As filed with the Securities and Exchange Commission on April 29, 1999
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. 36 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 29 [ X ]
(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)
[ ] On pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485 (a)(1)
[X] On June 30, 1999 pursuant to Rule 485 (a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On pursuant to Rule 485(a)(2)
Title of Securities Being Registered: Class A, B and C Shares of Common Stock of
PaineWebber Money Market Fund.
<PAGE>
PAINEWEBBER
MONEY MARKET FUND
-------------------------------
PROSPECTUS
JUNE 30, 1999
-------------------------------
This prospectus offers Class A, Class B and Class C shares of PaineWebber Money
Market Fund solely through exchange for shares of the corresponding class of
other PaineWebber funds.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
<PAGE>
PaineWebber Money Market Fund
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CONTENTS
THE FUND
--------------------------------------------
What every investor 3 Money Market Fund
should know about
the fund xx More About Risks and Investment
Strategies
YOUR INVESTMENT
--------------------------------------------
Information for xx Managing Your Fund Account
managing your fund - Flexible Pricing
account - Buying Shares
- Selling Shares
- Exchanging Shares
- Pricing and Valuation
ADDITIONAL INFORMATION
--------------------------------------------
Additional important xx Management
information about the
fund xx Dividends and Taxes
xx Financial Highlights
--------------------------------------------
Where to learn more
about PaineWebber Back Cover
mutual funds
----------------------------------
The fund is not a complete or
balanced investment program.
----------------------------------
2
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PaineWebber Money Market Fund
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PAINEWEBBER MONEY MARKET FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------
FUND OBJECTIVE
Maximum current income consistent with liquidity and conservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and is subject to maturity, quality and
diversification requirements designed to help it maintain a stable price of
$1.00 per share.
The fund invests in a diversified portfolio of high quality, short-term money
market instruments of U.S. and foreign issuers, including money market
instruments with variable and floating rate of interest. All the fund's
investments are denominated in U.S. dollars. Its investments include
o commercial paper and other short-term obligations of corporations,
partnerships, trusts and other entities
o government securities
o bank obligations
o repurchase agreements
Mitchell Hutchins Asset Management Inc., the fund's investment adviser,
evaluates its investments based on credit analysis and interest rate outlook.
Because the fund buys and sells its portfolio securities based on considerations
of safely of principal and liquidity, the fund may not buy securities that pay
the highest yield. The fund may attempt to increase its yield by trading to take
advantage of short-term market variations.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Although the fund's investments are considered by Mitchell Hutchins to have
minimal credit risk, they are not risk free and an issuer may not make principal
or interest payments when due. The fund is subject to interest rate risk, which
means that the value of its investments generally will fall when interest rates
rise and its yield will tend to lag behind prevailing short-term interest rates.
The fund's investments in money market instruments of foreign issuers may
present greater risk than investments in the money market instruments of U.S.
issuers.
More information about these and other risks of an investment in the fund is
provided in "More About Risks and Investment Strategies" below, under the
following headings:
o Credit Risk
o Interest Rate Risk
o Foreign Securities Risk
INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).
3
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PaineWebber Money Market Fund
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PERFORMANCE
- -----------
RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart shows Class B shares because they have the longest performance history
of any class of fund shares. The bar chart does not reflect the effect of sales
charges; if it did, the total returns shown would be lower.
The table that follows the bar chart shows the average annual returns over
several time periods for each class of the fund's shares. That table does
reflect fund sales charges.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
MONEY MARKET FUND -- TOTAL RETURN ON CLASS B SHARES
[INSERT BAR CHART]
NOTE: Calendar year-to-date total return as of March 31, 1999 -- %
Best quarter during years shown: quarter, 19 -- %
Worst quarter during years shown: quarter, 19 -- %
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
CLASS CLASS A CLASS B* CLASS C
(INCEPTION DATE) (7/1/91) (9/26/86) (7/14/92)
One Year
Five Years
Ten Years N/A N/A
Life of Class
- -----------
* Reflects conversion of Class B shares to Class A after six years.
4
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PaineWebber Money Market Fund
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EXPENSES AND FEE TABLES
- -----------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)
CLASS A CLASS B CLASS C
Maximum Sales
Charge (Load) Imposed on Purchases (as a %
of offering price) None None None
Maximum
Contingent Deferred
Sales Charge (Load) (CDSC)
(as a % of offering price) None 5% 1.00%
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
CLASS A CLASS B CLASS C
Management Fees 0.50% 0.50% 0.50%
Distribution and/or Service
(12b-1) Fees 0.25 0.75 0.75
Other Expenses
Total Annual Fund Operating Expenses
EXAMPLE
This example is intended to help you compare the cost of investing in
PaineWebber Money Market Fund with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A
Class B (assuming sales of all shares at end of period)
Class B (assuming no sales of shares)
Class C (assuming sales of all shares at end of period)
Class C (assuming no sales of shares)
</TABLE>
5
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PaineWebber Money Market Fund
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MORE ABOUT RISKS AND INVESTMENT STRATEGIES
- ------------------------------------------
PRINCIPAL RISKS
The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further detail about some of the risks
described below, are discussed in the fund's Statement of Additional Information
("SAI"). Information on how you can obtain the SAI is on the back cover of this
prospectus.
CREDIT RISK. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even high quality money market instruments
are subject to some credit risk. A money market instrument that is downgraded in
quality or otherwise is considered subject to greater credit risk may be
difficult or impossible to sell at the time and price the fund desires.
INTEREST RATE RISK. The value of money market instruments generally can be
expected to fall when interest rates rise and to rise when interest rates fall.
Interest rate risk is the risk that interest rates will rise, so that the value
of the fund's investments will fall. In addition, when interest rates are rising
or falling, the fund's yield will tend to lag behind the prevailing short-term
interest rates. This means that when interest rates are rising, the fund's yield
will tend to be somewhat lower than prevailing short-term interest rates and,
when interest rates fall, the fund's yield generally will be somewhat higher.
FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
YEAR 2000 RISK. The fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.
Similarly, the issuers whose money market instruments are bought by the fund and
the trading systems used by the fund could be adversely affected by this issue.
The ability of an issuer or trading system to respond successfully to the issue
requires both technological sophistication and diligence, and there can be no
assurance that any steps taken will be sufficient to avoid an adverse impact on
the fund.
ADDITIONAL INVESTMENT STRATEGIES
In managing the fund's portfolio, Mitchell Hutchins may employ a number of
professional money management techniques to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. These
techniques include varying the composition and the weighted average maturity of
the portfolio based upon its assessment of the relative values of various money
market instruments and future interest rate patterns. Mitchell Hutchins also may
seek to improve the fund's yield by purchasing or selling securities to take
advantage of yield disparities among similar or dissimilar money market
instruments that regularly occur in the money markets.
6
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PaineWebber Money Market Fund
- --------------------------------------------
YOUR INVESTMENT
MANAGING YOUR FUND ACCOUNT
- --------------------------
FLEXIBLE PRICING
- ----------------
The fund offers three classes of shares - Class A, Class B and Class C - solely
through exchange for shares of the corresponding class of other PaineWebber
funds. No front-end sales charge is imposed when fund shares are acquired
through an exchange, and no contingent deferred sales charge is imposed when
shares of another PaineWebber fund are exchanged for the fund's shares.
The fund and the other PaineWebber funds that use the Flexible Pricing system
have adopted plans under rule 12b-1 for their Class A, Class B and Class C
shares that allow each fund to pay service fees for services provided to
shareholders and (for Class B and Class C shares) distribution fees for the sale
of its shares. Because the 12b-1 distribution fees for Class B and Class C
shares are paid out of a fund's assets on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than if you paid a
front-end sale charge.
CLASS A SHARES
Class A shares of the fund have no front-end sales charge because they are
acquired through an exchange for Class A shares of another PaineWebber fund.
Class A shares of other PaineWebber funds generally have a front-end sales
charge that is included in their offering price and is not invested in a fund.
Class A shares of the fund pay an annual 12b-1 service fee of 0.25% of average
net assets, but they pay no 12b-1 distribution fees. The ongoing expenses for
Class A shares are lower than for Class B and Class C shares.
You may have to pay a 1% contingent deferred sales charge when you sell Class A
shares of the fund if
o The front-end sales charge was waived for the Class A shares you exchanged
for fund shares because your initial purchase was $1 million or more and
o You sell your Class A shares of the fund within one year of the initial
purchase date for the Class A shares that you later exchanged for fund
shares
This deferred sales charge would be 1% of the lesser of the offering price of
the Class A shares initially purchased or the net asset value of the Class A
shares of the fund at the time of sale. We will not impose the deferred sales
charge on Class A shares representing reinvestment of dividends or on
withdrawals in the first year after purchase of up to 12% of the value of your
Class A shares under the Systematic Withdrawal Plan.
NOTE: If you want information on the fund's Systematic Withdrawal Plan, see the
SAI or contact your PaineWebber Financial Advisor
or correspondent firm.
CLASS B SHARES
Class B shares have a contingent deferred sales charge. When you initially
purchase Class B shares of a PaineWebber fund, we invest 100% of your purchase
in that fund's shares and no deferred sales charge is imposed when you exchange
those shares for Class B shares of the fund. However, you may have to pay the
deferred sales charge when you sell your fund shares, depending on how long you
own the shares.
The fund's Class B shares pay an annual 12b-1 distribution fee of 0.50% of
average net assets, as well as an annual 12b-1 service fee of 0.25% of average
net assets. If you hold your Class B shares for six years after initial purchase
date for the Class B shares that you later exchanged for fund shares they will
automatically convert to Class A shares of the fund, which have lower ongoing
expenses.
You will pay a deferred sales charge if you sell Class B shares before the end
of six years (four years for fund shares acquired in certain exchanges for Class
B shares of PaineWebber Low Duration U.S. Government Income Fund). We calculate
the deferred sales charge by multiplying the lesser of the net asset value of
the Class B shares initially purchased or the net asset value of the Class B
shares of the fund at the time of sale by the percentage shown below:
7
<PAGE>
PaineWebber Money Market Fund
- --------------------------------------------
SALES OF FUND SHARES ACQUIRED THROUGH AN EXCHANGE FOR SHARES OF PAINEWEBBER LOW
DURATION U.S. GOVERNMENT INCOME FUND
IF YOU SELL PERCENTAGE BY WHICH THE
SHARES WITHIN: SHARES' NET ASSET
-------------- VALUE IS MULTIPLIED:
--------------------
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
The above schedule applies only if the exchanged shares would have been subject
to the same lower deferred sales charge schedule if you sold them rather than
exchanging them for Class B shares of the fund.
SALES OF FUND SHARES ACQUIRED THROUGH AN EXCHANGE FOR SHARES OF ANY OTHER
PAINEWEBBER FUND
IF YOU SELL PERCENTAGE BY WHICH THE
SHARES WITHIN: SHARES' NET ASSET
-------------- VALUE IS MULTIPLIED:
--------------------
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
We will not impose the deferred sales charge on Class B shares representing
reinvestment of dividends or on withdrawals in any year of up to 12% of the
value of your Class B shares under the Systematic Withdrawal Plan.
To minimize your deferred sales charge, we will assume that you are selling:
o First, Class B shares representing reinvested dividends, and
o Second, Class B shares that you have owned the longest.
SALES CHARGE WAIVERS. You may qualify for a waiver of the deferred sales charge
on a sale of shares if:
o You participate in the Systematic Withdrawal Plan;
o You are older than 59-1/2 and are selling shares to take a distribution
from certain types of retirement plans;
o You receive a tax-free return of an excess IRA contribution;
o You receive a tax-qualified retirement plan distribution following
retirement; or
o The shares are sold within one year of your death and you owned the shares
either (1) as the sole shareholder or (2) with your spouse as a joint
tenant with the right of survivorship.
NOTE: If you think you qualify for any of these sales charge waivers, you will
need to provide documentation to PaineWebber or the fund. For more information,
you should contact your PaineWebber Financial Advisor or correspondent firm or
call 1-800-647-1568. If you want information on the Systematic Withdrawal Plan,
see the SAI or contact your PaineWebber Financial Advisor or correspondent firm.
CLASS C SHARES
Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you initially purchase Class C shares of a PaineWebber
fund, we invest 100% of your purchase in that fund's shares.
The fund's Class C shares pay an annual 12b-1 distribution fee of 0.50% of
average net assets, as well as an annual 12b-1 service fee of 0.25% of average
net assets. Class C shares do not convert to another class of shares. This means
that you will pay the 12b-1 fees for as long as you own your shares.
8
<PAGE>
Class C shares also have a contingent deferred sales charge. You may have to pay
the deferred sales charge if you sell your shares within one year of the date
you initially purchased the Class C shares that you later exchanged for fund
shares. The deferred sales charge will be either 0.75% or 1.00%, depending on
the deferred sales charge that would have applied to the initially purchased
Class C shares. We calculate the deferred sales charge on sales of Class C
shares by multiplying 0.75% or 1.00% (as applicable) by the lesser of the net
asset value of the Class C shares initially purchased or the net asset value of
the Class C shares of the fund at the time of sale. We will not impose the
deferred sales charge on Class C shares representing reinvestment of dividends
or on withdrawals in the first year after purchase of up to 12% of the value of
your Class C shares under the Systematic Withdrawal Plan.
8A
<PAGE>
PaineWebber Money Market Fund
- --------------------------------------------
NOTE: If you want information on the fund's Systematic Withdrawal Plan, see the
SAI or contact your PaineWebber Financial Advisor
or correspondent firm.
BUYING SHARES
- -------------
If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase fund shares by asking your Financial Advisor to exchange
shares of another PaineWebber fund for shares of the corresponding class of the
fund. Otherwise, you may acquire fund shares by writing to the funds' transfer
agent, PFPC Inc., and requesting an exchange of shares of another PaineWebber
fund for shares of the corresponding class of the fund. You must make your
exchange request to the transfer agent in writing and include
o Your name and address;
o The name of the fund whose shares you are selling to purchase shares of
Money Market Fund;
o Your account number;
o How much you are exchanging (by dollar amount or by number of shares to be
sold); and
o A guarantee of each registered owner's signature. A signature guarantee
may be obtained from a financial institution, broker, dealer or clearing
agency that is a participant in one of the medallion programs recognized
by the Securities Transfer Agents Association. These are: Securities
Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion
Program (SEMP) and the New York Stock Exchange Medallion Signature Program
(MSP). The transfer agent and the funds will not accept signature
guarantees that are not a part of these programs.
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
If you wish to invest in other PaineWebber funds, you can do so by:
o Contacting your Financial Advisor (if you have an account at PaineWebber
or at a PaineWebber correspondent firm);
o Obtaining an application from the transfer agent by calling 1-800-647-1568
and mailing the completed application with a check to PFPC Inc., Attn:
PaineWebber Mutual Funds, P.O. Box 8950, Wilmington, DE 19899; or
o Opening an account by exchanging shares from another PaineWebber fund.
You do not have to complete an application when you make additional investments
in the same fund.
You may exchange shares of another PaineWebber fund for shares of Money Market
Fund only after the first purchase has settled and the first fund has received
your payment.
The funds and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of shares.
MINIMUM INVESTMENTS:
- --------------------
To open an account ................................... None
To add to an account ................................. None
o The fund may impose minimum investment requirements at any time.
SELLING SHARES
- --------------
You can sell your fund shares at any time. If you own more than one class of
shares, you should specify which class you want to sell. If you do not, the fund
will assume that you want to sell shares in the following order: Class A, then
Class C and last, Class B.
9
<PAGE>
If you have an account with PaineWebber or a PaineWebber correspondent firm, you
can sell shares by contacting your Financial Advisor.
If you do not have an account at PaineWebber or a correspondent firm, and you
bought your shares through the transfer agent, you can sell your shares by
writing to the fund's transfer agent. Your letter must include:
o Your name and address;
o The fund's name;
o The fund account number;
o The dollar amount or number of shares you want to sell; and
A guarantee of each registered owner's signature. (See "Buying Shares" for
information on obtaining a signature guarantee).
9A
<PAGE>
PaineWebber Money Market Fund
- --------------------------------------------
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
It costs the fund money to maintain shareholder accounts. Therefore, the fund
reserves the right to repurchase all shares in any account that has a net asset
value of less than $500. If the fund elects to do this with your account, it
will notify you that you can increase the amount invested to $500 or more within
60 days. The fund will not repurchase shares in accounts that fall below $500
solely because of a decrease in the fund's net asset value.
EXCHANGING SHARES
- -----------------
You may exchange Class A, Class B or Class C shares of the fund for shares of
the same class of most other PaineWebber funds.
You will not pay either a front-end sales charge or a deferred sales charge when
you exchange shares. However, you may have to pay a deferred sales charge if you
later sell the shares you acquired in the exchange. Each fund will use the date
that you initially purchased the exchanged shares to determine whether you must
pay a deferred sales charge when you sell the shares in the acquired fund.
Other PaineWebber funds may have different minimum investment amounts. You may
not be able to exchange your shares if your exchange is not as large as the
minimum investment amount in that other fund.
PAINEWEBBER CLIENTS If you bought your shares through PaineWebber or a
correspondent firm, you may exchange your shares by placing an order with your
PaineWebber Financial Advisor.
OTHER INVESTORS If you are not a PaineWebber client, you may exchange your
shares by writing to the fund's transfer agent. You must include:
o Your name and address;
o The name of the fund whose shares you are selling and the name of the fund
whose shares you want to buy;
o Your account number;
o How much you are exchanging (by dollar amount or by number of shares to be
sold); and
o A guarantee of your signature. (See "Buying Shares" for information on
obtaining a signature guarantee.)
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
The fund may modify or terminate the exchange privilege at any time.
PRICING AND VALUATION
- ---------------------
The fund's net asset value per share is expected to be $1.00 per share, although
this value is not guaranteed. The fund values its securities at their amortized
cost. This method uses a constant amortization to maturity of the difference
between the cost of the instrument to the fund and the amount due at maturity.
The fund calculates net asset value on days that the New York Stock Exchange
(NYSE) is open. The fund calculates net asset value separately for each class as
of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern
time). The NYSE normally is not open, and the funds do not price their shares,
on national holidays and on Good Friday. If trading on the NYSE is halted for
the day before 4:00 p.m., Eastern time, the fund's net asset value per share
will be calculated as of the time trading was halted.
Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for making sure that your order is promptly sent to the fund.
You should keep in mind that a deferred sales charge may be applied when you
sell Class B or Class C shares.
10
<PAGE>
PaineWebber Money Market Fund
- --------------------------------------------
MANAGEMENT
- ----------
INVESTMENT ADVISER
Mitchell Hutchins Asset Management Inc. is the investment adviser and
administrator of the fund. Mitchell Hutchins is located at 1285 Avenue of the
Americas, New York, New York, 10019, and is a wholly owned asset management
subsidiary of PaineWebber Incorporated, which is wholly owned by Paine Webber
Group Inc., a publicly owned financial services holding company. On May 31,
1999, Mitchell Hutchins was adviser or sub-adviser of 33 investment companies
with 75 separate portfolios and aggregate assets of approximately $__._ billion.
ADVISORY FEES
The fund paid advisory fees to Mitchell Hutchins for the most recent fiscal year
at the annual rate of 0.50% of its average daily net assets.
11
<PAGE>
PaineWebber Money Market Fund
- --------------------------------------------
DIVIDENDS AND TAXES
- -------------------
DIVIDENDS
The fund declares dividends daily and pays them monthly. The fund distributes
any net short-term capital gain annually, but may make more frequent
distributions if necessary to maintain its share prices at $1.00 per share.
Classes with higher expenses are expected to have lower dividends. For example,
Class B and Class C shares are expected to have lower dividends than Class A
shares.
You will receive dividends in additional shares of the same class unless you
elect to receive them in cash. Contact your Financial Advisor at PaineWebber or
one of its corresponding firms if you prefer to receive dividends in cash.
TAXES
The dividends that you receive from the fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. If you hold fund shares through a tax-exempt account or plan, such as
an IRA or 401(k) plan, dividends on your shares generally will not be subject to
tax.
The fund expects that its dividends will be taxed primarily as ordinary income.
The fund will tell you how you should treat its dividends for tax purposes.
12
<PAGE>
PaineWebber Money Market Fund
- --------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------
The following financial highlights tables are intended to help you understand
the fund's financial performance for the past 5 years. Certain information
reflects financial results for a single fund share. In the tables, "total
investment return" represents the rate that an investor would have earned on an
investment in the fund (assuming reinvestment of all dividends).
The information in the financial highlights has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report, along with
the fund's financial statements, are included in the fund's annual report to
shareholders. The annual report may be obtained without charge by calling
1-800-647-1568.
13
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PaineWebber Money Market Fund
- --------------------------------------------
MONEY MARKET FUND
[FINANCIAL HIGHLIGHTS TO BE PROVIDED]
14
<PAGE>
[BACK COVER]
Ticker Symbol: Money Market Fund Class: A:
B:
C:
If you want more information about the fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the fund's investments is available in the fund's
annual and semi-annual reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about the fund by contacting your PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting the fund directly at 1-800-647-1568.
You may review and copy information about the fund, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You can get text-only copies of reports and other information about
the fund:
o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov
Investment Company Act File No.
PaineWebber Master Series, Inc. - 811-4448
(PaineWebber Money Market Fund)
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PAINEWEBBER MONEY MARKET FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
PaineWebber Money Market Fund is a diversified series of PaineWebber
Master Series, Inc., a professionally managed open-end investment company
("Corporation").
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 funds, Mitchell Hutchins has appointed PaineWebber to serve
as the exclusive dealer for the sale of fund shares.
Portions of the fund's Annual Report to Shareholders are incorporated
by reference into this Statement of Additional Information. The Annual Report
accompanies this Statement of Additional Information. You may obtain an
additional copy of the fund's Annual Report by calling toll-free 1-800-647-1568.
This Statement of Additional Information is not a prospectus and should
be read only in conjunction with the fund's current Prospectus, dated June 30,
1999. A copy of the Prospectus may be obtained by calling any PaineWebber
Financial Advisor or correspondent firm or by calling toll-free 1-800-647-1568.
This Statement of Additional Information is dated June 30, 1999.
TABLE OF CONTENTS
PAGE
----
The Fund and Its Investment Policies.............................. 2
The Fund's Investments, Related Risks and Limitations............. 2
Organization of the Corporation; Directors and Officers
and Principal Holders of Securities.......................... 9
Investment Advisory and Distribution Arrangements................. 15
Portfolio Transactions............................................ 19
Additional Exchange and Redemption Information and Other
Services..................................................... 20
Conversion of Class B Shares...................................... 23
Valuation of Shares............................................... 23
Performance....................................................... 24
Taxes............................................................. 27
Other Information................................................. 27
Financial Statements.............................................. 28
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THE FUND AND ITS INVESTMENT POLICIES
The fund's investment objective may not be changed without shareholder
approval. Except where noted, the other investment policies of the fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that the fund will achieve its investment objective.
The fund has an investment objective of maximum current income
consistent with liquidity and conservation of capital. The fund invests in high
quality money market instruments that have, or are deemed to have, remaining
maturities of 13 months or less. These instruments include (1) U.S. government
securities, (2) obligations of U.S. and foreign banks, (3) commercial paper and
other short-term corporate obligations of U.S. and foreign companies,
governments and similar entities, including variable and floating rate
securities and participation interests and (4) repurchase agreements regarding
any of the foregoing. The fund also may purchase participation interests in any
of the securities in which it is permitted to invest. Participation interests
are pro rata interests in securities held by others. The fund maintains a
dollar-weighted average portfolio maturity of 90 days or less
The fund may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks having total assets at the time of purchase in excess of $1.5 billion. The
fund may invest in non-negotiable time deposits of U.S. banks, savings
associations and similar depository institutions only if the institution has
total assets at the time of purchase in excess of $1.5 billion and the time
deposit has a maturity of seven days or less.
The fund may purchase only those obligations that Mitchell Hutchins
determines, pursuant to procedures adopted by the board, present minimal credit
risks and are "Eligible Securities" as defined in Rule 2a-7 under the Investment
Company Act of 1940, as amended ("Investment Company Act"). Eligible Securities
include securities rated in one of the two highest short-term ratings categories
by at least two nationally recognized statistical rating organizations ("rating
agencies") or rated in one of the two highest short-term ratings categories by a
single rating agency if only that rating agency has assigned the obligation a
short-term rating. The fund also may rely on the short-term rating and credit
quality of a guarantee of a security (including bond insurance, letters of
credit or unconditional demand feature) or the issuer of the guarantee to
determine whether the security is an Eligible Security. Eligible Securities also
include unrated securities if Mitchell Hutchins determines the obligations to be
of comparable quality to rated securities that so qualify.
"Second Tier Securities" are Eligible Securities that are not rated in
the highest short-term ratings category by the requisite rating agencies or
determined by Mitchell Hutchins to be of comparable quality and do not otherwise
qualify for treatment as "First Tier Securities" under Rule 2a-7. (A definition
of First Tier Securities is set forth below.) The fund may invest no more than
5% of its total assets in Second Tier Securities. Although the fund may invest
in Second Tier Securities of U.S. companies, it does not purchase commercial
paper of foreign companies, governments and similar entities falling into this
category. Further, the fund generally may invest no more than 5% of its total
assets in the securities of a single issuer (other than U.S. government
securities). The fund may purchase only U.S. dollar-denominated obligations of
foreign issuers.
The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33-1/3% of its total assets. The fund
may borrow up to 10% of its total assets for temporary purposes, including
reverse repurchase agreements involving up to 5% of its total assets. The fund
may invest in the securities of other investment companies.
THE FUND'S INVESTMENTS, RELATED RISKS AND LIMITATIONS
The following supplements the information contained in the Prospectus
and above concerning the fund's investments, related risks and limitations.
Except as otherwise indicated in the Prospectus or the Statement of Additional
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Information, the fund has have established no policy limitations on its ability
to use the investments or techniques discussed in these documents.
YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS. The yields on
the money market instruments in which the fund invests (such as U.S. government
securities, commercial paper and bank obligations) are dependent on a variety of
factors, including general money market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer, the size of
the offering, the maturity of the obligation and the ratings of the issue. The
ratings assigned by rating agencies represent their opinions as to the quality
of the obligations they undertake to rate. Ratings, however, are general and are
not absolute standards of quality. Consequently, obligations with the same
rating, maturity and interest rate may have different market prices.
Subsequent to its purchase by the fund, an issue may cease to be rated
or its rating may be reduced. If a security in the fund's portfolio ceases to be
a First Tier Security (as defined below) or Mitchell Hutchins becomes aware that
a security has received a rating below the second highest rating by any rating
agency, Mitchell Hutchins and, in certain cases, the fund's board, will consider
whether the fund should continue to hold the obligation. A First Tier Security
is either (1) rated in the highest short-term rating category by at least two
rating agencies, (2) rated in the highest short-term rating category by a single
rating agency if only that rating agency has assigned the obligation a
short-term rating, (3) issued by an issuer that has received such a short-term
rating with respect to a security that is comparable is priority and security,
(4) subject to a guarantee rated in the highest short-term rating category or
issued by a guarantor that has received the highest short-term rating for a
comparable debt obligation or (5) unrated, but determined by Mitchell Hutchins
to be of comparable quality. A First Tier Security rated in the highest
short-term category at the time of purchase that subsequently receives a rating
below the highest rating category from a different rating agency may continue to
be considered a First Tier Security.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S.
Treasury (such as Treasury bills, notes or bonds) and obligations issued or
guaranteed as to principal and interest (but not as to market value) by the U.S.
government, its agencies or its instrumentalities. U.S. government securities
include mortgage-backed securities issued or guaranteed by government agencies
or government-sponsored enterprises. Other U.S. government securities may be
backed by the full faith and credit of the U.S. government or supported
primarily or solely by the creditworthiness of the government-related issuer or,
in the case of mortgage-backed securities, by pools of assets.
U.S. government securities also include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury,
which are traded independently under the Separate Trading of Registered Interest
and Principal of Securities ("STRIPS") program. Under the STRIPS programs, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury.
ASSET-BACKED SECURITIES. Asset-backed securities have structural
characteristics similar to mortgage-backed securities, as discussed in more
detail below. However, the underlying assets are not first lien mortgage loans
or interests therein, but include assets such as motor vehicle installment sales
contracts, other installment sales contracts, home equity loans, leases of
various types of real and personal property and receivables from revolving
credit (credit card) agreements. Such assets are securitized through the use of
trusts or special purpose corporations. Payments or distributions of principal
and interest may be guaranteed up to a certain amount and for a certain time
period by a letter of credit or pool insurance policy issued by a financial
institution unaffiliated with the issuer, or other
VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. The fund
may purchase variable and floating rate securities with remaining maturities in
excess of 13 months issued by U.S. government agencies or instrumentalities or
guaranteed by the U.S. government. In addition, the fund may purchase variable
and floating rate securities of other issuers with remaining maturities in
excess of 13 month if the securities are subject to a demand feature exercisable
within 13 months or less. The yields on these securities are adjusted in
relation to changes in specific rates, such as the prime rate, and different
securities may have different adjustment rates. The fund's investment in these
securities must comply with conditions established by the Securities and
Exchange Commission ("SEC") under which they may be considered to have remaining
maturities of 13 months or less. Certain of these obligations carry a demand
feature that gives the fund the right to tender them back to the issuer or a
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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 obligations. Changes in
the credit quality of these institutions could cause losses to the fund and
affect its share price.
Generally, the fund intends to exercise demand features (1) upon a
default under the terms of the underlying security, (2) to maintain its
portfolio in accordance with its investment objective and policies or applicable
legal or regulatory requirements or (3) as needed to provide liquidity to the
fund in order to meet redemption requests. The ability of a bank or other
financial institution to fulfill its obligations under a letter of credit,
guarantee or other liquidity arrangement might be affected by possible financial
difficulties of its borrowers, adverse interest rate or economic conditions,
regulatory limitations or other factors. The interest rate on floating rate or
variable rate securities ordinarily is readjusted on the basis of the prime rate
of the bank that originated the financing or some other index or published rate,
such as the 90-day U.S. Treasury bill rate, or is otherwise reset to reflect
market rates of interest. Generally, these interest rate adjustments cause the
market value of floating rate and variable rate securities to fluctuate less
than the market value of fixed rate securities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The fund may invest in variable
amount master demand notes, which are unsecured redeemable obligations that
permit investment of varying amounts at fluctuating interest rates under a
direct agreement between Money Market Portfolio and an issuer. The principal
amount of these notes may be increased from time to time by the parties (subject
to specified maximums) or decreased by the fund or the issuer. These notes are
payable on demand and may or may not be rated.
[COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The fund may
purchase commercial paper, which includes short-term obligations issued by
corporations, partnerships, trusts or other entities to finance short-term
credit needs. The fund also may purchase non-convertible debt obligations with
no more than 397 days remaining to maturity at the time of purchase. Short-term
obligations issued by trusts or special purpose entities may include
certificates or notes that represent participations in or are backed by pools or
mortgages or credit card, automobile or other types of receivables or financial
assets. The fund may invest in funding agreements and guaranteed investment
contracts issued by insurance companies which are obligations of the insurance
company or its separate account. Funding agreements permit the investment of
varying amounts under a direct agreement between the fund and an insurance
company and provide that the principal amount may be increased from time to time
(subject to specified maximums) by agreement of the parties or decreased by
either party. The fund expects to invest in funding agreements with floating or
variable rates that are subject to demand features that permit the fund to
tender its interest back to the issuer. To the extent the fund invests in
funding agreements and guaranteed investment contracts that either do not have
demand features or have demand features that may be exercised more than seven
days after the date of acquisition, these investments will be subject to the
fund's limitation on investments in illiquid securities. See "The Fund's
Investments, Related Risks and Limitations -- Illiquid Securities."]
INVESTING IN FOREIGN SECURITIES. The fund's investments in U.S.
dollar-denominated securities of foreign issuers may involve risks that are
different from investments in U.S. issuers. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect the payment of principal or interest
on the fund's investments. Additionally, there may be less publicly available
information about foreign issuers because they may not be subject to the same
regulatory requirements as domestic issuers.
ILLIQUID SECURITIES. The term "illiquid securities" for purposes of the
Prospectus and Statement of Additional Information means securities that cannot
be disposed of within seven days in the ordinary course of business at
approximately the amount at which a fund has valued the securities and includes,
among other things, repurchase agreements maturing in more than seven days and
restricted securities other than those Mitchell Hutchins has determined are
liquid pursuant to guidelines established by the board. To the extent the fund
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invests in illiquid securities, it may not be able readily to liquidate such
investments and may have to sell other investments if necessary to raise cash to
meet its obligations.
Restricted securities are not registered under the Securities Act of
1933, as amended ("Securities Act") and may be sold only in privately negotiated
or other exempted transactions or after a registration statement under the
Securities Act has become effective. Where registration is required, the fund
may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the fund might obtain a less favorable price than prevailed when it
decided to sell.
However, not all restricted securities are illiquid. A large
institutional market has developed for many U.S. and foreign securities that are
not registered under the Securities Act. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend either on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Institutional markets for restricted securities also have developed as
a result of Rule 144A, which establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
the fund, however, could affect adversely the marketability of such portfolio
securities, and the fund might be unable to dispose of such securities promptly
or at favorable prices.
The board has delegated the function of making day-to-day
determinations of liquidity to Mitchell Hutchins pursuant to guidelines approved
by the board. Mitchell Hutchins takes into account a number of factors in
reaching liquidity decisions, 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 bids are
solicited and the mechanics of transfer). Mitchell Hutchins monitors the
liquidity of restricted securities in the fund's portfolio and reports
periodically on such decisions to the board.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which
the fund purchases securities or other obligations from a bank or securities
dealer (or its affiliate) and simultaneously commits to resell them to the
counterparty at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased obligations. The fund maintains custody of the underlying obligations
prior to their repurchase, either through its regular custodian or through a
special "tri-party" custodian or sub-custodian that maintains separate accounts
for both the fund and its counterparty. Thus, the obligation of the counterparty
to pay the repurchase price on the date agreed to or upon demand is, in effect,
secured by such obligations. Repurchase agreements carry certain risks not
associated with direct investments in securities, including a possible decline
in the market value of the underlying obligations. If their value becomes less
than the repurchase price, plus any agreed-upon additional amount, the
counterparty must provide additional collateral so that at all times the
collateral is at least equal to the repurchase price plus any agreed-upon
additional amount. The difference between the total amount to be received upon
repurchase of the obligations and the price that was paid by the fund upon
acquisition is accrued as interest and included in its net investment income.
Repurchase agreements involving obligations other than U.S. government
securities (such as commercial paper and corporate bonds) may be subject to
special risks and may not have the benefit of certain protections in the event
of the counterparty's insolvency. If the seller or guarantor becomes insolvent,
the fund may suffer delays, costs and possible losses in connection with the
disposition of collateral. The fund intends to enter into repurchase agreements
only with counterparties in transactions believed by Mitchell Hutchins to
present minimum credit risks in accordance with guidelines established by the
board.
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REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve
the sale of securities held by the fund subject to its agreement to repurchase
the securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to the fund's
limitation on borrowings and may be entered into only with banks and securities
dealers. While a reverse repurchase agreement is outstanding, the fund will
maintain, in a segregated account with its custodian, cash or liquid securities,
marked to market daily, in an amount at least equal to its obligations under the
reverse repurchase agreement. See "The Fund's Investments, Related Risks and
Limitations -- Segregated Accounts."
Reverse repurchase agreements involve the risk that the buyer of the
securities sold by the fund might be unable to deliver them when the fund seeks
to repurchase. If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, such buyer or trustee or receiver may
receive an extension of time to determine whether to enforce that fund's
obligation to repurchase the securities, and the fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The fund may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery, i.e., for issuance or delivery to or by the fund later than
the normal settlement date for such securities at a stated price and yield.
[When-issued securities include TBA ("to be assigned") securities. TBA
securities are usually mortgage-backed securities that are purchased on a
forward commitment basis with an approximate principal amount and no defined
maturity date. The actual principal amount and maturity date are determined upon
settlement when the specific mortgage pools are assigned.] The fund generally
would not pay for such securities or start earning interest on them until they
are received. However, when the fund undertakes a when-issued or delayed
delivery obligation, it immediately assumes the risks of ownership, including
the risks of price fluctuation. Failure of the issuer to deliver a security
purchased by the fund on a when-issued or delayed delivery basis may result in
the fund's incurring or missing an opportunity to make an alternative
investment. Depending on market conditions, a fund's when-issued and delayed
delivery purchase commitments could cause its net asset value per share to be
more volatile, because such securities may increase the amount by which the
fund's total assets, including the value of when-issued and delayed delivery
securities held by that fund, exceeds its net assets.
A security purchased on a when-issued or delayed delivery basis is
recorded as an asset on the commitment date and is subject to changes in market
value, generally based upon changes in the level of interest rates. Thus,
fluctuation in the value of the security from the time of the commitment date
will affect a fund's net asset value. When a fund commits to purchase securities
on a when-issued or delayed delivery basis, its custodian segregates assets to
cover the amount of the commitment. See "The Fund's Investments, Related Risks
and Limitations--Segregated Accounts." The fund may sell the right to acquire
the security prior to delivery if Mitchell Hutchins deems it advantageous to do
so, which may result in a gain or loss to the fund.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The fund may invest in
securities of other money market funds, subject to Investment Company Act
limitations which at present restrict these investments to no more than 10% of
the fund's total assets. The shares of other money market funds are subject to
the management fees and other expenses of those funds. At the same time, the
fund would continue to pay its own management fees and expenses with respect to
all its investments, including shares of other money market funds. The fund
invests in securities of other money market funds when Mitchell Hutchins
believes that the amounts to be invested are too small or are available too late
in the day to be effectively invested in money market instruments or that shares
of other money market funds otherwise would provide a better return than a
direct investment in money market instruments.
LENDING OF PORTFOLIO SECURITIES. The fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables the fund to earn additional
income, but could result in a loss or delay in recovering these securities. The
borrower of the fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, at least equal
to the market value of the securities loaned, plus accrued interest and
dividends. Acceptable collateral is limited to cash, U.S. government securities
and irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. The fund may reinvest any cash collateral in money market
investments or other short-term liquid investments. In determining whether to
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lend securities to a particular broker-dealer or institutional investor,
Mitchell Hutchins will consider, and during the period of the loan will monitor,
all relevant facts and circumstances, including the creditworthiness of the
borrower. The fund will retain authority to terminate any of its loans at any
time. The fund may pay fees in connection with a loan and may pay the borrower
or placing broker a negotiated portion of the interest earned on the
reinvestment of cash held as collateral. The fund will receive amounts
equivalent to any interest or other distributions on the securities loaned. The
fund will regain record ownership of loaned securities to exercise beneficial
rights, such as voting and subscription rights, when regaining such rights is
considered to be in the fund's interest.
Pursuant to procedures adopted by the board governing the fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for the fund. The board also has authorized the payment of fees (including
fees calculated as a percentage of invested cash collateral) to PaineWebber for
these services. The board periodically reviews all portfolio securities loan
transactions for which PaineWebber acted as lending agent. PaineWebber also has
been approved as a borrower under the fund's securities lending program.
SEGREGATED ACCOUNTS. When the fund enters into certain transactions
that involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis or reverse
repurchase agreements, it will maintain with an approved custodian in a
segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the fund's obligation or commitment under such
transactions.
INVESTMENT LIMITATIONS OF THE FUND
FUNDAMENTAL LIMITATIONS. The following fundamental investment
limitations cannot be changed for the fund without the affirmative vote of the
lesser of (a) more than 50% of the outstanding shares of the fund or (b) 67% or
more of the shares of the fund present at a shareholders' meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy. If a percentage restriction is adhered to at the time of an investment or
transaction, later changes in percentage resulting from a change in values of
portfolio securities or amount of total assets will not be considered a
violation of any of the following limitations.
The fund will not:
(1) purchase any security if, as a result of that purchase, 25% or more
of the fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to municipal securities or to
certificates of deposit and bankers acceptances of domestic branches of U.S.
banks.
The following interpretations apply to, but are not a part of, this
fundamental restriction: (a) domestic and foreign banking will be considered to
be different industries and (b) asset-backed securities will be grouped in
industries based upon their underlying assets and not treated as constituting a
single, separate industry.
(2) issue senior securities or borrow money, except as permitted under
the Investment Company Act and then not in excess of 33 1/3% of the fund's total
assets (including the amount of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the time of the issuance or
borrowing, except that the fund may borrow up to an additional 5% of its total
assets (not including the amount borrowed) for temporary or emergency purposes.
(3) 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.
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The following interpretation applies to but is not part of this
fundamental restriction: the fund's investments in master notes, funding
agreements and similar instruments will not be considered to be the making of a
loan.
(4) 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.
(5) 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.
(6) 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.
(7) 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.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without shareholder
approval.
The fund will not:
(1) invest more than 10% of its net assets (15% of net assets for Low
Duration Fund and Strategic Income Fund) in illiquid securities.
(2) purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding.
(3) 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.
(4) 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) purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act and except that this limitation
does not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of reorganization, consolidation, or merger and
except that the fund will not purchase securities of registered open-end
investment companies or registered unit investment trusts in reliance on
Sections 12(d)(1)(F) or 12(d)(1)(G) of the Investment Company Act of 1940).
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ORGANIZATION OF CORPORATION; DIRECTORS AND OFFICERS AND PRINCIPAL HOLDERS OF
SECURITIES
The Corporation was organized on October 29, 1985 as a Maryland
corporation and has two operating series. The Corporation has authority to issue
10 billion shares of common stock, par value $.001 per share. One billion of
those shares are classified as shares of the fund. The Corporation is governed
by a board of directors, which oversees the fund's operations. The board also is
authorized to establish additional series.
The directors and executive officers of the Corporation, their ages,
business addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------------- ----------------------------------------
<S> <C> <C>
Margo N. Alexander**; 52 Director and President Mrs. Alexander is chairman (since March 1999), chief executive
officer and a director of Mitchell Hutchins (since January
1995), and an executive vice president and a director of
PaineWebber (since March 1984). Mrs. Alexander is president and
a director or trustee of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
Richard Q. Armstrong; 64 Director Mr. Armstrong is chairman and principal of R.Q.A. Enterprises
R.Q.A. Enterprises (management consulting firm) (since April 1991 and principal
One Old Church Road occupation since March 1995). Mr. Armstrong was
Unit #6 chairman of the board, chief executive officer and co-owner
Greenwich, CT 06830 of Adirondack Beverages (producer and distributor of soft
drinks and sparkling/still waters) (October 1993-March 1995).
He was a partner of The New England Consulting Group
(management consulting firm) (December 1992-September 1993). He
was managing director of LVMH U.S. Corporation (U.S. subsidiary
of the French luxury goods conglomerate, Louis Vuitton Moet
Hennessey Corporation) (1987-1991) and chairman of its wine and
spirits subsidiary, Schieffelin & Somerset Company (1987-1991).
Mr. Armstrong is a director or trustee of 31 investment
companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
9
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------------- ----------------------------------------
E. Garrett Bewkes, Jr.**; 72 Director and Chairman of the Mr. Bewkes is a director of Paine Webber Group Inc. ("PW
Board of Directors Group") (holding company of PaineWebber and Mitchell Hutchins).
Prior to December 1995, he was a consultant to PW Group. Prior
to 1988, he was chairman of the board, president and chief
executive officer of American Bakeries Company. Mr. Bewkes is a
director of Interstate Bakeries Corporation. Mr. Bewkes is a
director or trustee of 35 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
Richard R. Burt; 52 Director Mr. Burt is chairman of IEP Advisors, Inc. international)
1275 Pennsylvania Ave, N.W. investments and consulting firm) (since March 1994) and a
Washington, DC 20004 partner of McKinsey & Company (management consulting firm)
(since 1991). He is also a director of Archer-Daniels-Midland
Co. (agricultural commodities), Hollinger International Co.
(publishing), Homestake Mining Corp., Powerhouse Technologies
Inc. and Wierton Steel Corp. He was the chief negotiator in the
Strategic Arms Reduction Talks with the former Soviet Union
(1989-1991) and the U.S. Ambassador to the Federal Republic of
Germany (1985-1989). Mr. Burt is a director or trustee of 31
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
Mary C. Farrell**; 49 Director Ms. Farrell is a managing director, senior investment
strategist and member of the Investment Policy Committee of
PaineWebber. Ms. Farrell joined PaineWebber in 1982. She is a
member of the Financial Women's Association and Women's
Economic Roundtable and appears as a regular panelist on Wall
$treet Week with Louis Rukeyser. She also serves on the Board
of Overseers of New York University's Stern School of Business.
Ms. Farrell is a director or trustee of 31 investment companies
for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
10
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------------- ----------------------------------------
Meyer Feldberg; 57 Director Mr. Feldberg is Dean and Professor of Management of
Columbia University the Graduate School of Business, Columbia University. Prior
101 Uris Hall to 1989, he was president of the Illinois Institute of
New York, NY 10027 Technology. Dean Feldberg is also a director of Primedia, Inc.,
Federated Department Stores, Inc. and Revlon, Inc. Dean
Feldberg is a director or trustee of 34 investment companies
for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
George W. Gowen; 69 Director Mr. Gowen is a partner in the law firm of Dunnington,
666 Third Avenue Bartholow & Miller. Prior to May 1994, he was a partner in
New York, NY 10017 the law firm of Fryer, Ross & Gowen. Mr. Gowen is a director or
trustee of 34 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment
adviser.
Frederic V. Malek; 62 Director Mr. Malek is chairman of Thayer Capital Partners (merchant
1455 Pennsylvania Ave, N.W. bank). From January 1992 to November 1992, he was a campaign
Suite 350 manager of Bush-Quayle '92. From 1990 to 1992, he was
Washington, DC 20004 vice chairman and, from 1989 to 1990, he was president of
Northwest Airlines Inc., NWA Inc. (holding company of Northwest
Airlines Inc.) and Wings Holdings Inc. (holding company of NWA
Inc.). Prior to 1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline catering and contract
feeding), where he most recently was an executive vice
president and president of Marriott Hotels and Resorts. Mr.
Malek is also a director of American Management Systems, Inc.
(management consulting and computer related services),
Automatic Data Processing, Inc., CB Commercial Group, Inc.
(real estate services), Choice Hotels International (hotel and
hotel franchising), FPL Group, Inc. (electric services), Manor
Care, Inc. (health care) and Northwest Airlines Inc. Mr. Malek
is a director or trustee of 31 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
11
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------------- ----------------------------------------
Carl W. Schafer; 63 Director Mr. Schafer is president of the Atlantic Foundation
66 Witherspoon Street, #1100 (charitable foundation supporting mainly oceanographic
Princeton, NJ 08542 exploration and research). He is a director of Base Ten
Systems, Inc. (software), Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, the Harding, Loevner Funds,
Evans Systems, Inc. (motor fuels, convenience store and
diversified company), Electronic Clearing House, Inc.
(financial transactions processing), Frontier Oil Corporation
and Nutraceutix, Inc. (biotechnology company). Prior to January
1993, he was chairman of the Investment Advisory Committee of
the Howard Hughes Medical Institute. Mr. Schafer is a director
or trustee of 31 investment companies for which Mitchell
Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
T. Kirkham Barneby; 53 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. Mr. Barneby is a vice president of seven
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
John J. Lee; 30 Vice President and Mr. Lee is a vice president and a manager of the mutual fund
Assistant Treasurer finance department of Mitchell Hutchins. Prior to September
1997, he was an audit manager in the financial services
practice of Ernst & Young LLP. Mr. Lee is a vice president and
assistant treasurer of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as an investment adviser.
Dennis McCauley; 52 Vice President Mr. McCauley is a managing director and chief investment
officer--fixed income of Mitchell Hutchins. Prior to December
1994, he was director of fixed income investments of IBM
Corporation. Mr. McCauley is a vice president of 22 investment
companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
13
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------------- ----------------------------------------
Ann E. Moran; 41 Vice President and Ms. Moran is a vice president and a manager of the mutual fund
Assistant Treasurer finance department of Mitchell Hutchins. Ms. Moran is a vice
president and assistant treasurer of 32 investment companies
for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Dianne E. O'Donnell; 47 Vice President and Secretary Ms. O'Donnell is a senior vice president and deputy general
counsel of Mitchell Hutchins. Ms. O'Donnell is a vice president
and secretary of 31 investment companies and a vice president
and assistant secretary of one investment company for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
Emil Polito; 38 Vice President Mr. Polito is a senior vice president and director of
operations and control for Mitchell Hutchins. Mr. Polito is a
vice president of 32 investment companies for which Mitchell
Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
Susan Ryan; 39 Vice President Ms. Ryan is a senior vice president and portfolio manager of
Mitchell Hutchins and has been with Mitchell Hutchins since
1982. Ms. Ryan is a vice president of five investment companies
for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser
Victoria E. Schonfeld; 48 Vice President Ms. Schonfeld is a managing director and general counsel of
Mitchell Hutchins (since May 1994) and a senior vice president
of PaineWebber (since July 1995). Prior to May 1994, she was a
partner in the law firm of Arnold & Porter. Ms. Schonfeld is a
vice president of 31 investment companies and a vice president
and secretary of one investment company for which Mitchell
Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
Paul H. Schubert; 36 Vice President and Treasurer Mr. Schubert is a senior vice president and director of the
mutual fund finance department of Mitchell Hutchins. From
August 1992 to August 1994, he was a vice president at
BlackRock Financial Management L.P. Mr. Schubert is a vice
president and treasurer of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
13
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ------------------------- ----------------------------------------
Nirmal Singh; 43 Vice President Mr. Singh is a senior vice president and a portfolio manager of
Mitchell Hutchins. Mr. Singh is a vice president of four
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
Barney A. Taglialatela; 38 Vice President and Mr. Taglialatela is a vice president and a manager of the
Assistant Treasurer mutual fund finance department of Mitchell Hutchins. Prior to
February 1995, he was a manager of the mutual fund finance
division of Kidder Peabody Asset Management, Inc. Mr.
Taglialatela is a vice president and assistant treasurer of 32
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
Mark A. Tincher; 43 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 is a vice president of 13 investment companies for
which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
Keith A. Weller; 37 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 31 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
</TABLE>
- -------------
* Unless otherwise indicated, the business address of each listed person is 1285
Avenue of the Americas, New York, New York 10019.
** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are "interested persons" of the
fund as defined in the Investment Company Act of 1940 by virtue of their
positions with Mitchell Hutchins, PaineWebber, and/or PW Group.
The Corporation pays each board member who is not an "interested
person" of the Corporation $1,000 annually for the fund and $1,500 annually for
the Corporation's second series and an additional up to $150 per series for each
board meeting and each separate meeting of a board committee. Therefore, the
Corporation pays each such trustee $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 fund complex
receives additional compensation, aggregating $15,000 annually, from the
relevant funds. All board members are reimbursed for any expenses incurred in
attending meetings. Board members and officers own in the aggregate less than 1%
of the outstanding shares of any class of the fund. Because PaineWebber and
Mitchell Hutchins perform substantially all the services necessary for the
operation of the Corporation and the fund, the Corporation requires no
employees. No officer, director or employee of Mitchell Hutchins or PaineWebber
presently receives any compensation from the Corporation for acting as a board
member or officer.
14
<PAGE>
The table below includes certain information relating to the
compensation of the current board members who held office with the Corporation
or with other PaineWebber funds during the fund's fiscal year ended February 28,
1999.
COMPENSATION TABLE+
AGGREGATE
COMPENSATION TOTAL COMPENSATION FROM
FROM THE CORPORATION AND THE
NAME OF PERSON, POSITION CORPORATION* FUND COMPLEX**
------------------------ ------------ -----------------------
Richard Q. Armstrong, $ 101,372
Trustee
Richard R. Burt, 101,372
Trustee
Meyer Feldberg, 116,222
Trustee
George W. Gowen, 108,272
Trustee
Frederic V. Malek, 101,372
Trustee
Carl W. Schafer, 101,372
Trustee
- --------------------
+ Only independent board members are compensated by the Trusts and identified
above; board members who are "interested persons," as defined by the
Investment Company Act, do not receive compensation.
* Represents fees paid to each board member from the Corporation indicated for
the fiscal year ended February 28, 1999.
** Represents total compensation paid during the calendar year ended December
31, 1998, to each board member by 31 investment companies (33 in the case of
Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or one
of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.
PRINCIPAL HOLDERS OF SECURITIES
As of June 1, 1999, the funds' records showed no shareholders as owning
5% or more of any class of a fund's shares.
INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY ARRANGEMENTS. Mitchell Hutchins acts as the
investment adviser and administrator to the fund pursuant to a contract dated
August 4, 1988 ( "Advisory Contract") with the Corporation. Under the Advisory
Contract, the fund pays Mitchell Hutchins a fee, computed daily and paid
monthly, at the annual rate of 0.50% of its average daily net assets.
During the fiscal years ended February 28, 1999, February 28, 1998 and
February 28, 1997, the fund paid (or accrued) investment advisory and
administrative fees of $_______________ , $202,449 and $215,423, respectively.
Prior to August 1, 1997, PaineWebber provided certain services to the
fund not otherwise provided by its transfer agent. Pursuant to a separate
agreement between PaineWebber and the Corporation relating to those services,
PaineWebber earned (or accrued) $5,548 for the period March 1, 1997 to July 31,
1997 and $13,300 for the fiscal year ended February 28, 1997. Subsequent to July
15
<PAGE>
31, 1997, PFPC (not the fund) 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. Expenses borne by the fund include the following: (1) the cost
(including 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 under federal and state securities laws and
maintenance of such registrations and qualifications; (5) fees and salaries
payable to board members and officers who are not interested persons (as defined
in the Investment Company Act) of the Corporation or Mitchell Hutchins; (6) all
expenses incurred in connection with the board members' 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 fund for violation of any law; (10) legal, accounting and
auditing expenses, including legal fees of special counsel for the independent
board members; (11) charges of custodians, transfer agents and other agents;
(12) costs of preparing share certificates; (13) expenses of setting in type and
printing prospectuses, statements of additional information and supplements
thereto, reports and proxy materials for existing shareholders, and costs of
mailing such materials to shareholders; (14) any extraordinary expenses
(including fees and disbursements of counsel) incurred by the fund; (15) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (16) costs of mailing and tabulating
proxies and costs of meetings of shareholders, the board and any committees
thereof; (17) the cost of investment company literature and other publications
provided to board members and officers; and (18) 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
Corporation or the fund in connection with the performance of the Advisory
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 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 Corporation.
During the fiscal years ended February 28, 1999 and February 28, 1998,
the fund paid (or accrued) $________ and $____________ in fees to PaineWebber
for its services as securities lending agent:
NET ASSETS. The following table shows the approximate net assets as of
May 31, 1999, sorted by category of investment objective, of the investment
companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An
investment company may fall into more than one of the categories below.
NET ASSETS
INVESTMENT CATEGORY ($MIL)
------------------- ----------
Domestic (excluding Money Market)...............................
Global..........................................................
Equity/Balanced.................................................
Fixed Income (excluding Money Market)...........................
Taxable Fixed Income...................................
Tax-Free Fixed Income..................................
Money Market Funds..............................................
PERSONAL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to a code of ethics that describes
the fiduciary duty owed to shareholders of PaineWebber mutual funds and other
16
<PAGE>
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
each class of 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 each class of 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 Investment Company Act (each,
respectively, a "Class A Plan," "Class B Plan" and "Class C Plan," and
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 Plan, the fund pays Mitchell
Hutchins a distribution fee, accrued daily and payable monthly, at the annual
rate of 0.50% of the average daily net assets of the Class B shares. Under the
Class C Plan, each fund pays Mitchell Hutchins a distribution fee, accrued daily
and payable monthly, at the annual rate of 0.50% of the average daily net assets
of the Class C shares.
Mitchell Hutchins uses the service fees under the Plans for Class A, B
and C shares 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 then compensates its Financial
Advisors for shareholder servicing that they perform and offsets its own
expenses in servicing and maintaining shareholder accounts.
Mitchell Hutchins uses the distribution fees under the Class B and
Class C Plans to offset the fund's marketing costs attributable to such classes,
such as preparation, printing and distribution of sales literature, advertising
and prospectuses to prospective investors and related overhead expenses, such as
employee salaries and bonuses. Because fund shares may be acquired only through
an exchange of shares of other PaineWebber funds, Mitchell Hutchins does not pay
commissions to PaineWebber for selling fund shares.
Mitchell Hutchins receives the proceeds of the contingent deferred
sales charge paid upon sales of shares. These proceeds may be used to cover
distribution expenses.
The Plans and the related Distribution Contracts for Class A, Class B
and Class C shares specify that the fund must pay service and distribution fees
to Mitchell Hutchins for its activities, not as reimbursement for specific
expenses incurred. Therefore, even if Mitchell Hutchins' expenses exceed the
service or distribution fees it receives, 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. Expenses in
excess of service and distribution fees received or accrued through the
termination date of any Plan will be Mitchell Hutchins' sole responsibility and
not that of the fund. Annually, the board reviews the Plans and Mitchell
Hutchins' corresponding expenses for each class of fund shares separately from
the Plans and expenses of the other classes.
Among other things, each Plan provides that (1) Mitchell Hutchins will
submit to the board at least quarterly, and the board members 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 board members 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
17
<PAGE>
(4) while the Plan remains in effect, the selection and nomination of board
members who are not "interested persons" of the Corporation shall be committed
to the discretion of the board members who are not "interested persons" of that
Corporation.
In reporting amounts expended under the Plans to the board members,
Mitchell Hutchins allocates expenses attributable to the sale of each class of
the fund's 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
the fund's shares will not be used to subsidize the sale of any other class of
fund shares.
During the fiscal year ended February 28, 1999, the fund paid (or
accrued) service and/or distribution fees to Mitchell Hutchins under the Plans
as follows: Class A -- $___________ , Class B -- $_________________ and Class C
- -- $____________ .
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 during the fiscal year
ended February 28, 1999:
CLASS A CLASS B CLASS C
------- ------- -------
Marketing and advertising...............
Amortization of commissions.............
Printing of prospectuses and statements
of additional information...............
Branch network costs allocated and
interest expense........................
Service fees paid to PaineWebber
Financial Advisors......................
"Marketing and advertising" includes various internal costs allocated
by Mitchell Hutchins to its efforts at distributing the fund's 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 funds such that Class A fund shares could be
exchanged with Class A shares of other PaineWebber 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 of the fund 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 funds such that Class B fund shares could be exchanged with shares
of the corresponding class of other PaineWebber 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.
18
<PAGE>
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 funds, (2) the advantage to
investors in paying for distribution on an ongoing basis, (3) Mitchell Hutchins'
belief that the ability of PaineWebber Financial Advisors 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 generally do
not face contingent deferred sales charges, would prove attractive to the
Financial Advisors 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 board
members also recognized that Mitchell Hutchins' willingness to compensate
PaineWebber and its Financial Advisors, without the concomitant receipt by
Mitchell Hutchins of initial sales charges or contingent deferred sales charges
upon redemption after one year following purchase 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 that 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.
Mitchell Hutchins earned and retained the following contingent deferred
sales charges paid upon certain redemptions of shares for the fiscal year ended
February 28, 1999:
Class A......................
Class B......................
Class C......................
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. The Advisory Contract 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. Although Mitchell Hutchins may receive certain research or execution
services in connection with these transactions, Mitchell Hutchins will not
purchase securities at a higher price or sell securities at a lower price than
would otherwise be paid had no services been provided by the executing dealer.
Moreover, Mitchell Hutchins will not enter into any explicit soft dollar
arrangements relating to principal transactions and will not receive in
principal transactions the types of services that could be purchased for hard
dollars. Research services furnished by the dealers with which the fund effects
securities transactions may be used by Mitchell Hutchins in advising other funds
or accounts it advises and, conversely, research services furnished to Mitchell
Hutchins in connection with other funds or accounts that Mitchell Hutchins
advises may be used in advising the fund. Information and research received from
dealers will be in addition to, and not in lieu of, the services required to be
performed by Mitchell Hutchins under the Advisory Contract.
During the last three fiscal years, the fund paid no brokerage
commission.
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Mitchell Hutchins may engage in agency transactions in over-the-counter
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 a requirement that Mitchell
Hutchins obtain multiple quotes from dealers before executing the transactions
on an agency basis.
The fund purchases portfolio securities from dealers and underwriters
as well as from issuers. Securities are usually traded on a net basis with
dealers acting as principal for their own accounts without a stated commission.
Prices paid to dealers in principal transactions generally include a "spread,"
which is the difference between the prices at which the dealer is willing to
purchase and sell a specific security at the time. When securities are purchased
directly from an issuer, no commissions or discounts are paid. When securities
are purchased in underwritten offerings, they include a fixed amount of
compensation to the underwriter.
Investment decisions for the fund and for other investment accounts
managed by Mitchell Hutchins are made independently of each other in light of
differing considerations for the various accounts. However, the same investment
decision may occasionally be made for the fund and one or more of such accounts.
In such cases, simultaneous transactions are inevitable. Purchases or sales are
then averaged as to price and allocated between the fund and such other
account(s) as to amount according to a formula deemed equitable to the Fund and
such account(s). While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as the fund is concerned,
or upon its ability to complete its entire order, in other cases it is believed
that coordination and the ability to participate in volume transactions will be
beneficial to the fund.
As of February 28, 1999, the fund owned securities issued by the
following companies which are regular broker-dealers for the fund:
ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION; REDUCED SALES CHARGES; OTHER SERVICES
WAIVERS OF CONTINGENT DEFERRED 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 redemption of shares held at the time of death.
ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION. As discussed in the
Prospectus, shares of the fund may be exchanged for shares of the corresponding
class of most other PaineWebber 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
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 that 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 fund has
elected, however, to be governed by Rule 18f-1 under the Investment Company Act,
under which it is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of its net asset value during any 90-day period for one
shareholder. This election is irrevocable unless the SEC permits its withdrawal.
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The fund may suspend redemption privileges or postpone the date of
payment during any period (1) when the New York Stock Exchange is closed or
trading on the New York Stock Exchange is restricted as determined by the SEC,
(2) when an emergency exists, as defined by the SEC, that makes it not
reasonably practicable for the fund to dispose of securities owned by it or
fairly to determine the value of its assets or (3) as the SEC may otherwise
permit. The redemption price may be more or less than the shareholder's cost,
depending on the market value of a fund's portfolio at the time.
SERVICE ORGANIZATIONS. The fund may authorize service organizations,
and their agents, to accept on its behalf purchase and redemption orders that
are in "good form." The fund will be deemed to have received these purchase and
redemption orders when a service organization or its agent accepts them. Like
all customer orders, these orders will be priced based on the fund's net asset
value next computed after receipt of the order by the service organizations or
their agents. Service organizations may include retirement plan service
providers who aggregate purchase and redemption instructions received from
numerous retirement plans or plan participants.
SYSTEMATIC WITHDRAWAL PLAN. The systematic withdrawal plan allows
investors to set up monthly, quarterly (March, June, September and December),
semi-annual (June and December) or annual (December) withdrawals from their
PaineWebber Mutual Fund accounts. Minimum balances and withdrawals vary
according to the class of shares:
o Class A and Class C shares. Minimum value of fund shares is $5,000;
minimum withdrawals of $100.
o Class B shares. Minimum value of fund shares is $20,000; minimum
monthly, quarterly, and semi-annual and annual withdrawals of $200,
$400, $600 and $800, respectively.
Withdrawals under the systematic withdrawal plan will not be subject to
a contingent deferred sales charge if the investor withdraws no more than 12% of
the value of the fund account when the investor signed up for the Plan (for
Class B shares, annually; for Class A and Class C shares, during the first year
under the Plan). Shareholders who elect to receive dividends or other
distributions in cash may not participate in this plan.
An investor's participation in the systematic withdrawal plan will
terminate automatically if the "Initial Account Balance" (a term that means the
value of the fund account at the time the investor elects to participate in the
systematic withdrawal plan), less aggregate redemptions made other than pursuant
to the systematic withdrawal plan, is less than the minimum values specified
above. Purchases of additional shares of a fund concurrent with withdrawals are
ordinarily disadvantageous to shareholders because of tax liabilities and, for
Class A shares, initial sales charges. On or about the 20th of a month for
monthly, quarterly, semi-annual and annual plans, PaineWebber will arrange for
redemption by the fund of sufficient fund shares to provide the withdrawal
payments specified by participants in the fund's systematic withdrawal plan. The
payments generally are mailed approximately five Business Days (defined under
"Valuation of Shares") after the redemption date. Withdrawal payments should not
be considered dividends, but redemption proceeds. If periodic withdrawals
continually exceed reinvested dividends and other distributions, a shareholder's
investment may be correspondingly reduced. A shareholder may change the amount
of the systematic withdrawal or terminate participation in the systematic
withdrawal plan at any time without charge or penalty by written instructions
with signatures guaranteed to PaineWebber or PFPC Inc. Instructions to
participate in the plan, change the withdrawal amount or terminate participation
in the plan will not be effective until five days after written instructions
with signatures guaranteed are received by PFPC. Shareholders may request the
forms needed to establish a systematic withdrawal plan from their PaineWebber
Financial Advisors, correspondent firms or PFPC at 1-800-647-1568.
INDIVIDUAL RETIREMENT ACCOUNTS. Self-directed IRAs are available
through PaineWebber in which purchases of PaineWebber mutual funds and other
investments may be made. Investors considering establishing an IRA should review
applicable tax laws and should consult their tax advisers.
TRANSFER OF ACCOUNTS. If investors holding shares of a fund in a
PaineWebber brokerage account transfer their brokerage accounts to another firm,
the fund shares will be moved to an account with PFPC. However, if the other
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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.
PAINEWEBBER RMA RESOURCE ACCUMULATION PLAN(SERVICEMARK;
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT(REGISTERED) (RMA)(REGISTERED)
Shares of PaineWebber mutual funds (each a "PW Fund" and, collectively,
the "PW Funds") are available for purchase through the RMA Resource Accumulation
Plan ("Plan") by customers of PaineWebber and its correspondent firms who
maintain Resource Management Accounts ("RMA accountholders"). The Plan allows an
RMA accountholder to continually invest in one or more of the PW Funds at
regular intervals, with payment for shares purchased automatically deducted from
the client's RMA account. The client may elect to invest at monthly or quarterly
intervals and may elect either to invest a fixed dollar amount (minimum $100 per
period) or to purchase a fixed number of shares. A client can elect to have Plan
purchases executed on the first or fifteenth day of the month. Settlement occurs
three Business Days (defined under "Valuation of Shares") after the trade date,
and the purchase price of the shares is withdrawn from the investor's RMA
account on the settlement date from the following sources and in the following
order: uninvested cash balances, balances in RMA money market funds, or margin
borrowing power, if applicable to the account.
To participate in the Plan, an investor must be an RMA accountholder,
must have made an initial purchase of the shares of each PW Fund selected for
investment under the Plan (meeting applicable minimum investment requirements)
and must complete and submit the RMA Resource Accumulation Plan Client Agreement
and Instruction Form available from PaineWebber. The investor must have received
a current prospectus for each PW Fund selected prior to enrolling in the Plan.
Information about mutual fund positions and outstanding instructions under the
Plan are noted on the RMA accountholder's account statement. Instructions under
the Plan may be changed at any time, but may take up to two weeks to become
effective.
The terms of the Plan, or an RMA accountholder's participation in the
Plan, may be modified or terminated at any time. It is anticipated that, in the
future, shares of other PW Funds and/or mutual funds other than the PW Funds may
be offered through the Plan.
PERIODIC INVESTING AND DOLLAR COST AVERAGING. Periodic investing in the
PW Funds or other mutual funds, whether through the Plan or otherwise, helps
investors establish and maintain a disciplined approach to accumulating assets
over time, de-emphasizing the importance of timing the market's highs and lows.
Periodic investing also permits an investor to take advantage of "dollar cost
averaging." By investing a fixed amount in mutual fund shares at established
intervals, an investor purchases more shares when the price is lower and fewer
shares when the price is higher, thereby increasing his or her earning
potential. Of course, dollar cost averaging does not guarantee a profit or
protect against a loss in a declining market, and an investor should consider
his or her financial ability to continue investing through periods of both low
and high share prices. However, over time, dollar cost averaging generally
results in a lower average original investment cost than if an investor invested
a larger dollar amount in a mutual fund at one time.
PAINEWEBBER'S RESOURCE MANAGEMENT ACCOUNT. In order to enroll in the
Plan, an investor must have opened an RMA account with PaineWebber or one of its
correspondent firms. The RMA account is PaineWebber's comprehensive asset
management account and offers investors a number of features, including the
following:
o monthly Premier account statements that itemize all account activity,
including investment transactions, checking activity and Gold
MasterCard(Registered) transactions during the period, and provide
unrealized and realized gain and loss estimates for most securities
held in the account;
o comprehensive year-end summary statements that provide information on
account activity for use in tax planning and tax return preparation;
o automatic "sweep" of uninvested cash into the RMA accountholder's
choice of one of the six RMA money market funds-RMA Money Market
Portfolio, RMA U.S. Government Portfolio, RMA Tax-Free Fund, RMA
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California Municipal Money Fund, RMA New Jersey Municipal Money Fund
and RMA New York Municipal Money Fund. AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH A
MONEY MARKET FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN A MONEY
MARKET FUND.
o check writing, with no per-check usage charge, no minimum amount on
checks and no maximum number of checks that can be written. RMA
accountholders can code their checks to classify expenditures. All
canceled checks are returned each month;
o Gold MasterCard, with or without a line of credit, which provides RMA
accountholders with direct access to their accounts and can be used
with automatic teller machines worldwide. Purchases on the Gold
MasterCard are debited to the RMA account once monthly, permitting
accountholders to remain invested for a longer period of time;
o 24-hour access to account information through toll-free numbers, and
more detailed personal assistance during business hours from the RMA
Service Center;
o expanded account protection to $100 million in the event of the
liquidation of PaineWebber. This protection does not apply to shares
of the RMA money market funds or the PW Funds because those shares
are held at PFPC and not through PaineWebber; and
o automatic direct deposit of checks into your RMA account and
automatic withdrawals from the account.
The annual account fee for an RMA account is $85, which includes the
Gold MasterCard, with an additional fee of $40 if the investor selects an
optional line of credit with the Gold MasterCard.
CONVERSION OF CLASS B SHARES
Class B shares of the fund will automatically convert to Class A shares
of the fund, 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 under
"Valuation of Shares") of the month in which the sixth anniversary of the
initial issuance of such Class B shares occurs. For the purpose of calculating
the holding period required for conversion of Class B shares, the date of
initial issuance shall mean (i) the date on which such Class B shares were
issued or (ii) for Class B shares obtained through an exchange, or a series of
exchanges, the date on which the original Class B shares were issued. 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 will be 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
will also convert to Class A shares. The portion will be 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 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 that 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 will
not continue to be met.
VALUATION OF SHARES
The fund determines its net asset value separately for each
class of shares, normally as of the close of regular trading (usually 4:00 p.m.,
Eastern time) on the New York Stock Exchange on each Business Day, which is
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defined as each Monday through Friday when the New York Stock Exchange is open.
Net asset value will be calculated earlier when the New York Stock Exchange
closes early because trading has been halted for the day. Currently the New York
Stock Exchange 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 Investment
Company Act. To use amortized cost to value its portfolio securities, the fund
must adhere to certain conditions under the Rule relating to its investments,
some of which are discussed in this Statement of Additional Information..
Amortized cost is an approximation of market value of an instrument, whereby the
difference between its acquisition cost and value at maturity is amortized on a
straight-line basis over the remaining life of the instrument. The effect of
changes in the market value of a security as a result of fluctuating interest
rates is not taken into account, and thus the amortized cost method of valuation
may result in the value of a security being higher or lower than its actual
market value. If a large number of redemptions take place at a time when
interest rates have increased, the fund might have to sell portfolio securities
prior to maturity and at a price that might not be desirable.
The board has established procedures ("Procedures") for the purpose of
maintaining a constant net asset value of $1.00 per share, which include a
review of the extent of any deviation of net asset value per share, based on
available market quotations, from the $1.00 amortized cost per share. If that
deviation exceeds 1/2 of 1% for the fund, the board will promptly consider
whether any action should be initiated to eliminate or reduce material dilution
or other unfair results to shareholders. Such action may include redeeming
shares in kind, selling portfolio securities prior to maturity, reducing or
withholding dividends and utilizing a net asset value per share as determined by
using available market quotations. The fund will maintain a dollar-weighted
average portfolio maturity of 90 days or less and will not purchase any
instrument having, or deemed to have, a remaining maturity of more than 397
days, will limit portfolio investments, including repurchase agreements, to
those U.S. dollar-denominated instruments that are of high quality under the
Rule and that Mitchell Hutchins, acting pursuant to the Procedures, determines
present minimal credit risks, and will comply with certain reporting and
recordkeeping procedures. There is no assurance that constant net asset value
per share will be maintained. If amortized cost ceases to represent fair value
per share, the board will take appropriate action.
In determining the approximate market value of portfolio investments,
the fund may employ outside organizations, which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used.
PERFORMANCE INFORMATION
The fund's performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represent past performance and are not
intended to indicate future performance. The investment return will fluctuate.
TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in the fund's Performance Advertisements are
calculated according to the following formula:
n
P(1 + T) = ERV
where: P = a hypothetical initial payment of $1,000 to purchase
shares of a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of that period.
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
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period. In calculating the ending redeemable value, for Class B and Class C
shares, the applicable contingent deferred sales charge imposed on a redemption
of Class B or Class C shares held for the period is deducted. All dividends are
assumed to have been reinvested at net asset value.
The fund also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The fund calculates Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in fund shares
and assuming the reinvestment of all dividends distributions. The rate of return
is determined by subtracting the initial value of the investment from the ending
value and by dividing the remainder by the initial value. Contingent deferred
sales charges are not taken into account in calculating Non-Standardized Return;
the inclusion of those charges would reduce the return.
The fund also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The fund calculates Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in fund shares
and assuming the reinvestment of all dividends distributions. The rate of return
is determined by subtracting the initial value of the investment from the ending
value and by dividing the remainder by the initial value. Contingent deferred
sales charges are not taken into account in calculating Non-Standardized Return;
the inclusion of those charges would reduce the return.
Both Standardized Return and Non-Standardized Return for Class B shares
for periods of over six years reflect conversion of the Class B shares to Class
A shares at the end of the sixth year.
The following tables show performance information for each class of the
fund's shares outstanding for the periods indicated. All returns for periods of
more than one year are expressed as an average annual return.
CLASS A CLASS B CLASS C
------- ------- -------
Year ended February 28, 1999:
Standardized Return*..............
Non-Standardized Return...........
Five Years ended February 28, 1999:
Standardized Return*..............
Non-Standardized Return...........
Ten Years ended February 28, 1999:
Standardized Return...............
Non-Standardized Return...........
Inception** to February 28, 1999:
Standardized Return*..............
Non-Standardized Return...........
- --------------
* All Standardized Return figures for Class B and Class C shares reflect
deduction of the applicable contingent deferred sales charges imposed on a
redemption of shares held for the period.
** The inception date for each class of shares is as follows:
CLASS A CLASS B CLASS C
------- ------- -------
07/01/91 09/26/86 07/14/92
CALCULATION OF YIELD
The fund computes its yield and effective yield quotations using
standardized methods required by the SEC. The fund from time to time advertises
(1) its current yield based on a recently ended seven-day period, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
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of the period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7), with the resulting yield figure
carried to at least the nearest hundredth of one percent, and (2) its effective
yield based on the same seven-day period by compounding the base period return
by adding 1, raising the sum to a power equal to (365/7), and subtracting 1 from
the result, according to the following formula:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ] - 1
For the seven days ended February 28, 1999, the yield and effective
yield of the fund's shares was as follows:
YIELD EFFECTIVE YIELD
----- ---------------
Class A Shares................
Class B Shares................
Class C Shares................
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of the fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
OTHER INFORMATION. The fund's performance data quoted in advertising
and other promotional materials ("Performance Advertisements") represent past
performance and are not intended to predict or indicate future results. The
return on an investment in the fund will fluctuate. In Performance
Advertisements, the fund may compare its taxable yield with data published by
Lipper Analytical Services, Inc. for money funds ("Lipper"), CDA Investment
Technologies, Inc. ("CDA"), IBC Financial Data, Inc. ("IBC"), Wiesenberger
Investment Companies Service ("Wiesenberger") or Investment Company Data Inc.
("ICD"), or with the performance of recognized stock and other indexes,
including the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Morgan Stanley Capital International World Index, the
Lehman Brothers Treasury Bond Index, the Lehman Brothers Government/Corporate
Bond Index, the Salomon Brothers Government Bond Index and changes in the
Consumer Price Index as published by the U.S. Department of Commerce. The fund
also may refer in such materials to mutual fund performance rankings and other
data, such as comparative asset, expense and fee levels, published by Lipper,
CDA, IBC, Wiesenberger or ICD. Performance Advertisements also may refer to
discussions of the Fund and comparative mutual fund data and ratings reported in
independent periodicals, including THE WALL STREET JOURNAL, MONEY MAGAZINE,
FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES,
THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS. Comparisons
in Performance Advertisements may be in graphic form.
The fund may also compare its performance with the performances of bank
certificates of deposit ("CDs") as measured by the CDA Certificate of Deposit
Index and the Bank Rate Monitor National Index and the average of yields of CDs
of major banks published by Banxquotes(REGISTERED) Money Markets. In comparing
the fund's performance to CD performance, investors should keep in mind that
bank CDs are insured in whole or in part by an agency of the U.S. government and
offer fixed principal and fixed or variable rates of interest, and that bank CD
yields may vary depending on the financial institution offering the CD and
prevailing interest rates. Bank accounts are insured in whole or in part by an
agency of the U.S. government and may offer a fixed rate of return. Fund shares
are not insured or guaranteed by the U.S. government and returns thereon will
fluctuate. While the fund seeks to maintain a stable net asset value of $1.00
per share, there can be no assurance that it will be able to do so.
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The fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on the fund investment are reinvested by being paid in
additional Ffnd shares, any future income of the fund would increase the value,
not only of the original fund investment, but also of the additional fund shares
received through reinvestment. As a result, the value of the fund investment
would increase more quickly than if dividends had been paid in cash. The fund
may also make available to shareholders a daily accrual factor or "mil rate"
representing dividends accrued to shareholder accounts on a given day or days.
Certain shareholders may find that this information facilitates accounting or
recordkeeping.
TAXES
BACKUP WITHHOLDING. The fund is required to withhold 31% of all
dividends and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the fund or PaineWebber with a
correct taxpayer identification number. Withholding at that rate also is
required from dividends payable to those shareholders who otherwise are subject
to backup withholding.
CONVERSION OF CLASS B SHARES. A shareholder will recognize no gain or
loss as a result of a conversion from Class B shares to Class A shares.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To qualify for
treatment as a RIC under the Internal Revenue Code, the fund must distribute to
its shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gains, if any) and must meet several additional requirements. Among
these requirements are the following: (1) the fund must derive at least 90% of
its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities and certain other income; (2) at the close of each quarter of the
fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities that are limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the fund's total assets;
and (3) at the close of each quarter of the fund's taxable year, not more than
25% of the value of its total assets may be invested in securities (other than
U.S. government securities or the securities of other RICs) of any one issuer.
If the fund failed to qualify for treatment as a RIC for any taxable year, (a)
it would be taxed as an ordinary corporation on the full amount of its taxable
income for that year without being able to deduct the distributions it makes to
its shareholders and (b) the shareholders would treat all those distributions as
dividends (that is, ordinary income) to the extent of the fund's earnings and
profits. In addition, the fund could be required to recognize unrealized gains,
pay substantial taxes and interest, and make substantial distributions before
requalifying for RIC treatment.
OTHER INFORMATION
CLASSES OF SHARES. A share of each class of the fund represents an
identical interest in the fund's investment portfolio and has the same rights,
privileges and preferences. However, each class may differ with respect to
distribution and/or service fees, other expenses allocable exclusively to each
class, voting rights on matters exclusively affecting that class, and its
exchange privilege, if any. The different sales charges and other expenses
applicable to the different classes of shares of the fund will affect the
performance of those classes. Each share of the fund is entitled to participate
equally in dividends and the proceeds of any liquidation of the fund. However,
due to the differing expenses of the classes, dividends and liquidation proceeds
on Class A, B and C shares will differ.
VOTING RIGHTS. Shareholders of the fund are entitled to one vote for
each full share held and fractional votes for fractional shares held. Voting
rights are not cumulative and, as a result, the holders of more than 50% of all
the shares of the Corporation may elect all its board members. The shares 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 Rule 12b-1 Plan as it relates to the class. The shares of each series
of the Corporation will be voted separately, except when an aggregate vote of
all the series is required by law.
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The fund does not hold annual meetings. Shareholders of record of no
less than two-thirds of the outstanding shares of the Corporation may remove a
board member through a declaration in writing or by vote cast in person or by
proxy at a meeting called for that purpose. A meeting will be called to vote on
the removal of a board member at the written request of holders of 10% of the
outstanding shares of the Corporation.
CLASS-SPECIFIC EXPENSES. The fund may determine to allocate certain of
its expenses (in addition to service and 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.
PRIOR NAMES. Prior to November 10, 1995, the Class C shares of the fund
were called "Class D" shares.
CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. State
Street Bank and Trust Company, located at One Heritage Drive, North Quincy,
Massachusetts 02171, serves as custodian and recordkeeping agent for the fund.
PFPC Inc., a subsidiary of PNC Bank, N.A., serves as each fund's transfer and
dividend disbursing agent. It is located at 400 Bellevue Parkway, Wilmington, DE
19809.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the fund.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
AUDITORS. PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New
York, New York 10036, serves as
independent accountants for the Fund.
FINANCIAL STATEMENTS
The fund's Annual Report to Shareholders for its last fiscal year ended February
28, 1999 is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors or independent accountants appearing therein are
incorporated herein by this reference.
28
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION. THE FUND AND ITS
DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN
OFFER TO SELL SHARES OF THE FUND IN ANY JURISDICTION WHERE THE FUND OR ITS
DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.
-----------
PAINEWEBBER
MONEY MARKET FUND
- ------------------------------------------
Statement of Additional Information
June 30, 1999
- ------------------------------------------
PAINEWEBBER
(COPYRIGHT)1999 PaineWebber Incorporated
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
--------
(1) Restated Articles of Incorporation 1/
(2) Restated By-Laws 1/
(3) Instruments defining the rights of holders of the Registrant's
common stock 2/
(4) Investment Advisory and Administration Contract 1/
(5) (a) Distribution Contract with respect to Class A shares
1/
(b) Distribution Contract with respect to Class B shares
1/
(c) Distribution Contract with respect to Class C shares
3/
(d) Distribution Contract with respect to Class Y shares
3/
(e) Exclusive Dealer Agreement with respect to Class A
shares 1/
(f) Exclusive Dealer Agreement with respect to Class B
shares 1/
(g) Exclusive Dealer Agreement with respect to Class C
shares 3/
(h) Exclusive Dealer Agreement with respect to Class Y
shares 3/
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement 1/
(8) Transfer Agency Agreement 1/
(9) Opinion and consent of counsel (to be filed)
(10) Other opinions, appraisals, rulings and consents: Accountant's
Consent (to be filed)
(11) Financial statements omitted from prospectus - none
(12) Letter of investment intent 1/
(13) (a) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class A Shares (to be filed)
(b) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class B Shares (to be filed)
(c) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class C Shares (to be filed)
(14) and
(27) Financial Data Schedule (to be filed)
(15) Plan pursuant to Rule 18f-3 4/
- -------------
1/ Incorporated by reference from Post-Effective Amendment No. 34 to the
registration statement, SEC File No. 33-2524, filed June 29, 1998.
2/ 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.
3/ 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>
4/ 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
C-2
<PAGE>
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.
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 INSTITUTIONAL SERIES
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
C-3
<PAGE>
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST, INC.
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 801-7163). 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
and a Director 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
Assistant Treasurer Manager of the Mutual Fund
Finance Department 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
Assistant Treasurer Manager of the Mutual Fund
Finance Department 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 and a
Senior Vice President of
PaineWebber
Paul H. Schubert Vice President and Senior Vice President and
Treasurer Director of the Mutual
Fund Finance Department of
Mitchell Hutchins
C-4
<PAGE>
Position and Offices With
Underwriter or
Name Position With Registrant Exclusive Dealer
- ---- ------------------------ ----------------
Nirmal Singh Vice President Senior Vice President and
a Portfolio Manager at
Mitchell Hutchins
Barney A. Taglialatela Vice President and Vice President and a
Assistant Treasurer Manager of the Mutual Fund
Finance Department of
Mitchell Hutchins
Mark A. Tincher Vice President Managing Director and
Chief Investment Officer -
Equities of Mitchell
Hutchins
Keith A. Weller Vice President and First Vice President and
Assistant Secretary Associate General Counsel
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>
PAINEWEBBER MASTER SERIES, INC.
EXHIBIT INDEX
Exhibit
Number
- ------
(1) Restated Articles of Incorporation 1/
(2) Restated By-Laws 1/
(3) Instruments defining the rights of holders of the Registrant's
common stock 2/
(4) Investment Advisory and Administration Contract 1/
(5) (a) Distribution Contract with respect to Class A shares
1/
(b) Distribution Contract with respect to Class B shares
1/
(c) Distribution Contract with respect to Class C shares
3/
(d) Distribution Contract with respect to Class Y shares
3/
(e) Exclusive Dealer Agreement with respect to Class A
shares 1/
(f) Exclusive Dealer Agreement with respect to Class B
shares 1/
(g) Exclusive Dealer Agreement with respect to Class C
shares 3/
(h) Exclusive Dealer Agreement with respect to Class Y
shares 3/
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement 1/
(8) Transfer Agency Agreement 1/
(9) Opinion and consent of counsel (to be filed)
(10) Other opinions, appraisals, rulings and consents: Accountant's
Consent (to be filed)
(11) Financial statements omitted from prospectus - none
(12) Letter of investment intent 1/
(13) (a) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class A Shares (to be filed)
(b) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class B Shares (to be filed)
(c) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class C Shares (to be filed)
(14) and
(27) Financial Data Schedule (to be filed)
(15) Plan pursuant to Rule 18f-3 4/
- -------------
1/ Incorporated by reference from Post-Effective Amendment No. 34 to the
registration statement, SEC File No. 33-2524, filed June 29, 1998.
2/ 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>
3/ Incorporated by reference from Post-Effective Amendment No. 28 to the
registration statement, SEC File No. 33-2524, filed July 1, 1996.
4/ Incorporated by reference from Post-Effective Amendment No. 30 to the
registration statement, SEC File No. 33-2524, filed September 20, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 28th day of April, 1999.
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 April 28, 1999
- -------------------------- (Chief Executive Officer)
Margo N. Alexander*
/s/ E. Garrett Bewkes, Jr. Director and Chairman April 28, 1999
- -------------------------- of the Board of Directors
E. Garrett Bewkes, Jr.*
/s/ Richard Q. Armstrong Director April 28, 1999
- --------------------------
Richard Q. Armstrong*
/s/ Richard R. Burt Director April 28, 1999
- --------------------------
Richard R. Burt*
/s/ Mary C. Farrell Director April 28, 1999
- --------------------------
Mary C. Farrell*
/s/ Meyer Feldberg Director April 28, 1999
- --------------------------
Meyer Feldberg*
/s/ George W. Gowen Director April 28, 1999
- --------------------------
George W. Gowen*
/s/ Frederic V. Malek Director April 28, 1999
- --------------------------
Frederic V. Malek*
/s/ Carl W. Schafer Director April 28, 1999
- --------------------------
Carl W. Schafer*
/s/ Paul H. Schubert Vice President and Treasurer April 28, 1999
- -------------------------- (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.
