<PAGE>
As filed with the Securities and Exchange Commission on June 29, 1998
1933 Act: Registration No. 33-2524
1940 Act: Registration No. 811-4448
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. 34 [ X ]
----- -----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
----
Amendment No. 27
-----
(Check appropriate box or boxes.)
PAINEWEBBER MASTER SERIES, INC.
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, Esq.
BENJAMIN J. HASKIN, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.; Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: Effective Date of this Post
Effective Amendment.
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
-----
[ X ] On July 1, 1998 pursuant to Rule 485(b)
----- -----------------
[ ] 60 days after filing pursuant to Rule 485 (a)(1)
-----
[ ] On pursuant to Rule 485 (a)(1)
----- -----------------
[ ] 75 days after filing pursuant to Rule 485(a)(2)
-----
[ ] On pursuant to Rule 485(a)(2)
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Title of Securities Being Registered: Shares of Common Stock.
<PAGE>
PAINEWEBBER MASTER SERIES, INC.
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheets
PAINEWEBBER MONEY MARKET FUND
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
PAINEWEBBER MASTER SERIES, INC.
PaineWebber Money Market Fund
Form N-1A Cross Reference Sheet
<TABLE>
<CAPTION>
Part A Item No and Caption Prospectus Caption
-------------------------- ------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Prospectus Summary, Investment Objective and Policies;
General Information
5. Management of the Fund Management; General Information
6. Capital Stock and Other Securities Cover Page; Conversion of Class B Shares; Dividends and
Taxes; General Information
7. Purchase of Securities Being Offered Investing in the Fund
8. Redemption or Repurchase Investing in the Fund
9. Pending Legal Proceedings Not Applicable
Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Other Information
13. Investment Objective and Policies Investment Policies and Restrictions; Portfolio
Transactions
14. Management of the Fund Directors and Officers; Principal Holders of Securities
15. Control Persons and Principal Holders of Securities Directors and Officers; Principal Holders of Securities
16. Investment Advisory and Other Services Investment Advisory and Distribution Arrangements
17. Brokerage Allocation Portfolio Transactions
<PAGE>
Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
18. Capital Stock and Other Securities Conversion of Class B Shares; Other Information
19. Purchase, Redemption and Pricing of Securities Being Additional Exchange and Redemption Information; Reduced
Offered Sales Charges; Valuation of Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Distribution Arrangements
22. Calculation of Performance Data Performance Information
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 of this Registration Statement.
<PAGE>
The Fund is a series of PaineWebber PAINEWEBBER
Master Series, Inc. This Prospectus MONEY MARKET FUND
concisely sets forth information about 1285 AVENUE OF THE AMERICAS
the Fund a prospective investor should NEW YORK, NEW YORK 10019
know before investing. Please retain
this Prospectus for future reference.
A Statement of Additional Information
dated July 1, 1998 (which is incorpo-
rated by reference herein) has been
filed with the Securities and Exchange
Commission ("SEC" or "Commission").
The Statement of Additional Infor-
mation can be obtained without charge,
and further inquiries can be made, by
contacting the Fund, your PaineWebber
investment executive or PaineWebber's
correspondent firms or by calling
toll-free 1-800-647-1568. In addition,
the Commission maintains a website
(http://www.sec.gov) that contains the
Statement of Additional Information,
material incorporated by reference,
and other information regarding
registrants that file electronically
with the Commission.
- -------------------------------------- --------------------------------------
A PROFESSIONALLY MANAGED MUTUAL / / MAXIMUM CURRENT INCOME
FUND SEEKING MAXIMUM CURRENT CONSISTENT WITH LIQUIDITY AND
INCOME CONSISTENT WITH LIQUIDITY AND CONSERVATION OF CAPITAL
CONSERVATION OF CAPITAL. THE FUND / / PROFESSIONAL MANAGEMENT
INVESTS IN HIGH QUALITY MONEY / / DAILY DIVIDENDS
MARKET INSTRUMENTS. / / EXCHANGE PRIVILEGES
AN INVESTMENT IN THE FUND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY. ALTHOUGH THE
FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING
IN THE FUND.
- -------------------------------------- --------------------------------------
July 1, 1998 A PaineWebber Mutual Fund
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR
HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
(This page has been left blank intentionally.)
2
<PAGE>
INVESTORS SHOULD RELY ON THE INFORMATION CONTAINED OR REFERRED TO IN THIS
PROSPECTUS. THE FUND AND ITS DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE
INVESTORS WITH INFORMATION THAT IS DIFFERENT. THE PROSPECTUS IS NOT AN OFFER TO
SELL SHARES OF THE FUND IN ANY JURISDICTION WHERE THE FUND OR ITS DISTRIBUTOR
MAY NOT LAWFULLY SELL THOSE SHARES.
--------------
PAINEWEBBER MONEY MARKET FUND
HIGHLIGHTS
See the body of the Prospectus for more information on the topics discussed
in these highlights.
<TABLE>
<S> <C>
The Fund: PaineWebber Money Market Fund ("Fund") is a diversified series of
PaineWebber Master Series, Inc., an open-end management investment
company organized as a Maryland corporation ("Corporation").
Investment Objective Maximum current income consistent with liquidity and conservation of
and Policies: capital; invests in high quality money market instruments.
Assets at May 31, Over $54.7 million.
1998:
Investment Adviser: Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a
wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"), manages over $52 billion in assets. See
"Management."
Investing in the Fund: Class A, Class B and Class C shares of the Fund may be obtained only
through an exchange of shares of the corresponding class of most
other PaineWebber mutual funds. Exchanges may be made through
PaineWebber or PFPC Inc., the Fund's transfer agent ("Transfer
Agent"). See "Investing in the Fund."
Exchanges: Shares may be exchanged for shares of the corresponding class of
most PaineWebber mutual funds.
Redemptions: Shareholders who are clients of PaineWebber or its correspondent
firms ("PaineWebber clients") may redeem through PaineWebber; other
shareholders must redeem through the Transfer Agent.
Dividends: Declared daily and paid monthly. See "Dividends and Taxes."
Reinvestment: All dividends are paid in Fund shares of the same class at net asset
value unless the shareholder has requested cash.
Net Asset Value: The Fund seeks to maintain its net asset value at $1.00 per share.
</TABLE>
3
<PAGE>
WHO SHOULD INVEST. The Fund invests primarily in various types of high
quality money market instruments. Accordingly, the Fund is designed for
investors in other PaineWebber mutual funds whose investment objectives or needs
have changed so that they presently seek current income and preservation of
capital for all or a portion of their investment.
RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective. While the types of money market securities in which the
Fund invests generally are considered to have low risk of loss to principal or
interest, these securities are not completely risk free. The Fund may invest in
U.S. dollar-denominated securities of foreign issuers, which may present a
greater degree of risk than investments in securities of domestic issuers.
During periods when interest rates are declining or rising, the Fund's yield
will tend to lag behind prevailing short-term interest rates. See "Investment
Objective and Policies."
EXPENSES OF INVESTING IN THE FUND. The following tables are intended to
assist investors in understanding the expenses associated with investing in
Class A, B and C shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum sales charge on purchases of shares (as a
% of public offering price)..................... None(1) None(1) None(1)
Sales charge on reinvested dividends.............. None None None
Maximum contingent deferred sales charge (as a %
of public offering price at the time of
investment or net asset value at the time of
redemption, whichever is less).................. None(2) 5%(3) 1%(4)
</TABLE>
ANNUAL FUND OPERATING EXPENSES (5)
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Management fees................................... 0.50% 0.50% 0.50%
12b-1 fees (6).................................... 0.25 0.75 0.75
Other expenses.................................... 0.66 0.65 0.70
------- ------- -------
Total operating expenses.......................... 1.41% 1.90% 1.95%
------- ------- -------
------- ------- -------
</TABLE>
- ---------
(1) Shares of the Fund may be acquired solely through an exchange of shares
of the corresponding class of another PaineWebber mutual fund. No initial sales
charge is imposed when Class A shares of the Fund are acquired through an
exchange. See "Investing in the Fund."
(2) Class A shares of the Fund may be subject to a contingent deferred
sales charge ("CDSC") of 1% upon redemption if the original shares that were
purchased and subsequently exchanged (directly or through a series of exchanges)
to obtain Class A shares of the Fund were subject to a 1% CDSC upon redemption
and less than one year has elapsed since the original shares were purchased.
(3) Redemptions of Class B shares of the Fund that were acquired through an
exchange of Class B shares of PaineWebber Low Duration U.S. Government Income
Fund will be subject to a maximum CDSC of 3%, provided that the exchanged shares
would have been subject to the lower schedule had they been redeemed rather than
exchanged for Class B shares of the Fund. The maximum 3% CDSC applies to
redemptions during the first year after purchase of the exchanged shares; the
charge declines by 1% following each of the first, third and fourth years after
purchase, reaching zero after four years. Redemptions of Class B shares of the
Fund that were acquired through an exchange of Class B shares of any other
4
<PAGE>
PaineWebber mutual fund will be subject to a maximum CDSC of 5%. The maximum 5%
CDSC applies to redemptions during the first year after purchase of the
exchanged shares; the charge generally declines by 1% annually thereafter,
reaching zero after six years. The holding period of Class B shares acquired
through an exchange with another PaineWebber mutual fund will be calculated from
the date that the Class B shares were initially acquired in the other fund. See
"Redemptions."
(4) Redemptions of Class C shares of the Fund that were acquired through an
exchange of Class C shares of another PaineWebber mutual fund and are held less
than one year from the date of original purchase will be subject to the same
CDSC that would have been imposed on the Class C shares of the other PaineWebber
mutual fund. The maximum CDSC applicable to Class C shares sold within one year
of the purchase date is 1% (0.75% for funds that invest predominantly in debt
securities) of net asset value of the shares at the time of purchase or sale,
whichever is less.
(5) See "Management" for additional information. All expenses are based on
those incurred for the most recent fiscal year.
(6) 12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
12b-1 service fees................................ 0.25% 0.25% 0.25%
12b-1 distribution fees........................... 0.00 0.50 0.50
</TABLE>
12b-1 distribution fees are asset-based sales charges. Long-term Class B and
Class C shareholders may pay more in direct and indirect sales charges
(including distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would directly or indirectly pay the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
Class A shares.................................... $ 14 $ 45 $ 77 $ 169
Class B shares:
Assuming a complete redemption at end of period
(1)(2)........................................ $ 69 $ 90 $ 123 $ 198
Assuming no redemption (2)...................... $ 19 $ 60 $ 103 $ 198
Class C shares:
Assuming a complete redemption at end of period
(1)........................................... $ 30 $ 61 $ 105 $ 227
Assuming no redemption.......................... $ 20 $ 61 $ 105 $ 227
</TABLE>
- ---------
(1) Assumes deduction at the time of redemption of the maximum applicable
CDSC.
(2) Ten-year figures assume conversion of Class B shares to Class A shares
at the end of the sixth year.
This Example assumes that all dividends are reinvested and that the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in the years shown. The above tables and the assumption in the Example of a 5%
annual return are required by regulations of the SEC applicable to all mutual
funds; the assumed 5% annual return is not a prediction of, and does not
represent, the projected or actual performance of any class of Fund shares.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses attributable to each class of Fund shares will depend upon,
among other things, the level of average net assets and the extent to which the
Fund incurs variable expenses, such as transfer agency costs.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide investors with data and ratios for one Class A,
Class B and Class C share of the Fund for each of the periods shown. This
information is supplemented by the financial statements, accompanying notes and
the report of Price Waterhouse LLP, independent accountants, which appear in the
Fund's Annual Report to Shareholders for the fiscal year ended February 28,
1998, and are incorporated by reference into the Statement of Additional
Information. The financial statements and notes, as well as the information in
the tables below, relating to the five years in the period ended February 28,
1998, have been audited by Price Waterhouse LLP. The Annual Report to
Shareholders may be obtained without charge by calling 1-800-647-1568.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------
FOR THE YEARS ENDED
--------------------------------------------------------------- FOR THE PERIOD
JULY 1, 1991+
FEBRUARY 28 OR 29, TO FEBRUARY 29,
--------------------------------------------------------------- ---------------
1998 1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------
Net investment income......... 0.042 0.040 0.046 0.037 0.016 0.022 0.026
Dividends from net investment
income....................... (0.042) (0.040) (0.046) (0.037) (0.016) (0.022) (0.026)
-------- -------- -------- -------- -------- -------- -------
Net asset value, end of
period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------- -------
Total investment return (1)... 4.33% 4.11% 4.69% 3.95% 1.64% 2.25% 2.47%
-------- -------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------- -------
Ratios/Supplemental data:
Net assets, end of period
(000's)...................... $ 12,983 $ 11,808 $ 23,735 $ 21,042 $ 14,204 $ 11,716 $ 3,806
Expenses to average net
assets....................... 1.41% 1.42% 1.31% 1.06% 1.72% 1.74% 1.90%*
Net investment income to
average net assets........... 4.29% 4.09% 4.68% 3.85% 1.70% 2.18% 3.61%*
</TABLE>
- ------------
* Annualized.
+ Commencement of issuance of shares.
(1) Total investment return is calculated assuming a $1,000 investment in Fund
shares on the first day of each period reported, reinvestment of all
dividends at net asset value on the payable dates, and a sale at net asset
value on the last day of each period reported. The figures do not include
sales charges; results for each class would be lower if sales charges were
included. Total investment return for periods of less than one year has not
been annualized.
6
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED FEBRUARY 28 OR 29,
--------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment income......... 0.037 0.035 0.041 0.032 0.011 0.016 0.039 0.068 0.076 0.068
Dividends from net investment
income....................... (0.037) (0.035) (0.041) (0.032) (0.011) (0.016) (0.039) (0.068) (0.076) (0.068)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total investment return (1)... 3.81% 3.60% 4.18% 3.41% 1.12% 1.73% 4.16% 6.98% 8.18% 6.75%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Ratios/Supplemental data:
Net assets, end of period
(000's)...................... $ 14,715 $ 18,389 $ 26,592 $ 39,123 $ 9,819 $ 15,280 $ 29,341 $ 50,842 $ 50,392 $ 50,320
Expenses to average net
assets....................... 1.90% 1.90% 1.79% 1.55% 2.25% 2.28% 2.06% 1.40% 1.48% 1.25%
Net investment income to
average net assets........... 3.78% 3.55% 4.17% 3.46% 1.16% 1.69% 4.07% 6.82% 7.77% 6.88%
</TABLE>
7
<PAGE>
FINANCIAL HIGHLIGHTS--(CONCLUDED)
<TABLE>
<CAPTION>
CLASS C**
----------------------------------------------------------------------
FOR THE YEARS ENDED
---------------------------------------------------- FOR THE PERIOD
JULY 14, 1992+
FEBRUARY 28 OR 29, TO FEBRUARY 28,
---------------------------------------------------- ---------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------
Net investment income............................ 0.037 0.034 0.041 0.033 0.012 0.009
Dividends from net investment income............. (0.037) (0.034) (0.041) (0.033) (0.012) (0.009)
-------- -------- -------- -------- -------- -------
Net asset value, end of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Total investment return (1)...................... 3.78% 3.50% 4.14% 3.44% 1.19% 0.81%
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Ratios/Supplemental data:
Net assets, end of period (000's)................ $ 5,308 $ 5,504 $ 5,754 $ 16,137 $ 9,430 $ 2,220
Expenses to average net assets................... 1.95% 1.99% 1.79% 1.55% 2.14% 2.14%*
Net investment income to average net assets...... 3.76% 3.47% 4.27% 3.35% 1.36% 1.67%*
</TABLE>
- ------------
* Annualized.
** Formerly Class D.
+ Commencement of issuance of shares.
(1) Total investment return is calculated assuming a $1,000 investment in Fund
shares on the first day of each period reported, reinvestment of all
dividends at net asset value on the payable dates, and a sale at net asset
value on the last day of each period reported. The figures do not include
sales charges; results for each class would be lower if sales charges were
included. Total investment return for periods of less than one year has not
been annualized.
8
<PAGE>
INVESTMENT OBJECTIVE
AND POLICIES
The Fund's investment objective is to provide maximum current income
consistent with liquidity and conservation of capital. The Fund's investments
include (1) U.S. Treasury bills and other obligations issued or guaranteed as to
interest and principal by the U.S. government, its agencies or
instrumentalities; such obligations may or may not be backed by the full faith
and credit of the United States; (2) obligations of U.S. and foreign banks,
including certificates of deposit, bankers' acceptances, time deposits and
similar obligations; issuing banks must have total assets at the time of
purchase in excess of $1.5 billion; (3) time deposits of savings associations
having total assets in excess of $1.5 billion at the time of purchase; (4)
commercial paper of U.S. and foreign companies, governments and similar
entities, including variable amount master demand notes and other short-term
obligations; and (5) repurchase agreements relating to any of the foregoing.
The Fund may invest in non-negotiable time deposits of U.S. banks, savings
associations and similar depository institutions having total assets in excess
of $1.5 billion at the time of purchase only if the time deposits have
maturities of seven days or less. The Fund may also purchase participation
interests in any of the securities in which it is permitted to invest.
Participation interests are pro rata interests in securities held by others. The
Fund invests in securities having, or deemed to have, a remaining maturity of up
to 13 months and maintains a dollar-weighted average portfolio maturity of 90
days or less.
The commercial paper and other short-term obligations purchased by the Fund
consist only of obligations that Mitchell Hutchins determines, pursuant to
procedures adopted by the Corporation's board of directors (sometimes referred
to as the "board"), present minimal credit risks and are either (1) rated in one
of the two highest short-term ratings categories by at least two nationally
recognized statistical rating organizations ("NRSROs"), (2) rated in one of the
two highest short-term ratings categories by a single NRSRO if only that NRSRO
has assigned the obligations a short-term rating or (3) unrated, but determined
by Mitchell Hutchins to be of comparable quality ("Eligible Securities").
Eligible Securities that have not been (1) rated in the highest short-term
ratings category by at least two NRSROs (or by one NRSRO if only one NRSRO has
assigned the obligation a short-term rating) or (2), if the obligations are
unrated, determined by Mitchell Hutchins to be of comparable quality are known
as "Second Tier Securities." The Fund may invest no more than 5% of its total
assets in Second Tier Securities. The Fund generally may invest no more than the
greater of 1% of its total assets or $1 million in Second Tier Securities of a
single issuer. Although the Fund may invest in Second Tier Securities of U.S.
companies, the Fund does not purchase commercial paper of foreign companies,
governments and similar entities falling into this category. Furthermore, the
Fund generally may invest no more than 5% of its total assets in the securities
of a single issuer (other than securities issued by the U.S. government, its
agencies or instrumentalities).
In managing the Fund's portfolio, Mitchell Hutchins may employ a number of
professional money management techniques, including varying the composition and
the weighted average maturity of the portfolio based upon its assessment of the
relative values of various money market instruments and future interest rate
patterns, in order to respond to changing economic and money market conditions
and to shifts in fiscal and monetary policy. Mitchell Hutchins may also seek to
improve the Fund's yield by purchasing or selling securities to take advantage
of yield disparities among similar or dissimilar money market instruments that
regularly occur in the money markets.
9
<PAGE>
While the types of money market instruments in which the Fund invests
generally are considered to have low risk of loss of principal or interest, they
are not completely risk free. An issuer or guarantor may be unable or unwilling
to pay interest or repay principal on its obligations for many reasons,
including adverse changes in its own financial condition or in economic
conditions generally.
In periods of declining interest rates the Fund's yield will tend to be
somewhat higher than prevailing market rates, and in periods of rising interest
rates the opposite generally will be true. Also, when interest rates are
falling, net cash inflows from the continuous sale of Fund shares are likely to
be invested in portfolio instruments producing lower yields than the balance of
the Fund's portfolio, thereby reducing its yield. In periods of rising interest
rates, the opposite can be true. There can be no assurance that the Fund will
achieve its investment objective.
U.S. GOVERNMENT SECURITIES. The U.S. government securities in which the
Fund may invest include direct obligations of the U.S. Treasury (such as
Treasury bills, notes and bonds) and obligations issued or guaranteed by U.S.
government agencies and instrumentalities, including securities that are
supported by the full faith and credit of the United States (such as Government
National Mortgage Association certificates ("GNMAs")), securities supported
primarily or solely by the creditworthiness of the issuer (such as securities of
the Resolution Funding Corporation and the Tennessee Valley Authority) and
securities that are supported primarily or solely by specific pools of assets
and the creditworthiness of a U.S. government-related issuer (such as
mortgage-backed securities issued by Fannie Mae, also known as the Federal
National Mortgage Association, and Freddie Mac, also known as the Federal Home
Loan Mortgage Corporation).
The Fund may invest in separately traded principal and interest components
of securities issued or guaranteed by the U.S. Treasury. The principal and
interest components of selected securities are traded independently under the
Separate Trading of Registered Interest and Principal of Securities ("STRIPS")
program. Under the STRIPS program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase variable and
floating rate securities with remaining maturities in excess of 13 months issued
by U.S. government agencies or instrumentalities or guaranteed by the U.S.
government. In addition, the Fund may purchase variable and floating rate
securities of other issuers with remaining maturities in excess of 13 months if
the securities are subject to a demand feature exercisable within 13 months or
less. The yield on these securities is adjusted in relation to changes in
specific rates, such as the prime rate, and different securities may have
different adjustment rates. The Fund's investment in these securities must
comply with conditions established by the SEC under which they may be considered
to have remaining maturities of 13 months or less. Certain of these obligations
carry a demand feature that gives the Fund the right to tender them back to the
issuer or a remarketing agent and receive the principal amount of the security
prior to maturity. The demand feature may be backed by letters of credit or
other liquidity support arrangements provided by banks or other financial
institutions, whose credit standing affects the credit quality of the
obligation. Changes in the credit quality of these institutions could cause
losses to the Fund and affect its share price.
VARIABLE AMOUNT MASTER DEMAND NOTES. Securities purchased by the Fund may
include variable amount master demand notes, which are unsecured redeemable
obligations that permit
10
<PAGE>
investment of varying amounts at fluctuating interest rates under a direct
agreement between the Fund and the issuer. The principal amount of these notes
may be increased from time to time by the parties (subject to specified
maximums) or decreased by the Fund or the issuer. These notes are payable on
demand and may or may not be rated.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
Fund purchases obligations from a bank or recognized securities dealer (or its
affiliate) and simultaneously commits to resell the obligations to that
counterparty at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased obligations.
Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible decline in the market value of the
underlying obligations. Repurchase agreements involving obligations other than
U.S. government securities (such as commercial paper and corporate bonds) may be
subject to special risks and may not have the benefit of certain protections in
the event of the counterparty's insolvency. If the seller or guarantor becomes
insolvent, the Fund may suffer delays, costs and possible losses in connection
with the disposition of the collateral. The Fund intends to enter into
repurchase agreements only with counterparties in transactions believed by
Mitchell Hutchins to present minimum credit risks in accordance with guidelines
established by the board.
FOREIGN SECURITIES. The Fund may invest in U.S. dollar-denominated
securities of foreign issuers, including debt securities of foreign
corporations, governments and similar entities. Such investments may consist of
obligations of foreign and domestic branches of foreign banks and foreign
branches of domestic banks. Such investments may involve risks that are
different from investments in U.S. issuers. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect the payment of principal or interest
on the securities held by the Fund. Additionally, there may be less publicly
available information about foreign issuers, as these issuers may not be subject
to the same regulatory requirements as domestic issuers.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend its securities to
qualified broker-dealers or institutional investors in an amount up to 33 1/3%
of the Fund's total assets. Lending securities enables the Fund to earn
additional income, but could result in a loss or delay in recovering these
securities.
OTHER INFORMATION. The Fund may borrow money for temporary purposes, but
not in excess of 10% of its total assets, including reverse repurchase
agreements involving up to 5% of its total assets. The Fund may invest no more
than 10% of its net assets in illiquid securities, including repurchase
agreements with maturities in excess of seven days. The Fund's investment
objective may not be changed without the affirmative vote of its shareholders.
Certain investment limitations, as described in the Statement of Additional
Information, also may not be changed without shareholder approval. All other
investment policies may be changed by the board without shareholder approval.
YEAR 2000 RISKS. Like other mutual funds, financial and business
organizations around the world, the Fund could be adversely affected if the
computer systems used by Mitchell Hutchins, other service providers and entities
with computer systems that are linked to the Fund's records do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Issue." Mitchell Hutchins is
taking steps that it
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believes are reasonably designed to address the Year 2000 Issue with respect to
the computer systems that it uses and to obtain satisfactory assurances that
comparable steps are being taken by the Fund's other major service providers.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Fund.
INVESTING IN THE FUND
Shares of the Fund are available only through an exchange of shares of the
corresponding class of other PaineWebber mutual funds. No initial sales charge
is imposed on the Fund shares being acquired, and no CDSC is imposed on the
shares of the other PaineWebber mutual fund being disposed of through an
exchange. However, CDSCs may apply to redemptions of Fund shares acquired
through an exchange. See "Redemptions." Exchanges may be subject to minimum
investment requirements of the fund into which exchanges are made.
The other PaineWebber mutual funds with which Fund shares may be exchanged
include the following:
PAINEWEBBER BOND FUNDS
- HIGH INCOME FUND
- INVESTMENT GRADE INCOME FUND
- LOW DURATION U.S. GOVERNMENT INCOME FUND
- STRATEGIC INCOME FUND
- U.S. GOVERNMENT INCOME FUND
PAINEWEBBER TAX-FREE BOND FUNDS
- CALIFORNIA TAX-FREE INCOME FUND
- MUNICIPAL HIGH INCOME FUND
- NATIONAL TAX-FREE INCOME FUND
- NEW YORK TAX-FREE INCOME FUND
PAINEWEBBER ASSET ALLOCATION FUNDS
- BALANCED FUND
- TACTICAL ALLOCATION FUND
PAINEWEBBER STOCK FUNDS
- FINANCIAL SERVICES GROWTH FUND
- GROWTH FUND
- GROWTH AND INCOME FUND
- MID CAP FUND
- SMALL CAP FUND
- UTILITY INCOME FUND
PAINEWEBBER GLOBAL FUNDS
- ASIA PACIFIC GROWTH FUND
- EMERGING MARKETS EQUITY FUND
- GLOBAL EQUITY FUND
- GLOBAL INCOME FUND
MITCHELL HUTCHINS PORTFOLIOS
- AGGRESSIVE PORTFOLIO
- MODERATE PORTFOLIO
- CONSERVATIVE PORTFOLIO
PaineWebber clients must place exchange orders through their PaineWebber
investment executives or correspondent firms. Shareholders who are not
PaineWebber clients must place exchange orders in writing with the Transfer
Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington,
Delaware 19899. All exchanges will be effected based on the relative net asset
values per share next determined after the exchange order is received at
PaineWebber's New York City offices or by the Transfer Agent. See "Valuation of
Shares." Exchanges may be made on any Business Day. A "Business Day" is each
day, Monday through Friday, on which the New York Stock Exchange ("NYSE") is
open.
This exchange privilege may be modified or terminated at any time, upon at
least 60 days' notice when such notice is required by SEC rules. See the
Statement of Additional Information for further details. This exchange privilege
is available only in those jurisdictions where the sale of the PaineWebber
mutual fund shares to be acquired may be legally made. Before making any
exchange, shareholders should contact their PaineWebber investment executives or
correspondent firms or the Transfer Agent to obtain more
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<PAGE>
information and prospectuses of the PaineWebber mutual funds to be acquired
through the exchange.
REDEMPTIONS
Fund shares may be redeemed (sold) at their net asset value (subject to any
applicable CDSC), and redemption proceeds will be paid after receipt of a
redemption request, as described below. PaineWebber clients may redeem shares
through PaineWebber or its correspondent firms; all other shareholders must
redeem through the Transfer Agent. If a redeeming shareholder owns shares of
more than one class, the shares will be redeemed in the following order unless
the shareholder specifically requests otherwise: Class A shares, then Class C
shares, and finally Class B shares.
CONTINGENT DEFERRED SALES CHARGE--CLASS A SHARES. Class A shares held less
than one year are subject to a CDSC if the Class A shares of the PaineWebber
mutual fund initially purchased and subsequently exchanged for Class A shares of
the Fund were purchased without an initial sales charge due to the sales charge
waiver for purchases of $1 million or more. This CDSC is equal to 1% of the
lower of (a) the public offering price of the Class A shares of the other
PaineWebber mutual fund when initially purchased or (b) the net asset value of
the Fund shares at the time of redemption. For these purposes, the holding
period of Class A shares of the Fund is calculated from the date the Class A
shares of the other PaineWebber mutual fund were initially purchased. Class A
shares will be considered to represent, as applicable, dividend and capital gain
distribution reinvestments in such other funds. Redemption order will be
determined as described for Class B shares (see "Contingent Deferred Sales
Charge--Class B Shares"). Class A shares acquired through reinvestment of
dividends and capital gain distributions are not subject to this CDSC. The CDSC
is waived for exchanges and for most redemptions in connection with the
systematic withdrawal plan. The amount of any CDSC will be paid to Mitchell
Hutchins.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A CDSC is imposed upon
most redemptions of Class B shares. The amount of the CDSC is calculated by
multiplying the percentage indicated below by the lower of (a) the net asset
value of the Class B shares of the other PaineWebber mutual fund when initially
purchased or (b) the net asset value of the Fund shares at the time of
redemption. Class B shares held six years or longer (four years or longer for
Fund shares acquired in certain exchanges for Class B shares of PaineWebber Low
Duration U.S. Government Income Fund) and Class B shares acquired through
reinvestment of dividends or capital gain distributions are not subject to the
CDSC.
REDEMPTIONS OF FUND SHARES ACQUIRED THROUGH AN EXCHANGE FOR SHARES OF
PAINEWEBBER LOW DURATION U.S. GOVERNMENT INCOME FUND.
<TABLE>
<CAPTION>
CDSC AS A
REDEMPTION PERCENTAGE OF
DURING NET ASSET VALUE
- ---------------------------------------- ----------------
<S> <C>
1st Year Since Purchase................. 3%
2nd Year Since Purchase................. 2
3rd Year Since Purchase................. 2
4th Year Since Purchase................. 1
5th Year Since Purchase................. None
</TABLE>
The schedule above will apply only if the exchanged shares would have been
subject to the same lower schedule had they been redeemed rather than exchanged
for Class B shares of the Fund.
REDEMPTIONS OF FUND SHARES ACQUIRED THROUGH AN EXCHANGE FOR SHARES OF ANY
OTHER PAINEWEBBER MUTUAL FUND.
<TABLE>
<CAPTION>
CDSC AS A
REDEMPTION PERCENTAGE OF
DURING NET ASSET VALUE
- ---------------------------------------- ----------------
<S> <C>
1st Year Since Purchase................. 5%
2nd Year Since Purchase................. 4
3rd Year Since Purchase................. 3
4th Year Since Purchase................. 2
5th Year Since Purchase................. 2
6th Year Since Purchase................. 1
7th Year Since Purchase................. None
</TABLE>
In determining the applicability and rate of any CDSC, it will be assumed
that a redemption is
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<PAGE>
made first of Class B shares representing the reinvestment of dividends and
capital gain distributions and then of other shares held by the shareholder for
the longest period of time. The holding period of Class B shares acquired
through an exchange with another PaineWebber mutual fund will be calculated from
the date that the Class B shares were initially acquired in one of the other
funds, and Class B shares being redeemed will be considered to represent, as
applicable, dividend and capital gain distribution reinvestments in such other
funds. This will result in any CDSC being imposed at the lowest possible rate.
The amount of any CDSC will be paid to Mitchell Hutchins.
SALES CHARGE WAIVERS--CLASS B SHARES. The CDSC will be waived for exchanges,
as described above, and for most redemptions in connection with the Fund's
systematic withdrawal plan. In addition, the CDSC will be waived for a total or
partial redemption if made within one year of the death of the shareholder. The
CDSC waiver is available where the decedent is either the sole shareholder or
owns the shares with his or her spouse as a joint tenant with right of
survivorship. This waiver applies only to redemption of shares held at the time
of death. The CDSC will also be waived in connection with a lump-sum or other
distribution in the case of an individual retirement account ("IRA"), a
self-employed individual retirement plan (so-called "Keogh Plan") or a custodial
account under Section 403(b) of the Internal Revenue Code following attainment
of age 59 1/2; a total or partial redemption resulting from a distribution
following retirement in the case of a tax-qualified retirement plan; and any
redemption resulting from a tax-free return of an excess contribution to an IRA.
CDSC waivers will be granted subject to confirmation (by PaineWebber in the
case of shareholders who are PaineWebber clients or by the Transfer Agent in the
case of all other shareholders) of the shareholder's status or holdings, as the
case may be.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. Class C shares held less
than one year are subject to the same CDSC that would have been imposed on the
Class C shares of the PaineWebber mutual fund initially purchased and
subsequently exchanged for Class C shares of the Fund. This CDSC will be either
1% or 0.75% of the lower of (a) the net asset value of the Class C shares of the
other PaineWebber mutual fund when initially purchased or (b) the net asset
value of the Fund shares at the time of redemption. For these purposes, the
holding period of Class C shares of the Fund is calculated from the date the
Class C shares of the other PaineWebber mutual fund were initially purchased.
Class C shares will be considered to represent, as applicable, dividend and
capital gain distribution reinvestments in such other funds. Redemption order
will be determined as described for Class B shares (see "Contingent Deferred
Sales Charge--Class B Shares"). Class C shares acquired through reinvestment of
dividends and capital gain distributions are not subject to this CDSC. The CDSC
is waived for exchanges and for most redemptions in connection with the
systematic withdrawal plan. The amount of any CDSC will be paid to Mitchell
Hutchins.
REDEMPTION THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. PaineWebber clients
may submit redemption requests to their investment executives or correspondent
firms in person or by telephone, mail or wire. As the Fund's agent, PaineWebber
may honor a redemption request by repurchasing Fund shares from a redeeming
shareholder based upon the shares' net asset value next determined after receipt
of the request by PaineWebber's New York City offices. Within three Business
Days after receipt of the request, repurchase proceeds (less any applicable
CDSC) will be paid by check or credited to the shareholder's brokerage account
at the election of the shareholder. PaineWebber investment executives and
correspondent firms are responsible for promptly forwarding redemption requests
to PaineWebber's New York City offices.
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<PAGE>
PaineWebber reserves the right not to honor any redemption request, in which
case it promptly will forward the request to the Transfer Agent for treatment as
described below.
REDEMPTION THROUGH THE TRANSFER AGENT. Fund shareholders who are not
PaineWebber clients must redeem their shares through the Transfer Agent by mail;
other shareholders also may redeem Fund shares through the Transfer Agent.
Shareholders should mail redemption requests directly to the Transfer Agent:
PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington, Delaware
19899. A redemption request will be executed at the net asset value next
determined after it is received in "good order," and redemption proceeds will be
paid within seven days of receipt of the request. "Good order" means that the
request must be accompanied by the following: (1) a letter of instruction or a
stock assignment specifying the number of shares or amount of investment to be
redeemed (or that all shares credited to a Fund account be redeemed), signed by
all registered owners of the shares in the exact names in which they are
registered, (2) a guarantee of each registered owner's signature, and (3) other
supporting legal documents for estates, trusts, guardianships, custodianships,
partnerships and corporations. Shareholders are responsible for ensuring that a
request for redemption is received in "good order."
A signature guarantee may be obtained from a domestic bank or trust company,
broker, dealer, clearing agency or savings association which is a participant in
a medallion program recognized by the Securities Transfer Association. The three
recognized medallion programs are Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and the New York Stock
Exchange Medallion Signature Program (MSP). Signature guarantees which are not a
part of these programs will not be accepted.
ADDITIONAL INFORMATION ON REDEMPTIONS. A shareholder may have redemption
proceeds of $1 million or more wired to the shareholder's PaineWebber brokerage
account or a commercial bank account designated by the shareholder. Questions
about this option, or redemption requirements generally, should be referred to
the shareholder's PaineWebber investment executive or correspondent firm, or to
the Transfer Agent if the shares are not held in a PaineWebber brokerage
account.
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, the Fund reserves the right to redeem all Fund shares in any
shareholder account of less than $500 net asset value. If the Fund elects to do
so, it will notify the shareholder and provide the shareholder the opportunity
to increase the amount invested to $500 or more within 60 days of the notice.
The Fund will not redeem accounts that fall below $500 solely as a result of a
reduction in net asset value per share.
TRANSFER OF ACCOUNTS. If a shareholder holding Fund shares in a PaineWebber
brokerage account transfers his brokerage account to another firm, the Fund
shares normally will be transferred to an account with the Transfer Agent.
However, if the other firm has entered into a selected dealer agreement with
Mitchell Hutchins relating to the Fund, the shareholder may be able to hold Fund
shares in an account with the other firm.
CONVERSION OF CLASS B SHARES
A shareholder's Class B shares will automatically convert to Class A shares
approximately six years after the date of issuance, together with a pro rata
portion of all Class B shares representing dividends and other distributions
paid in additional Class B shares. The Class B shares so converted will no
longer be subject to the higher expenses borne by Class B shares. The conversion
will be effected at the relative net asset values per share of the two classes
(normally $1.00) on the first Business Day of the month in which the sixth
anniversary of issuance occurs. See "Valuation of Shares."
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<PAGE>
If a shareholder effects one or more exchanges among Class B shares of the
PaineWebber mutual funds during the six-year period, the holding periods for the
shares so exchanged will be counted toward the six-year period.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund declares dividends daily from its net investment income
and pays them monthly. Shares begin earning dividends on the day after the
exchange is effected and continue to receive dividends declared through the date
of redemption. The Fund distributes its net short-term capital gain annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The Fund
does not expect to realize net long-term capital gain and thus does not
anticipate payment of any long-term capital gain distributions. Dividends paid
on all classes of shares are calculated at the same time and in the same manner.
Dividends on Class B and Class C shares are expected to be lower than those on
Class A shares because of the higher expenses resulting from the distribution
fees borne by the Class B and Class C shares. Dividends on each class also might
be affected differently by the allocation of other class-specific expenses.
Dividends are paid in additional Fund shares of the same class unless the
shareholder requests cash payments. Shareholders who wish to receive dividends
in cash, either mailed to the shareholder by check or credited to the
shareholder's PaineWebber account, should contact their PaineWebber investment
executives or correspondent firms.
TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code so that it will be relieved
of federal income tax on that part of its investment company taxable income
(consisting generally of net investment income and net short-term capital gain,
if any) that it distributes to its shareholders.
Dividends from the Fund's investment company taxable income (whether paid in
cash or in additional Fund shares) are taxable to its shareholders as ordinary
income to the extent of its earnings and profits. Shareholders not subject to
tax on their income will not be required to pay tax on amounts distributed to
them.
The Fund notifies its shareholders following the end of each calendar year
of the amount of dividends paid that year.
The Fund is required to withhold 31% of all dividends payable to any
individuals and certain other noncorporate shareholders who do not provide the
Fund with a correct taxpayer identification number or who otherwise are subject
to backup withholding.
No gain or loss will be recognized to a shareholder as a result of a
conversion of Class B shares to Class A shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. There may be other
federal, state or local tax considerations applicable to a particular investor.
Prospective shareholders are urged to consult their tax advisers.
VALUATION OF SHARES
The Fund uses its best efforts to maintain its net asset value at $1.00 per
share. Net asset value per share is determined by dividing the Fund's net assets
by the total number of Fund shares outstanding. The Fund's net assets are equal
to the value of the Fund's investments and its other assets less its
liabilities. Net asset value is determined separately for each class as of the
close of regular trading on the NYSE (currently 4:00 p.m., Eastern time) each
Business Day.
16
<PAGE>
The Fund values its portfolio securities using the amortized cost method of
valuation, under which market value is approximated by amortizing the difference
between the acquisition cost and value at maturity of an instrument on a
straight-line basis over its remaining life. All cash, receivables and current
payables are carried at their face value. Other assets, if any, are valued at
fair value as determined in good faith by or under the direction of the board.
MANAGEMENT
The board, as part of its overall management responsibility, oversees
various organizations responsible for the Fund's day-to-day management. Mitchell
Hutchins, the Fund's investment adviser and administrator, makes and implements
all investment decisions and supervises all aspects of the Fund's operations.
Mitchell Hutchins receives a monthly fee for these services at the annual rate
of 0.50% of the Fund's average daily net assets.
In accordance with procedures adopted by the Fund's board, the Fund may pay
fees to PaineWebber for its services as lending agent in its portfolio
securities lending program. Mitchell Hutchins investment personnel may engage in
securities transactions for their own accounts pursuant to a code of ethics that
establishes procedures for personal investing and restricts certain
transactions.
Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New
York 10019, and is an asset management subsidiary of PaineWebber, which is
wholly owned by Paine Webber Group Inc., a publicly owned financial services
holding company. As of May 31, 1998, Mitchell Hutchins was adviser or subadviser
of 31 investment companies with 69 separate portfolios and aggregate assets of
over $39.7 billion.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins is the distributor of Fund
shares and has appointed PaineWebber as the exclusive dealer for the sale of
Fund shares. Under separate plans of distribution pertaining to the Class A
shares, the Class B shares and the Class C shares ("Class A Plan," "Class B
Plan" and "Class C Plan," collectively, "Plans"), the Fund pays Mitchell
Hutchins:
- Monthly service fees at the annual rate of 0.25% of the average daily net
assets of each class of shares.
- Monthly distribution fees at the annual rate of 0.50% of the average daily
net assets of Class B and Class C shares.
Under the Plans, Mitchell Hutchins uses the service fees primarily to pay
PaineWebber for shareholder servicing, currently at the annual rate of 0.25% of
the aggregate investment amounts maintained in the Fund by PaineWebber clients.
PaineWebber passes on a portion of these fees to its investment executives to
compensate them for shareholder servicing that they perform and retains the
remainder to offset its own expenses in servicing and maintaining shareholder
accounts. These expenses may include costs of the PaineWebber branch office in
which the investment executive is based, such as rent, communications equipment,
employee salaries and other overhead costs.
Mitchell Hutchins uses the distribution fees under the Class B and Class C
Plans to offset the Fund's marketing costs attributable to those classes, such
as preparation of sales literature, advertising and printing and distributing
prospectuses and other shareholder materials to prospective investors. Mitchell
Hutchins also may use the distribution fees to pay additional compensation to
PaineWebber and other costs allocated to Mitchell Hutchins' and PaineWebber's
distribution activities, including employee salaries, bonuses and other overhead
expenses. These expenses may include the branch office costs noted above.
Because shares of the Fund may be acquired only
17
<PAGE>
through an exchange of shares of other PaineWebber mutual funds, Mitchell
Hutchins does not pay commissions to PaineWebber for selling Fund shares.
Mitchell Hutchins receives the proceeds of the CDSCs paid upon certain
redemptions and may use these proceeds for any of the expenses described above.
See "Redemptions."
During the period they are in effect, the Plans and related distribution
contracts pertaining to each class of shares ("Distribution Contracts") obligate
the Fund to pay service and distribution fees to Mitchell Hutchins as
compensation for its service and distribution activities, not as reimbursement
for specific expenses incurred. Therefore, even if Mitchell Hutchins' expenses
exceed its service or distribution fees, the Fund will not be obligated to pay
more than those fees. On the other hand, if Mitchell Hutchins' expenses are less
than such fees, it will retain its full fees and realize a profit. The Fund will
pay the service and distribution fees to Mitchell Hutchins until either the
applicable Plan or Distribution Contract is terminated or not renewed. In that
event, Mitchell Hutchins' expenses in excess of service and distribution fees
received or accrued through the termination date will be Mitchell Hutchins' sole
responsibility and not obligations of the Fund. In their annual consideration of
the continuation of each Plan, the directors will review the Plan and Mitchell
Hutchins' corresponding expenses for each class separately from the Plans and
expenses for the other two classes.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund is the income on an
investment in the Fund over a specified seven-day period. This income is then
"annualized" (that is, assumed to be earned each week over a 52-week period) and
shown as a percentage of the investment. The "effective yield" is calculated
similarly, but when annualized the income earned is assumed to be reinvested.
The "effective yield" will be higher than the "yield" because of the compounding
effect of this assumed reinvestment.
GENERAL INFORMATION
ORGANIZATION. PaineWebber Master Series, Inc. is registered with the SEC as
a diversified, open-end management investment company and was incorporated in
Maryland on October 29, 1985. The Fund commenced operations on September 26,
1986. The Corporation has authority to issue 10 billion shares of common stock
of separate series, par value $.001 per share; one billion of these shares are
classified as shares of the Fund.
The outstanding shares of common stock of the Fund are divided into three
Classes, designated Class A shares, Class B shares and Class C shares. Each
class represents interests in the same assets of the Fund. The classes differ as
follows: (1) each class of shares has exclusive voting rights on matters
pertaining to its plan of distribution; (2) Class A shares may be subject to a
CDSC upon certain redemptions within one year of purchase; (3) Class B shares
bear ongoing distribution fees, are subject to a CDSC upon most redemptions and
will automatically convert to Class A shares approximately six years after
issuance; (4) Class C shares may be subject to a CDSC if redeemed within one
year of purchase, bear ongoing distribution expenses and do not convert into
another class; and (5) each class may bear differing amounts of certain
class-specific expenses. The different sales charges and other expenses
applicable to the different classes of Fund shares may affect the performance of
those classes.
The Corporation does not hold annual shareholder meetings. There normally
will be no meetings of shareholders to elect directors unless fewer than a
majority of the directors holding office have
18
<PAGE>
been elected by shareholders. Shareholders of record holding at least two-thirds
of the outstanding shares of the Corporation may remove a director by votes cast
in person or by proxy at a meeting called for that purpose. The directors are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any director when so requested in writing by the
shareholders of record holding at least 10% of the Corporation's outstanding
shares.
Each share of the Fund is entitled to participate equally in dividends and
other distributions and the proceeds of any liquidation except that, due to the
differing expenses borne by the three classes, dividends are likely to be lower
for the Class B and Class C shares than for the Class A shares.
Shareholders of the Fund are entitled to one vote for each full share held
and fractional votes for fractional shares held. Voting rights are not
cumulative and, as a result, the holders of more than 50% of the shares of the
Corporation may elect all of its directors. The shares of the Fund will be voted
together, except that only the shareholders of a particular class of the Fund
may vote on matters affecting only that class, such as the terms of a Plan as it
relates to a class. The shares of each series of the Corporation will be voted
separately, except when an aggregate vote of all the securities is required by
law.
CERTIFICATES. To avoid additional operating costs and for investor
convenience, the Fund does not issue share certificates. Ownership of Fund
shares is recorded on a stock register by the Transfer Agent and shareholders
have the same rights of ownership with respect to such shares as if certificates
had been issued.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One
Heritage Drive, North Quincy, Massachusetts 02171, is custodian of the Fund's
assets. PFPC Inc., a subsidiary of PNC Bank, N.A., 400 Bellevue Parkway,
Wilmington, Delaware 19809, is the Fund's transfer and dividend disbursing
agent.
CONFIRMATIONS AND STATEMENTS. Shareholders receive confirmations of
purchases and redemptions of Fund shares. PaineWebber clients receive statements
at least quarterly that report their Fund activity and consolidated year-end
statements that show all Fund transactions for that year. Shareholders who are
not PaineWebber clients receive quarterly statements from the Transfer Agent.
Shareholders also receive audited annual and unaudited semiannual financial
statements of the Fund.
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<PAGE>
Shares of the Fund can be exchanged for shares of the following PaineWebber
Mutual Funds:
PAINEWEBBER BOND FUNDS
- - High Income Fund
- - Investment Grade Income Fund
- - Low Duration U.S. Government Income Fund
- - Strategic Income Fund
- - U.S. Government Income Fund
PAINEWEBBER TAX-FREE BOND FUNDS
- - California Tax-Free Income Fund
- - Municipal High Income Fund
- - National Tax-Free Income Fund
- - New York Tax-Free Income Fund
PAINEWEBBER ASSET ALLOCATION FUNDS
- - Balanced Fund
- - Tactical Allocation Fund
PAINEWEBBER STOCK FUNDS
- - Financial Services Growth Fund
- - Growth Fund
- - Growth and Income Fund
- - Mid Cap Fund
- - Small Cap Fund
- - Utility Income Fund
PAINEWEBBER GLOBAL FUNDS
- - Asia Pacific Growth Fund
- - Emerging Markets Equity Fund
- - Global Equity Fund
- - Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
- - Aggressive Portfolio
- - Moderate Portfolio
- - Conservative Portfolio
--------------
A prospectus containing more complete information for any of the above funds,
including charges and expenses, can be obtained from a PaineWebber investment
executive or correspondent firm. Read the prospectus carefully before investing.
- -C-1998 PaineWebber Incorporated
PAINEWEBBER
MONEY
MARKET
/ / FUND
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights................................................................ 3
Financial Highlights...................................................... 6
Investment Objective and Policies......................................... 9
Investing in the Fund..................................................... 12
Redemptions............................................................... 13
Conversion of Class B Shares.............................................. 15
Dividends and Taxes....................................................... 16
Valuation of Shares....................................................... 16
Management................................................................ 17
Performance Information................................................... 18
General Information....................................................... 18
</TABLE>
PROSPECTUS
July 1, 1998
<PAGE>
PAINEWEBBER MONEY MARKET FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
PaineWebber Money Market Fund ("Fund") is a diversified series of
PaineWebber Master Series, Inc. ("Corporation"), a professionally managed mutual
fund. The Fund's investment adviser, administrator and distributor is Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset
management subsidiary of PaineWebber Incorporated ("PaineWebber"). As
distributor for the Fund, Mitchell Hutchins has appointed PaineWebber to serve
as the exclusive dealer for the sale of Fund shares. This Statement of
Additional Information is not a prospectus and should be read only in
conjunction with the Fund's current Prospectus, dated July 1, 1998. A copy of
the Prospectus may be obtained by calling any PaineWebber investment executive
or correspondent firm or by calling toll-free 1-800-647-1568. This Statement of
Additional Information is dated July 1, 1998.
INVESTMENT POLICIES AND RESTRICTIONS
The following supplements the information contained in the Prospectus
concerning the Fund's investment policies and limitations.
YIELDS AND RATINGS OF MONEY MARKET INSTRUMENTS. The yields on the money
market instruments in which the Fund invests (such as U.S. government
securities, commercial paper and bank obligations) are dependent on a variety of
factors, including general money market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer, the size of
the offering, the maturity of the obligation and the ratings of the issue. The
ratings of nationally recognized statistical rating organizations ("NRSROs")
represent their opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices. Subsequent to its purchase by the Fund, an issue
may cease to be rated or its rating may be reduced. In the event that a security
in the Fund's portfolio ceases to be a "First Tier" security, as defined below,
or Mitchell Hutchins becomes aware that a security has received a rating below
the second highest rating by any NRSRO, Mitchell Hutchins, and in certain cases
the Corporation's board of directors ("board"), will consider whether the Fund
should continue to hold the obligation. A "First Tier" security is a security
that is either (1) rated in the highest short-term rating category by at least
two NRSROs, (2) rated in the highest short-term rating category by a single
NRSRO if only that NRSRO has assigned the obligation a short-term rating, (3)
was issued by an issuer that has received such a short-term rating with respect
to a security that is comparable in priority and security, or (4) unrated, but
determined by Mitchell Hutchins to be of comparable quality. A First Tier
security rated in the highest short-term rating category by a single NRSRO at
the time of purchase that subsequently receives a rating below the highest
rating category from a different NRSRO will continue to be considered a First
Tier security.
VARIABLE AND FLOATING RATE DEMAND INSTRUMENTS. The Fund may invest in
variable and floating rate securities with demand features. A demand feature
gives the Fund the right to sell the securities back to a specified party,
usually a remarketing agent, on a specified date, at a price equal to their
amortized cost value plus accrued interest. A demand feature is often backed by
a letter of credit, guarantee or other liquidity support arrangement from a bank
or other financial institution, that may be drawn upon demand,
<PAGE>
after specified notice, for all or any part of the exercise price of the demand
feature. Generally, the Fund intends to exercise demand features (1) upon a
default under the terms of the underlying security, (2) to maintain the Fund's
portfolio in accordance with its investment objective and policies or applicable
legal or regulatory requirements or (3) as needed to provide liquidity to the
Fund in order to meet redemption requests. The ability of a bank or other
financial institution to fulfill its obligations under a letter of credit,
guarantee or other liquidity arrangement might be affected by possible financial
difficulties of its borrowers, adverse interest rate or economic conditions,
regulatory limitations or other factors. The interest rate on floating rate or
variable rate securities ordinarily is readjusted on the basis of the prime rate
of the bank that originated the financing or some other index or published rate,
such as the 90-day U.S. Treasury bill rate, or is otherwise reset to reflect
market rates of interest. Generally, these interest rate adjustments cause the
market value of floating rate and variable rate securities to fluctuate less
than the market value of fixed rate obligations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
respect to any security in which it is authorized to invest, except that
securities subject to repurchase agreements may have maturities in excess of 13
months. The Fund maintains custody of the underlying securities prior to their
repurchase; thus, the obligation of the bank or securities dealer to pay the
repurchase price on the date agreed to or upon demand is, in effect, secured by
such securities. If the value of these securities is less than the repurchase
price, plus any agreed-upon additional amount, the other party to the agreement
must provide additional collateral so that at all times the collateral is at
least equal to the repurchase price plus any agreed-upon additional amount. The
difference between the total amount to be received upon repurchase of the
securities and the price that was paid by the Fund upon acquisition is accrued
as interest and included in the Fund's net investment income.
Repurchase agreements carry certain risks not associated with direct
investments in securities. The Fund intends to enter into repurchase agreements
only with banks and dealers in transactions believed by Mitchell Hutchins to
present minimal credit risks in accordance with guidelines established by the
board. Mitchell Hutchins will review and monitor the creditworthiness of those
institutions under the board's general supervision.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements with banks and securities dealers up to an aggregate value of not
more than 5% of its total assets. Such agreements involve the sale of securities
held by the Fund subject to the Fund's agreement to repurchase the securities at
an agreed-upon date or upon demand and at a price reflecting a market rate of
interest. Such agreements are considered to be borrowings and may be entered
into only for temporary or emergency purposes. While a reverse repurchase
agreement is outstanding, the Fund's custodian segregates assets to cover the
Fund's obligations under the reverse repurchase agreement. See "Investment
Policies and Restrictions--Segregated Accounts."
ILLIQUID SECURITIES. The Fund will not invest more than 10% of its net
assets in illiquid securities. The term "illiquid securities" for this purpose
means securities that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued the
securities and includes, among other things, repurchase agreements maturing in
more than seven days and restricted securities other than those Mitchell
Hutchins has determined to be liquid pursuant to guidelines established by the
board. To the extent the Fund invests in illiquid securities, it may not be able
to readily liquidate such investments and may have to sell other investments if
necessary to raise cash to meet its obligations.
2
<PAGE>
Restricted securities are not registered under the Securities Act of 1933
("1933 Act") and may be sold only in privately negotiated or other exempted
transactions or after a 1933 Act registration statement has become effective.
Where registration is required, the Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the time
of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
However, not all restricted securities are illiquid. A large institutional
market has developed for many U.S. and foreign securities that are not
registered under the 1993 Act. Institutional investors generally will not seek
to sell these instruments to the general public but instead will often depend
either on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers, providing both readily ascertainable values for restricted
securities and the ability to liquidate an investment in order to satisfy share
redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
the Fund, however, could affect adversely the marketability of such portfolio
securities, and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
The board has delegated the function of making day-to-day determinations of
liquidity to Mitchell Hutchins, pursuant to guidelines approved by the board.
Mitchell Hutchins takes into account a number of factors in reaching liquidity
decisions, including (1) the frequency of trades for the security, (2) the
number of dealers that make quotes for the security, (3) the number of dealers
that have undertaken to make a market in the security, (4) the number of other
potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities held by the Fund and reports periodically on such
decisions to the board.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
securities on a "when-issued" or "delayed delivery" basis. A security purchased
on a when-issued or delayed delivery basis is recorded as an asset on the
commitment date and is subject to changes in market value, generally based upon
changes in the level of interest rates. Thus, fluctuation in the value of the
security from the time of the commitment date will affect the Fund's net asset
value. When the Fund commits to purchase securities on a when-issued or delayed
delivery basis, its custodian segregates assets to cover the amount of the
commitment. See "Investment Policies and Restrictions--Segregated Accounts."
SEGREGATED ACCOUNTS. When the Fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis or reverse
repurchase agreements, the Fund will maintain with an approved custodian in a
segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the Fund's obligation or commitment under such
transactions.
3
<PAGE>
LENDING OF PORTFOLIO SECURITIES. The Fund is authorized to lend up to
33 1/3% of its total assets to broker-dealers or institutional investors that
Mitchell Hutchins deems qualified, but only when the borrower maintains
acceptable collateral with the Fund's custodian, marked to market daily, at
least equal to the market value of the securities loaned, plus accrued interest
and dividends. Acceptable collateral is limited to cash, U.S. government
securities and irrevocable letters of credit that meet certain guidelines
established by Mitchell Hutchins. The Fund may reinvest cash collateral in money
market instruments or other short-term liquid investments. In determining
whether to lend securities to a particular broker-dealer or institutional
investor, Mitchell Hutchins will consider, and during the period of the loan
will monitor, all relevant facts and circumstances, including the
creditworthiness of the borrower. The Fund will retain authority to terminate
any of its loans at any time. The Fund may pay reasonable fees in connection
with a loan and may pay the borrower or placing broker a negotiated portion of
the interest earned on the reinvestment of cash held as collateral. The Fund
will receive amounts equivalent to any dividends, interest or other
distributions on the securities loaned. The Fund will regain record ownership of
loaned securities to exercise beneficial rights, such as voting and subscription
rights, when regaining such rights is considered to be in the Fund's interest.
Pursuant to procedures adopted by the board governing the Fund's securities
lending program, PaineWebber has been retained to serve as lending agent for the
Fund. The board also has authorized the payment of fees (including fees
calculated as a percentage of invested cash collateral) to PaineWebber for these
services. The board periodically reviews all portfolio securities loan
transactions for which PaineWebber acted as lending agent.
INVESTMENT LIMITATIONS OF THE FUND
FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations
cannot be changed without the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of the Fund or (2) 67% or more of the Fund's
shares present at a shareholders' meeting if more than 50% of the outstanding
Fund shares are represented at the meeting in person or by proxy. If a
percentage restriction is adhered to at the time of an investment or
transaction, later changes in percentage resulting from a change in values of
portfolio securities or amount of total assets will not be considered a
violation of any of the following limitations.
The Fund will not:
(1) purchase securities of any one issuer if, as a result, more than 5% of the
Fund's total assets would be invested in securities of that issuer or the
Fund would own or hold more than 10% of the outstanding voting securities
of that issuer, except that up to 25% of the Fund's total assets may be
invested without regard to this limitation, and except that this limitation
does not apply to securities issued or guaranteed by the U.S. government,
its agencies and instrumentalities or to securities issued by other
investment companies.
(The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage-and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the
securities having the same sponsor, and mortgage- and asset-backed
securities issued by a finance or other special purpose subsidiary that are
not guaranteed by the parent company will be considered to be issued by a
separate issuer from the parent company.)
(2) purchase any security if, as a result of that purchase, 25% or more of the
Fund's total assets would be invested in securities of issuers having their
principal business activities in the same industry, except
4
<PAGE>
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or to municipal
securities or to certificates of deposit and bankers' acceptances of
domestic branches of U.S. banks.
(The following interpretations apply to, but are not a part of, this
fundamental restriction: (a) with respect to this limitation, domestic and
foreign banking will be considered to be different industries; and (b) with
respect to this limitation, asset-backed securities will be grouped in
industries based upon their underlying assets and not treated as
constituting a single, separate industry.)
(3) issue senior securities or borrow money, except as permitted under the
Investment Company Act of 1940 ("1940 Act") and then not in excess of
33 1/3% of the Fund's total assets (including the amount of the senior
securities issued but reduced by any liabilities not constituting senior
securities) at the time of the issuance or borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
(4) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers'
acceptances or similar instruments will not be considered the making of a
loan.
(5) engage in the business of underwriting securities of other issuers, except
to the extent that the Fund might be considered an underwriter under the
federal securities laws in connection with its disposition of portfolio
securities.
(6) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except
that the Fund may exercise rights under agreements relating to such
securities, including the right to enforce security interests and to hold
real estate acquired by reason of such enforcement until that real estate
can be liquidated in an orderly manner.
(7) purchase or sell physical commodities unless acquired as a result of owning
securities or other instruments, but the Fund may purchase, sell or enter
into financial options and futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative instruments.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are not
fundamental and may be changed by the vote of the board without shareholder
approval.
The Fund will not:
(1) purchase securities on margin, except for short-term credit necessary for
clearance of portfolio transactions and except that the Fund may make
margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(2) engage in short sales of securities or maintain a short position, except
that the Fund may (a) sell short "against the box" and (b) maintain short
positions in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments.
5
<PAGE>
(3) purchase securities of other investment companies, except to the extent
permitted by the 1940 Act and except that this limitation does not apply to
securities received or acquired as dividends, through offers of exchange,
or as a result of reorganization, consolidation, or merger.
(4) purchase portfolio securities while borrowings in excess of 5% of its total
assets are outstanding.
DIRECTORS AND OFFICERS; PRINCIPAL HOLDERS OF SECURITIES
The directors and executive officers of the Corporation, their ages,
business addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------------ -------------------- ---------------------------------------------------
<S> <C> <C>
Margo N. Alexander**; 51 Director and Mrs. Alexander is president, chief executive
President officer and a director of Mitchell Hutchins
(since January 1995) and an executive vice
president and director of PaineWebber (since
March 1984). Mrs. Alexander is president and a
director or trustee of 31 investment companies
for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Richard Q. Armstrong; 63 Director Mr. Armstrong is chairman and principal of RQA
78 West Brother Drive Enterprises (management consulting firm) (since
Greenwich, CT 06830 April 1991 and principal occupation since March
1995). Mr. Armstrong was chairman of the board,
chief executive officer and co-owner of
Adirondack Beverages (producer and distributor of
soft drinks and sparkling/still waters) (October
1993-March 1995). He was a partner of The New
England Consulting Group (management consulting
firm) (December 1992-September 1993). He was
managing director of LVMH U.S. Corporation (U.S.
subsidiary of the French luxury goods con-
glomerate, Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman of its wine
and spirits subsidiary, Schieffelin & Somerset
Company (1987-1991). Mr. Armstrong is a director
or trustee of 30 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------------ -------------------- ---------------------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**; 71 Director and Mr. Bewkes is a director of Paine Webber Group Inc.
Chairman of the ("PW Group") (holding company of PaineWebber and
Board Mitchell Hutchins). Prior to December 1995, he
was a consultant to PW Group. Prior to 1988, he
was chairman of the board, president and chief
executive officer of American Bakeries Company.
Mr. Bewkes is a director of Interstate Bakeries
Corporation and NaPro BioTherapeutics, Inc. Mr.
Bewkes is a director or trustee of 31 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Richard R. Burt; 51 Director Mr. Burt is chairman of IEP Advisors, Inc.
1275 Pennsylvania Ave. N.W. (international investments and consulting firm)
Washington, D.C. 20004 (since March 1994) and a partner of McKinsey &
Company (management consulting firm) (since
1991). He is also a director of
Archer-Daniels-Midland Co. (agricultural
commodities), Hollinger International Co.
(publishing), Homestake Mining Corp., Powerhouse
Technologies Inc. and Wierton Steel Corp. He was
the chief negotiator in the Strategic Arms
Reduction Talks with the former Soviet Union
(1989-1991) and the U.S. Ambassador to the
Federal Republic of Germany (1985-1989). Mr. Burt
is a director or trustee of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Mary C. Farrell**; 48 Director Ms. Farrell is a managing director, senior
investment strategist and member of
the Investment Policy Committee of PaineWebber.
Ms. Farrell joined PaineWebber in 1982. She is a
member of the Financial Women's Association and
Women's Economic Roundtable, and appears as a
regular panelist on Wall $treet Week with Louis
Rukeyser. She also serves on the Board of
Overseers of New York University's Stern School
of Business. Ms. Farrell is a director or trustee
of 30 investment companies for which Mitchell
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------------ -------------------- ---------------------------------------------------
<S> <C> <C>
Hutchins or PaineWebber serves as investment
adviser.
Meyer Feldberg; 56 Director Mr. Feldberg is Dean and Professor of Management of
Columbia University the Graduate School of Business, Columbia
101 Uris Hall University. Prior to 1989, he was president of
New York, New York 10027 the Illinois Institute of Technology. Dean
Feldberg is a director of Primedia Inc.,
Federated Department Stores, Inc. and Revlon,
Inc.. Dean Feldberg is a director or trustee of
30 investment companies for which Mitchell
Hutchins or PaineWebber serves as an investment
adviser.
George W. Gowen; 68 Director Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to May
New York, New York 10017 1994, he was a partner in the law firm of Fryer,
Ross & Gowen. Mr. Gowen is a director of Columbia
Real Estate Investments, Inc. Mr. Gowen is a
director or trustee of 30 investment companies
for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Frederic V. Malek; 61 Director Mr. Malek is chairman of Thayer Merchant Capital
1455 Pennsylvania Ave. N.W. Partners (merchant bank). From January 1992 to
Suite 350 November 1992, he was campaign manager of
Washington, D.C. 20004 Bush-Quayle '92. From 1990 to 1992, he was vice
chairman and, from 1989 to 1990, he was president
of Northwest Airlines Inc., NWA Inc. (holding
company of Northwest Airlines Inc.) and Wings
Holdings Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline
catering and contract feeding), where he most
recently was an executive vice president and
president of Marriott Hotels and Resorts. Mr.
Malek is also a director of American Management
Systems, Inc. (management consulting and
computer-related services), Automatic Data
Processing, Inc., CB Commercial Group, Inc. (real
estate services), Choice Hotels International
(hotel and hotel franchising), FPL Group,
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------------ -------------------- ---------------------------------------------------
<S> <C> <C>
Inc. (electric services), Manor Care, Inc.
(healthcare), and Northwest Airlines Inc. Mr.
Malek is a director or trustee of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Carl W. Schafer; 62 Director Mr. Schafer is president of the Atlantic Foun-
66 Witherspoon Street #1100 dation (charitable foundation supporting mainly
Princeton, New Jersey 08542 oceanographic exploration and research). He is a
director of Base Ten Systems, Inc. (software),
Roadway Express, Inc. (trucking), The Guardian
Group of Mutual Funds, Loevner Funds, Evans
Systems, Inc. (motor fuels, convenience store and
diversified company), Electronic Clearing House,
Inc. (financial transactions processing),
Frontier Oil Corporation and Nutraceutix Inc.
(biotechnology company). Prior to January 1993,
Mr. Schafer was chairman of the Investment
Advisory Committee of the Howard Hughes Medical
Institute. Mr. Schafer is a director or trustee
of 30 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment
adviser.
T. Kirkham Barneby; 52 Vice President Mr. Barneby is a managing director and chief
investment officer--quantitative investments of
Mitchell Hutchins. Prior to September 1994, he
was a senior vice president at Vantage Global
Management. Prior to June 1993, he was a senior
vice president at Mitchell Hutchins. Mr. Barneby
is a vice president of six investment companies
for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
John J. Lee; 29 Vice President and Mr. Lee is a vice president and manager of the
Assistant Treasurer mutual fund finance department of Mitchell
Hutchins. Prior to September 1997, he was an
audit manager in the financial services practice
of Ernst & Young LLP. Mr. Lee is a vice president
and assistant treasurer of 30 investment
companies for which Mitchell
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------------ -------------------- ---------------------------------------------------
<S> <C> <C>
Hutchins or PaineWebber serves as investment
adviser.
Dennis McCauley; 51 Vice President Mr. McCauley is a managing director and chief
investment officer--fixed income of Mitchell
Hutchins. Prior to December 1994, he was director
of fixed income investments of IBM Corporation.
Mr. McCauley is a vice president of 21 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Ann E. Moran; 40 Vice President and Ms. Moran is a vice president and a manager of the
Assistant Treasurer mutual fund finance department of Mitchell
Hutchins. Ms. Moran is a vice president and
assistant treasurer of 31 investment companies
for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Dianne E. O'Donnell; 46 Vice President and Ms. O'Donnell is a senior vice president and deputy
Secretary general counsel of Mitchell Hutchins. Ms.
O'Donnell is a vice president and secretary of 30
investment companies, and vice president and
assistant secretary of one investment company for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Emil Polito; 37 Vice President Mr. Polito is a senior vice president and director
of operations and control for Mitchell Hutchins.
From March 1991 to September 1993 he was director
of the mutual funds sales support and service
center for Mitchell Hutchins and PaineWebber. Mr.
Polito is vice president of 31 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Susan Ryan; 38 Vice President Ms. Ryan is a senior vice president and portfolio
manager of Mitchell Hutchins and has been with
Mitchell Hutchins since 1982. Ms. Ryan is a vice
president of five investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------------ -------------------- ---------------------------------------------------
<S> <C> <C>
Victoria E. Schonfeld; 47 Vice President Ms. Schonfeld is a managing director and general
counsel of Mitchell Hutchins. Prior to May 1994,
she was a partner in the law firm of Arnold &
Porter. Ms. Schonfeld is a vice president of 30
investment companies and a vice president and
secretary of one investment company for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Paul H. Schubert; 35 Vice President and Mr. Schubert is a senior vice president and the
Treasurer director of the mutual fund finance department of
Mitchell Hutchins. From August 1992 to August
1994, he was a vice president of BlackRock
Financial Management L.P. Mr. Schubert is a vice
president and treasurer of 31 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Nirmal Singh; 42 Vice President Mr. Singh is a senior vice president and a port-
folio manager of Mitchell Hutchins. Prior to
1993, he was a member of the portfolio man-
agement team at Merrill Lynch Asset Management,
Inc. Mr. Singh is a vice president of four
investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
Barney A. Taglialatela; 37 Vice President and Mr. Taglialatela is a vice president and a manger
Assistant Treasurer of the mutual fund finance department of Mitchell
Hutchins. Prior to February 1995, he was a
manager of the mutual fund finance division of
Kidder Peabody Asset Management, Inc. Mr.
Taglialatela is a vice president and assistant
treasurer of 31 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Mark A. Tincher; 42 Vice President Mr. Tincher is a managing director and
chief investment officer--equities of Mitchell
Hutchins. Prior to March 1995, he was a vice
president and directed the U.S. funds management
and equity research areas of Chase Manhattan
Private Bank. Mr. Tincher
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------------ -------------------- ---------------------------------------------------
<S> <C> <C>
is a vice president of 13 investment companies
for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Craig M. Varrelman; 39 Vice President Mr. Varrelman is a senior vice president and a
portfolio manager of Mitchell Hutchins. Mr.
Varrelman is a vice president of four investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Keith A. Weller; 36 Vice President and Mr. Weller is a first vice president and associate
Assistant Secretary general counsel of Mitchell Hutchins. Prior to
May 1995, he was an attorney in private practice.
Mr. Weller is a vice president and assistant
secretary of 30 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Ian W. Williams; 41 Vice President and Mr. Williams is a vice president and a manger of
Assistant Treasurer the mutual fund finance department of Mitchell
Hutchins. Mr. Williams is a vice president and
assistant treasurer of 31 investment companies
for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
</TABLE>
- ---------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, N.Y. 10019.
** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are "interested persons" of the
Corporation as defined in the 1940 Act by virtue of their positions with
Mitchell Hutchins, PaineWebber and/or PW Group.
The Corporation pays directors who are not interested persons of the
Corporation $1,000 annually for the Fund and $1,500 annually for the
Corporation's other series and $150 per series for each meeting of a board
committee (other than committee meetings held on the same day as a board
meeting). The Corporation thus pays each such director $2,500 annually, plus any
additional amounts due for board or committee meetings. Each chairman of the
audit and contract review committees of individual funds within the PaineWebber
complex receives additional compensation aggregating $15,000 annually from the
relevant funds. All directors are reimbursed for any expenses incurred in
attending meetings. Directors and officers of the Corporation own in the
aggregate less than 1% of the shares of the Fund. Because PaineWebber and
Mitchell Hutchins perform substantially all of the services necessary for the
operation of the Corporation and the Fund, the Corporation requires no
employees. No officer, director or employee of PaineWebber or Mitchell Hutchins
presently receives any compensation from the Corporation for acting as director
or officer.
12
<PAGE>
The table below includes certain information relating to the compensation of
the Corporation's current directors who held office with the Corporation or
other PaineWebber funds during the Fund's fiscal year ended February 28, 1998.
COMPENSATION TABLE+
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE FROM THE
COMPENSATION CORPORATION
FROM THE AND THE
NAME OF PERSON, POSITION CORPORATION* COMPLEX**
- -------------------------------------------------- -------------- --------------
<S> <C> <C>
Richard Q. Armstrong, Director.................... $ 4,600 $ 94,885
Richard R. Burt, Director......................... 4,300 87,085
Meyer Feldberg, Director.......................... 4,600 117,853
George W. Gowen, Director......................... 5,192 101,567
Frederic V. Malek, Director....................... 4,600 95,845
Carl W. Schafer, Director......................... 4,600 94,885
</TABLE>
- ---------
+ Only independent board members are compensated by the Corporation and
identified above; directors who are "interested persons," as defined by the
1940 Act, do not receive compensation.
* Represents fees paid to each director during the fiscal year ended February
28, 1998.
** Represents total compensation paid to each director during the calendar year
ended December 31, 1997; no fund within the fund complex has a bonus,
pension, profit sharing or retirement plan.
PRINCIPAL HOLDERS OF SECURITIES
The following shareholders are shown in the Funds records as owning more
than 5% of its shares:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF
SHARES BENEFICIALLY OWNED
NAME AND ADDRESS* AS OF MAY 31, 1998
- ------------------------------------------------ -------------------------
<S> <C> <C>
Decten Fund L.P. 4,254,130 6.96%
Independent Trust Corp.
Custodian Ian Trust Funds 11,243,241 18.41%
Independent Trust Corp.
Trust Fund 5,938,324 9.72%
</TABLE>
- ---------
* The shareholders listed may be contacted c/o Mitchell Hutchins Asset
Management, Inc., 1285 Avenue of the Americas, New York, NY 10019.
INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. Mitchell Hutchins acts
as the investment adviser and administrator of the Fund pursuant to a contract
with the Corporation dated August 4, 1988 ("Advisory Contract"). Under the
Advisory Contract, the Fund pays Mitchell Hutchins a fee, computed daily and
paid monthly, at the annual rate of 0.50% of the Fund's average daily net
assets.
During the fiscal years ended February 28, 1998, February 28, 1997 and
February 29, 1996, the Fund paid (or accrued) to Mitchell Hutchins investment
advisory and administrative fees of $202,449, $215,423, and $312,991,
respectively.
13
<PAGE>
Prior to August 1, 1997, PaineWebber provided certain services to the Fund
not otherwise provided by the Fund's transfer agent. Pursuant to an agreement
relating to those services, PaineWebber earned (or accrued) $5,548 for the
period March 1, 1997 to July 31, 1997; $13,300 for the fiscal year ended
February 28, 1997; and $17,432 for the fiscal year ended February 29, 1996.
Effective August 1, 1997, PFPC (not the Funds) pays PaineWebber for certain
transfer agency related services that PFPC has delegated to PaineWebber.
Under the terms of the Advisory Contract, the Fund bears all expenses
incurred in its operation that are not specifically assumed by Mitchell
Hutchins. General expenses of the Corporation not readily identifiable as
belonging to the Fund or to the Corporation's other series are allocated among
series by or under the direction of the board in such manner as the board deems
to be fair and equitable. Expenses borne by the Fund include the following (or
the Fund's share of the following): (1) the cost (including any brokerage
commissions) of securities purchased or sold by the Fund and any losses incurred
in connection therewith; (2) fees payable to and expenses incurred on behalf of
the Fund by Mitchell Hutchins; (3) organizational expenses; (4) filing fees and
expenses relating to the registration and qualification of the Fund's shares and
the Corporation under federal and state securities laws and maintenance of such
registrations and qualifications; (5) fees and salaries payable to directors who
are not interested persons of the Corporation or Mitchell Hutchins; (6) all
expenses incurred in connection with the directors' services, including travel
expenses; (7) taxes (including any income or franchise taxes) and governmental
fees; (8) costs of any liability, uncollectible items of deposit and other
insurance or fidelity bonds; (9) any costs, expenses or losses arising out of a
liability of or claim for damages or other relief asserted against the
Corporation or the Fund for violation of any law; (10) legal, accounting and
auditing expenses, including legal fees of special counsel for the independent
directors; (11) charges of custodians, transfer agents and other agents; (12)
expenses of setting in type and printing prospectuses and supplements thereto,
statements of additional information and supplements thereto, reports and proxy
materials for existing shareholders, and costs of mailing such materials to
existing shareholders; (13) any extraordinary expenses (including fees and
disbursements of counsel) incurred by the Corporation or the Fund; (14) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (15) costs of mailing and tabulating
proxies and costs of meetings of shareholders, the board and any committees
thereof; (16) the cost of investment company literature and other publications
provided to directors and officers; and (17) costs of mailing, stationery and
communications equipment.
Under the Advisory Contract, Mitchell Hutchins will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of the contract, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Mitchell
Hutchins in the performance of its duties or from reckless disregard of its
duties and obligations thereunder. The Advisory Contract terminates
automatically upon assignment and is terminable with respect to the Fund at any
time without penalty by the board or by vote of the holders of a majority of the
Fund's outstanding voting securities on 60 days' written notice to Mitchell
Hutchins, or by Mitchell Hutchins on 60 days' written notice to the Fund.
14
<PAGE>
The following table shows the approximate net assets as of May 31, 1998,
sorted by category of investment objective, of the investment companies as to
which Mitchell Hutchins serves as adviser or sub-adviser. An investment company
may fall into more than one of the categories below.
<TABLE>
<CAPTION>
INVESTMENT CATEGORY NET ASSETS ($ MIL)
- -------------------------------------------------- ------------------
<S> <C>
Domestic (excluding Money Market)................. $ 7,322.7
Global............................................ 3,788.7
Equity/Balanced................................... 6,260.8
Fixed Income (excluding Money Market)............. 4,850.6
Taxable Fixed Income.......................... 3,267.9
Tax-Free Fixed Income......................... 1,582.7
Money Market Funds................................ 28,628.3
</TABLE>
PERSONNEL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to a code of ethics that describes
the fiduciary duty owed to shareholders of the PaineWebber funds and other
Mitchell Hutchins' advisory accounts by all Mitchell Hutchins' directors,
officers and employees, establishes procedures for personal investing and
restricts certain transactions. For example, employee accounts generally must be
maintained at PaineWebber, personal trades in most securities require
pre-clearance and short-term trading and participation in initial public
offerings generally are prohibited. In addition, the code of ethics puts
restrictions on the timing of personal investing in relation to trades by
PaineWebber funds and other Mitchell Hutchins advisory clients.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of the
Class A, Class B and Class C shares of the Fund under separate distribution
contracts with the Corporation (collectively, "Distribution Contracts"). Each
Distribution Contract requires Mitchell Hutchins to use its best efforts,
consistent with its other businesses, to sell shares of the Fund. Shares of the
Fund are offered continuously. Under separate exclusive dealer agreements
between Mitchell Hutchins and PaineWebber relating to the Class A, Class B and
Class C shares of the Fund (collectively, "Exclusive Dealer Agreements"),
PaineWebber and its correspondent firms sell the Fund's shares.
Under separate plans of distribution pertaining to the Class A, Class B and
Class C shares of the Fund adopted by the Corporation in the manner prescribed
under Rule 12b-1 under the 1940 Act ("Class A Plan," "Class B Plan" and "Class C
Plan," collectively, "Plans"), the Fund pays Mitchell Hutchins a service fee,
accrued daily and payable monthly, at the annual rate of 0.25% of the average
daily net assets of each Class of shares. Under the Class B and Class C Plans,
the Fund pays Mitchell Hutchins distribution fees, accrued daily and payable
monthly, at the annual rate of 0.50% of the average daily net assets of the
Class B shares and the Class C shares.
Among other things, each Plan provides that (1) Mitchell Hutchins will
submit to the board at least quarterly, and the board will review, reports
regarding all amounts expended under the Plan and the purposes for which such
expenditures were made, (2) the Plan will continue in effect only so long as it
is approved at least annually, and any material amendment thereto is approved,
by the board, including those directors who are not "interested persons" of the
Corporation and who have no direct or indirect financial interest in the
operation of the Plan or any agreement related to the Plan, acting in person at
a meeting called for that purpose, (3) payments by the Fund under the Plan shall
not be materially increased without the affirmative vote of the holders of a
majority of the outstanding shares of the relevant Class and (4) while the Plan
remains in effect, the selection and nomination of directors who are not
"interested persons" of the Corporation shall be committed to the discretion of
the directors who are not "interested persons" of the Corporation.
15
<PAGE>
In reporting amounts expended under the Plans to the directors, Mitchell
Hutchins will allocate expenses attributable to the sale of each class of Fund
shares to such class based on the ratio of sales of shares of such class to the
sales of all three classes of shares. The fees paid by one class of Fund shares
will not be used to subsidize the sale of any other class of Fund shares.
For the fiscal year ended February 28, 1998, the Fund paid (or accrued) fees
to Mitchell Hutchins under the Plans as follows: Class A--$38,643, Class
B--$141,332 and Class C--$46,409.
Mitchell Hutchins estimates that it and its parent corporation, PaineWebber,
incurred the following shareholder service-related and distribution-related
expenses with respect to the Fund for the fiscal year ended February 28, 1998:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------- --------- ---------
<S> <C> <C> <C>
Marketing and advertising......................... $ 29,871 $ 36,221 $ 12,162
Amortization of commissions....................... N/A 54,170 11,757
Printing of prospectuses and statements of
additional information for other than current
shareholders.................................... 285 346 116
Branch network costs allocated and interest
expense......................................... 68,706 88,555 28,180
Service fees paid to PaineWebber investment
executives...................................... 14,685 17,903 5,878
</TABLE>
"Marketing and advertising" includes various internal costs allocated by
Mitchell Hutchins in its efforts at distributing Fund shares. These internal
costs encompass office rent, salaries and other overhead expenses of various
departments and areas of operations of Mitchell Hutchins. "Branch network costs
allocated and interest expense" consist of an allocated portion of the expenses
of various PaineWebber departments involved in the distribution of the Fund's
shares, including the PaineWebber retail branch system.
In approving the Class A Plan, the board considered all the features of the
distribution system, including (1) the benefit to the Fund and its shareholders
of the Fund being available as an exchange vehicle for the Class A shares of
other PaineWebber mutual funds such that Class A Fund shares could be exchanged
with Class A shares of other PaineWebber mutual funds without an initial sales
charge being incurred, (2) the advantages to the shareholders of economies of
scale resulting from growth in the Fund's assets and potential continued growth,
(3) the services provided to the Fund and its shareholders by Mitchell Hutchins,
(4) the services provided by PaineWebber pursuant to its Exclusive Dealer
Agreement with Mitchell Hutchins and (5) Mitchell Hutchins' shareholder
service-related expenses and costs.
In approving the Class B Plan, the board considered all the features of the
distribution system, including (1) the conditions under which contingent
deferred sales charges would be imposed and the amount of such charges, (2) the
benefit to the Fund and its shareholders of the Fund being available as an
exchange vehicle for shares of the corresponding class of other PaineWebber
mutual funds such that Class B Fund shares could be exchanged with shares of the
corresponding class of other PaineWebber mutual funds without a contingent
deferred sales charge being incurred; (3) the advantages to the shareholders of
economies of scale resulting from growth in the Fund's assets and potential
continued growth, (4) the services provided to the Fund and its shareholders by
Mitchell Hutchins, (5) the services provided by PaineWebber pursuant to its
Exclusive Dealer Agreement with Mitchell Hutchins and (6) Mitchell Hutchins'
shareholder service and distribution-related expenses and costs.
In approving the Class C Plan, the board considered all the features of the
distribution system, including (1) the benefit to the Fund and its shareholders
of the Fund being available as an exchange vehicle for shares of the
corresponding class of other PaineWebber mutual funds, (2) the advantage to
16
<PAGE>
investors in paying for distribution on an ongoing basis, (3) Mitchell Hutchins'
belief that the ability of PaineWebber investment executives and correspondent
firms to receive sales compensation for their sales of Class C shares on an
ongoing basis, along with continuing service fees, while their customers invest
their entire purchase payments immediately in Class C shares and do not face
contingent deferred sales charges for shares held more than one year, would
prove attractive to the investment executives and correspondent firms, resulting
in greater growth to the Fund than might otherwise be the case, (4) the
advantages to the shareholders of economies of scale resulting from growth in
the Fund's assets and potential continued growth, (5) the services provided to
the Fund and its shareholders by Mitchell Hutchins, (6) the services provided by
PaineWebber pursuant to its Exclusive Dealer Agreement with Mitchell Hutchins
and (7) Mitchell Hutchins' shareholder service and distribution-related expenses
and costs. The directors also recognized that Mitchell Hutchins' willingness to
compensate PaineWebber and its investment executives, without the concomitant
receipt by Mitchell Hutchins of initial sales charges or contingent deferred
sales charges upon redemption of shares held more than one year, was conditioned
upon its expectation of being compensated under the Class C Plan.
With respect to each Plan, the board considered all compensation that
Mitchell Hutchins would receive under the Plan and the Distribution Contract,
including service fees and, as applicable, distribution fees and contingent
deferred sales charges. The board also considered the benefits that would accrue
to Mitchell Hutchins under each Plan in that Mitchell Hutchins would receive
service, distribution and advisory fees which are calculated based upon a
percentage of the average net assets of the Fund, which fees would increase if
the Plan were successful and the Fund attained and maintained significant asset
levels.
For the fiscal year ended February 28, 1998, Mitchell Hutchins earned and
retained the following initial sales charges paid on certain purchases of Class
A shares, and contingent deferred sales charges paid upon certain redemptions of
Class B and Class C shares:
<TABLE>
<S> <C>
Class A............. $ 1,121
Class B............. $ 82,318
Class C............. $ 6,118
</TABLE>
PORTFOLIO TRANSACTIONS
The Advisory Contract authorizes Mitchell Hutchins (with the approval of the
board) to select brokers and dealers to execute purchases and sales of the
Fund's portfolio securities. It directs Mitchell Hutchins to use its best
efforts to obtain the best available price and most favorable execution with
respect to all transactions for the Fund. To the extent that the execution and
price offered by more than one dealer are comparable, Mitchell Hutchins may, in
its discretion, effect transactions in portfolio securities with dealers who
provide the Fund with research, analysis, advice and similar services. The Fund
will not purchase portfolio securities at a higher price or sell such securities
at a lower price in connection with transactions effected with a dealer, acting
as principal, who furnishes research services to Mitchell Hutchins than would be
the case if no weight were given by Mitchell Hutchins to the dealer's furnishing
of such services. For purchases or sales with broker-dealer firms that act as
principal, Mitchell Hutchins seeks best execution. Although Mitchell Hutchins
may receive certain research or execution services in connection with those
transactions, Mitchell Hutchins will not purchase securities at a higher price
or sell securities at a lower price than would otherwise be paid if no weight
was attributed to the services provided by the executing dealer. Moreover,
Mitchell Hutchins will not enter into any explicit soft dollar arrangements
relating to principal transactions and will not receive in principal
transactions the types of services that could be
17
<PAGE>
purchased for hard dollars. Mitchell Hutchins may engage in agency transactions
in over-the-counter ("OTC") equity and debt securities in return for research
and execution services. These transactions are entered into only in compliance
with procedures ensuring that the transaction (including commissions) is at
least as favorable as it would have been if effected directly with a
market-maker that did not provide research or execution services. These
procedures include Mitchell Hutchins receiving multiple quotes from dealers
before executing the transactions on an agency basis. Research services
furnished by the dealers through which or with which the Fund effects securities
transactions may be used by Mitchell Hutchins in advising other funds or
accounts and, conversely, research services furnished to Mitchell Hutchins by
dealers in connection with other funds or accounts that Mitchell Hutchins
advises may be used by Mitchell Hutchins in advising the Fund. Since its
inception, the Fund has not paid any brokerage commissions, nor has it allocated
any transactions to dealers for research, analysis, advice and similar services.
Information and research received from such dealers will be in addition to, and
not in lieu of, the services required to be performed by Mitchell Hutchins under
the Advisory Contract.
The Fund purchases portfolio securities from dealers and underwriters as
well as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.
Investment decisions for the Fund and for other investment accounts managed
by Mitchell Hutchins are made independently of each other in light of differing
considerations for the various accounts. However, the same investment decision
may occasionally be made for the Fund and one or more of such accounts. In such
cases, simultaneous transactions are inevitable. Purchases or sales are then
averaged as to price and allocated between the Fund and such other account(s) as
to amount according to a formula deemed equitable to the Fund and such
account(s). While in some cases this practice could have a detrimental effect
upon the price or value of the security as far as the Fund is concerned or upon
its ability to complete its entire order, in other cases it is believed that
coordination and the ability to participate in volume transactions will be
beneficial to the Fund.
HOLDINGS OF REGULAR BROKER-DEALERS. As of February 28, 1998, the Fund held
the following securities issued by entities which are regular broker-dealers for
the Fund:
<TABLE>
<CAPTION>
ISSUER TYPE OF SECURITY VALUE
- --------------------------------------------------- -------------------------------------- ----------
<S> <C> <C>
Goldman Sachs & Company Commercial Paper $ 994,378
Merrill Lynch & Company, Incorporated Commercial Paper 997,560
Bear Stearns Companies, Incorporated Short-Term Corporate Obligations 500,000
Lehman Brothers Holdings, Incorporated Short-Term Corporate Obligations 200,837
</TABLE>
ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION;
REDUCED SALES CHARGES
As discussed in the Prospectus, shares of the Fund may be exchanged for
shares of the corresponding Class of most other PaineWebber mutual funds.
Shareholders will receive at least 60 days' notice of any termination or
material modification of the exchange offer, except no notice need be given of
an amendment whose only material effect is to reduce an
18
<PAGE>
exchange fee and no notice need be given if, under extraordinary circumstances,
either redemptions are suspended under the circumstances described below or the
Fund temporarily delays or ceases the sales of its shares because it is unable
to invest amounts effectively in accordance with the Fund's investment
objective, policies and restrictions.
If conditions exist which make cash payments undesirable, the Fund reserves
the right to honor any request for redemption by making payment in whole or in
part in securities chosen by the Fund and valued in the same way as they would
be valued for purposes of computing the Fund's net asset value. Any such
redemption in kind will be made with readily marketable securities, to the
extent available. If payment is made in securities, a shareholder may incur
brokerage expenses in converting these securities into cash. The Corporation has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, under which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund during any 90-day period for
one shareholder. This election is irrevocable unless the Securities and Exchange
Commission ("SEC") permits its withdrawal. The Fund may suspend redemption
privileges or postpone the date of payment during any period (1) when the New
York Stock Exchange ("NYSE") is closed or trading on the NYSE is restricted as
determined by the SEC, (2) when an emergency exists, as defined by the SEC,
which makes it not reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its assets or (3) as the SEC may
otherwise permit. The redemption price may be more or less than the
shareholder's cost, depending on the market value of the Fund's portfolio at the
time.
WAIVERS OF SALES CHARGES--CLASS B SHARES. Among other circumstances, the
contingent deferred sales charge on Class B shares is waived where a total or
partial redemption is made within one year following the death of the
shareholder. The contingent deferred sales charge waiver is available where the
decedent is either the sole shareholder or owns the shares with his or her
spouse as a joint tenant with right of survivorship. This waiver applies only to
redemptions of shares held at the time of death.
CONVERSION OF CLASS B SHARES
Class B shares will automatically convert to Class A shares, based on the
relative net asset values per share of the two classes, as of the close of
business on the first Business Day (as defined below) of the month in which the
sixth anniversary of the initial issuance of such Class B shares occurs. For
these purposes, the date of initial issuance shall mean the date of issuance of
the original Class B shares of other PaineWebber mutual funds that were
exchanged (directly or through a series of exchanges) for the Fund's Class B
shares. For purposes of conversion to Class A shares, Class B shares purchased
through the reinvestment of dividends and other distributions paid in respect of
Class B shares of the Fund or those other PaineWebber mutual funds are held in a
separate sub-account. Each time any Class B shares in the shareholder's regular
account (other than those in the sub-account) convert to Class A shares, a pro
rata portion of the Class B shares in the sub-account also converts to Class A
shares. The portion is determined by the ratio that the shareholder's Class B
shares converting to Class A shares bears to the shareholder's total Class B
shares not acquired through dividends and other distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
"preferential dividends" under the Internal Revenue Code and the conversion of
shares does not constitute a taxable event. If the conversion feature ceased to
be available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond six years
from the date of purchase. Mitchell Hutchins has no reason to believe that this
condition for the availability of the conversion feature will not continue to be
met.
19
<PAGE>
VALUATION OF SHARES
The Fund determines its net asset value per share separately for each Class
as of the close of regular trading (currently 4:00 p.m., Eastern time) on the
NYSE on each Monday through Friday when the NYSE is open. Currently, the NYSE is
closed on the observance of the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ("Rule") under the 1940 Act. To use
amortized cost to value its portfolio securities, the Fund must adhere to
certain conditions under that Rule relating to the Fund's investments, some of
which are discussed in the Prospectus. Amortized cost is an approximation of
market value of an instrument, whereby the difference between its acquisition
cost and value at maturity is amortized on a straight-line basis over the
remaining life of the instrument. The effect of changes in the market value of a
security as a result of fluctuating interest rates is not taken into account and
thus the amortized cost method of valuation may result in the value of a
security being higher or lower than its actual market value. In the event that a
large number of redemptions take place at a time when interest rates have
increased, the Fund may have to sell portfolio securities prior to maturity and
at a price that might not be desirable.
The board has established procedures for the purpose of maintaining a
constant net asset value of $1.00 per share, which include a review of the
extent of any deviation of net asset value per share, based on available market
quotations, from the $1.00 amortized cost per share. Should that deviation
exceed 1/2 of 1%, the directors will promptly consider whether any action should
be initiated to eliminate or reduce material dilution or other unfair results to
shareholders. Such action may include redeeming shares in kind, selling
portfolio securities prior to maturity, reducing or withholding dividends and
utilizing a net asset value per share as determined by using available market
quotations. The Fund will maintain a dollar-weighted average portfolio maturity
of 90 days or less and will not purchase any instrument having, or deemed to
have, a remaining maturity greater than 13 months, will limit portfolio
investments, including repurchase agreements, to those U.S. dollar-denominated
instruments that are of high quality and that the directors determine present
minimal credit risks as advised by Mitchell Hutchins, and will comply with
certain reporting and recordkeeping procedures. There is no assurance that
constant net asset value will be maintained. In the event amortized cost ceases
to represent fair value per share, the board will take appropriate action.
In determining the approximate market value of portfolio investments, the
Fund may employ outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board.
CALCULATION OF YIELD
The Fund computes its yield and effective yield quotations for each class of
shares using standardized methods required by the SEC. The Fund from time to
time advertises for each class of shares (1) the current yield based on a
recently ended seven-day period, computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one share of such class at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account at the
beginning of the
20
<PAGE>
base period to obtain the base period return, and then multiplying the base
period return by (365/7), with the resulting yield figure carried to at least
the nearest hundredth of one percent, and (2) the effective yield based on the
same seven-day period by compounding the base period return and by adding 1,
raising the sum to a power equal to (365/7) and subtracting 1 from the result,
according to the following formula:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ] - 1
For the seven days ended February 28, 1998, the yield of the Fund's Class A
shares was 4.13%, of the Class B shares was 3.63% and of the Class C shares was
3.67%. The effective yield of the Fund's Class A shares was 4.21%, of the Class
B shares was 3.69% and of the Class C shares was 3.74%.
The Fund may also advertise other performance data, which may consist of the
annual or cumulative return (including realized net short-term capital gain, if
any) earned on a hypothetical investment in the Fund since it began operations
or for shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of each class of shares of the Fund fluctuates,
it cannot be compared with yields on savings accounts or other investment
alternatives that provide an agreed-to or guaranteed fixed yield for a stated
period of time. However, yield information may be useful to an investor
considering temporary investments in money market instruments. In comparing the
yield of one money market fund to another, consideration should be given to each
fund's investment policies, including the types of investments made, the average
maturity of the portfolio securities and whether there are any special account
charges which may reduce the yield.
OTHER INFORMATION. The Fund's performance data quoted in advertising and
other promotional materials ("Performance Advertisements") represent past
performance and are not intended to indicate future results. The return on an
investment in the Fund will fluctuate. In Performance Advertisements, the Fund
may compare its yield with data published by Lipper Analytical Services, Inc.
for money funds ("Lipper"), CDA Investment Technologies, Inc. ("CDA"),
IBC/Donoghue's Money Market Fund Report ("Donoghue"), Wiesenberger Investment
Companies Service ("Wiesenberger"), Investment Company Data Inc. ("ICD") or
Morningstar Mutual Funds ("Morningstar"), or with the performance of recognized
stock and other indexes, including (but not limited to) the Standard & Poor's
500 Composite Stock Price Index, the Dow Jones Industrial Average, the Morgan
Stanley Capital World Index, the Lehman Brothers 20+ Year Treasury Bond Index,
the Lehman Brothers Government/Corporate Bond Index, the Salomon Brothers
Non-U.S. World Government Bond Index and the Consumer Price Index as published
by the U.S. Department of Commerce. The Fund also may refer in such materials to
mutual fund performance rankings and other data, such as comparative asset,
expense and fee levels, published by Lipper, CDA, Donoghue, Wiesenberger, ICD or
Morningstar. Performance Advertisements also may refer to discussions of the
Fund and comparative mutual fund data and ratings reported in independent
periodicals, including THE WALL STREET JOURNAL, MONEY Magazine, FORBES, BUSINESS
WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES, THE CHICAGO
TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS. Comparisons in
Performance Advertisements may be in graphic form.
The Fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends or other distributions on a Fund investment are reinvested by
being paid in additional Fund shares, any future income or capital appreciation
of the Fund would increase the value, not only of the original Fund investment,
but also of the
21
<PAGE>
additional Fund shares received through reinvestment. As a result, the value of
the Fund investment would increase more quickly than if dividends or other
distributions had been paid in cash.
The Fund may also compare its performance with the performance of bank
certificates of deposit (CDs) as measured by the CDA Certificate of Deposit
Index, the Bank Rate Monitor National Index and the averages of yields of CDs of
major banks published by Banxquote-C- Money Markets. In comparing the Fund's
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Fund shares are not insured or guaranteed by the U.S.
government, its returns will fluctuate, and while the Fund attempts to maintain
a stable net asset value of $1.00 per share, there is no assurance that it will
be able to do so.
TAXES
To continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gain, if any) and must meet several additional requirements. Among these
requirements are the following: (1) the Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of securities and
certain other income; (2) at the close of each quarter of the Fund's taxable
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. government securities, securities of other RICs and other
securities that are limited, in respect of any one issuer, to an amount that
does not exceed 5% of the value of the Fund's total assets; and (3) at the close
of each quarter of the Fund's taxable year, not more than 25% of the value of
its total assets may be invested in securities (other than U.S. government
securities or securities of other RICs) of any one issuer. If the Fund failed to
qualify for treatment as a RIC for any taxable year, it would be taxed as an
ordinary corporation on its taxable income for that year (even if that income
was distributed to its shareholders) and all distributions out of its earnings
and profits would be taxable to its shareholders, as dividends (that is,
ordinary income).
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.
OTHER INFORMATION
CLASS-SPECIFIC EXPENSES. The Fund might determine to allocate certain of
its expenses (in addition to distribution fees) to the specific classes of its
shares to which those expenses are attributable. For example, Class B and Class
C shares bear higher transfer agency fees per shareholder account than those
borne by Class A shares. The higher fee is imposed due to the higher costs
incurred by the transfer agent in tracking shares subject to a contingent
deferred sales charge because, upon redemption, the duration of the
shareholder's investment must be determined in order to determine the applicable
charge. Although the transfer agency fee will differ on a per account basis as
stated above, the specific extent to which the transfer agency fees will differ
between the classes as a percentage of net assets is not certain, because the
fee as a percentage of net assets will be affected by the number of shareholder
accounts in each class and the relative amounts of net assets in each class.
22
<PAGE>
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the Corporation.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP, 1177 Avenue of the Americas,
New York, N.Y. 10036, serves as the Corporation's independent accountants.
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders for the most recent fiscal year is
a separate document supplied with this Statement of Additional Information, and
the financial statements, accompanying notes and report of independent
accountants appearing therein are incorporated by reference in this Statement of
Additional Information.
23
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THE PROSPECTUS
AND THIS STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFERING BY
THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Investment Policies and Restrictions............. 1
Directors and Officers; Principal Holders of
Securities..................................... 6
Investment Advisory, Administration and
Distribution Arrangements...................... 13
Portfolio Transactions........................... 17
Additional Exchange and Redemption Information;
Reduced Sales Charges.......................... 18
Conversion of Class B Shares..................... 19
Valuation of Shares.............................. 20
Calculation of Yield............................. 20
Taxes............................................ 22
Other Information................................ 22
Financial Statements............................. 23
</TABLE>
- -C- 1998 PaineWebber Incorporated
PAINEWEBBER
MONEY MARKET FUND
-------------------------
STATEMENT OF ADDITIONAL INFORMATION
JULY 1, 1998
- -----------------------------------
[LOGO]
<PAGE>
PART C. OTHER INFORMATION
--------------------------
Item 23. Exhibits
--------
(1) Restated Articles of Incorporation (filed herewith)
(2) Restated By-Laws (filed herewith)
(3) Instruments defining the rights of holders of the Registrant's
common stock 1/
(4) Investment Advisory and Administration Contract (filed herewith)
(5) (a) Distribution Contract with respect to Class A shares (filed
herewith)
(b) Distribution Contract with respect to Class B shares (filed
herewith)
(c) Distribution Contract with respect to Class C shares 2/
(d) Distribution Contract with respect to Class Y shares 2/
(e) Exclusive Dealer Agreement with respect to Class A shares
(filed herewith)
(f) Exclusive Dealer Agreement with respect to Class B shares
(filed herewith)
(g) Exclusive Dealer Agreement with respect to Class C shares 2/
(h) Exclusive Dealer Agreement with respect to Class Y shares 2/
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (filed herewith)
(8) Transfer Agency Agreement (filed herewith)
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Accountant's
Consent (filed herewith)
(11) Financial statements omitted from prospectus - none
(12) Letter of investment intent (filed herewith)
(13) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to
Class A Shares (filed herewith)
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to
Class B Shares (filed herewith)
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to
Class C, formerly Class D, Shares (filed herewith)
(14) and
(27) Financial Data Schedule (filed herewith)
(15) Plan pursuant to Rule 18f-3 3/
- --------------
1/ Incorporated by reference from Articles Sixth, Seventh, Eighth,
Eleventh and Twelfth of the Registrant's Restated Articles of
Incorporation and from Articles II, VIII, X, XI and XII of the
Registrant's Restated By-Laws.
2/ Incorporated by reference from Post-Effective Amendment No. 28 to the
registration statement, SEC File No. 33-2524, filed July 1, 1996.
C-1
<PAGE>
3/ Incorporated by reference from Post-Effective Amendment No. 30 to the
registration statement, SEC File No. 33-2524, filed September 20,
1996.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 25. INDEMNIFICATION
Article Eleventh of the Articles of Incorporation provides that the directors
and officers of the Registrant shall not be liable to the Registrant or to any
of its stockholders for monetary damages to the maximum extent permitted by
applicable law. Article Eleventh also provides that any repeal or modification
of Article Eleventh or adoption, or modification of any other provision of the
Articles or By-Laws inconsistent with Article Eleventh shall not adversely
affect any limitation of liability of any director or officer of the Registrant
with respect to any act or failure to act which occurred prior to such repeal,
modification or adoption.
Article Eleventh of the Articles of Incorporation and Section 10.01 of Article X
of the By-Laws provide that the Registrant shall indemnify and advance expenses
to its present and past directors, officers, employees and agents, and any
persons who are serving or have served at the request of the Registrant as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or enterprise, to the fullest extent permitted by law.
Section 10.02 of Article X of the By-Laws further provides that the Registrant
may purchase and maintain insurance on behalf of any person who is or was a
director, officer or employee of the Registrant, or is or was serving at the
request of the Registrant as a director, officer or employee of a corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or out of his or her status as such whether or not the
Registrant would have the power to indemnify him or her against such liability.
Section 9 of the Investment Advisory and Administration Contract provides that
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
Registrant in connection with the matters to which the Contract relates except
for a loss resulting from willful misfeasance, bad faith or gross negligence of
Mitchell Hutchins in the performance of its duties or from its reckless
disregard of its obligations and duties under the Contract. Section 9 further
provides that 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 Registrant shall be deemed, when rendering services to the
Registrant or acting with respect to any business of the Registrant, to be
rendering such service to or acting solely for the Registrant and not as an
officer, partner, employee, or agent or one under the control or direction of
Mitchell Hutchins even though paid by it.
Section 9 of each Distribution Contract provides that the Registrant will
indemnify Mitchell Hutchins and its officers, directors or controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by Mitchell Hutchins to the Registrant for use in the Registration
Statement; and provided that this indemnity agreement shall not protect any such
persons against liabilities arising by reason of their bad faith, gross
negligence or willful misfeasance; and shall not inure to the benefit of any
such persons unless a court of competent jurisdiction or controlling precedent
determines that such result is not against public policy as expressed in the
Securities Act of 1933. Section 9 of each Distribution Contract also provides
that Mitchell Hutchins agrees to indemnify, defend and hold the Registrant, its
officers and directors free and harmless of any claims arising out of any
alleged untrue statement or any alleged omission of material fact contained in
information furnished by Mitchell Hutchins for use in the Registration Statement
or arising out of an agreement between Mitchell Hutchins and any retail dealer,
or arising out of supplementary literature or advertising used by Mitchell
Hutchins in connection with each Distribution Contract.
C-2
<PAGE>
Section 9 of each Exclusive Dealer Agreement contains provisions similar to
Section 9 of each Distribution Contract, with respect to PaineWebber
Incorporated ("PaineWebber").
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be provided to directors, officers and controlling persons
of the Registrant, pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Registrant by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Mitchell Hutchins, a Delaware corporation, is a registered investment adviser
and is a wholly owned subsidiary of PaineWebber which is, in turn, a wholly
owned subsidiary of Paine Webber Group Inc. Mitchell Hutchins is primarily
engaged in the investment advisory business. Information as to the officers and
directors of Mitchell Hutchins is included in its Form ADV, as filed with the
Securities and Exchange Commission (registration number 801-13219) and is
incorporated herein by reference.
Item 27. PRINCIPAL UNDERWRITERS
a) Mitchell Hutchins serves as principal underwriter and/or
investment adviser for the following investment companies:
ALL-AMERICAN TERM TRUST, INC.
GLOBAL HIGH INCOME DOLLAR FUND, INC.
GLOBAL SMALL CAP FUND, INC.
INSURED MUNICIPAL INCOME FUND, INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND, INC.
MANAGED HIGH YIELD FUND, INC.
MANAGED HIGH YIELD PLUS FUND INC.
MITCHELL HUTCHINS PORTFOLIOS
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND, INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST, INC.
C-3
<PAGE>
b) Mitchell Hutchins is the principal underwriter for the
Registrant. PaineWebber acts as exclusive dealer for the shares
of the Registrant. The directors and officers of Mitchell
Hutchins, their principal business addresses, and their positions
and offices with Mitchell Hutchins are identified in its Form
ADV, as filed with the Securities and Exchange Commission
(registration number 801-13219). The directors and officers of
PaineWebber, their principal business addresses, and their
positions and offices with PaineWebber are identified in its Form
ADV, as filed with the Securities and Exchange Commission
(registration number 801-163). The foregoing information is
hereby incorporated herein by reference. The information set
forth below is furnished for those directors and officers of
Mitchell Hutchins or PaineWebber who also serve as directors or
officers of the Registrant. Unless otherwise indicated, the
principal business address of each person named is 1285 Avenue of
the Americas, New York, NY 10019.
Position and Offices With
Underwriter or
Name Position With Registrant Exclusive Dealer
- ------ ------------------------ ----------------
Margo N. Alexander Director and President President, Chief Executive
Officer and a Director of
Mitchell Hutchins and
Executive Vice President of
PaineWebber
Mary C. Farrell Director Managing Director, Senior
Investment Strategist and
Member of the Investment
Policy Committee of
PaineWebber
T. Kirkham Barneby Vice President Managing Director and Chief
Investment Officer -
Quantitative Investments of
Mitchell Hutchins
John J. Lee Vice President and Vice President and a Manager
Assistant Treasurer of the Mutual Fund Finance
Division of Mitchell Hutchins
Dennis McCauley Vice President Managing Director and Chief
Investment Officer - Fixed
Income of Mitchell Hutchins
Ann E. Moran Vice President and Vice President and a Manager
Assistant Treasurer of the Mutual Fund Finance
Division of Mitchell Hutchins
Dianne E. O'Donnell Vice President and Senior Vice President and
Secretary Deputy General Counsel of
Mitchell Hutchins
Emil Polito Vice President Senior Vice President and
Director of Operations and
Control for Mitchell Hutchins
Susan Ryan Vice President Senior Vice President and a
Portfolio Manager at Mitchell
Hutchins
Victoria E. Schonfeld Vice President Managing Director and General
Counsel of Mitchell Hutchins
Paul H. Schubert Vice President and First Vice President and
Treasurer Director of the Mutual Fund
Finance Division of Mitchell
Hutchins
Nirmal Singh Vice President First Vice President and a
Portfolio Manager at Mitchell
Hutchins
C-4
<PAGE>
Position and Offices With
Underwriter or
Name Position With Registrant Exclusive Dealer
- ----- ------------------------ ----------------
Barney A. Vice President and Vice President and a Manager
Taglialatela Assistant Treasurer of the Mutual Fund Finance
Division of Mitchell Hutchins
Mark A. Tincher Vice President Managing Director and Chief
Investment Officer - U.S.
Equity Investments of Mitchell
Hutchins
Craig Varrelman Vice President First Vice President and a
Portfolio Manager of Mitchell
Hutchins
Keith A. Weller Vice President and First Vice President and
Assistant Secretary Associate General Counsel of
Mitchell Hutchins
Ian W. Williams Vice President and Vice President and a Manager
Assistant Treasurer of the Mutual Fund Finance
Division of Mitchell Hutchins
c) None
Item 28. LOCATION OF ACCOUNTS AND RECORDS
The books and other documents required by paragraphs (b)(4), (c) and (d) of Rule
31a-1 under the Investment Company Act of 1940 are maintained in the physical
possession of Mitchell Hutchins, 1285 Avenue of the Americas, New York, New York
10019. All other accounts, books and documents required by Rule 31a-1 are
maintained in the physical possession of Registrant's transfer agent and
custodian.
Item 29. MANAGEMENT SERVICES
Not applicable.
Item 30. UNDERTAKINGS
None.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State of
New York, on the 26th day of June, 1998.
PAINEWEBBER MASTER SERIES, INC.
By: /s/ Dianne E. O'Donnell
-----------------------------------
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Margo N. Alexander President and Director June 26, 1998
- ------------------------------ (Chief Executive Officer)
Margo N. Alexander*
/s/ E. Garrett Bewkes, Jr. Director and Chairman June 26, 1998
- ------------------------------ of the Board of Directors
E. Garrett Bewkes, Jr.*
/s/ Richard Q. Armstrong Director June 26, 1998
- ------------------------------
Richard Q. Armstrong*
/s/ Richard R. Burt Director June 26, 1998
- ------------------------------
Richard R. Burt*
/s/ Mary C. Farrell Director June 26, 1998
- ------------------------------
Mary C. Farrell*
/s/ Meyer Feldberg Director June 26, 1998
- ------------------------------
Meyer Feldberg*
/s/ George W. Gowen Director June 26, 1998
- ------------------------------
George W. Gowen*
/s/ Frederic V. Malek Director June 26, 1998
- ------------------------------
Frederic V. Malek*
/s/ Carl W. Schafer Director June 26, 1998
- ------------------------------
Carl W. Schafer*
/s/ Paul H. Schubert Vice President and Treasurer June 26, 1998
- ------------------------------ (Chief Financial and
Paul H. Schubert Accounting Officer)
<PAGE>
SIGNATURES (CONTINUED)
Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated
May 21, 1996 and incorporated by reference from Post-Effective Amendment
No. 25 to the registration statement of PaineWebber RMA Tax-Free Fund,
Inc., SEC File 2-78310, filed June 27, 1996.
<PAGE>
PAINEWEBBER MASTER SERIES, INC.
EXHIBIT INDEX
-------------
Exhibit
NUMBER
- ------
(1) Restated Articles of Incorporation (filed herewith)
(2) Restated By-Laws (filed herewith)
(3) Instruments defining the rights of holders of the Registrant's common
stock 1/
(4) Investment Advisory and Administration Contract (filed herewith)
(5) (a) Distribution Contract with respect to Class A shares (filed
herewith)
(b) Distribution Contract with respect to Class B shares (filed
herewith)
(c) Distribution Contract with respect to Class C shares 2/
(d) Distribution Contract with respect to Class Y shares 2/
(e) Exclusive Dealer Agreement with respect to Class A shares (filed
herewith)
(f) Exclusive Dealer Agreement with respect to Class B shares (filed
herewith)
(g) Exclusive Dealer Agreement with respect to Class C shares 2/
(h) Exclusive Dealer Agreement with respect to Class Y shares 2/
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (filed herewith)
(8) Transfer Agency Agreement (filed herewith)
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Accountant's Consent
(filed herewith)
(11) Financial statements omitted from prospectus - none
(12) Letter of investment intent (filed herewith)
(13) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
A Shares (filed herewith)
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
B Shares (filed herewith)
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
C, formerly Class D, Shares (filed herewith)
(14) and
(27) Financial Data Schedule (filed herewith)
(15) Plan pursuant to Rule 18f-3 3/
_____________
1/ Incorporated by reference from Articles Sixth, Seventh, Eighth, Eleventh
and Twelfth of the Registrant's Restated Articles of Incorporation and from
Articles II, VIII, X, XI and XII of the Registrant's Restated By-Laws.
<PAGE>
2/ Incorporated by reference from Post-Effective Amendment No. 28 to the
registration statement, SEC File No. 33-2524, filed July 1, 1996.
3/ Incorporated by reference from Post-Effective Amendment No. 30 to the
registration statement, SEC File No. 33-2524, filed September 20, 1996.
<PAGE>
Exhibit No. 1
RESTATEMENT OF ARTICLES OF INCORPORATION
PAINEWEBBER MASTER SERIES, INC.
PaineWebber Master Series, Inc., a Maryland corporation, desires to restate
its existing Articles of Incorporation by adopting the following Restatement of
Articles of Incorporation, as approved by a majority of the Board of Directors
on May 13, 1998. The provisions set forth in this Restatement of Articles of
Incorporation, which do not amend the existing Articles of Incorporation,
restate all the provisions of the charter currently in effect and otherwise
permitted by Maryland General Corporate Law.
FIRST:
The undersigned, Arthur J. Brown, whose post office address is 1800 M
Street, N.W., Washington, D.C. 20036, being at least twenty-one years of age,
under and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations, is acting as the sole incorporator with the intention
of forming a corporation (hereinafter called the "Corporation").
SECOND: NAME.
The name of the Corporation is PaineWebber Master Series, Inc.
THIRD: DURATION.
The duration of the Corporation shall be perpetual.
FOURTH: CORPORATE PURPOSES.
The purposes for which the Corporation is formed are to act as an open-end
management investment company under the Investment Company Act of 1940, as
amended, and to exercise and enjoy all of the powers, rights and privileges
granted to, or conferred upon, corporations of a similar character by the Public
General Laws of the State of Maryland now or hereafter in force, including, but
not limited to, the following:
(a) To hold, invest and reinvest its funds, and in connection therewith to
hold part or all of its funds in cash, and to purchase, subscribe for
or otherwise acquire, hold for investment or otherwise, to trade and
deal in, write, sell, assign, negotiate, transfer, exchange, lend,
pledge or otherwise dispose of or turn to account or realize upon,
securities (which term "securities" shall, for the purposes of these
Articles of Incorporation, without limiting the generality thereof, be
deemed to include any stocks, shares, bonds, debentures, bills, notes,
mortgages or other obligations or evidences of indebtedness, and any
options, certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or
in any property or assets; and any negotiable or non-negotiable
instruments and
<PAGE>
money market instruments, including bank certificates of deposit,
finance paper, commercial paper, bankers' acceptances and all kinds of
repurchase or reverse repurchase agreements) created or issued by any
United States or foreign issuer (which term "issuer" shall, for the
purpose of these Articles of Incorporation, without limiting the
generality thereof, be deemed to include any persons, firms,
associations, partnerships, corporations, syndicates, combinations,
organizations, governments or subdivisions, agencies or
instrumentalities of any government); and to exercise, as owner or
holder of any securities, all rights, powers and privileges in respect
thereof including the right to vote thereon; to aid by further
investment any issuer, any obligation of or interest in which is held
by the Corporation or in the affairs of which the Corporation has any
direct or indirect interest; to guarantee or become surety on any or
all of the contracts, stocks, bonds, notes, debentures and other
obligations of any corporation, company, trust, association or firm;
and to do any and all acts and things for the preservation,
protection, improvement and enhancement in value of any and all such
securities.
(b) To acquire all or any part of the goodwill, rights, property and
business of any person, firm, association or corporation heretofore or
hereafter engaged in any business similar to any business which the
Corporation has the power to conduct, and to hold, utilize, enjoy and
in any manner dispose of the whole or any part of the rights, property
and business so acquired, and to assume in connection therewith any
liabilities of any such person, firm, association or corporation.
(c) To apply for, obtain, purchase or otherwise acquire, any patents,
copyrights, licenses, trademarks, trade names and the like, which may
be capable of being used for any of the purposes of the Corporation;
and to use, exercise, develop, grant licenses in respect of, sell and
otherwise turn to account, the same.
(d) To issue and sell shares of its own capital stock and securities
convertible into such capital stock in such amounts and on such terms
and conditions, for such purposes and for such amount or kind of
consideration (including without limitation thereto, securities) now
or hereafter permitted by the laws of the State of Maryland, by the
Investment Company Act of 1940 and by these Articles of Incorporation,
as its Board of Directors may determine.
(e) To purchase or otherwise acquire, hold, dispose of, resell, transfer,
reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its capital stock in any manner and to
the extent now or hereafter permitted by the laws of the State of
Maryland, by the Investment Company Act of 1940 and by these Articles
of Incorporation.
(f) To conduct its business in all its branches at one or more offices in
Maryland and elsewhere in any part of the world, without restriction
or limit as to extent.
(g) To exercise and enjoy, in Maryland and in any other states,
territories, districts and United States dependencies and in foreign
countries, all of the powers, rights
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and privileges granted to, or conferred upon, corporations by the
Public General Laws of the State of Maryland now or hereafter in
force.
(h) In general to carry on any other business in connection with or
incidental to its corporate purposes, to do everything necessary,
suitable or proper for the accomplishment of such purposes or for the
attainment of any object or the furtherance of any power hereinbefore
set forth, either alone or in association with others, to do every
other act or thing incidental or appurtenant to or growing out of or
connected with its business or purposes, objects or powers, and,
subject to the foregoing, to have and exercise all the powers, rights
and privileges conferred upon corporations by the laws of the State of
Maryland as in force from time to time.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Article of these Articles of
Incorporation, and shall each be regarded as independent and construed as a
power as well as an object and a purpose, and the enumeration of specific
purposes, objects and powers shall not be construed to limit or restrict in any
manner the meaning of general terms or the general powers of the Corporation now
or hereafter conferred by the laws of Maryland, nor shall the expression of one
thing be deemed to exclude another though it be of like nature, not expressed;
provided, however, that the Corporation shall not have power to carry on within
the State of Maryland any business whatsoever that precludes it from being
classified as an ordinary business corporation under the laws of the State of
Maryland; nor shall it carry on any business, or exercise any powers in any
other jurisdiction except to the extent that the same may lawfully be carried on
or exercised under the laws thereof.
Incident to meeting the purposes specified above, the Corporation also
shall have the power to:
(a) acquire (by purchase, lease or otherwise) and hold, use, maintain,
develop and dispose of (by sale or otherwise) any property, real or
personal, and any interest therein;
(b) borrow money and, in connection with such borrowing, issue notes or
other evidence of indebtedness; and
(c) buy, hold, sell, and otherwise deal in and with commodities, indices
of commodities or securities, and foreign exchange, including the
purchase and sale of futures contracts and options on futures
contracts related thereto, subject to any applicable provisions of
law.
FIFTH: ADDRESS AND RESIDENT AGENT.
The post office address of the principal office of the Corporation in this
State is c/o CSC - Lawyers Incorporating Service Company, 11 East Chase Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
this State is CSC - Lawyers Incorporating
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Service Company, and the post office address of the resident agent is 11 East
Chase Street, Baltimore, Maryland 21202.
SIXTH: CAPITAL STOCK.
SECTION 6.1. AUTHORITY TO ISSUE. The total number of shares of capital
stock which the Corporation shall have authority to issue is ten billion
(10,000,000,000) shares, $.001 par value per share ("Shares"), having an
aggregate par value of $l0,000,000, comprising four billion (4,000,000,000)
Shares of the PaineWebber Balanced Fund, one billion (1,000,000,000) Shares of
the PaineWebber Money Market Fund and five billion (5,000,000,000) Shares of the
Corporation that remain unclassified. The Shares may be issued by the Board of
Directors in such separate and distinct series ("Series") and classes of Series
("Classes") as the Board of Directors shall from time to time create and
establish. The Board of Directors shall have full power and authority, in its
sole discretion, to create and establish Series and Classes having such
preferences, rights, voting powers, terms of conversion, restrictions,
limitations on dividends, qualifications, and terms and conditions of redemption
as shall be fixed and determined from time to time by resolution or resolutions
providing for the issuance of such Shares adopted by the Board of Directors. In
event of establishment of Classes, each Class of a Series shall represent
interests in the assets of that Series and have identical voting, dividend,
liquidation and other rights and the same terms and conditions as any other
Class of that Series, except as provided in these Articles of Incorporation
(provided that additional terms of conversion may be adopted in accordance with
Section 6.8(3)(e) of these Articles) and except that expenses allocated to the
Class of a Series may be borne solely by such Class as shall be determined by
the Board of Directors and a Class of a Series may have exclusive voting rights
with respect to matters affecting only that Class. Expenses related to the
distribution of, and other identified expenses that should properly be allocated
to, the Shares of a particular Class or Series may be charged to and borne
solely by such Class or Series and the bearing of expenses solely by a Class or
Series may be appropriately reflected (in a manner determined by the Board of
Directors) and cause differences in the net asset value attributable to, and the
dividend, redemption and liquidation rights of, the Shares of each Class or
Series. In addition, the Board of Directors is hereby expressly granted
authority to increase or decrease the number of Shares of any Series or Class,
but the number of Shares of any Series or Class shall not be decreased by the
Board of Directors below the number of Shares thereof then outstanding.
The Board of Directors of the Corporation is authorized from time to time
to classify or to reclassify, as the case may be, any unissued Shares of the
Corporation in separate Series or Classes. The Shares of said Series or Classes
shall have such preferences, rights, voting powers, terms of conversion,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption as shall be fixed and determined from time to time by
the Board of Directors. The Corporation may hold as treasury shares, reissue
for such consideration and on such terms as the Board of Directors may
determine, or cancel, at their discretion from time to time, any Shares
reacquired by the Corporation. No holder of any of the Shares shall be entitled
as of right to subscribe for, purchase, or otherwise acquire any Shares of the
Corporation which the Corporation proposes to issue or reissue.
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The Corporation shall have authority to issue any additional Shares
hereafter authorized and any Shares redeemed or repurchased by the Corporation.
All Shares of any Series or Class when properly issued in accordance with these
Articles of Incorporation shall be fully paid and nonassessable.
SECTION 6.2. REDEMPTION BY STOCKHOLDERS. Each holder of Shares
("Stockholder") shall have the right at such times as may be permitted by the
Corporation to require the Corporation to redeem all or any part of his or her
Shares at a redemption price per Share equal to the net asset value per Share at
such time as the Board of Directors shall have prescribed by resolution. In the
absence of such resolution, the redemption price per Share shall be the net
asset value next determined (in accordance with Section 6.4) after receipt by
the Corporation of a request for redemption in proper form less such charges as
are determined by the Board of Directors and described in the Corporation's
Registration Statement under the Securities Act of 1933. The Board of Directors
may specify conditions, prices, and places of redemption, and may specify
binding requirements for the proper form or forms of requests for redemption.
Payment of the redemption price may be wholly or partly in securities or other
assets at the value of such securities or assets used in such determination of
net asset value, or may be in cash. Notwithstanding the foregoing, the Board of
Directors may postpone payment of the redemption price and may suspend the right
of the holders of Shares to require the Corporation to redeem Shares during any
period or at any time when and to the extent permissible under the Investment
Company Act of 1940.
SECTION 6.3. REDEMPTION BY THE CORPORATION. The Board of Directors may
cause the Corporation to redeem at current net asset value all Shares owned or
held by any one Stockholder having an aggregate current net asset value of less
than five hundred dollars ($500). No such redemption shall be effected unless
the Corporation has given the Stockholder at least sixty (60) days' notice of
its intention to redeem the Shares and an opportunity to purchase a sufficient
number of additional Shares to bring the aggregate current net asset value of
his or her Shares to five hundred dollars ($500). Upon redemption of Shares
pursuant to this Section, the Corporation shall promptly cause payment of the
full redemption price to be made to the holder of Shares so redeemed.
SECTION 6.4. NET ASSET VALUE PER SHARE. The net asset value of each Share
of the Corporation, or each Series or Class, shall be the quotient obtained by
dividing the value of the net assets of the Corporation, or if applicable of the
Series (being the value of the assets of the Corporation or of the particular
Series less its actual and accrued liabilities exclusive of capital stock and
surplus), by the total number of outstanding Shares of the Corporation, or of
the Series. Such determination may be made on a Series-by-Series basis or made
or adjusted on a Class-by-Class basis, as appropriate and shall include any
expenses allocated to a specific Series or Class thereof. The Board of
Directors shall have the power and duty to determine from time to time the net
asset value per Share at such times and by such methods as it shall determine,
subject to any restrictions or requirements under the Investment Company Act of
1940, as amended, and the rules, regulations and interpretations thereof
promulgated or issued by the Securities and Exchange Commission or insofar as
permitted by any order of the Securities and Exchange Commission applicable to
the Corporation. The Board of Directors may delegate such power
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and duty to any one or more of the directors and officers of the Corporation,
the Corporation's administrator, investment adviser, custodian or depository of
the Corporation's assets, or another agent of the Corporation.
SECTION 6.5. ESTABLISHMENT OF SERIES OR CLASS. The establishment of any
Series or Class shall be effective upon the adoption of a resolution by a
majority of the Directors setting forth such establishment and designation and
the relative rights and preferences of the Shares of such Series or Class. At
any time that there are no Shares outstanding of any particular Series or Class
previously established and designated, the Directors may by a majority vote
abolish that Series or Class and the establishment and designation thereof.
SECTION 6.6. ASSETS AND LIABILITIES OF SERIES. All consideration received
by the Corporation for the issuance or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange, or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form, shall
be referred to as "assets belonging to" that Series. In addition, any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Series shall be
allocated by the Board of Directors between and among one or more of the Series
in such manner as the Board of Directors, in its sole discretion, deems fair and
equitable. Each such allocation shall be conclusive and binding upon the
Stockholders of all Series for all purposes, and shall be referred to as assets
belonging to that Series. The assets belonging to a particular Series shall be
so recorded upon the books of the Corporation. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and all
expenses, costs, charges, and reserves attributable to that Series or Class
thereof shall be borne by that Series or Class. Any general liabilities,
expenses, costs, charges, or reserves of the Corporation which are not readily
identifiable as belonging to any particular Series or Class shall be allocated
and charged by the Board of Directors between or among any one or more of the
Series or Classes in such a manner as the Board of Directors in its sole
discretion deems fair and equitable. Each such allocation shall be conclusive
and binding upon the Stockholders of all Series or Classes for all purposes.
SECTION 6.7. DIVIDENDS. Dividends and distributions on Shares with
respect to each Series or Class may be declared and paid with such frequency and
in such form and amount as the Board of Directors may from time to time
determine. Dividends may be declared daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the Board
of Directors may determine.
All dividends and distributions of Shares of a particular Series shall be
distributed pro rata to the holders of that Series in proportion to the number
of Shares of that Series held by such holders at the date and time of record
established for the payment of such dividends or distributions, except that such
dividends and distributions shall appropriately reflect expenses allocated to a
particular Class of such Series.
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The Board of Directors shall have the power, in its sole discretion, to
distribute in any fiscal year as dividends (including dividends designated in
whole or in part as capital gain distributions) amounts sufficient, in the
opinion of the Board of Directors, to enable the Corporation, or where
applicable each Series of the Corporation, to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended, or any successor or
comparable statute thereto, and regulations promulgated thereunder, and to avoid
liability of the Corporation, or each Series of the Corporation, for federal
income tax in respect of that year. The foregoing shall not limit the authority
of the Board of Directors to make distributions greater than or less than the
amount necessary to qualify as a regulated investment company and to avoid
liability of the Corporation, or any Series of the Corporation, for such tax.
Dividends and distributions may be paid in cash, property or Shares, or a
combination thereof, as determined by the Board of Directors or pursuant to any
program that the Board of Directors may have in effect at the time. Any such
dividend or distribution paid in Shares will be paid at the current net asset
value thereof as defined in Section 6.4.
SECTION 6.8. CLASSES OF STOCK. One billion (1,000,000,000) Shares of the
PaineWebber Balanced Fund are designated Class A Common Stock; one billion
(1,000,000,000) Shares of the PaineWebber Balanced Fund are designated Class B
Common Stock; one billion (1,000,000,000) Shares of the PaineWebber Balanced
Fund are designated Class C Common Stock; and one billion (1,000,000,000) Shares
of the PaineWebber Balanced Fund are designated Class Y Common Stock. In
addition, three hundred thirty million (330,000,000) Shares of the PaineWebber
Money Market Fund are designated Class A Common Stock, three hundred thirty
million (330,000,000) Shares of the PaineWebber Money Market Fund are designated
Class B Common Stock and three hundred forty million (340,000,000) Shares of the
PaineWebber Money Market Fund are designated Class C Common Stock. The Class A
Common Stock, Class B Common Stock, Class C Common Stock and Class Y Common
Stock of each Series represent interests in the same investment portfolio of
such Series. Shares of each Class of Common Stock of a Seriesshall be subject
to all provisions of Article SIXTH hereof relating to stock of the Corporation
generally and shall have the same preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption, except as follows:
(1) The dividends and distributions of investment income and capital gains
with respect to the Class A Common Stock, Class B Common Stock, Class C Common
Stock and Class Y Common Stock shall be in such amount as may be declared from
time to time by the Board of Directors, and such dividends and distributions may
vary between the Classes to reflect differing allocations of the expenses of
each Series of the Corporation between the Classes to such extent and for such
purposes as the Board of Directors may deem appropriate.
(2) The proceeds of the redemption of a Share of Common Stock (including a
fractional share) shall be reduced by the amount of any applicable contingent
deferred sales charge payable on such redemption to the distributor of the
Common Stock pursuant to the terms of the issuance of the Shares (to the extent
consistent with the Investment Company Act of 1940,
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as amended, or regulations or exemptions thereunder) and the Corporation shall
promptly pay to such distributor the amount of such contingent deferred sales
charge.
(3) (a) Each Share of the Class B Common Stock, other than a Share
purchased through the reinvestment of a dividend or a distribution with respect
to the Class B Common Stock, shall be converted automatically, and without any
action or choice on the part of the holder thereof, into Shares of the Class A
Common Stock, at the relative net asset value of each Class, at the time of the
calculation of the net asset value of such Class of Shares on the date that is
the first Business Day (as defined in such Series' prospectus and/or statement
of additional information) of the month in which the sixth anniversary of the
issuance of such Shares of the Class B Common Stock occurs (which, for the
purpose of calculating the holding period required for conversion, shall mean
(i) the date on which the issuance of such Class B Shares occurred or (ii) for
Class B Shares obtained through an exchange, the date on which the issuance of
the Class B Shares of an eligible PaineWebber fund occurred, if such Shares were
exchanged directly, or through a series of exchanges, for the Corporation's
Class B Shares (the "Conversion Date")). The Board of Directors shall adopt a
resolution setting forth a list of eligible PaineWebber funds for purposes of
this paragraph.
(b) Each Share of the Class B Common Stock purchased through the
reinvestment of a dividend or a distribution with respect to the Class B Common
Stock and the dividends and distributions on such Shares shall be segregated in
a separate sub-account on the stock records of the Corporation for each of the
holders of record thereof. On any Conversion Date, a number of the Shares held
in the sub-account of the holder of record of the Share or Shares being
converted, calculated in accordance with the next following sentence, shall be
converted automatically, and without any action or choice on the part of the
holder thereof, into Shares of the Class A Common Stock. The number of Shares
in the holder's sub-account so converted shall bear the same relation to the
total number of Shares maintained in the sub-account on the Conversion Date as
the number of Shares of the holder converted on the Conversion Date pursuant to
paragraph (3)(a) hereof bears to the total number of Shares of the Class B
Common Stock of the holder on the Conversion Date not purchased through the
automatic reinvestment of dividends or distributions with respect to the Class B
Common Stock.
(c) The number of Shares of the Class A Common Stock into which a Share of
the Class B Common Stock is converted pursuant to Paragraphs (3)(a) and (3)(b)
hereof shall equal the number (including for this purpose fractions of a Share)
obtained by dividing the net asset value per Share of the Class B Common Stock
for purposes of sales and redemptions thereof at the time of the calculation of
the net asset value on the Conversion Date by the net asset value per Share of
the Class A Common Stock for purposes of sales and redemptions thereof at the
time of the calculation of the net asset value on the Conversion Date.
(d) On the Conversion Date, the Shares of the Class B Common Stock
converted into Shares of the Class A Common Stock will cease to accrue dividends
and will no longer be outstanding and the rights of the holders thereof will
cease (except the right to receive declared but unpaid dividends to the
Conversion Date).
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(e) The Board of Directors shall have full power and authority to adopt
such other terms and conditions concerning the conversion of Shares of the Class
B Common Stock to Shares of the Class A Common Stock as they deem appropriate;
provided such terms and conditions are not inconsistent with the terms contained
in this Section 6.8 and subject to any restrictions or requirements under the
Investment Company Act of 1940, as amended, and the rules, regulations and
interpretations thereof promulgated or issued by the Securities and Exchange
Commission or any conditions or limitations contained in an order issued by the
Securities and Exchange Commission applicable to the Corporation.
SEVENTH: ISSUANCE OF COMMON STOCK.
SECTION 7.1. ISSUANCE OF NEW STOCK. The Board of Directors is authorized
to issue and sell or cause to be issued and sold from time to time (without the
necessity of offering the same or any part thereof to existing Stockholders) all
or any portion or portions of the entire authorized but unissued Shares of the
Corporation, and all or any portion or portions of the Shares of the Corporation
from time to time in its treasury, for cash or for any other lawful
consideration or considerations and on or for any terms, conditions, or prices
consistent with the provisions of law and of the Articles of Incorporation at
the time in force; provided, however, that in no event shall Shares of the
Corporation be issued or sold for a consideration or considerations less in
amount or value than the par value of the Shares so issued or sold, and provided
further that in no event shall any Shares of the Corporation be issued or sold,
except as a stock dividend distributed to Stockholders, for a consideration
(which shall be net to the Corporation after underwriting discounts or
commissions) less in amount or value than the net asset value of the Shares so
issued or sold determined as of such time as the Board of Directors shall have
by resolution prescribed. In the absence of such a resolution, such net asset
value shall be that next determined after an unconditional order in proper form
to purchase such Shares is accepted, except that Shares may be sold to an
underwriter at (a) the net asset value next determined after such orders are
received by a dealer with whom such underwriter has a sales agreement or (b) the
net asset value determined at a later time.
SECTION 7.2. ISSUANCE OF FRACTIONAL SHARES. The Corporation may issue and
sell fractions of Shares having pro rata all the rights of full Shares,
including, without limitation, the right to vote and to receive dividends, and
wherever the words "Share" or "Shares" are used in these Articles or in the
By-Laws they shall be deemed to include fractions of Shares, where the context
does not clearly indicate that only full Shares are intended.
EIGHTH: VOTING.
On each matter submitted to a vote of the Stockholders, each holder of a
Share shall be entitled to one vote for each Share and fractional votes for
fractional Shares standing in his or her name on the books of the Corporation;
provided, however, that when required by the Investment Company Act of 1940, as
amended, or rules thereunder or when the Board of Directors has determined that
the matter affects only the interests of one Series or Class, matters may be
submitted to a vote of the Stockholders of a particular Series or Class, and
each holder of Shares thereof shall be entitled to votes equal to the full and
fractional Shares of the Series or Class
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standing in his or her name on the books of the Corporation. The presence in
person or by proxy of the holders of one-third of the Shares outstanding and
entitled to vote shall constitute a quorum for the transaction of business at a
Stockholders' meeting, except that where any provision of law or of these
Articles of Incorporation permit or require that holders of any Series or Class
shall vote as a Series or Class, one-third of the aggregate number of Shares of
that Series or Class outstanding and entitled to vote shall constitute a quorum
for the transaction of business by that Series or Class.
Notwithstanding any provision of law requiring a greater proportion than a
majority of the votes of all Shares of the Corporation or of all Series or
Classes (or of any Series or Class entitled to vote thereon as a separate Series
or Class) to take or authorize any action, in accordance with the authority
granted by Section 2-104(b)(5) of the Maryland Corporations and Associations
Code, the Corporation is hereby authorized to take such action upon the
concurrence of a majority of the aggregate number of Shares entitled to vote
thereon (or of a majority of the aggregate number of Shares of a Series or Class
entitled to vote thereon as a separate Series or Class). The right to cumulate
votes in the election of directors is expressly prohibited.
NINTH: BOARD OF DIRECTORS.
All corporate powers and authority of the Corporation (except as otherwise
provided by statute, these Articles of Incorporation, or the By-Laws of the
Corporation) shall be vested in and exercised by the Board of Directors. The
number of directors constituting the Board of Directors shall be such number as
may from time to time be fixed in or in accordance with the By-Laws of the
Corporation, provided that after stock is issued to more than one Stockholder,
such number shall not be less than three. Except as provided in the By-Laws,
the election of directors may be conducted in any way approved at the meeting
(whether of Stockholders or directors) at which the election is held, provided
that such election shall be by ballot whenever requested by any person entitled
to vote. The names of the persons who shall act as directors of the Corporation
until their respective successors are duly chosen and qualified are Margo N.
Alexander, Richard Q. Armstrong, E. Garrett Bewkes, Jr., Richard R. Burt, Mary
C. Farrell, Meyer Feldberg, George W. Gowen, Frederic V. Malek and Carl W.
Schafer.
TENTH: CONTRACTS.
SECTION 10.1. CONTRACTS IN GENERAL. The Board of Directors may in its
discretion from time to time enter into an exclusive or nonexclusive
distribution contract or contracts providing for the sale of Shares whereby the
Corporation may either agree to sell Shares to the other party to the contract
or appoint such other party its sales agent for such Shares (such other party
being herein sometimes called the "underwriter"), and in either case on such
terms and conditions as may be prescribed in the By-Laws, if any, and such
further terms and conditions as the Board of Directors may in its discretion
determine not inconsistent with the provisions of these Articles of
Incorporation and such contract may also provide for the repurchase of Shares of
the Corporation by such other party or parties as agent of the Corporation. The
Board of Directors may also in its discretion from time to time enter into an
investment advisory or management contract or
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contracts whereby the other party to such contract shall undertake to furnish to
the Board of Directors such management, investment advisory, statistical and
research facilities and services and such other facilities and services, if any,
and all upon such terms and conditions as the Board of Directors may in its
discretion determine.
SECTION 10.2. PARTIES TO CONTRACTS. Any contract of the character
described in Section 10.1 or for services as administrator, custodian, transfer
agent or disbursing agent or related services may be entered into with any
corporation, firm, trust or association, although any one or more of the
directors or officers of the Corporation may be an officer, director, trustee,
stockholder or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Corporation under or
by reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this Article
TENTH. The same person (including a firm, corporation, trust, or association)
may be the other party to contracts entered into pursuant to Section 10.1 above,
and any individual may be financially interested or otherwise affiliated with
persons who are parties to any or all of the contracts mentioned in this Section
10.2.
ELEVENTH: LIABILITY OF DIRECTORS AND OFFICERS.
SECTION 11.1. LIABILITY. To the maximum extent permitted by applicable
law (including Maryland law and the Investment Company Act of 1940) as currently
in effect or as may hereafter be amended, no director or officer of the
Corporation shall be liable to the Corporation or its stockholders for money
damages.
SECTION 11.2. INDEMNIFICATION. To the maximum extent permitted by
applicable law (including Maryland law and the Investment Company Act of 1940)
currently in effect or as may hereafter be amended, the Corporation shall
indemnify and advance expenses as provided in the By-Laws to its present and
past directors, officers, employees and agents, and persons who are serving or
have served at the request of the Corporation as a director, officer, employee
or agent in similar capacities for other entities.
SECTION 11.3. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity or arising out of his
or her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability.
SECTION 11.4. MODIFICATION. Any repeal or modification of this Article
ELEVENTH by the Stockholders of the Corporation, or adoption or modification of
any other provision of the Articles of Incorporation or By-Laws inconsistent
with this Article ELEVENTH, shall be prospective only, to the extent that such
repeal or modification would, if applied retrospectively,
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adversely affect any limitation on the liability of any director or officer of
the Corporation or indemnification available to any person covered by these
provisions with respect to any act or omission which occurred prior to such
repeal, modification or adoption.
TWELFTH: AMENDMENT.
SECTION 12.1. ARTICLES OF INCORPORATION. The Corporation reserves the
right from time to time to make any amendment of these Articles of
Incorporation, now or hereafter authorized by law, including any amendment which
alters contract rights, as expressly set forth in these Articles of
Incorporation, of any outstanding Shares. Any amendment to these Articles of
Incorporation may be adopted at a meeting of the Stockholders upon receiving an
affirmative vote of a majority of all votes entitled to be cast thereon.
SECTION 12.2. BY-LAWS. Except as may otherwise be provided in the
By-Laws, the Board of Directors of the Corporation is expressly authorized to
make, alter, amend and repeal By-Laws or to adopt new By-Laws of the
Corporation, without any action on the part of the Stockholders; but the By-Laws
made by the Board of Directors and the power so conferred may be altered or
repealed by the Stockholders.
IN WITNESS WHEREOF, PAINEWEBBER MASTER SERIES, INC. has caused these
presents to be signed in its name and on its behalf by its Vice President and
attested by the Corporation's Assistant Secretary on this 11th day of June,
1998, who swear under penalty of perjury to the best of their knowledge,
information and belief, that the matters and facts set forth in these Articles
are true in all material respects.
PAINEWEBBER MASTER SERIES, INC.
By: /s/ Dianne E. O'Donnell
--------------------------------
Attest: /s/ Keith A. Weller
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Exhibit No. 2
PAINEWEBBER MASTER SERIES, INC.
A Maryland Corporation
BY-LAWS
As Restated
May 13, 1998
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TABLE OF CONTENTS
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ARTICLE I NAME OF CORPORATION, LOCATION OF OFFICES
AND SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Name: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Principal Offices:. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03. Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.01. Annual Meetings:. . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.02. Special Meetings: . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.03. Place of Meetings:. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.04. Notice of Meetings: . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.05. Voting - In General:. . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.06. Stockholders Entitled to Vote:. . . . . . . . . . . . . . . . . . 3
Section 2.07. Voting - Proxies: . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.08. Quorum: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.09. Absence of Quorum:. . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.10. Stock Ledger and List of Stockholders:. . . . . . . . . . . . . . 4
Section 2.11. Action Without Meeting: . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.01. Number and Term of Office:. . . . . . . . . . . . . . . . . . . . 4
Section 3.02. Qualification of Directors: . . . . . . . . . . . . . . . . . . . 4
Section 3.03. Election of Directors:. . . . . . . . . . . . . . . . . . . . . . 5
Section 3.04. Removal of Directors: . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.05. Vacancies and Newly Created Directorships:. . . . . . . . . . . . 5
Section 3.06. General Powers: . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.07. Power to Issue and Sell Stock:. . . . . . . . . . . . . . . . . . 6
Section 3.08. Power to Declare Dividends: . . . . . . . . . . . . . . . . . . . 6
Section 3.09. Annual and Regular Meetings:. . . . . . . . . . . . . . . . . . . 6
Section 3.10. Special Meetings: . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.11. Notice: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.12. Waiver of Notice: . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.13. Quorum and Voting:. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.14. Compensation: . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.15. Action Without a Meeting: . . . . . . . . . . . . . . . . . . . . 7
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ARTICLE IV EXECUTIVE COMMITTEE AND OTHER COMMITTEES. . . . . . . . . . . . . . . . . . . . . 8
Section 4.01. How Constituted:. . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.02. Powers of the Executive Committee:. . . . . . . . . . . . . . . . 8
Section 4.03. Powers of Other Committees of the Board of Directors: . . . . . . 8
Section 4.04. Proceedings, Quorum and Manner of Acting: . . . . . . . . . . . . 8
Section 4.05. Other Committees: . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.01. Officers: . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.02. Election, Term of Office and Qualifications:. . . . . . . . . . . 9
Section 5.03. Resignation:. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.04. Removal:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.05. Vacancies and Newly Created Offices:. . . . . . . . . . . . . . .10
Section 5.06. Chairman of the Board:. . . . . . . . . . . . . . . . . . . . . .10
Section 5.07. President:. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 5.08. Vice President: . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 5.09. Treasurer and Assistant Treasurers: . . . . . . . . . . . . . . .10
Section 5.10. Secretary and Assistant Secretaries:. . . . . . . . . . . . . . .11
Section 5.11. Subordinate Officers: . . . . . . . . . . . . . . . . . . . . . .11
Section 5.12. Remuneration: . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 5.13. Surety Bonds: . . . . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE VI CUSTODY OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 6.01. Employment of a Custodian:. . . . . . . . . . . . . . . . . . . .12
Section 6.02. Action Upon Termination of Custodian Agreement: . . . . . . . . .12
Section 6.03. Provisions of Custodian Contract: . . . . . . . . . . . . . . . .12
Section 6.04. Other Arrangements: . . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE VII EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES. . . . . . . . . . . . . . . . . .13
Section 7.01. General:. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 7.02. Checks, Notes, Drafts, Etc.:. . . . . . . . . . . . . . . . . . .13
Section 7.03. Voting of Securities: . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE VIII CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 8.01. Share Certificates: . . . . . . . . . . . . . . . . . . . . . . .13
Section 8.02. Transfer of Capital Stock:. . . . . . . . . . . . . . . . . . . .14
Section 8.03. Transfer Agents and Registrars: . . . . . . . . . . . . . . . . .14
Section 8.04. Transfer Regulations: . . . . . . . . . . . . . . . . . . . . . .14
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Section 8.05. Fixing of Record Date:. . . . . . . . . . . . . . . . . . . . . .15
Section 8.06. Lost Stolen or Destroyed Certificates:. . . . . . . . . . . . . .15
ARTICLE IX FISCAL YEAR, ACCOUNTANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 9.01. Fiscal Year:. . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 9.02. Accountant: . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE X INDEMNIFICATION AND INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 10.01. Indemnification of Officers, Directors, Employees and Agents: . .16
Section 10.02. Insurance of Officers, Directors, Employees and Agents: . . . . .16
Section 10.03. Amendment:. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE XI AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 11.01. General:. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 11.02. By Stockholders Only: . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 12.01. Transactions in Shares by Affiliates: . . . . . . . . . . . . . .17
Section 12.02. Loans to Affiliates:. . . . . . . . . . . . . . . . . . . . . . .18
Section 12.03. Restrictions on Transfer of Shares: . . . . . . . . . . . . . . .18
Section 12.04. Conflict of Interest Transactions:. . . . . . . . . . . . . . . .18
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ARTICLE I
NAME OF CORPORATION, LOCATION OF OFFICES
AND SEAL
Section 1.01. NAME:
The name of the Corporation is PaineWebber Master Series, Inc.
Section 1.02. PRINCIPAL OFFICES:
The principal office of the Corporation in the State of Maryland shall be
located in the City of Baltimore. The Corporation shall also maintain a
principal office in the City of New York, New York. The Corporation may
establish and maintain such other offices and places of business as the board of
directors may, from time to time, determine.
Section 1.03. SEAL
The corporate seal of the Corporation shall be circular in form and shall
bear the name of the Corporation, the year of its incorporation, and the words
"Corporate Seal, Maryland." The form of the seal shall be subject to alteration
by the board of directors and the seal may be used by causing it or a facsimile
to be impressed or affixed or printed or otherwise reproduced. Any officer or
director of the Corporation shall have authority to affix the corporate seal of
the Corporation to any document requiring the same.
ARTICLE II
STOCKHOLDERS
Section 2.01. ANNUAL MEETINGS:
There shall be no stockholders' meetings for the election of directors and
the transaction of other proper business except as required by law or as
hereinafter provided.
Section 2.02. SPECIAL MEETINGS:
Special meetings of the stockholders may be called at any time by the
chairman of the board, the president or by any vice president, or by a majority
of the board of directors. Special meetings of the stockholders shall be called
by the secretary upon the written request of the holders of shares entitled to
cast not less than 25% of all the votes entitled to be cast at such meeting,
provided that (a) such request shall state the purposes of such meeting and the
matters proposed to be acted on, and (b) the stockholders requesting such
meeting shall have paid to the Corporation the reasonably estimated cost of
preparing and mailing the notice thereof, which the secretary shall determine
and specify to such stockholders. No special meeting shall be called upon the
request of the stockholders to consider any matter which is substantially the
same as a matter voted upon at any special meeting of the stockholders held
during the preceding twelve months, unless requested by holders of a majority of
shares entitled to be voted at such meeting.
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Section 2.03. PLACE OF MEETINGS:
All stockholders' meetings shall be held at 1285 Avenue of the Americas,
New York, New York, except that the board of directors may fix a different place
of meeting, within the United States, and keep the books of the Corporation at
any other place within the United States as they may from time to time
determine, or, in the case of meetings as shall be specified in each notice or
waiver of notice of the meeting.
Section 2.04. NOTICE OF MEETINGS:
The secretary or an assistant secretary shall cause notice of the place,
date and hour, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, to be mailed, postage prepaid, not less than 10
nor more than 90 days before the date of the meeting, to each stockholder
entitled to vote at such meeting, at his address as it appears on the records of
the Corporation at the time of such mailing. Notice shall be deemed given when
deposited in the United States mail addressed to the stockholders as aforesaid.
Notice of any stockholders' meeting need not be given to any stockholder who
shall sign a written waiver of such notice whether before or after the time of
such meeting, which waiver shall be filed with the record of such meeting, or to
any stockholder who shall attend such meeting in person or by proxy. Notice of
adjournment of a stockholders' meeting to another time or place need not be
given, if such time and place are announced at the meeting. Irregularities in
the notice of any meeting to, or the nonreceipt of any such notice by, any of
the stockholders shall not invalidate any action otherwise properly taken by or
at any such meeting.
Section 2.05. VOTING - IN GENERAL:
At each stockholders' meeting each stockholder shall be entitled to one
vote for each share and a fractional vote for each fraction of a share of stock
of the Corporation validly issued and outstanding, held by such stockholder
irrespective of the series thereof and standing in his name on the books of the
Corporation on the record date fixed in accordance with Section 8.05 of Article
VIII hereof, either in person or by proxy appointed by instrument in writing
subscribed by such stockholder or his or her duly authorized attorney, except
that no shares held by the Corporation shall be entitled to a vote; provided,
however, that (i) as to any matter with respect to which a separate vote of any
series is required by the Investment Company Act of 1940, as amended, or by the
Maryland General Corporation Law, such requirement as to a separate vote by that
series shall apply; (ii) in the event that the separate vote requirements
referred to in (i) above apply with respect to one or more series, then, subject
to (iii) below, the shares of all other series shall vote as a single series;
and (iii) as to any matter which affects the interest of only particular series,
only the holders of shares of the one or more affected series shall be entitled
to vote. Except as otherwise specifically provided in the Articles of
Incorporation, these By-Laws or the Investment Company Act of 1940, as amended,
all matters shall be decided by a vote of the majority of the votes validly cast
at a meeting at which a quorum is present. The vote upon any question shall be
by ballot whenever requested by any person entitled to vote, but, unless such a
request is made, voting may be conducted in any way approved by the meeting. At
any meeting at which there is an election of directors, the chairman of the
meeting may, and upon the request of the holders of ten percent of the stock
entitled to vote at such election shall, appoint two
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inspectors of election who shall first subscribe an oath or affirmation to
execute faithfully the duties of inspectors at such election with strict
impartiality and according to the best of their ability, and shall, after the
election, make a certificate of the result of the vote taken. No candidate for
the office of director shall be appointed as an inspector.
Section 2.06. STOCKHOLDERS ENTITLED TO VOTE:
If, pursuant to Section 8.05 hereof, a record date has been fixed for the
determination of stockholders entitled to notice of or to vote at any
stockholders' meeting, each stockholder of the Corporation shall be entitled to
vote, in person or by proxy, each share of stock and fraction of a share of
stock standing in his or her name on the books of the Corporation on such record
date and outstanding at the time of the meeting subject to the provisions
concerning series voting described in Section 2.05 hereof. If no record date
has been fixed for the determination of stockholders, the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the later of the close of business on the day on which the
notice of the meeting is mailed or the thirtieth day before the meeting; or, if
notice is waived by all stockholders of series entitled to notice of or to vote
at the meeting, at the close of business on the tenth day next preceding the day
on which the meeting is held.
Section 2.07. VOTING - PROXIES:
The right to vote by proxy shall exist only if the proxy is authorized to
act by (1) a written instrument, dated not more than eleven months prior to the
meeting and executed either by the stockholder or by his or her duly authorized
attorney in fact (who may be so authorized by a writing or by any non-written
means permitted by the laws of the State of Maryland) or (2) such electronic,
telephonic, computerized or other alternative means as may be approved by a
resolution adopted by the Directors. Proxies shall be delivered to the secretary
of the Corporation or person acting as secretary of the meeting before being
voted, who shall decide all questions concerning qualification of voters, the
validity of proxies, and the acceptance or rejection of votes. If inspectors of
election have been appointed by the chairman of the meeting, such inspectors
shall decide all such questions. A proxy with respect to stock held in the name
of two or more persons shall be valid if executed by one of them unless at or
prior to exercise of such proxy the Corporation receives from any one of them
written notice to the contrary and a copy of the instrument or order which so
provides. A proxy purporting to be executed by or on behalf of a stockholder
shall be deemed valid unless challenged at or prior to its exercise.
Section 2.08. QUORUM:
The presence at any stockholders' meeting, in person or by proxy, of
stockholders entitled to cast a majority of the votes thereat shall be necessary
and sufficient to constitute a quorum for the transaction of business.
Section 2.09. ABSENCE OF QUORUM:
In the absence of a quorum, the holders of a majority of the shares
entitled to vote at the meeting and present in person or by proxy, or, if no
stockholder entitled to vote is present in
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person or by proxy, any officer present entitled to preside or act as secretary
of such meeting, may adjourn the meeting without determining the date of the new
meeting or, from time to time, without further notice to a date not more than
120 days after the original record date. Any business that might have been
transacted at the meeting originally called may be transacted at any such
adjourned meeting at which a quorum is present.
Section 2.10. STOCK LEDGER AND LIST OF STOCKHOLDERS:
It shall be the duty of the secretary or assistant secretary of the
Corporation to cause an original or duplicate stock ledger to be maintained at
the office of the Corporation's transfer agent. Such stock ledger may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection. Any one or more persons, each
of whom has been a stockholder of record of the Corporation for more than six
months next preceding such request, who owns in the aggregate 5% or more of the
outstanding capital stock of the Corporation, may submit (unless the Corporation
at the time of the request maintains a duplicate stock ledger at its principal
office in Maryland) a written request to any officer of the Corporation or its
resident agent in Maryland for a list of the stockholders of the Corporation.
Within 20 days after such a request, there shall be prepared and filed at the
Corporation's principal office in Maryland a list containing the names and
addresses of all stockholders of the Corporation and the number of shares of
each class held by each stockholder, certified as correct by an officer of the
Corporation, by its stock transfer agent, or by its registrar.
Section 2.11. ACTION WITHOUT MEETING:
Any action to be taken by stockholders may be taken without a meeting if
all stockholders entitled to vote on the matter consent to the action in writing
and the written consents are filed with the records of the meetings of
stockholders. Such consent shall be treated for all purposes as a vote at a
meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. NUMBER AND TERM OF OFFICE:
The board of directors shall consist of nine directors, which number may be
increased or decreased by a resolution of a majority of the entire board of
directors; provided that the number of directors shall not be less than three
nor more than fifteen. Each director (whenever selected) shall hold office
until his earlier death, resignation or removal.
Section 3.02. QUALIFICATION OF DIRECTORS:
Except for the initial board of directors, at least one of the members of
the board of directors shall be a person who is not an interested person of the
Corporation, as defined in the Investment Company Act of 1940, as amended. All
other directors may be interested persons of the Corporation if the requirements
of Section 10(d) of the Investment Company Act of 1940, as amended, are met by
the Corporation and its investment adviser. Directors need not be
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stockholders of the Corporation. All acts done by any meeting of the directors
or by any person acting as a director, so long as his successor shall not have
been duly elected or appointed, shall, notwithstanding that it be afterwards
discovered that there was some defect in the election of the directors or of
such person acting as aforesaid or that they or any of them were disqualified,
be as valid as if the directors or such other person, as the case may be, had
been duly elected and were or was qualified to be directors or a director of the
Corporation.
Section 3.03. ELECTION OF DIRECTORS:
Initially the director or directors of the Corporation shall be that person
or those persons named as such in the Articles of Incorporation. Thereafter,
except as otherwise provided in Section 3.04 and 3.05 hereof, the directors
shall be elected at the an annual stockholders' meeting. In the event that the
directors are not elected at the annual stockholders' meeting, then directors
may be elected at a special stockholders' meeting. A plurality of all the votes
cast at a meeting at which a quorum is present in person or by proxy is
sufficient to elect a director.
Section 3.04. REMOVAL OF DIRECTORS:
At any stockholders' meeting duly called, provided a quorum is present, any
director may be removed (either with or without cause) by the vote of the
holders of a majority of the shares represented at the meeting, and at the same
meeting a duly qualified person may be elected in his stead by a majority of the
votes validly cast.
Section 3.05. VACANCIES AND NEWLY CREATED DIRECTORSHIPS:
If any vacancies shall occur in the board of directors by reason of death,
resignation, removal or otherwise, or if the authorized number of directors
shall be increased, the directors then in office shall continue to act, and such
vacancies (if not previously filled by the stockholders) may be filled by a
majority of the directors then in office, although less than a quorum, except
that a newly created directorship may be filled only by a majority vote of the
entire board of directors, provided that in either case immediately after
filling such vacancy, at least two-thirds of the directors then holding office
shall have been elected to such office by the stockholders of the Corporation.
In the event that at any time, other than the time preceding the first
stockholders' meeting, less than a majority of the directors of the Corporation
holding office at that time were so elected by the stockholders, a meeting of
the stockholders shall be held promptly and in any event within 60 days for the
purpose of electing directors to fill any existing vacancies in the board of
directors unless the Securities and Exchange Commission shall by order extend
such period.
Section 3.06. GENERAL POWERS:
The property, affairs and business of the Corporation shall be managed by
or under the direction of the board of directors, which may exercise all the
powers of the Corporation except those powers vested solely in the stockholders
of the Corporation by statute, by the Articles of Incorporation, or by these
By-Laws.
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Section 3.07. POWER TO ISSUE AND SELL STOCK:
The board of directors may from time to time issue and sell or cause to be
issued and sold any of the Corporation's authorized shares to such persons and
for such consideration as the board of directors shall deem advisable, subject
to the provisions of Article SEVENTH of the Articles of Incorporation.
Section 3.08. POWER TO DECLARE DIVIDENDS:
(a) The board of directors, from time to time as it may deem advisable,
may declare and pay dividends in stock, cash or other property of the
Corporation, out of any source available for dividends, to the stockholders
according to their respective rights and interests in accordance with the
applicable provisions of the Articles of Incorporation.
(b) The board of directors may prescribe from time to time that dividends
declared may be payable at the election of any of the stockholders (exercisable
before of after the declaration of the dividend), either in cash or in shares of
the Corporation, provided that the sum of the cash dividend actually paid to any
stockholder and the asset value of the shares received (determined as of such
time as the board of directors shall have prescribed, pursuant to the applicable
provisions of the Articles of Incorporation, with respect to shares sold on the
date of such election) shall not exceed the full amount of cash to which the
stockholder would be entitled if he elected to receive only cash.
(c) The board of directors shall cause to be accompanied by a written
statement any dividend payment wholly or partly from any source other than:
(i) the Corporation's accumulated undistributed net income (determined in
accordance with good accounting practice and the rules and regulations
of the Securities and Exchange Commission then in effect) and not
including profits or losses realized upon the sale of securities or
other properties; or
(ii) the Corporation's net income so determined for the current or
preceding fiscal year.
Such statement shall adequately disclose the source or sources of such payment
and the basis of calculation, and shall be in such form as the Securities and
Exchange Commission may prescribe.
Section 3.09. ANNUAL AND REGULAR MEETINGS:
The annual meeting of the board of directors for choosing officers and
transacting other proper business shall be held at such time and place as the
board may determine. The board of directors from time to time may provide by
resolution for the holding of regular meetings and fix their time and place
within or outside the State of Maryland. Except as otherwise provided under the
Investment Company Act of 1940, as amended, notice of such annual and regular
meetings need not be given, provided that notice of any change in the time or
place of such meetings shall be sent promptly to each director not present at
the meeting at which such change was made in the manner provided for notice of
special meetings. Except as otherwise provided under the
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Investment Company Act of 1940, as amended, members of the board of directors or
any committee designated thereby may participate in a meeting of such board or
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other
at the same time, and participation by such means shall constitute presence in
person at a meeting.
Section 3.10. SPECIAL MEETINGS:
Special meetings of the board of directors shall be held whenever called by
the chairman of the board, the president (or, in the absence or disability of
the president, by any vice president), the treasurer, or by any two directors,
at the time and place within or outside the State of Maryland specified in the
respective notices or waivers of notice of such meetings.
Section 3.11. NOTICE:
Notice of any special meeting, stating the time and place, shall be mailed
to each director at his residence or regular place of business at least three
days before the day on which the special meeting is to be held or caused to be
delivered to him personally or to be transmitted to him by telegraph, cable or
wireless at least one day before the meeting.
Section 3.12. WAIVER OF NOTICE:
No notice of any meeting need be given to any director who attends such
meeting in person or to any director who waives notice of such meeting in
writing (which waiver shall be filed with the records of such meeting), whether
before or after the time of the meeting.
Section 3.13. QUORUM AND VOTING:
At all meetings of the board of directors the presence of a majority or
more of the number of directors the presence of one-half or more of the number
of directors then in office shall constitute a quorum for the transaction of
business, provided that there shall be present no fewer than two directors. In
the absence of a quorum, a majority of the directors present may adjourn the
meeting, from time to time, until a quorum shall be present. The action of a
majority of the directors present at a meeting at which a quorum is present
shall be the action of the board of directors unless the concurrence of a
greater proportion is required for such action by law, by the Articles of
Incorporation or by these By-Laws.
Section 3.14. COMPENSATION:
Each director may receive such remuneration for his or her services as
shall be fixed from time to time by resolution of the board of directors.
Section 3.15. ACTION WITHOUT A MEETING:
Except as otherwise provided under the Investment Company Act of 1940, as
amended, any action required or permitted to be taken at any meeting of the
board of directors or any committee thereof may be taken without a meeting if
written consents thereto are signed by all
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members of the board or of such committee, as the case may be, and such written
consents are filed with the minutes of proceedings of the board or committee.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 4.01. HOW CONSTITUTED:
By resolution adopted by the board of directors, the board may designate
one or more committees, including an executive committee, each consisting of at
least two directors. Each member of a committee shall be a director and shall
hold office during the pleasure of the board. The board of directors shall have
the power at any time to change the members of such committees and to fill
vacancies in the committees. The chairman of the board, if any, shall be a
member of the executive committee.
Section 4.02. POWERS OF THE EXECUTIVE COMMITTEE:
Unless otherwise provided by resolution of the board of directors, when the
board of directors is not in session the executive committee shall have and may
exercise all powers of the board of directors in the management of the business
and affairs of the Corporation that may lawfully be exercised by an executive
committee, except the power to declare a dividend, to authorize the issuance of
stock, to recommend to stockholders any matter requiring stockholders' approval,
to amend the By-Laws, approve any merger or share exchange which does not
require shareholder approval or approve or terminate any contract with the
investment adviser or principal underwriter, as those terms are defined in the
Investment Company Act of 1940, as amended, or to take any other action required
by the Investment Company Act of 1940, as amended, to be taken by the board of
directors.
Section 4.03. POWERS OF OTHER COMMITTEES OF THE BOARD OF DIRECTORS:
To the extent provided by resolution of the board, other committees of the
board of directors shall have and may exercise any of the powers that may
lawfully be granted to the executive committee.
Section 4.04. PROCEEDINGS, QUORUM AND MANNER OF ACTING:
In the absence of an appropriate resolution of the board of directors, each
committee may adopt such rules and regulations governing its proceedings, quorum
and manner of acting as it shall deem proper and desirable, provided that the
quorum shall not be less than two directors. In the absence of any member of
any such committee, the members thereof present at any meeting, whether or not
they constitute a quorum, may appoint a member of the board of directors to act
in the place of such absent member.
Section 4.05. OTHER COMMITTEES:
The board of directors may appoint other committees, each consisting of one
or more persons, who need not be directors. Each such committee shall have such
powers and perform
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such duties as may be assigned to it from time to time by the board of
directors, but shall not exercise any power which may lawfully be exercised only
by the board of directors or a committee thereof.
ARTICLE V
OFFICERS
Section 5.01. OFFICERS:
The officers of the Corporation shall be a president, a secretary and a
treasurer, and may include one or more vice presidents, assistant secretaries or
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 5.11 hereof. The board of directors may elect,
but shall not be required to elect, a chairman of the board.
Section 5.02. ELECTION, TERM OF OFFICE AND QUALIFICATIONS:
The officers of the Corporation (except those appointed pursuant to Section
5.11 hereof) shall be chosen by the board of directors at its first meeting or
such subsequent meetings as shall be held prior to its first annual meeting, and
thereafter annually at its annual meeting. If any officers are not chosen at
any annual meeting, such officers may be chosen at any subsequent regular or
special meeting of the board. Except as provided in Sections 5.03, 5.04 and
5.05 hereof, each officer chosen by the board of directors shall hold office
until the next annual meeting of the board of directors and until his successor
shall have been chosen and qualified. Any person may hold one or more offices
of the Corporation except that the president may not hold the office of vice
president and provided further that a person who holds more than one office may
not act in more than one capacity to execute, acknowledge or verify an
instrument required by law to be executed, acknowledged or verified by more than
one officer. The chairman of the board shall be chosen from among the directors
of the Corporation and may hold such office only so long as he continues to be a
director. No other officer need be a director.
Section 5.03. RESIGNATION:
Any officer may resign his or her office at any time by delivering a
written resignation to the board of directors, the president, the secretary, or
any assistant secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 5.04. REMOVAL:
Any officer may be removed from office whenever in the board's judgment the
best interest of the Corporation will be served thereby, by the vote of a
majority of the board of directors given at the regular meeting or any special
meeting called for such purpose. In addition, any officer or agent appointed in
accordance with the provisions of Section 5.11 hereof may be removed, either
with or without cause, by any officer upon whom such power of removal shall have
been conferred by the board of directors.
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Section 5.05. VACANCIES AND NEWLY CREATED OFFICES:
If any vacancy shall occur in any office by reason of death, resignation,
removal, disqualification or other cause, or if any new office shall be created,
such vacancies or newly created offices may be filled by the board of directors
at any regular or special meeting or, in the case of any office created pursuant
to Section 5.11 hereof, by any officer upon whom such power shall have been
conferred by the board of directors.
Section 5.06. CHAIRMAN OF THE BOARD:
The chairman of the board, if there be such an officer, shall be the senior
officer of the Corporation, shall preside at all stockholders' meetings and at
all meetings of the board of directors and shall be EX OFFICIO a member of all
committees of the board of directors. He shall have such other powers and
perform such other duties as may be assigned to him from time to time by the
board of directors.
Section 5.07. PRESIDENT:
The president shall be the chief executive officer of the Corporation and,
in the absence of the chairman of the board or if no chairman of the board has
been chosen, he shall preside at all stockholders' meetings and at all meetings
of the board of directors and shall in general exercise the powers and perform
the duties of the chairman of the board. Subject to the supervision of the
board of directors, he shall have general charge of the business, affairs and
property of the Corporation and general supervision over its officers, employees
and agents. Except as the board of directors may otherwise order, he may sign
in the name and on behalf of the Corporation all deeds, bonds, contracts or
agreements. He shall exercise such other powers and perform such duties as from
time to time may be assigned to him by the board of directors.
Section 5.08. VICE PRESIDENT:
The board of directors may from time to time designate and elect one or
more vice presidents who shall have such powers and perform such duties as from
time to time may be assigned to them by the board of directors or the president.
At the request or in the absence or disability of the president, the vice
president (or, if there are two or more vice presidents, the then senior of the
vice presidents present and able to act) may perform all the duties of the
president and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the president.
Section 5.09. TREASURER AND ASSISTANT TREASURERS:
The treasurer shall be the principal financial and accounting officer of
the Corporation and shall have general charge of the finances and books of
account of the Corporation. Except as otherwise provided by the board of
directors, he shall have general supervision of the funds and property of the
Corporation and of the performance by the custodian of its duties with respect
thereto. He shall render to the board of directors, whenever directed by the
board, an account of the financial condition of the Corporation and of all his
transactions as treasurer; and as soon as possible after the close of each
financial year he shall make and submit to the board of directors a
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like report for such financial year. He shall cause to be prepared annually a
full and correct statement of the affairs of the Corporation, including a
balance sheet and a financial statement of operations for the preceding fiscal
year, which shall be submitted at the annual meeting of stockholders and filed
within twenty days thereafter at the principal office of the Corporation in the
State of Maryland. He shall perform all the acts incidental to the office of
treasurer, subject to the control of the board of directors.
Any assistant treasurer may perform such duties of the treasurer as the
treasurer or the board of directors may assign, and, in the absence of the
treasurer, may perform all the duties of the treasurer.
Section 5.10. SECRETARY AND ASSISTANT SECRETARIES:
The secretary shall attend to the giving and serving of all notices of the
Corporation and shall record all proceedings of the meetings of the stockholders
and directors in the books to be kept for that purpose. He shall keep in safe
custody the seal of the Corporation, and shall have charge of the records of the
Corporation, including the stock books and such other books and papers as the
board of directors may direct and such books, reports, certificates and other
documents required by law to be kept, all of which shall at all reasonable times
be open to inspection by any director. He shall perform such other duties as
appertain to his office or as may be required by the board of directors.
Any assistant secretary may perform such duties of the secretary as the
secretary or the board of directors may assign, and, in the absence of the
secretary, may perform all the duties of the secretary.
Section 5.11. SUBORDINATE OFFICERS:
The board of directors from time to time may appoint such other officers or
agents as it may deem advisable, each of whom shall have such title, hold office
for such period, have such authority and perform such duties as the board of
directors may determine. The board of directors from time to time may delegate
to one or more officers or agents the power to appoint any such subordinate
officers or agents and to prescribe their respective rights, terms of office,
authorities and duties.
Section 5.12. REMUNERATION:
The salaries or other compensation of the officers of the Corporation shall
be fixed from time to time by resolution of the board of directors, except that
the board of directors may by resolution delegate to any person or group of
persons the power to fix the salaries or other compensation of any subordinate
officers or agents appointed in accordance with the provisions of Section 5.11
hereof.
Section 5.13. SURETY BONDS:
The board of directors may require any officer or agent of the Corporation
to execute a bond (including, without limitation, any bond required by the
Investment Company Act of 1940,
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as amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder) to the Corporation in such sum and with such
surety or sureties as the board of directors may determine, conditioned upon the
faithful performance of his duties to the Corporation, including responsibility
for negligence and for the accounting of any of the Corporation's property,
funds or securities that may come into his or her hands.
ARTICLE VI
CUSTODY OF SECURITIES
Section 6.01. EMPLOYMENT OF A CUSTODIAN:
The Corporation shall place and at all times maintain in the custody of a
custodian (including any sub-custodian for the custodian) all funds, securities
and similar investments owned by the Corporation. The custodian (and any
sub-custodian) shall be a bank or similar financial institution having not less
than $2,000,000 aggregate capital, surplus and undivided profits and shall be
appointed from time to time by the board of directors, which shall fix its
remuneration.
Section 6.02. ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT:
Upon termination of a custodian agreement or inability of the custodian to
continue to serve, the board of directors shall promptly appoint a successor
custodian, but in the event that no successor custodian can be found who has the
required qualifications and is willing to serve, the board of directors shall
call as promptly as possible a special meeting of the stockholders to determine
whether the Corporation shall function without a custodian or shall be
liquidated. If so directed by vote of the holders of a majority of the
outstanding shares of stock of the Corporation, the custodian shall deliver and
pay over all property of the Corporation held by it as specified in such vote.
Section 6.03. PROVISIONS OF CUSTODIAN CONTRACT:
The following provisions shall apply to the employment of a custodian and
to any contract entered into with the custodian so employed:
The board of directors shall cause to be delivered to the custodian all
securities owned by the Corporation or to which it may become entitled, and
shall order the same to be delivered by the custodian only in completion of
a sale, exchange, transfer, pledge, or other disposition thereof, all as
the board of directors may generally or from time to time require or
approve or to a successor custodian; and the board of directors shall cause
all funds owned by the Corporation or to which it may become entitled to be
paid to the custodian, and shall order the same disbursed only for
investment against delivery of the securities acquired, or in payment of
expenses, including management compensation, and liabilities of the
Corporation, including distributions to shareholders, or to a successor
custodian.
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Section 6.04. OTHER ARRANGEMENTS:
The Corporation may make such other arrangements for the custody of its
assets (including deposit arrangements) as may be required by any applicable
law, rule or regulation.
ARTICLE VII
EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES
Section 7.01. GENERAL:
Subject to the provisions of Sections 5.07, 7.02 and 8.03 hereof, all
deeds, documents, transfers, contracts, agreements and other instruments
requiring execution by the Corporation shall be signed by the president or a
vice president and by the treasurer or secretary or an assistant treasurer or an
assistant secretary, or as the board of directors may otherwise, from time to
time, authorize. Any such authorization may be general or confined to specific
instances.
Section 7.02. CHECKS, NOTES, DRAFTS, ETC.:
So long as the Corporation shall employ a custodian to keep custody of the
cash and securities of the Corporation, all checks and drafts for the payment of
money by the Corporation may be signed in the name of the Corporation by the
custodian. Except as otherwise authorized by the board of directors, all
requisitions or orders for the assignment of securities standing in the name of
the custodian or its nominee, or for the execution of powers to transfer the
same, shall be signed in the name of the Corporation by the president or a vice
president and by the treasurer or an assistant treasurer. Promissory notes,
checks or drafts payable to the Corporation may be endorsed only to the order of
the custodian or its nominee and only by the treasurer or president or a vice
president or by such other person or persons as shall be authorized by the board
of directors.
Section 7.03. VOTING OF SECURITIES:
Unless otherwise ordered by the board of directors, the president or any
vice president shall have full power and authority on behalf of the Corporation
to attend and to act and to vote, or in the name of the Corporation to execute
proxies to vote, at any meeting of stockholders of any company in which the
Corporation may hold stock. At any such meeting such officer shall possess and
may exercise (in person or by proxy) any and all rights, powers and privileges
incident to the ownership of such stock. The board of directors may by
resolution from time to time confer like powers upon any other person or
persons.
ARTICLE VIII
CAPITAL STOCK
Section 8.01. SHARE CERTIFICATES:
(a) No certificates certifying the ownership of shares shall be issued
except as the directors may otherwise authorize. In the event that the
directors authorize the issuance of share
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certificates, certificates of stock shall be in the form approved by the board
of directors, signed in the name of the Corporation by the president of any vice
president and by the treasurer or any assistant treasurer or the secretary or
any assistant secretary, sealed with the seal of the Corporation. Such
signatures and seal may be a facsimile and may be mechanically reproduced
thereon. The certificates containing such facsimiles shall be valid for all
intents and purposes.
(b) In case any officer who shall have signed any such certificate, or
whose facsimile signature has been placed thereon, shall cease to be such
officer (because of death, resignation or otherwise) before such certificate is
issued, such certificates may be issued an delivered by the Corporation with the
same effect as if he were such officer at the date of issue.
(c) The number of each certificate issued, the name of the person owning
the shares represented thereby, the number of such shares and the date of
issuance shall be entered upon the stock ledger of the Corporation at the time
of issuance.
(d) Every certificate exchanged, surrendered for redemption or otherwise
returned to the Corporation shall be marked "Canceled" with the date of
cancellation.
(e) The directors may at any time discontinue the issuance of share
certificates and may, by written notice to each stockholder, require the
surrender of share certificates to the Corporation for cancellation. Such
surrender and cancellation shall not affect the ownership of shares the
Corporation.
Section 8.02. TRANSFER OF CAPITAL STOCK:
(a) Transfers of shares of the capital stock of the Corporation shall be
made on the books of the Corporation by the holder of record thereof (in person
or by his or her attorney thereunto duly authorized by a power of attorney duly
executed in writing and filed with the secretary of the Corporation) (i) if a
certificate or certificates have been issued, upon the surrender of the
certificate or certificates, properly endorsed or accompanied by proper
instruments of transfer, representing such shares, or (ii) as otherwise
prescribed by the board of directors.
(b) The Corporation shall be entitled to treat the holder of record of any
share of stock as the absolute owner thereof for all purposes, and accordingly
shall not be bound to recognize any legal, equitable or other claim or interest
in such share on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly provided by the
statutes of the State of Maryland.
Section 8.03. TRANSFER AGENTS AND REGISTRARS:
The board of directors may, from time to time, appoint or remove transfer
agents or registrars of shares of stock of the Corporation, and it may appoint
the same person as both transfer agent and registrar. Upon any such appointment
being made all certificates representing shares of the Corporation thereafter
issued shall be countersigned by one of such transfer agents or registrars or by
both and shall not be valid unless so countersigned. If the same person shall
be both transfer agent and registrar, only one countersignature by such person
shall be required.
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Section 8.04. TRANSFER REGULATIONS:
Except as provided in the Articles of Incorporation, the shares of the
Corporation may be freely transferred, subject to the charging of customary
transfer fees, and the board of directors may, from time to time, adopt rules
and regulations with reference to the method of transfer of the shares of the
Corporation.
Section 8.05. FIXING OF RECORD DATE:
The board of directors may fix in advance a date as a record date for the
determination of the stockholders entitled to notice of or to vote at any
stockholders' meeting or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action; provided that such record date shall be a
date not more than 90 days prior to the date on which the particular action
requiring such determination of stockholders of record will be taken, except
that a meeting of stockholders convened on the date for which it was called may
be adjourned from time to time without further notice to a date not more than
120 days after the original record date. In the case of a meeting of
stockholders, the record date shall be at least ten days before the date of the
meeting.
Section 8.06. LOST STOLEN OR DESTROYED CERTIFICATES:
Before issuing a new certificate for shares of the Corporation alleged to
have been lost, stolen or destroyed, the board of directors or any officer
authorized by the board may, in its discretion, require the owner of the lost,
stolen or destroyed certificate (or his or her legal representative) to give the
Corporation a bond or other indemnity, in such form and in such amount as the
board or any such officer may direct and with such surety or sureties as may be
satisfactory to the board or any such officer, sufficient to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
ARTICLE IX
FISCAL YEAR, ACCOUNTANT
Section 9.01. FISCAL YEAR:
The fiscal year of the Corporation or of its Series shall be as
determined by the board of directors.
Section 9.02. ACCOUNTANT:
(a) The Corporation shall employ and independent public accountant or firm
of independent public accountants as its accountant to examine the accounts of
the Corporation and to sign and certify financial statements filed by the
Corporation. The accountant's certificates and reports shall be addressed both
to the board of directors and to the stockholders. The
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employment of the accountant shall be conditioned upon the right of the
Corporation to terminate the employment forthwith without any penalty by vote of
a majority of the outstanding voting securities at any stockholders' meeting
called for that purpose.
(b) A majority of the members of the board of directors who are not
interested persons (as such term is defined in the Investment Company Act of
1940, as amended) of the Corporation shall select the accountant at any meeting
held within 90 days before or after the beginning of the fiscal year of the
Corporation or before the annual stockholders' meeting in that year. Such
selection shall be submitted for ratification or rejection at the next
succeeding annual stockholders' meeting. If such meeting shall reject such
selection, the accountant shall be selected by majority vote of the
Corporation's outstanding voting securities, either at the meeting at which the
rejection occurred or at a subsequent meeting of stockholders called for the
purpose.
(c) Any vacancy occurring between annual meetings, due to the death or
resignation of the accountant, may be filled by a majority vote of the members
of the board of directors who are not such interested persons.
ARTICLE X
INDEMNIFICATION AND INSURANCE
Section 10.01. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS:
The Corporation shall indemnify its present and past directors, officers,
employees and agents, and any persons who are serving or have served at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or enterprise, to the full
extent provided and allowed by Section 2-418 of the Annotated Corporations and
Associations Code of Maryland concerning corporations, as amended from time to
time or any other applicable provision of law. Notwithstanding anything herein
to the contrary, no director, officer, investment adviser or principal
underwriter of the Corporation shall be indemnified in violation of Section
17(h) and (i) of the Investment Company Act of 1940, as amended.
Section 10.02. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS:
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability.
Section10.03. AMENDMENT:
No amendment, alteration or repeal of this Article or the adoption,
alteration or amendment of any other provision of the Articles of Incorporation
or By-Laws inconsistent with this Article shall adversely affect any right or
protection of any person under this Article with
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respect to any act or failure to act which occurred prior to such amendment,
alteration, repeal or adoption.
ARTICLE XI
AMENDMENTS
Section 11.01. GENERAL:
Except as provided in Section 11.02 hereof, all By-Laws of the Corporation,
whether adopted by the board of directors or the stockholders, shall be subject
to amendment, alteration or repeal, and new By-Laws may be made, by the
affirmative vote of a majority of either:
(a) the holders of record of the outstanding shares of stock of the
Corporation entitled to vote, at any meeting, the notice or waiver of notice of
which shall have specified or summarized the proposed amendment, alteration,
repeal or new By-Law; or
(b) the directors, at any regular or special meeting the notice or waiver
of notice of which shall have specified or summarized the proposed amendment,
alteration, repeal or new By-Law.
Section 11.02. BY STOCKHOLDERS ONLY:
(a) No amendment of any section of these By-laws shall be made except by
the stockholders of the Corporation if the By-laws provide that such section may
not be amended, altered or repealed except by the stockholders.
(b) From and after the issue of any shares of capital stock of the
Corporation, no amendment of this Article XI or Article XII shall be made except
by the stockholders of the Corporation.
ARTICLE XII
MISCELLANEOUS
Section12.01. TRANSACTIONS IN SHARES BY AFFILIATES:
(a) Except as hereinafter provided, no officer or director of the
Corporation and no partner, officer, director or shareholder of an investment
adviser (as the term is defined in the Investment Company Act of 1940, as
amended) of the Corporation or of the distributor of the Corporation, and no
investment adviser or distributor of the Corporation, shall take long or short
positions in the securities issued by the Corporation.
(b) The foregoing provision shall not prevent the distributor from
purchasing from the Corporation shares of the Corporation if such purchases are
limited (except for reasonable allowances for clerical errors, delays and errors
of transmission and cancellation of orders) to
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purchases for the purpose of filling orders for such shares received by the
distributor, and provided that orders to purchase from the Corporation are
entered with the Corporation or the custodian promptly upon receipt by the
distributor of purchase orders for such shares, unless the distributor is
otherwise instructed by its customer.
(c) The foregoing provision shall not prevent the distributor from
purchasing shares of the Corporation as agent for the account of the
Corporation.
(d) The foregoing provision shall not prevent the purchase from the
Corporation or from the underwriter of shares issued by the Corporation by any
officer or director of the Corporation or by any partner, officer, director or
stockholder of the investment adviser of the Corporation at the price available
to the public generally at the moment of such purchase or, to the extent that
any such person is a stockholder, at the price available to stockholders of the
Corporation generally at the moment of such purchase, or as described in the
current Registration Statement of the Corporation.
Section12.02. LOANS TO AFFILIATES:
The Corporation shall not lend assets of the Corporation to any officer or
director of the Corporation, or to any partner, officer, director or stockholder
of, or person financially interested in, the investment adviser of the
Corporation, or the distributor of the Corporation, or to the investment adviser
of the Corporation or to the distributor of the Corporation.
Section12.03. RESTRICTIONS ON TRANSFER OF SHARES:
Except as provided in subsection 2.06 of Article SEVENTH of the Articles of
Incorporation, the Corporation shall not impose any restrictions upon the
transfer of the shares of the Corporation, but this requirement shall not
prevent the charging of customary transfer agent fees.
Section12.04. CONFLICT OF INTEREST TRANSACTIONS:
The Corporation shall not permit any officer or director, or any officer or
director of the investment adviser or distributor of the Corporation to deal for
or on behalf of the Corporation with himself as principal or agent, or with any
partnership, association or corporation in which he has a financial interest;
provided that the foregoing provision shall not prevent (a) officers and
directors of the Corporation from buying, holding or selling shares in the
Corporation, or from being partners, officers or directors of or otherwise
financially interested in the investment adviser or distributor of the
Corporation; (b) purchases or sales or securities or other property by the
Corporation from or to an affiliated person or to the investment advisers or
distributor of the Corporation if such transaction is exempt from the applicable
provisions of the Investment Company Act of 1940, as amended; (c) purchases of
investments for the portfolio of the Corporation or sales of investments owned
by the Corporation through a security dealer who is, or one or more whose
partners, stockholders, officers or directors is, an officer or director of the
Corporation, if such transaction are handled in the capacity of brokers only and
commissions charged do not exceed customary brokerage charges for such services;
(d) employment of legal
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counsel, registrar, transfer agent, dividend disbursing agent or custodian who
is, or has a partner, stockholder, officer or director who is, an officer or
director of the Corporation, if only customary fees are charged for services to
the Corporation; (e) sharing statistical, research, legal and management
expenses and office hire and expenses with any other investment company in which
an officer or director of the Corporation is an officer or director or otherwise
financially interested.
END OF BY-LAWS
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Exhibit No. 4
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of August 4, 1988, between PAINEWEBBER MASTER SERIES,
INC., a Maryland corporation ("Corporation"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC. ("Mitchell Hutchins"), 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.
WHEREAS the Corporation is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company, and
intends to offer for public sale distinct series of shares of common stock
("Series"), each corresponding to a distinct portfolio; and
WHEREAS the Corporation desires to retain Mitchell Hutchins as investment
adviser and administrator to furnish certain administrative, investment advisory
and portfolio management services to the Corporation and each Series as now
exists and as hereafter may be established, and Mitchell Hutchins is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Corporation hereby appoints Mitchell Hutchins as
investment adviser and administrator of the Corporation and each Series for the
period and on the terms set forth in this Contract. Mitchell Hutchins accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. DUTIES AS INVESTMENT ADVISER.
(a) Subject to the supervision of the Corporation's Board of Directors
("Board"), Mitchell Hutchins will provide a continuous investment program for
each Series, including investment research and management with respect to all
securities and investments and cash equivalents in each Series. Mitchell
Hutchins will determine from time to time what securities and other investments
will be purchased, retained or sold by each Series.
(b) Mitchell Hutchins agrees that in placing orders with brokers and
dealers, 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, purchase and sell portfolio securities to and from 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 research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to Mitchell Hutchins' determining in good
faith that such commission or spread is reasonable in terms either of the
particular transaction or of the overall responsibility of Mitchell Hutchins to
such Series and its other clients and that the total commissions or spreads paid
by such Series will be reasonable in relation to the benefits to the Series over
the long term. In no instance will portfolio securities be purchased from or
sold to Mitchell Hutchins, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
<PAGE>
thereunder. 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 Corporation recognizes that in some cases this procedure may
adversely affect the results obtained for the 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 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
Corporation are the property of the Corporation, agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act any records which it
maintains for the Corporation and which are required to be maintained by Rule
31a-1 under the 1940 Act, and further agrees to surrender promptly to the
Corporation any records which it maintains for the Corporation upon request by
the Corporation.
(d) Mitchell Hutchins will oversee the computation of the net asset value
and the net income of each Series as described in the currently effective
registration statement of the Corporation 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) The Corporation hereby authorizes Mitchell Hutchins and any entity or
person associated with Mitchell Hutchins which is a member of a national
securities exchange to effect any transaction on such exchange for the account
of any Series, which transaction is permitted by Section 11(a) of the 1934 Act
and Rule 11a2-2(T) thereunder, and the Corporation hereby consents to the
retention of compensation by Mitchell Hutchins or person or entity associated
with Mitchell Hutchins for such transactions in accordance with Rule
11a2-2(T)(a)(2)(iv).
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the
affairs of the Corporation and each Series subject to the supervision of the
Board and the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of the
Corporation and each Series, including the oversight of transfer agency,
custodial and accounting services, 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 the affairs of the
Corporation and each Series.
(b) Mitchell Hutchins will provide the Corporation and each Series with
such corporate, administrative and clerical personnel (including officers of the
Corporation) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Corporation
and each Series.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the
Corporation's Registration Statement, proxy
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material, tax returns and required reports to each Series' shareholders and the
Securities and Exchange Commission.
(d) Mitchell Hutchins will provide the Corporation and each Series with,
or obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Articles of
Incorporation, By-Laws and Registration Statement of the Corporation and with
the instructions and directions of the Board and will comply with the
requirements of the 1940 Act, the rules thereunder, and all other applicable
federal and state laws and regulations.
5. DELEGATION OF MITCHELL HUTCHINS' DUTIES AS INVESTMENT ADVISER AND
ADMINISTRATOR. With respect to any or all Series, Mitchell Hutchins may enter
into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
a sub-adviser or a sub-administrator in which Mitchell Hutchins delegates to
such sub-adviser or sub-administrator any or all its duties specified in
Paragraph 2 and 3 of this Contract, provided that each Sub-Advisory or
Sub-Administration Contract imposes on the sub-adviser or sub-administrator
bound thereby all the duties and conditions to which Mitchell Hutchins is
subject by Paragraph 2, 3 and 4 of this Contract, and further provided that each
Sub-Advisory or Sub-Administration Contract meets all requirements of the 1940
Act and rules thereunder.
6. 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 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 Director, officer or employee of the Corporation, 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.
7. EXPENSES.
(a) During the term of this Contract, each Series will bear all expenses,
not specifically assumed by Mitchell Hutchins, incurred in its operations and
the offering of its shares.
(b) Expenses borne by each Series will include but not be limited to the
following (or each Series' proportionate share of the following): (i) the cost
(including brokerage commissions) of securities purchased or sold by the Series
and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Series by Mitchell Hutchins
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under this Contract; (iii) expenses of organizing the Corporation and the
Series; (iv) filing fees and expenses relating to the registration and
qualification of the Series' shares and the Corporation under federal and/or
state securities laws and maintaining such registrations and qualifications; (v)
fees and salaries payable to the Corporation's Directors who are not interested
persons of the Corporation or Mitchell Hutchins; (vi) all expenses incurred in
connection with the Directors' services, including travel expenses; (vii) taxes
(including any income or franchise taxes) and governmental fees; (viii) costs of
any liability, uncollectible items of deposit and other insurance and fidelity
bonds; (ix) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the Corporation or Series for
violation of any law; (x) legal, accounting and auditing expenses, including
legal fees of special counsel for those Directors of the Corporation who are not
interested persons of the Corporation; (xi) charges of custodians, transfer
agents and other agents; (xii) costs of preparing share certificates; (xiii)
expenses of setting in type and printing prospectuses and supplements thereto,
statements of additional information and supplements thereto, reports and proxy
materials for existing shareholders; (xiv) costs of mailing prospectuses and
supplements thereto, statements of additional information and supplements
thereto, reports and proxy materials to existing shareholders; (xv) any
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Corporation is a party and the
expenses the Corporation may incur as a result of its legal obligation to
provide indemnification to its officers, Directors, agents and shareholders)
incurred by the Corporation or Series; (xvi) fees, voluntary assessments and
other expenses incurred in connection with membership in investment company
organizations; (xvii) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xviii) the cost
of investment company literature and other publications provided by the
Corporation to its Directors and officers; and (xix) costs of mailing,
stationery and communications equipment.
(c) The Corporation or a Series may pay directly any expense incurred by
it in its normal operations and, if any such payment is consented to by Mitchell
Hutchins and acknowledged as otherwise payable by Mitchell Hutchins pursuant to
this Contract, the Series may reduce the fee payable to Mitchell Hutchins
pursuant to Paragraph 8 hereof by such amount. To the extent that such
deductions exceed the fee payable to Mitchell Hutchins on any monthly payment
date, such excess shall be carried forward and deducted in the same manner from
the fee payable on succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Corporation received by the officers of the Corporation
and by those Directors who are interested persons of the Corporation.
(e) The payment or assumption by Mitchell Hutchins of any expense of the
Corporation or a Series that Mitchell Hutchins is not required by this Contract
to pay or assume shall not obligate Mitchell Hutchins to pay or assume the same
or any similar expense of the Corporation or a Series on any subsequent
occasion.
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8. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to this
Contract with respect to the Series identified below, the Corporation will pay
to Mitchell Hutchins a fee, computed daily and paid monthly from the assets of
the appropriate Series, in accordance with the following:
(i) PaineWebber Master Income Fund:
Up to $500 million of average daily net assets. . . . . . . .625%
In excess of $500 million up to $1.0 billion. . . . . . . . .600
In excess of $1.0 billion up to $2.0 billion. . . . . . . . .550
In excess of $2.0 billion up to $4.0 billion. . . . . . . . .500
Over $4.0 billion. . . . . . . . . . . . . . . . . . . . . . .450
(ii) PaineWebber Master Growth Fund:
Up to $500 million of average daily net assets. . . . . . . .750%
In excess of $500 million up to $1.0 billion. . . . . . . . .725
In excess of $1.0 billion up to $1.5 billion. . . . . . . . .700
In excess of $1.5 billion up to $2.0 billion. . . . . . . . .675
Over $2.0 billion. . . . . . . . . . . . . . . . . . . . .. .650
(iii) PaineWebber Master Money Fund:
All average daily net assets. . . . . . . . . . . . . . . . .500%
(iv) PaineWebber Asset Allocation Fund:
Up to $500 million of average daily net assets. . . . . . . .750%
In excess of $500 million up to $1.0 billion. . . . . . . . .725
In excess of $1.0 billion up to $1.5 billion. . . . . . . . .700
In excess of $1.5 billion up to $2.0 billion. . . . . . . . .675
Over $2.0 billion. . . . . . . . . . . . . . . . . . . . . . .650
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any Series hereafter established, the Corporation will
pay to Mitchell Hutchins from the assets of such Series a fee in an amount to be
agreed upon in a written fee agreement ("Fee Agreement") executed by the
Corporation on behalf of such Series and by Mitchell Hutchins. All such Fee
Agreements shall provide that they are subject to all terms and conditions of
this Contract.
(c) The fee shall be computed daily and paid monthly to Mitchell Hutchins
on or before the last business day of the next succeeding calendar month.
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(d) If this Contract becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
9. LIMITATION OF LIABILITY OF MITCHELL HUTCHINS. Mitchell Hutchins shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by any Series or the Corporation in connection with the matters to
which this Contract relates except a loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this Contract.
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
Corporation shall be deemed, when rendering services to any Series or the
Corporation or acting with respect to any business of such Series or the
Corporation, to be rendering such service to or acting solely for the Series or
the Corporation and not as an officer, partner, employee, or agent or one under
the control or direction of Mitchell Hutchins even though paid by it.
10. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove 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
of the Corporation 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 shall
continue in effect for two years 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 those Directors of the
Corporation 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 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 or
by Mitchell Hutchins at any time, without the payment of any penalty, on sixty
days' written notice to the Corporation. 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 automatically terminate in the event of its assignment.
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11. 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, 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.
12. 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.
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," "interested person,"
"assignment," "broker," "dealer," "investment adviser," "national securities
exchange," "net assets," "prospectus," "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 Securities and Exchange Commission by any rule,
regulation or order. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Contract is relaxed by a rule, regulation or
order of the Securities and Exchange Commission, 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 officers designated as of the day and year first above
written.
Attest: PAINEWEBBER MASTER SERIES, INC.
/s/ Robin Berger By: /s/ Dianne E. O'Donnell
- --------------------------- ---------------------------
Attest: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
/s/ Robin Berger By: /s/
- --------------------------- ---------------------------
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Exhibit No. 5(a)
PAINEWEBBER MASTER SERIES, INC.
DISTRIBUTION CONTRACT
CLASS A SHARES
CONTRACT made as of July 7, 1993, between PAINEWEBBER MASTER SERIES, a
Maryland corporation ("Fund"), and MITCHELL HUTCHINS ASSET MANAGEMENT INC., a
Delaware corporation ("Mitchell Hutchins").
WHEREAS the Fund is registered under the Investment Company Act of l940, as
amended ("l940 Act"), as an open-end management investment company and currently
has four distinct series of shares of common stock ("Series"), which correspond
to distinct portfolios and have been designated as the PaineWebber Income Fund,
PaineWebber Blue Chip Growth Fund, PaineWebber Asset Allocation Fund and
PaineWebber Money Market Fund; and
WHEREAS the Fund's board of directors ("Board") has established shares of
common stock of the above-referenced Series as Class A shares ("Class A
Shares"); and
WHEREAS the Fund has adopted a Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act for its Class A Shares ("Plan") and desires to retain
Mitchell Hutchins as principal distributor in connection with the offering and
sale of the Class A Shares of the above referenced Series and of such other
Series as may hereafter be designated by the Board and have Class A Shares
established; and
WHEREAS Mitchell Hutchins is willing to act as principal distributor of the
Class A Shares of each such Series 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 Mitchell Hutchins as its
exclusive agent to be the principal distributor to sell and to arrange for the
sale of the Class A Shares on the terms and for the period set forth in this
Contract. Mitchell Hutchins hereby accepts such appointment and agrees to act
hereunder. It is understood, however, that this appointment does not preclude
sales of the Class A Shares directly through the Fund's transfer agent in the
manner set forth in the Registration Statement. As used in this Contract, the
term "Registration Statement" shall mean the currently effective registration
statement of the Fund, and any supplements thereto, under the Securities Act of
1933, as amended ("1933 Act"), and the 1940 Act.
<PAGE>
2. SERVICES AND DUTIES OF MITCHELL HUTCHINS.
(a) Mitchell Hutchins agrees to sell Class A Shares on a best
efforts basis from time to time during the term of this Contract as agent for
the Fund and upon the terms described in the Registration Statement.
(b) Upon the later of the date of this Contract or the initial
offering of the Class A Shares to the public by a Series, Mitchell Hutchins will
hold itself available to receive purchase orders, satisfactory to Mitchell
Hutchins, for Class A Shares of that Series 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 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) Mitchell Hutchins in its discretion may enter into agreements to
sell Class A Shares to such registered and qualified retail dealers, including
but not limited to PaineWebber Incorporated ("PaineWebber"), as it may select.
In making agreements with such dealers, Mitchell Hutchins shall act only as
principal and not as agent for the Fund.
(d) The offering price of the Class A Shares of each Series shall be
the net asset value per Share as next determined by the Fund following receipt
of an order at Mitchell Hutchins' principal office plus the applicable initial
sales charge, if any, computed as set forth in the Registration Statement. The
Fund shall promptly furnish Mitchell Hutchins with a statement of each
computation of net asset value.
(e) Mitchell Hutchins shall not be obligated to sell any certain
number of Class A Shares.
(f) To facilitate redemption of Class A Shares by shareholders
directly or through dealers, Mitchell Hutchins is authorized but not required on
behalf of the Fund to repurchase Class A 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. Such price shall reflect the subtraction
of the contingent deferred sales charge, if any, computed in accordance with and
in the manner set forth in the Registration Statement.
(g) Mitchell Hutchins shall provide ongoing shareholder services,
which include responding to shareholder inquiries, providing shareholders with
information on their investments in the Class A 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").
"Service activities" do not include the transfer agency-related and other
services for which PaineWebber receives compensation under the Service Contract
between PaineWebber and the Fund.
(h) Mitchell Hutchins 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
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under this Contract; provided, however, that Mitchell Hutchins 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 Class A Shares of any or
all Series, Mitchell Hutchins may enter into an exclusive dealer agreement with
PaineWebber or any other registered and qualified dealer with respect to sales
of the Class A Shares or the provision of service activities. In a separate
contract or as part of any such exclusive dealer agreement, Mitchell Hutchins
also may delegate to PaineWebber 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
Mitchell Hutchins 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 Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins 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 Mitchell Hutchins, 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
with respect to the Class A Shares, Mitchell Hutchins shall receive from the
Fund a service fee at the rate and under the terms and conditions of the Plan
adopted by the Fund with respect to the Class A Shares of the Series, as such
Plan is amended from time to time, and subject to any further limitations on
such fee as the Board may impose.
(b) As compensation for its activities under this contract with
respect to the distribution of the Class A Shares, Mitchell Hutchins shall
retain the initial sales charge, if any, on purchases of Class A Shares as set
forth in the Registration Statement. Mitchell Hutchins is authorized to collect
the gross proceeds derived from the sale of the Class A Shares, remit the net
asset value thereof to the fund upon receipt of the proceeds and retain the
initial sales charge, if any.
(c) As compensation for its activities under this contract with
respect to the distribution of the Class A Shares, Mitchell Hutchins shall
receive all contingent deferred sales charges imposed on redemptions of Class A
Shares of each Series. Whether and at what rate a contingent deferred sales
charge will be imposed with respect to a redemption shall be determined in
accordance with, and in the manner set forth in, the Registration Statement.
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(d) Mitchell Hutchins may reallow any or all of the initial sales
charges, contingent deferred sales charges, or service fees which it is paid
under this Contract to such dealers as Mitchell Hutchins may from time to time
determine.
6. DUTIES OF THE FUND.
(a) The Fund reserves the right at any time to withdraw offering
Class A Shares of any or all Series by written notice to Mitchell Hutchins at
its principal office.
(b) The Fund shall determine in its sole discretion whether
certificates shall be issued with respect to the Class A Shares. If the Fund
has determined that certificates shall be issued, the Fund will not cause
certificates representing Class A Shares to be issued unless so requested by
shareholders. If such request is transmitted by Mitchell Hutchins, the Fund
will cause certificates evidencing Class A Shares to be issued in such names and
denominations as Mitchell Hutchins shall from time to time direct.
(c) The Fund shall keep Mitchell Hutchins fully informed of its
affairs and shall make available to Mitchell Hutchins copies of all information,
financial statements, and
other papers which Mitchell Hutchins may reasonably request for use in
connection with the distribution of Class A 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 any Series as Mitchell Hutchins may request, and the Fund
shall cooperate fully in the efforts of Mitchell Hutchins to sell and arrange
for the sale of the Class A Shares of the Series and in the performance of
Mitchell Hutchins 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
Class A Shares under the 1933 Act to the end that there will be available for
sale such number of Class A Shares as Mitchell Hutchins 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 Class A Shares of each Series for sale
under the securities laws of such states or other jurisdictions as Mitchell
Hutchins 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 amend its Articles of Incorporation or By-Laws to comply with the
laws of any jurisdiction, to maintain an office in any jurisdiction, to change
the terms of the offering of the Class A Shares in any jurisdiction from the
terms set forth in its Registration Statement, to qualify as a foreign
corporation in any jurisdiction, or to consent to service of process in any
jurisdiction other than with respect to claims arising out of the offering of
the Class A Shares. Mitchell Hutchins shall
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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 Class A Shares with the Securities and Exchange Commission and
state and other regulatory bodies, and shall assume expenses related to
communications with shareholders of each Series, 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 Class A Shares for sale and of the
Fund as a broker or dealer under the securities laws of such jurisdictions as
shall be selected by the Fund and Mitchell Hutchins pursuant to Paragraph 6(e)
hereof, and the costs and expenses payable to each such jurisdiction for
continuing qualification therein.
8. EXPENSES OF MITCHELL HUTCHINS. Mitchell Hutchins shall bear all costs
and expenses of (i) preparing, printing and distributing any materials not
prepared by the Fund and other materials used by Mitchell Hutchins in connection
with the sale of Class A 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
Mitchell Hutchins in connection with such offering; (iii) the expenses of
registration or qualification of Mitchell Hutchins 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 Mitchell Hutchins' employees
and others for selling Class A Shares, and all expenses of Mitchell Hutchins,
its employees and others who engage in or support the sale of Class A Shares as
may be incurred in connection with their sales efforts.
9. INDEMNIFICATION.
(a) The Fund agrees to indemnify, defend and hold Mitchell Hutchins,
its officers and directors, and any person who controls Mitchell Hutchins 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 Mitchell Hutchins, 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 alleged untrue
statement of a material fact contained in the Registration Statement or arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement 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 Mitchell Hutchins to the Fund for use
in the Registration Statement; provided, however, that this indemnity agreement
shall not inure to the benefit of any person
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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 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 Mitchell Hutchins against any liability to
the Fund or to the shareholders of any Series to which Mitchell Hutchins 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 Mitchell Hutchins under this indemnity agreement with respect to any claim
made against Mitchell Hutchins or any person indemnified unless Mitchell
Hutchins 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 Mitchell Hutchins or such other person (or after Mitchell Hutchins
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 Mitchell Hutchins 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 indemnified defendants in the suit whose approval shall not
be unreasonably withheld. 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 defendants. The Fund agrees to notify Mitchell
Hutchins promptly of the commencement of any litigation or proceedings against
it or any of its officers or trustees in connection with the issuance or sale of
any of its Class A Shares.
(b) Mitchell Hutchins 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, 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
Mitchell Hutchins to the Fund for use in the Registration Statement, 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 arising out of any
agreement between Mitchell Hutchins and any retail dealer, or arising out of any
supplemental sales literature or advertising used by Mitchell Hutchins in
connection with its duties under this Contract. Mitchell Hutchins 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 the claim, but if Mitchell
Hutchins elects to assume the defense, the defense shall be conducted by counsel
chosen by Mitchell Hutchins and satisfactory to the indemnified defendants whose
approval shall not be unreasonably withheld. In the event
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that Mitchell Hutchins 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 Mitchell Hutchins 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.
10. SERVICES PROVIDED TO THE FUND BY EMPLOYEES OF MITCHELL HUTCHINS.
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 the Fund or acting in any
business of the Fund, to be rendering such services to or acting solely for 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 Mitchell Hutchins.
11. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove
written, provided that, with respect to any Series, 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 Series 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 with respect to any given Series by vote of a majority of the
outstanding voting securities of the Class A Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, 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 Class A Shares of such
Series on sixty days' written notice to Mitchell Hutchins or by Mitchell
Hutchins at any time, without the payment of any penalty, on sixty days' written
notice to the Fund or such Series. This Contract will automatically terminate
in the event of its assignment.
(d) 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.
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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 l940 Act, the latter shall control.
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 l940 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 MASTER SERIES, INC.
/s/ Jenny Ann Frank By:/s/ Dianne E. O'Donnell
------------------------------ -------------------------------------
Dianne E. O'Donnell
Secretary and Vice President
ATTEST: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/ Jenny Ann Frank By: /s/ Jack W. Murphy
------------------------------- ----------------------------------
Jack W. Murphy
First Vice President
8
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Exhibit No. 5(b)
PAINEWEBBER MASTER SERIES, INC.
DISTRIBUTION CONTRACT
CLASS B SHARES
CONTRACT made as of July 7, 1993, between PAINEWEBBER MASTER SERIES, INC.,
a Maryland corporation ("Fund") and MITCHELL HUTCHINS ASSET MANAGEMENT INC., a
Delaware corporation ("Mitchell Hutchins").
WHEREAS the Fund is registered under the Investment Company Act of l940, as
amended ("l940 Act"), as an open-end management investment company and currently
has four distinct series of shares of common stock ("Series"), which correspond
to distinct portfolios and have been designated as the PaineWebber Income Fund,
PaineWebber Blue Chip Growth Fund, PaineWebber Asset Allocation Fund and
PaineWebber Money Market Fund; and
WHEREAS the Fund's board of directors ("Board") has established shares of
common stock of the above-referenced Series as Class B shares ("Class B
Shares"); and
WHEREAS the Fund has adopted a Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act for its Class B Shares ("Plan") and desires to retain
Mitchell Hutchins as principal distributor in connection with the offering and
sale of the Class B Shares of the above-referenced Series and of such other
Series as may hereafter be designated by the Board and have Class B Shares
established; and
WHEREAS Mitchell Hutchins is willing to act as principal distributor of the
Class B Shares of each such Series 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 Mitchell Hutchins as its
exclusive agent to be the principal distributor to sell and to arrange for the
sale of the Class B Shares on the terms and for the period set forth in this
Contract. Mitchell Hutchins hereby accepts such appointment and agrees to act
hereunder. It is understood, however, that this appointment does not preclude
sales of the Class B Shares directly through the Fund's transfer agent in the
manner set forth in the Registration Statement. As used in this Contract, the
term "Registration Statement" shall mean the currently effective registration
statement of the Fund, and any supplements thereto, under the Securities Act of
1933, as amended ("1933 Act"), and the 1940 Act.
<PAGE>
2. SERVICES AND DUTIES OF MITCHELL HUTCHINS.
(a) Mitchell Hutchins agrees to sell Class B Shares on a best efforts
basis from time to time during the term of this Contract as agent for the Fund
and upon the terms described in the Registration Statement.
(b) Upon the later of the date of this Contract or the initial
offering of the Class B Shares to the public by a Series, Mitchell Hutchins will
hold itself available to receive purchase orders, satisfactory to Mitchell
Hutchins, for Class B Shares of that Series 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 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) Mitchell Hutchins in its discretion may enter into agreements to
sell Class B Shares to such registered and qualified retail dealers, including
but not limited to PaineWebber Incorporated ("PaineWebber"), as it may select.
In making agreements with such dealers, Mitchell Hutchins shall act only as
principal and not as agent for the Fund.
(d) The offering price of the Class B Shares of each Series shall be
the net asset value per Share as next determined by the Fund following receipt
of an order at Mitchell Hutchins' principal office. The Fund shall promptly
furnish Mitchell Hutchins with a statement of each computation of net asset
value.
(e) Mitchell Hutchins shall not be obligated to sell any certain
number of Class B Shares.
(f) To facilitate redemption of Class B Shares by shareholders
directly or through dealers, Mitchell Hutchins is authorized but not required on
behalf of the Fund to repurchase Class B 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. Such price shall reflect the subtraction
of the contingent deferred sales charge, if any, computed in accordance with and
in the manner set forth in the Registration Statement.
(g) Mitchell Hutchins shall provide ongoing shareholder services,
which include responding to shareholder inquiries, providing shareholders with
information on their investments in the Class B 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").
"Service activities" do not include the transfer agency-related and other
services for which PaineWebber receives compensation under the Service Contract
between PaineWebber and the Fund.
(h) Mitchell Hutchins 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
2
<PAGE>
under this Contract; provided, however, that Mitchell Hutchins 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 Class B Shares of any or
all Series, Mitchell Hutchins may enter into an exclusive dealer agreement with
PaineWebber or any other registered and qualified dealer with respect to sales
of the Class B Shares or the provision of service activities. In a separate
contract or as part of any such exclusive dealer agreement, Mitchell Hutchins
also may delegate to PaineWebber 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
Mitchell Hutchins 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 Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins 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 Mitchell Hutchins, 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
with respect to the Class B Shares, Mitchell Hutchins shall receive from the
Fund a service fee at the rate and under the terms and conditions of the Plan
adopted by the Fund with respect to the Class B Shares of the Series, as such
Plan is amended from time to time, and subject to any further limitations on
such fee as the Board may impose.
(b) As compensation for its activities under this contract with
respect to the distribution of the Class B Shares, Mitchell Hutchins shall
receive from the Fund a distribution fee at the rate and under the terms and
conditions of the Plan adopted by the Fund with respect to the Class B Shares of
the Series, as such Plan is amended from time to time, and subject to any
further limitations on such fee as the Board may impose.
(c) As compensation for its activities under this contract with
respect to the distribution of the Class B Shares, Mitchell Hutchins shall
receive all contingent deferred sales charges imposed on redemptions of Class B
Shares of each Series. Whether and at what rate a contingent deferred sales
charge will be imposed with respect to a redemption shall be determined in
accordance with, and in the manner set forth in, the Registration Statement.
3
<PAGE>
(d) Mitchell Hutchins may reallow any or all of the distribution
fees, contingent deferred sales charges, or service fees which it is paid under
this Contract to such dealers as Mitchell Hutchins may from time to time
determine.
6. DUTIES OF THE FUND.
(a) The Fund reserves the right at any time to withdraw offering
Class B Shares of any or all Series by written notice to Mitchell Hutchins at
its principal office.
(b) The Fund shall determine in its sole discretion whether
certificates shall be issued with respect to the Class B Shares. If the Fund
has determined that certificates shall be issued, the Fund will not cause
certificates representing Class B Shares to be issued unless so requested by
shareholders. If such request is transmitted by Mitchell Hutchins, the Fund
will cause certificates evidencing Class B Shares to be issued in such names and
denominations as Mitchell Hutchins shall from time to time direct.
(c) The Fund shall keep Mitchell Hutchins fully informed of its
affairs and shall make available to Mitchell Hutchins copies of all
information, financial statements, and other papers which Mitchell Hutchins
may reasonably request for use in connection with the distribution of Class B
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 any Series as
Mitchell Hutchins may request, and the Fund shall cooperate fully in the
efforts of Mitchell Hutchins to sell and arrange for the sale of the Class B
Shares of the Series and in the performance of Mitchell Hutchins 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
Class B Shares under the 1933 Act to the end that there will be available for
sale such number of Class B Shares as Mitchell Hutchins 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 Class B Shares of each Series for sale
under the securities laws of such states or other jurisdictions as Mitchell
Hutchins 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 amend its Articles of Incorporation or By-Laws to comply with the
laws of any jurisdiction, to maintain an office in any jurisdiction, to change
the terms of the offering of the Class B Shares in any jurisdiction from the
terms set forth in its Registration Statement, to qualify as a foreign
corporation in any jurisdiction, or to consent to service of process in any
jurisdiction other than with respect to claims arising out of the offering of
the Class B Shares. Mitchell Hutchins shall
4
<PAGE>
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 Class B Shares with the Securities and Exchange Commission and
state and other regulatory bodies, and shall assume expenses related to
communications with shareholders of each Series, 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 Class B Shares for sale and of the
Fund as a broker or dealer under the securities laws of such jurisdictions as
shall be selected by the Fund and Mitchell Hutchins pursuant to Paragraph 6(e)
hereof, and the costs and expenses payable to each such jurisdiction for
continuing qualification therein.
8. EXPENSES OF MITCHELL HUTCHINS. Mitchell Hutchins shall bear all costs
and expenses of (i) preparing, printing and distributing any materials not
prepared by the Fund and other materials used by Mitchell Hutchins in connection
with the sale of Class B 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
Mitchell Hutchins in connection with such offering; (iii) the expenses of
registration or qualification of Mitchell Hutchins 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 Mitchell Hutchins' employees
and others for selling Class B Shares, and all expenses of Mitchell Hutchins,
its employees and others who engage in or support the sale of Class B Shares as
may be incurred in connection with their sales efforts.
9. INDEMNIFICATION.
(a) The Fund agrees to indemnify, defend and hold Mitchell Hutchins,
its officers and directors, and any person who controls Mitchell Hutchins 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 Mitchell Hutchins, 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 alleged untrue
statement of a material fact contained in the Registration Statement or arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement 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 Mitchell Hutchins to the Fund for use
in the Registration Statement;
5
<PAGE>
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 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 Mitchell Hutchins against any
liability to the Fund or to the shareholders of any Series to which Mitchell
Hutchins 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 Mitchell Hutchins under this indemnity agreement with respect to
any claim made against Mitchell Hutchins or any person indemnified unless
Mitchell Hutchins 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 Mitchell Hutchins or such other person (or after Mitchell Hutchins
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 Mitchell Hutchins 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 indemnified defendants in the suit whose approval shall not
be unreasonably withheld. 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 defendants. The Fund agrees to notify Mitchell
Hutchins 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 Class B Shares.
(b) Mitchell Hutchins 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, 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
Mitchell Hutchins to the Fund for use in the Registration Statement, 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 arising out of any
agreement between Mitchell Hutchins and any retail dealer, or arising out of any
supplemental sales literature or advertising used by Mitchell Hutchins in
connection with its duties under this Contract. Mitchell Hutchins shall be
entitled to participate, at its own expense, in the defense or, if it so elects,
to assume the
6
<PAGE>
defense of any suit brought to enforce the claim, but if Mitchell Hutchins
elects to assume the defense, the defense shall be conducted by counsel chosen
by Mitchell Hutchins and satisfactory to the indemnified defendants whose
approval shall not be unreasonably withheld. In the event that Mitchell
Hutchins 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 Mitchell Hutchins 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.
10. SERVICES PROVIDED TO THE FUND BY EMPLOYEES OF MITCHELL HUTCHINS. 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 the Fund or acting in any
business of the Fund, to be rendering such services to or acting solely for 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 Mitchell Hutchins.
11. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove
written, provided that, with respect to any Series, 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 Series 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 with respect to any given Series by vote of a majority of the
outstanding voting securities of the Class B Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, 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 Class B Shares of such
Series on sixty days' written notice to Mitchell Hutchins or by Mitchell
Hutchins at any time, without the payment of any penalty, on sixty days' written
notice to the Fund or such Series. This Contract will automatically terminate
in the event of its assignment.
7
<PAGE>
(d) 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.
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 l940 Act, the latter shall control.
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.
16. 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 l940 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 MASTER SERIES, INC.
/s/ Jenny Ann Frank By: /s/ Dianne E. O'Donnell
-------------------------------------- --------------------------
Dianne E. O'Donnell
Secretary and Vice
President
ATTEST: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/ Jenny Ann Frank By: /s/ Jack W. Murphy
-------------------------------------- ---------------------------
Jack W. Murphy
First Vice President
8
<PAGE>
Exhibit No. 5(e)
EXCLUSIVE DEALER AGREEMENT
CLASS A SHARES OF PAINEWEBBER MASTER SERIES, INC.
AGREEMENT made as of July 7, 1993, between Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a Delaware corporation, and PaineWebber
Incorporated ("PaineWebber"), a Delaware corporation.
WHEREAS PaineWebber Master Series, Inc. ("Fund") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended ("1940 Act"), as
an open-end management investment company; and
WHEREAS the Fund currently has four distinct series of shares of common
stock ("Series"), which correspond to distinct portfolios and have been
designated as the PaineWebber Income Fund, PaineWebber Blue Chip Growth Fund,
PaineWebber Asset Allocation Fund and PaineWebber Money Market Fund; and
WHEREAS the Fund's board of directors ("Board") has established shares of
common stock of the above-referenced Series as Class A shares ("Class A Shares")
and has adopted a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act
("Plan") with respect to the Class A Shares of the above-referenced Series and
of such other Series as may hereafter be designated by the Board and have Class
A Shares established; and
WHEREAS Mitchell Hutchins has entered into a Distribution Contract with the
Fund ("Distribution Contract") pursuant to which Mitchell Hutchins serves as
principal distributor in connection with the offering and sale of the Class A
Shares of each such Series; and
WHEREAS Mitchell Hutchins desires to retain PaineWebber as its exclusive
agent in connection with the offering and sale of the Class A Shares of each
Series and to delegate to PaineWebber performance of certain of the services
which Mitchell Hutchins provides to the Fund under the Distribution Contract;
and
WHEREAS PaineWebber is willing to act as Mitchell Hutchins' exclusive agent
in connection with the offering and sale of such Class A Shares and to perform
such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, Mitchell Hutchins and PaineWebber agree as follows:
<PAGE>
1. APPOINTMENT. Mitchell Hutchins hereby appoints PaineWebber as its
exclusive agent to sell and to arrange for the sale of the Class A Shares on the
terms and for the period set forth in this Agreement. Mitchell Hutchins also
appoints PaineWebber as its agent for the performance of certain other services
set forth herein which Mitchell Hutchins provides to the Fund under the
Distribution Contract. PaineWebber hereby accepts such appointments and agrees
to act hereunder. It is understood, however, that these appointments do not
preclude sales of Class A Shares directly through the Fund's transfer agent in
the manner set forth in the Registration Statement. As used in this Agreement,
the term "Registration Statement" shall mean the currently effective
Registration Statement of the Fund, and any supplements thereto, under the
Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
2. SERVICES, DUTIES AND REPRESENTATIONS OF PAINEWEBBER.
(a) PaineWebber agrees to sell the Class A Shares on a best efforts
basis from time to time during the term of this Agreement as agent for Mitchell
Hutchins and upon the terms described in this Agreement and the Registration
Statement.
(b) Upon the later of the date of this Agreement or the initial
offering of Class A Shares by a Series to the public, PaineWebber will hold
itself available to receive orders, satisfactory to PaineWebber and Mitchell
Hutchins, for the purchase of Class A Shares and will accept such orders on
behalf of Mitchell Hutchins and the Fund as of the time of receipt of such
orders and will promptly transmit such orders as are accepted to 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 sell Class A Shares to (i) its
correspondent firms and customers of such firms and (ii) such other registered
and qualified retail dealers as it may select, subject to the approval of
Mitchell Hutchins. In making agreements with such dealers, PaineWebber shall
act only as principal and not as agent for Mitchell Hutchins or the Fund.
(d) The offering price of the Class A Shares of each Series shall be
the net asset value per Share as next determined by the Fund following receipt
of an order at PaineWebber's principal office, plus the applicable initial sales
charge, if any, as set forth in the Registration Statement. Mitchell Hutchins
shall promptly furnish or arrange for the furnishing to PaineWebber of a
statement of each computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain number of
Class A Shares.
2
<PAGE>
(f) To facilitate redemption of Class A Shares by shareholders
directly or through dealers, PaineWebber is authorized but not required on
behalf of Mitchell Hutchins and the Fund to repurchase Class A Shares presented
to it by shareholders, its correspondent firms and other dealers at the price
determined in accordance with, and in the manner set forth in, the Registration
Statement. Such price shall reflect the subtraction of the applicable
contingent deferred sales charge, if any, computed 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 Class A 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").
"Service activities" do not include the transfer agency-related and other
services for which PaineWebber receives compensation under the Service Contract
between PaineWebber and the Fund.
(h) PaineWebber represents and warrants that: (i) it is a member in
good standing of the NASD and agrees to abide by the Rules of Fair Practice of
the NASD; (ii) it is registered as a broker-dealer with the Securities and
Exchange Commission; (iii) it will maintain any filings and licenses required by
federal and state laws to conduct the business contemplated under this
Agreement; and (iv) it will comply with all federal and state laws and
regulations applicable to the offer and sale of the Class A Shares.
(i) PaineWebber shall not incur any debts or obligations on behalf of
Mitchell Hutchins or the Fund. PaineWebber shall bear all costs that it incurs
in selling the Class A Shares and in complying with the terms and conditions of
this Agreement as more specifically set forth in paragraph 8.
(j) PaineWebber shall not permit any employee or agent to offer or
sell Class A Shares to the public unless such person is duly licensed under
applicable federal and state laws and regulations.
(k) PaineWebber shall not (i) furnish any information or make any
representations concerning the Class A Shares other than those contained in the
Registration Statement or in sales literature or advertising that has been
prepared or approved by Mitchell Hutchins as provided in paragraph 6 or (ii)
offer or sell the Class A Shares in jurisdictions in which they have not been
approved for offer and sale.
3. 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 Agreement
are not impaired thereby. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of PaineWebber who may also be a
director, officer or employee of Mitchell Hutchins or the Fund, to engage in any
other
3
<PAGE>
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.
4. COMPENSATION.
(a) As compensation for its service activities under this Agreement
with respect to the Class A Shares, Mitchell Hutchins shall pay to PaineWebber
service fees with respect to Class A Shares maintained in shareholder accounts
serviced by PaineWebber employees, correspondent firms and other dealers in such
amounts as Mitchell Hutchins and PaineWebber may from time to time agree upon.
(b) As compensation for its activities under this Agreement with
respect to the distribution of the Class A Shares, PaineWebber shall retain that
portion of the offering price constituting the Discount to Selected Dealers
("Discount"), if any, set forth in the Registration Statement for Class A shares
sold with an initial sales charge under this Agreement. PaineWebber is
authorized to collect the gross proceeds derived from the sale of such Class A
Shares; remit the net asset value thereof to the Fund's Transfer Agent; remit to
Mitchell Hutchins the difference between the offering price of the Class A
Shares and the applicable Discount; and retain said Discount. Whether the
offering price of the Class A Shares includes any initial sales charge out of
which a Discount may be retained by PaineWebber shall be determined in
accordance with the Registration Statement.
(c) Mitchell Hutchins shall pay to PaineWebber such commissions and
other compensation for sales of the Class A Shares by PaineWebber employees,
correspondent firms and other dealers as Mitchell Hutchins and PaineWebber may
from time to time agree upon.
(d) Mitchell Hutchins' obligation to pay compensation to PaineWebber
as agreed upon pursuant to this paragraph 4 is not contingent upon receipt by
Mitchell Hutchins of any compensation from the Fund or Series. Mitchell
Hutchins shall advise the Board of any agreements or revised agreements as to
compensation to be paid by Mitchell Hutchins to PaineWebber at their first
regular meeting held after such agreement but shall not be required to obtain
prior approval for such agreements from the Board.
(e) PaineWebber may reallow all or any part of the service fees,
commissions or other compensation which it is paid under this Agreement to its
correspondent firms or other dealers, in such amounts as PaineWebber may from
time to time determine.
5. DUTIES OF MITCHELL HUTCHINS.
(a) It is understood that the Fund reserves the right at any time to
withdraw all offerings of Class A Shares of any or all Series by written notice
to Mitchell Hutchins.
(b) Mitchell Hutchins shall keep PaineWebber fully informed of the
Fund's 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
4
<PAGE>
distribution of Class A 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 any
Series as PaineWebber may request, and Mitchell Hutchins shall cooperate fully
in the efforts of PaineWebber to sell and arrange for the sale of the Class A
Shares and in the performance of PaineWebber under this Agreement.
(c) Mitchell Hutchins shall comply with all state and federal laws
and regulations applicable to a distributor of the Class A Shares.
6. ADVERTISING. Mitchell Hutchins agrees to make available such sales
and advertising materials relating to the Class A Shares as Mitchell Hutchins in
its discretion determines appropriate. PaineWebber agrees to submit all sales
and advertising materials developed by it relating to the Class A Shares to
Mitchell Hutchins for approval. PaineWebber agrees not to publish or distribute
such materials to the public without first receiving such approval in writing.
Mitchell Hutchins shall assist PaineWebber in obtaining any regulatory approvals
of such materials that may be required of or desired by PaineWebber.
7. RECORDS. PaineWebber agrees to maintain all records required by
applicable state and federal laws and regulations relating to the offer and sale
of the Class A Shares. Mitchell Hutchins and its representatives shall have
access to such records during normal business hours for review or copying.
8. EXPENSES OF PAINEWEBBER. PaineWebber shall bear all costs and
expenses of (i) preparing, printing, and distributing any materials not prepared
by the Fund or Mitchell Hutchins and other materials used by PaineWebber in
connection with its offering of Class A Shares for sale to the public; (ii) any
expenses of advertising incurred by PaineWebber in connection with such
offering; (iii) the expenses of registration or qualification of PaineWebber as
a dealer or broker under federal or state laws and the expenses of continuing
such registration or qualification; and (iv) all compensation paid to
PaineWebber's Investment Executives or other employees and others for selling
Class A Shares, and all expenses of PaineWebber, its Investment Executives and
employees and others who engage in or support the sale of Class A Shares as may
be incurred in connection with their sales efforts. PaineWebber shall bear such
additional costs and expenses as it and Mitchell Hutchins may agree upon, such
agreement to be evidenced in a writing signed by both parties. Mitchell
Hutchins shall advise the Board of any such agreement as to additional costs and
expenses borne by PaineWebber at their first regular meeting held after such
agreement but shall not be required to obtain prior approval for such agreements
from the Board.
5
<PAGE>
9. INDEMNIFICATION.
(a) Mitchell Hutchins 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, under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement; arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement thereof or necessary to make the
statements in the Registration Statement thereof not misleading; or arising out
of any sales or advertising materials with respect to the Class A Shares
provided by Mitchell Hutchins to PaineWebber. However, this indemnity agreement
shall not apply to any claims, demands, liabilities, or expenses that 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 Mitchell Hutchins or the Fund for use in
the Registration Statement or in any sales or advertising material; and further
provided, that in no event shall anything contained herein be so construed as to
protect PaineWebber against any liability to Mitchell Hutchins or the Fund or to
the shareholders of any Series 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 Agreement.
(b) PaineWebber agrees to indemnify, defend, and hold Mitchell
Hutchins and its officers and directors, the Fund, its officers and directors,
and any person who controls Mitchell Hutchins or 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 Mitchell Hutchins or its officers or
directors or the Fund, its officers or directors, or any such controlling person
may incur under the 1933 Act, 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 Mitchell Hutchins or the Fund
for use in the Registration Statement; 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 or necessary to make such information
not misleading; or arising out of any agreement between PaineWebber and a
correspondent firm or any other retail dealer; or arising out of any sales or
advertising material used by PaineWebber in connection with its duties under
this Agreement.
6
<PAGE>
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective upon the date written above,
provided that, with respect to any Series, 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 who have no direct or indirect financial interest in the
operation of the Plan 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 Agreement shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Agreement 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 with respect to any given Series by vote of a majority of
the outstanding voting securities of the Class A Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Agreement may be terminated at any time, without the payment of any penalty, by
either party, upon the giving of 30 days' written notice. Such notice shall be
deemed to have been given on the date it is received in writing by the other
party or any officer thereof. This Agreement may also 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 Class A Shares of such Series on 30 days'
written notice to Mitchell Hutchins and PaineWebber.
(d) Termination of this Agreement with respect to any given Series
shall in no way affect the continued validity of this Agreement or the
performance thereunder with respect to any other Series. This Agreement will
automatically terminate in the event of its assignment or in the event that the
Distribution Contract is terminated.
(e) Notwithstanding the foregoing, Mitchell Hutchins may terminate
this Agreement without penalty, such termination to be effective upon the giving
of written notice to PaineWebber in the event that the Plan is terminated or is
amended to reduce the compensation payable to Mitchell Hutchins thereunder or in
the event that the Registration Statement is amended so as to reduce the amount
of compensation payable to Mitchell Hutchins under the Distribution Contract,
provided that Mitchell Hutchins gives notice of termination pursuant to this
provision within 90 days of such amendment or termination of the Plan or
amendment of the Registration Statement.
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
amended, 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.
7
<PAGE>
12. USE OF PAINEWEBBER NAME. PaineWebber hereby authorizes Mitchell
Hutchins to use the name "PaineWebber Incorporated" or any name derived
therefrom in any sales or advertising materials prepared and/or used by Mitchell
Hutchins in connection with its duties as distributor of the Class A Shares, but
only for so long as this Agreement or any extension, renewal or amendment hereof
remains in effect, including any similar agreement with any organization which
shall have succeeded to the business of PaineWebber.
13. GOVERNING LAW. This Agreement 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.
14. MISCELLANEOUS. 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. 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 upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, 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 Agreement to be
executed by their officers designated as of the day and year first written
above.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: /s/ Jenny Ann Frank By: /s/ Dianne E. O'Donnell
----------------------- ----------------------------
Dianne E. O'Donnell
First Vice President
PAINEWEBBER INCORPORATED
Attest: /s/ Jenny Ann Frank By: /s/ Steven M. Joenk
----------------------- -----------------------------
Steven M. Joenk
Corporate Vice President
8
<PAGE>
Exhibit No. 5(f)
EXCLUSIVE DEALER AGREEMENT
CLASS B SHARES OF PAINEWEBBER MASTER SERIES, INC.
AGREEMENT made as of July 7, 1993, between Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a Delaware corporation, and PaineWebber
Incorporated ("PaineWebber"), a Delaware corporation.
WHEREAS PaineWebber Master Series, Inc. ("Fund") is a Massachusetts
business trust registered under the Investment Company Act of 1940, as amended
("1940 Act"), as an open-end management investment company; and
WHEREAS the Fund currently has four distinct series of shares of common
stock ("Series"), which correspond to distinct portfolios and have been
designated as the PaineWebber Income Fund, PaineWebber Blue Chip Growth Fund,
PaineWebber Asset Allocation Fund and PaineWebber Money Market Fund; and
WHEREAS the Fund's board of directors ("Board") has established shares of
common stock of the above-referenced Series as Class B shares ("Class B Shares")
and has adopted a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act
("Plan") with respect to the Class B Shares of the above-referenced Series and
of such other Series as may hereafter be designated by the Board and have Class
B Shares established; and
WHEREAS Mitchell Hutchins has entered into a Distribution Contract with the
Fund ("Distribution Contract") pursuant to which Mitchell Hutchins serves as
principal distributor in connection with the offering and sale of the Class B
Shares of each such Series; and
WHEREAS Mitchell Hutchins desires to retain PaineWebber as its exclusive
agent in connection with the offering and sale of the Class B Shares of each
Series and to delegate to PaineWebber performance of certain of the services
which Mitchell Hutchins provides to the Fund under the Distribution Contract;
and
WHEREAS PaineWebber is willing to act as Mitchell Hutchins' exclusive agent
in connection with the offering and sale of such Class B Shares and to perform
such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, Mitchell Hutchins and PaineWebber agree as follows:
<PAGE>
1. APPOINTMENT. Mitchell Hutchins hereby appoints PaineWebber as its
exclusive agent to sell and to arrange for the sale of the Class B Shares on the
terms and for the period set forth in this Agreement. Mitchell Hutchins also
appoints PaineWebber as its agent for the performance of certain other services
set forth herein which Mitchell Hutchins provides to the Fund under the
Distribution Contract. PaineWebber hereby accepts such appointments and agrees
to act hereunder. It is understood, however, that these appointments do not
preclude sales of Class B Shares directly through the Fund's transfer agent in
the manner set forth in the Registration Statement. As used in this Agreement,
the term "Registration Statement" shall mean the currently effective
Registration Statement of the Fund, and any supplements thereto, under the
Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
2. SERVICES, DUTIES AND REPRESENTATIONS OF PAINEWEBBER.
(a) PaineWebber agrees to sell the Class B Shares on a best efforts
basis from time to time during the term of this Agreement as agent for Mitchell
Hutchins and upon the terms described in this Agreement and the Registration
Statement.
(b) Upon the later of the date of this Agreement or the initial
offering of Class B Shares by a Series to the public, PaineWebber will hold
itself available to receive orders, satisfactory to PaineWebber and Mitchell
Hutchins, for the purchase of Class B Shares and will accept such orders on
behalf of Mitchell Hutchins and the Fund as of the time of receipt of such
orders and will promptly transmit such orders as are accepted to 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 sell Class B Shares to (i) its
correspondent firms and customers of such firms and (ii) such other registered
and qualified retail dealers as it may select, subject to the approval of
Mitchell Hutchins. In making agreements with such dealers, PaineWebber shall
act only as principal and not as agent for Mitchell Hutchins or the Fund.
(d) The offering price of the Class B Shares of each Series shall be
the net asset value per Share as next determined by the Fund following receipt
of an order at PaineWebber's principal office. Mitchell Hutchins shall promptly
furnish or arrange for the furnishing to PaineWebber of a statement of each
computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain number of
Class B Shares.
(f) To facilitate redemption of Class B Shares by shareholders
directly or through dealers, PaineWebber is authorized but not required on
behalf of Mitchell Hutchins and the Fund to repurchase Class B Shares presented
to it by shareholders, its correspondent firms and other dealers at the price
determined in accordance with, and in the manner set forth in, the Registration
Statement. Such price shall reflect the subtraction of the applicable
contingent
-2-
<PAGE>
deferred sales charge, if any, computed 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 Class B 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").
"Service activities" do not include the transfer agency-related and other
services for which PaineWebber receives compensation under the Service Contract
between PaineWebber and the Fund.
(h) PaineWebber represents and warrants that: (i) it is a member in
good standing of the NASD and agrees to abide by the Rules of Fair Practice of
the NASD; (ii) it is registered as a broker-dealer with the Securities and
Exchange Commission; (iii) it will maintain any filings and licenses required by
federal and state laws to conduct the business contemplated under this
Agreement; and (iv) it will comply with all federal and state laws and
regulations applicable to the offer and sale of the Class B Shares.
(i) PaineWebber shall not incur any debts or obligations on behalf of
Mitchell Hutchins or the Fund. PaineWebber shall bear all costs that it incurs
in selling the Class B Shares and in complying with the terms and conditions of
this Agreement as more specifically set forth in paragraph 8.
(j) PaineWebber shall not permit any employee or agent to offer or
sell Class B Shares to the public unless such person is duly licensed under
applicable federal and state laws and regulations.
(k) PaineWebber shall not (i) furnish any information or make any
representations concerning the Class B Shares other than those contained in the
Registration Statement or in sales literature or advertising that has been
prepared or approved by Mitchell Hutchins as provided in paragraph 6 or (ii)
offer or sell the Class B Shares in jurisdictions in which they have not been
approved for offer and sale.
3. 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 Agreement
are not impaired thereby. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of PaineWebber who may also be a
director, officer or employee of Mitchell Hutchins or 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.
-3-
<PAGE>
4. COMPENSATION.
(a) As compensation for its service activities under this Agreement
with respect to the Class B Shares, Mitchell Hutchins shall pay to PaineWebber
service fees with respect to Class B Shares maintained in shareholder accounts
serviced by PaineWebber employees, correspondent firms and other dealers in such
amounts as Mitchell Hutchins and PaineWebber may from time to time agree upon.
(b) As compensation for its activities under this Agreement with
respect to the distribution of the Class B Shares, Mitchell Hutchins shall pay
to PaineWebber such commissions for sales of the Class B shares by PaineWebber
employees, correspondent firms and other dealers and such other compensation as
Mitchell Hutchins and PaineWebber may from time to time agree upon.
(c) Mitchell Hutchins' obligation to pay compensation to PaineWebber
as agreed upon pursuant to this paragraph 4 is not contingent upon receipt by
Mitchell Hutchins of any compensation from the Fund or Series. Mitchell
Hutchins shall advise the Board of any agreements or revised agreements as to
compensation to be paid by Mitchell Hutchins to PaineWebber at their first
regular meeting held after such agreement but shall not be required to obtain
prior approval for such agreements from the Board.
(d) PaineWebber may reallow all or any part of the service fees,
commissions or other compensation which it is paid under this Agreement to its
correspondent firms or other dealers, in such amounts as PaineWebber may from
time to time determine.
5. DUTIES OF MITCHELL HUTCHINS.
(a) It is understood that the Fund reserves the right at any time to
withdraw all offerings of Class B Shares of any or all Series by written notice
to Mitchell Hutchins.
(b) Mitchell Hutchins shall keep PaineWebber fully informed of the
Fund's 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 Class B
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 any Series as
PaineWebber may request, and Mitchell Hutchins shall cooperate fully in the
efforts of PaineWebber to sell and arrange for the sale of the Class B Shares
and in the performance of PaineWebber under this Agreement.
(c) Mitchell Hutchins shall comply with all state and federal laws
and regulations applicable to a distributor of the Class B Shares.
6. ADVERTISING. Mitchell Hutchins agrees to make available such sales
and advertising materials relating to the Class B Shares as Mitchell Hutchins in
its discretion
-4-
<PAGE>
determines appropriate. PaineWebber agrees to submit all sales and advertising
materials developed by it relating to the Class B Shares to Mitchell Hutchins
for approval. PaineWebber agrees not to publish or distribute such materials to
the public without first receiving such approval in writing. Mitchell Hutchins
shall assist PaineWebber in obtaining any regulatory approvals of such materials
that may be required of or desired by PaineWebber.
7. RECORDS. PaineWebber agrees to maintain all records required by
applicable state and federal laws and regulations relating to the offer and sale
of the Class B Shares. Mitchell Hutchins and its representatives shall have
access to such records during normal business hours for review or copying.
8. EXPENSES OF PAINEWEBBER. PaineWebber shall bear all costs and
expenses of (i) preparing, printing, and distributing any materials not prepared
by the Fund or Mitchell Hutchins and other materials used by PaineWebber in
connection with its offering of Class B Shares for sale to the public; (ii) any
expenses of advertising incurred by PaineWebber in connection with such
offering; (iii) the expenses of registration or qualification of PaineWebber as
a dealer or broker under federal or state laws and the expenses of continuing
such registration or qualification; and (iv) all compensation paid to
PaineWebber's Investment Executives or other employees and others for selling
Class B Shares, and all expenses of PaineWebber, its Investment Executives and
employees and others who engage in or support the sale of Class B Shares as may
be incurred in connection with their sales efforts. PaineWebber shall bear such
additional costs and expenses as it and Mitchell Hutchins may agree upon, such
agreement to be evidenced in a writing signed by both parties. Mitchell
Hutchins shall advise the Board of any such agreement as to additional costs and
expenses borne by PaineWebber at their first regular meeting held after such
agreement but shall not be required to obtain prior approval for such agreements
from the Board.
9. INDEMNIFICATION.
(a) Mitchell Hutchins 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, under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement; arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement thereof or necessary to make the
statements in the Registration Statement thereof not misleading; or arising out
of any sales or advertising materials with respect to the Class B Shares
provided by Mitchell Hutchins to PaineWebber. However, this indemnity agreement
shall not apply to any claims, demands, liabilities, or expenses that 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 Mitchell Hutchins or the Fund for use in
the Registration Statement or in any sales or advertising material; and further
provided, that in no
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<PAGE>
event shall anything contained herein be so construed as to protect PaineWebber
against any liability to Mitchell Hutchins or the Fund or to the shareholders of
any Series 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 Agreement.
(b) PaineWebber agrees to indemnify, defend, and hold Mitchell
Hutchins and its officers and directors, the Fund, its officers and directors,
and any person who controls Mitchell Hutchins or 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 Mitchell Hutchins or its officers or
directors or the Fund, its officers ordirectors, or any such controlling person
may incur under the 1933 Act, 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 Mitchell Hutchins or the Fund
for use in the Registration Statement; 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 or necessary to make such information
not misleading; or arising out of any agreement between PaineWebber and a
correspondent firm or any other retail dealer; or arising out of any sales or
advertising material used by PaineWebber in connection with its duties under
this Agreement.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective upon the date written above,
provided that, with respect to any Series, 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 who have no direct or indirect financial interest in the
operation of the Plan 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 Agreement shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Agreement 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 with respect to any given Series by vote of a majority of
the outstanding voting securities of the Class B Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Agreement may be terminated at any time, without the payment of any penalty, by
either party, upon the giving of 30 days' written notice. Such notice shall be
deemed to have been given on the date it is received in writing by the other
party or any officer thereof. This Agreement may also be terminated at any
time, without the payment of any penalty, by vote of the Board, by vote of a
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majority of the Independent Directors or by vote of a majority of the
outstanding voting securities of the Class B Shares of such Series on 30 days'
written notice to Mitchell Hutchins and PaineWebber.
(d) Termination of this Agreement with respect to any given Series
shall in no way affect the continued validity of this Agreement or the
performance thereunder with respect to any other Series. This Agreement will
automatically terminate in the event of its assignment or in the event that the
Distribution Contract is terminated.
(e) Notwithstanding the foregoing, Mitchell Hutchins may terminate
this Agreement without penalty, such termination to be effective upon the giving
of written notice to PaineWebber in the event that the Plan is terminated or is
amended to reduce the compensation payable to Mitchell Hutchins thereunder or in
the event that the Registration Statement is amended so as to reduce the amount
of compensation payable to Mitchell Hutchins under the Distribution Contract,
provided that Mitchell Hutchins gives notice of termination pursuant to this
provision within 90 days of such amendment or termination of the Plan or
amendment of the Registration Statement.
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
amended, 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.
12. USE OF PAINEWEBBER NAME. PaineWebber hereby authorizes Mitchell
Hutchins to use the name "PaineWebber Incorporated" or any name derived
therefrom in any sales or advertising materials prepared and/or used by Mitchell
Hutchins in connection with its duties as distributor of the Class B Shares, but
only for so long as this Agreement or any extension, renewal or amendment hereof
remains in effect, including any similar agreement with any organization which
shall have succeeded to the business of PaineWebber.
13. GOVERNING LAW. This Agreement 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.
14. MISCELLANEOUS. 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. 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 upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the
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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 Agreement to be
executed by their officers designated as of the day and year first written
above.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: /s/ Jenny Ann Frank By: /s/ Dianne E. O'Donnell
-------------------------- -------------------------
Dianne E. O'Donnell
First Vice President
PAINEWEBBER INCORPORATED
Attest: /s/ Jenny Ann Frank By: /s/ Steven M. Joenk
-------------------------- -------------------------
Steven M. Joenk
Corporate Vice President
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<PAGE>
Exhibit No. 7
CUSTODIAN CONTRACT
Between
PAINEWEBBER MASTER SERIES, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be Held by It . . . . . . . . . .1
2. Duties of the Custodian with Respect to Property of the
Portfolios Held By the Custodian in the United States . . . . . . . . . .2
2.1 Holding Investments. . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 Delivery of Securities.. . . . . . . . . . . . . . . . . . . . . . .2
2.3 Registration of Securities.. . . . . . . . . . . . . . . . . . . . .4
2.4 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.5 Availability of Federal Funds. . . . . . . . . . . . . . . . . . . .5
2.6 Collection of Income.. . . . . . . . . . . . . . . . . . . . . . . .5
2.7 Payment of Fund Monies.. . . . . . . . . . . . . . . . . . . . . . .5
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.9 Appointment of Agents. . . . . . . . . . . . . . . . . . . . . . . .6
2.10 Deposit of Fund Assets in Securities Systems.. . . . . . . . . . . .7
2.11 Fund Assets Held in the Custodian's Direct Paper System. . . . . . .8
2.12 Segregated Account.. . . . . . . . . . . . . . . . . . . . . . . . .9
2.13 Ownership Certificates for Tax Purposes. . . . . . . . . . . . . . .9
2.14 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.15 Communications Relating to Portfolio Securities. . . . . . . . . . .9
3. Payments for Sales or Repurchases or Redemptions of Shares
of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Actions Permitted without Express Authority . . . . . . . . . . . . . . 11
6. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . . . . 11
7. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income . . . . . . . . . . . . . 11
8. Records. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Opinion of Fund's Independent Accountant. . . . . . . . . . . . . . . . 12
10. Reports to Fund by Independent Public Accountants . . . . . . . . . . . 12
11. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . . . 12
12. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
13. Mitigation by Custodian . . . . . . . . . . . . . . . . . . . . . . . . 14
14. Notification of Litigation; Right to Proceed. . . . . . . . . . . . . . 14
15. Effective Period, Termination and Amendment . . . . . . . . . . . . . . 14
16. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . 15
17. Additional Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . 16
18. Interpretive and Additional Provisions. . . . . . . . . . . . . . . . . 16
19. Massachusetts Law to Apply. . . . . . . . . . . . . . . . . . . . . . . 16
20. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
23. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
24. Shareholder Communications Election . . . . . . . . . . . . . . . . . . 17
<PAGE>
CUSTODIAN CONTRACT
This Contract between PaineWebber Master Series, Inc., a corporation
organized and existing under the laws of Maryland, having its principal place of
business at 1285 Avenue of the Americas, New York, New York, 10019 hereinafter
called the "Fund" and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian".
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in two series, the
PaineWebber Money Market Fund and the PaineWebber Balanced Fund (such series
together with all other series subsequently established by the Fund and made
subject to this Contract in accordance with paragraph 17, being herein referred
to as the "Portfolio(s)");
WHEREAS, the Fund desires to engage the Custodian to act as custodian of
the assets of the Portfolios;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios pursuant to the provisions of the Articles of Incorporation. The Fund
agrees to deliver to the Custodian all securities and cash of the Portfolios,
and all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Portfolios from time
to time, and the cash consideration received by it for such new or treasury
shares of beneficial interest of the Portfolios ("Shares") as may be issued or
sold from time to time. The Custodian shall not be responsible for any property
of the Portfolios held or received by the Fund and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 4),
the Custodian shall on behalf of a Portfolio from time to time employ one or
more sub-custodians, located in the United States but only in accordance with an
applicable vote by the Board of Directors of the Fund, and provided that the
Custodian shall have no more or less responsibility or liability to the
Portfolio or the Fund on account of any actions or omissions of any sub-
custodian so employed than any such sub-custodian has to the Custodian.
<PAGE>
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD BY
THE CUSTODIAN IN THE UNITED STATES
2.1 HOLDING INVESTMENTS. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by the Portfolio,
other than (a) securities which are maintained pursuant to Section 2.10 in
a clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury and certain
federal agencies, (each, a "U.S. Securities System") and (b) commercial
paper of an issuer for which State Street Bank and Trust Company acts as
issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian (the "Direct Paper
System") pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund on
behalf of the Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; PROVIDED that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination
in accordance with "street
2
<PAGE>
delivery" custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own negligence or
willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian:
10) For delivery in connection with any loans of securities made by the
Portfolio, BUT ONLY against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Portfolio, which may
be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be credited to
the Custodian's account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will not be held liable
or responsible for the delivery of securities owned by the Portfolio
prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Portfolio requiring a pledge of assets by the Portfolio, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Portfolio, for delivery to such Transfer Agent or to
the holders of shares in
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<PAGE>
connection with distributions in kind, as may be described from time
to time in the currently effective prospectus and statement of
additional information of the Fund relating to the Portfolio
("Prospectus"), in satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Portfolio, a certified copy
of a resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, specifying the securities of the
Portfolio to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery
of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
applicable Portfolio or in the name of any nominee of the Portfolio or of
any nominee of the Custodian which nominee shall be assigned exclusively to
the Portfolio, UNLESS the Fund on behalf of the Portfolio has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolios under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, a Portfolio directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Portfolio on
such securities and to notify the Portfolio on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio,
which shall contain only property held by the Custodian as custodian for
the Portfolio, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or
for the account of the Portfolio, other than cash maintained by the
Portfolio in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940, as amended (the "1940
Act"). Funds held by the Custodian for a Portfolio may be deposited by it
to its credit as Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the 1940 Act and
that each such bank or trust company and the funds to be deposited with
each such bank or trust company shall on behalf of the Portfolio be
approved by vote of a majority of the Board of Directors of the Fund. Such
funds shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.
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<PAGE>
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of a Portfolio and the Custodian, the Custodian shall, upon the
receipt of Proper Instructions from the Portfolio, make federal funds
available to the Portfolio as of specified times agreed upon from time to
time by the Fund on behalf of the Portfolio and the Custodian in the amount
of checks received in payment for Shares of the Portfolio which are
deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which a
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to bearer domestic securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to the
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due a Portfolio on securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Portfolio. The Custodian will
have no duty or responsibility in connection therewith, other than to
provide the Portfolio with such information or data as may be necessary to
assist the Portfolio in arranging for the timely delivery to the Custodian
of the income to which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of the Portfolio in the
following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of title
to such options, futures contracts or options on futures contracts to
the Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under the
1940 Act, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in the case of
a purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.10 hereof; (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11 hereof; (d) in the case of
repurchase agreements entered into between the Fund on behalf of the
Portfolio and the Custodian, or another bank, or a broker-dealer which
is a member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio of
securities owned by the Custodian along with written evidence of the
agreement by the Custodian to
5
<PAGE>
repurchase such securities from the Portfolio; or (e) for transfer to
a time deposit account of the Portfolio in any bank, whether domestic
or foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Portfolio as defined in Article 4 hereof;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Article 3 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: interest, taxes, management, accounting, transfer agent
and legal fees, and operating expenses of the Portfolio whether or not
such expenses are to be in whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund relating to the
Portfolio;
6) For payment of the amount of dividends received in respect of
securities sold short; and
7) For any other proper purpose, BUT ONLY upon receipt of, in addition to
Proper Instructions from the Portfolio, a certified copy of a
resolution of the Board of Directors or of the Executive Committee of
the Fund on behalf of the Portfolio signed by an officer of the Fund
and certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the
Portfolio to so pay in advance, the Custodian shall be absolutely liable to
the Portfolio for such securities to the same extent as if the securities
had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act, to act as a
custodian, as its agent to carry out such of the provisions of this Article
2 as the Custodian may from time to time direct; PROVIDED, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder. In the event of any loss, damage
or expense suffered or incurred by a
6
<PAGE>
Portfolio caused by or resulting from the negligence or willful misconduct
of any agent appointed by the Custodian pursuant to this Section 2.9, the
Custodian shall promptly reimburse the Portfolio in the amount of such
loss, damage or expense.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Exchange Act, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "U.S.
Securities Systems" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of a Portfolio in a U.S. Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the U.S. Securities System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio. The
Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System
that payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Portfolio.
Copies of all advices from the U.S. Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and be
provided to the Portfolio at its request. Upon request, the Custodian
shall furnish the Portfolio confirmation of each transfer to or from
the account of the Portfolio in the form of a written advice or notice
and shall furnish to the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities System for
the account of the Portfolio;
4) The Custodian shall provide the Portfolio with any report obtained by
the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
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5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial certificate required by Article 15 hereof; and
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Portfolio for any loss or damage to
the Portfolio resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce effectively such
rights as it may have against the U.S. Securities System; at the
election of the Fund on behalf of the Portfolio, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if and
to the extent that the Portfolio has not been made whole for any such
loss or damage. The Custodian agrees to cooperate with Fund in
connection with the enforcement of the Portfolio's subrogation rights.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities sold
for the account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Portfolio confirmation of each
transfer to or from the account of the Portfolio, in the form of a
written advice or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Portfolio copies of
daily transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio; and
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6) The Custodian shall provide the Portfolio with any report on its
system of internal accounting control as the Portfolio may reasonably
request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from a Portfolio establish and maintain a segregated account
or accounts for and on behalf of the Portfolio, into which account or
accounts may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section 2.10 hereof,
(i) in accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio, (ii) for purposes of
segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures contracts
or options thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies and
(iv) for other proper corporate purposes, BUT ONLY, in the case of clause
(iv), upon receipt of, in addition to Proper Instructions from the
Portfolio, a certified copy of a resolution of the Board of Directors or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Portfolio held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
a Portfolio or a nominee of a Portfolio, all proxies, without indication of
the manner in which such proxies are to be voted, and shall promptly
deliver to the Portfolios such proxies, all proxy soliciting materials and
all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Portfolios all
written information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by the
Portfolios and the maturity of futures contracts purchased or sold by the
Portfolios) received by the Custodian from issuers of the securities being
held for
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the Portfolios. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Portfolios all written information received
by the Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or exchange
offer. If a Portfolio desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Portfolio shall
notify the Custodian at least three business days prior to the date on
which the Custodian is to take such action.
3. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Portfolios and deposit into the account of the applicable
Portfolio such payments as are received for Shares of the Portfolio issued or
sold from time to time by the Portfolio. The Custodian will provide timely
notification to the Portfolios and the Transfer Agent of any receipt by it of
payments for Shares of the Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the Portfolio to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund on behalf of the Portfolio and the Custodian.
4. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing signed
or initialed by two or more persons as the Board of Directors shall have from
time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested and may be in the form of
standing instructions. Oral instructions will be considered Proper Instructions
if the Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction involved.
The Portfolios shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of Directors of the Fund accompanied by a
detailed description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Directors
and the Custodian are satisfied that such procedures afford adequate safeguards
for the Portfolios' assets. For purposes of this Section, Proper Instructions
shall include instructions
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received by the Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.12.
5. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from a
Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to
the Portfolios;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolios, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolios except as
otherwise directed by the Board of Directors of the Fund.
6. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of a Portfolio. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
7. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF
NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of a Portfolio and/or compute the net asset value per share of
the outstanding shares of a Portfolio or, if directed in writing to do so by
the Portfolio, shall itself keep such books of account and/or compute such net
asset value per share. If so directed, the Custodian shall also calculate daily
the net income of the Portfolio as described in the Fund's currently effective
prospectus and shall advise the Portfolio and the Transfer Agent daily of the
total amounts of such net income and, if instructed in writing by an officer of
the Portfolio to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The calculations of
the net asset value per share and the daily income of the Portfolios shall be
made at the time or times described from time to time in the Fund's currently
effective prospectus.
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8. RECORDS
The Custodian shall with respect to the Portfolios create, maintain and
retain all records relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the Portfolios under the
1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Portfolios and
shall at all times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents of the Fund and
the Portfolios, attorneys for and auditors employed by the Fund or the
Portfolios, and employees and agents of the Securities and Exchange Commission.
The Custodian shall, at a Portfolio's request, supply the Portfolio with a
tabulation of securities owned by the Portfolio and held by the Custodian and
shall, when requested to do so by a Portfolio and for such compensation as shall
be agreed upon between the Fund on behalf of the Portfolio and the Custodian,
include certificate numbers in such tabulations.
9. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Fund's Form N-lA, and Form N-SAR or other annual
reports to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
10. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
12. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in
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acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party or
parties, including any futures commission merchant acting pursuant to the terms
of a three-party futures or options agreement. The Custodian shall be held to
the exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund or
the Portfolios for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
If a Portfolio requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Portfolio being liable for the payment of money or incurring liability of
some other form, the Fund on behalf of the Portfolio, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If a Portfolio requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement)
including the purchase or sale of foreign exchange or of contracts for foreign
exchange ("Advance") or in the event that the Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct ("Liability"), then in such event property equal in
value to not more than 125% of such Advance and accrued interest on the Advance
or the anticipated amount of such Liability, held at any time for the account of
the Portfolio by the Custodian or sub-custodian may be held as security for such
Liability or for such Advance and accrued interest on the Advance. The Custodian
shall designate the security or securities constituting security for an Advance
or Liability (the "Designated Securities") by notice in writing to the Portfolio
(which may be sent by tested telefax or telex). In the event the value of the
Designated Securities shall decline to less than 110% of the amount of such
Advance and accrued interest on the Advance or the anticipated amount of such
Liability, then the Custodian may designate in the same manner an additional
security for such obligation ("Additional Securities"), but the aggregate value
of the Designated Securities and Additional Securities shall not be in excess of
125% of the amount of such Advance and the accrued interest on the Advance or
the anticipated amount of such Liability. At the request of the Portfolio, on
behalf of a Portfolio, the Custodian shall agree to substitution of a security
or securities which have a value equal to the value of the Designated or
Additional Securities which the Portfolio desires be released from their status
as security, and such release from status as security shall be effective upon
the Custodian and the Fund agreeing in writing as to the identity of the
substituted security or securities, which shall thereupon become Designated
Securities.
Notwithstanding the above, the Custodian shall, at the request of a
Portfolio, immediately release from their status as security any or all of the
Designated Securities or Additional
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Securities upon the Custodian's receipt from the Portfolio of cash or cash
equivalents in an amount equal to 100% of the value of the Designated Securities
or Additional Securities that the Portfolio desires to be released from their
status as security pursuant to this Article. Interest, dividends and other
distributions paid or received on the Designated Securities and Additional
Securities, other than payments of principal or payments upon retirement,
redemption or repurchase, shall remain the property of the Portfolio and shall
not be subject to this Article.
13. MITIGATION BY CUSTODIAN
Upon the occurrence of any event connected with the duties of the Custodian
under this Contract which causes or may cause any loss, damage or expense to a
Portfolio, (i) the Custodian shall, and (ii) shall exercise reasonable efforts
to cause any sub-custodian to, use reasonable efforts and take all reasonable
steps under the circumstances to mitigate the effect of such event and to avoid
continuing harm to the Portfolio.
14. NOTIFICATION OF LITIGATION; RIGHT TO PROCEED
The Fund shall not be liable for indemnification under this Contract to the
extent that the Fund's ability to defend against any litigation or proceeding
brought against the Custodian in respect of which indemnity may be sought under
this Contract is prejudiced by the Custodian's failure to give prompt notice of
the commencement of any such litigation or proceeding. With respect to claims in
such litigation or proceeding for which indemnity by the Fund may be sought and,
subject to applicable law and the ruling of any court of competent jurisdiction,
the Fund shall be entitled to participate in any such litigation or proceeding
and, after written notice from the Fund to the Custodian, the Fund may assume
the defense of such litigation or proceeding with counsel of its choice at its
own expense in respect of that portion of the litigation for which the Fund may
be subject to an indemnification obligation; provided, however, that the
Custodian shall be entitled to participate in the defense of any such litigation
or proceeding. If the Fund has acknowledged in writing its obligation to
indemnify the Custodian with respect to such litigation or proceeding, the
Custodian's participation shall be at its own expense and the Fund shall control
the defense of the litigation or proceeding. If the Fund is not permitted to
participate in or control such litigation or proceeding under applicable law or
by a ruling of a court of competent jurisdiction, the Custodian shall reasonably
prosecute such litigation or proceeding. The Custodian shall not consent to the
entry of any judgment or enter into any settlement in any such litigation or
proceeding without providing the Fund with adequate notice of any such
settlement or judgment, and without the Fund's prior written consent. The
Custodian shall submit written evidence to the Fund with respect to any cost or
expense for which it is seeking indemnification in such form and detail as the
Fund may reasonably request.
15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than
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thirty (30) days after the date of such delivery or mailing; PROVIDED, however
that the Custodian shall not act under Section 2.10 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Directors of the Fund has approved the initial use of a
particular Securities System by the Fund, as required by Rule 17-4 under the
1940 Act and that the Custodian shall not act under Section 2.11 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors has approved the initial use of the Direct
Paper System by the Fund; PROVIDED FURTHER, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Articles of Incorporation, and
further provided, that the Fund may at any time by action of its Board of
Directors (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
16. SUCCESSOR CUSTODIAN
If a successor custodian for a Portfolio shall be appointed by the Board of
Directors of the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities of the Portfolio then held by it hereunder and
shall transfer to an account of the successor custodian all of the securities of
the Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian on
behalf of the Portfolio and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract on behalf of the
Portfolio and to transfer to an account of such successor custodian all of the
securities of the Portfolio held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the Custodian under this Contract.
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In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of a Portfolio to procure the certified copy of the vote referred to or
of the Board of Directors to appoint a successor custodian, the Custodian shall
be entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
17. ADDITIONAL PORTFOLIOS
In the event that the Fund establishes one or more series of Shares in
addition to PaineWebber Money Market Fund and PaineWebber Balanced Fund with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such series of Shares
shall become a Portfolio hereunder.
18. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, PROVIDED that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
19. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
20. CONFIDENTIALITY
The Custodian agrees that all books records, information and data
pertaining to the business of the Portfolios which are exchanged or received
pursuant to the negotiation or carrying out of this Contract shall remain
confidential, shall not be voluntarily disclosed to any other person, except as
may be required by law, and shall not be used by the Custodian for any purpose
not directly related to the business of the Fund, except with the Fund's prior
written consent.
21. ASSIGNMENT
Neither the Fund nor the Custodian shall have the right to assign any of
its rights or obligations under this Contract without the prior written consent
of the other party.
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22. SEVERABILITY
If any provision of this Contract is held to be unenforceable as a matter
of law, the other terms and provisions of this Contract shall not be affected
thereby and shall remain in full force and effect.
23. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Portfolio's assets.
24. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Portfolio's name, address, and share position to
requesting companies whose securities the Portfolio owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either "yes"
or "no" below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the
Portfolios or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release the Portfolio's name,
address and share positions.
NO [X] The Custodian is not authorized to release the Portfolio's name,
address and share positions.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of March, 1996 .
PAINEWEBBER MASTER SERIES, INC.
BY:/s/ Dianne E. O'Donnell
--------------------------------
DIANNE O'DONNELL
SECRETARY AND VICE PRESIDENT
STATE STREET BANK AND TRUST
COMPANY
By:/s/
--------------------------------
Executive Vice President
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Exhibit No. 8
TRANSFER AGENCY AND RELATED SERVICES AGREEMENT
THIS AGREEMENT is made as of August 1, 1997 by and between PFPC INC., a
Delaware corporation ("PFPC"), and PAINEWEBBER MASTER SERIES, INC., a Maryland
corporation (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to the Fund's
Portfolios (as hereinafter defined) and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(c ) "AUTHORIZED PERSON" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors or Trustees ("Board") to
give Oral Instructions and Written Instructions on behalf of the Fund and listed
on the Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
<PAGE>
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC from
an Authorized Person.
(f) "PORTFOLIO" means a series or investment portfolio of the Fund
identified on Annex A hereto, as the same may from time to time be amended, if
the Fund consists of more than one series or investment portfolio; however, if
the Fund does not have separate series or investment portfolios, then this term
shall be deemed to refer to the Fund itself.
(g) "SEC" means the Securities and Exchange Commission.
(h) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(i) "SHARES" mean the shares of common stock or beneficial interest
of any series or class of the Fund.
(j) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
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 related services agent to the
Fund, and should the Fund have separate Portfolios, those Portfolios which are
listed on Annex A hereto, in accordance with the terms set forth in this
Agreement. PFPC accepts such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund (or a particular Portfolio, as
appropriate) has provided or, where applicable, will provide PFPC with the
following:
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(a) Certified or authenticated copies of the resolutions of the Fund's
Board approving the appointment of PFPC to provide services to the
Fund and approving this Agreement;
(b) A copy of each executed broker-dealer agreement with respect to each
Fund; and
(c) Copies (certified or authenticated if requested by PFPC) of any
post-effective amendment to the Fund's registration statement,
advisory agreement, distribution agreement, shareholder servicing
agreement and all amendments or supplements to the foregoing upon
request.
4. COMPLIANCE WITH 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 the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any of
its Portfolios.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and Written
Instructions it receives from an Authorized Person pursuant to this Agreement.
PFPC may assume that any Oral Instruction 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 Board or of the
Fund's shareholders, unless and until PFPC receives Written Instructions to the
contrary.
(c ) 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 day after such Oral Instructions are received. The fact
that such confirming Written Instructions
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are not received by PFPC shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions. Where
Oral Instructions 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 Oral Instructions or Written 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 may request directions or advice, including Oral
Instructions 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 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 Instructions 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 set forth 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 Instructions or
Written Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section shall
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be construed so as to impose an obligation upon PFPC (i) to seek such
directions, advice or Oral Instructions or Written Instructions, or (ii) to act
in accordance with such directions, advice or Oral Instructions 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 faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
7. RECORDS; 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 related services agent to each
Portfolio, 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 and Authorized Persons shall have access to such books and
records in the possession or under the control of PFPC at all times during
PFPC's normal business hours. Upon the reasonable request of the Fund, copies
of any such books and records in the possession or under the control of PFPC
shall be provided by PFPC to the Fund or to an Authorized Person. 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
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Fund, any agent or person designated by the Fund or any regulatory agency having
authority over the Fund.
8. CONFIDENTIALITY. PFPC agrees 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 provisions 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
reasonable steps to minimize service interruptions. PFPC shall have no
liability with respect to the loss of data or service interruptions caused by
equipment failure, provided such loss or interruption is not caused by PFPC's
own willful misfeasance, bad faith, negligence or reckless disregard of its
duties or obligations under this Agreement and provided further that PFPC has
complied with the provisions of this paragraph 10.
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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 affiliates
from all taxes, charges, expenses, assessments, penalties, 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 (i) any
action or omission to act which PFPC takes (a) at the request or on the
direction of or in reliance on the advice of the Fund or (b) upon Oral
Instructions or Written Instructions or (ii) the acceptance, processing and/or
negotiation of checks or other methods utilized for the purchase of Shares.
Neither PFPC, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of PFPC's or
its affiliates' own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement. The Fund's
liability to PFPC for PFPC's acceptance, processing and/or negotiation of checks
or other methods utilized for the purchase of Shares shall be limited to the
extent of the Fund's policy(ies) of insurance that provide for coverage of such
liability, and the Fund's insurance coverage shall take precedence.
(b) PFPC agrees to indemnify and hold harmless the Fund from all taxes,
charges, expenses, assessments, penalties, claims and liabilities arising from
PFPC's obligations pursuant to this 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,
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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.
(d) The members of the Board of the Fund, its officers and Shareholders,
or of any Portfolio thereof, shall not be liable for any obligations of the
Fund, or any such Portfolio, under this Agreement, and 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 Portfolio in settlement of
such rights or claims and not to such members of the Board, its officers or
Shareholders. PFPC further agrees that it will look only to the assets and
property of a particular Portfolio of the Fund, should the Fund have established
separate series, in asserting any rights or claims under this Agreement with
respect to services rendered with respect to that Portfolio and will not seek to
obtain settlement of such rights or claims from the assets of any other
Portfolio of the Fund.
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
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<PAGE>
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 which would otherwise be a covered claim in the
absence of any provision of this Agreement.
14. SECURITY.
(a) 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 reasonable access to review these
systems and procedures.
(b) Y2K Compliance. PFPC further represents and warrants that any and all
electronic data processing systems and programs that it uses or retains in
connection with the provision of services hereunder on or before January 1, 1999
will be year 2000 compliant.
15. RESPONSIBILITY OF PFPC.
(a) 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 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 for any damages arising out of PFPC's failure to perform its duties under
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<PAGE>
this Agreement to the extent such damages arise out of PFPC's willful
misfeasance, bad faith, negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC 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 Instruction 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
Section 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, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its affiliates shall be liable to the Fund for any consequential,
special or indirect losses or damages which the Fund may incur or suffer by or
as a consequence of PFPC's or its affiliates' performance of the services
provided hereunder, whether or not the likelihood of such losses or damages was
known by PFPC or its affiliates.
(d) Notwithstanding anything in this Agreement to the contrary, the Fund
shall not be liable to PFPC nor its affiliates for any consequential, special or
indirect losses or damages which PFPC or its affiliates may incur or suffer by
or as a consequence of PFPC's performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by the Fund.
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16. DESCRIPTION OF SERVICES.
(a) SERVICES PROVIDED ON AN ONGOING BASIS, IF APPLICABLE.
(i) Calculate 12b-1 payments to financial intermediaries,
including brokers, and financial intermediary trail
commissions;
(ii) Develop, monitor and maintain, in consultation with the Fund,
all systems necessary to implement and operate the four-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 the same;
(vi) Establish and maintain proper shareholder registrations;
(vii) Review new applications and correspond with 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) Prepare and mail to shareholders confirmation of activity;
(xi) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
(xii) Send duplicate confirmations to broker-dealers of their
clients' activity, whether executed through the broker-dealer
or directly with PFPC;
(xiii) Provide periodic shareholder lists, outstanding share
calculations and related statistics to the Fund;
(xiv) Provide detailed data for underwriter/broker confirmations;
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(xv) Prepare and mail required calendar and taxable year-end tax
and statement information (including forms 1099-DIV and
1099-B and accompanying statements);
(xvi) Notify on a daily basis the investment adviser, accounting
agent, and custodian of fund activity;
(xvii) Perform, itself or through a delegate, all of the services,
whether or not included within the scope of another paragraph
of this Paragraph 16(a), specified on Annex B hereto; 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 INSTRUCTIONS OR WRITTEN
INSTRUCTIONS.
(i) Accept and post daily Fund 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) Cancel certificates.
(c) PURCHASE OF SHARES. PFPC shall issue and credit an account of an
investor, in the manner described in the Fund's 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
to the Fund's custodian.
(d) REDEMPTION OF SHARES. PFPC shall redeem Shares only if that function
is properly authorized by the Fund's organizational documents or resolutions of
the Fund's Board. Shares shall be redeemed and payment therefor shall be made
in accordance with the Fund's or Portfolio's prospectus.
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(i) BROKER-DEALER ACCOUNTS.
When a broker-dealer notifies PFPC of a redemption desired by
a customer, and the Fund's or Portfolio's custodian (the
"Custodian") has provided PFPC with funds, PFPC shall (a)
transfer by Fedwire or other agreed upon electronic means
such redemption payment to the broker-dealer for the credit
to, and for the benefit of, the customer's account or (b)
shall prepare and send a redemption check to the
broker-dealer, made payable to the broker-dealer on behalf of
its customer.
(ii) FUND-ONLY ACCOUNTS.
If Shares (or appropriate instructions) are received in
proper form, at the Fund's request Shares may be redeemed
before the funds are provided to PFPC from the Custodian. If
the recordholder has not directed that redemption proceeds be
wired, when the Custodian provides PFPC with funds, the
redemption check shall be sent to and made payable to the
recordholder, unless:
(a) the surrendered certificate is drawn to the order of an
assignee or holder and transfer authorization is signed
by the recordholder; or
(b) transfer authorizations are signed by the recordholder
when Shares are held in book-entry form.
(e) DIVIDENDS AND DISTRIBUTIONS. Upon receipt of a resolution of the
Fund's 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 the appropriate Fund's or Portfolio's prospectus.
Such issuance or payment, as well as payments upon redemption as described
above,
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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 the Fund's shareholders and the IRS and other
appropriate taxing authorities such tax forms, or permissible substitute forms,
and other information relating to dividends and distributions paid by the Fund
(including designations of the portions of distributions of net capital gain
that are 20% rate gain distributions and 28% rate gain distributions pursuant to
IRS Notice 97-64) as are required to be filed and mailed by applicable law, rule
or regulation within the time required thereby. 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.
(f) SHAREHOLDER ACCOUNT SERVICES.
(i) PFPC will arrange, in accordance with the appropriate Fund's
or Portfolio's prospectus, for issuance of Shares obtained
through:
- The transfer of funds from shareholders' accounts at
financial institutions, provided PFPC receives advance
Oral or Written Instruction of such transfer;
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks
and applications.
(ii) PFPC will arrange, in accordance with the appropriate Fund's
or Portfolio's prospectus, for a shareholder's:
- Exchange of Shares for shares of another fund with
which the Fund has exchange privileges;
Automatic redemption from an account where that
shareholder participates in a systematic withdrawal
plan; and/or
- Redemption of Shares from an account with a
checkwriting privilege.
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(g) 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 forms (including substitute forms) and accompanying
information containing the information required by paragraph
16(e).
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.
(h) RECORDS. PFPC shall maintain those records required by the Securities
Laws and any laws, rules and regulations of governmental authorities having
jurisdiction with respect to the duties to be performed by PFPC hereunder with
respect to shareholder accounts or by transfer agents generally, including
records of the accounts for each shareholder showing the following information:
(i) Name, address and United States Taxpayer 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,
their character (e.g. ordinary income, net capital gain
(including 20% rate gain and 28% rate gain), exempt-interest,
foreign tax-credit and dividends received deduction eligible)
for federal income tax purposes and the date and price for
all transactions on a shareholder's account;
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(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
(vii) Any information required in order for the transfer agent to
perform any calculations contemplated or required by this
Agreement.
(i) 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. The lost or stolen certificate will be canceled and
uncertificated Shares will be issued to a shareholder's account only upon:
(i) The shareholder's pledge of a lost instrument bond or such
other 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 and its affiliates.
(j) SHAREHOLDER INSPECTION OF STOCK RECORDS. Upon a request from any Fund
shareholder to inspect stock records, PFPC will notify the Fund, and the Fund
will issue instructions granting or denying each such request. Unless PFPC has
acted contrary to the Fund's instructions, the Fund agrees and does hereby
release PFPC from any liability for refusal of permission for a particular
shareholder to inspect the Fund's shareholder records.
(k) WITHDRAWAL OF SHARES AND CANCELLATION OF CERTIFICATES. Upon receipt of
Written Instructions, PFPC shall cancel outstanding certificates surrendered by
the Fund to reduce the total amount of outstanding shares by the number of
shares surrendered by the Fund.
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17. DURATION AND TERMINATION.
(a) This Agreement shall be effective on the date first written above and
shall continue for a period of three (3) years (the "Initial Term"). Upon the
expiration of the Initial Term, this Agreement shall automatically renew for
successive terms of one (1) year ("Renewal Terms") each provided that it may be
terminated by either party during a Renewal Term upon written notice given at
least ninety (90) days prior to termination. During either the Initial Term or
the Renewal Terms, this Agreement may also be terminated on an earlier date 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 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.
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<PAGE>
(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 any 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 the Fund or any Portfolio thereof 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 described in
the preceding sentence to the successors, PFPC shall be entitled to be
reimbursed for such extraordinary expenses, including any out-of-pocket expenses
reasonably incurred by PFPC in connection with the transfer.
(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 or any Portfolio thereof upon the liquidation, merger, or
other dissolution of the Fund or Portfolio or upon the Fund's ceasing to be a
registered investment company.
18. 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
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permitted to lawfully conduct its activities without such registration and that
it will remain so registered or able to so conduct such activities 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, on written notice to
PFPC, terminate this Agreement upon five days written notice to PFPC.
19. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at the address
of the Fund or (c) if to neither of the foregoing, at such other address as
shall have been given by like notice to the sender of any such notice or other
communication by the other party. If 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 at 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 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.
20. 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.
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21. ADDITIONAL PORTFOLIOS. 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 related services 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 Portfolio hereunder, subject
to such additional terms, fees and conditions as are agreed to by the parties.
22. DELEGATION; ASSIGNMENT.
(a) PFPC may, at its own expense, assign its rights and delegate its
duties hereunder to any wholly-owned direct or 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 (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the Securities
Laws; and (iii) PFPC and such delegate (or assignee) promptly provide such
information as the Fund may request, and respond to such questions as the Fund
may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee). 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 delegate to PaineWebber Incorporated its obligation to
perform the services described on Annex B hereto. In addition, PFPC may assign
its rights and delegate its other duties hereunder to PaineWebber Incorporated
or Mitchell Hutchins Asset Management Inc. or an affiliated person of either,
provided that (I) PFPC gives the Fund thirty (30) days' prior written notice;
(ii) the delegate (or assignee) agrees with PFPC and the Fund to comply with all
relevant provisions of the Securities Laws; and (iii) PFPC and such delegate (or
assignee)
20
<PAGE>
promptly provide such information as the Fund may request, and respond to such
questions as the Fund may ask, relative to the delegation (or assignment),
including (without limitation) the capabilities of the delegate (or assignee).
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 of this Agreement shall become
effective without the written consent of PFPC.
23. 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.
24. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
25. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. 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 fees payable under this Agreement.
(b) CAPTIONS. 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.
21
<PAGE>
(c ) GOVERNING LAW. This Agreement shall be deemed to be a contract made
in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) PARTIAL INVALIDITY. 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.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ Robert F. Crouse
--------------------------
Title: Vice President
PAINEWEBBER MASTER SERIES, INC.
By: /s/ Dianne E. O'Donnell
--------------------------
Title: Secretary and Vice President
22
<PAGE>
ANNEX A
Portfolios
PaineWebber Balanced Fund
PaineWebber Money Market Fund
23
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- ---------- -------------
- ---------- -------------
- ---------- -------------
- ---------- -------------
- ---------- -------------
- ---------- -------------
24
<PAGE>
ANNEX B
a. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all shareholder
inquiries received by telephone, mail or in-person regarding the Funds and
their accounts
b. Provide timely execution of redemptions, exchanges and non-financial
transactions directed to investment executives and specifically requested
by Fund shareholders
c. Issue checks from proceeds of Fund share redemptions to shareholders as
directed by the shareholders or their agents
d. Process and maintain shareholder account registration information
e. With respect to customer accounts maintained through PaineWebber
Incorporated ("PaineWebber"), review new applications and correspond with
shareholders to complete or correct information
f. Prepare and mail monthly or quarterly consolidated account statements that
reflect PaineWebber Mutual Fund balances and transactions (such
information to be combined with other activity and holdings in investors'
brokerage accounts if this responsibility is delegated to PaineWebber)
g. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all branch inquiries
regarding operational issues and performance
h. Capture, process and mail required tax information to shareholders and
report this information to the Internal Revenue Service
i. Provide the capability to margin PaineWebber Mutual Funds held within the
client's brokerage account (if this responsibility is delegated to
PaineWebber)
j. Prepare and provide shareholder registrations for mailing of proxies,
reports and other communications to shareholders
k. Develop, maintain and issue checks from the PaineWebber systematic
withdrawal plan offered within the client's brokerage account (if this
responsibility is delegated to PaineWebber)
l. Maintain duplicate shareholder records and reconcile those records with
those at the transfer agent (if this responsibility is delegated to
PaineWebber)
25
<PAGE>
m. Process and mail duplicate PaineWebber monthly or quarterly statements to
PaineWebber Investment Executives
n. Establish and maintain shareholder distribution options (i.e., election to
have dividends paid in cash, rather than reinvested in Fund shares)
o. Process and mail purchase, redemption and exchange confirmations to Fund
shareholders and PaineWebber Investment Executives
p. Issue dividend checks to shareholders that select cash distributions to
their brokerage account (if this responsibility is delegated to
PaineWebber)
q. Develop and maintain the automatic investment plan offered within the
client's brokerage account (if this responsibility is delegated to
PaineWebber)
r. Provide bank-to-bank wire transfer capabilities related to transactions in
Fund shares
s. Maintain computerized compliance programs for blue sky and non-resident
alien requirements (only with respect to PaineWebber Cashfund, Inc.)
26
<PAGE>
Exhibit No. 9
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE 202-778-9000
www.kl.com
June 29, 1998
PaineWebber Master Series, Inc.
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
You have requested our opinion, as counsel to PaineWebber Master Series,
Inc. ("Fund"), as to certain matters regarding the issuance of certain Shares of
the Fund. As used in this letter, the term "Shares" means the Class A, Class B
and Class C shares of common stock of the series of the Fund listed below during
the time that Post-Effective Amendment No. 34 to the Fund's Registration
Statement on Form N-1A ("PEA") is effective and has not been superseded by
another post-effective amendment. The series of the Fund is PaineWebber Money
Market Fund.
As such counsel, we have examined certified or other copies, believed by us
to be genuine, of the Fund's Articles of Incorporation and by-laws and such
resolutions and minutes of meetings of the Fund's Board of Directors as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) in the State of Maryland that in
our experience are normally applicable to the issuance of shares by registered
investment companies organized as corporations under the laws of that State and
to the Securities Act of 1933 ("1933 Act"), the Investment Company Act of 1940
("1940 Act") and the regulations of the Securities and Exchange Commission
("SEC") thereunder.
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by the Fund and that, when sold in accordance
with the terms contemplated by the PEA, including receipt by the Fund of full
payment for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been validly issued, fully paid and non-assessable.
We hereby consent to this opinion accompanying the PEA when it is filed
with the SEC and to the reference to our firm in the statement of additional
information that is being filed as part of the PEA.
Very truly yours,
/s/ Kirkpatrick & Lockhart LLP
KIRKPATRICK & LOCKHART LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 34 to the Registration Statement on Form N-1A (the "Registration
Statement") of our report dated April 17, 1998, relating to the financial
statements and financial highlights appearing in the February 28, 1998 Annual
Report to Shareholders of PaineWebber Money Market Fund, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" in the Prospectus
and "Independent Accountants" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
New York, New York
June 29, 1998
<PAGE>
Exhibit No. 12
Administration
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
212-713-2000
PAINEWEBBER
March 3, 1986
PaineWebber Master Series, Inc.
1285 Avenue of the Americas
New York, New York 10019
Gentlemen:
Please be advised that PaineWebber Incorporated herewith tenders $100,000 to
purchase shares of PaineWebber Master Series, Inc. valued at $100,000 minimum
initial capital required by the Investment Company Act of 1940. We intend to
purchase the shares as an investment and have no present intention of redeeming
or selling such shares.
Very truly yours,
/s/ Anne F. Riney
Anne F. Riney
Vice President - Finance
<PAGE>
Exhibit No. 13(a)
PAINEWEBBER MASTER SERIES, INC. -- CLASS A SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, PaineWebber Master Series, Inc. ("Fund") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and currently offers for public sale four series
of shares of common stock ("Series"), which correspond to distinct portfolios
and have been designated as the PaineWebber Income Fund, the PaineWebber Blue
Chip Growth Fund, the PaineWebber Asset Allocation Fund and the PaineWebber
Money Market Fund; and
WHEREAS, the Fund desires to adopt a Plan of Distribution ("Plan") pursuant
to Rule 12b-1 under the 1940 Act with respect to the Class A shares of the
above-referenced Series and of such other Series as may hereafter be designated
by the Fund's board of directors ("Board") and have Class A shares established;
and
WHEREAS, the Fund has entered into a Distribution Contract ("Contract")
with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") pursuant to
which Mitchell Hutchins has agreed to serve as Distributor of the Class A shares
of each such Series;
NOW, THEREFORE, the Fund hereby adopts this Plan with respect to the Class
A shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
1. A. Each Series is authorized to pay to Mitchell Hutchins, as
compensation for Mitchell Hutchins' services as Distributor of the Series' Class
A shares, a service fee at the rate of 0.25% on an annualized basis of the
average daily net assets of the Series' Class A shares. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
B. Any Series may pay a service fee to Mitchell Hutchins at a lesser
rate than the fee specified in paragraph 1A of this Plan, as agreed upon by the
Board and Mitchell Hutchins and as approved in the manner specified in paragraph
4 of this Plan.
2. As Distributor of the Class A shares of each Series, Mitchell Hutchins
may spend such amounts as it deems appropriate on any activities or expenses
primarily intended to result in the sale of the Series' Class A shares or the
servicing and maintenance of shareholder accounts, including, but not limited
to, compensation to employees of Mitchell Hutchins; compensation to and
expenses, including overhead and telephone and other communication expenses, of
Mitchell Hutchins, PaineWebber Incorporated ("PaineWebber") and other selected
dealers who engage in or support the distribution of shares or who service
shareholder accounts; the printing of prospectuses, statements of additional
information, and reports for other than existing
<PAGE>
shareholders; and the preparation, printing and distribution of sales literature
and advertising materials.
3. This Plan shall not take effect with respect to the Class A shares of
any Series unless it first has been approved by a vote of the then sole
shareholder of the Class A shares of such Series.
4. This Plan shall not take effect with respect to any Series unless it
first has been approved, together with any related agreements, by votes of a
majority of both (a) the Board and (b) 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 this Plan or any agreements related thereto
("Independent Directors"), cast in person at a meeting (or meetings) called for
the purpose of voting on such approval; and until the Directors who approve the
Plan's taking effect with respect to such Series' Class A shares have reached
the conclusion required by Rule 12b-1(e) under the 1940 Act.
5. After approval as set forth in paragraphs 3 and 4, this Plan shall
continue in full force and effect until a meeting of the Class A shareholders
held after the initial offering of such shares of such Series to the public. If
approved at such meeting by a vote of a majority of the outstanding voting
securities of the Class A shares of such Series, the Plan shall continue in full
force and effect with respect to such Series for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in paragraph 4.
6. Mitchell Hutchins shall provide to the Board and the Board shall
review, at least quarterly, a written report of the amounts expended with
respect to the Class A shares of each Series by Mitchell Hutchins under this
Plan and the Contract and the purposes for which such expenditures were made.
Mitchell Hutchins shall submit only information regarding amounts expended for
"service activities," as defined in this Paragraph 6, to the Board in support of
the service fee payable hereunder.
For purposes of this Plan, "service activities" shall mean activities
in connection with the provision by Mitchell Hutchins or PaineWebber of
personal, continuing services to investors in the Class A Shares of the Series;
provided, however, that if the National Association of Securities Dealers, Inc.
("NASD") adopts a definition of "service fee" for purposes of Section 26(d) of
the NASD Rules of Fair Practice that differs from the definition of "service
activities" hereunder, or if the NASD adopts a related definition intended to
define the same concept, the definition of "service activities" in this
Paragraph shall be automatically amended, without further action of the parties,
to conform to such NASD definition. Overhead and other expenses of Mitchell
Hutchins and PaineWebber related to their "service activities," including
telephone and other communications expenses, may be included in the information
regarding amounts expended for such activities.
-2-
<PAGE>
7. This Plan may be terminated with respect to the Class A shares of any
Series at any time 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 Class A shares of that Series.
8. This Plan may not be amended to increase materially the amount of
service fees provided for in paragraph 1A hereof unless such amendment is
approved by a vote of a majority of the outstanding voting securities of each
Series, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval and annual renewal in paragraph 5 hereof.
9. The amount of the service fees payable by any Series to Mitchell
Hutchins under paragraph 1A hereof and the Contract is not related directly to
expenses incurred by Mitchell Hutchins on behalf of such Series in serving as
Distributor of the Class A shares, and paragraph 2 hereof and the Contract do
not obligate the Series to reimburse Mitchell Hutchins for such expenses. The
service fees set forth in paragraph 1A hereof will be paid by the Series to
Mitchell Hutchins until either the Plan or the Contract is terminated or not
renewed. If either the Plan or the Contract is terminated or not renewed with
respect to the Class A shares of any Series, any distribution expenses incurred
by Mitchell Hutchins on behalf of the Series in excess of payments of the
service fees specified in paragraph 1A hereof and the Contract which Mitchell
Hutchins has received or accrued through the termination date are the sole
responsibility and liability of Mitchell Hutchins, and are not obligations of
the Series.
10. While this Plan is in effect, the selection and nomination of the
Directors who are not interested persons of the Fund shall be committed to the
discretion of the Directors who are not interested persons of the Fund.
11. As used in this Plan, the terms "majority of the outstanding voting
securities" and "interested person" shall have the same meaning as those terms
have in the 1940 Act.
12. The Fund shall preserve copies of this Plan (including any amendments
thereto) and any related agreements and all reports made pursuant to paragraph 6
hereof for a period of not less than six years from the date of this Plan, the
first two years in an easily accessible place.
IN WITNESS WHEREOF, the Fund has executed this Plan of Distribution on
the day and year set forth below in New York, New York.
Date: July 1, 1991
ATTEST: PAINEWEBBER MASTER SERIES, INC.
/s/ Teresa M. Boyle By: /s/ Dianne E. O'Donnell
- ----------------------------------- --------------------------
-3-
<PAGE>
Exhibit No. 13(b)
PAINEWEBBER MASTER SERIES, INC. -- CLASS B SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, PaineWebber Master Series, Inc. ("Fund") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and currently offers for public sale four
distinct series of shares of common stock ("Series"), which correspond to
distinct portfolios and have been designated as the PaineWebber Income Fund, the
PaineWebber Blue Chip Growth Fund, the PaineWebber Asset Allocation Fund and
the PaineWebber Money Market Fund; and
WHEREAS, the Fund desires to adopt a Plan of Distribution ("Plan") pursuant
to Rule 12b-1 under the 1940 Act with respect to the Class B shares of the
above-referenced Series and of such other Series as may hereafter be designated
by the Fund's board of directors ("Board") and have Class B shares established;
and
WHEREAS, the Fund has entered into a Distribution Contract ("Contract")
with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") pursuant to
which Mitchell Hutchins has agreed to serve as Distributor of the Class B shares
of each such Series;
NOW, THEREFORE, the Trust hereby adopts this Plan with respect to the Class
B shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
1. A. Each Series, other than the PaineWebber Money Market Fund, is
authorized to pay to Mitchell Hutchins, as compensation for Mitchell Hutchins'
services as Distributor of the Series' Class B shares, a distribution fee at the
rate of 0.75% on an annualized basis of the average daily net assets of the
Series' Class B shares. The PaineWebber Money Market Fund is authorized to pay
Mitchell Hutchins as compensation for Mitchell Hutchins' services as Distributor
of its Class B shares, a distribution fee at the rate of 0.50% on an annualized
basis of the average daily net assets of the PaineWebber Money Market Fund.
Such fee shall be calculated and accrued daily and paid monthly or at such other
intervals as the Board shall determine.
B. Each Series is authorized to pay to Mitchell Hutchins, as
compensation for Mitchell Hutchins' services as Distributor of the Series' Class
B shares, a service fee at the rate of 0.25% on an annualized basis of the
average daily net assets of the Series Class B shares. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
<PAGE>
C. Any Series may pay a distribution or service fee to Mitchell
Hutchins at a lesser rate than the fees specified in Paragraphs 1A and 1B,
respectively, of this Plan, in either case as agreed upon by the Board and
Mitchell Hutchins and as approved in the manner specified in Paragraph 4 of this
Plan.
2. As Distributor of the Class B shares of each Series, Mitchell Hutchins
may spend such amounts as it deems appropriate on any activities or expenses
primarily intended to result in the sale of the Class B shares of the Series or
the servicing and maintenance of shareholder accounts, including, but not
limited to, compensation to employees of Mitchell Hutchins; compensation to and
expenses, including overhead and telephone and other communication expenses, of
Mitchell Hutchins, PaineWebber Incorporated ("PaineWebber") and other selected
dealers who engage in or support the distribution of shares or who service
shareholder accounts; the printing of prospectuses, statements of additional
information, and reports for other than existing shareholders; and the
preparation, printing and distribution of sales literature and advertising
materials.
3. This Plan shall take effect with respect to the Class B shares of
PaineWebber Income Fund, the PaineWebber Blue Chip Growth Fund, the PaineWebber
Asset Allocation on the date set forth below, provided that it has first been
approved by the Board as set forth in paragraph 4, but shall not take effect
with respect to the Class B shares of any other Series unless it first has been
approved by a vote of the then sole shareholder of the Class B shares.
4. This Plan shall not take effect with respect to the Class B shares of
any Series unless it first has been approved, together with any related
agreements, by votes of a majority of both (a) the Board and (b) 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 this Plan or any agreements
related thereto ("Independent Directors"), cast in person at a meeting (or
meetings) called for the purpose of voting on such approval; and until the
Directors who approve the Plan's taking effect with respect to such Series'
Class B shares have reached the conclusion required by Rule 12b-1(e) under the
1940 Act.
5. With respect to any Series for which this Plan was approved as set
forth in paragraphs 3 and 4 prior to the commencement of operation of such
Series, this Plan continue in full force and effect until a meeting of the Class
B shareholders held after the initial offering of such shares of such Series to
the public. If approved at such meeting by a vote of a majority of the
outstanding voting securities of the Class B shares of such Series, the Plan
shall continue in full force and effect with respect to the Class B shares of
such Series for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in Paragraph 4.
6. Mitchell Hutchins shall provide to the Board and the Board shall
review, at least quarterly, a written report of the amounts expended with
respect to the Class B shares of each Series by Mitchell Hutchins under this
Plan and the Contract and the purposes for which such expenditures were made.
Mitchell Hutchins shall submit only information regarding amounts expended for
"distribution activities," as defined in this Paragraph 6, to the Board in
support of
2
<PAGE>
the distribution fee payable hereunder and shall submit only information
regarding amounts expended for "service activities," as defined in this
Paragraph 6, to the Board in support of the service fee payable hereunder.
For purposes of this Plan, "distribution activities" shall mean any
activities in connection with Mitchell Hutchins' performance of its obligations
under this Plan or the Contract that are not deemed "service activities."
"Service activities" shall mean activities in connection with the provision by
Mitchell Hutchins or PaineWebber of personal, continuing services to investors
in the Class B shares of the Series; provided, however, that if the National
Association of Securities Dealers, Inc. ("NASD") adopts a definition of "service
fee" for purposes of Section 26(d) of the NASD Rules of Fair Practice that
differs from the definition of "service activities" hereunder, or if the NASD
adopts a related definition intended to define the same concept, the definition
of "service activities" in this Paragraph shall be automatically amended,
without further action of the parties, to conform to such NASD definition.
Overhead and other expenses of Mitchell Hutchins and PaineWebber related to
their "distribution activities" or "service activities," including telephone and
other communications expenses, may be included in the information regarding
amounts expended for such activities.
7. This Plan may be terminated with respect to the Class B shares of
any Series at any time 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 Class B shares of that Series.
8. This Plan may not be amended to increase materially the amount of
distribution fees provided for in Paragraph 1A hereof or the amount of service
fees provided for in Paragraph 1B hereof unless such amendment is approved in
the manner provided for initial approval in paragraphs 3 and 4 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for approval and annual renewal in Paragraph 5 hereof.
9. The amount of the distribution and service fees payable by the Series
to Mitchell Hutchins under Paragraphs 1A and 1B hereof and the Contract is not
related directly to expenses incurred by Mitchell Hutchins on behalf of such
Series in serving as Distributor of the Class B shares, and Paragraph 2 hereof
and the Contract do not obligate the Series to reimburse Mitchell Hutchins for
such expenses. The distribution and service fees set forth in Paragraphs 1A and
1B hereof will be paid by the Series to Mitchell Hutchins until either the Plan
or the Contract is terminated or not renewed. If either the Plan or the
Contract is terminated or not renewed with respect to the Class B shares of any
Series, any distribution expenses incurred by Mitchell Hutchins on behalf of the
Class B shares of the Series in excess of payments of the distribution and
service fees specified in Paragraphs 1A and 1B hereof and the Contract which
Mitchell Hutchins has received or accrued through the termination date are the
sole responsibility and liability of Mitchell Hutchins, and are not obligations
of the Series.
10. While this Plan is in effect, the selection and nomination of the
Directors who are not interested persons of the Fund shall be committed to the
discretion of the Directors who are not interested persons of the Fund.
3
<PAGE>
11. As used in this Plan, the terms "majority of the outstanding voting
securities" and "interested person" shall have the same meaning as those terms
have in the 1940 Act.
12. The Fund shall preserve copies of this Plan (including any amendments
thereto) and any related agreements and all reports made pursuant to Paragraph 6
hereof for a period of not less than six years from the date of this Plan, the
first two years in an easily accessible place.
IN WITNESS WHEREOF, the Fund has executed this Plan of Distribution on the
day and year set forth below in New York, New York.
Date: July 1, 1991
ATTEST: PAINEWEBBER MASTER SERIES, INC.
/s/ Teresa M. Boyle By: /s/ Dianne E. O'Donnell
- ----------------------------------- ---------------------------
4
<PAGE>
Exhibit No. 13(c)
PAINEWEBBER MASTER SERIES, INC. -- CLASS D SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, PaineWebber Master Series, Inc. ("Fund") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and currently has four distinct series of shares
of common stock ("Series"), which correspond to distinct portfolios and have
been designated as the PaineWebber Fund, PaineWebber Blue Chip Growth Fund,
PaineWebber Asset Allocation Fund and PaineWebber Money Market Fund; and
WHEREAS, the Fund desires to adopt a Plan of Distribution ("Plan") pursuant
to Rule 12b-1 under the 1940 Act with respect to the Class D shares of the
above-referenced Series and of such other Series as may hereafter be designated
by the Fund's board of directors ("Board") and have Class D shares established;
and
WHEREAS, the Fund has entered into a Distribution Contract ("Contract")
with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") pursuant to
which Mitchell Hutchins has agreed to serve as Distributor of the Class D shares
of each such Series;
NOW, THEREFORE, the Fund hereby adopts this Plan with respect to the Class
D shares of each Series in accordance with Ru1e 12b-1 under the 1940 Act.
1. A. The following Series of the Fund are authorized to pay to
Mitchell Hutchins, as compensation for Mitchell Hutchins' services as
Distributor of the Series' Class D shares, distribution fees at the rate (on an
annualized basis) set forth below of the average daily net assets of the Series'
Class D shares. Such fee shall be calculated and accrued daily and paid monthly
or at such other intervals as the Board shall determine.
PaineWebber Income Fund 0.50%
PaineWebber Blue Chip Growth Fund 0.75%
PaineWebber Asset Allocation Fund 0.75%
PaineWebber Money Market Fund 0.50%
B. Any Series hereafter established is authorized to pay to Mitchell
Hutchins, as compensation for Mitchell Hutchins' services as Distributor of the
Series' Class D Shares, a distribution fee in the amount to be agreed upon in a
written distribution fee addendum to this Plan ("Distribution Fee Addendum")
executed by the Fund on behalf of such Series. All such Distribution Fee Addenda
shall provide that they are subject to all terms and conditions of this Plan.
<PAGE>
C. Each series is authorized to pay to Mitchell Hutchins, as
compensation for Mitchell Hutchins' services as Distributor of the Series' Class
D shares, a service fee at the rate of 0.25%, on an annualized basis, of the
average daily net assets of the Series' Class D shares. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
D. Any Series may pay a distribution or service fee to Mitchell
Hutchins at a lesser rate than the fees specified above, as agreed upon by the
Board and Mitchell Hutchins and as approved in the manner specified in Paragraph
4 of this Plan.
2. As Distributor of the Class D shares of each Series, Mitchell Hutchins
may spend such amounts as it deems appropriate on any activities or expenses
primarily intended to result in the sale of the Class D shares of the Series or
the servicing and maintenance of shareholder accounts, including, but not
limited to, compensation to employees of Mitchell Hutchins; compensation to and
expenses, including overhead and telephone and other communication expenses, of
Mitchell Hutchins, PaineWebber Incorporated ("PaineWebber") and other selected
dealers who engage in or support the distribution of shares or who service
shareholder accounts; the printing of prospectuses, statements of additional
information, and reports for other than existing shareholders; and the
preparation, printing and distribution of sales literature and advertising
materials.
3. This Plan shall not take effect with respect to the Class D shares of
any Series unless it first has been approved by a vote of the then sole
shareholder of the Class D shares of the Series.
4. This Plan shall not take effect with respect to the Class D shares of
any Series unless it first has been approved, together with any related
agreements, by votes of a majority of both (a) the Board and (b) 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 this Plan or any agreements
related thereto ("Independent Directors"), cast in person at a meeting (or
meetings) called for the purpose of voting on such approval; and until the
Directors who approve the Plan's taking effect with respect to such Series'
Class D shares have reached the conclusion required by Rule 12b-l(e) under the
1940 Act.
5. After approval as set forth in paragraphs 3 and 4, this Plan shall
take effect and continue in full force and effect until a meeting of the Class D
shareholders held after the initial offering of such shares of such Series to
the public. If approved at such meeting by a vote of a majority of the
outstanding voting securities of the Class D shares of such Series, the Plan
shall continue in full force and effect with respect to the Class D shares of
such Series for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in Paragraph 4.
6. Mitchell Hutchins shall provide to the Board and the Board shall
review, at least quarterly, a written report of the amounts expended with
respect to the Class D shares of each
2
<PAGE>
Series by Mitchell Hutchins under this Plan and the Contract and the purposes
for which such expenditures were made. Mitchell Hutchins shall submit only
information regarding amounts expended for "distribution activities," as defined
in this Paragraph 6, to the Board in support of the distribution fee payable
hereunder and shall submit only information regarding amounts expended for
"service activities," as defined in this Paragraph 6, to the Board in support of
the service fee payable hereunder.
For purposes of this Plan, "distribution activities" shall mean any
activities in connection with Mitchell Hutchins' performance of its obligations
under this Plan or the Contract that are not deemed "services activities."
"Service activities" shall mean activities in connection with the provision by
Mitchell Hutchins or PaineWebber of personal, continuing services to investors
in the Class D shares of the Series; provided, however, that if the National
Association of Securities Dealers, Inc. ("NASD") adopts a definition of "service
fee" for purposes of Section 26(d) of the NASD Rules of Fair Practice that
differs from the definition of "service activities" hereunder, or if the NASD
adopts a related definition intended to define the same concept, the definition
of "service activities" in this Paragraph shall be automatically amended,
without further action of the parties, to conform to such NASD definition.
Overhead and other expenses of Mitchell Hutchins and PaineWebber related to
their "distribution activities" or "service activities," including telephone and
other communications expenses, may be included in the information regarding
amounts expended for such activities.
7. This Plan may be terminated with respect to the Class D shares of any
Series at any time 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 Class D shares of that Series.
8. This Plan may not be amended to increase materially the amount of
distribution fees provided for in Paragraph lA or lB hereof or the amount of
service fees provided for in Paragraph lC hereof unless such amendment is
approved in the manner provided for initial approval in paragraphs 3 and 4
hereof, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval and annual renewal in Paragraph 5 hereof.
9. The amount of the distribution and service fees payable by the Series
to Mitchell Hutchins under Paragraphs 1 hereof and the Contract is not related
directly to expenses incurred by Mitchell Hutchins on behalf of such Series in
serving as Distributor of the Class D shares, and Paragraph 2 hereof and the
Contract do not obligate the Series to reimburse Mitchell Hutchins for such
expenses. The distribution and service fees set forth in Paragraph 1 hereof will
be paid by the Series to Mitchell Hutchins until either the Plan or the Contract
is terminated or not renewed. If either the Plan or the Contract is terminated
or not renewed with respect to the Class D shares of any Series, any
distribution expenses incurred by Mitchell Hutchins on behalf of the Class D
shares of the Series in excess of payments of the distribution and service fees
specified in Paragraphs 1 hereof and the Contract which Mitchell Hutchins has
received or accrued through the termination date are the sole responsibility and
liability of Mitchell Hutchins, and are not obligations of the Series.
3
<PAGE>
10. While this Plan is in effect, the selection and nomination of the
Directors who are not interested persons of the Fund shall be committed to the
discretion of the Directors who are not interested persons of the Fund.
11. As used in this Plan, the terms "majority of the outstanding voting
securities" and "interested person" shall have the same meaning as those terms
have in the 1940 Act.
12. The Fund shall preserve copies of this Plan (including any amendments
thereto) and any related agreements and all reports made pursuant to Paragraph 6
hereof for a period of not less than six years from the date of this Plan, the
first two years in an easily accessible place.
IN WITNESS WHEREOF, the Fund has caused this Plan of Distribution to be
executed on the day and year set forth below in New York, New York.
Date: July 1, 1992
ATTEST: PAINEWEBBER MASTER SERIES, INC.
/s/ Teresa M. Boyle By: /s/ Dianne E. O'Donnell
------------------------------- -----------------------
Teresa M. Boyle Dianne E. O'Donnell
Secretary and Vice President
4
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