STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 1996 (AS REVISED
MARCH 5, 1996)
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PAINEWEBBER RMA
CONNECTICUT MUNICIPAL MONEY FUND
NEW JERSEY MUNICIPAL MONEY FUND
1285 Avenue of the Americas . New York, New York 10019 . 1-800-762-1000
PaineWebber Municipal Money Market Series (the "Trust") is an open-end,
management investment company. The Trust permits investors to invest in two
separate portfolios (each, a "Fund"): PaineWebber RMA Connecticut Municipal
Money Fund ("Connecticut Municipal Money Fund") and PaineWebber RMA New Jersey
Municipal Money Fund ("New Jersey Municipal Money Fund"). The investment
objective of Connecticut Municipal Money Fund is the maximization of current
income exempt from federal income tax and Connecticut personal income tax to the
extent consistent with the preservation of capital and the maintenance of
liquidity. Connecticut Municipal Money Fund seeks to achieve its investment
objective by investing primarily in municipal securities issued by the State of
Connecticut, its political subdivisions, authorities and corporations, the
interest from which is exempt from federal income tax and Connecticut personal
income tax. The investment objective of New Jersey Municipal Money Fund is the
maximization of current income exempt from federal income tax and New Jersey
personal income tax to the extent consistent with the preservation of capital
and the maintenance of liquidity. New Jersey Municipal Money Fund seeks to
achieve its investment objective by investing primarily in municipal securities
issued by the State of New Jersey, its political subdivisions, authorities and
corporations, the interest from which is exempt from federal income tax and New
Jersey personal income tax. Each Fund is non-diversified for purposes of the
Investment Company Act of 1940, as amended (the "1940 Act"). The investment
adviser, administrator and distributor of the Funds is PaineWebber Incorporated
("PaineWebber"); the sub-adviser and sub-administrator of the Funds is Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned subsidiary
of PaineWebber.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Funds' Prospectus. A copy of the Funds'
Prospectus can be obtained by contacting any PaineWebber investment executive or
correspondent firm or by calling 1-800-762-1000. The date of the Prospectus to
which this Statement of Additional Information relates is March 1, 1996, as
revised March 5, 1996.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements and should be read in conjunction with
the section in the Funds' Prospectus entitled "Investment Objectives and
Policies."
MUNICIPAL SECURITIES. The types of municipal securities identified in the
Prospectus may include obligations of issuers whose revenues are primarily
derived from mortgage loans on housing projects for moderate to low income
families. Each Fund also may purchase mortgage subsidy bonds with a remaining
maturity of less than 13 months that are issued to subsidize mortgages on single
family homes and "moral obligation" bonds with a remaining maturity of less than
13 months that are normally issued by special purpose public authorities. In
some cases the repayment of such bonds
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depends upon annual legislative appropriations; in other cases repayment is a
legal obligation of the issuer and, if the issuer is unable to meet its
obligations, repayment becomes a moral commitment of a related government unit
(subject, however, to such appropriations).
PUT BONDS. Each Fund may each invest in put bonds that have a fixed rate of
interest and a final maturity beyond the date on which the put may be exercised.
If the put is a "one time only" put, the Fund ordinarily will either sell the
bond or put the bond, depending upon the more favorable price. If the bond has a
series of puts after the first put, the bond will be held as long as, in the
judgment of Mitchell Hutchins, it is in the best interest of the Fund to do so.
There is no assurance that an issuer of a put bond acquired by the Fund will be
able to repurchase the bond on the exercise date, if the Fund chooses to
exercise its right to put the bond back to the issuer.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As stated in the Prospectus,
each Fund may purchase municipal securities on a "when-issued" or "delayed
delivery" basis. A security purchased on a when-issued or delayed delivery basis
is recorded as an asset on the commitment date and is subject to changes in
market value, generally based upon changes in the level of interest rates. Thus,
fluctuation in the value of the security from the time of the commitment date
will affect the Fund's net asset value. When 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 "Investment Objective and
Policies--Segregated Accounts."
STAND-BY COMMITMENTS. Pursuant to a stand-by commitment, a municipal bond
dealer agrees to purchase the securities that are the subject of the commitment
at an amount equal to (1) the acquisition cost (excluding any accrued interest
paid on acquisition), less any amortized market premium and plus any accrued
market or original issue discount, plus (2) all interest accrued on the
securities since the last interest payment date or the date the securities were
purchased, whichever is later. Although the Funds do not currently intend to
acquire stand-by commitments with respect to municipal securities held in its
portfolio, a Fund may acquire such commitments under unusual market conditions
to facilitate portfolio liquidity.
A Fund would enter into stand-by commitments only with those banks or other
dealers that, in the opinon of Mitchell Hutchins, present minimal credit risk. A
Fund's right to exercise stand-by commitments would be unconditional and
unqualified. A stand-by commitment would not be transferable by a Fund, although
the Fund could sell the underlying securities to a third party at any time. A
Fund may pay for stand-by commitments either separately in cash or by paying a
higher price for the securities that are acquired subject to such a commitment
(thus reducing the yield to maturity otherwise available for the same
securities). The acquisition of a stand-by commitment would not ordinarily
affect the valuation or maturity of the underlying municipal securities.
Stand-by commitments acquired by a Fund would be valued at zero in determining
net asset value. Whether a Fund paid directly or indirectly for a stand-by
commitment, its cost would be treated as unrealized depreciation and would be
amortized over the period the commitment is held by the Fund.
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PARTICIPATION INTERESTS. Each Fund also may invest in participation
interests in municipal bonds, including industrial development bonds ("IDBs"),
private activity bonds ("PABs") and floating and variable rate securities. A
participation interest gives a Fund an undivided interest in a municipal bond
owned by a bank. A Fund has the right to sell the instrument back to the bank.
To the extent that payment of an obligation is backed by a bank's letter of
credit or guarantee, such payment may be subject to the bank's ability to
satisfy that commitment. Mitchell Hutchins will monitor the pricing, quality and
liquidity of the participation interests held by each Fund, and the credit
standing of banks issuing letters of credit or guarantees supporting such
participation interests, on the basis of published financial information,
reports of rating services and bank analytical services. Under normal market
conditions, neither Fund will invest more than 25% of its total assets in
participation interests or other securities issued by or purchased from banks.
SEGREGATED ACCOUNTS. When a 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, the Fund will
maintain with an approved custodian in a segregated account cash, U.S.
government securities or other liquid high-grade debt securities, marked to
market daily, in an amount at least equal to the Fund's obligation or commitment
under such transactions.
ILLIQUID SECURITIES. Neither Fund will invest more than 10% of its net
assets in illiquid securities. The term "illiquid securities" for this purpose
means securities that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued the
securities and includes, among other things, repurchase agreements maturing in
more than seven days, and restricted securities and municipal lease obligations
(including certificates of participation) other than those Mitchell Hutchins has
determined to be liquid pursuant to guidelines established by the Trust's board
of trustees.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933 (the "1933 Act"), including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
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.
The board has delegated the function of making day-to-day determinations of
liquidity to Mitchell Hutchins, pursuant to guidelines approved by the board.
Mitchell Hutchins takes into account a number of factors in reaching liquidity
decisions, including (1) the frequency of trades for the security, (2) the
number of dealers that make quotes for the security, (3) the number of dealers
that have undertaken to make a market in the security, (4) the number of other
potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities held by the Funds and reports periodically on such
decisions to the board.
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In making liquidity determinations with respect to municipal lease
obligations, Mitchell Hutchins takes into account a number of additional factors
relating specifically to the credit quality of the obligations, including, where
appropriate, (1) whether the underlying lease can be cancelled, (2) what
assurance there is that the assets underlying the lease can be sold, (3) the
strength of the lessee's general credit (e.g., its administrative, economic and
financial characteristics), (4) the likelihood that the municipality will
discontinue appropriating funding for the property because the property is no
longer deemed essential to the operations of the municipality (e.g., the
potential for an "event of nonappropriation") and (5) the legal recourse in the
event of a failure to appropriate. In making liquidity determinations, Mitchell
Hutchins will distinguish between direct investments in municipal lease
obligations (or participations therein) and investments in securities that may
be supported by municipal lease obligations or certificates of participation
therein. Since these municipal lease obligation-backed securities are based on a
well-established means of securitization, Mitchell Hutchins does not believe
that investing in such securities presents the same liquidity issues as direct
investments in municipal lease obligations.
YIELDS AND RATINGS OF MONEY MARKET INVESTMENTS. The yields on the money
market instruments in which the Funds invest are dependent on a variety of
factors, including general money market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer, the size of
the offering, the maturity of the obligation and the ratings of the issue. The
ratings of nationally recognized statistical rating organizations ("NRSROs")
represent their opinions as 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 a Fund, an issue may
cease to be rated or its rating may be reduced. In the event that a security in
a Fund's portfolio ceases to be a "First Tier Security," as defined in the
Prospectus, or Mitchell Hutchins becomes aware that a security has received a
rating below the second highest rating by any NRSRO, Mitchell Hutchins and in
certain cases the Trust's board of trustees will consider whether the Fund
should continue to hold the obligation. A First Tier Security rated in the
highest short-term rating category by a single NRSRO at the time of purchase
that subsequently receives a rating below the highest rating category from a
different NRSRO will continue to be considered a First Tier Security.
Opinions relating to the validity of municipal securities and to the
exemption of interest thereon from federal income tax, Connecticut personal
income tax and New Jersey personal income tax (and also, when available, from
the federal alternative minimum tax) are rendered by bond counsel to the
respective issuing authorities at the time of issuance. Neither the Funds nor
Mitchell Hutchins will review the proceedings relating to the issuance of
municipal securities or the basis for such opinions. An issuer's obligations
under its municipal securities are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors (such
as the federal bankruptcy laws) and federal, state and local laws that may be
enacted that adversely affect the tax-exempt status of interest on the municipal
securities held by a Fund or of the exempt-interest dividends received by a
Fund's shareholders, extend the time for payment of principal or interest, or
both, or impose other constraints upon enforcement of such obligations. There is
also the possibility that, as a result of litigation or other conditions, the
power or ability of issuers to meet their obligations for the payment of
principal of and interest on their municipal securities may be materially
adversely affected.
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FLOATING RATE AND VARIABLE RATE DEMAND INSTRUMENTS. As noted in the
Prospectus, each Fund may invest in floating rate and variable rate securities
with demand features. A demand feature gives a Fund the right to sell the
securities back to a specified party, usually a remarketing agent, on a
specified date, at a price equal to their par value. A demand feature is often
backed by a letter of credit or guarantee from a bank, which permits the
remarketing agent to draw on the letter of credit on demand, after specified
notice, for all or any part of the exercise price of the demand feature.
Generally, a Fund intends to exercise demand features only (1) upon a default
under the terms of the underlying security, (2) to maintain the Fund's
portfolio in accordance with its investment objective and policies or (3) as
needed to provide liquidity to the Fund in order to meet redemption requests.
The ability of a bank to fulfill its obligations under a letter of credit or
guarantee 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. Generally, these interest rate adjustments cause
the market value of floating rate and variable rate securities to fluctuate less
than the market value of fixed rate obligations.
TAXABLE INVESTMENTS
Securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities include U.S. Treasury securities which differ in their
interest rates, maturities and times of issuance: Treasury Bills have initial
maturities of one year or less; Treasury Notes have initial maturities of one to
ten years; and Treasury Bonds generally have initial maturities of greater than
ten years. Some obligations issued or guaranteed by U.S. government agencies and
instrumentalities, such as Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Federal Home Loan Banks, by the right of the issuer
to borrow from the U.S. Treasury; others, such as those issued by the Federal
National Mortgage Association, by discretionary authority of the U.S. government
to purchase certain obligations of the agency or instrumentality; and others,
such as those issued by the Student Loan Marketing Association, only by the
credit of the agency or instrumentality. These securities bear fixed, floating
or variable rates of interest. Interest may fluctuate based on generally
recognized reference rates or the relationship of rates. While the U.S.
government provides financial support to such U.S. government-sponsored agencies
or instrumentalities, no assurance can be given that it will always do so, since
it is not so obligated by law. The Funds invest in such securities only when it
is satisfied that the credit risk with respect to the issuer is minimal.
Commercial paper consists of short-term unsecured promissory notes issued to
finance short-term credit needs.
Certificates of deposit are certificates representing the obligation of a
bank to repay funds deposited with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Investments in time deposits generally are limited to London
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branches of domestic banks that have total assets in excess of $1.5 billion
at the time of purchase. Time deposits which may be held by the Fund will not
benefit from insurance from the Bank Insurance Fund or the Savings Association
Insurance Fund administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Other short-term bank obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
Each Fund each may enter into repurchase agreements with U.S. banks and
dealers with respect to any obligation issued or guaranteed by the U.S.
government, its agencies or instrumentalities and also with respect to
commercial paper, bank certificates of deposit and bankers' acceptances.
However, the Funds do not intend to do so except as a temporary measure and
under unusual circumstances, because repurchase agreements are transactions that
generate taxable income. Each Fund maintains custody of the underlying
securities prior to their repurchase; thus, the obligation of the bank or
securities dealer to pay the repurchase price on the date agreed to is, in
effect, secured by such securities. If the value of these securities is less
than the repurchase price, plus any agreed-upon additional amount, the other
party to the agreement must provide additional collateral so that at all times
the collateral is at least equal to the repurchase price plus any agreed-upon
additional amount. The difference between the total amount to be received upon
repurchase of the securities and the price that was paid by the Fund upon
acquisition is accrued as interest and included in the Fund's net investment
income.
Repurchase agreements carry certain risks not associated with direct
investments in securities. Each Fund intends to enter into repurchase agreements
only with banks and dealers in transactions believed by Mitchell Hutchins to
present minimal credit risks in accordance with guidelines established by the
Trust's board of trustees. Mitchell Hutchins will review and monitor the
creditworthiness of those institutions under the board's general supervision.
RISK FACTORS--INVESTING IN CONNECTICUT AND NEW JERSEY MUNICIPAL SECURITIES
Investors should review the information in the Appendix A hereto, which
provides a brief summary of special investment considerations relating to
investing in Connecticut and New Jersey municipal securities.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following restrictions as fundamental policies.
These restrictions cannot be changed without approval by the holders of a
majority of the outstanding voting shares of the Fund. For purposes of the 1940
Act, "majority" means the lesser of (i) 67% of the Fund's outstanding voting
shares present at a meeting if the holders of more than 50% of the outstanding
voting shares of the Fund are present in person or by proxy, or (ii) more than
50% of the Fund's outstanding voting shares. Neither Fund may:
1. Purchase securities other than municipal securities and taxable
investments as those terms are referred to above.
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2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the Fund's total assets
(including the amount borrowed) based upon the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of the value of the Fund's
total assets, the Fund will not make any additional investments.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure borrowings for temporary or emergency purposes.
4. Make loans to others, except through the purchase of qualified debt
obligations and entry into repurchase agreements referred to above and in
the Prospectus.
5. Purchase or sell real estate investment trust securities, commodities
or commodity contracts, or oil and gas interests, but this shall not prevent
the Fund from investing in municipal securities secured by real estate or
interests therein.
6. Sell securities short or purchase securities on margin.
7. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid
(which securities could include municipal lease/purchase agreements,
participation interests that are not subject to the demand feature described
in the Prospectus and floating and variable rate demand obligations as to
which the Fund cannot exercise the demand feature described in the
Prospectus on less than seven days' notice and as to which there is no
secondary market), if, in the aggregate, more than 10% of the Fund's net
assets would be so invested.
8. Underwrite securities of other issuers, except that the Fund may bid
separately or as part of a group for the purchase of municipal securities
directly from an issuer for its own portfolio to take advantage of the lower
purchase price available.
9. Purchase the securities of any other registered investment company,
except in connection with a merger, consolidation, reorganization or
acquisition of assets.
10. Purchase securities of any issuer for the purpose of exercising
control or management.
11. Invest more than 25% of its assets in the securities of issuers in
any single industry; however, there is no limitation on the purchase of
municipal securities and, for temporary defensive purposes, obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
For purposes of Investment Restriction No. 11, industrial development bonds,
where payment of principal and interest is the ultimate responsibility of
companies within the same industry, are grouped together as an "industry."
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in value of portfolio
securities or amount of net assets will not be considered a violation of any of
the foregoing restrictions.
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The Trust may make commitments more restrictive than the restrictions listed
above so as to permit the sale of Fund shares in certain states. Should the
Trust determine that a commitment is no longer in the best interests of a Fund
and its shareholders, the Trust reserves the right to revoke the commitment by
terminating the sale of such Fund's shares in the state involved.
CHANGES TO INVESTMENT LIMITATIONS OF THE FUNDS
At a special meeting of shareholders scheduled to be held on April 10, 1996
(the "Special Meeting"), shareholders will be asked to approve changes to the
Funds' fundamental investment restrictions. If approved, the following
investment restrictions will supersede and replace the restrictions listed
above:
Neither Fund may:
(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 interpretation applies to, but is not a part of, this
fundamental restriction: With respect to this limitation, domestic and
foreign banking will be considered to be different industries.
(2) issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the time of the issuance
or borrowing, except that the Fund may borrow up to an additional 5% of its
total assets (not including the amount borrowed) for temporary or emergency
purposes;
(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 or other debt securities and investments in
government obligations, commercial paper, certificates of deposit, bankers'
acceptances or similar instruments will not be considered 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; or
(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,
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forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments.
If the foregoing fundamental restrictions are approved by a Fund's
shareholders, the Fund would become subject to the non-fundamental investment
restrictions listed below:
The following investment restrictions are not fundamental and may be changed
by the Trust's board of trustees without shareholder approval.
Neither Fund may:
(1) mortgage, pledge or hypothecate any assets except in connection with
permitted borrowings or the issuance of senior securities;
(2) 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;
(3) 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;
(4) invest in oil, gas or mineral exploration or development programs or
leases, except that investments in securities of issuers that invest in such
programs or leases and investments in asset-backed securities supported by
receivables generated from such programs or leases are not subject to this
prohibition;
(5) purchase securities of other investment companies, except to the
extent permitted by the 1940 Act and except that this limitation does not
apply to securities received or acquired as dividends, through offers of
exchange, or as a result of reorganization, consolidation, or merger;
(6) invest in companies for the purpose of exercising control or
management; or
(7) Invest more than 10% of its net assets in illiquid securities.
MANAGEMENT
TRUSTEES AND OFFICERS
Information regarding the trustees and officers of the Trust, including
information as to their principal business occupations during the last five
years, is listed below. Each trustee who is an 'interested person' of the Trust,
as defined in the Act, is indicated by an asterisk.
Margo N. Alexander, 48, Trustee and President. President, chief executive
officer and a director of Mitchell Hutchins. Prior to January 1995, an executive
vice president of PaineWebber. Ms. Alexander is also a director or trustee of
seven other investment companies and president of 29 other investment companies
for which Mitchell Hutchins or PaineWebber serves as investment adviser.
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David J. Beaubien, 67, Trustee. Chairman of Yankee Environmental Systems,
Inc., manufacturer of meteorological measuring instruments. Director of IEC,
Inc., manufacturer of electronic assemblies, Belfort Instruments, Inc.,
manufacturer of environmental instruments, and Oriel Corp., manufacturer of
optical instruments. Mr. Beaubien is a director or trustee of five other
investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
William W. Hewitt, Jr., 67, Trustee. Trustee of The Guardian Group of Mutual
Funds. Mr. Hewitt is a director or trustee of five other investment companies
for which Mitchell Hutchins or PaineWebber serves as investment adviser.
Carl W. Schafer, 59, Trustee. President of the Atlantic Foundation, a
charitable foundation supporting mainly oceanographic exploration and research.
Director of Roadway Express, Inc., a trucking firm, The Guardian Group of Mutual
Funds, Evans Systems, Inc., a motor fuels, convenience store and diversified
company, Hidden Lake Gold Mines Ltd., gold mining companies, Electronic Clearing
House, Inc., a financial transactions processing company, Wainoco Oil
Corporation and Nutraceutics, Inc., a biotechnology company. Prior to January
1993, chairman of the Investment Advisory Committee of Howard Hughes Medical
Institute and director of Ecova Corporation, a toxic waste treatment firm. Mr.
Schafer is a director or trustee of four other investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
Teresa M. Boyle, 37, Vice President. First vice president and
manager--advisory administration of Mitchell Hutchins. Prior to November 1993,
compliance manager of Hyperion Capital Management, Inc., an investment advisory
firm. Prior to April 1993, a vice president and manager-- legal administration
of Mitchell Hutchins. Ms. Boyle is also a vice president of 29 other investment
companies for which Mitchell Hutchins or PaineWebber serves as investment
adviser.
Scott H. Griff, 29, Vice President and Assistant Secretary. Vice president
and attorney of Mitchell Hutchins. Prior to January 1995, an associate at the
law firm of Cleary, Gottlieb, Steen & Hamilton. Mr. Griff is also a vice
president and assistant secretary of four other investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
C. William Maher, 34, Vice President and Assistant Treasurer. Mr. Maher is a
first vice president and a senior manager of the mutual fund division of
Mitchell Hutchins. Mr. Maher is also a vice president and assistant treasurer of
29 other investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Ann E. Moran, 38, Vice President and Assistant Treasurer. Ms. Moran is a
vice president of Mitchell Hutchins. Ms. Moran is also a vice president and
assistant treasurer of 29 other investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
Dianne E. O'Donnell, 43, Vice President and Secretary. Ms. O'Donnell is a
senior vice president and deputy general counsel of Mitchell Hutchins. Ms.
O'Donnell is also a vice president and secretary of 29 other investment
companies for which Mitchell Hutchins or PaineWebber serves as investment
adviser.
Victoria E. Schonfeld, 45, Vice President. Ms. Schonfeld is a managing
director and general counsel of Mitchell Hutchins. From April 1990 to May 1994
she was a partner in the law firm of
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Arnold & Porter. Ms. Schonfeld is also a vice president and assistant secretary
of 29 other investment companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
Paul H. Schubert, 32, Vice President and Assistant Treasurer. Mr. Schubert
is a first president and a senior manager of the mutual fund finance division of
Mitchell Hutchins. From August 1992 to August 1994, he was a vice president at
BlackRock Financial Management Inc. Prior to August 1992, he was an audit
manager with Ernst & Young LLP. Mr. Schubert is also a vice president and
assistant treasurer of 29 other investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
Julian F. Sluyters, 35, Vice President and Treasurer. Mr. Sluyters is a
senior vice president and the director of the mutual fund finance division of
Mitchell Hutchins. Prior to 1991, he was an audit senior manager with Ernst &
Young LLP. Mr. Sluyters is also a vice president and treasurer of 29 other
investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Gregory K. Todd, 39, Vice President and Assistant Secretary. Mr. Todd is a
first vice president and associate general counsel of Mitchell Hutchins. Prior
to 1993, he was a partner with the law firm of Shereff, Friedman, Hoffman &
Goodman. Mr. Todd is also a vice president and assistant secretary of 29 other
investment companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
The address of each of the non-interested Trustees is: Mr. Beaubien,
Montague Industrial Park, 101 Industrial Road, Box 746, Turners Falls,
Massachusetts 01376; Mr. Hewitt, P.O. Box 2359, Princeton, New Jersey
08543-2359; and Mr. Schafer, P.O. Box 1164, Princeton, New Jersey 08542. The
address of Mrs. Alexander and each of the officers is 1285 Avenue of the
Americas, New York, New York 10019.
The Trust requires no executive employees other than its officers, each of
whom is employed by either PaineWebber or Mitchell Hutchins and none of whom
devotes full time to the affairs of the Funds. Trustees and officers, as a
group, owned less than 1% of each Fund's outstanding shares as of February 1,
1996. No officer, director or employee of Mitchell Hutchins or any affiliate
receives any compensation from the Fund for serving as an officer or trustee of
the Trust. The Trust pays each trustee who is not an officer, director or
employee of Mitchell Hutchins or any of its affiliates an annual retainer of
$1,000 and $375 for each trustees' meeting attended, and reimburses the trustees
for out-of-pocket expenses associated with attendance at trustees' meetings. The
chairman of the trustees' audit committee receives an annual fee of $250. The
amount of compensation paid by the Trust to each trustee for the fiscal year
ended October 31, 1995, and the aggregate amount of compensation
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<PAGE>
paid to each such trustee for the year ended December 31, 1995 by all other
funds in the complex for which such person is a board member were as follows:
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE FROM TRUST AND
NAME OF BOARD COMPENSATION FROM FUND COMPLEX PAID
MEMBER TRUST TO BOARD MEMBER
- --------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
David J. Beaubien........................................ $ 2,876 $ 116,800
William W. Hewitt, Jr.................................... $ 2,876 $ 116,800
Carl W. Schafer.......................................... $ 3,042 $ 118,175
</TABLE>
INVESTMENT ADVISER AND ADMINISTRATOR
PaineWebber acts as the Funds' investment adviser and administrator pursuant
to a contract dated April 13, 1995 with the Trust ("PaineWebber Contract").
Under a separate contract with PaineWebber dated April 13, 1995 with respect to
the Trust ("Mitchell Hutchins Contract"), Mitchell Hutchins serves as each
Fund's sub-adviser and sub-administrator. Under the Mitchell Hutchins Contract,
PaineWebber (not the Funds) pays Mitchell Hutchins fees, computed daily and paid
monthly, at an annual rate of 20% of the fee paid by each Fund to PaineWebber
under the PaineWebber Contract.
PaineWebber has agreed that if, in any fiscal year, the aggregate operating
expenses of a Fund (including fees pursuant to the PaineWebber Contract, but
excluding interest, taxes, brokerage and distribution fees and extraordinary
expenses) exceed the expense limitation of any state having jurisdiction over
such Fund, PaineWebber will reimburse the Fund for such excess expense. The most
stringent state expense limitations applicable to a Fund presently require
reimbursement of expenses in any year that such expenses exceed 2.5% of the
first $30 million of the average value of a Fund's net assets, 2.0% of the next
$70 million and 1.5% of the remaining net assets of the Fund. During the fiscal
year ended October 31, 1995, neither Fund exceeded such limitations.
Under the terms of the PaineWebber Contract, each Fund bears all expenses
incurred in its operation that are not specifically assumed by PaineWebber.
General expenses of a Trust not readily identifiable as belonging to a specific
Fund are allocated among series by or under the direction of the Trust's board
in such manner as the board deems fair and equitable. Expenses borne by the
Funds include the following (or each Fund's share of the following): (1) the
cost (including brokerage commissions and other transaction costs, if any) of
securities purchased or sold by the Funds and any losses incurred in connection
therewith, (2) fees payable to and expenses incurred on behalf of the Funds by
PaineWebber, (3) organizational expenses, (4) filing fees and expenses relating
to the registration and qualification of the shares of the Funds under federal
and state securities laws and maintaining such registrations and qualifications,
(5) fees and salaries payable to trustees and officers who are not interested
persons of the Trust or of PaineWebber, (6) all expenses incurred in connection
with the trustees' services, including travel expenses, (7) taxes (including any
income or franchise taxes) and governmental fees, (8) costs of any liability,
uncollectable 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 Trust or Fund for violation of any law, (10)
legal,
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accounting and auditing expenses, including legal fees of special counsel for
those trustees who are not interested persons of the Trust, (11) charges of
custodians, transfer agents and other agents, (12) costs of preparing share
certificates, (13) expenses of setting in type and printing prospectuses and
supplements thereto, reports and statements to shareholders and proxy material
for existing shareholders, (14) costs of mailing prospectuses and supplements
thereto, statements of additional information and supplements thereto, reports
and proxy materials to existing shareholders, (15) any extraordinary expenses
(including fees and disbursements of counsel, costs of actions, suits or
proceedings to which the Trust is a party and the expenses the Trust may incur
as a result of its legal obligation to provide indemnification to its officers,
trustees, agents and shareholders) incurred by the Fund, (16) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations, (17) costs of mailing and tabulating proxies
and costs of meetings of shareholders, the board and any committees thereof,
(18) the cost of investment company literature and other publications provided
to the trustees and officers, (19) costs of mailing, stationery and
communications equipment, (20) expenses incident to any dividend, withdrawal or
redemption options, (21) charges and expenses of any outside pricing service
used to value portfolio securities and (22) interest on borrowings of the Fund.
Under the PaineWebber and Mitchell Hutchins Contracts (collectively,
"Contracts"), PaineWebber or Mitchell Hutchins will not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with the performance of the Contracts, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of PaineWebber or
Mitchell Hutchins in the performance of its duties or from reckless disregard of
its duties and obligations thereunder.
The Contracts are terminable with respect to each Fund at any time, without
penalty, by vote of the Trust's board of trustees or by vote of the holders of a
majority of the outstanding voting securities of that Fund on 60 days' written
notice to PaineWebber or Mitchell Hutchins, as the case may be. The PaineWebber
Contract is also terminable without penalty by PaineWebber on 60 days' written
notice to the Trust, and the Mitchell Hutchins Contract is terminable without
penalty by PaineWebber or Mitchell Hutchins on 60 days' written notice to the
other party. The Contracts terminate automatically upon their assignment, and
the Mitchell Hutchins Contract also terminates automatically upon the assignment
of the PaineWebber Contract.
As compensation for PaineWebber's services rendered to each Fund, each Fund
pays a fee, computed daily and paid monthly, at an annual rate of .50% of such
Fund's average daily net assets. For the fiscal year ended October 31, 1993, the
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund paid fees
of $312,881 and $349,798, respectively, to Kidder Peabody Asset Management, Inc.
("KPAM"), the Fund's predecessor manager and investment adviser. For the fiscal
year ended October 31, 1994, the Connecticut Municipal Money Fund and New Jersey
Municipal Money Fund paid fees of $151,858 and $207,338, respectively, to KPAM.
For the fiscal year ended October 31, 1995, the Connecticut Municipal Money Fund
and New Jersey Municipal Money Fund paid (or accrued) fees of $120,651 and
$167,865, respectively, to KPAM and PaineWebber. For the fiscal year ended
October 31, 1995, Mitchell Hutchins, as sub-adviser and sub-administrator of
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund, received
fees of $13,354 and $18,580, respectively.
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<PAGE>
Mitchell Hutchins personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders of the PaineWebber mutual funds and other Mitchell Hutchins'
advisory accounts by all Mitchell Hutchins' directors, officers and employees,
establishes procedures for personal investing and restricts certain
transactions. For example, employee accounts generally must be maintained at
PaineWebber, personal trades in most securities require pre-clearance and
short-term trading and participation in initial public offerings generally are
prohibited. In addition, the code of ethics puts restrictions on the timing of
personal investing in relation to trades by PaineWebber and other Mitchell
Hutchins advisory clients.
CUSTODIAN, AND TRANSFER, DIVIDEND DISBURSING AND RECORDKEEPING AGENT
State Street Bank and Trust Company, located at One Heritage Drive, North
Quincy, Massachusetts 02171, serves as the Trust's custodian. As custodian,
State Street maintains custody of each Fund's portfolio securities. PFPC Inc., a
subsidiary of PNC Bank, National Association, whose principal address is 400
Bellevue Parkway, Wilmington, Delaware 19809, is each Fund's transfer, dividend
disbursing and recordkeeping agent. As transfer agent, PFPC Inc. maintains each
Fund's official record of shareholders; as dividend disbursing agent, it is
responsible for crediting dividends to shareholders' accounts; and, as
recordkeeping agent, it maintains certain accounting and financial records of
each Fund.
DISTRIBUTOR
PaineWebber is the distributor of each Fund's shares and is acting on a best
efforts basis.
The Trust's Plan of Distribution continues from year to year, provided such
continuance is approved annually by vote of the board of trustees, including a
majority of those trustees who are not interested persons and who have no direct
or indirect financial interest in the Plan of Distribution, cast in person at a
meeting called for such purpose. The Plan of Distribution may not be amended to
increase materially the amount to be spent for the services described therein
without approval of the shareholders of the Trust, and all material amendments
of the Plan of Distribution must also be approved by the board of trustees in
the manner described above. The Plan of Distribution may be terminated at any
time, without payment of any penalty, by vote of the holders of a majority of
the outstanding voting securities of the Trust, as defined in the 1940 Act, or,
as to each Fund, by vote of a majority of the board of trustees as described
above, on not more than 30 days' written notice to any other party to the Plan
of Distribution. So long as the Plan of Distribution is in effect, the election
and nomination of trustees who are not interested persons of the Fund shall be
committed to the discretion of the trustees who are not interested persons. The
trustees have determined that, in their judgment, there is a reasonable
likelihood that the Plan of Distribution will continue to benefit the Fund and
its shareholders.
Pursuant to the Plan of Distribution, PaineWebber provides the Fund's board
of trustees, at least quarterly, with a written report of the amounts expended
under the Plan of Distribution. The report includes an itemization of the
distribution expenses incurred by PaineWebber on behalf of the Funds and the
purpose of such expenditures. In their quarterly review of the Plan of
Distribution, the trustees consider its continued appropriateness and the level
of compensation provided therein.
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<PAGE>
The trustees believe that each Fund's expenditures under the Trust's Plan of
Distribution benefit each Fund and its shareholders by providing better
shareholder services. For the fiscal year ended October 31, 1995, Kidder,
Peabody & Co. Incorporated, the Fund's predecessor distributor, and PaineWebber
received $28,957 and $40,287 from the Connecticut Municipal Money Fund and New
Jersey Municipal Money Fund, respectively, of which $14,478 and $20,145,
respectively, was spent on payments to investment executives, $23,686, and
$32,852, respectively, was spent on advertising, promotion and allocated costs
and $927 and $1,392, respectively, was spent on printing.
INDEPENDENT AUDITORS
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, acts as
independent auditors for each Fund. In such capacity, Ernst & Young LLP audits
each Fund's annual financial statements. For the fiscal year ended October 31,
1994, and prior thereto, the Funds' independent auditors were Deloitte & Touche
LLP, 2 World Financial Center, New York, New York 10281.
LEGAL COUNSEL
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-2696,
is counsel for the Fund.
PRINCIPAL SHAREHOLDERS
With respect to New Jersey Municipal Money Fund, to the knowledge of the
Trust, G. Rogers & R. Rogers, c/o Mitchell Hutchins Asset Management Inc., New
York, New York 10019, owned 8.5% of the Fund's outstanding shares of beneficial
interest as of January 31, 1996.
The Trust is not aware as to whether or to what extent shares owned of
record also are owned beneficially.
15
<PAGE>
PORTFOLIO TRANSACTIONS
The Mitchell Hutchins Contract authorizes Mitchell Hutchins (with the
approval of the Trust's board) to select brokers and dealers to execute
purchases and sales of the Funds' portfolio securities. The Mitchell Hutchins
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 Funds. 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 Funds 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 which could be purchased for hard dollars. Research services furnished
by the dealers with which a 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 Funds. 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 Mitchell Hutchins Contract. During its past three fiscal
years, neither Fund has paid any brokerage commissions, nor has either Fund
allocated any transactions to dealers for research, analysis, advice and similar
services.
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 Mitchell Hutchins' receiving
multiple quotes from dealers before executing the transactions on an agency
basis.
The Funds purchase 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 each 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 a 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
16
<PAGE>
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.
Mitchell Hutchins may seek to obtain an undertaking from issuers of
commercial paper or dealers selling commercial paper to consider the repurchase
of such securities from the Fund prior to their maturity at their original cost
plus interest (sometimes adjusted to reflect the actual maturity of the
securities), if it believes that the Fund's anticipated need for liquidity makes
such actions desirable. Any such repurchase prior to maturity reduces the
possibility that the Fund would incur a capital loss in liquidating commercial
paper for which there is no established market, especially if interest rates
have risen since acquisition of the particular commercial paper.
SHARES OF THE FUNDS
The Trust's Declaration of Trust permits the trustees to issue an unlimited
number of full and fractional shares of one or more series and to divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the Trust. Each share of a
Fund represents an equal proportionate interest in such Fund with each other
share of such Fund. Upon liquidation of a Fund, shareholders are entitled to
share pro rata in the net assets of such Fund available for distribution to
shareholders. Shares have no preemptive or conversion rights. Shares are fully
paid and non-assessable by the Trust.
Each Fund's shareholders are entitled to a full vote for each share of a
Fund held (and proportionate, fractional votes for fractional shares held). The
trustees themselves have the power to alter the number of the trustees, to fill
vacancies in their own number and appoint their own successors, provided that
always at least a majority of the Trustees have been elected by the shareholders
of the Fund. A trustee may be removed with or without cause by action of the
trustees or the shareholders. The voting rights of shareholders are not
cumulative, so that holders of more than 50% of the shares voting can, if they
choose, elect all trustees being selected, while the holders of the remaining
shares would be unable to elect any trustees. The Trust is not required to hold
annual meetings of shareholders. The Trustees may call special meetings of
shareholders for action by shareholder vote as may be required by the 1940 Act
or the Declaration of Trust or as the trustees may consider desirable.
The Trust is a trust fund of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the Trust, which is not the case with a corporation. The
Declaration of Trust provides that shareholders shall not be subject to any
personal liability for the acts or obligations of the Trust and that every
written agreement, obligation, instrument or undertaking made by the Trust shall
contain a provision to the effect that the shareholders are not personally
liable thereunder.
Special counsel for the Trust is of the opinion that no personal liability
will attach to the shareholders under any undertaking containing such provision
when adequate notice of such provision is given, except possibly in a few
jurisdictions. With respect to all types of claims in the latter jurisdictions
and with respect to tort claims, contract claims where the provision referred to
is omitted
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<PAGE>
from the undertaking, claims for taxes and certain statutory liabilities, a
shareholder may be held personally liable to the extent that claims are not
satisfied by the Trust. However, upon payment of any such liability, the
shareholder will be entitled to reimbursement from the general assets of the
Fund. The trustees intend to conduct the operations of the Trust, with the
advice of counsel, in such a way so as to avoid, as far as possible, ultimate
liability of the shareholders for the liabilities of the Trust.
The Declaration of Trust further provides that no trustee, officer, employee
or agent of the Trust is liable to the Trust or a shareholder, nor is any
trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Trust, except as such liability may arise from his or
its own bad faith, willful misfeasance, gross negligence, or reckless disregard
of his or its duties. It also provides that all third persons shall look solely
to the Trust property for satisfaction of claims arising in connection with the
affairs of the Trust. With the exceptions stated, the Declaration of Trust
provides that a trustee, officer or employee is entitled to be indemnified
against all liability in connection with the affairs of the Trust.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
Each Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange, Inc. ("NYSE") is closed
or trading on the NYSE is restricted as determined by the Securities and
Exchange Commission (the "SEC"), (2) when an emergency exists, as defined by the
SEC, which makes it not reasonably practicable for a Fund to dispose of
securities owned by it or to determine fairly the market value of its assets or
(3) as the SEC may otherwise permit. The redemption price may be more or less
than the shareholder's cost, depending on the market value of the Fund's
portfolio at the time, although each Fund seeks to maintain a constant net asset
value of $1.00 per share.
If conditions exist that make cash payments undesirable, each Fund each
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. If
payment is made in securities, a shareholder may incur brokerage expenses in
converting these securities into cash.
VALUATION OF SHARES
Each Fund's net asset value per share is determined as of 12:00 noon,
Eastern time, on each Business Day. As defined in the Prospectus, "Business Day"
means any day on which State Street Bank and Trust Company's Boston offices,
PaineWebber's New York City offices and the New York City offices of
PaineWebber's bank, The Bank of New York, are all open for business. One or more
of these institutions will be closed on the observance of the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Patriot's Day, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day and Christmas Day.
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Each Fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ("Rule") under the 1940 Act. To use
amortized cost to value its portfolio securities, a Fund must adhere to certain
conditions under that Rule relating to the Fund's investments, some of which are
discussed in the Prospectus. Amortized cost is an approximation of market value
of an instrument, whereby the difference between its acquisition cost and value
at maturity is amortized on a straight-line basis over the remaining life of the
instrument. The effect of changes in the market value of a security as a result
of fluctuating interest rates is not taken into account, and thus the amortized
cost method of valuation may result in the value of a security being higher or
lower than its actual market value. In the event that a large number of
redemptions take place at a time when interest rates have increased, a Fund
might have to sell portfolio securities prior to maturity and at a price that
might not be desirable.
The board of trustees of the Trust 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. Should that deviation exceed 1/2 of 1% for either Fund, the board of
trustees 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. Each Fund
will maintain a dollar-weighted average portfolio maturity of 90 days or less
and will not purchase any instrument with a remaining maturity greater than 13
months (as calculated under the Rule), will limit portfolio investments,
including repurchase agreements, to those U.S. dollar-denominated instruments
that are of eligible 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. In the
event amortized cost ceases to represent fair value per share, the board will
take appropriate action.
In determining the approximate market value of portfolio investments, each
Fund may employ outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board of trustees.
DETERMINATION OF CURRENT AND EFFECTIVE YIELDS
Each Fund provides current and effective yield quotations on its daily
dividends. See "Performance Information" in the Prospectus. Such quotations are
made in reports, sales literature and advertisements published by the Funds.
Current yield is computed by determining the net change exclusive of capital
changes in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of a seven-
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<PAGE>
calendar-day period, dividing the net change in account value by the value of
the account at the beginning of the period and multiplying the return over the
seven-day period by 365/7. For purposes of the calculation, net change in
account value reflects the value of additional shares purchased with dividends
from the original share and dividends declared on both the original share and
any such additional shares, but does not reflect realized seven-day return with
all dividends reinvested in additional shares of the Fund.
Current and effective yields fluctuate and are not necessarily
representative of future results. Shareholders should remember that yield is a
function of the type and quality of the instruments in the portfolio, portfolio
maturity and operating expenses. See "Investment Objectives and Policies" in the
Prospectus and "Management" above. Current and effective yield information is
useful in reviewing each Fund's performance, but because current and effective
yields fluctuate, such information under certain conditions may not provide a
basis for comparison with bank deposits, other investments which pay a fixed
yield for a stated period of time or other investment companies which may use a
different method of calculating yield. A shareholder's principal in the Fund is
not guaranteed. See "Valuation of Shares" for a discussion of the manner in
which each Fund's price per share is determined.
Each Fund may also compare its performance with the performances of bank
certificates of deposit ("CDs") as measured by the CDA Investment Technologies,
Inc. Certificate of Deposit Index and the Bank Rate Monitor National Index. In
comparing a 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. Advertisements and other promotional
materials for the Funds or for the PaineWebber Resource Management Account
("RMA")(R) and Business Services Account ("BSA")SM programs may compare features
of the RMA and BSA programs to those offered by bank checking accounts and other
bank accounts. 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 each Fund seeks to maintain a stable net asset value of $1.00 per share,
there can be no assurance that it will be able to do so.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all the information set forth in the Registration Statement and the exhibits
relating thereto, which the Trust has filed with the SEC under the 1933 Act and
the 1940 Act, to which reference is hereby made.
FINANCIAL STATEMENTS
The Funds' Annual Report to Shareholders for the fiscal year ended October
31, 1995 is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing therein are incorporated by reference in this
Statement of Additional Information.
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RATINGS OF SECURITIES
RATINGS BY MOODY'S
MUNICIPAL BONDS
AAA. Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
AA. Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa bonds or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa bonds.
CONDITIONAL RATINGS. The designation "Con." followed by a rating indicates
bonds for which the security depends upon the completion of some act or the
fulfillment of some condition. These are bonds secured by (a) earnings of
projects under construction, (b) earnings of projects unseasoned in operating
experience, (c) rentals which begin when facilities are completed, or (d)
payments to which some other limiting condition attaches. A parenthetical rating
denotes probable credit stature upon completion of construction or elimination
of the basis of the condition.
Note: Those bonds in the Aa group which Moody's believes possess the
strongest investment attributes are designated by the symbol Aa1.
MUNICIPAL NOTES
MIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2. This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE AND FLOATING RATE DEMAND OBLIGATIONS
Moody's assigns a dual rating, one representing an evaluation of the degree
of risk associated with scheduled principal and interest payments and the other
representing an evaluation of the degree of risk associated with the demand
feature (VMIG) to variable and floating rate demand obligations.
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Depending upon the maturity of a variable or floating rate obligation, it is
assigned either a municipal bond and VMIG rating or a municipal note and VMIG
rating. The VMIG ratings include the following:
VMIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
VMIG 2. This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
COMMERCIAL PAPER
PRIME-1. This designation is the highest commercial paper rating assigned by
Moody's and denotes superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2. Denotes a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
If an issuer represents to Moody's that its commercial paper obligations are
supported by the credit of another entity or entities, Moody's, in assigning
ratings to such issuers, evaluates the financial strength of the indicated
affiliated corporations, commercial banks, insurance companies, foreign
governments, or other entities, but only as one factor in the total rating
assessment.
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RATINGS BY S&P
- --------------
MUNICIPAL BONDS
AAA. Bonds rated AAA have the highest rating. Capacity to pay interest and
repay principal is extremely strong.
AA. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
In order to provide more detailed indications of credit quality, the AA
rating described above may be modified by the addition of a plus or a minus sign
to show relative standing within the rating category.
PROVISIONAL RATINGS. The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, although addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
MUNICIPAL NOTES
SP-1. Notes rated SP-1 have very strong or strong capacity to pay principal
and interest. Those issues determined to possess very strong characteristics are
given a plus(+) designation.
Notes due in three years or less normally receive a note rating. Notes
maturing beyond three years normally receive a bond rating, although the
following criteria are used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue will be rated as a note).
-- Source of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be rated as a note).
VARIABLE AND FLOATING RATE DEMAND OBLIGATIONS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a demand feature. The first rating addresses the likelihood of
repayment of principal and interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity and the commercial paper rating symbols are
usually used to denote the put (demand) option (for example, AAA/A-1+).
Normally, demand notes receive note rating symbols combined with commercial
paper symbols (for example, SP-1/A-1+).
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COMMERCIAL PAPER
A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2 and 3 to indicate the relative degree of safety.
A-1. This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2. Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
RATINGS BY FITCH
- ----------------
MUNICIPAL BONDS
The ratings represent Fitch's assessment of the issuer's ability to meet the
obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA. Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA. Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA category covering 13-36 months.
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis, the
short-term rating places greater emphasis than bond ratings on the existence of
liquidity necessary to meet the issuer's obligations in a timely manner.
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F-1+. Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1. Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2. Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
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APPENDIX A
RISK FACTORS--INVESTING IN CONNECTICUT AND NEW JERSEY MUNICIPAL SECURITIES
The following information supplements and should be read in conjunction with
the information set forth in the Prospectus. The following information
constitutes only a brief summary, does not purport to be a complete description,
and is based on information drawn from official statements relating to
securities offerings of the State of Connecticut and State of New Jersey
available as of the date of this Statement of Additional Information. While the
Trust has not independently verified such information, it has no reason to
believe that such information is not correct in all material respects.
CONNECTICUT MUNICIPAL MONEY FUND
Connecticut's economy is diverse, with manufacturing, services and trade
accounting for approximately 70% of total non-agricultural employment. The
State's manufacturing industry is diversified, but from 1970 to 1993
manufacturing employment declined to 18.5%, while non-manufacturing-related
employment increased to 81.5%. The non-manufacturing sector is comprised of
service industries. The four major industries in terms of employment are: trade;
finance, insurance and real estate; business and personal services; and
government, which collectively comprise about 90% of employment in the
non-manufacturing sector.
Connecticut has a high level of personal income. According to Bureau of
Economic Analysis figures, personal income of State residents for calendar year
1994 was $95.1 billion, a 3.3% increase over the previous year. As of January
1995, the rate of unemployment (on a seasonably adjusted basis) in the State was
5.2%. According to projections made by the U.S. Department of Commerce through
the year 2005, Connecticut is expected to continue to rank first in the nation
in state per capita income throughout the projected period.
While the State's General Fund ended fiscal 1985, 1986 and 1987 with
operating surpluses of approximately $365.5 million, $250.1 million and $365.2
million, respectively, the State recorded operating deficits of $115.6 million,
$28 million, $259.5 million and $808.5 million for fiscal 1988, 1989, 1990 and
1991, respectively. Together with the deficit carried forward from fiscal
1989-90, the total deficit for the fiscal year 1990-91 was $965.7 million. The
total deficit amount was funded by the issuance of General Obligation Economic
Recovery Notes. The Comptroller's annual report for the fiscal year ended June
30, 1992 reflected a General Fund operating surplus of $110.2 million, which
surplus was used to retire $110.1 million of the State's Economic Recovery
Notes. The Comptroller's annual reports for fiscal years ended June 30, 1993,
1994 and 1995 reflected General Fund operating surpluses of $113.5 million,
$19.7 million and $80.5 million, respectively. The unappropriated surplus in the
General Fund is deemed to be appropriated for debt service for the following
fiscal year.
Since 1988, the Comptroller's annual report has reported results on the
basis of both the modified cash basis required by State law and the modified
accrual basis used for GAAP financial reporting. The Comptroller's monthly
report for the period ended September 30, 1995 stated that on a GAAP basis the
cumulative deficit was $576.9 million for fiscal 1995. The modified cash basis
of accounting used for statutory financial reporting and the modified accrual
basis used for GAAP financial
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reporting are different and, as a result, often produce varying financial
results, primarily because of differences in the recognition of revenues and
expenditures.
The budget adopted for fiscal 1995-96 anticipates General Fund revenues of
$8.837 billion and projected General Fund expenditures of $8.836 billion,
resulting in a projected surplus of $0.2 million. For fiscal 1996-1997, the
adopted budget anticipates General Fund revenues of $9.158 billion and General
Fund expenditures of $9.157 billion, resulting in a projected surplus of $0.2
million.
The adopted budget reflects implementation of significant tax changes aimed
at increasing overall disposable income and encouraging economic expansion in
the State. A phase down in the personal income tax rate was enacted. To improve
the business climate in the State and stimulate long-term job growth,
legislation was also enacted which will reduce Connecticut's corporate tax rate
from its current rate of 11.25% to 7.5% by January 1, 2000. The adopted budget
also reflects significant reductions in expenditures from current service
levels.
As part of the adopted budget, approximately $241 million of the original
$965.7 million in Economic Recovery Notes issued to fund the cumulative deficit
of fiscal year 1990-91 will be retired in fiscal years 1996-97 through 1998-99,
rather than in fiscal 1995-96. Of the original $965.7 million issued, $725
million will be retired on schedule and the Economic Recovery Notes will be paid
in full by the expiration of the current Governor's term.
The State finances its operations primarily through the General Fund. All
tax and most non-tax revenues of the State, except for motor fuels taxes and
other transportation-related taxes, fees and revenues, are paid into, and
substantially all expenditures pursuant to legislative appropriations are made
out of, the General Fund. The State derives over 70% of its revenues from taxes.
Miscellaneous fees, receipts, transfers and Federal grants account for most of
the other State revenue. The Sales and Use Taxes, the corporation business tax
and the recently enacted broad based personal income tax are the major revenue
raising taxes.
On November 3, 1992, Connecticut voters approved a constitutional amendment
which requires a balanced budget for each year and imposes a cap on the growth
of expenditures. The General Assembly is required by the constitutional
amendment to adopt by three-fifths vote certain spending cap definitions. The
statutory spending cap limits the growth of expenditures to either (1) the
rolling five-year average annual growth in personal income, or (2) the increase
in the consumer price index for urban consumers during the preceding 12-month
period, whichever is greater. Expenditures for the payment of bonds, notes and
other evidences of indebtedness are excluded from the constitutional and
statutory definitions of general budget expenditures.
The State has no constitutional limit on its power to issue obligations or
incur indebtedness other than that it may only borrow for public purposes. There
are no reported court decisions relating to State bonded indebtedness other than
two cases validating the legislative determination of the public purpose for
improving employment opportunities and related activities. The State
Constitution has never contained provisions requiring submission of the
questions of incurring indebtedness to a public referendum. Therefore, the
authorization and issuance of State debt, including the purpose, amount
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and nature thereof, the method and manner of the incurrence of such debt, the
maturity and terms of repayment thereof, and other related matters are
statutory.
The State has established a program of temporary note issuance to cover
periodic cash flow requirements. The maximum volume of cash flow borrowing is
determined based upon the State's actual cash needs on a daily basis. In
September 1995, the State established a commercial paper program which replaces
all previous programs. Under this program, the State may issue and have
outstanding at any time up to $400 million of general obligation temporary notes
during a two-year period concluding in September 1997.
The General Assembly has empowered, pursuant to bond acts in effect, the
State Bond Commission to authorize general obligation bonds in the amount of
$9.069 billion. As of September 15, 1995, the State Bond Commission had
authorized $7.716 billion in such bonds and the balance of $1.445 billion was
available for authorization.
General obligations bonds issued by Connecticut municipalities are payable
primarily from ad valorem taxes on property subject to taxation by the
municipality. Certain Connecticut municipalities have experienced severe fiscal
difficulties and have reported operating and accumulated deficits in recent
years. The most notable of these was the City of Bridgeport.
NEW JERSEY MUNICIPAL MONEY FUND
New Jersey's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural areas
with selective commercial agriculture. New Jersey's principal manufacturing
industries produce chemicals, pharmaceuticals, electrical equipment and
instruments, machinery, food products, and printing. Other economic activities
include services, wholesale and retail trade, insurance, tourism, petroleum
refining and truck farming.
While New Jersey's economy continued to expand during the late 1980s, the
level of growth has slowed considerably after 1987. By the beginning of the
national recession in July 1990 (according to the National Bureau of Economic
Research), construction activity had already been declining in New Jersey for
nearly two years, growth had tapered off markedly in the service sectors and the
long-term downward trend of factory employment had accelerated, partly because
of a leveling off of industrial demand nationally. The onset of recession caused
an acceleration of New Jersey's job losses in construction and manufacturing, as
well as an employment downturn in such previously growing sectors as wholesale
trade, retail trade, finance, utilities and trucking and warehousing. The net
effect was a decline in the State's total nonfarm wage and salary employment
from a peak of 3,689,800 in 1989 to a low of 3,445,000 in 1992. This loss has
been followed by an employment gain of 176,400 from May 1992 to October 1995, a
recovery of 67% of the jobs lost during the recession. In July 1991, S&P lowered
the State's general obligation bond rating from AAA to AA+.
Reflecting the downturn, the rate of unemployment in the State rose from a
low of 3.6% during the first quarter of 1989 to a recessionary peak of 8.4%
during 1992. Since then, the unemployment rate fell to 6.4% during the first ten
months of 1995. Despite an increase reported in December 1995, the annualized
unemployment rate remained 6.4% for the fourth quarter of 1995.
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The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts Sales and Use Tax collections for Fiscal Year 1996 as $4.310
billion, a 4.3% increase from Fiscal Year 1995 revenue. The Fiscal Year 1997
estimate of $4.403 billion is a 2.2% increase from the Fiscal Year 1996
estimate.
The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts Gross Income Tax collections for Fiscal Year 1996 as $4.547
billion, a 0.2% increase from Fiscal Year 1995 revenue. Included in the Fiscal
Year 1995 revenue is a 5% reduction of personal income tax rates effective
January 1, 1994 and a further 10% reduction of personal income tax rates
effective January 1, 1995 (on joint income under $80,000). The estimate for
Fiscal Year 1997 as shown in the Governor's Fiscal Year 1997 Budget Message of
$4.610 billion is a 1.4% increase from the Fiscal Year 1996 estimate. Included
in the Fiscal Year 1996 forecast is the 10% reduction of personal income tax
rates effective January 1, 1995 and a further 15% reduction of personal income
tax rates effective January 1, 1996 (on joint incomes under $80,000).
The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts Corporation Business Tax collection for fiscal year 1996 as
$1,198 million, a 10.4% increase from Fiscal Year 1995 revenue. Included in the
Corporation Business Tax forecast is a reduction in the Corporation Business Tax
rate from 9.375% to 9.0% of net New Jersey income. The Fiscal Year 1997 forecast
as shown in the Governor's Fiscal Year 1997 Budget Message of $1.210 billion
represents a 1.0% increase from the Fiscal Year 1996 estimate.
The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts Other Miscellaneous Taxes Fees and Revenues collections for
Fiscal Year 1996 as $1.514 billion, a decrease from Fiscal Year 1995 revenue.
The Fiscal Year 1996 revised estimates anticipate that the Legislature will
enact a tax amnesty program. It is estimated that a 90-day tax amnesty will
yield $70 million.
Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. There are additional means by which the
Governor may ensure that the State is operated efficiently and does not incur a
deficit. No supplemental appropriation may be enacted after adoption of an
appropriations act except where there are sufficient revenues on hand or
anticipated, as certified by the Governor, to meet such appropriation. In the
past when actual revenues have been less than the amount anticipated in the
budget, the Governor has exercised her plenary powers leading to, among other
actions, implementation of a hiring freeze for all State departments and the
discontinuation of programs for which appropriations were budgeted but not yet
spent.
The State appropriated approximately $15.439 billion and $16.109 billion for
fiscal 1995 and 1996, respectively. Of the $16.109 billion appropriated in
Fiscal Year 1996 from the General Fund, the Property Tax Relief Fund, the Casino
Control Fund, the Casino Revenue Fund and the Gubernatorial Elections Fund,
$6.447 billion (40.0%) is appropriated for State aid to local governments,
$3.746 billion (23.3%) is appropriated for grants-in-aid (payments to
individuals or public or private agencies for benefits to which a recipient is
entitled by law or for the provision of
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services on behalf of the State), $5.233 billion (32.5%) for Direct State
Services, $466.3 million (2.9%) for debt service on State general obligation
bonds and $217.1 million (1.3%) for capital construction.
Should tax revenues be less than the amount anticipated in the Budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. The appropriations for Fiscal Year 1996 and
for Fiscal Year 1997 reflect the amounts contained in the Governor's Fiscal Year
1997 Budget Message.
The State has made appropriations for principal and interest payments for
general obligation bonds for fiscal years 1993 through 1996 in the amounts of
$444.3 million, $119.9 million, $103.6 million and $466.3 million, respectively.
The Governor's Fiscal Year 1997 Budget Message for Fiscal Year 1997 includes an
appropriation in the amount of $463.1 million for principal and interest
payments for general obligation bonds.
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APPENDIX B
SERVICES AVAILABLE THROUGH THE RMA PROGRAM TO RMA ACCOUNTHOLDERS
Shares of the Funds are available to investors who are Participants in the
RMA program offered by PaineWebber and its correspondent firms. The following is
a summary of some of the services available to RMA Participants. For more
complete information, investors should refer to their RMA account agreement and
the brochure entitled "Facts About Your PaineWebber Resource Management
Account."
THE PAINEWEBBER PREMIER STATEMENT. RMA Participants receive a monthly
Premier account statement, which provides consolidated information to assist
with portfolio management decisions and personal financial planning. The Premier
account statement summarizes securities transactions, charges, cash advances and
checks (if applicable) and provides cost basis information and calculations of
unrealized and realized gains and losses on most investments.
PRELIMINARY AND YEAR-END SUMMARY STATEMENT. RMA Participants receive
preliminary (nine month) summary information and year-end summary account
statements that provide a comprehensive overview of tax-related activity in the
account during the year to help investors with tax planning.
CHOICE OF MONEY MARKET FUNDS AND AUTOMATIC SWEEP OF UNINVESTED CASH. As
described more fully in the prospectus under the heading "Purchases--The RMA and
BSA Programs," RMA Participants select one of seven money market funds as a
primary fund into which uninvested cash is automatically swept on a daily
(balances of $500 or more) or weekly (balances under $500) basis. By
automatically investing cash balances into a money market fund, this sweep
feature minimizes the extent to which an investor's assets remain idle while
held in the account pending investment.
CHECK WRITING. RMA Participants have ready access to the assets held in
their RMA account through the check writing feature. There are no minimum check
amounts or per check charges. The RMA checks also include an expense coding
system that enables the investor to track types of expenses for tax and
financial planning.
DIRECT DEPOSIT. Regular payments from an employer, pension, social security
or other sources may be eligible for electronic deposit into RMA Participants'
accounts.
ELECTRONIC FUNDS TRANSFER/BILL PAYMENT SERVICE. RMA Participants can
electronically transfer money between their RMA and other financial
institutions, transfer funds to and from other PaineWebber accounts and pay
bills. Unlimited transfers from financial accounts and ten free transfers to
financial accounts are permitted monthly, with a nominal charge per transaction
thereafter. A Bill Payment Service is available for an additional charge.
GOLD MASTERCARD(R). RMA Participants are provided with a Gold MasterCard
that makes account assets easily accessible. The Gold MasterCard is accepted by
businesses, stores and services both in the U.S. and abroad, and can be used to
obtain cash advances at thousands of automated teller machines in the U.S. For
an additional annual fee, investors can also obtain a line of credit from Bank
One that can be accessed through their Gold MasterCard. Through MasterCard's
enhanced
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MasterAssist(R) and MasterPurchase(R) programs, investors can obtain other
benefits, including rental car insurance, emergency medical and travel
assistance, legal services and purchase protection.
EXTENDED ACCOUNT PROTECTION. Assets of RMA Participants that are held in an
RMA Account by PaineWebber or one of its correspondent firms are protected for
up to $50 million through private insurance in the event of the liquidation or
failure of the firm. This protection is in addition to the $500,000 in
protection provided to accountholders by the Securities Investor Protection
Corporation ("SIPC"). Neither the SIPC protection nor the additional account
protection insurance applies to shares of the Funds because such shares are
registered directly in the name of the shareholder, and not in the name of
PaineWebber or one of its correspondents firms.
THE PAINEWEBBER PROTECTOR. The PaineWebber Protector is a popular
convalescent care insurance program. Participants can elect to own $50,000 to
$200,000 of convalescent care benefits. This feature is not available to
PaineWebber's correspondent firms.
RMA RESOURCE ACCUMULATION PLANSM. The RMA Resources Accumulation Plan is an
automatic mutual fund investment program that provides RMA participants the
ability to purchase shares of mutual funds on a regular, periodic basis. The
minimum purchase in the program is $100 per investment, however, initial minimum
purchase requirements of the designated mutual fund(s) must be met before an
investor can participate in this program. The participant must receive a
prospectus, which contains more complete information (including charges and
expenses), for each fund before the application form to participate in the
Resource Accumulation Plan is submitted.
RMA AUTHORIZATION LIMIT. RMA Participants' Authorization Limit is the
combined amount of any uninvested cash balances in the account, money fund
balances and, if applicable, the Securities Credit Line (margin). The
Authorization Limit is reduced each time a debit is generated in their
securities account, a security is purchased, an RMA check is paid, cash advances
are obtained from MasterCard or when an electronic transfer/payment is made. The
Authorization Limit is increased when funds are deposited into their securities
account.
FINANCIAL SERVICES CENTER AND RESOURCELINE(R). RMA Participants have day and
night access to information concerning their RMA account. This service is
available by calling (800) RMA-1000. RMA representatives are available at the
Financial Services Center from 8:30 a.m. to 8:00 p.m. (EST) to answer inquiries
from Participants regarding their accounts and ResourceLine, an automated voice
response system, provides 24 hour account information.
SECURITIES CREDIT LINE. RMA Participants may choose to have a Securities
Credit Line (margin) as part of their RMA account.
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APPENDIX C
SERVICES AVAILABLE THROUGH THE BSA PROGRAM FOR BSA ACCOUNTHOLDERS
Shares of the Funds are available to investors who are Participants in the
Business Services Account ("BSA") program. The following is a summary of some of
the services that are available to BSA Participants. For more complete
information, investors should refer to their BSA Account Agreement and the
brochure entitled "Facts About Your Business Services Account."
PREMIER BUSINESS SERVICES ACCOUNT STATEMENT--BSA Participants receive the
monthly Premier Business Services Account statement, which provides consolidated
information to assist with portfolio management decisions and business finances.
The Premier Business Services Account statement summarizes securities
transactions, charges, cash advances and checks in chronological order with
running cash and money fund balances. When applicable, the expiration and
beneficiary of outstanding letters of credit are printed. The "Portfolio
Management" feature provides cost basis information where available as well as
calculated gains and losses on most investments.
PRELIMINARY AND YEAR-END SUMMARY STATEMENT--BSA Participants receive
preliminary (nine month) summary information and year-end summary account
statements that provide a comprehensive overview of tax-related activity in the
account during the year to help investors plan.
CHOICE OF MONEY MARKET FUNDS AND AUTOMATIC SWEEP OF UNINVESTED CASH--As
described more fully in the prospectus under the heading "Purchases--The RMA and
BSA Programs," BSA Participants select one of seven money market funds as a
primary fund into which uninvested cash is automatically swept on a daily
(balances of $500 or more) or weekly (balances under $500) basis. By
automatically investing cash balances into a money market fund, this sweep
feature minimizes the extent to which an investor's assets remain idle while
held in the account pending investment.
CHECK WRITING--BSA Participants have ready access to the assets held in
their BSA account through the check writing feature. There are no minimum check
amounts. BSA Participants may clear up to 100 checks each month without
incurring per check charges. Participants can order from a number of business
check styles to suit their check writing needs. The BSA checks also include an
expense code system that enables the investors to track business expense types
for tax and financial planning.
MASTERCARD BUSINESSCARD(R)--BSA Participants can elect to receive a
MasterCard BusinessCard for easy access to account assets. The MasterCard
BusinessCard is accepted by businesses, stores and services worldwide, and can
be used to obtain cash at thousands of automated teller machines in the U.S.
Through MasterCard's enhanced MasterAssist(R) and MasterPurchase(R) programs,
investors can obtain other benefits including full value primary rental car
insurance, emergency medical and travel assistance, legal services and purchase
protection.
SECURITIES CREDIT LINE--BSA Participants may choose to have a Securities
Credit Line (margin) as part of their BSA account.
EXTENDED ACCOUNT PROTECTION--Assets of BSA Participants that are held in a
BSA Account by PaineWebber or one of its correspondent firms are protected for
up to $50 million through private
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insurance in the event of the liquidation or failure of the firm. This
protection is in addition to the $500,000 in protection provided to
accountholders by the Securities Investor Protection Corporation ("SIPC").
Neither the SIPC protection nor the additional account protection insurance
applies to shares of the Funds because such shares are registered directly in
the name of the shareholder, and not in the name of PaineWebber or one of its
correspondent firms.
BSA AUTHORIZATION LIMIT--BSA Participants' Authorization Limit is the
combined amount of any uninvested cash balances in the account, money fund
balances and, if applicable, the Securities Credit Line (margin). The
Authorization Limit is reduced each time a debit is generated in their
securities account, a security is purchased, a BSA check is paid, cash advances
are obtained from MasterCard or when an electronic transfer/payment is made. The
Authorization Limit is increased when funds are deposited into their securities
account.
FINANCIAL SERVICES CENTER AND RESOURCELINE(R)--BSA Participants can call the
Financial Services Center at (800) BSA-0140 from 8:30 A.M. to 8:00 P.M. E.S.T.
and speak to a PaineWebber representative to resolve any inquiries about their
accounts. The automated ResourceLine provides basic account information through
a touchtone phone and is available night and day by calling (800) BSA-0140.
ELECTRONIC FUNDS TRANSFER/PAYMENT SERVICE--BSA Participants have the option
to initiate transfers of funds to and from their accounts, pay bills and process
their payroll through an electronic fund transfer service. Unlimited transfers
to the BSA and twenty free transfers/payments out of the BSA are permitted
monthly with nominal fees thereafter. Participants can set up payees to receive
regular or one time payments simply by calling an 800 number.
DIRECT DEPOSIT--Regular payments from customers, receivables and other
sources may be eligible for electronic deposit into BSA Participants' accounts.
This feature permits the investor's money to be invested sooner and eliminates
excess paperwork.
LETTERS OF CREDIT--BSA Participants can have Standby Letters of Credit
issued on their behalf through PaineWebber at competitive rates and backed by
securities in their account.
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No person has been authorized to give
any information or to make any PAINEWEBBER RMA
representations not contained in the CONNECTICUT MUNICIPAL
Prospectus or in this Statement of MONEY FUND
Additional Information in connection NEW JERSEY MUNICIPAL
with the offering made by the MONEY FUND
Prospectus and, if given or made, such
information or representations must not
be relied upon as having been
authorized by the Funds or their
distributor. The Prospectus and this
Statement of Additional Information do
not constitute an offering by the Funds
or by the distributor in any
jurisdiction in which such offering may
not lawfully be made.
-------------------
TABLE OF CONTENTS
Page
-----------------------------
Investment Objective and Policies..... 1 Statement of Additional
Management............................ 9 Information
Portfolio Transactions................ 16 March 1, 1996,
Shares of the Funds................... 17 as revised March 5, 1996
Additional Information Regarding
Redemptions......................... 18
Valuation of Shares................... 18
Determination of Current and Effective
Yields.............................. 19
Additional Information................ 20
Financial Statements.................. 20
Ratings of Securities................. 21
Appendix A............................ 26
Appendix B............................ 31
Appendix C............................ 33
-----------------------------
(C)1996 PaineWebber Incorporated
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