 Act'), [which offers for public sale distinct
series of shares of [common stock/beneficial interest] ('Series'),(1) each
corresponding to a distinct portfolio]; and
WHEREAS under the Advisory Contract PaineWebber has agreed to provide
certain investment advisory and administrative services to the Series as now
exist and as hereafter may be established; and
WHEREAS the Advisory Contract authorizes PaineWebber to delegate certain of
its duties as investment adviser and administrator under the Advisory Contract
to a sub-adviser or sub-administrator; and
WHEREAS PaineWebber wishes to retain Mitchell Hutchins as sub-adviser and
sub-administrator to provide certain investment advisory and administrative
services to PaineWebber and each Series of the Fund as listed in Schedule A to
this agreement, as such schedule may be revised from time to time, and Mitchell
Hutchins is willing to render such services as described herein upon the terms
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. PaineWebber hereby appoints Mitchell Hutchins as its
sub-adviser and sub-administrator with respect to each Series and Mitchell
Hutchins accepts such appointment and agrees that it will furnish the
services set forth in Paragraph 2.
2. Services and Duties of Mitchell Hutchins.
(a) Subject to the supervision of the [Board of Directors/Trustees]
('Board') and PaineWebber, Mitchell Hutchins will provide a continuous
investment program for each Series, including investment research and
management with respect to all securities, investments and cash equivalents
held in the portfolio of each Series. Mitchell Hutchins will determine from
time to time what investments will be purchased, retained or sold by each
Series. Mitchell Hutchins will be responsible for placing purchase and sale
orders for investments and for other related transactions. Mitchell
Hutchins will provide services under this agreement in accordance with the
Series' investment objective, policies and restrictions as stated in the
Series' Prospectuses.
(b) Mitchell Hutchins agrees that, in placing orders with brokers, it
will attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of any Series, Mitchell Hutchins may, in its
discretion, effect securities transactions with brokers and dealers who
provide the Series with research, analysis, advice and similar services,
and Mitchell Hutchins may pay to those brokers and dealers, in return for
brokerage and research services and analysis, a higher commission than may
be charged by other brokers and dealers, subject to Mitchell Hutchins'
determining in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of
Mitchell Hutchins and its affiliates to such Series and its other clients
and that the total commissions paid by such Series will be reasonable in
relation to the benefits to such Series over the long term. In no instance
will portfolio securities be purchased
- ------------
(1) In the event a Fund has only one portfolio, bracketed language will be
deleted and the term 'Series' will be replaced with the word 'Fund' as
appropriate.
B-1
<PAGE>
from or sold to PaineWebber, Mitchell Hutchins or any affiliated person
thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder, or any applicable exemptive orders.
Whenever Mitchell Hutchins simultaneously places orders to purchase or sell
the same security on behalf of a Series and one or more other accounts
advised by Mitchell Hutchins, such orders will be allocated as to price and
amount among all such accounts in a manner believed to be equitable to each
account. The Fund recognizes that in some cases this procedure may
adversely affect the results obtained for a Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series and will
furnish the Board with such periodic and special reports as PaineWebber or
the Board reasonably may request. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, Mitchell Hutchins hereby agrees that all
records which it maintains for the Fund are the property of the Fund,
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act any records which it maintains for the Fund and which are required to
be maintained by Rule 31a-1 under the 1940 Act, and further agrees to
surrender promptly to the Fund any records which it maintains for the Fund
upon request by the Fund.
(d) Mitchell Hutchins will oversee the computation of the net asset
value and net income of each Series as described in the currently effective
registration statement of the Fund under the Securities Act of 1933, as
amended, and 1940 Act and any supplements thereto ('Registration
Statement') or as more frequently requested by the Board.
(e) Mitchell Hutchins will assist in administering the affairs of the
Fund and each Series, subject to the supervision of the Board and
PaineWebber, and further subject to the following understandings:
(i) Mitchell Hutchins will supervise all aspects of the operation
of the Fund and each Series except as hereinafter set forth; provided,
however, that nothing herein contained shall be deemed to relieve or
deprive the Board of its responsibility for and control of the conduct
of affairs of the Fund and each Series.
(ii) Mitchell Hutchins will provide the Fund and each Series with
such administrative and clerical personnel (including officers of the
Fund) as are reasonably deemed necessary or advisable by the Board and
PaineWebber and Mitchell Hutchins will pay the salaries of all such
personnel.
(iii) Mitchell Hutchins will provide the Fund and each Series with
such administrative and clerical services as are reasonably deemed
necessary or advisable by the Board and PaineWebber, including the
maintenance of certain of the books and records of the Fund and each
Series.
(iv) Mitchell Hutchins will arrange, but not pay for, the periodic
preparation, updating, filing and dissemination (as applicable) of the
Fund's Registration Statement, proxy material, tax returns and reports
to shareholders of each Series, the Securities and Exchange Commission
and other appropriate federal or state regulatory authorities.
(v) Mitchell Hutchins will provide the Fund and each Series with,
or obtain for, adequate office space and all necessary office equipment
and services, including telephone service, heat, utilities, stationery
supplies and similar items.
3. Duties Retained by PaineWebber. PaineWebber will continue to
provide to the Board and each Series the services described in subparagraph
3(e) of the Advisory Contract.
4. Further Duties. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Fund's
[Articles of Incorporation/Declaration of Trust], By-Laws and Registration
Statement of the Fund and with the written instructions and directions of
the Board and PaineWebber, and will comply with the requirements of the
1940 Act, the Investment Advisers Act of 1940 ('Advisers Act'), the rules
thereunder, and all other applicable federal and state laws and
regulations.
5. Services Not Exclusive. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive, and Mitchell Hutchins shall be
free to furnish similar services to others so long
B-2
<PAGE>
as its services under this Contract are not impaired thereby. Nothing in
this Contract shall limit or restrict the right of any director, officer or
employee of Mitchell Hutchins, who may also be a trustee, officer or
employee of the Fund, to engage in any other business or to devote his or
her time and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar nature.
6. Expenses. During the term of this Contract, Mitchell Hutchins will
pay all expenses incurred by it in connection with its services under this
Contract.
7. Compensation. For the services provided and the expenses assumed by
Mitchell Hutchins pursuant to this Contract with respect to each Series,
PaineWebber will pay to Mitchell Hutchins a fee equal to 20% of the fee
received by PaineWebber from the Fund pursuant to the Advisory Contract
with respect to such Series, such compensation to be paid monthly.
8. Limitation of Liability. Mitchell Hutchins and its delegates will
not be liable for any error of judgment or mistake of law or for any loss
suffered by PaineWebber or the Fund or the shareholders of any Series in
connection with the performance of this Contract, except a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Contract. Any person, even though also an
officer, director, employee, or agent of Mitchell Hutchins, who may be or
become an officer, director, employee or agent of the Fund shall be deemed,
when rendering services to any Series of the Fund or acting with respect to
any business of such Series or the Fund, to be rendering such services to
or acting solely for the Series or the Fund and not as an officer,
director, employee, or agent or one under the control or direction of
Mitchell Hutchins even though paid by it.
9. Duration and Termination.
(a) This Contract will become effective upon the date first above
written, provided that, with respect to any Series, this Contract shall not
take effect unless it has first been approved (i) by a vote of a majority
of those [directors/trustees] of the Fund who are not parties to this
Contract or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by vote
of a majority of that Series' outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract will
continue in effect for two years from the above written date. Thereafter,
if not terminated, this Contract will continue automatically for successive
periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of
those [directors/trustees] of the Fund who are not parties to this Contract
or interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or, with
respect to any given Series, by vote of a majority of the outstanding
voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Contract may be terminated by any party hereto at any time, without the
payment of any penalty, on sixty days' written notice to the other party;
this Contract also may be terminated at any time, without the payment of
any penalty, by vote of the Board or by a vote of a majority of the
outstanding voting securities of such Series on sixty days' written notice
to Mitchell Hutchins and PaineWebber. Termination of this Contract with
respect to any given Series shall in no way affect the continued validity
of this Contract or the performance thereunder with respect to any other
Series. This Contract will terminate automatically in the event of its
assignment or upon termination of the Advisory Contract.
10. Amendment of this Agreement. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought, and no amendment of this
Contract as to any given Series shall be effective until approved by vote
of a majority of such Series' outstanding voting securities.
11. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Delaware without giving effect to the conflicts of
laws principles thereof and the 1940 Act [provided, however, that Section
12 will be construed in accordance with the laws of the
B-3
<PAGE>
Commonwealth of Massachusetts.] To the extent that the applicable laws of
the State of Delaware [or the Commonwealth of Massachusetts] conflict with
the applicable provisions of the 1940 Act, the latter shall control.
[12. Limitation of Liability of the Trustees and Shareholders of the
Trust. No Trustee, shareholder, officer, employee or agent of any Series
shall be liable for any obligations of any Series or the Trust under this
Contract, and Mitchell Hutchins agrees that, in asserting any rights or
claims under this Contract, it shall look only to the assets and property
of the Trust in settlement of such right or claim, and not to such Trustee,
shareholder, officer, employee or agent. The Trust represents that a copy
of its Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and the Boston City Clerk.]
13. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Contract shall
not be affected thereby. This Contract shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
As used in this Contract, the terms 'majority of the outstanding voting
securities,' 'affiliated person,' 'interested person,' 'assignment,'
'broker,' 'investment adviser,' 'net assets,' 'sale,' 'sell' and 'security'
shall have the same meaning as such terms have in the 1940 Act, subject to
such exemption as may be granted by the SEC by any rule, regulation or
order. Where the effect of a requirement of the federal securities laws
reflected in any provision of this Agreement is affected by a rule,
regulation or order of the SEC, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
<TABLE>
<S> <C>
Attest: PAINEWEBBER INCORPORATED
................................... By ......................................
Title ...................................
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
................................... By ......................................
Title ...................................
</TABLE>
B-4
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND
DISTRIBUTION CONTRACT
CONTRACT made as of January 30, 1995, between PAINEWEBBER/KIDDER,
PEABODY GOVERNMENT MONEY FUND, a Maryland corporation, ('Fund'), and PAINEWEBBER
INCORPORATED, a Delaware corporation ('PaineWebber').
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended ('1940 Act'), as an open-end management investment company and
has one series of shares of common stock ('Shares'); and
WHEREAS PaineWebber is willing to act as principal distributor for
the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PaineWebber as its
exclusive agent to be the principal distributor to sell and to arrange for the
sale of the Shares on the terms and for the period set forth in this Contract.
PaineWebber hereby accepts such appointment and agrees to act hereunder.
2. Services and Duties of PaineWebber.
(a) PaineWebber agrees to solicit orders for the sale of
Shares and to undertake advertising and promotion that it believes reasonable in
connection with such solicitation as agent for the Fund and upon the terms
described in the Registration Statement. As used in this Contract, the term
'Registration Statement' shall mean the currently effective registration state-
ment of the Fund, and any supplements thereto, under the Securities Act of 1933,
as amended ('1933 Act'), and the 1940 Act.
(b) Upon the later of the date of this Contract or the initial
offering of the Shares to the public by the Fund, PaineWebber will hold itself
available to receive purchase orders, satisfactory to PaineWebber, for Shares
and will accept such orders on behalf of the Fund as of the time of receipt of
such orders and promptly transmit such orders as are accepted to
<PAGE>
the Fund's transfer agent. Purchase orders shall be deemed effective at the time
and in the manner set forth in the Registration Statement.
(c) PaineWebber in its discretion may enter into agreements to
sell Shares to such registered and qualified retail dealers, including but not
limited to Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), as it
may select. In making agreements with such dealers, PaineWebber shall act only
as principal and not as agent for the Fund.
(d) The offering price of the Shares shall be the net asset
value per Share as next determined by the Fund following receipt of an order at
PaineWebber's principal office. The Fund shall promptly furnish PaineWebber with
a statement of each computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain
number of Shares.
(f) To facilitate redemption of Shares by shareholders
directly or through dealers, PaineWebber is authorized but not required on
behalf of the Fund to repurchase Shares presented to it by shareholders and
dealers at the price determined in accordance with, and in the manner set forth
in, the Registration Statement.
(g) PaineWebber shall provide ongoing shareholder services,
which include responding to shareholder inquiries, providing shareholders with
information on their investments in the Shares and any other services now or
hereafter deemed to be appropriate subjects for the payments of 'service fees'
under Section 26(d) of the National Association of Securities Dealers, Inc.
('NASD') Rules of Fair Practice (collectively, 'service activities').
(h) PaineWebber shall have the right to use any list of
shareholders of the Fund or any other list of investors which it obtains in
connection with its provision of services under this Contract; provided,
however, that PaineWebber shall not sell or knowingly provide such list or lists
to any unaffiliated person.
3. Authorization to Enter into Exclusive Dealer Agreements and to
Delegate Duties as Distributor. With respect to the Shares of the Fund,
PaineWebber may enter into an exclusive dealer agreement with Mitchell Hutchins
any other registered and qualified dealer with respect to sales of the Shares or
the provision of service activities. In a separate contract or as part of any
such exclusive dealer agreement, PaineWebber also may
-2-
<PAGE>
delegate to Mitchell Hutchins or another registered and qualified dealer
('sub-distributor') any or all of its duties specified in this Contract,
provided that such separate contract or exclusive dealer agreement imposes on
the sub-distributor bound thereby all applicable duties and conditions to which
PaineWebber is subject under this Contract, and further provided that such
separate contract or exclusive dealer agreement meets all requirements of the
1940 Act and rules thereunder.
4. Services Not Exclusive. The services furnished by PaineWebber
hereunder are not to be deemed exclusive and PaineWebber shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of PaineWebber, who may also be a
director, officer or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar or a dissimilar nature.
5. Compensation.
(a) As compensation for its service activities under this
Contract, PaineWebber shall receive from the Fund a service fee at the rate and
under the terms and conditions of the Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act ('Plan') adopted by the Fund, as such Plan is amended
from time to time, and subject to any further limitations on such fee as the
board of trustees ('Board') may impose.
(b) PaineWebber may reallow any or all of the service fees
which it is paid under this Contract to such dealers as PaineWebber may from
time to time determine.
6. Duties of the Fund.
(a) The Fund reserves the right at any time to withdraw
offering Shares of the Fund by written notice to PaineWebber at its principal
office.
(b) The Fund shall determine in its sole discretion whether
certificates shall be issued with respect to the Shares. If the Fund has
determined that certificates shall be issued, the Fund will not cause
certificates representing Shares to be issued unless so requested by
shareholders. If such request is transmitted by PaineWebber, the Fund will cause
certificates evidencing Shares to be issued in such names and denominations as
PaineWebber shall from time to time direct.
-3-
<PAGE>
(c) The Fund shall keep PaineWebber fully informed of its
affairs and shall make available to PaineWebber copies of all information,
financial statements, and other papers which PaineWebber may reasonably request
for use in connection with the distribution of Shares, including, without
limitation, certified copies of any financial statements prepared for the Fund
by its independent public accountant and such reasonable number of copies of the
most current prospectus, statement of additional information, and annual and
interim reports of the Fund as PaineWebber may request, and the Fund shall
cooperate fully in the efforts of PaineWebber to sell and arrange for the sale
of the Shares and in the performance of PaineWebber under this Contract.
(d) The Fund shall take, from time to time, all necessary
action, including payment of the related filing fee, as may be necessary to
register the Shares under the 1933 Act to the end that there will be available
for sale such number of Shares as PaineWebber may be expected to sell. The Fund
agrees to file, from time to time, such amendments, reports, and other documents
as may be necessary in order that there will be no untrue statement of a
material fact in the Registration Statement, nor any omission of a material fact
which omission would make the statements therein misleading.
(e) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of Shares for sale under the
securities laws of such states or other jurisdictions as PaineWebber and the
Fund may approve, and, if necessary or appropriate in connection therewith, to
qualify and maintain the qualification of the Fund as a broker or dealer in such
jurisdictions; provided that the Fund shall not be required to execute a general
consent to the service of process in any state. PaineWebber shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such qualifications.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
registering the Shares with the Securities and Exchange Commission and state and
other regulatory bodies, and shall assume expenses related to communications
with shareholders of the Fund, including (i) fees and disbursements of its
counsel and independent public accountant; (ii) the preparation, filing and
printing of registration statements and/or prospectuses or statements of
additional information required under the federal securities laws; (iii) the
preparation and mailing of annual and interim reports, prospectuses, statements
of additional information and proxy materials to shareholders; and (iv) the
qualifications of Shares for sale and of the Fund as a broker or dealer under
the securities laws of such jurisdictions as shall be
-4-
<PAGE>
selected by the Fund and PaineWebber pursuant to Paragraph 6(e) hereof, and the
costs and expenses payable to each such jurisdiction for continuing
qualification therein.
8. Expenses of PaineWebber. PaineWebber shall bear all costs and
expenses of (i) preparing, printing and distributing any materials not prepared
by the Fund and other materials used by PaineWebber in connection with the sale
of Shares under this Contract, including the additional cost of printing copies
of prospectuses, statements of additional information, and annual and interim
shareholder reports other than copies thereof required for distribution to
existing shareholders or for filing with any federal or state securities
authorities; (ii) any expenses of advertising incurred by PaineWebber in
connection with such offering; (iii) the expenses of registration or quali-
fication of PaineWebber as a broker or dealer under federal or state laws and
the expenses of continuing such registration or qualification; and (iv) all
compensation paid to PaineWebber's employees and others for selling Shares, and
all expenses of PaineWebber, its employees and others who engage in or support
the sale of Shares as may be incurred in connection with their sales efforts.
9. Indemnification.
(a) The Fund agrees to indemnify, defend and hold PaineWebber,
its officers and directors, and any person who controls PaineWebber within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which PaineWebber, its officers,
directors or any such controlling person may incur under the 1933 Act, or under
common law or otherwise, arising out of or based upon any untrue statement, or
alleged untrue statement, of a material fact contained in the Registration
Statement or any related prospectus ('Prospectus') or arising out of or based
upon any omission, or alleged omission, to state a material fact required to be
stated in the Registration Statement or Prospectus or necessary to make the
statements therein not misleading, except insofar as such claims, demands,
liabilities or expenses arise out of or are based upon any such untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by PaineWebber to the Fund for
use in the Registration Statement or Prospectus; provided, however, that this
indemnity agreement shall not inure to the benefit of any person who is also an
officer or director of the Fund or who controls the Fund within the meaning of
Section 15 of the 1933 Act, unless a court of competent jurisdiction shall
determine, or it shall have been
-5-
<PAGE>
determined by controlling precedent, that such result would not be against
public policy as expressed in the 1933 Act; and further provided, that in no
event shall anything contained herein be so construed as to protect PaineWebber
against any liability to the Fund or to the shareholders to which PaineWebber
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations under this Contract. The Fund shall not be liable
to PaineWebber under this indemnity agreement with respect to any claim made
against PaineWebber or any person indemnified unless PaineWebber or other such
person shall have notified the Fund in writing of the claim within a reasonable
time after the summons or other first written notification giving information of
the nature of the claim shall have been served upon PaineWebber or such other
person (or after PaineWebber or the person shall have received notice of service
on any designated agent). However, failure to notify the Fund of any claim shall
not relieve the Fund from any liability which it may have to PaineWebber or any
person against whom such action is brought otherwise than on account of this
indemnity agreement. The Fund shall be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any claims subject to this indemnity agreement. If the Fund
elects to assume the defense of any such claim, the defense shall be conducted
by counsel chosen by the Fund and satisfactory to the indemnified defendants in
the suit. In the event that the Fund elects to assume the defense of any suit
and retain counsel, the indemnified defendants shall bear the fees and expenses
of any additional counsel retained by them. If the Fund does not elect to assume
the defense of a suit, it will reimburse the indemnified defendants for the
reasonable fees and expenses of any counsel retained by the indemnified defen-
dants. The Fund agrees to notify PaineWebber promptly of the commencement of any
litigation or proceedings against it or any of its officers or directors in
connection with the issuance or sale of any of its Shares.
(b) The Fund's indemnification agreement contained in this
Section 9 will remain operative and in full force and effect regardless of any
investigation made by or on behalf of PaineWebber, its officers and directors,
or any controlling person, and will survive the delivery of any shares of the
Fund.
(c) PaineWebber agrees to indemnify, defend, and hold the
Fund, its officers and directors and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund,
-6-
<PAGE>
its directors or officers, or any such controlling person may incur under the
1933 Act or under common law or otherwise arising out of or based upon any
alleged untrue statement of a material fact contained in information furnished
in writing by PaineWebber to the Fund for use in the Registration Statement, or
arising out of or based upon any alleged omission to state a material fact in
connection with such information required to be stated in the Registration
Statement necessary to make such information not misleading, or in the event
that Shares of the Fund are offered to eligible participants in the
PaineWebber/Kidder, Peabody Premium Account program ('PW/KPPA'), losses or costs
in connection with the redemption of Shares due to unauthorized use of a Visa
card or Visa checks or due to any error, fault or breakdown of the PW/KPPA
computer programs or operating procedures. PaineWebber shall have the right to
control the defense of any action contemplated by this Section 9(c), with
counsel of its own choosing, satisfactory to the Fund, unless the action is not
based solely upon an alleged misstatement or omission on PaineWebber's part. In
such event, the Fund, its officers or directors or controlling persons will each
have the right to participate in the defense or preparation of the defense of
the action. In the event that PaineWebber elects to assume the defense of any
suit and retain counsel, the defendants in the suit shall bear the fees and
expenses of any additional counsel retained by them. If PaineWebber does not
elect to assume the defense of any suit, it will reimburse the indemnified
defendants in the suit for the reasonable fees and expenses of any counsel
retained by them.
(d) PaineWebber shall not be liable to the Fund under this
indemnity agreement with respect to any claim made against the Fund or any
person indemnified unless the Fund or other such person shall have notified
PaineWebber in writing of the claim within a reasonable time after the summons
or other first written notification giving information of the nature of the
claim shall have been served upon the Fund or such other person (or after the
Fund shall have received notice of service on any designated agent). PaineWebber
will not be obligated to indemnify any entity or person against any liability to
which the Fund, its officers and directors, or any controlling person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in performance of, or reckless disregard of, the obligations and
duties set forth in this Agreement.
10. Services Provided to the Fund by Employees of PaineWebber. Any
person, even though also an officer, director, employee or agent of PaineWebber,
who may be or become an officer, director, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting in any business of the
Fund, to be rendering such services to or acting
-7-
<PAGE>
solely for the Fund and not as an officer, director, employee or agent or one
under the control or direction of PaineWebber even though paid by PaineWebber.
11. Duration and Termination.
(a) This Contract shall become effective upon the date
hereabove written, provided that this Contract shall not take effect unless such
action has first been approved by vote of a majority of the Board and by vote of
a majority of those directors of the Fund who are not interested persons of
the Fund, and have no direct or indirect financial interest in the operation of
the Plan relating to the Shares or in any agreements related thereto (all such
directors collectively being referred to herein as the 'Independent Directors')
cast in person at a meeting called for the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Contract
shall continue in effect for one year from the above written date. Thereafter,
if not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Independent
Directors, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or by vote of a majority of the outstanding
voting securities of the Shares of the Fund.
(c) Notwithstanding the foregoing, this Contract may be
terminated at any time, without the payment of any penalty, by vote of the
Board, by vote of a majority of the Independent Directors or by vote of a
majority of the outstanding voting securities of the Fund on sixty days' written
notice to PaineWebber or by PaineWebber at any time, without the payment of any
penalty, on sixty days' written notice to the Fund. This Contract will
automatically terminate in the event of its assignment.
12. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
13. Governing Law. This Contract shall be construed in accordance with the
laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the 1940 Act, the latter shall control.
-8-
<PAGE>
14. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient upon receipt in writing at the
other party's principal offices.
15. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms 'majority of the outstanding voting securities,' 'interested person'
and 'assignment' shall have the same meaning as such terms have in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: PAINEWEBBER/KIDDER, PEABODY
GOVERNMENT MONEY FUND
Ilene Shore By: Dianne E. O'Donnell
- ------------------------------ -------------------------------
ATTEST: PAINEWEBBER INCORPORATED
Ilene Shore By: Thomas Eggers
- ------------------------------ -------------------------------
-9-
<PAGE>
TRANSFER AGENCY SERVICES AND SHAREHOLDER SERVICES AGREEMENT
TERMS AND CONDITIONS
This Agreement is made as of January 30, 1995, to be effective as of
such date as is agreed to in writing by the parties, by and between
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC. (the "Fund"), a Maryland
corporation and PFPC INC. ("PFPC"), a Delaware corporation, which is an indirect
wholly-owned subsidiary of PNC Bank Corp.
The Fund is registered as an open-end management series investment
company under the Investment Company Act of 1940, as amended ("1940 Act"). The
Fund wishes to retain PFPC to serve as the transfer agent, registrar, dividend
disbursing agent and shareholder servicing agent for such series listed in
Appendix C to this agreement, as amended from time to time (the "Series"), and
PFPC wishes to furnish such services.
In consideration of the promises and mutual covenants herein contained,
the parties agree as follows:
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall
mean any officer of the Fund and any other person who is duly authorized by the
Fund's Governing Board to give Oral and Written Instructions on behalf of the
Fund. Such persons are listed in the Certificate attached hereto as the
Authorized Persons Appendix or any amendment thereto as may be received by PFPC
from time to time. If PFPC provides more than one service hereunder, the Fund's
designation of Authorized Persons may vary by service.
<PAGE>
(b) "Governing Board". The term "Governing Board" shall mean
the Fund's Board of Directors if the Fund is a corporation or the Fund's Board
of Trustees if the Fund is a trust, or, where duly authorized, a competent
committee thereof.
(c) "Oral Instructions". The term "Oral Instructions" shall
mean oral instructions received by PFPC from an Authorized Person by telephone
or in person.
(d) "SEC". The term "SEC" shall mean the Securities and
Exchange Commission.
(e) "Securities Laws". The term "Securities Laws" shall mean
the 1933 Act, the 1934 Act and the 1940 Act. The terms the "1933 Act" shall mean
the Securities Act of 1933, a amended, and the "1934 Act" shall mean the
Securities Exchange Act of 1934, a amended.
(f) "Shares". The term "Shares" shall mean the shares of
beneficial interest of any Series or class of the Fund.
(g) "Written Instructions". The term "Written Instructions"
shall mean written instructions signed by one Authorized Person and received by
PFPC. The instructions may be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PFPC to serve as transfer
agent, registrar, dividend disbursing agent and shareholder servicing agent to
each of its Series, in accordance with the terms set forth in this Agreement,
and PFPC accepts such appointment and agrees to furnish such services.
2
<PAGE>
3. Delivery of Documents. The Fund has provided or, where
applicable, will provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of
the Fund's Governing Board, approving the appointment of PFPC to provide
services to each Series and approving this agreement;
(b) A copy of the Fund's most recent Post-Effective Amendment
to its Registration Statement on Form N-1A under the 1933 Act and 1940 Act as
filed with the SEC;
(c) A copy of the Fund's investment advisory and
administration agreement or agreements;
(d) A copy of the Fund's distribution agreement or
agreements;
(e) Copies of any shareholder servicing agreements made
in respect of the Fund; and
(f) Copies of any and all amendments or supplements to
the foregoing.
4. Compliance with Government Rules and Regulations. PFPC undertakes to
comply with all applicable requirements of the Securities Laws, and any laws,
rules and regulations of governmental authorities having jurisdiction with
respect to all duties to be performed by PFPC hereunder. Except as specifically
set forth herein, PFPC assumes no responsibility for such compliance by the
Fund.
5. Instructions. Unless otherwise provided in this Agreement,
PFPC shall act only upon Oral and Written Instructions. PFPC shall be entitled
to rely upon any Oral and Written
3
<PAGE>
Instruction it receives from an Authorized Person pursuant to this Agreement.
PFPC may assume that any Oral or Written Instruction received hereunder is not
in any way inconsistent with the provisions of organizational documents or of
any vote, resolution or proceeding of the Fund's Governing Board or of the
Fund's shareholders, unless and until it receives Written Instructions to the
contrary.
The Fund agrees to forward to PFPC Written Instructions confirming Oral
Instructions so that PFPC receives the Written Instructions by the close of
business on the next business day after such Oral Instructions are received. The
fact that such confirming Written Instructions are not received by PFPC shall in
no way invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. Where Oral or Written Instructions
reasonably appear to have been received from an Authorized Person, PFPC shall
incur no liability to the Fund in acting upon such instructions provided that
PFPC's actions comply with the other provisions of this Agreement.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action
it should or should not take, PFPC will request directions or advice, including
Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
question of law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel
4
<PAGE>
of its own choosing (who may be counsel for the Fund, the Fund's investment
adviser or PFPC, at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions PFPC receives from the Fund
and the advice it receives from counsel, PFPC may rely upon and follow the
advice of counsel. In the event PFPC so relies on the advice of counsel, PFPC
remains liable for any action or omission on the part of PFPC which constitutes
willful misfeasance, bad faith, negligence or reckless disregard by PFPC of any
duties, obligations or responsibilities provided for in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action
it takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel in accordance with this
Agreement and which PFPC believes, in good faith, to be consistent with those
directions, advice or Oral or Written Instructions.
Nothing in this paragraph shall be construed to impose an obligation
upon PFPC (i) to seek such directions, advice or Oral or Written Instructions,
or (ii) to act in accordance with such directions, advice or Oral or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PFPC's properly taking or not taking such action. Nothing
in this subsection shall excuse PFPC when an action or omission on the part of
PFPC constitutes willful misfeasance, bad
5
<PAGE>
faith, negligence or reckless disregard of PFPC of any duties, obligations or
responsibilities provided for in this Agreement.
7. Records and Visits. PFPC shall prepare and maintain in complete and
accurate form all books and records necessary for it to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to the
Fund, including (a) all those records required to be prepared and maintained by
the Fund under the 1940 Act, by other applicable Securities Laws, rules and
regulations and by state laws and (b) such books and records as are necessary
for PFPC to perform all of the services it agrees to provide in this Agreement
and the appendices attached hereto, including but not limited to the books and
records necessary to effect the conversion of Class B Shares, the calculation of
any contingent deferred sales charges and the calculation of front-end sales
charges. The books and records pertaining to the Fund which are in the
possession, or under the control, of PFPC shall be the property of the Fund. The
Fund or the Fund's Authorized Persons shall have access to such books and
records at all times during PFPC's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided by
PFPC to the Fund or to an Authorized Person of the Fund. Upon reasonable notice
by the Fund, PFPC shall make available during regular business hours its
facilities and premises employed in connection with its performance of this
Agreement for reasonable visits by the Fund, any agent or person designated by
the Fund or any regulatory agency having authority over the Fund.
6
<PAGE>
8. Confidentiality. PFPC agrees on its own behalf and that of its
employees to keep confidential all records of the Fund and information relating
to the Fund and its shareholders (past, present and future), its investment
adviser and its principal underwriter, unless the release of such records or
information is otherwise consented to, in writing, by the Fund prior to its
release. The Fund agrees that such consent shall not be unreasonably withheld,
and may not be withheld where PFPC may be exposed to civil or criminal contempt
proceedings or when required to divulge such information or records to duly
constituted authorities.
9. Cooperation with Accountants. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
10. Disaster Recovery. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provision for periodic backup of computer files and data with respect to the
Fund and emergency use of electronic data processing equipment. In the event of
equipment failures, PFPC shall, at no additional expense to the Fund, take all
reasonable steps to minimize service interruptions. PFPC shall have no liability
with respect to the loss of data or service interruptions caused by equipment
failures, provided such loss or
7
<PAGE>
interruption is not caused by the negligence of PFPC and provided further that
PFPC has complied with the provisions of this Paragraph 10.
11. Compensation. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to, from time to time, in writing by the Fund and PFPC.
12. Indemnification.
(a) The Fund agrees to indemnify and hold harmless PFPC and
its nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws, and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including, without limitation, reasonable
attorneys' fees and disbursements arising directly or indirectly from any action
or omission to act which PFPC (i) at the request of or on the direction of or in
reliance on the advice of the Fund or (ii) upon Oral or Written Instructions.
Neither PFPC, nor any of its nominees, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of PFPC's or
its nominees' own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement.
(b) PFPC agrees to indemnify and hold harmless the Fund from
all taxes, charges, expenses, assessments, claims and liabilities arising from
PFPC's obligations pursuant to this
8
<PAGE>
Agreement (including, without limitation, liabilities arising under the
Securities Laws, and any state and foreign securities and blue sky laws, and
amendments thereto) and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, arising directly or indirectly out of PFPC's
or its nominee's own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement.
(c) In order that the indemnification provisions contained in
this Paragraph 12 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion, and shall keep the
other party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate with
the party seeking indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
13. Insurance. PFPC shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of insurance
may provide for coverage of claims for liability or indemnity by the parties set
forth in this Agreement, the contracts of insurance shall take precedence, and
no provision of this Agreement shall be construed to relieve an insurer of any
obligation to pay claims to the Fund, PFPC or other insured party
9
<PAGE>
which would otherwise be a covered claim in the absence of any provision of this
Agreement.
14. Security. PFPC represents and warrants that, to the best of its
knowledge, the various procedures and systems which PFPC has implemented with
regard to the safeguarding from loss or damage attributable to fire, theft or
any other cause (including provision for twenty-four hours a day restricted
access) of the Fund's blank checks, certificates, records and other data and
PFPC's equipment, facilities and other property used in the performance of its
obligations hereunder are adequate, and that it will make such changes therein
from time to time as in its judgment are required for the secure performance of
its obligations hereunder. PFPC shall review such systems and procedures on a
periodic basis and the Fund shall have access to review these systems and
procedures.
15. Responsibility of PFPC. PFPC shall be under no duty to take any
action on behalf of the Fund except as specifically set forth herein or as may
be specifically agreed to by PFPC in writing. PFPC shall be obligated to
exercise due care and diligence in the performance of its duties hereunder, to
act in good faith and to use its best efforts in performing services provided
for under this Agreement. PFPC shall be liable only for any damages arising out
of or in connection with PFPC's performance of or omission or failure to perform
its duties under this Agreement to the extent such damages arise out of PFPC's
negligence, reckless disregard of its duties, bad faith or willful misfeasance.
10
<PAGE>
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC, in connection with its duties under this
Agreement, shall not be under any duty or obligation to inquire into and shall
not be liable for (a) the validity or invalidity or authority or lack thereof of
any Oral or Written Instruction, notice or other instrument which conforms to
the applicable requirements of this Agreement, and which PFPC reasonably
believes to be genuine; or (b) subject to the provisions of Paragraph 10, delays
or errors or loss of data occurring by reason of circumstances beyond PFPC's
control, including acts of civil or military authority, national emergencies,
labor difficulties, fire, flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
16. Description of Services. PFPC shall perform the duties of the
transfer agent, registrar, dividend disbursing agent and shareholder servicing
agent of the Fund and its specified Series. (a) Purchase of Shares. PFPC shall
issue and credit an account of an investor in the manner described in each
Series prospectus once it receives: (i) A purchase order;
(ii) Proper information to establish a shareholder
account; and
(iii) Confirmation of receipt or crediting of funds
for such order from the Series' custodian.
(b) Redemption of Shares. PFPC shall redeem a Series'
Shares only if that function is properly authorized by the Fund's
11
<PAGE>
organizational documents or resolution of the Fund's Governing Board. Shares
shall be redeemed and payment therefor shall be made in accordance with each
Series' prospectus when the shareholder tenders his or her Shares in proper form
and directs the method of redemption.
(c) Dividends and Distributions. Upon receipt of a resolution
of the Fund's Governing Board authorizing the declaration and payment of
dividends and distributions, PFPC shall issue dividends and distributions
declared by the Fund in Shares, or, upon shareholder election, pay such
dividends and distributions in cash if provided for in each Series' prospectus.
Such issuance or payment, as well as payments upon redemption as described
above, shall be made after deduction and payment of the required amount of funds
to be withheld in accordance with any applicable tax law or other laws, rules or
regulations. PFPC shall mail to each Series' shareholders such tax forms and
other information, or permissible substitute notice, relating to dividends and
distributions paid by the Fund as are required to be filed and mailed by
applicable law, rule or regulation.
PFPC shall prepare, maintain and file with the IRS and other
appropriate taxing authorities reports relating to all dividends above a
stipulated amount paid by the Fund to its shareholders as required by tax or
other law, rule or regulation.
(d) PFPC will provide the services listed on Appendix A and Appendix B
on an ongoing basis. Performance of certain of these services, with accompanying
responsibilities and liabilities,
12
<PAGE>
may be delegated and assigned to PaineWebber Incorporated or Mitchell Hutchins
Asset Management Inc. or to an affiliated person of either.
17. Duration and Termination.
(a) This Agreement shall continue until January 30, 1997 and
shall automatically be renewed thereafter on a year-to-year basis and with
respect to the year-to-year renewal, provided that the Fund's Governing Board
approves such renewal; and provided further that this Agreement may be
terminated by either party for cause.
(b) With respect to the Fund, cause includes, but is not
limited to: (i) PFPC's material breach of this Agreement causing it to fail to
substantially perform its duties under this Agreement. In order for such
material breach to constitute "cause" under this Paragraph, PFPC must receive
written notice from the Fund specifying the material breach and PFPC shall not
have corrected such breach within a 15-day period; (ii) financial difficulties
of PFPC evidenced by the authorization or commencement of a voluntary or
involuntary bankruptcy under the U.S. Bankruptcy Code or any applicable
bankruptcy or similar law, or under any applicable law of any jurisdiction
relating to the liquidation or reorganization of debt, the appointment of a
receiver or to the modification or alleviation of the rights of creditors; and
(iii) issuance of an administrative or court order against PFPC with regard to
the material violation or alleged material violation of
13
<PAGE>
the Securities Laws or other applicable laws related to its business of
performing transfer agency services.
(c) With respect to PFPC, cause includes, but is not limited
to, the failure of the Fund to pay the compensation set forth in writing
pursuant to Paragraph 11 of this Agreement.
(d) Any notice of termination for cause in conformity with
subparagraphs (a), (b) and (c) of this Paragraph by the Fund shall be effective
thirty (30) days from the date of such notice. Any notice of termination for
cause by PFPC shall be effective 90 days from the date of such notice.
(e) Upon the termination hereof, the Fund shall pay to PFPC
such compensation as may be due for the period prior to the date of such
termination. In the event that the Fund designates a successor to any of PFPC's
obligations under this Agreement, PFPC shall, at the direction and expense of
the Fund, transfer to such successor all relevant books, records and other data
established or maintained by PFPC hereunder including a certified list of the
shareholders of each Series of the Fund with name, address, and if provided
taxpayer identification or Social Security number, and a complete record of the
account of each shareholder. To the extent that PFPC incurs expenses related to
a transfer of responsibilities to a successor, other than expenses involved in
PFPC's providing the Fund's books and records to the successor, PFPC shall be
entitled to be reimbursed for such expenses, including any out-of-pocket
expenses reasonably incurred by PFPC in connection with the transfer.
14
<PAGE>
(f) Any termination effected pursuant to this Paragraph shall
not affect the rights and obligations of the parties under Paragraph 12 hereof.
(g) Notwithstanding the foregoing, this Agreement shall
terminate with respect to the Fund and any Series thereof upon the liquidation,
merger or other dissolution of the Fund or Series or upon the Fund's ceasing to
be registered investment company.
19. Registration as a Transfer Agent. PFPC represents that it is
currently registered with the appropriate federal agency for the registration of
transfer agents, or is otherwise permitted to lawfully conduct its activities
without such registration and that it will remain so registered for the duration
of this Agreement. PFPC agrees that it will promptly notify the Fund in the
event of any material change in its status as a registered transfer agent.
Should PFPC fail to be registered with the SEC as a transfer agent at any time
during this Agreement, and such failure to register does not permit PFPC to
lawfully conduct its activities, the Fund may terminate this Agreement upon five
days written notice to PFPC.
20. Notices. All notices and other communications, other than Oral or
Written Instructions, shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notice shall be addressed (a) if to PFPC at
PFPC's address, 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the
Fund, at 1285 Avenue of the Americas, 15th Floor, New York, N.Y. 10005; or (c)
if to neither of the foregoing, at such other address as shall have been
notified to the sender of any such notice or other
15
<PAGE>
communication. If the notice is sent by confirming telegram, cable telex or
facsimile sending device during regular business hours, it shall be deemed to
have been given immediately. If sent during a time other than regular business
hours, such notice shall be deemed to have been given at the opening of the next
business day. If notice is sent by first-class mail, it shall be deemed to have
been given three business days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day it is delivered. All
postage, cable, telegram, telex and facsimile sending device charges arising
from the sending of a notice hereunder shall be paid by the sender.
21. Amendments. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
22. Additional Series. In the event that the Fund establishes one or
more investment Series in addition to and with respect to which it desires to
have PFPC render services as transfer agent, registrar, dividend disbursing
agent and shareholder servicing agent under the terms set forth in this
Agreement, it shall so notify PFPC in writing, and PFPC shall agree in writing
to provide such services, and such investment Series shall become a Series
hereunder, subject to such additional terms, fees and conditions as are agreed
to by the parties.
23. Assignment and Delegation.
(a) PFPC may, at its owns expense, assign its rights and
delegate its duties hereunder to any wholly-owned direct or
16
<PAGE>
indirect subsidiary of PNC Bank, National Association or PNC Bank Corp.,
provided that (i) PFPC gives the Fund thirty (30) days' prior written notice;
(ii) the delegate agrees with PFPC to comply with all relevant provisions of the
Securities Laws; and (iii) PFPC and such delegate promptly provide such
information as the Fund may request and respond to such questions as the Fund
may ask relating to the delegation, including, without limitation, the
capabilities of the delegate. The assignment and delegation of any of PFPC's
duties under this subparagraph (a) shall not relieve PFPC of any of its
responsibilities or liabilities under this Agreement.
(b) PFPC may assign its rights and delegate its duties
hereunder to PaineWebber Incorporated or Mitchell Hutchins Asset Management Inc.
or affiliated person of either provided that (i) PFPC gives the Fund thirty (30)
days' prior written notice; (ii) the delegate agrees to comply with all relevant
provisions of the Securities Laws; and (iii) PFPC and such delegate promptly
provide such information as the Fund may request and respond to such questions
as the Fund may ask relative to the delegation, including, without limitation,
the capabilities of the delegate. In assigning its rights and delegating its
duties under this paragraph, PFPC may impose such conditions or limitations as
it determines appropriate including the condition that PFPC be retained as a
sub-transfer agent.
(c) In the event that PFPC assigns its rights and delegates
its duties under this section, no amendment of the terms
17
<PAGE>
of this Agreement shall become effective without the written consent of PFPC.
24. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
25. Further Actions. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
26. Limitation of Liability. Notice is hereby given that this Agreement
is executed on behalf of the Fund and that the obligations of this instrument
are not binding upon any of the directors, officers or shareholders individually
but are binding only upon the assets and property of the Fund. PFPC agrees that,
in asserting any rights or claims under this Agreement, it shall look only to
the assets and property of the Fund or the particular Series of the Fund in
settlement of such right or claims, and not to such directors, officers or
shareholders.
27. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to services to be performed and compensation to be paid under this
Agreement.
18
<PAGE>
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware Law, except that, to the extent provision of the Securities
Laws govern the subject matter of this Agreement, such Securities Laws will
controlling. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding and inure to the
benefit of the parties hereto and their respective successors and assigns.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PFPC INC.
By: GEO. W. GARVEY
-----------------------------
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
By: DIANNE E. O'DONNELL
-----------------------------
20
<PAGE>
APPENDIX A
Description of Services
(a) Services Provided on an Ongoing Basis by PFPC to the Fund, If
Applicable.
(i) Calculate 12b-1 payments and broker trail
commissions;
(ii) Develop, monitor and maintain all systems necessary
to implement and operate the three-tier distribution
system, including Class B conversion feature, as
described in the registration statement and related
documents of the Fund, as they may be amended from
time to time;
(iii) Calculate contingent deferred sales charge amounts
upon redemption of Fund Shares and deduct such
amounts from redemption proceeds;
(iv) Calculate front-end sales load amounts at time of
purchase of Shares;
(v) Determine dates of Class B conversion and effect
same;
(vi) Establish and maintain proper shareholder
registrations, unless requested by the Fund;
(vii) Review new applications with correspondence to
shareholders to complete or correct information;
(viii) Direct payment processing of checks or wires;
(ix) Prepare and certify stockholder lists in conjunction
with proxy solicitations;
(x) Countersign share certificates;
(xi) Prepare and mail to shareholders confirmation of
activity;
(xii) Provide toll-free lines for direct shareholder use,
plus customer liaison staff for on-line inquiry
response;
(xiii) Send duplicate confirmations to broker-dealers of
their clients' activity, whether executed through the
broker-dealer or directly with PFPC;
A-1
<PAGE>
(xiv) Provide periodic shareholder lists, outstanding share
calculations and related statistics to the Fund;
(xv) Provide detailed data for underwriter/broker
confirmations;
(xvi) Periodic mailing of year-end tax and statement
information;
(xvii) Notify on a daily basis the investment advisor,
accounting agent, and custodian of fund activity; and
(xviii) Perform other participating broker-dealer shareholder
services as may be agreed upon from time to time.
(b) Services Provided by PFPC Under Oral or Written Instructions of
the Fund.
(i) Accept and post daily Series and class purchases and
redemptions;
(ii) Accept, post and perform shareholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates.
(c) Shareholder Account Services.
(i) PFPC may arrange, in accordance with the Series'
prospectus, for issuance of Shares obtained through:
The transfer of funds from shareholders' account at
financial institutions; and
Any pre-authorized check plan.
(ii) PFPC, if requested, shall arrange for a
shareholder's:
Exchange of Shares for shares of a fund for which the
Fund has exchange privileges;
A-2
<PAGE>
Systematic withdrawal from an account where that
shareholder participates in a systematic withdrawal
plan; and/or
Redemption of Shares from an account with a
checkwriting privilege.
(d) Communications to Shareholders. Upon timely written instructions,
PFPC shall mail all communications by the Fund to its
shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of fund Shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
If requested by the Fund, PFPC will receive and tabulate the proxy
cards for the meetings of the Fund's shareholders and supply personnel
to serve as inspectors of election.
(e) Records. PFPC shall maintain records of the accounts for each
shareholder showing the following information:
(i) Name, address and United States Tax Identification or
Social Security number;
(ii) Number and class of Shares held and number and class
of Shares for which certificates, if any, have been
issued, including certificate numbers and
denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions
paid and the date and price for all transactions on a
shareholder's account;
(iv) Any stop or restraining order placed against a
shareholder's account;
(v) Any correspondence relating to the current
maintenance of a shareholder's account;
(vi) Information with respect to withholdings; and
A-3
<PAGE>
(vii) Any information required in order for the transfer
agent to perform any calculations contemplated or
required by this Agreement.
(f) Lost or Stolen Certificates. PFPC shall place a stop notice
against any certificate reported to be lost or stolen and comply
with all applicable federal regulatory requirements for reporting
such loss or alleged misappropriation.
A new certificate shall be registered and issued upon:
(i) Shareholder's pledge of a lost instrument bond or
such other and appropriate indemnity bond issued by a
surety company approved by PFPC; and
(ii) Completion of a release and indemnification agreement
signed by the shareholder to protect PFPC.
(g) Shareholder Inspection of Stock Records. Upon requests from Fund
shareholders to inspect stock records, PFPC will notify the Fund
and require instructions granting or denying such request prior to
taking any action. Unless PFPC has acted contrary to the Fund's
instructions, the Fund agrees to release PFPC from any liability
for refusal of permission for a particular shareholder to inspect
the Fund's shareholder records.
A-4
<PAGE>
APPENDIX B
PFPC will perform or arrange for others to perform the following activities,
some or all of which may be delegated and assigned by PFPC to PaineWebber
Incorporated ("PaineWebber") or Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins") or to an
affiliated person of either:
(i) providing, to the extent reasonable, uninterrupted
processing of new accounts, shareholder account
changes, sales and redemption activity, dividend
calculations and payments, check settlements, blue
sky reporting, tax reporting, recordkeeping,
communication with all shareholders, resolution of
discrepancies and shareholder inquiries and
adjustments, maintenance of dual system, development
and maintenance of repricing system, and development
and maintenance of correction system;
(ii) develop and maintain all systems for custodian
interface and reporting, and underwriter interface
and reporting;
(iii) develop and maintain all systems necessary to
implement and operate the three-tier distribution
system, including Class B conversion features as
described in the registration statement and related
documents of the Fund, as they may be amended from
time to time; and
(iv) provide administrative, technical and legal support
for the foregoing services.
In undertaking its activities and responsibilities under this Appendix, PFPC
will not be responsible, except to the extent caused by PFPC's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this agreement, for any charges or fees billed, expenses
incurred or penalties, imposed by any party, including the Fund or any current
or prior services providers of the Fund, without the prior written approval by
PFPC.
<PAGE>
APPENDIX C
PaineWebber/Kidder, Peabody Government Money Fund, Inc.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
PaineWebber/Kidder, Peabody Government Money Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 14
to Registration Statement No. 2-81760 of our report dated May 18, 1995,
appearing in the annual report to shareholders for the year ended March 31,
1995, and to the references to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
Deloitte & Touche LLP
New York, New York
July 25, 1995
<PAGE>
AMENDMENT TO
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
WHEREAS, pursuant to resolutions adopted by the Board of Directors of
Kidder, Peabody Government Money Fund, Inc. ('Fund') on December 16, 1994,
PaineWebber Incorporated ('PaineWebber') was appointed distributor of the Fund,
and it was determined, subject to shareholder approval, to change the name of
the Fund to the 'PaineWebber/Kidder, Peabody Government Money Fund';
NOW, THEREFORE, the Fund hereby adopts the following amendments to the
above-referenced plan ('Plan'):
1. All references to the 'Kidder, Peabody Government Money Fund, Inc.'
contained in the Plan are hereby replaced with 'PaineWebber/Kidder, Peabody
Government Money Fund.'
2. All references to 'Kidder, Peabody & Co. Incorporated' contained in
the Plan are hereby replaced with 'PaineWebber Incorporated,' and all
references to 'Kidder, Peabody' contained in the Plan are hereby replaced
with 'PaineWebber.'
IN WITNESS WHEREOF, the Fund and PaineWebber have executed this 'Amendment
to the Plan of Distribution Pursuant to Rule 12b-1 of Kidder, Peabody Government
Money Fund, Inc.' on the day and year set forth below.
Date: January 30, 1995
PAINEWEBBER/KIDDER, PEABODY
GOVERNMENT MONEY FUND
By: Dianne E. O'Donnell
..................................
Attest: Ilene Shore
..............................
PAINEWEBBER INCORPORATED
By: Thomas Eggers
..................................
Attest: Ilene Shore
...............................
<PAGE>
POWER OF ATTORNEY
I, Margo N. Alexander, President of Mitchell Hutchins/Kidder, Peabody
Equity Income Fund, Inc., Mitchell Hutchins/Kidder, Peabody Government Income
Fund, Inc., PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc.,
PaineWebber/Kidder, Peabody Government Money Fund, Inc., and PaineWebber/Kidder,
Peabody Tax Exempt Money Fund, Inc. (collectively, the 'Funds'), hereby
constitute and appoint Victoria E. Schonfeld, Dianne E. O'Donnell, Gregory K.
Todd and Scott Griff, and each of them singly, my true and lawful attorneys,
with full power to them to sign for me, and in my capacity as President for each
of the Funds, any and all amendments to each of the particular registration
statements of the Funds, and all instruments necessary or desirable in
connection therewith, filed with the Securities and Exchange Commission, hereby
ratifying and confirming my signature as it may be signed by said attorneys to
any and all amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this instrument
has been signed below by the following in the capacity and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------------- ---------------
<S> <C> <C>
/s/ MARGO N. ALEXANDER President July 21, 1995
.........................................
(MARGO N. ALEXANDER)
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