AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1996
SECURITIES ACT FILE NO. 33-36766
INVESTMENT COMPANY FILE NO. 811-6173
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 7 X
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT NO. 9 X
(CHECK APPROPRIATE BOX OR BOXES)
-------------------
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
(Exact Name of Registrant as Specified in Charter)
1285 AVENUE OF THE AMERICAS
10019
(Zip Code)
NEW YORK, NEW YORK
(Address of Principal Executive
Offices)
-------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 713-2000
DIANNE O'DONNELL, ESQ.
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(Name and Address of Agent for Service)
-------------------
COPY TO:
LEWIS G. COLE, ESQ.
STROOCK & STROOCK & LAVAN
7 HANOVER SQUARE
NEW YORK, NEW YORK 10004-2696
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
BOX)
/X/ IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485
/ / ON PURSUANT TO PARAGRAPH (B) OF RULE 485
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(I) OF RULE 485
/ / ON (DATE) PURSUANT TO PARAGRAPH (A)(I) OF RULE 485
/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(II) OF RULE 485
/ / ON (DATE) PURSUANT TO PARAGRAPH (A)(II) OF RULE 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE
FOR A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
-------------------
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940, AS AMENDED. THE NOTICE REQUIRED BY SUCH RULE FOR THE REGISTRANT'S
FISCAL YEAR ENDED OCTOBER 31, 1995 WAS FILED ON DECEMBER 28, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- -------------------------------------------------- -----------------------------------------
<C> <S> <C>
Part A
1. Cover Page............................... Cover Page
2. Synopsis................................. Highlights
3. Condensed Financial Information.......... Financial Highlights; Performance Infor-
mation
4. General Description of Registrant........ Highlights Investment Objective and Poli-
cies; General Information
5. Management of the Fund................... Management; General Information
6. Capital Stock and Other Securities....... Cover Page; Dividends and Taxes; General
Information
7. Purchase of Securities Being Offered..... Purchases; Valuation of Shares; Manage-
ment
8. Redemption or Repurchase................. Redemptions
9. Pending Legal Proceedings................ Not Applicable
Part B
10. Cover Page............................... Cover Page
11. Table of Contents........................ Cover Page
12. General Information and History.......... Not Applicable
13. Investment Objective and Policies........ Investment Objective and Policies
14. Management of the Fund................... Management of the Fund
15. Control Persons and Principal Holders of
Securities............................. Management of the Fund
16. Investment Advisory and Other Services... Management of the Fund
17. Brokerage Allocation..................... Portfolio Transactions
18. Capital Stock and Other Securities....... Shares of the Fund
19. Purchase, Redemption and Pricing of
Securities Being Offered............... Redemption of Shares; Exchange of Shares;
Determination of Net Asset Value
20. Tax Status............................... Dividends, Distributions and Taxes (in
the prospectus)
21. Underwriters............................. The Distributor (in the prospectus)
22. Calculations of Performance Data......... Determination of Current and Effective
Yields
23. Financial Statements..................... Financial Statements (Audited)
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
This Prospectus concisely sets forth information
about the Funds a prospective investor should know
before investing. Please retain this Prospectus for
future reference. With respect to all the Funds
(except Connecticut Municipal Money Fund and
New Jersey Municipal Money Fund), a Statement
of Additional Information dated August 29, 1995
(which is incorporated by reference herein) has
been filed with the Securities and Exchange Com-
mission ("SEC"). With respect to Connecticut
Municipal Money Fund and New Jersey Municipal
Money Fund, a Statement of Additional Informa-
tion dated March 1, 1996 (which is incorporated by
reference herein) has been filed with the SEC. The
Statement of Additional Information can be
obtained without charge, and further inquiries can
be made, by contacting the Funds, your PaineWeb-
ber investment executive or PaineWebber's corre-
spondent firms, or by calling toll-free 1-800-762-
1000.
- ------------------------------------------
The Money Market Portfolio and U.S. Government
Portfolio are series of PaineWebber RMA Money
Fund, Inc. PaineWebber RMA Money Fund, Inc.
And PaineWebber RMA Tax-Free Fund, Inc. are
Maryland corporations (each a "Corporation").
PaineWebber RMA California Municipal Money
Fund and PaineWebber RMA New York Municipal
Money Fund are series of PaineWebber Managed
Municipal Trust, a Massachusetts business trust,
and PaineWebber RMA Connecticut Municipal
Money Fund and PaineWebber RMA New Jersey
Municipal Money Fund are series of
PaineWebber/Kidder, Peabody Municipal Money
Market Series, a Massachusetts business trust
(each a "Trust").
An investment in a Fund is neither insured nor
guaranteed by the U.S. Government. While each
Fund seeks to maintain a stable net asset value of
$1.00 per share, there can be no assurance that it
will be able to do so.
__________________________________________________
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL
OFFENSE.
PaineWebber RMA
Money Market Portfolio
U.S. Government Portfolio
Tax-Free Fund
California Municipal
Money Fund
Connecticut Municipal
Money Fund
New Jersey Municipal
Money Fund
New York Municipal
Money Fund
1285 Avenue of the Americas
New York, New York 10019
- -----------------------------------
Professionally managed money
market funds seeking:
/x/ Maximum Current Income
/x/ High Liquidity
/x/ Conservation of Capital
/x/ Income Free from Federal Income Tax
for the RMA Tax-Free Fund
/x/ California Double Tax-Free Income for
the RMA California Municipal Money Fund
/x/ Connecticut Double Tax-Free Income
for the RMA Connecticut Municipal
Money Fund
/x/ New Jersey Double Tax-Free Income
for the RMA New Jersey Municipal
/x/ New York State Double Tax-Free
Income or New York City Triple Tax-
Free Income for the RMA New York
Municipal Money Fund
- -----------------------------------
March 1, 1996 with respect to Connecticut
Municipal Money Fund and New Jersey
Municipal Money Fund and August 29, 1995
(as revised March 1, 1996) with respect to the
other Funds.
<PAGE>
HIGHLIGHTS
See the body of the Prospectus for more information on the topics discussed
in these highlights.
<TABLE>
<S> <C>
The Funds: Professionally managed money market funds (each a "Fund") offered
primarily to participants in the PaineWebber Resource Management
Account ("RMA")(R) program. The Funds also are offered to
participants in the PaineWebber Business Services Account
("BSA")SM program.
Investment Objectives PaineWebber RMA Money Market Portfolio ("Money Market
and Policies: Portfolio")--A diversified money market fund seeking maximum
current income consistent with liquidity and conservation of
capital; invests in high-grade money market instruments.
PaineWebber RMA U.S. Government Portfolio ("U.S. Government
Portfolio")--A diversified money market fund seeking maximum
current income consistent with liquidity and conservation of
capital; invests in short-term U.S. government securities.
PaineWebber RMA Tax-Free Fund, Inc. ("Tax-Free Fund")--A
diversified money market fund seeking maximum current income
exempt from federal income tax consistent with liquidity and
conservation of capital; invests in high-grade municipal money
market instruments.
PaineWebber RMA California Municipal Money Fund ("California
Municipal Money Fund")--A non-diversified money market fund
seeking maximum current income exempt from federal income tax and
California personal income tax, consistent with liquidity and
conservation of capital; invests in high-grade municipal money
market instruments.
PaineWebber RMA Connecticut Municipal Money Fund ("Connecticut
Municipal Money Fund")--A non-diversified money market fund
seeking the maximization of current income exempt from Federal and
Connecticut State income taxes to the extent consistent with the
preservation of capital and the maintenance of liquidity; invests
primarily in debt securities of the State of Connecticut, its
political subdivisions, authorities and corporations.
PaineWebber RMA New Jersey Municipal Money Fund ("New Jersey
Municipal Money Fund")--A non-diversified money market fund
seeking the maximization of current income exempt from Federal and
New Jersey State income taxes to the extent consistent with the
preservation of capital and the maintenance of liquidity; invests
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
primarily in debt securities of the State of New Jersey, its
political subdivisions, authorities and corporations.
PaineWebber RMA New York Municipal Money Fund ("New York Municipal
Money Fund")--A non-diversified money market fund seeking maximum
current income exempt from federal income tax and New York State
and New York City personal income taxes, consistent with liquidity
and conservation of capital; invests in high-grade municipal money
market instruments.
Total Net Assets at Money Market Portfolio--$5.7 billion.
July 31, 1995: U.S. Government Portfolio--$884.8 million.
Tax-Free Fund--$1.7 billion.
California Municipal Money Fund--$323.6 million.
New York Municipal Money Fund--$219.7 million.
Total Net Assets at Connecticut Municipal Money Fund--$23.6 million.
January 31, 1996: New Jersey Municipal Money Fund--$41.1 million.
Distributor and PaineWebber Incorporated ("PaineWebber"). See "Management."
Investment Adviser:
Sub-Adviser: Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins").
Purchases: Shares are available exclusively through PaineWebber and its
correspondent firms. See "Purchases."
Redemptions: Shares may be redeemed through PaineWebber or its correspondent
firms. See "Redemptions."
Yield: Based on current money market rates; quoted in the financial
section of most newspapers.
Dividends: Declared daily and paid monthly. See "Dividends and Taxes."
Reinvestment: All dividends are automatically paid in Fund shares.
Minimum Purchase: No minimum.
Public Offering Price: Net asset value, which each Fund seeks to maintain at $1.00 per
share.
</TABLE>
WHO SHOULD INVEST. Each Fund has its own suitability considerations and risk
factors, as summarized below and described in detail under "Investment
Objectives and Policies." The Funds are designed for investors seeking liquidity
and current income. The Funds provide a convenient means for investors to enjoy
current income at money market rates with minimal risk of fluctuation of
principal.
Shares of the Funds are offered primarily to clients of PaineWebber and its
correspondent firms who are participants in the RMA and BSA programs. Shares of
the Funds may be offered to PaineWebber clients with other types of accounts
under certain limited circumstances.
Tax-Free Fund, California Municipal Money Fund, Connecticut Municipal Money
Fund, New Jersey Municipal Money Fund and New York Municipal Money Fund
(referred to collectively in this Prospectus as the "Municipal Funds") are not
suitable for tax-exempt institutions or qualified
3
<PAGE>
retirement plans, because those investors cannot take advantage of the
tax-exempt character of these Funds' dividends.
MONEY MARKET PORTFOLIO AND U.S. GOVERNMENT PORTFOLIO are designed for
investors seeking liquidity and current income. They provide a convenient means
for investors to enjoy current income at money market rates with minimal risk of
fluctuation of principal.
TAX-FREE FUND is designed for investors seeking liquidity and current income
that is exempt from federal income tax. It provides a convenient means for
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.
CALIFORNIA MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and California
personal income tax. The Fund provides a convenient means for California
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.
CONNECTICUT MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and Connecticut
personal income taxes. The Fund provides a convenient means for Connecticut
investors to enjoy current tax-free income at money-market rates with minimal
risk of fluctuation of principal.
NEW JERSEY MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and New Jersey
personal income taxes. The Fund provides a convenient means for New Jersey
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.
NEW YORK MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and New York State and
New York City personal income taxes. The Fund provides a convenient means for
New York investors to enjoy current tax-free income at money market rates with
minimal risk of fluctuation of principal.
RISK FACTORS. There can be no assurance that any Fund will achieve its
investment objective. In periods of declining interest rates, a Fund's yield
will tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, a Fund's yield generally will be somewhat lower. See
"Investment Objectives and Policies" for more information about this risk factor
and those described below.
The concentration of the investments of California Municipal Money Fund, New
York Municipal Money Fund, Connecticut Municipal Money Fund and New Jersey
Municipal Money Fund in California Municipal Securities (defined below), New
York Municipal Securities (defined below) Connecticut Municipal Securities
(defined below) and New Jersey Municipal Securities (defined below),
respectively, may subject those Funds to greater risks than an investment
company that has a broader range of investments. The States of California and
New York and many of their agencies and local governments have been
experiencing, and continue to experience, significant financial difficulties and
the credit standings of those States and of certain local governments (including
New York City) have been, and could be further, reduced.
4
<PAGE>
The status of California Municipal Money Fund, New York Municipal Money
Fund, Connecticut Municipal Money Fund and New Jersey Municipal Money Fund as
"non-diversified" investment companies and the ability of each of the Municipal
Funds to invest more than 25% of its total assets in securities the interest on
which is paid from similar types of projects, may further increase the risk of
an investment in those Funds.
EXPENSES OF INVESTING IN THE FUNDS. The following tables are intended to
assist investors in understanding the expenses associated with investing in each
Fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CALIFORNIA CONNECTICUT NEW JERSEY NEW YORK
MONEY U.S. MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
MARKET GOVERNMENT TAX- MONEY MONEY MONEY MONEY
PORTFOLIO PORTFOLIO FREE FUND FUND FUND FUND FUND
--------- ---------- --------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales charge on
purchases of shares.... None None None None None None None
Sales charge on
reinvested dividends... None None None None None None None
Redemption fee or
deferred sales charge.. None None None None None None None
</TABLE>
5
<PAGE>
ANNUAL FUND OPERATING EXPENSES*
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CALIFORNIA CONNECTICUT NEW JERSEY NEW YORK
MONEY U.S. MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
MARKET GOVERNMENT TAX- MONEY MONEY MONEY MONEY
PORTFOLIO PORTFOLIO FREE FUND FUND FUND FUND FUND
--------- ---------- --------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Management fees.......... 0.50% 0.45% 0.48% 0.50% 0.50% 0.50% 0.50%
12b-1 service fees....... None 0.08% 0.08% 0.08% 0.12% 0.12% 0.08%
Other expenses........... 0.09% 0.10% 0.07% 0.11% 0.39% 0.31% 0.13%
--------- --- --- --- --- --- ---
Total Operating
Expenses............... 0.59% 0.63% 0.63% 0.69% 1.01% 0.93% 0.71%
--------- --- --- --- --- --- ---
--------- --- --- --- --- --- ---
</TABLE>
- ---------
* See "Management" for additional information. The fees and expenses shown are
those actually incurred for the fiscal year ended June 30, 1995 and, in the
case of New York Municipal Money Fund, "Management Fees" and "Total
Operating Expenses" are those which would have been incurred by that Fund
had PaineWebber not waived a portion of its fees during the fiscal year. For
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund, the
fees and expenses shown are those actually incurred for the fiscal year
ended October 31, 1995. PaineWebber currently charges an annual $85 account
charge for the RMA program including the Gold MasterCard without the Bank
One Line of Credit. The fee for clients who choose the Line of Credit for
their Gold MasterCard is $125. The annual account charge for the BSA
program, including the MasterCard Business Card, is $125 ($165 with a
MasterCard Line of Credit). The account charges are not included in the
table because certain non-RMA and non-BSA participants are permitted to
purchase shares of the Funds.
EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in each Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Portfolio..................................... $ 6 $19 $33 $ 74
U.S. Government Portfolio.................................. $ 6 $20 $35 $ 79
Tax-Free Fund.............................................. $ 6 $20 $35 $ 79
California Municipal Money Fund............................ $ 7 $22 $38 $ 86
New York Municipal Money Fund.............................. $ 7 $23 $40 $ 88
Connecticut Municipal Money Fund........................... $ 10 $32 $56 $124
New Jersey Municipal Money Fund............................ $ 9 $30 $51 $114
</TABLE>
This Example assumes that all dividends are reinvested and that the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in the years shown. The above tables and the assumption in the Example of a 5%
annual return are required by regulations of the Securities and Exchange
Commission ("SEC") applicable to all mutual funds; the assumed 5% annual return
is not a prediction of, and does not represent, any Fund's projected or actual
performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND EACH FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN. The actual expenses of each Fund will depend upon, among other things,
the level of average net assets and the extent to which each Fund incurs
variable expenses, such as transfer agency costs.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below provide selected per share data and ratios for one share of
each Fund for each of the periods shown. This information is supplemented by the
financial statements and accompanying notes appearing in each Fund's Annual
Report to Shareholders for the fiscal years ended June 30, 1995 (in the case of
Tax-Free Fund, Money Market Portfolio, U.S. Government Portfolio, California
Municipal Money Fund and New York Municipal Money Fund) and October 31, 1995 (in
the case of Connecticut Municipal Money Fund and New Jersey Municipal Money
Fund), which are incorporated by reference into their respective Statements of
Additional Information and which may be obtained without charge by calling
1-800-647-1568. Further information about each Fund's performance is also
included in those Annual Reports to Shareholders. The financial statements and
notes, as well as the information in the tables appearing below insofar as it
relates to the each of the five fiscal years in the period ended June 30, 1995
(in the case of Tax-Free Fund, Money Market Portfolio and U.S. Government
Portfolio) and the six fiscal periods ended June 30, 1995 (in the case of
California Municipal Money Fund and New York Municipal Money Fund) have been
audited by Ernst & Young LLP, independent auditors, whose unqualified reports
thereon are incorporated by reference into the Funds' Statement of Additional
Information. The information appearing below for the years ended prior to June
30, 1991 or November 30, 1990, as applicable, also have been audited by Ernst &
Young LLP, whose reports thereon were unqualified. The financial statements and
notes, as well as the information in the tables appearing below for the fiscal
year ended October 31, 1995 (in the case of Connecticut Municipal Money Market
Fund and New Jersey Municipal Money Fund) have been audited by Ernst & Young
LLP; financial information for prior periods was audited by other auditors whose
reports thereon were unqualified.
<TABLE>
<CAPTION>
TAX-FREE FUND
------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Net investment
income............... 0.030 0.019 0.021 0.033 0.047 0.053 0.056 0.042 0.037
Dividends from net
investment income.... (0.030) (0.019) (0.021) (0.033) (0.047) (0.053) (0.056) (0.042) (0.037)
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Net asset value, end
of period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Total Investment
Return (1)........... 3.03% 1.88% 2.07% 3.30% 4.74% 5.30% 5.60% 4.20% 3.70%
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's)....... $1,562,040 $1,427,724 $1,248,702 $1,183,719 $1,190,073 $1,097,787 $912,865 $941,169 $942,668
Ratio of expenses to
average net assets... 0.63% 0.64% 0.65% 0.62% 0.67% 0.67% 0.60% 0.61% 0.62%
Ratio of net
investment income to
average net assets... 3.00% 1.90% 2.06% 3.30% 4.66% 5.33% 5.49% 4.20% 3.70%
<CAPTION>
1986
--------
<S> <C>
Net asset value,
beginning of
+-period................$1.00
--------
Net investment
income............... 0.044
Dividends from net
investment income.... (0.044)
--------
Net asset value, end
of period............ $1.00
--------
--------
Total Investment
Return (1)........... 4.40%
--------
--------
RATIOS/SUPPLEMENTAL DA
Net assets, end of
period (000's)....... $885,308
Ratio of expenses to
average net assets... 0.60%
Ratio of net
investment income to
average net assets... 4.43%
</TABLE>
- ---------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable date, and a sale at net asset value on the last
day of each period reported.
7
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
----------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment
income............ 0.049 0.030 0.029 0.046 0.069 0.081 0.084 0.064 0.055
Dividends from net
investment
income............ (0.049) (0.030) (0.029) (0.046) (0.069) (0.081) (0.084) (0.064) (0.055)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Investment
Return (1)........ 5.00% 2.95% 2.98% 4.56% 6.88% 8.10% 8.40% 6.40% 5.50%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's).... $5,398,146 $4,337,009 $4,031,398 $4,054,344 $4,208,467 $3,765,953 $2,637,820 $2,509,372 $2,163,807
Ratio of expenses
to average net
assets............ 0.59% 0.59% 0.59% 0.59% 0.61% 0.58% 0.59% 0.76% 0.79%
Ratio of net
investment income
to average net
assets............ 4.91% 2.98% 2.95% 4.57% 6.89% 8.07% 8.48% 6.37% 5.54%
<CAPTION>
1986
----------
<S> <C>
Net asset value,
beginning of
period............. $1.00
----------
Net investment
income............. 0.069
Dividends from net
investment
income............. (0.069)
----------
Net asset value,
end of period..... $1.00
----------
----------
Total Investment
Return (1)......... 6.90%
----------
----------
RATIOS/SUPPLEMENTAL
Net assets, end of
period (000's).... $1,740,660
Ratio of expenses
to average net
assets............. 0.78%
Ratio of net
investment income
to average net
assets............. 6.90%
</TABLE>
- ---------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable date, and a sale at net asset value on the last
day of each period reported.
<TABLE>
<CAPTION>
U.S. GOVERNMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment
income............ 0.046 0.027 0.028 0.044 0.066 0.077 0.078 0.059 0.053
Dividends from net
investment
income............ (0.046) (0.027) (0.028) (0.044) (0.066) (0.077) (0.078) (0.059) (0.053)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Investment
Return (1)........ 4.67% 2.74% 2.83% 4.36% 6.59% 7.70% 7.80% 5.90% 5.30%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's).... $815,781 $854,928 $880,834 $838,023 $937,943 $488,577 $327,437 $316,349 $241,148
Ratio of expenses
to average net
assets............ 0.63% 0.62% 0.61% 0.62% 0.64% 0.68% 0.60% 0.74% 0.75%
Ratio of net
investment income
to average net
assets............ 4.55% 2.75% 2.80% 4.37% 6.46% 7.67% 7.77% 5.92% 5.31%
<CAPTION>
1986
----------
<S> <C>
Net asset value,
beginning of
period............ $1.00
----------
Net investment
income............ 0.066
Dividends from net
investment
income............ (0.066)
----------
Net asset value,
end of period..... $1.00
----------
----------
Total Investment
Return (1)........ 6.60%
----------
----------
RATIOS/SUPPLEMENTAL
Net assets, end of
period (000's).... $204,660
Ratio of expenses
to average net
assets............ 0.82%
Ratio of net
investment income
to average net
assets............ 6.56%
</TABLE>
- ---------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable date, and a sale at net asset value on the last
day of each period reported.
8
<PAGE>
<TABLE><CAPTION>
CALIFORNIA MUNICIPAL MONEY FUND
--------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEARS ENDED FOR THE SEVEN FOR THE YEARS ENDED NOVEMBER 7, 1988
JUNE 30, MONTHS NOVEMBER 30, (COMMENCEMENT
----------------------------- ENDED ---------------------------- OF OPERATIONS) TO
1995 1994 1993 JUNE 30, 1992 1991 1990 1989 NOVEMBER 30, 1988
-------- -------- -------- ------------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------- -------- -------- -------- ---------
Net investment income......... 0.029 0.018 0.019 0.016 0.038 0.050 0.056 0.004
Dividends from net investment
income....................... (0.029) (0.018) (0.019) (0.016) (0.038) (0.050) (0.056) (0.004)
-------- -------- -------- ------- -------- -------- -------- ---------
Net asset value, end of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------- -------- -------- -------- ---------
-------- -------- -------- ------- -------- -------- -------- ---------
Total Investment Return (1)... 2.91% 1.78% 1.88% 1.61% 3.81% 4.95% 5.56% 0.35%
-------- -------- -------- ------- -------- -------- -------- ---------
-------- -------- -------- ------- -------- -------- -------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)...................... $330,937 $295,183 $290,367 $259,183 $261,902 $300,516 $234,605 $53,745
Ratio of expenses to average
net assets**................. 0.69% 0.69% 0.72% 0.69%* 0.75% 0.70% 0.67% 0.67%*
Ratio of net investment income
to average net assets**...... 2.87% 1.79% 1.86% 2.75%* 3.83% 4.96% 5.52% 5.24%*
</TABLE>
- ---------
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable date, and a sale at net asset value on the last
day of each period reported. Total investment returns for periods of less
than one year have not been annualized.
** For the year ended November 30, 1989, PaineWebber waived fees and/or
reimbursed the Fund for a portion of its operating expenses. If such fee
waivers and/or expense reimbursements had not been made, the annualized
ratio of expenses to average net assets and the annualized ratio of net
investment income to average net assets would have been 0.73% and 5.46%
respectively.
<TABLE><CAPTION>
NEW YORK MUNICIPAL MONEY FUND
------------------------------------------------------------------------
FOR THE FOR THE PERIOD
FOR THE YEARS ENDED SEVEN FOR THE YEARS ENDED NOVEMBER 10, 1988
JUNE 30, MONTHS ENDED NOVEMBER 30, (COMMENCEMENT
----------------------------- JUNE 30, --------------------------- OF OPERATIONS) TO
1995 1994 1993 1992 1991 1990 1989 NOVEMBER 30, 1988
-------- -------- -------- ------------ -------- -------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------ -------- -------- ------- ---------
Net investment income......... 0.028 0.017 0.018 0.016 0.037 0.049 0.055 0.003
Dividends from net investment
income....................... (0.028) (0.017) (0.018) (0.016) (0.037) (0.049) (0.055) (0.003)
-------- -------- -------- ------ -------- -------- ------- ---------
Net asset value, end of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------ -------- -------- ------- ---------
-------- -------- -------- ------ -------- -------- ------- ---------
Total investment return (1)... 2.80% 1.70% 1.82% 1.62% 3.74% 4.92% 5.51% 0.29%
-------- -------- -------- ------ -------- -------- ------- ---------
-------- -------- -------- ------ -------- -------- ------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)..................... $192,799 $165,111 $116,604 $129,687 $121,347 $113,885 $78,497 $24,237
Ratio of expenses to average
net assets:
Before waiver from
adviser.................. 0.71% 0.75% 0.79% 0.73%* 0.89% 0.85% 0.89% 1.09%*
After waiver from
adviser.................. 0.68% 0.68% 0.68% 0.68%* 0.68% 0.64% 0.37% 0.27%*
Ratio of net investment
income to average net
assets:
Before waiver from
adviser.................. 2.79% 1.67% 1.70% 2.54%* 3.52% 4.67% 5.04% 4.07%*
After waiver from
adviser.................. 2.81% 1.74% 1.81% 2.59%* 3.73% 4.88% 5.56% 4.89%*
</TABLE>
- ---------
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates, and a sale at net asset value on the last
day of each period reported. Total investment returns for periods of less
than one year have not been annualized.
9
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT MUNICIPAL MONEY FUND
-----------------------------------------------------------------
FOR THE YEARS FOR THE PERIOD
ENDED OCTOBER 31, NOVEMBER 6, 1990+
------------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------
Net investment income.......................... 0.026 0.017 0.015 0.022 0.040
Dividends from net investment income........... (0.026) (0.017) (0.015) (0.022) (0.040)
------- ------- ------- ------- ------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------
------- ------- ------- ------- ------
Total investment return (1).................... 2.62% 1.74% 1.49% 2.25% 4.04%
------- ------- ------- ------- ------
------- ------- ------- ------- ------
Ratios/Supplemental data:
Net assets, end of period (000's).............. $22,209 $25,763 $27,937 $28,063 $40,078
Ratio of expenses to average net assets**...... 1.01% 0.90% 0.97% 0.86% 0.36%*
Ratio of net investment income to average net
assets**..................................... 2.63% 1.71% 1.47% 2.28% 3.96%*
</TABLE>
- ------------
* Annualized
+ Commencement of operations
(1) Total investment return is calculated assuming a $1,000 investment in fund
shares on the first day of each period reported, reinvestment of all
dividends at net asset value on the payable dates, and a sale at net asset
value on the last day of each period reported. Total investment returns for
periods less than one year have not been annualized.
** For the period November 6, 1990 to October 31, 1991, the predecessor adviser
waived and/or reimbursed the Fund for a portion of its operating expenses.
If such fee waivers and/or expense reimbursements had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income to average net assets would have been 0.82% and
3.50%, respectively.
<TABLE>
<CAPTION>
NEW JERSEY MUNICIPAL MONEY FUND
--------------------------------------------------------------------
FOR THE YEARS FOR THE PERIOD
ENDED OCTOBER 31, FEBRUARY 1, 1991+
------------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
------- ------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------
Net investment income.......................... 0.027 0.018 0.016 0.025 0.032
Dividends from net investment income........... (0.027) (0.018) (0.016) (0.025) (0.032)
------- ------- ------- ------- ------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------
------- ------- ------- ------- ------
Total investment return (1).................... 2.75% 1.76% 1.65% 2.49% 3.19%
------- ------- ------- ------- ------
------- ------- ------- ------- ------
Ratios/Supplemental data:
Net assets, end of period (000's).............. $36,206 $31,981 $36,473 $27,625 $ 41,504
Ratio of expenses to average net assets**...... 0.93% 0.85% 0.93% 0.86% 0.27%*
Ratio of net investment income to average net
assets**..................................... 2.73% 1.74% 1.63% 2.51% 4.20%*
</TABLE>
- ------------
* Annualized
+ Commencement of operations
(1) Total investment return is calculated assuming a $1,000 investment in fund
shares on the first day of each period reported, reinvestment of all
dividends at net asset value on the payable dates, and a sale at net asset
value on the last day of each period reported. Total investment returns for
periods less than one year have not been annualized.
** For the period February 1, 1991 to October 31, 1991, the predecessor adviser
waived and/or reimbursed the Fund for a portion of its operating expenses.
If such fee waivers and/or expense reimbursements had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income to average net assets would have been 0.83% and
3.64%, respectively.
10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of both the Money Market Portfolio and the U.S.
Government Portfolio is to provide maximum current income consistent with
liquidity and conservation of capital. Each Fund seeks to meet this objective by
following different investment policies. The Tax-Free Fund's investment
objective is to provide maximum current income exempt from federal income tax
consistent with liquidity and conservation of capital. The California Municipal
Money Fund's investment objective is to provide maximum current income exempt
from federal income tax and California personal income tax consistent with
liquidity and conservation of capital. The New York Municipal Money Fund's
investment objective is to provide maximum current income exempt from federal
income tax and New York State and New York City personal income taxes consistent
with liquidity and conservation of capital. The Connecticut Municipal Money
Fund's objective is the maximization of current income exempt from federal and
Connecticut state income taxes for residents of the state of Connecticut,
consistent with the preservation of capital and the maintenance of liquidity.
The New Jersey Municipal Money Fund's objective is the maximization of current
income exempt from fed-eral and New Jersey state income taxes for residents of
the state of New Jersey, consistent with the preservation of capital and the
\maintenance of liquidity.
Each Fund maintains a dollar-weighted average portfolio maturity of 90 days
or less. In managing each Fund's portfolio, Mitchell Hutchins may employ a
number of professional money management techniques, including varying the
composition and the average weighted maturity of each Fund's portfolio based
upon its assessment of the relative values of various money market instruments
and future interest rate patterns, in order to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. Mitchell
Hutchins may also seek to improve a Fund's yield by purchasing or selling
securities to take advantage of yield disparities among similar or dissimilar
money market instruments that regularly occur in the money market.
There can be no assurance that the Funds will achieve their investment
objectives. In periods of declining interest rates, the Funds' yields will tend
to be somewhat higher than prevailing market rates, and in periods of rising
interest rates the opposite will be true. Also, when interest rates are falling,
net cash inflows from the continuous sale of a Fund's shares are likely to be
invested in portfolio instruments producing lower yields than the balance of
that Fund's portfolio, thereby reducing its yield. In periods of rising interest
rates, the opposite can be true.
MONEY MARKET PORTFOLIO
The Money Market Portfolio invests in high-grade money market instruments
with remaining maturities of 13 months or less. These instruments include U.S.
government securities, obligations of U.S. banks, commercial paper and other
short-term corporate obligations, corporate bonds and notes, variable and
floating rate securities and participation interests or repurchase agreements
involving any of the foregoing securities. Participation interests are pro rata
interests in securities held by others.
The U.S. government securities in which the Money Market Portfolio may
invest include direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and obligations issued or guaranteed by U.S. government
agencies and instrumentalities, including securities that are supported by the
full faith and credit of the United States (such as Government National Mortgage
Association certificates
11
<PAGE>
("GNMAs")), securities supported primarily or solely by the creditworthiness of
the issuer (such as securities of the Resolution Funding Corporation and the
Tennessee Valley Authority) and securities that are supported primarily or
solely by specific pools of assets and the creditworthiness of a U.S.
government-related issuer (such as mortgage-backed securities issued by the
Federal National Mortgage Association).
The Money Market Portfolio may invest in obligations (including certificates
of deposit, bankers' acceptances and similar obligations) of U.S. banks,
including foreign branches of domestic banks and domestic branches of foreign
banks, having total assets in excess of $1.5 billion at the time of purchase.
The Fund may also invest in interest-bearing savings deposits in U.S. commercial
and savings banks having total assets of $1.5 billion or less, provided that the
principal amounts at each such bank are fully insured by the Federal Deposit
Insurance Corporation and the aggregate amount of such deposits (plus interest
earned) does not exceed 5% of the value of the Fund's assets.
The commercial paper and other short-term corporate obligations purchased by
the Money Market Portfolio consist only of obligations that Mitchell Hutchins
determines, pursuant to procedures adopted by the Corporation's board of
directors, present minimal credit risks and are either (1) rated in the highest
short-term rating category by at least two nationally recognized statistical
rating organizations ("NRSROs"), (2) rated in the highest short-term rating
category by a single NRSRO if only that NRSRO has assigned the obligations a
short-term rating or (3) unrated, but determined by Mitchell Hutchins to be of
comparable quality ("First Tier Securities"). The Money Market Portfolio
generally may invest no more than 5% of its total assets in the securities
of a single issuer (other than securities issued
by the U.S. government, its agencies or instrumentalities).
U.S. GOVERNMENT PORTFOLIO
The U.S. Government Portfolio invests in U.S. government securities with
remaining maturities of 13 months or less and repurchase agreements secured by
U.S. government securities. Under investment guidelines adopted by the
Corporation's board of directors, the U.S. Government Portfolio currently
invests only in securities, such as U.S. Treasury bills, Treasury notes and
GNMAs, that are backed by the full faith and credit of the United States and
repurchase agreements secured by such securities. These guidelines may be
modified by the directors without shareholder approval, but there is no present
intention to do so. U.S. government securities in which the Fund would otherwise
be authorized to invest include obligations supported primarily or solely by the
creditworthiness of the issuer.
TAX-FREE FUND
The Tax-Free Fund invests substantially all of its assets in money market
instruments with remaining maturities of 13 months or less issued by states,
municipalities and public authorities, the interest from which is exempt from
federal income tax ("Municipal Securities"). The Fund purchases only those
Municipal Securities that are First Tier Securities. These Municipal Securities
include municipal notes, municipal commercial paper, municipal bonds, floating
and variable rate municipal obligations and participation interests in municipal
bonds and floating and variable rate obligations. Municipal bonds include
industrial development bonds ("IDBs"), private activity bonds ("PABs"), moral
obligation bonds, municipal lease obligations and certificates of participation
therein and put bonds. The interest on most PABs is an
12
<PAGE>
item of tax preference for purposes of the federal alternative minimum tax
("AMT"). Under normal market conditions, the Fund intends to invest in Municipal
Securities that pay interest that is not an item of tax preference for purposes
of the AMT ("AMT exempt interest"), but may invest up to 20% of its total assets
in such securities if, in Mitchell Hutchins' judgment, market conditions
warrant. The principal municipal obligations in which the Fund invests are
described in the Appendix to this Prospectus.
CALIFORNIA MUNICIPAL MONEY FUND
Except for temporary purposes, the California Municipal Money Fund will
invest at least 80% and will seek to invest 100% of its net assets in Municipal
Securities issued by the State of California, its municipalities and public
authorities and other issuers if such obligations pay interest that is exempt
from federal income tax as well as California personal income tax ("California
Municipal Securities").
The California Municipal Money Fund invests in high-grade California
Municipal Securities with remaining maturities of 13 months or less. These
instruments include the types of Municipal Securities identified above for the
Tax-Free Fund and further described in the Appendix to this Prospectus. Under
normal market conditions, the Fund intends to invest in California Municipal
Securities that pay AMT exempt interest, but may invest without limit in
securities that pay interest that is subject to the AMT if, in Mitchell
Hutchins' judgment, market conditions warrant. The California Municipal
Securities purchased by the Fund consist only of First Tier Securities.
NEW YORK MUNICIPAL MONEY FUND
Except for temporary purposes, the New York Municipal Money Fund will invest
at least 80% and will seek to invest 100% of its net assets in Municipal
Securities issued by the State of New York, its municipalities and public
authorities and other issuers if such obligations pay interest that is exempt
from federal income tax as well as New York State and New York City personal
income taxes ("New York Municipal Securities").
The New York Municipal Money Fund invests in high-grade New York Municipal
Securities with remaining maturities of 13 months or less. These instruments
include the types of Municipal Securities identified above for the Tax-Free Fund
and further described in the Appendix to this Prospectus. Under normal market
conditions, the Fund intends to invest in New York Municipal Securities that pay
AMT exempt interest, but may invest without limit in securities that pay
interest that is subject to the AMT if, in Mitchell Hutchins' judgment, market
conditions warrant. The New York Municipal Securities purchased by the Fund
consist only of First Tier Securities.
CONNECTICUT MUNICIPAL MONEY FUND AND
NEW JERSEY MUNICIPAL MONEY FUND
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund invest
primarily in the debt securities of the State after which it is named, such
State's political subdivisions, authorities and corporations, the interest from
which is, in the opinion of bond counsel to the issuer, exempt from Federal and
such State's income taxes (collectively, "State Municipal Obligations" or when
the context so requires "Connecticut Municipal Obligations;" or "New Jersey
Municipal Obligations."). To the extent acceptable State Municipal Obligations
are at any time unavailable for investment by each Fund, the Fund will invest,
for temporary defensive purposes, primarily in Municipal Obligations (defined as
debt securities, the interest from which is exempt from Federal
13
<PAGE>
income tax in the opinion of bond counsel to the issuer). Obligations in which
the Funds invest may not earn as high a level of current income as long-term or
lower quality obligations which generally have less liquidity, greater market
risk and more fluctuation in market value.
It is a fundamental policy of the Connecticut Municipal Money Fund and the
New Jersey Municipal Money Fund that it invest at least 80% of the value of its
net assets (except when maintaining a temporary defensive position) in Municipal
Obligations. At least 65% of the value of each Fund's net assets will be
invested in State Municipal Obligations, as defined above, and the remainder may
be invested in securities that are not State Municipal Obligations and,
therefore, may be subject to State income taxes.
OTHER INVESTMENT POLICIES AND RISK FACTORS RELATING TO ALL FUNDS--EXCEPT
CONNECTICUT MUNICIPAL MONEY FUND AND NEW JERSEY MUNICIPAL MONEY FUND
U.S. GOVERNMENT SECURITIES. The Money Market and U.S. Government Portfolios
may also acquire securities issued or guaranteed as to principal and interest by
the U.S. government in the form of custodial receipts that evidence ownership of
future interest payments, principal payments or both on certain U.S. Treasury
notes or bonds. Such notes and bonds are held in custody by a bank on behalf of
the owners of such notes or bonds. These custodial receipts are known by various
names, including "Treasury Investment Growth Receipts" ("TIGRs") and
"Certificates of Accrual on Treasury Securities" ("CATS"). The Funds may also
invest in separately traded principal and interest components of securities
issued or guaranteed by the U.S. Treasury. The principal and interest components
of selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently. The
staff of the SEC currently takes the position that "stripped" U.S. government
securities that are not issued through the U.S. Treasury STRIPS program are not
U.S. government securities.
VARIABLE AND FLOATING RATE SECURITIES. The Funds may purchase variable and
floating rate securities with remaining maturities in excess of 13 months issued
by U.S. government agencies or instrumentalities or guaranteed by the U.S.
government (Money Market and U.S. Government Portfolios), or (if subject to a
demand feature exercisable within 13 months or less) issued by U.S. companies
(Money Market Portfolio) or municipal issuers (Municipal Funds). The yield on
these securities is adjusted in relation to changes in specific rates, such as
the prime rate, and different securities may have different adjustment rates.
The Funds' investments in these securities must comply with conditions
established by the SEC under which they may be considered to have remaining
maturities of 13 months or less. Certain of these obligations carry a demand
feature that gives the Fund the right to tender them back to the issuer or a
remarketing agent and receive the principal amount of the security prior to
maturity. The demand feature may or may not be backed by letters of credit or
other credit support arrangements provided by banks or other financial
institutions, the credit standing of which affects the credit quality of the
obligation.
14
<PAGE>
Securities purchased by the Money Market Portfolio may include variable
amount master demand notes, which are unsecured redeemable obligations that
permit investment of varying amounts at fluctuating interest rates under a
direct agreement between the Fund and the issuer. The principal amount of these
notes may be increased from time to time by the parties (subject to specified
maximums) or decreased by the Fund or the issuer. These notes are payable on
demand and are typically unrated.
REPURCHASE AGREEMENTS. The Money Market Portfolio and the U.S. Government
Portfolio each may enter into repurchase agreements with U.S. banks and dealers
with respect to any security in which that Fund is authorized to invest. Each
Municipal Fund may enter into repurchase agreements with such institutions with
respect to U.S. government securities, commercial paper, bank certificates of
deposit and bankers' acceptances. Repurchase agreements are transactions in
which a Fund purchases securities from a bank or recognized securities dealer
and simultaneously commits to resell the securities to that bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Although repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible decline in the market value of the underlying
securities and delays and costs to the Fund if the other party to the repurchase
agreement becomes insolvent, the Funds intend to enter into repurchase
agreements only with banks and dealers in transactions believed by Mitchell
Hutchins to present minimal credit risks in accordance with guidelines
established by the applicable Corporation's board of directors or Trust's board
of trustees. The Municipal Funds do not intend to enter into repurchase
agreements except as a temporary measure and under unusual circumstances.
SPECIAL RISK CONSIDERATIONS--CALIFORNIA MUNICIPAL MONEY FUND AND NEW YORK
MUNICIPAL MONEY FUND.
The California Municipal Money Fund and the New York Municipal Money Fund
each may invest more than 25% of the value of its total assets in Municipal
Securities that are related in such a way that an economic, business or
political development or change affecting one such security would also affect
the other securities, such as securities the interest on which is paid from
revenues of similar types of projects. The Funds may be subject to greater risk
than other funds that do not follow this practice.
These Funds are "non-diversified," as that term is defined in the Investment
Company Act of 1940 ("1940 Act"), but each intends to continue to qualify as a
"regulated investment company" for federal income tax purposes. See "Dividends
and Taxes." This means, in general, that more than 5% of each Fund's total
assets may be invested in securities of one issuer, but only if, at the close of
each quarter of the Fund's taxable year, the aggregate amount of such holdings
does not exceed 50% of the value of its total assets and no more than 25% of the
value of its total assets is invested in the securities of a single issuer.
Although Mitchell Hutchins anticipates that normally each Fund's portfolio will
include the securities of a number of different issuers, each Fund may be
subject to greater risk with respect to its portfolio securities than a
"diversified" investment company, because changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in that
Fund's yield or affect that Fund's ability to maintain a constant net asset
value per share.
RISKS OF CALIFORNIA MUNICIPAL SECURITIES. The California Municipal Money
Fund's investment concentration in California Municipal Securities involves
greater risks than if it
15
<PAGE>
selected its investments from a broader geographic region. The Fund's yield and
ability to maintain a constant net asset value per share can be affected by
political and economic developments within the State of California
("California") and by the financial condition of California, its public
authorities and political subdivisions. California suffered a severe eco-
nomic recession between 1990-1993, which resulted in broad-based revenue
shortfalls for the State and many local governments. California's fiscal
condition has improved as its economy has been in a sustained recovery since
1994. During the recession, the State substantially reduced local assistance,
and further reductions could adversely affect the financial conditions of
cities, counties, and other government agencies facing constraints in their own
revenue collections. California's long-term credit rating has been reduced in
the past several years.
In the past, California voters have passed amendments to the California
Constitution and other measures that limit the taxing and spending authority of
California governmental entities and future voter initiatives could result in
adverse consequences affecting California Municipal Securities. These factors,
among others (including the outcome of related pending litigation), could reduce
the credit standing of certain issuers of California Municipal Securities. A
more detailed discussion of the risks of investing in California Municipal
Securities is included in the Statement of Additional Information.
RISKS OF NEW YORK MUNICIPAL SECURITIES. The New York Municipal Money Fund's
investment concentration in New York Municipal Securities involves greater risks
than if it selected its investments from a broader geographic region. The Fund's
yield and ability to maintain a constant net asset value per share can be
affected by political and economic developments within the State of New York
(the "State") and by the financial condition of the State, its public
authorities and political subdivisions, particularly the City of New York (the
"City"). Although the State reduced its accumulated General Fund deficits and
experienced operating surpluses in fiscal year ("FY") 1991-92 through 1993-94,
it experienced an operating deficit of $1.426 billion for FY 1994-95. The State
continues to experience substantial financial difficulties related to the recent
recession, resulting in, among other things, reductions in General Fund
receipts. Currently the 1995-96 State Financial Plan shows a cash balance in the
General Fund, and projects a moderate operating surplus, but prolonged
interruptions in the State's receipt of federal grants could create adverse
developments. Similarly, although the Governor's proposed FY 1996-97 budget
projects a cash balance in the General Fund, it anticipates closing an
approximate $3.9 billion budget gap to arrive at such balance. Approximately $2
billion of such savings are expected to derive from Federal policy changes. The
likelihood that a balanced budget for FY 1996-97 will be achieved depends in
part on a Federal budget resolution as well as the implementation of numerous
and substantial corrective measures assumed in the Governor's proposed budget.
The City, (which is constrained in its fiscal flexibility by an already heavy
local tax burden, urgent social needs and its extensive and deteriorating
infrastructure) and most suburban county governments have experienced serious
fiscal problems related to the recessionary performance of the regional economy,
which has caused substantial, broad-based and recurring revenue shortfalls. Both
the State of New York's credit rating and the City's credit rating have been,
and could be further, reduced; and their ability to provide assistance to public
authorities and political subdivisions has been, and could be
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further, impaired. A more detailed discussion of the risks of investing in New
York Municipal Securities is included in the Statement of Additional
Information.
OTHER INVESTMENT POLICIES.
During unusual market conditions, including when, in the opinion of Mitchell
Hutchins there are insufficient suitable Municipal Securities available, each of
the Municipal Funds temporarily may invest more than 20% of its net assets in
other Municipal Securities. For this purpose, "suitable Municipal Securities"
means, in the case of the Tax-Free Fund, Municipal Securities that pay AMT
exempt interest, in the case of California Municipal Money Fund, California
Municipal Securities and, in the case of New York Municipal Money Fund, New York
Municipal Securities. "Other Municipal Securities" means, in the case of the
Tax-Free Fund, Municipal Securities that pay interest subject to the AMT and, in
the case of California Municipal Money Fund and New York Municipal Money Fund,
Municipal Securities other than California Municipal Securities and New York
Municipal Securities, respectively.
Under normal circumstances, each Municipal Fund must invest at least 80% of
its net assets in securities that pay interest which is exempt from federal
income tax. However, when Mitchell Hutchins believes unusual circumstances
warrant a defensive posture, including when, in the opinion of Mitchell
Hutchins, neither suitable Municipal Securities nor other Municipal Securities
are available, each Municipal Fund may hold cash and may invest any portion or
all of its net assets in taxable money market instruments, including repurchase
agreements. To the extent a Fund holds cash, such cash would not earn income and
would reduce the Fund's yield.
Each Fund may borrow money for temporary purposes, but not in excess of 10%
of its total assets. Borrowings by the Money Market Portfolio and U.S.
Government Portfolio may include reverse repurchase agreements involving up to
5% of each Fund's assets. The Municipal Funds may purchase Municipal Securities
on a "when-issued" basis, that is, for delivery beyond the normal settlement
date at a stated price and yield. A Fund generally would not pay for such
securities or start earning interest on them until they are received. However,
when a Fund purchases Municipal Securities on a when-issued basis, it
immediately assumes the risks of ownership, including the risk of price
fluctuation. Failure by the issuer to deliver a security purchased on a
when-issued basis may result in a loss or missed opportunity to make an
alternative investment. Each Fund expects that commitments to purchase
when-issued securities normally will not exceed 25% of its assets.
OTHER INVESTMENT POLICIES AND RISK FACTORS RELATING TO
CONNECTICUT MUNICIPAL MONEY FUND AND NEW JERSEY MUNICIPAL MONEY FUND.
Both Funds seek to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Funds use the amortized cost method of
valuing securities pursuant to Rule 2a-7 under the Act, certain requirements of
which are summarized as follows. In accordance with Rule 2a-7, each Fund is
required to maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining maturities of 397 days or less
and invest only in U.S. dollar denominated securities determined in accordance
with procedures established by the Board of Trustees to present minimal credit
risks and which are rated in one of the two highest rating categories for debt
obligations by at least two NRSROs (or one rating organization if the instrument
was rated only by one such organization) or, if unrated, are of comparable
quality as determined in accordance with procedures established by the Board of
Trustees.
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Each Fund may invest more than 25% of the value of its total assets in
Municipal Obligations, which are related in such a way that an economic,
business or political development or change affecting one such security also
would affect the other securities; for example, securities the interest upon
which is paid from revenues of similar types of projects.
Each Fund also may invest more than 25% of the value of its total assets in
industrial development bonds which, although issued by industrial
development authorities, may be backed only by the assets and revenues of the
non-governmental users. Interest on Municipal Obligations (including certain
industrial development bonds) which are specified private activity bonds, as
defined in the Internal Revenue Code of 1986, as amended (the "Code"), issued
after August 7, 1986, while exempt from Federal income tax, is a preference
item for the purpose of the alternative minimum tax. Where a regulated
investment company receives such interest, a proportionate share of any exempt-
interest dividend paid by the investment company may be treated as such a
preference item to shareholders. Both Funds may invest without limitation
in such Municipal Obligations if Mitchell Hutchins determines that their
purchase is consistent with the Fund's investment objective.
Both Funds may purchase floating and variable rate demand obligations,
which are tax exempt obligations ordinarily having stated maturities in excess
of 397 days, but which permit the holder to demand payment of principal at
any time, or at specified intervals not exceeding 397 days, in each case upon
not more than 30 days' notice. Variable rate demand notes include master demand
notes which are obligations that permit the Funds to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct
arrangements between a Fund, as lender, and the borrower. The interest rates on
these obligations fluctuate from time to time. Frequently, such obligations are
secured by letters of credit or other credit support arrangements provided by
banks. Use of letters of credit or other credit support arrangements do not
adversely affect the tax exempt status of these obligations. Because these
obligations are direct lending arrangements between the lender and borrower, it
is not contemplated that such instruments generally will be traded, and there
generally is no secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, a Fund's right to
redeem is dependent on the ability of the borrower to pay principal and
interest on demand. Each obligation purchased by a Fund will meet the quality
criteria established for the purchase of Municipal Obligations. Mitchell
Hutchins, on behalf of each Fund, considers on an ongoing basis the
creditworthiness of the issuers of the floating and variable rate demand
obligations in a Fund's portfolio. Neither Fund will invest more than 10% of
the value of its net assets in securities that are illiquid, which would
include floating or variable rate demand obligations as to which it cannot
exercise the demand feature on not more than seven days' notice if there is no
secondary market available for these obligations.
Both Funds may purchase from financial institutions participation interests
in Municipal Obligations (such as industrial development bonds and municipal
lease/purchase agreements). A participation interest gives the purchaser an
undivided interest in the Municipal Obligation in the proportion that the
purchaser's participation interest bears to the total principal amount of the
Municipal Obligation. These instruments may have fixed, floating or variable
rates of interest, with remaining maturities of 397 days or less. If the
participation interest is
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unrated, or has been given a rating below that which otherwise is permissible
for purchase by the Fund, the participation interest will be backed by an
irrevocable letter of credit or guarantee of a bank that the Board of
Trustees has determined meets the prescribed quality standards for banks set
forth below, or the payment obligation otherwise will be collateralized by U.S.
Government securities or other securities deemed appropriate by the Board of
Trustees, or the underlying Municipal Obligations will be permissible
investments for the Fund. For certain participation interests, each Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of the Fund's participation interest in the Municipal Obligation,
plus accrued interest. As to these instruments, each Fund intends to exercise
its right to demand payment only upon a default under the terms of the
Municipal Obligation, as needed to provide liquidity to meet redemptions, or to
maintain a high quality investment portfolio. Neither Fund will invest more
than 10% of the value of its net assets in securities that are illiquid, which
would include participation interests that do not have the demand feature
described above. Under normal market conditions, no Fund will invest more than
25% of its total assets in participation interests or other securities issued
by or purchased from banks.
Both Funds may acquire stand-by commitments with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment, a Fund
obligates a broker, dealer or bank to repurchase at such Fund's option
specified securities at a specified price. The exercise of a stand-by
commitment, therefore, is subject to the ability of the seller to make payment
on demand. Each Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The Trust anticipates that stand-by commitments will be
available from brokers, dealers and banks without the payment of any direct
or indirect consideration. Each Fund may pay for stand-by commitments if such
action is deemed necessary thus increasing to a degree the cost of the
underlying Municipal Obligation and similarly decreasing such security's yield
to investors. The New Jersey Municipal Money Fund may acquire stand-by
commitments to the extent consistent with the requirements for a "qualified
investment fund" under the New Jersey gross income tax.
Both Funds may purchase tender option bonds. A tender option bond is a
Municipal Obligation (generally held pursuant to a custodial arrangement)
having a relatively long maturity and bearing interest at a fixed rate
substantially higher than prevailing short-term tax exempt rates, that has been
coupled with the agreement of a third party, such as a bank, broker-dealer or
other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligation's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at
or near the commencement of such period, that would cause the securities,
coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder effectively
holds a demand obligation that bears interest at the prevailing short-term tax
exempt rate. Mitchell Hutchins, on behalf of the Trust, will consider on an
ongoing basis the creditworthiness of the issuer of the underlying Municipal
Obligation, of any custodian and of the third party provider of the tender
option. In
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certain instances and for certain tender option bonds, the option may be
terminable in the event of a default in payment of principal or interest on the
underlying Municipal Obligations and for other reasons. The Trust will consider
as illiquid securities tender option bonds as to which it cannot exercise the
tender feature on not more than seven days' notice if there is no secondary
market available for these obligations.
Both Funds may invest, for other than temporary defensive purposes, in
taxable short-term investments ("Taxable Investments") in an amount not to
exceed 20% of the Fund's net assets. Both Funds also may invest without limi-
tation in Taxable Investments for temporary defensive purposes. Taxable
Investments consist of: notes of issuers having, at the time of purchase, a
quality rating within the two highest grades of Moody's, S&P or Fitch;
obligations of the U.S. Government, its agencies or instrumentalities;
commercial paper rated at least P-1 by Moody's or A-1 by S&P of P-1 by Fitch;
certificates of deposit of U.S. domestic banks, including foreign branches
of domestic banks, with assets of $1 billion or more; time deposits; bankers'
acceptances and other short-term bank obligations; and repurchase agreements
in respect of any of the foregoing. Under normal market conditions, the Trust
anticipates that not more than 5% of the value of both Funds' total assets will
be invested in any one category of Taxable Investments. Dividends paid by a
Fund that are attributable to interest earned by such Fund from Taxable
Investments will be taxable to its investors. If a Fund purchases Taxable
Investments, it will value them using the amortized cost method and comply
with the provisions of Rule 2a-7 relating to purchases of taxable instruments.
To the extent a Fund is invested in Taxable Investments, it will not be
achieving its objective of maximizing tax exempt income. See "Dividends and
Taxes." Taxable Investments are more fully described in the Statement of
Additional Information to which reference hereby is made.
Each Fund may purchase Municipal Obligations on a when-issued basis (as
described above for the other Municipal Funds). No additional when-issued
commitments will be made for a Fund if more than 20% of the value of such
Fund's net assets would be so committed. Each Fund may also borrow money for
temporary purposes, but not in excess of 15% of the value of its total assets.
SPECIAL RISKS CONSIDERATIONS--
CONNECTICUT MUNICIPAL MONEY FUND AND
NEW JERSEY MUNICIPAL MONEY FUND
RISKS OF CONNECTICUT MUNICIPAL MONEY FUND. Connecticut's economy relies in
part on activities that may be adversely affected by cyclical change and
recent declines in defense spending have had an impact on unemployment levels.
Although the State recorded General Fund surpluses in its 1986 and 1987 fiscal
years, Connecticut reported deficits from its General Fund operations for the
fiscal years 1988 through 1991. Together with the deficit carried forward from
the State's 1990 fiscal year, the total General Fund deficit for the 1991
fiscal year was $965.7 million. The total deficit was funded by the issuance of
General Obligation Economic Recovery Notes. The State Comptroller's annual
reports for the fiscal years ended June 30, 1993, 1994 and 1995 reflected
General Fund operating surpluses of $113.5 million, $19.7 million and $80.5
million, respectively. In February 1996, the Comptroller estimated a General
Fund deficit of $22.1 million for the fiscal year end. To the extent there is a
deficit, it may be funded by a transfer from the $80.5 million Budget Reserve
Fund. As a result of recurring budgetary problems in the early 1990s, S&P
downgraded the State's general obligation bonds from AA+ to AA in April
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1990 and, in September 1991, to AA-, Moody's and Fitch rate Connecticut's bonds
Aa and AA+, respectively.
RISKS OF NEW JERSEY MUNICIPAL MONEY FUND. Although New Jersey enjoyed a
period of economic growth with unemployment levels below the national average
during the mid-1980s, New Jersey's economy slowed down well before the onset of
the national recession, which, according to the National Bureau of Economic
Research, began in July 1990. Reflecting the economic downturn, New Jersey's
unemployment rate rose from a low of 3.6% in the first quarter of 1989 to a
recessionary peak of 8.4% during 1992. Since then, the State's unemployment
rate fell to 6.4% during the first ten months of 1995. As a result of New
Jersey's recent fiscal weakness, in July 1991, S&P lowered its rating of the
State's AAA general obligation debt to AA+.
ADDITIONAL POLICIES AND CONSIDERATIONS RELATING TO ALL FUNDS. No Fund will
invest more than 10% of its net assets in illiquid securities, including
repurchase agreements with maturities in excess of seven days.
Future federal, state and local laws may adversely affect the tax-exempt
status of interest on Municipal Securities held by one of the Municipal Funds
or of the exempt-interest dividends paid by the Municipal Funds, extend the
time for payment of principal or interest or otherwise constrain enforcement of
such obligations. Opinions relating to the validity of Municipal Securities and
the tax-exempt status of interest thereon are rendered by the issuer's bond
counsel at the time of issuance; Mitchell Hutchins will rely on such opinions
without independent verification.
A Fund's investment objective may not be changed without the approval of
its shareholders. The California Municipal Money Fund's investment policy of
investing at least 80% of its net assets in California Municipal Securities and
the similar investment policy of the New York Municipal Money Fund, Con-
necticut Municipal Money Fund and New Jersey Municipal Money Fund relating to
investments in New York Municipal Securities, Connecticut Municipal Securities
and New Jersey Municipal Securities, respectively, may not be changed without
approval of the appropriate Fund's shareholders. Certain other investment
limitations, as described in the Statement of Additional Information, also may
not be changed without shareholder approval. All other investment policies may
be changed by the applicable Corporation's board of directors or the Trust's
board of trustees without shareholder approval.
PURCHASES
THE RMA AND BSA PROGRAMS. Shares of each Fund are available primarily
through the RMA and BSA programs. RMA and BSA participants are asked to select
one of the Funds as their designated portfolio ("Primary Sweep Money Fund").
Investors will have all free credit cash balances (including proceeds from
securities sold) in the account invested in the Primary Sweep Money Fund.
Balances of $1 or more are invested daily. Each Fund and PaineWebber reserve
the right to reject any purchase order and to suspend the offering of Fund
shares for a period of time.
Investors who choose one Fund as their Primary Sweep Money Fund may also
purchase shares of another Fund by contacting their PaineWebber investment
executives or correspondent firms. Minimum purchase and maintenance
requirements, however, may apply to purchases of shares of a Fund other than
the investor's Primary Sweep Money Fund.
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Certain features available to RMA and BSA participants are summarized in
the Appendices to the Statement of Additional Information. The RMA program is
more fully described in the brochure, "Facts about Your PaineWebber Resource
Management Account" and the BSA program is more fully described in the
brochure, "Facts about Your Business Services Account". The availability of
Fund shares to customers of PaineWebber's correspondent firms varies depending
on the arrangements between PaineWebber and such firms.
An order to purchase shares of a Fund will be executed on the Business Day
on which federal funds become available to the Fund, at the Fund's next-
determined net asset value per share. A "Business Day" is any day on which the
Boston offices of the Fund's custodian, State Street Bank and Trust Company
("Custodian"), and the New York City offices of PaineWebber and PaineWebber's
bank, are all open for business. "Federal funds" are funds deposited by a
commercial bank in an account at a Federal Reserve Bank that can be transferred
to a similar account of another bank in one day and thus may be made
immediately available to a Fund through its Custodian.
RMA and BSA participants may change their Primary Sweep Money Fund at any
time by notifying their PaineWebber investment executives or correspondent
firms. However, RMA and BSA participants may not have more than one Primary
Sweep Money Fund at a time.
On any Business Day, a Fund will accept purchase orders and credit shares
to investors' accounts as follows.
PURCHASES WITH FUNDS HELD AT PAINEWEBBER. All deposits to RMA and BSA
participants' brokerage accounts and any free credit cash balances that may
arise in such brokerage accounts will be automatically invested in shares of
their Primary Sweep Money Fund, as described above under "The RMA and BSA
Programs," provided that federal funds are available for the investment.
Federal funds normally are available for cash balances arising from the sale of
securities held in a brokerage account on the Business Day following
settlement, but in some cases can take longer.
PURCHASES BY CHECK OR ELECTRONIC FUNDS TRANSFER CREDIT. RMA and BSA
participants may purchase Fund shares by depositing into their account checks
drawn on a U.S. bank. The RMA or BSA participant's brokerage account number
should be included on the check.
As noted above, shares of the participant's Primary Sweep Money Fund will
be purchased when federal funds are available. RMA or BSA participants wishing
to invest amounts deposited in their accounts by check in one of the other
Funds should so instruct their PaineWebber investment executives or
correspondent firms. Federal funds are deemed available to a Fund two Business
Days after deposit of a personal check and/or an Electronic Funds Transfer
credit and one Business Day after deposit of a cashier's or certified check.
PaineWebber may benefit from the temporary use of the proceeds of personal
checks and Electronic Funds Transfer credits to the extent those funds are
converted to federal funds in fewer than two Business Days.
PURCHASES BY WIRE. RMA and BSA participants may also purchase shares of
their Primary Sweep Money Fund or another Fund by instructing their banks to
transfer federal funds by wire to their RMA or BSA account. Wire transfers
should be directed to: The Bank of New York, ABA 021000018, PaineWebber Inc.,
A/C 890-0114-088, OBI=FBO [Account Name]/[Brokerage Account Number]. The wire
must include the investor's name and RMA or BSA brokerage account number. RMA
or BSA participants wishing to transfer federal
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funds into their accounts should contact their PaineWebber investment
executives or correspondent firms to determine the appropriate wire
instructions.
To the extent that the amounts transferred by wire create a cash balance in
an investor's account, that cash balance will be automatically invested in the
investor's Primary Sweep Money Fund, as described above under "Purchases with
Funds Held at PaineWebber." RMA or BSA participants wishing to invest amounts
transferred by wire in one of the other Funds should so instruct their
PaineWebber investment executives or correspondent firms.
If PaineWebber receives a notice from an investor's bank of a wire transfer
of federal funds by 12:00 noon, eastern time, on a Business Day, the automatic
investment will be executed on that Business Day. Otherwise, the automatic
investment will be executed at 12:00 noon, eastern time, on the next Business
Day. PaineWebber and/or an investor's bank may impose a service charge for wire
transfers.
REDEMPTIONS
Shareholders may redeem any number of shares from their Fund accounts by
wire, by telephone or by mail. Shares will be redeemed at the net asset value
per share next determined after receipt by the Funds' transfer agent ("Transfer
Agent") of instructions from PaineWebber to redeem. PaineWebber delivers such
instructions to the Transfer Agent prior to the determination of net asset
value at 12:00 noon, eastern time, on any Business Day.
AUTOMATIC REDEMPTIONS. Under the RMA and BSA programs, PaineWebber will
redeem Fund shares automatically to satisfy outstanding "Debits" and "Charges."
"Debits" are amounts due PaineWebber on settlement date for securities
purchases and other debits in the investor's RMA or BSA brokerage account,
including margin loans, any federal funds wires arranged by PaineWebber ($5,000
and over) and fees for such wires and PaineWebber (not RMA or BSA) checks and
fees for such checks. "Charges" are RMA or BSA checks, Gold and Business
MasterCard purchases, cash advances, Bill Payment Service checks and Automated
Clearing House transfers including Electronic Funds Transfer Debits. Shares are
redeemed to cover Debits on the day the Debit is generated. Shares are redeemed
to cover RMA or BSA checks and Gold and Business MasterCard cash advances on
the day they are paid. Shares are redeemed to cover Gold and Business
MasterCard purchases at the end of the MasterCard monthly billing period.
Shares are also redeemed to cover interest due on and credit extended and
outstanding under the Bank One Line of Credit at the end of the MasterCard
monthly billing cycle. Securities purchases are automatically paid for on
settlement date. Fund shares will not be purchased until all Debits and Charges
in a shareholder's RMA or BSA brokerage account are satisfied.
ORDER OF REDEMPTION. If a shareholder owns shares of more than one Fund,
shares of the Primary Sweep Money Fund are always redeemed first; thereafter,
shares held in the other Funds will be redeemed, if necessary, in the following
order: first, Money Market Portfolio; second, U.S. Government Portfolio; third,
Tax-Free Fund; and fourth, New York Municipal Money Fund, California Municipal
Money Fund, Connecticut Municipal Money Fund or New Jersey Municipal Money
Fund.
ADDITIONAL INFORMATION ON REDEMPTIONS. Shareholders with questions about
redemption requirements should consult their PaineWebber investment executives
or correspondent firms. Shareholders who redeem all their shares will receive
cash credits to their RMA or BSA brokerage accounts for dividends earned on
those shares to (but not including) the
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day of redemption. The redemption price may be more or less than the purchase
price, depending on the market value of the Fund's portfolio; however, each
Fund anticipates that its net asset value per share will normally be $1.00 per
share. See "Valuation of Shares."
Because each Fund incurs certain fixed costs in maintaining shareholder
accounts, each Fund reserves the right to establish minimum initial purchase
requirements and to redeem Fund shares in any shareholder account of less than
$500 net asset value. If a Fund elects to do so, it will notify the shareholder
and provide the shareholder with an opportunity to increase the amount invested
to $500 or more within 60 days of the notice. This notice may appear on the
shareholder's account statement. If a shareholder requests redemption of shares
that were purchased recently, a Fund may delay payment until it is assured that
it has received good payment for the purchase of the shares. In the case of
purchases by check, this can take up to 15 days.
PaineWebber has the right to terminate an RMA or BSA brokerage account for
any reason. In such event, all Fund shares held in the shareholder's RMA or BSA
brokerage account will be redeemed and the proceeds sent to the shareholder
within three Business Days.
VALUATION OF SHARES
Each Fund uses its best efforts to maintain its net asset value at $1.00
per share. Each Fund's net asset value per share is determined by dividing the
Fund's net assets by the number of Fund shares outstanding. A Fund's net assets
are equal to the value of its investments and other assets minus its
liabilities. Each Fund's net asset value is determined once each Business Day
at 12:00 noon, eastern time.
Each Fund values its portfolio securities using the amortized cost method
of valuation, under which market value is approximated by amortizing the
difference between the acquisition cost and value at maturity of an instrument
on a straight-line basis over its remaining life. All cash, receivables and
current payables are carried at their face value. Other assets are valued at
fair value as determined in good faith by or under the direction of the board
of directors of the applicable Corporation or the board of trustees of the
applicable Trust.
DIVIDENDS AND TAXES
DIVIDENDS. Each Business Day, each Fund declares as dividends all of its
net investment income. Shares begin earning dividends on the day of purchase;
dividends are accrued to shareholder accounts daily and are automatically paid
in additional Fund shares monthly. Shares do not earn dividends on the day of
redemption. Net investment income includes accrued interest and earned discount
(including original issue discount and, except for Municipal Securities
acquired by the Municipal Funds prior to May 1, 1993, market discount), less
amortization of market premium and accrued expenses. Daily dividends declared
by each Municipal Fund do not include any net investment income attributable to
the accretion of market discount on Municipal Securities. Any such amounts,
which are taxable to each Fund's shareholders, are distributed annually, unless
more frequent distributions are necessary to maintain a Fund's net asset value
per share at $1.00 or to avoid income or excise taxes.
Each Fund distributes its net short-term capital gain, if any, annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The
Funds do not expect to realize net long-term capital gain and thus do not
anticipate payment of any long-term capital gain distributions.
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FEDERAL TAX. Each Fund intends to continue to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code so that it
will be relieved of federal income tax on that part of its investment company
taxable income (consisting generally of taxable net investment income and net
short-term capital gain, if any) that is distributed to its shareholders.
Dividends paid by the Money Market Portfolio and the U.S. Government
Portfolio generally are taxable to their shareholders as ordinary income,
notwithstanding that such dividends are paid in additional Fund shares.
Shareholders not subject to tax on their income, however, generally are not
required to pay tax on amounts distributed to them. Distributions by a
Municipal Fund that it designates as "exempt-interest dividends" generally may
be excluded from gross income by a shareholder. Interest on indebtedness
incurred by a shareholder to purchase or carry shares of a Municipal Fund is
not deductible.
Each Fund notifies its shareholders following the end of each calendar year
of the tax status of all distributions paid (or deemed paid) during that year.
The notice sent by each Municipal Fund specifies the amount of exempt-interest
dividends (and the portion thereof, if any, that is not AMT exempt interest)
and the amount of any taxable dividends.
Each Fund is required to withhold 31% of all taxable dividends payable to
any individuals and certain other noncorporate shareholders who (1) do not
provide the Fund with a correct taxpayer identification number or (2) otherwise
are subject to backup withholding.
CALIFORNIA TAXES. If the California Municipal Money Fund qualifies as a RIC
under the Internal Revenue Code and at least 50% of the value of its total
assets consists of California Municipal Securities, exempt-interest dividends
derived from interest on qualifying California Municipal Securities will be
exempt from California personal income tax ("California exempt-interest
dividends"), but not California franchise tax. Dividends derived from interest
on other Municipal Securities, taxable income and net capital gain are taxable
under California law at ordinary income rates. Interest on indebtedness
incurred by a shareholder to purchase or carry shares of the Fund is not
deductible for purposes of California personal income tax. California exempt-
interest dividends may affect the calculation of certain adjustments to
alternative minimum taxable income for shareholders that are corporations.
Shareholders receive notification annually stating the portion of the Fund's
exempt-interest dividends attributable to issuers in California and other
states. The Fund itself will not be subject to California franchise or
corporate income tax on interest income distributed to its shareholders.
NEW YORK STATE AND NEW YORK CITY TAXES. If the New York Municipal Money
Fund qualifies as a RIC under the Internal Revenue Code and at the end of each
quarter of the Fund's taxable year at least 50% of its assets are invested in
New York Municipal Securities, exempt-interest dividends paid by the Fund that
are derived from interest on qualifying New York Municipal Securities will be
exempt from New York State and New York City personal income taxes, but not
corporate franchise taxes. Dividends derived from interest on other Municipal
Securities, taxable income and net capital gain are not exempt from New York
State and New York City taxes. Interest on indebtedness incurred by a
shareholder to purchase or carry shares of the Fund is not deductible for
purposes of New York State or New York City personal income tax. Shareholders
receive notification annually stating the portion of the Fund's exempt-interest
dividends attributable to issuers
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in New York State, New York City and other states.
CONNECTICUT TAXES. Dividends paid by the Connecticut Municipal Money Fund
that qualify as exempt-interest dividends for Federal income tax purposes are
not subject to the Connecticut income tax imposed on individuals, trusts and
estates, to the extent that such dividends are derived from income received
by the Series as interest from Connecticut Municipal Obligations, or as
interest from obligations with respect to which Connecticut is prohibited by
Federal law from taxing. Dividends derived from other sources are subject to
Connecticut income tax except that dividends qualifying as capital gains
dividends for Federal income tax purposes are not subject to Connecticut income
tax to the extent derived from Connecticut Municipal Obligations. In the case
of a shareholder subject to the Connecticut income tax and required to pay the
Federal alternative minimum tax, the portion of exempt-interest dividends paid
by the Fund that is derived from income received by the Fund as interest from
Connecticut Municipal Obligations or obligations the interest with respect to
which Connecticut is prohibited by Federal law from taxing is not subject to
the net Connecticut minimum tax even though treated as a preference item for
purposes of the Federal alternative minimum tax.
Dividends qualifying as exempt-interest dividends for Federal income tax
purposes that are distributed by the Fund to entities taxed as corporations
under the Connecticut corporation business tax are not exempt from the tax.
The Connecticut Municipal Money Fund's shares are not subject to property
taxation by the State of Connecticut or its political subdivisions.
NEW JERSEY TAXES. New Jersey Municipal Money Fund anticipates that
substantially all dividends paid by the New Jersey Series will not be subject
to New Jersey gross income tax. In accordance with the provisions of New Jersey
law as currently in effect, distributions paid by a "qualified investment fund"
will not be subject to the New Jersey gross income tax to the extent the
distributions are attributable to income received as interest or gain from New
Jersey Municipal Obligations or direct U.S. Government obligations or certain
other specified obli-gations. To be classified as a qualified investment
fund, at least 80% of the Series' investments must consist of such
obligations. Distributions by a qualified investment fund that are
attributable to most other sources will be subject to the New Jersey gross
income tax. If the New Jersey Series qualifies as a qualified investment fund,
any gain on the redemption of New Jersey Municipal Money Fund's shares will not
be subject to the New Jersey gross income tax. To the extent a shareholder of
the New Jersey Municipal Money Fund is obligated to pay state or local taxes
outside on New Jersey, dividends earned by such shareholder may represent taxa-
ble income.
The shares of the New Jersey Municipal Money Fund are not subject to
property taxation by New Jersey or its political subdivisions.
ADDITIONAL INFORMATION. The foregoing is only a summary of some of the
important federal, state and local income tax considerations generally
affecting the Funds and their shareholders; see the Statement of Additional
Information for a further discussion. There may be other federal, state and
local tax considerations applicable to a particular investor. Prospective
shareholders are urged to consult their tax advisers.
MANAGEMENT
Each Corporation's board of directors, and each Trust's board of trustees,
as part of their
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<PAGE>
overall management responsibility, oversee various organizations responsible
for the Funds' day-to-day management. PaineWebber, the Funds' investment
adviser and administrator, provides a continuous investment program for each
Fund and supervises all aspects of its operations. As sub-adviser to the Funds,
Mitchell Hutchins makes and implements investment decisions and, as sub-
administrator, is responsible for the day-to-day administration of the Funds.
PaineWebber receives a monthly fee for these services. For the fiscal year
ended June 30, 1995, the effective advisory and administration fees paid to
PaineWebber by the Money Market Portfolio, the U.S. Government Portfolio, the
Tax-Free Fund, California Municipal Money Fund and New York Municipal Money
Fund were equal to 0.50%, 0.45%, 0.48%, 0.50%, and 0.50%, respectively, of the
Fund's average daily net assets. For the fiscal year ended October 31, 1995,
the effective advisory and administration fees paid to PaineWebber by the
Connecticut Municipal Money Fund and the New Jersey Municipal Money Fund were
equal to 0.50% and 0.50%, respectively. PaineWebber (not the Funds) pays
Mitchell Hutchins a fee for its sub-advisory and sub-administration services,
at an annual rate of 20% of the fee received by PaineWebber from each Fund for
advisory and administrative services.
Each Fund except Connecticut Municipal Money Fund and New Jersey Municipal
Money Fund pays PaineWebber an annual fee of $4.00 per active Fund account,
plus certain out-of-pocket expenses, for certain services not performed by the
Transfer Agent. Each Fund also incurs other expenses. For the fiscal year ended
June 30, 1995, the ratio of expenses as a percentage of average net assets of
the Money Market Portfolio, the U.S. Government Portfolio, the Tax-Free Fund,
California Municipal Money Fund and New York Municipal Money Fund were 0.59%,
0.63%, 0.63%, 0.69% and 0.68%, respectively. For the fiscal year ended October
31, 1995, the ratio of expenses as a percentage of average net assets of the
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund were
1.01% and 0.93%, respectively. PaineWebber waived a portion of its advisory and
administration fees for New York Municipal Money Fund. If such waivers had not
been made, the Fund's ratio of expenses stated as a percentage of average net
assets would have been 0.71%.
PaineWebber and Mitchell Hutchins are located at 1285 Avenue of the
Americas, New York, New York 10019. Mitchell Hutchins is a wholly owned
subsidiary of PaineWebber, which is in turn wholly owned by Paine Webber Group
Inc., a publicly owned financial services holding company. At January 31, 1996,
PaineWebber or Mitchell Hutchins was investment adviser or sub-adviser to 34
registered investment companies with 68 separate portfolios and aggregate
assets in excess of $30.3 billion.
Mitchell Hutchins investment personnel may engage in securities
transactions for their own accounts pursuant to a code of ethics that
establishes procedures for personal investing and restricts certain
transactions.
DISTRIBUTION ARRANGEMENTS. PaineWebber is the distributor of each Fund's
shares. Under separate plans of distribution ("Plans"), the U.S. Government
Portfolio, Tax-Free Fund, California Municipal Money Fund, New York Municipal
Money Fund, each is authorized to pay PaineWebber a 12b-1 service fee at the
annual rate of up to 0.15% of the Fund's average daily net assets. Each of
these Funds currently pays PaineWebber a 12b-1 service fee at the annual rate
of 0.08% of its average daily net assets. Connecticut Municipal Money Fund and
New Jersey Municipal Money Fund are authorized and currently pay PaineWebber
a 12b-1
27
<PAGE>
service fee at the annual rate of 0.12% of the Fund's average daily net assets.
Any increase in this annual rate would require prior approval by the applicable
Corporation's board of directors or applicable Trust's board of trustees.
Under each Plan, PaineWebber uses the 12b-1 service fee to pay PaineWebber
investment executives and correspondent firms for shareholder servicing,
currently at the annual rate of 0.06% of the Fund's (0.10% in the case of Con-
necticut Municipal Money Fund and New Jersey Municipal Money Fund) average
daily net assets held in accounts serviced by such investment executives and
correspondent firms. The fee is also used to offset PaineWebber's other
expenses in servicing and maintaining shareholder accounts. These expenses may
include the costs of the PaineWebber branch office in which the investment
executive is based, such as rent, communications equipment, employee salaries
and other overhead costs.
During the period they are in effect, each Plan and a related distribution
contract ("Distribution Contract") obligate the affected Fund to pay the 12b-1
service fee to PaineWebber as compensation for its service activities and not
as reimbursement for specific expenses incurred. Thus, even if PaineWebber's
expenses exceed the 12b-1 service fee, the Fund will not be obliged to pay more
than the fee and, if PaineWebber's expenses are less than the fee, it will
retain its full fee and realize a profit. Each Fund will pay the 12b-1 service
fee to PaineWebber until either the Plan or the Distribution Contract is
terminated or not renewed for that Fund. In that event, PaineWebber's service
expenses in excess of service fees received or accrued through the termination
date will be PaineWebber's sole responsibility and not obligations of the Fund.
PERFORMANCE INFORMATION
From time to time each Fund may advertise its "yield" and "effective
yield." Both yield figures are based on historical earnings and are not
intended to indicate future performance. The "yield" of a Fund is the income on
an investment in that Fund over a specified seven-day period. This income is
then "annualized" (that is, assumed to be earned each week over a 52-week
period) and shown as a percentage of the investment. The "effective yield" is
calculated similarly, but when annualized the income earned is assumed to be
reinvested. The "effective yield" will be higher than the "yield" because of
the compounding effect of this assumed reinvestment.
The Municipal Funds may also advertise "tax-equivalent yield" and "tax-
equivalent effective yield." "Tax equivalent yield" shows the taxable yield
that would produce the same income after a stated rate of taxes as the
respective Fund's tax-exempt yield (yield excluding taxable income). "Tax-
equivalent effective yield" shows the taxable effective yield that would
produce the same income after a stated rate of taxes as the respective Fund's
tax-exempt effective yield (effective yield excluding taxable income).
Each Fund may also advertise other performance data, which may consist of
the annual or cumulative return (including realized net short-term capital
gain, if any) earned on a hypothetical investment in the Fund since it began
operations or for shorter periods. This return data may or may not assume
reinvestment of dividends (compounding).
The performance of shareholder accounts with small balances will differ
from the quoted performance because daily income for each shareholder account
is rounded to the nearest whole penny. Accordingly, very small shareholder
accounts (at current interest rates,
28
<PAGE>
approximately $33 or less in the case of the Money Market Portfolio and the
U.S. Government Portfolio, and approximately $53 or less in the case of the
Municipal Funds) that generate less than 1/2 per day of income will earn no
dividends.
GENERAL INFORMATION
The Money Market and U.S. Government Portfolios are series of PaineWebber
RMA Money Fund, Inc. ("Money Fund Corporation"). Both the Tax-Free Fund and the
Money Fund Corporation were incorporated in Maryland on July 2, 1982 and each
is registered with the SEC as an open-end, diversified management investment
company. The Money Fund Corporation has an authorized capitalization of 30
billion shares of $0.001 par value common stock; 15 billion and 5 billion of
which are designated as shares of the Money Market Portfolio and the U.S.
Government Portfolio, respectively. The remaining shares are classified as
shares of the Money Fund Corporation's third series. The Tax-Free Fund has an
authorized capitalization of 20 billion shares of $0.001 par value common
stock.
The California Municipal Money Fund and the New York Municipal Money Fund
are series of PaineWebber Managed Municipal Trust. The Trust is registered as
an open-end management investment company and was organized as a business trust
under the laws of the Commonwealth of Massachusetts by Declaration of Trust
dated November 21, 1986. The Trust's board of trustees has authority to issue
an unlimited number of shares of beneficial interest of separate series, par
value $0.001 per share.
The Connecticut Municipal Money Fund and New Jersey Municipal Money Fund
are series of PaineWebber/Kidder, Peabody Municipal Money Market Series. The
Trust was organized as a Massachusetts business trust on Sep-tember 14, 1990.
The Connecticut Series commenced operations on November 6, 1990 and the New
Jersey Series commenced operations on February 1, 1991. The board of trustees
may issue an unlimited number of full and fractional shares of beneficial
interest with $.001 par value per share. Each share has one vote.
Although each Fund is offering only its own shares, it is possible that a
Fund might become liable for a misstatement in the Prospectus about another
Fund. The board of directors of each Corporation and the board of trustees of
each Trust has considered this factor in approving the use of a single,
combined Prospectus.
The Corporations and the Trusts do not hold annual shareholder meetings.
There normally will be no meetings of shareholders to elect directors or
trustees unless fewer than a majority of the directors/trustees holding office
have been elected by shareholders. The directors are required to call a meeting
of shareholders of a Corporation when requested in writing to do so by the
shareholders of record holding at least 25% of the Corporation's outstanding
shares.
Shareholders of record of no less than two-thirds of the outstanding shares
of the Trust may remove a trustee by vote cast in person or by proxy at a
meeting called for that purpose. The trustees are required to call a meeting of
shareholders of the Trust for the purposes of voting upon the question of
removal of any trustee when requested in writing to do so by the shareholders
of record of not less than 10% of the Trust's outstanding shares.
Each share of a Fund has equal voting, dividend and liquidation rights. The
shares of each series of the Money Fund Corporation and the Trusts will be
voted separately except when an aggregate vote of all series is required by the
Investment Company Act of 1940.
29
<PAGE>
CERTIFICATES. To avoid additional operating expenses and for investor
convenience, stock certificates are not issued. Ownership of shares of each
Fund is recorded on a stock register by the Transfer Agent, and shareholders
have the same rights of ownership with respect to such shares as if
certificates had been issued.
REPORTS. Shareholders receive audited annual and unaudited semi-annual
financial statements of the Funds. All purchases and redemptions of Fund shares
are confirmed to shareholders at least quarterly.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One
Heritage Drive, North Quincy, Massachusetts 02171, is custodian of each Fund's
assets. PFPC Inc., a subsidiary of PNC Bank, National Association, whose
principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809,
is each Fund's transfer and dividend disbursing agent.
30
<PAGE>
APPENDIX
MUNICIPAL SECURITIES
The following description of the Municipal Securities in which, where
applicable, Tax-Free Fund, California Municipal Money Fund, Connecticut
Municipal Money Fund, New Jersey Municipal Money Fund and New York Municipal
Money Fund may invest supplements that provided elsewhere in the prospectus.
MUNICIPAL BONDS. Municipal bonds are debt obligations issued to obtain
funds for various public purposes, the interest on which is exempt from federal
income tax in the opinion of bond counsel. The two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds. General
obligation bonds are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable only from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source such as from the user of the facility being
financed. The term "municipal bonds" also includes "moral obligation" issues,
which are normally issued by special purpose authorities. In the case of such
issues, an express or implied "moral obligation" of a related governmental unit
is pledged to the payment of the debt service, but is usually subject to annual
budget appropriations. The term "municipal bonds" also includes municipal lease
obligations, such as leases, installment purchase contracts and conditional
sales contracts, and certificates of participation therein. Municipal lease
obligations are issued by local and state governments and authorities to
purchase land or various types of equipment or facilities and may be subject to
annual budget appropriations. The Funds generally invest in municipal lease
obligations through certificates of participation. The term "municipal bonds"
also includes custodial receipts that represent an ownership interest in one or
more municipal bonds.
INDUSTRIAL DEVELOPMENT BONDS AND PRIVATE ACTIVITY BONDS. Industrial
development bonds ("IDBs") and private activity bonds ("PABs") are issued by or
on behalf of public authorities to finance various privately operated
facilities, such as airport or pollution control facilities. PABs generally are
such bonds issued after August 15, 1986. These obligations are included within
the term "municipal bonds" if the interest paid thereon is exempt from federal
income tax in the opinion of the bond issuer's counsel. IDBs and PABs are in
most cases revenue bonds and thus are not payable from the unrestricted
revenues of the issuer. The credit quality of IDBs and PABs is usually directly
related to the credit standing of the user of the facilities being financed.
Each Fund is authorized to invest more than 25% of its assets in IDBs and PABs.
PARTICIPATION INTERESTS. Participation interests are interests in municipal
bonds, including IDBs and PABs, and floating and variable rate obligations that
are owned by banks. These interests carry a demand feature permitting the
holder to tender them back to the bank, which demand feature generally is
backed by an irrevocable letter of credit or guarantee of the bank. The credit
standing of such bank affects the credit quality of the participation interest.
PUT BONDS. A put bond is a municipal bond that gives the holder the
unconditional right to sell the bond back to the issuer or a third party at a
specified price and exercise date, which is typically well in advance of the
bond's maturity date.
TAX-EXEMPT COMMERCIAL PAPER AND SHORT-TERM MUNICIPAL NOTES. Tax-exempt
commercial paper and short-term municipal notes include tax anticipation notes,
bond anticipation notes, revenue anticipation notes and other forms of short-
term loans. Such notes are issued with a short-term maturity in anticipation of
the receipt of tax funds, the proceeds of bond placements or other revenues.
A-1
<PAGE>
- ---------------------------------------- --------------------------------
Table of Contents
- -------------------------------------------- PAINEWEBBER RMA MONEY MARKET
2 Highlights PORTFOLIO
-----------------------------------
7 Financial Highlights
-----------------------------------
11 Investment Objectives and Policies
-----------------------------------
21 Purchases PAINEWEBBER RMA U.S. GOVERNMENT
----------------------------------- PORTFOLIO
23 Redemptions
-----------------------------------
24 Valuation of Shares
-----------------------------------
24 Dividends and Taxes
-----------------------------------
26 Management PAINEWEBBER RMA TAX-FREE
----------------------------------- FUND
28 Performance Information
-----------------------------------
29 General Information
-----------------------------------
A-1 Appendix
-----------------------------------
For information on the RMA program
or the RMA Funds, call PaineWebber
toll-free at 1-800-762-1000. PAINEWEBBER RMA CALIFORNIA
MUNICIPAL MONEY FUND
For information on the BSA program,
call PaineWebber toll-free at
1-800-BSA-0140.
PAINEWEBBER RMA CONNECTICUT
MUNICIPAL MONEY FUND
- ------------------------------------------
No person has been authorized to give
any information or to make any
representations not contained in this
Prospectus in connection with the
offering made by the Prospectus and, PAINEWEBBER RMA NEW JERSEY
if given or made, such information or MUNICIPAL MONEY FUND
representations must not be relied upon
as having been authorized by the Funds or
their Distributor. This Prospectus does
not constitute an offering by the Funds
or by the Distributor in any jurisdiction
in which such offering may not lawfully
be made. PAINEWEBBER RMA NEW YORK
MUNICIPAL MONEY FUND
[LOGO] Recycled
Paper
(C) 1996 PaineWebber Incorporated
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 1996
- --------------------------------------------------------------------------------
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/Kidder, Peabody Municipal Money Market Series (the "Fund") is an
open-end, management investment company. Its investment objective is
maximization of current income exempt from Federal and, where applicable, State
income taxes consistent with the preservation of capital and the maintenance of
liquidity. The Fund permits investors to invest in two separate portfolios
(each, a "Series"): the Connecticut Series and New Jersey Series. Each Series
seeks to achieve the Fund's investment objective by investing primarily in
short-term Municipal Obligations issued by issuers in the State after which it
is named ("State Municipal Obligations") and believed to be exempt from Federal
and, where applicable, that State's income taxes. The Connecticut Series and New
Jersey Series are non-diversified for purposes of the Investment Company Act of
1940, as amended (the "Act").
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Fund's Prospectus. A copy of the Fund's Prospectus can
be obtained from the Fund at the above address. The date of the Prospectus to
which this Statement relates is March 1, 1996.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
SUB-ADVISER AND SUB-ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
- --------------------------------------------------------------------------------
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements and should be read in conjunction with
the section in the Fund's Prospectus entitled "Investment Objectives and
Policies."
MUNICIPAL OBLIGATIONS
Municipal Obligations generally include debt obligations issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In addition,
certain types of industrial development bonds are issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair or improvement of privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit,
industrial, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity, or
sewage or solid waste disposal; the interest paid on such obligations may be
exempt from Federal income tax, although current tax laws place substantial
limitations on the size of such issues. Such obligations are considered to be
Municipal Obligations if the interest paid thereon qualifies as exempt from
Federal income tax in the opinion of bond counsel to the issuer. There are, of
course, variations in Municipal Obligations, both within a particular
classification and between classifications.
Floating and variable rate demand obligations are tax exempt obligations
which may have a stated maturity in excess of 397 days, but which permit the
holder to demand payment of principal at any time, or at specified intervals not
exceeding 397 days, in each case upon not more than 30 days' notice. The issuer
of such obligations ordinarily has a corresponding right, after a given period,
to prepay in its discretion the outstanding principal amount of the obligation
plus accrued interest upon a specified number of days' notice to the holders
thereof. The interest rate on a floating rate demand obligation is based on a
known lending rate, such as a bank's prime rate, and is adjusted automatically
each time such rate is adjusted. The interest rate on a variable rate demand
obligation is adjusted at specified intervals. Because floating and variable
rate demand obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments generally will be traded,
and there is no secondary market for these obligations, although they are
redeemable (and thus immediately repayable by the borrower) at face value, plus
accrued interest, at any time. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements, the Fund's
right to redeem is dependent on the ability of the borrower to pay principal and
interest on demand. Each obligation purchased by the Fund will meet the quality
criteria established for the purchase of Municipal Obligations.
The yields on Municipal Obligations are dependent on a variety of factors,
including general economic and monetary conditions, money market factors,
conditions in the municipal market, size of a particular offering, maturity of
the obligation and rating of the issue.
2
<PAGE>
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily associated
with Municipal Obligations. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation ordinarily is backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult. Each Series will seek to minimize these risks by
investing only in those lease obligations that (1) are rated in one of the two
highest rating categories for debt obligations by at least two nationally
recognized statistical rating organizations ("NRSRO") (or one rating
organization if the lease obligation was rated only by one such organization) or
(2) if unrated, are purchased principally from the issuer or domestic banks or
other responsible third parties, in each case only if the seller shall have
entered into an agreement with the Fund providing that the seller or other
responsible third party will either remarket or repurchase the lease obligation
within a short period after demand by the Fund. The staff of the Securities and
Exchange Commission (the "SEC") currently considers certain lease obligations to
be illiquid. Accordingly, the Trustees have established guidelines to be used by
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), the Fund's
Sub-Adviser, in determining the liquidity of municipal lease obligations. In
addition, no Series will invest more than 10% of the value of its net assets in
lease obligations that are illiquid and in other illiquid securities. See
"Investment Restriction No. 7" below.
The Fund will not purchase tender option bonds unless (a) the demand feature
applicable thereto is exercisable by the Fund within 397 days of the date of
such purchase upon no more than 30 days' notice and thereafter is exercisable by
the Fund no less frequently than annually upon no more than 30 days' notice and
(b) at the time of such purchase, Mitchell Hutchins reasonably expects, (i)
based upon its assessment of current and historical interest rate trends, that
prevailing short-term tax exempt rates will not exceed the stated interest rate
on the underlying Municipal Obligations at the time of the next tender fee
adjustment, and (ii) that the circumstances which might entitle the grantor of a
tender option to terminate the tender option would not occur prior to the time
of the next tender opportunity. At the time of each tender opportunity, the Fund
will exercise the tender option with respect to any tender option bonds unless
Mitchell Hutchins reasonably expects, (x) based on its assessment of current and
historical interest rate trends, that short-term tax exempt rates will not
exceed the stated interest rate on the underlying Municipal Obligations at the
time of the next tender fee adjustment, and (y) that the circumstances which
might entitle the grantor of a tender option to terminate the tender option
would not occur prior to the time of the next tender opportunity. The Fund will
exercise the tender feature with respect to tender option bonds, or otherwise
dispose of its tender option bonds, prior to the time the tender option is
scheduled to expire pursuant to the terms of the agreement under which the
tender option is granted. The Fund otherwise will comply with the provisions of
Rule 2a-7 under the Act in connection with the purchase of tender option bonds,
including, without limitation, the requisite determination by the Trustees that
the tender option bonds in question meet the quality standards described in Rule
2a-7, which, in the case of a tender option bond subject to a conditional demand
feature, would include a determination that the security has received both the
required short-
3
<PAGE>
term and long-term high quality rating or is determined to be of comparable
quality. In the event of a default of the Municipal Obligation underlying a
tender option bond, or the termination of the tender option agreement, the Fund
would look to the maturity date of the underlying security for purposes of
compliance with Rule 2a-7 and, if its remaining maturity was greater than 397
days, the Fund would sell the security as soon as would be practicable. The Fund
will purchase tender option bonds only when it is satisfied that the custodial
and tender option arrangements, including the fee payment arrangements, will not
adversely affect the tax exempt status of the underlying Municipal Obligations
and that payment of any tender fees will not have the effect of creating taxable
income for the Fund. Based on the tender option bond arrangement, the Fund
expects to be able to value the tender option bond at par; however, the value of
the instrument will be monitored to assure that it is valued at fair value.
RATINGS OF MUNICIPAL OBLIGATIONS
If, subsequent to its purchase by a Series, (a) an issue of rated Municipal
Obligations ceases to be rated in the highest rating category by at least two
rating organizations (or one rating organization if the instrument was rated by
only one such organization) or the Fund's Trustees determine that it is no
longer of comparable quality or (b) Mitchell Hutchins becomes aware that any
portfolio security not so highly rated or any unrated security has been given a
rating by any rating organization below the rating organization's second highest
rating category, the Fund's Trustees will reassess promptly whether such
security presents minimal credit risk and will cause the Fund to take such
action as it determines is in the best interest of the Series and its
shareholders; provided that the reassessment required by clause (b) is not
required if the portfolio security is disposed of or matures within five
business days of Mitchell Hutchins becoming aware of the new rating and the
Fund's Trustees are subsequently notified of Mitchell Hutchins' actions.
To the extent that the ratings given by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P"), a division of The
McGraw-Hill Companies, Inc., or Fitch Investors Service, L.P. ("Fitch") for
Municipal Obligations may change as a result of changes in such organizations or
their rating systems, the Fund will attempt to use comparable ratings as
standards for its investments in accordance with the investment policies
contained in the Fund's Prospectus and this Statement of Additional Information.
The ratings of Moody's, S&P and Fitch represent their opinions as to the quality
of the Municipal Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings may be an initial
criterion for selection of portfolio securities, Mitchell Hutchins also will
evaluate these securities.
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
4
<PAGE>
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 Fund invests 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 branches of
domestic banks that have total assets in excess of $1 billion. 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.
Repurchase agreements involve the acquisition by the Fund of an underlying
debt instrument for a relatively short period (usually not more than one week),
subject to an obligation of the seller to repurchase, and the Fund to resell,
the instrument at a fixed price. The Fund's custodian will have custody of, and
will hold in a segregated account, securities acquired by the Fund under a
repurchase agreement. Repurchase agreements are considered by the staff of the
SEC to be loans by the Fund. The Fund enters into repurchase agreements only
with selected registered or unregistered securities dealers or banks or other
recognized financial institutions, and requires that additional securities be
deposited with it if the value of the securities purchased should decrease below
resale price. Mitchell Hutchins considers on an ongoing basis the value of the
collateral to assure that it always equals or exceeds the repurchase price.
Certain costs may be incurred by the Fund in connection with the sale of the
securities if the seller does not repurchase them in accordance with the
repurchase agreement. Mitchell Hutchins considers on an ongoing basis the
creditworthiness of the institutions with which the Fund enters into repurchase
agreements.
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RISK FACTORS--INVESTING IN STATE MUNICIPAL OBLIGATIONS
Investors should review the information in the Appendix hereto, which
provides a brief summary of special investment considerations relating to
investing in State Municipal Obligations.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions as fundamental policies
which apply to each Series. These restrictions cannot be changed, as to a
Series, without approval by the holders of a majority of the outstanding voting
shares of such Series. For purposes of the Act, "majority" means the lesser of
(i) 67% of such Series' outstanding voting shares present at a meeting if the
holders of more than 50% of the outstanding voting shares of such Series are
present in person or by proxy, or (ii) more than 50% of such Series' outstanding
voting shares. No Series may:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are referred to above and in the Prospectus.
2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the Series' 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 Series'
total assets, the Series 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 Series from investing in Municipal Obligations 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 Fund's Prospectus and floating and variable rate demand obligations
as to which the Series cannot exercise the demand feature described in the
Fund's 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 Series' net
assets would be so invested.
8. Underwrite securities of other issuers, except that the Series may
bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage
of the lower purchase price available.
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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 such Series' assets in the securities of
issuers in any single industry; however, there is no limitation on the
purchase of Municipal Obligations 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.
The Fund may make commitments more restrictive than the restrictions listed
above so as to permit the sale of Series shares in certain states. Should the
Fund determine that a commitment is no longer in the best interests of a Series
and its shareholders, the Fund reserves the right to revoke the commitment by
terminating the sale of such Series' shares in the state involved.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
Information regarding the Trustees and officers of the Fund, 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 Fund,
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.
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.
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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 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.
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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 Ms. Alexander and each of the officers is 1285 Avenue of the
Americas, New York, New York 10019.
The Fund 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 Fund. Trustees and officers, as a group,
owned less than 1% of each Series' 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 Fund. The
Fund 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 Trustee 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 Fund to each Trustee for the fiscal year ended October
31, 1995, and the aggregate amount of compensation 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:
TOTAL
COMPENSATION
AGGREGATE FROM FUND AND
NAME OF BOARD COMPENSATION FROM FUND COMPLEX PAID
MEMBER FUND TO BOARD MEMBER
- --------------------------------------- ----------------- -----------------
David J. Beaubien...................... $ 2,876 $ 116,800
William W. Hewitt, Jr.................. $ 2,876 $ 116,800
Carl W. Schafer........................ $ 3,042 $ 118,175
INVESTMENT ADVISER AND ADMINISTRATOR
PaineWebber, the Fund's investment adviser and administrator, and Mitchell
Hutchins, the Fund's sub-adviser and sub-administrator are located at 1285
Avenue of the Americas, New York, New York 10019.
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PaineWebber has agreed that if, in any fiscal year, the aggregate expenses
of a Series (including fees pursuant to the Investment Advisory and
Administration Agreement, but excluding interest, taxes, brokerage and
distribution fees and extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over such Series, PaineWebber will reimburse the
Series for such excess expense. This expense reimbursement obligation is not
limited to the amount of PaineWebbers' fee. Such expense reimbursement, if any,
will be estimated, reconciled and paid on a monthly basis. The most stringent
state expense limitations applicable to the Fund presently require reimbursement
of expenses in any year that such expenses exceed 2 1/2% of the first $30
million of the average value of a Series' net assets, 2% of the next $70 million
and 1 1/2% of the remaining net assets of the Series. During the fiscal year
ended October 31, 1995, the Series' expenses did not exceed such limitations.
Subject to the supervision and direction of the Fund's Trustees, Mitchell
Hutchins manages each Series' portfolio in accordance with the stated policies
of the Fund. Mitchell Hutchins provides the Fund with investment officers who
are authorized by the Trustees to execute purchases and sales of securities and
employs a professional staff of portfolio managers who draw upon a variety of
sources, including PaineWebber, for research information for the Fund. Mitchell
Hutchins makes investment decisions for the Fund and places the purchase and
sale orders for portfolio transactions. In addition, Mitchell Hutchins pays the
salaries of all officers and employees who are employed by both it and the Fund,
maintains office facilities, furnishes statistical and research data, clerical
help and accounting, data processing, bookkeeping, internal auditing and legal
services and certain other services required by the Fund, prepares reports to
shareholders, tax returns, and filings with the SEC and state Blue Sky
authorities, is responsible for the calculation of the net asset value of shares
and generally assists in all aspects of the Fund's operations. Mitchell Hutchins
bears all expenses in connection with the performance of its services.
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.
Expenses incurred in the operation of the Fund, including, but not limited
to, organizational costs, taxes, interest, brokerage fees and commissions,
compensation paid to PaineWebber under the Fund's Plan of Distribution pursuant
to Rule 12b-1 (the "Plan of Distribution"), fees of Trustees who are not
officers, directors, stockholders or employees of Mitchell Hutchins or
PaineWebber, SEC fees and related expenses, state Blue Sky qualification fees,
charges of the custodian and transfer, dividend disbursing and recordkeeping
agents, charges and expenses of any outside service used for pricing each
Series' portfolio securities and calculating net asset value, outside auditing
and legal expenses, and costs of maintenance of trust existence, investor
services, printing of prospectuses and statements of additional information for
regulatory purposes or for distribution to shareholders, shareholders' reports
and trust meetings, are borne by the Fund. Expenses attributable to a particular
Series are
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<PAGE>
charged against the assets of that Series; other expenses of the Fund are
allocated among the Series on the basis determined by the Board of Trustees,
including, but not limited to, proportionately in relation to the net assets of
each Series.
The Investment Advisory and Administration Agreement remains in effect as to
each Fund from year to year, provided its continuance is approved at least
annually by (i) the Board of Trustees or (ii) the vote of a majority of the
outstanding voting securities of the Fund, provided further that in either event
the continuance is also approved by a majority of the Trustees who are not
"interested persons," as defined in the Act of the Trust, PaineWebber or
Mitchell Hutchins, by vote cast in person at a meeting called for the purpose of
voting on this approval. With respect to each Fund, the Investment Advisory and
Administration Agreement was approved by shareholders in accordance with the
terms of the Act on April 13, 1995. With respect to each Fund, the Investment
Advisory and Administration Agreement is terminable without penalty, on 60 days'
written notice, by the Board of Trustees of the Trust, by vote of the holders of
a majority of such Fund's outstanding voting securities, as defined in the Act,
or by PaineWebber. The Investment Advisory and Administration Agreement will
terminate automatically, as to the relevant Fund, in the event of its
assignment, as defined in the Act and the rules thereunder.
As compensation for PaineWebber's services rendered to the Fund, each Series
pays a fee, computed daily and paid monthly, at an annual rate of .50% of such
Series' average daily net assets. For the fiscal year ended October 31, 1993,
the Connecticut Series and New Jersey Series 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 Series and New Jersey Series paid fees of $151,858 and
$207,338, respectively, to KPAM. For the fiscal year ended October 31, 1995, the
Connecticut Series and New Jersey Series paid (or accrued) fees of $120,651 and
$167,865, respectively, for KPAM and PaineWebber. For the fiscal year ended
October 31, 1995, Mitchell Hutchins, as the Fund's sub-adviser and
sub-administrator, received fees of $ .
PaineWebber shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the matters to which the
Investment Advisory and Administration Agreement relates, except for a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under the Investment Advisory and Administration
Agreement.
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 Fund's custodian. As custodian, State
Street maintains custody of the Fund's portfolio securities. PFPC, Inc., a
subsidiary of PNC Bank, National Association, whose principal address is 400
Bellevue Parkway, Wilmington, Delaware 19809, is the Fund's transfer, dividend
disbursing and recordkeeping agent. As transfer agent, PFPC, Inc. maintains the
Fund's official record of shareholders; as dividend disbursing agent, it is
responsible for crediting dividends to shareholders'
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accounts; and, as recordkeeping agent, it maintains certain accounting and
financial records of the Fund.
DISTRIBUTOR
PaineWebber is the distributor of the Fund's shares and is acting on a best
efforts basis.
The Trustees believe that the Series' expenditures under the Fund's Plan of
Distribution benefit the Series and their 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 Series and New Jersey Series,
respectively, of which $ , and $ , respectively, was spent on payments to
investment executives and $ and $ , respectively, was spent on
overhead-related expenses.
INDEPENDENT AUDITORS
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, acts as
independent auditors for the Fund. In such capacity, Ernst & Young LLP audits
the Fund's annual financial statements. For the fiscal year ended October 31,
1994, and prior thereto, the Fund's independent auditors were Deloitte & Touche
LLP, 2 World Financial Center, New York, New York 10281
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<PAGE>
LEGAL COUNSEL
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-2696,
is counsel for the Fund.
PRINCIPAL SHAREHOLDERS
With respect to the New Jersey Series, to the knowledge of the Fund, G.
George Rogers & Rolfa Rogers, c/o Mitchell Hutchins Asset Management, Inc., New
York, New York 10019, owned 8.5% of the Series' outstanding shares of beneficial
interest as of January 31, 1996.
The Fund is not aware as to whether or to what extent shares owned of record
also are owned beneficially.
PORTFOLIO TRANSACTIONS
Portfolio securities are purchased from and sold to parties acting as either
principal or agent. Newly-issued securities ordinarily are purchased directly
from the issuer or from an underwriter; other purchases and sales are allocated
to various dealers. Usually no brokerage commissions, as such, are paid by the
Fund for such purchases and sales, although the price paid usually includes an
undisclosed compensation to the dealer acting as agent. The prices paid to
underwriters of newly-issued securities usually include a concession paid by the
issuer to the underwriter, and purchases of after-market securities from dealers
ordinarily are executed at a price between the bid and asked price. No brokerage
commissions have been paid by any Series to date.
Transactions are allocated to various dealers by Mitchell Hutchins in its
best judgment. The primary consideration is the prompt and effective execution
of orders at the most favorable price. Subject to that primary consideration,
dealers may be selected for research, statistical or other services to enable
Mitchell Hutchins to supplement its own research and analysis with the views and
information of other securities firms.
Information so received supplements, but does not replace, that to be
provided by Mitchell Hutchins, and Mitchell Hutchins' fee is not reduced as a
consequence of the receipt of any such supplemental information. Such
information may be useful to Mitchell Hutchins in serving both the Fund and
other clients and, conversely, supplemental information obtained by the
placement of business of its other clients may be useful to Mitchell Hutchins in
carrying out its obligations to the Fund.
Investment decisions for a Series are made independently from those of any
other investment companies or accounts that are managed by Mitchell Hutchins.
If, however, other investment companies or accounts managed by Mitchell Hutchins
are simultaneously engaged in the purchase or sale of the same security, the
transactions are averaged as to price and allocated equitably to each. In some
cases, this system might adversely affect the price paid or received by the
Series or the size of the position obtainable for, or disposable by, the Series.
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<PAGE>
No portfolio transactions are executed through PaineWebber. PaineWebber
engages in and acts as a dealer in or an underwriter of Municipal Obligations
and Taxable Investments. PaineWebber's activities may have some effect on the
market for such securities, and PaineWebber may be competing in the marketplace
with the Fund in the purchase and sale of such securities.
SHARES OF THE FUND
The Fund'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 Fund. Each share of a
Series represents an equal proportionate interest in such Series with each other
share of such Series. Upon liquidation of a Series, shareholders are entitled to
share pro rata in the net assets of such Series available for distribution to
shareholders. Shares have no preemptive or conversion rights. Shares are fully
paid and non-assessable by the Fund.
A Series' shareholders are entitled to a full vote for each share of a
Series 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 Fund 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 Act or
the Declaration of Trust or as the Trustees may consider desirable.
The Fund 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 Fund, 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 Fund and that every
written agreement, obligation, instrument or undertaking made by the Fund shall
contain a provision to the effect that the shareholders are not personally
liable thereunder.
Special counsel for the Fund 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 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 Fund. However, upon payment of any such
liability, the shareholder will be entitled to reimbursement from the general
assets of the Series. The Trustees intend to conduct the operations of the Fund,
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 Fund.
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<PAGE>
The Declaration of Trust further provides that no Trustee, officer, employee
or agent of the Fund is liable to the Fund or a shareholder, nor is any Trustee,
officer, employee or agent liable to any third persons in connection with the
affairs of the Fund, 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
Fund property for satisfaction of claims arising in connection with the affairs
of the Fund. 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 Fund.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of payment postponed
(a) for any period during which the New York Stock Exchange ("NYSE") is closed
other than for customary weekend and holiday closings, (b) when trading in the
markets the Fund normally utilizes is restricted, or when an emergency, as
defined by the rules and regulations of the SEC, exists, making disposal of the
Fund's investments or determination of its net asset value not reasonably
practicable, or (c) for any other periods as the SEC by order may permit for
protection of the Fund's shareholders.
DETERMINATION OF NET ASSET VALUE
Net asset value will not be computed on a day in which no orders to
purchase, sell, exchange or redeem Fund shares have been received or on days on
which the NYSE is not open for trading. The NYSE is currently closed on the
following holidays (as observed): New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
If one of these holidays falls on a Saturday or Sunday, the NYSE will be closed
on the preceding Friday or the following Monday, respectively. The days on which
net asset value is determined are the Fund's business days. A Series' net asset
value is computed by dividing the value of such Series' total assets less
liabilities by the total number of shares outstanding. Each Series' expenses and
fees, including Mitchell Hutchins' fee and fees pursuant to the Plan of
Distribution, are accrued daily and taken into account for the purpose of
determining the net asset value of each Series' shares. It is the Fund's policy
to attempt to maintain a net asset value of $1.00 per share for purposes of
sales and redemptions, although there can be no assurance that the Fund will
always be able to do so.
The valuation of each Series' portfolio securities is based upon their
amortized cost, which does not take into account unrealized gains or losses.
This involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold the instrument.
In connection with the utilization of the amortized cost method of
valuation, the Trustees have established procedures reasonably designed, taking
into account current market conditions and the Fund's investment objective, to
stabilize net asset value per share as computed for the purpose of sales
15
<PAGE>
and redemptions at $1.00. These procedures include periodic review, as the
Trustees deem appropriate and at such intervals as are reasonable in light of
current market conditions, of the relationship between the amortized cost value
per share and the net asset value per share based upon available indications of
value. In such review, market quotations and market equivalents are obtained
from an independent pricing service (the "Service") approved by the Board of
Trustees. The Service values the Series' investments based on methods which
include consideration of: yields or prices of municipal bonds of comparable
quality, coupon, maturity and type; indications of values from dealers; and
general market conditions. The Service also may employ electronic data
processing techniques and/or a matrix system to determine valuations.
In the event of a difference of over 1/2 of 1% between a Series' net asset
value based upon available market quotations or market equivalents and $1.00 per
share based on amortized cost, the Trustees will promptly consider what action,
if any, should be taken. The Trustees will also take such action as they deem
appropriate to eliminate or to reduce to the extent reasonably practicable any
material dilution or other unfair results which might arise from differences
between the two. Such action may include redeeming shares in kind, selling
portfolio instruments prior to maturity to realize capital gains or losses, or
to shorten the average portfolio maturity, withholding dividends, making
distributions from capital or capital gains, utilizing a net asset value per
share as determined by using available market quotations or market equivalents,
or reducing the number of the Series' outstanding shares. Any reduction of
outstanding shares will be effected by having each shareholder proportionately
contribute to the relevant Series' capital the necessary shares that represent
the excess upon such determination. Each shareholder will be deemed to have
agreed to such contribution in these circumstances by his investment in the
Fund.
DETERMINATION OF CURRENT AND EFFECTIVE YIELDS
The Fund provides current and effective yield quotations on each Series'
daily dividends. See "Dividends, Distributions and Taxes" in the Fund's
Prospectus. Such quotations are made in reports, sales literature and
advertisements published by the Fund.
Current yield is computed by determining the net change exclusive of capital
changes in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of a seven 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. The shareholder should remember that yield is
a function of the type and quality of the instruments in the portfolio,
portfolio maturity and operating expenses. See "Investment Objective and
Policies" in the Fund's Prospectus and "Management of the Fund" above. Current
and effective yield information is useful in reviewing the Fund's performance,
but because current and effective yields fluctuate such
16
<PAGE>
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
"Determination of Net Asset Value" for a discussion of the manner in which each
Series' price per share is determined.
Historical and comparative yield information may be presented by the Fund.
ADDITIONAL INFORMATION ABOUT THE FUND
The Prospectus and this Statement of Additional Information do not contain
all the information set forth in the Registration Statement and the exhibits
relating thereto, which the Fund has filed with the SEC under the Securities Act
of 1933 and the Act, to which reference is hereby made.
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders for the fiscal year ended 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.
RATINGS OF SECURITIES
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion as to the
credit quality of the security being rated. However, ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, Mitchell Hutchins believes that the quality of Municipal
Obligations should be continuously reviewed and that individual analysts give
different weightings to the various factors involved in credit analysis. A
rating is not a recommendation to purchase, sell or hold a security, because it
does not take into account market value or suitability for a particular
investor. When a security has received a rating from more than one service, each
rating should be evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources which they consider reliable. Ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information, or
for other reasons. Mitchell Hutchins, through independent analysis, attempts to
discern variations in credit ratings of the published services, and to
anticipate changes in credit ratings. The following is a description of the
characteristics of ratings used by Moody's, S&P and Fitch.
17
<PAGE>
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 edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. Although 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.
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:
18
<PAGE>
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.
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.
19
<PAGE>
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 overwhelming safety
characteristics are designated as SP-1+.
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+).
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 either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are designated A-1+.
20
<PAGE>
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.
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 Qualify. 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.
21
<PAGE>
APPENDIX
RISK FACTORS--INVESTING IN STATE MUNICIPAL OBLIGATIONS
The following information supplements and should be read in conjunction with
the information set forth in the Fund's 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 relevant State available as of the date of this
Statement of Additional Information. While the Fund has not independently
verified such information, it has no reason to believe that such information is
not correct in all material respects.
CONNECTICUT SERIES
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
A-1
<PAGE>
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 stimulated 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 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
A-2
<PAGE>
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 SERIES
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.
A-3
<PAGE>
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
A-4
<PAGE>
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.
A-5
<PAGE>
- --------------------------------------------- PAINEWEBBER RMA
CONTENTS
- --------------------------------------------- CONNECTICUT
Investment Objective and Policies 2
- --------------------------------------------- MUNICIPAL
MONEY
Management of the Fund 9
- --------------------------------------------- FUND
Principal Shareholders 14
- ---------------------------------------------
Portfolio Transactions 14
- ---------------------------------------------
Shares of the Fund 15
- ---------------------------------------------
Redemption of Shares 16
- --------------------------------------------- NEW JERSEY
Determination of Net Asset Value 16 MUNICIPAL
- ---------------------------------------------
Determination of Current and Effective MONEY
Yields 17 FUND
- ---------------------------------------------
Additional Information About the Fund 18
- ---------------------------------------------
Financial Statements 18
- ---------------------------------------------
Ratings of Securities 18
- ---------------------------------------------
Appendix A-1
- ---------------------------------------------
STATEMENT OF
ADDITIONAL
INFORMATION
MARCH 1, 1996
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Contained in Part A:
Financial Highlights for the period ended October 31, 1991 and the
years ended October 31, 1992, 1993, 1994 and 1995.
Contained through incorporation by reference in Part B and filed with
the Annual Report to Shareholders with the Securities and Exchange
Commission on January 2, 1996 (EDGAR Accession No. 0000950112-96-000001):
Schedules of Investments at October 31, 1995.
Statements of Assets and Liabilities as of October 31, 1995.
Statements of Operations for the year ended October 31, 1995.
Statements of Changes in Net Assets for the years ended October 31,
1994 and October 31, 1995.
Financial Highlights for the period ended October 31, 1991 and the
years ended October 31, 1992, 1993, 1994 and 1995.
Report of Ernst & Young LLP, Independent Auditors, dated December 11,
1995.
Contained in Part B through incorporation by reference to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A as filed
on February 28, 1995.
Report of Deloitte & Touche LLP, Independent Auditors, dated November
30, 1994.
(b) Exhibits:
<TABLE>
<S> <C>
(1)(a) --Amended and Restated Declaration of Trust, dated August 28, 1991.
(1)(b) --Certificate of Amendment, dated February 16, 1995.
(2) --The Registrant's By-Laws dated July 3, 1986 are incorporated by reference to
Exhibit 2 of Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on November 1, 1990.
(3) --None
(4) --None
(5)(a) --Investment Advisory and Administration Agreement.
(5)(b) --Sub-Advisory and Sub-Administration Agreement.
(6) --Distribution Contract is incorporated by reference to Exhibit 6 of Post-Effective
Amendment No. 6 to the Registration Statement on Form N-1A, filed on February 28,
1995.
(7) --None
(8) --Custody Agreement.
(9) --Transfer Agency Agreement.
(10) --None
(11)(a) --Consent of Ernst & Young LLP.
(11)(b) --Consent of Deloitte & Touche LLP.
(12) --None
(13) --Subscription Agreement is incorporated by reference to Exhibit 13 of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed on November 1,
1990.
(14) --None
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
(15)(a) --The Plan of Distribution pursuant to Rule 12b-1 is incorporated by reference to
Exhibit 15 of Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on November 1, 1990.
(15)(b) --Amendment to Plan of Distribution, dated January 30, 1995.
(16) --Schedule for computation of current and effective yields is incorporated by
reference to Exhibit 16 of Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A, filed on May 3, 1991.
17 --Financial Data Schedule (filed as exhibit No. 27 pursuant to EDGAR rules).
18 --Powers of Attorney.
27 --Financial Data Schedule.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
No person is controlled by or under common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF RECORDHOLDERS
TITLE OF CLASS AT FEBRUARY 28, 1996
-------------- -----------------------
<S> <C>
Shares of beneficial interest, par value $.001 per share
Connecticut Series........................................ 571
New Jersey Series......................................... 935
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article VII of Registrant's By-Laws. Indemnification of
the principal underwriter against certain liabilities is provided for in the
Distribution Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant and the principal underwriter pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such trustee, officer or controlling person or the principal
underwriter in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management" in the Prospectus and "Management of the Fund" and
"Investment Advisory and Other Services" in the Statement of Additional
Information.
I. PaineWebber Incorporated ("PaineWebber"), a Delaware corporation, is a
registered investment adviser and is wholly owned by Paine Webber Group Inc.
PaineWebber is primarily engaged in the financial services business. Information
as to the officers and directors of PaineWebber is included in its Form ADV
filed on March 31, 1995, with the Securities and Exchange Commission
(registration number 801-7163) and is incorporated herein by reference.
II. Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a
Delaware corporation, is a registered investment adviser and is wholly owned by
PaineWebber. Mitchell Hutchins is primarily
C-2
<PAGE>
engaged in the investment advisory business. Information as to the officers and
directors of Mitchell Hutchins is included in its Form ADV filed on April 3,
1995, with the Securities and Exchange Commission (registration number
801-13219) and is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) PaineWebber services as principal underwriter and/or investment adviser
for the following other investment companies:
PaineWebber CashFund, Inc.
PaineWebber Managed Municipal Trust
PaineWebber RMA Money Fund, Inc.
PaineWebber RMA Tax-Free Fund, Inc.
(b) PaineWebber is the principal underwriter of the Registrant. The
directors and officers of PaineWebber, their principal business addresses, and
their positions and offices with PaineWebber are identified in its Form ADV
filed March 31, 1995, with the Securities and Exchange Commission (registration
number 801-7163), and such information is hereby incorporated herein by
reference. The information set forth below is furnished for those directors and
officers of PaineWebber who also serve as Trustees or officers of the
Registrant:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICER
BUSINESS ADDRESS POSITION AND REGISTRANT WITH UNDERWRITER
------------------ ------------------------ --------------------
<S> <C> <C>
Margo N. Alexander Trustee and President Director and Executive
1285 Avenue of the Americas Vice President
New York, NY 10019
</TABLE>
(c) None.
ITEM 30. LOCATION ON ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder will be maintained at the offices
of State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, the Fund, 1285 Avenue of the Americas, New York, New York
10019, and PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
Not Applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
this City of New York, and State of New York, on the 29th day of February, 1996.
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL
MONEY MARKET SERIES
By: /s/ DIANNE E. O'DONNELL
..................................
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to the Registrant's Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<S> <C> <C>
/s/ MARGO N. ALEXANDER* Trustee and President (Chief February 29, 1996
..................................... Executive Officer)
Margo N. Alexander
/s/ JULIAN F. SLUYTERS Vice President and Treasurer (Chief February 29, 1996
..................................... Financial and Accounting Officer)
Julian F. Sluyters
/s/ DAVID J. BEAUBIEN** Trustee February 29, 1996
.....................................
David J. Beaubien
/s/ WILLIAM W. HEWITT, JR** Trustee February 29, 1996
.....................................
William W. Hewitt, Jr.
/s/ CARL W. SCHAFER** Trustee February 29, 1996
.....................................
Carl W. Schafer
</TABLE>
- ------------
* Signature affixed by Dianne E. O'Donnell pursuant to power of attorney dated
December 28, 1995 and filed herewith.
** Signature affixed by Dianne E. O'Donnell pursuant to power of attorney dated
March 8, 1995 and filed herewith.
C-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- ----------- ----
<C> <S> <C>
(1)(a)-- Amended and Restated Declaration of Trust, dated August 28, 1991............
(1)(b)-- Certificate of Amendment, dated February 16, 1995...........................
(5)(a)-- Investment Advisory and Administration Agreement............................
(5)(b)-- Sub-Advisory and Sub-Administration Agreement...............................
(8) -- Custody Agreement...........................................................
(9) -- Transfer Agency Agreement...................................................
(11)(a)-- Consent of Ernst & Young LLP................................................
(11)(b)-- Consent of Deloitte & Touche LLP............................................
(15)(a)-- Plan of Distribution pursuant to Rule 12b-1 incorporated by reference to
Exhibit 15 of Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on November 1, 1990+.......................................
(15)(b)-- Amendment to Plan of Distribution, dated January 30, 1995...................
17 -- Financial Data Schedule (filed as exhibit No. 27 pursuant to EDGAR rules)...
18 -- Powers of Attorney..........................................................
27 -- Financial Data Schedule.....................................................
</TABLE>
- ------------
+ Refiled pursuant to rules under EDGAR
Exhibit 1(a)
KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
Amended and Restated Declaration of Trust
Dated: August 28, 1991
The undersigned Trustees of the Trust, which was organized
pursuant to an Agreement and Declaration of Trust made at Boston,
Massachusetts on the 14th day of September, 1990, by Gilbert R. Ott, Jr.,
David A. Hartman and David M. Elwood and the holders of shares of
beneficial interest to be issued thereunder, hereby amend and restate the
Agreement and Declaration of Trust as follows.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Trustees have agreed to manage all property coming
into their hands as trustees of a Massachusetts business trust in
accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold
all cash, securities and other assets, which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and dispose
of the same upon the following terms and conditions for the pro rata
benefit of the holders from time to time of Shares, whether or not
certificated, in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be known as "Kidder, Peabody
--------- ----
Municipal Money Market Series."
Section 2. Definitions. Whenever used herein, unless otherwise
--------- -----------
required by the context or specifically provided:
(a) The term "Commission" shall have the meaning provided in the
1940 Act;
(b) The "Trust" refers to the Massachusetts business trust
established by this Agreement and Declaration of Trust, as amended from
time to time;
(c) "Shareholder" means a record owner of Shares of the
Trust;
(d) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest in the Trust
<PAGE>
shall be divided from time to time or, if more than one series of Shares is
authorized by the Trustees, the equal proportionate transferable units into
which each series of Shares shall be divided from time to time, and
includes a fraction of a Share as well as a whole Share. All references to
Shares in this Declaration of Trust shall be deemed to be Shares of any or
all series as the context may require;
(e) The "1940 Act" refers to the Investment Company Act of 1940,
and the Rules and Regulations thereunder, all as amended from time to time;
(f) The term "Manager" is defined in Article IV, Section 5; and
(g) The term "Person" shall mean an individual or any
corporation, partnership, joint venture, trust or other enterprise.
(h) "Trust Property" or "Trust Estate" means any and all
property, real or personal, tangible or intangible, which is owned or held
by or for the account of the Trust or the Trustees.
(i) "Trustees" shall mean the signatories to this Declaration of
Trust, so long as they shall continue in office in accordance with the
terms hereof, and all other persons who have been duly elected or appointed
and have qualified as trustees in accordance with the provisions hereof and
are then in office, and reference in this Declaration of Trust to a Trustee
or Trustees shall refer to such person or persons in their capacity as
trustees hereunder.
ARTICLE II
Purposes of Trust
Section 1. Purposes. This Trust is formed for the following
--------- --------
purpose or purposes:
(a) to conduct, operate and carry on the business of an
investment company;
(b) to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, lend, write
options on, exchange, distribute or otherwise dispose of and deal in and
with securities of every nature, kind, character, type and form, including,
without limitation of the generality of the foregoing, all types Of stocks,
shares, futures contracts, bonds, debentures, notes, bills and other
negotiable or non-negotiable instruments, obligations, evidences of
interest, certificates of interest, certificates of participation,
certificates, interests,
<PAGE>
evidences of ownership, guarantees, warrants, options or evidences of
indebtedness issued or created by or guaranteed as to principal and
interest by any state or local government or any agency or instrumentality
thereof, by the United States Government or any agency, instrumentality,
territory, district or possession thereof, by any foreign government or any
agency, instrumentality, territory, district or possession thereof, by any
corporation organized under the laws of any state, the United States or any
territory or possession thereof or under the laws of any foreign country,
bank certificates of deposit, bank time deposits, bankers' acceptances and
commercial paper; to pay for the same in cash or by the issue of stock,
including treasury stock, bonds or notes of the Trust or otherwise; and to
exercise any and all rights, powers and privileges of ownership or interest
in respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more persons, firms,
associations or corporations to exercise any of said rights, powers and
privileges in respect of any said instruments;
(c) to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the assets
of the Trust;
(d) to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in, Shares
including Shares in fractional denominations, and to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares
of any funds or other assets of the appropriate series of Shares, whether
capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of The Commonwealth of Massachusetts;
(e) to conduct its business, promote its purposes, and carry on
its operations in any and all of its branches and maintain offices both
within and without The Commonwealth of Massachusetts, in any and all States
of the United States of America, in the District of Columbia, and in any
other parts of the world; and
(f) to do all and everything necessary, suitable, convenient, or
proper for the conduct, promotion, and attainment of any of the businesses
and purposes herein specified or which at any time may be incidental thereto
or may appear conducive to or expedient for the accomplishment of any of
such businesses and purposes and which might be engaged in or carried on by
a Trust organized under the Massachusetts General Laws, and to have and
exercise all of the powers conferred by the laws of The Commonwealth of
Massachusetts upon a Massachusetts business trust.
<PAGE>
The foregoing provisions of this Article II shall be construed
both as purposes and powers and each as an independent purpose and power.
Section 2. Pennsylvania Series. Notwithstanding the provisions
--------- -------------------
of this Article II, the Pennsylvania Series of the Trust will invest in
securities for income earnings rather than trading for profit. The
Pennsylvania Series, however, will be permitted to sell securities held in
its portfolio and, as a result, may realize capital gain or loss.
ARTICLE III
Beneficial Interest
Section 1. Shares of Beneficial Interest. The Shares of the
--------- -----------------------------
Trust shall be divided into transferable Shares of beneficial interest and
issued in one or more series as the Trustees may, without Shareholder
approval, authorize. Each series shall be preferred over all other series
in respect of the assets allocated to that series. The beneficial interest
in each series at all times shall be divided into Shares, with or without
par value as the Trustees may from time to time determine, each of which
shall represent an equal proportionate interest in the series with each
other Share of the same series, none having priority or preference over
another. The number of Shares authorized shall be unlimited, and the Shares
so authorized may be represented in part by fractional shares. All Shares
issued hereunder, including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully
paid and non-assessable by the Trust. From time to time, the Trustees may
divide or combine the Shares of any series into a greater or lesser number
without thereby changing the proportionate beneficial interests in the
series.
Section 2. Rights of Shareholders. The ownership of the Trust
--------- ----------------------
Property and the property of each series of the Trust of every description
and the right to conduct any business hereinbefore described are vested
exclusively in the Trustees, and the Shareholders shall have no interest
therein other than the beneficial interest conferred by their Shares, and
they shall have no right to call for any partition or division of any
property, profits, rights or interests of the Trust nor can they be called
upon to share or assume any losses of the Trust or suffer an assessment of
any kind by virtue of their ownership of Shares. The Shares shall be
personal property giving only the rights specifically set forth in this
Declaration of Trust. The Shares shall not entitle the holder to
preference, preemptive, appraisal, conversion or exchange rights, except as
the Trustees may determine with respect to any series of Shares.
<PAGE>
Section 3. Trust Only. It is the intention of the Trustees to
--------- ----------
create only the relationship of Trustee and beneficiary between the
Trustees and each Shareholder from time to time. It is not the intention of
the Trustees to create a general partnership, limited partnership, joint
stock association, corporation, bailment or any form of legal relationship
other than a trust with transferable shares. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or
with the Trustees, partners or members of a joint stock association.
Section 4. Issuance of Shares. The Trustees in their discretion
--------- ------------------
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on
such terms as the Trustees may deem best, and may in such manner acquire
other assets (including the acquisition of assets subject to, and in
connection with the assumption of liabilities) and businesses. In
connection with any issuance of Shares, the Trustees may issue fractional
Shares and Shares held in the treasury. The Trustees may from time to time
divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole Shares and/or 1/1,000ths of a Share or integral
multiples thereof.
Section 5. Register of Shares. A register shall be kept at the
--------- ------------------
principal office of the Trust or an office of the transfer agent which
shall contain the names and addresses of the Shareholders and the number of
Shares held by them respectively and a record of all transfers thereof.
Such register shall be conclusive as to who are the holders of the Shares
and who shall be entitled to receive dividends or distributions or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder
shall be entitled to receive payment of any dividend or distribution, nor
to have notice given to him as herein or in the By-Laws provided, until he
has given his address to the Transfer Agent or such other officer or agent
of the Trustees as shall keep the said register for entry thereon. It is
not contemplated that certificates will be issued for the Shares; however,
the Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as to their
use.
Section 6. Transfer of Shares. Except as otherwise provided by
--------- ------------------
the Trustees, Shares shall be transferable on the records of the Trust only
by the record holder thereof or by his agent thereunto duly authorized in
writing, upon delivery to the Trustees or the Transfer Agent of a duly
executed instrument of
<PAGE>
transfer, together with such evidence of the genuineness of each such
execution and authorization and of other matters as may reasonably be
required. Upon such delivery the transfer shall be recorded on the register
of the Trust. Until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the
proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the register of Shares as the holder
of such Shares upon production of the proper evidence thereof to the
Trustees or the transfer agent, but until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for
all purposes hereunder and neither the Trustees nor any transfer agent or
registrar nor any officer or agent of the Trust shall be affected by any
notice of such death, bankruptcy or incompetence, or other operation of
law.
Section 7. Treasury Shares. Shares held in the treasury shall
--------- ---------------
not confer, until reissued pursuant to Section 4 hereof, any voting rights
on the Trustees, nor shall such Shares be entitled to any dividends or
other distributions declared with respect to the Shares.
Section 8. Series Designation. The Trustees, in their
--------- ------------------
discretion, may authorize the division of Shares into two or more series,
and the different series shall be established and designated, and the
variations in the relative rights and preferences as between the different
series shall be fixed and determined, by the Trustees; provided, that all
Shares shall be identical except that there may be variations so fixed and
determined between different series as to investment objective, purchase
price, allocation of expenses, right of redemption, special and relative
rights as to dividends and on liquidation, conversion rights, and
conditions under which the several series shall have separate voting
rights.
If the Trustees shall divide the Shares of the Trust into two or
more series, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust shall apply
equally to each series of the Trust except as the context requires
otherwise.
(b) The number of authorized Shares and the number of Shares of
each series that may be issued shall be unlimited. The Trustess may
classify or reclassify any unissued Shares or any
<PAGE>
Shares previously issued and reacquired of any series into one or more
series that may be established and designated from time to time. The
Trustees may hold as treasury Shares (of the same or some other series),
reissue for such consideration and on such terms as they may determine, or
cancel any Shares of any series reacquired by the Trust at their discretion
from time to time.
(c) All consideration received by the Trust for the issue or
sale of Shares of a particular series, together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that series for all purposes, subject
only to the rights of creditors of such series and except as may otherwise
be required by applicable laws, and shall be so recorded upon the books of
account of the Trust. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular series, the Trustees
shall allocate them among any one or more of the series established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable. Each such allocation by the
Trustees shall be conclusive and binding upon the shareholders of all
series for all purposes.
(d) The assets belonging to each particular series shall be
charged with the liabilities of the Trust in respect of that series and all
expenses, costs, charges and reserves attributable to that series, and any
general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular series
shall be allocated and charged by the Trustees to and among any one or more
of the series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the
Shareholders of all series for all purposes. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to determine
which items are capital; and each such determination and allocation shall
be conclusive and binding upon the Shareholders. The assets of a particular
series of the Trust shall, under no circumstances, be charged with
liabilities attributable to any other series of the Trust. All persons
extending credit to, or contracting with or having any claim against a
particular series of the Trust shall look only to the assets of that
particular series for payment of such credit, contract or claim. No
Shareholder or former Shareholder of any series shall have any claim on or
right to any assets allocated or belonging to any other series.
<PAGE>
(e) Each Share of a series of the Trust shall represent a
beneficial interest in the net assets of such series. Each holder of Shares
of a series shall be entitled to receive his pro rata share of
distributions of income and capital gains made with respect to such series.
Upon redemption of his Shares or indemnification for liabilities incurred
by reason of his being or having been a Shareholder of a series, such
Shareholder shall be paid solely out of the funds and property of such
series of the Trust. Upon liquidation or termination of a series of the
Trust, Shareholders of such series shall be entitled to receive a pro rata
share of the net assets of such series. A Shareholder of a particular
series of the Trust shall not be entitled to participate in a derivative or
class action on behalf of any other series or the Shareholders of any other
series of the Trust.
(f) The establishment and designation of any additional series
of Shares shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation
and the relative rights and preferences of such series, or as otherwise
provided in such instrument. The Trustees may by an instrument executed by
a majority of their number abolish any series and the establishment and
designation thereof. Except as otherwise provided in this Article III, the
Trustees shall have the power to determine the designations, preferences,
privileges, limitations and rights, of each class and series of Shares.
Each instrument referred to in this paragraph shall have the status of an
amendment to this Declaration of Trust.
Section 9. Assent to Declaration of Trust. Every Shareholder,
--------- ------------------------------
by virtue of having become a shareholder, shall be held to have expressly
assented and agreed to the terms hereof and to have become a party hereto.
ARTICLE IV
Trustees
Section 1. Election. A Trustee may be elected either by the
--------- --------
Trustees or the Shareholders. The Trustees named herein shall serve until
the first meeting of the Shareholders or until the election and
qualification of their successors. Prior to the first meeting of
Shareholders the initial Trustees hereunder may elect additional Trustees
to serve until such meeting and until their successors are elected and
qualified. The Trustees also at any time may elect Trustees to fill
vacancies in the number of Trustees. The number of Trustees shall be fixed
from time to time by the Trustees and, at or after the commencement of the
business of the Trust, shall be not less than three. Each Trustee, whether
named above or hereafter becoming a Trustee, shall serve as a
<PAGE>
Trustee during the lifetime of this Trust, until such Trustee dies,
resigns, retires, or is removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and the election
and qualification of his successor. Subject to Section 16(a) of the 1940
Act, the Trustees may elect their own successors and, pursuant to this
Section, may appoint Trustees to fill vacancies.
Section 2. Powers. The Trustees shall have all powers necessary
--------- ------
or desirable to carry out the purposes of the Trust, including, without
limitation, the powers referred to in Article II hereof. Without limiting
the generality of the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of
the business of the Trust and may amend and repeal them to the extent that
they do not reserve that right to the Shareholders; they may fill vacancies
in their number, including vacancies resulting from increases in their own
number, and may elect and remove such officers and employ, appoint and
terminate such employees or agents as they consider appropriate; they may
appoint from their own number and terminate any one or more committees;
they may employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any
part of such assets in a system or systems for the central handling of
securities, retain a transfer agent and a Shareholder servicing agent, or
both, provide for the distribution of Shares through a principal
underwriter or otherwise, set record dates, and in general delegate such
authority as they consider desirable (including, without limitation, the
authority to purchase and sell securities and to invest funds, to determine
the net income of the Trust for any period, the value of the total assets
of the Trust and the net asset value of each Share, and to execute such
deeds, agreements or other instruments either in the name of the Trust or
the names of the Trustees or as their attorney or attorneys or otherwise as
the Trustees from time to time may deem expedient) to any officer of the
Trust, committee of the Trustees, any such employee, agent, custodian or
underwriter or to any Manager.
Without limiting the generality of the foregoing, the Trustees
shall have full power and authority:
(a) To invest and reinvest cash and to hold cash uninvested;
(b) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property, and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees
shall deem proper,
<PAGE>
(c) To hold any security or property in a form not indicating
any trust whether in bearer, unregistered or other negotiable form or in
the name of the Trust or a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(d) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or concern, and
to pay calls or subscriptions with respect to any security held in the
Trust;
(e) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection
to deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(f) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy, including, but
not limited to, claims for taxes;
(g) To allocate assets, liabilities and expenses of the Trust to
a particular series of Shares or to apportion the same among two or more
series, provided that any liabilities or expenses incurred by a particular
series of Shares shall be payable solely out of the assets of that series;
(h) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(i) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers or Managers,
principal underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such
person as Shareholder, Trustee, officer, employee, agent, investment
adviser or Manager, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to constitute
negligence,
<PAGE>
whether or not the Trust would have the power to indemnify such person
against such liability; and
(j) To pay pensions for faithful service, as deemed appropriate
by the Trustees, and to adopt, establish and carry out pension, profit-
sharing, share bonus, share purchase, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
Further, without limiting the generality of the foregoing, the
Trustees shall have full power and authority to incur and pay out of the
principal or income of the Trust such expenses and liabilities as may be
deemed by the Trustees to be necessary or proper for the purposes of the
Trust; provided, however, that all expenses and liabilities incurred or
-------- -------
arising in connection with a particular series of Shares, as determined by
the Trustees, shall be payable solely out of the assets of that series.
Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles by or pursuant to the authority granted by the Trustees, as to
the amount of the assets, debts, obligations or liabilities of the Trust;
the amount of any reserves or charges set up and the propriety thereof; the
time of or purpose for creating such reserves or charges; the use,
alteration or cancellation of any reserves or charges (whether or not any
debt, obligation or liability for which such reserves or charges shall have
been created shall have been paid or discharged or shall be then or
thereafter required to be paid or discharged); the price or closing bid or
asked price of any investment owned or held by the Trust; the market value
of any investment or fair value of any other asset of the Trust; the number
of Shares outstanding; the estimated expense to the Trust in connection
with purchases of its Shares; the ability to liquidate investments in an
orderly fashion; the extent to which it is practicable to deliver a cross-
section of the portfolio of the Trust in payment for any such Shares, or as
to any other matters relating to the issue, sale, purchase and/or other
acquisition or disposition of investments or Shares of the Trust, shall be
final and conclusive, and shall be binding upon the Trust and its
Shareholders, past, present and future, and Shares are issued and sold on
the condition and understanding that any and all such determinations shall
be binding as aforesaid.
Section 3. Pennsylvania Series. Notwithstanding the provisions
--------- -------------------
of Article IV, Section 2, the Pennsylvania Series of the Trust may only
vary its separate portfolio investments to:
<PAGE>
(a) eliminate unsafe investments and investments not consistent with
the preservation of capital or the tax status of the investments of the
Pennsylvania Series;
(b) honor redemption orders, meet anticipated redemption
requirements and negate gains from discount purchases;
(c) reinvest the earnings from securities in like securities; or
(d) defray normal administrative expenses.
Section 4. Meetings. At any meeting of the Trustees, a majority
--------- --------
of the Trustees then in office shall constitute a quorum. Any meeting may
be adjourned from time to time by a majority of the votes cast upon the
question, whether or not a quorum is present, and the meeting may be held
as adjourned without further notice.
When a quorum is present at any meeting, a majority of the
Trustees present may take any action, except when a larger vote is
required by this Declaration of Trust, the By-Laws or the 1940 Act.
Any action required or permitted to be taken at any meeting of
the Trustees or of any committee thereof may be taken without a meeting, if
a written consent to such action is signed by a majority of the Trustees or
members of any such committee then in office, as the case may be, and such
written consent is filed with the minutes of proceedings of the Trustees or
any such committee.
The Trustees or any committee designated by the Trustees may
participate in a meeting of the Trustees or such committee by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.
Section 5. Ownership of Assets of the Trust. Title to all of the
--------- --------------------------------
assets of each series of Shares of the Trust at all times shall be
considered as vested in the Trustees.
Section 6. Investment Advice and Management Services. The
--------- -----------------------------------------
Trustees shall not in any way be bound or limited by any present or future
law or custom in regard to investments by trustees. The Trustees from time
to time may enter into a written contract or contracts with any person or
persons (herein called the "Manager"), including any firm, corporation,
trust or association in which any Trustee or Shareholder may be interested,
to act as investment advisers and/or managers of the Trust and to provide
such investment advice and/or management as the Trustees
<PAGE>
from time to time may consider necessary for the proper management of the
assets of the Trust, including, without limitation, authority to determine
from time to time what investments shall be purchased, held, sold or
exchanged and what portion, if any, of the assets of the Trust shall be
held uninvested and to make changes in the Trust's investments. Any such
contract shall be subject to the requirements of the 1940 Act with respect
to its continuance in effect, its termination and the method of
authorization and approval of such contract, or any amendment thereto or
renewal thereof.
Any Trustee or any organization with which any Trustee may be
associated also may act as broker for the Trust in making purchases and
sales of securities for or to the Trust for its investment portfolio, and
may charge and receive from the Trust the usual and customary commission
for such service. Any organization with which a Trustee may be associated
in acting as broker for the Trust shall be responsible only for the proper
execution of transactions in accordance with the instructions of the Trust
and shall be subject to no further liability of any sort whatever.
The Manager, or any affiliate thereof, also may be a distributor
for the sale of Shares by separate contract or may be a person controlled
by or affiliated with any Trustee or any distributor or a person in which
any Trustee or any distributor is interested financially, subject only to
applicable provisions of law. Nothing herein contained shall operate to
prevent any Manager, who also acts as such a distributor, from also
receiving compensation for services rendered as such distributor.
Section 7. Removal and Resignation of Trustees. The Trustees or
--------- -----------------------------------
the Shareholders (by vote of 66-2/3% of the outstanding shares entitled to
vote thereon) may remove at any time any Trustee with or without cause, and
any Trustee may resign at any time as Trustee, without penalty by written
notice to the Trust.
Section 8. Compensation. The Trustees shall be entitled to
--------- ------------
reasonable compensation from the Trust and may fix the amount of their
compensation.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to
--------- -------------
vote only (i) for the election of Trustees as provided in Article IV,
Section 1, of this Declaration of Trust; provided, however, that no meeting
-------- -------
of Shareholders is required to be called
<PAGE>
less than a majority of the Trustees have been elected by the Shareholders,
(ii) for the removal of Trustees as provided in Article IV, Section 6,
(iii) with respect to any Manager as provided in Article IV, Section 5,
(iv) with respect to any amendment of this Declaration of Trust as provided
in Article VIII, Section 3, (v) with respect to a consolidation, merger or
certain sales of assets as provided in Article VIII, Section 4, (vi) with
respect to the termination of the Trust or a series of Shares as provided
in Article VIII, Section 2, (vii) to the same extent as the stockholders of
a Massachusetts business corporation, as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders, (viii) with
respect to incorporation of the Trust or any series to the extent and as
provided in Article VIII, Section 5, (ix) with respect to any plan adopted
pursuant to Rule 12b-1 (or any successor rule) under the 1940 Act and (x)
with respect to such additional matters relating to the Trust as may be
required by law, by this Declaration of Trust, or the By-Laws of the Trust
or any registration of the Trust with the Commission or any state, or as
the Trustees may consider desirable. Each whole Share shall be entitled to
one vote as to any matter on which it is entitled to vote (except that in
the election of Trustees said vote may be cast for as many persons as there
are Trustees to be elected), and each fractional Share shall be entitled to
a proportionate fractional vote. Notwithstanding any other provision of
this Declaration of Trust, on any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote shall be voted
in the aggregate and not by individual series, except (i)when otherwise
required by the 1940 Act, and (ii) when the Trustees have determined that
the matter affects only the interests of one or more series, then
only Shareholders of such series shall be entitled to vote thereon. There
shall be no cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy. A proxy with respect to Shares held in the
name of two or more persons shall be valid if executed by any one of them,
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to
be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by
law, this Declaration of Trust or any By-Laws of the Trust to be taken by
Shareholders.
Section 2. Meetings of Shareholders. Meetings of Shareholders
--------- ------------------------
may be called at any time by the President, and shall be called by the
President and Secretary at the request in writing or by resolution, of a
majority of Trustees, or at the written request of the holder or holders of
ten percent (10%) or more of the total number of Shares then issued and
outstanding of the
<PAGE>
Trust entitled to vote at such meeting. Any such request shall state the
purpose of the proposed meeting.
Section 3. Quorum and Required Vote. Thirty percent (30%) of
--------- ------------------------
the outstanding Shares shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this
Declaration of Trust permits or requires that holders of any series shall
vote as a series, then thirty percent (30%) of the aggregate number of
Shares of that series entitled to vote shall be necessary to constitute a
quorum for the transaction of business by that series. Any lesser number,
however, shall be sufficient for adjournment and any adjourned session or
sessions may be held within 90 days after the date set for the original
meeting without the necessity of further notice. Except when a larger vote
is required by any provision of this Declaration of Trust or the By-Laws of
the Trust and subject to any applicable requirements of law, a majority of
the Shares voted shall decide any question and a plurality shall elect a
Trustee, provided that where any provision of law or of this Declaration of
Trust permits or requires that the holders of any series shall vote as a
series, then a majority of the Shares of that series voted on the matter
(or a plurality with respect to the election of a Trustee) shall decide
that matter insofar as that series is concerned.
Section 4. Action by Written Consent. Any action required or
--------- -------------------------
permitted to be taken at any meeting may be taken without a meeting if a
consent in writing, setting forth such action, is signed by all the
Shareholders entitled to vote on the subject matter thereof and such
consent is filed with the records of the Trust.
Section 5. Additional Provisions. The By-Laws may include
--------- ---------------------
further provisions for Shareholders' votes and meetings and related
matters.
ARTICLE VI
Distributions and Redemptions
Section 1. Distributions. The Trustees shall distribute
--------- -------------
periodically to the Shareholders of each series of Shares an amount
approximately equal to the net income of that series, determined by the
Trustees or as they may authorize and as herein provided. Distributions of
income may be made in one or more payments, which shall be in Shares, cash
or otherwise, and on a date or dates and as of a record date or dates
determined by the Trustees. At any time and from time to time in their
discretion, the Trustees also may cause to be distributed to the
Shareholders of any one or more series as of a record date or dates
determined by the Trustees in Shares cash or otherwise, all or part of any
<PAGE>
gains realized on the sale or disposition of the assets of the series or
all or part of any other principal of the Trust attributable to the series.
Each distribution pursuant to this Section 1 shall be made ratably
according to the number of Shares of the series held by the several
Shareholders on the record date for such distribution, provided that no
distribution need be made on Shares purchased pursuant to orders received,
or for which payment is made, after such time or times as the Trustees may
determine.
Section 2. Determination of Net Income. In determining the net
--------- ---------------------------
income of each series of Shares for any period, there shall be deducted
from income for that period (a) such portion of all charges, taxes,
expenses and liabilities due or accrued as the Trustees shall consider
properly chargeable and fairly applicable to income for that period or any
earlier period and (b) whatever reasonable reserves the Trustees shall
consider advisable for possible future charges, taxes, expenses and
liabilities which the Trustees shall consider properly chargeable and
fairly applicable to income for that period or any earlier period. The net
income of each series for any period may be adjusted for amounts included
on account of net income in the net asset value of Shares issued or
redeemed or repurchased during that period. In determining the net income
of a series for a period ending on a date other than the end of its fiscal
year, income may be estimated as the Trustees shall deem fair. Gains on the
sale or disposition of assets shall not be treated as income, and losses
shall not be charged against income unless appropriate under applicable
accounting principles, except in the exercise of the discretionary powers
of the Trustees. Any amount contributed to the Trust which is received as
income pursuant to a decree of any court of competent jurisdiction shall be
applied as required by the said decree.
Section 3. Redemptions. Any Shareholder shall be entitled to
--------- -----------
require the Trust to redeem and the Trust shall be obligated to redeem at
the option of such Shareholder all or any part of the Shares owned by said
Shareholder, at the redemption price, pursuant to the method, upon the
terms and subject to the conditions hereinafter set forth:
(a) Certificates for Shares, if issued, shall be presented for
redemption in proper form for transfer to the Trust or the agent of the
Trust appointed for such purpose, and these shall be presented with a
written request that the Trust redeem all or any part of the Shares
represented thereby.
(b) The redemption price per Share shall be the net asset value
per Share when next determined by the Trust at such time or times as the
Trustees shall designate, following the time of presentation of
certificates for Shares, if issued, and an appropriate request for
redemption, or such other time as the
<PAGE>
Trustees may designate in accordance with any provision of the 1940 Act, or
any rule or regulation made or adopted by any securities association
registered under the Securities Exchange Act of 1934, as determined by the
Trustees.
(c) Net asset value of each series of Shares (for the purpose of
issuance of Shares as well as redemptions thereof) shall be determined by
dividing:
(i) the total value of the assets of such series determined
as provided in paragraph (d) below less, to the extent determined
by or pursuant to the direction of the Trustees in accordance
with generally accepted accounting principles, all debts,
obligations and liabilities of such series (which debts,
obligations and liabilities shall include, without limitation of
the generality of the foregoing, any and all debts, obligations,
liabilities, or claims, of any and every kind and nature, fixed,
accrued and otherwise, including the estimated accrued expenses
of management and supervision, administration and distribution and
any reserves or charges for any or all of the foregoing, whether
for taxes, expenses, or otherwise, and the price of Shares
redeemed but not paid for) but excluding the Trust's liability
upon its Shares and its surplus, by
(ii) the total number of Shares of such series outstanding.
The Trustees are empowered, in their absolute discretion, to
establish other methods for determining such net asset value whenever such
other methods are deemed by them to be necessary to enable the Trust to
comply with, or are deemed by them to be desirable, provided they are not
inconsistent with any provision of the 1940 Act.
(d) in determining for the purposes of this Declaration of Trust
the total value of the assets of each series of Shares at any time,
investments and any other assets of such series shall be valued in such
manner as may be determined from time to time by or pursuant to the order
of the Trustees.
(e) Payment of the redemption price by the Trust may be made
either in cash or in securities or other assets at the time owned by the
Trust or partly in cash and partly in securities or other assets at
the time owned by the Trust. The value of any part of such payment to be
made in securities or other assets of the TruSt shall be the value employed
in determining the redemption price. Payment of the redemption price shall
be made on or before the seventh day following the day on which the Shares
are properly presented for redemption hereunder, except that delivery of
any securities included in any such payment shall be
<PAGE>
made as promptly as any necessary transfers on the books of the issuers
whose securities are to be delivered may be made and except as postponement
of the date of payment may be permissible under the 1940 Act.
Pursuant to resolution of the Trustees, the Trust may deduct from
the payment made for any Shares redeemed a liquidating charge not in excess
of five percent (5%) of the redemption price of the Shares so redeemed, and
the Trustees may alter or suspend any such liquidating charge from time to
time.
(f) The right of any holder of Shares redeemed by the Trust as
provided in this Article VI to receive dividends or distributions thereon
and all other rights of such Shareholder with respect to such Shares shall
terminate at the time as of which the redemption price of such Shares is
determined, except the right of such Shareholder to receive (i) the
redemption price of such Shares from the Trust in accordance with the
provisions hereof, and(ii) any dividend or distribution to which such
Shareholder previously had become entitled as the record holder of such
Shares on the record date for such dividend or distribution.
(g) Redemption of Shares by the Trust is conditional upon the
Trust having funds or other assets legally available therefor.
(h) The Trust, either directly or through an agent, may
repurchase its Shares, out of funds legally available therefor, upon such
terms and conditions and for such consideration as the Trustees shall deem
advisable, by agreement with the owner at a price not exceeding the net
asset value per Share as determined by or pursuant to the order of the
Trustees at such time or times as the Trustees shall designate, less a
charge not to exceed five percent (5%) of such net asset value, if and as
fixed by resolution of the Trustees from time to time, and to take all
other steps deemed necessary or advisable in connection therewith.
(i) Shares purchased or redeemed by the Trust shall be cancelled
or held by the Trust for reissue, as the Trustees from time to time may
determine.
(j) The obligations set forth in this Article VI may be
suspended or postponed, (1) for any period (i) during which the New York
Stock Exchange is closed other than for customary weekend and holiday
closings, or (ii) during which trading on the New York Stock Exchange is
restricted, (2) for any period during which an emergency exists as a
result of which (i) the disposal by the Trust of investments owned by it is
not reasonably practicable, or (ii) it is not reasonably practicable for
the Trust fairly to determine the value of its net assets, or (3) for such
other periods as the Commission or any successor governmental authority by
order may permit.
<PAGE>
Notwithstanding any other provision of this Section 3 of Article
VI, if certificates representing such Shares have been issued, the
redemption or repurchase price need not be paid by the Trust until such
certificates are presented in proper form for transfer to the Trust or the
agent of the Trust appointed for such purpose; however, the redemption or
repurchase shall be effective, in accordance with the resolution of the
Trustees, regardless of whether or not such presentation has been made.
Section 4. Redemptions at the Option of the Trust. The Trust
--------- --------------------------------------
shall have the right at its option and at any time to redeem Shares of any
Shareholder at the net asset value thereof as determined in accordance with
Section 3 of Article VI of this Declaration of Trust: (i) if at such time
such Shareholder owns fewer Shares than, or Shares having an aggregate net
asset value of less than, an amount determined from time to time by the
Trustees; or (ii) to the extent that such Shareholder owns Shares of a
particular series of Shares equal to or in excess of a percentage of the
outstanding Shares of that series determined from time to time by the
Trustees; or (iii) to the extent that such Shareholder owns Shares of the
Trust representing a percentage equal to or in excess of such percentage of
the aggregate number of outstanding Shares of the Trust or the aggregate
net asset value of the Trust determined from time to time by the Trustees.
Section 5. Dividends, Distributions, Redemptions and
--------- -----------------------------------------
Repurchases. No dividend or distribution (including, without limitation,
- -----------
any distribution paid upon termination of the Trust or of any series) with
respect to, nor any redemption or repurchase of, the Shares of any series
shall be effected by the Trust other than from the assets of such series.
ARTICLE VII
Limitation of Liability of
Shareholders, Trustees and Others
Section 1. No Personal Liability of Shareholders, Trustees, Etc.
--------- ----------------------------------------------------
No Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or
affairs of the Trust. No Trustee, officer, employee or agent of the Trust
shall be subject to any personal liability whatsoever to any Person, other
than to the Trust or its Shareholders, in connection with Trust Property or
the affairs of the Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties with
respect to such Person; and all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature arising in connection
with the affairs of the Trust.
<PAGE>
If any Shareholder, Trustee, officer, employee, or agent, as such, of the
Trust, is made a party to any suit or proceeding to enforce any such
liability of the Trust, he shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each Shareholder
harmless from and against all claims and liabilities, to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The indemnification and reimbursement required by the preceding
sentence shall be made only out of the assets of the one or more series of
which the Shareholder who is entitled to indemnification or reimbursement
was a Shareholder at the time the act or event occurred which gave rise to
the claim against or liability of said Shareholder. The rights accruing to
a Shareholder under this Article VII, Section 1 shall not impair any other
right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
Every note, bond, contract, instrument, certificate, share, or
undertaking and every other act or thing whatsoever executed or done by or
on behalf of the Trust or the Trustees or any of them in connection with
the Trust shall be deemed conclusively to have been executed or done only
in their or his capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
Section 2. Limitation of Liability Of Trustees, Etc. No
--------- ----------------------------------------
Trustee, officer, employee or agent of the Trust shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee,
or agent thereof for any action or failure to act (including without
limitation the failure to compel in any way any former or acting Trustee to
redress any breach of trust) except for his own bad faith, willful
misfeasance, gross negligence or reckless disregard of the duties involved
in the conduct of his office.
Section 3. Indemnification.
--------- ---------------
(a) The Trustees shall provide for indemnification by the Trust
of every person who is, or has been, a Trustee or officer or employee of
the Trust against all liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue
of his being or having been a Trustee or officer and against amounts paid
or incurred by him in the settlement thereof, in such manner not otherwise
prohibited or limited by law as the Trustees may provide from time to time
in the By-Laws.
<PAGE>
(b) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the
words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
Section 4. No Bond Required of Trustees. No Trustee shall be
--------- ----------------------------
obligated to give any bond or other security for the performance of any of
his duties hereunder.
Section 5. No Duty of Investigation; Notice in Trust
--------- -----------------------------------------
Instruments, Etc. No purchaser, lender, transfer agent or other Person
- -----------------
dealing with the Trustees or any officer, employee or agent of the Trust
shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by said officer,
employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking, and every
other act or thing whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done by the executors
thereof only in their capacity as Trustees under this Declaration of Trust
or in their capacity as officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees may
recite that the same is executed or made by them not individually, but as
Trustees under this Declaration of Trust, and that the obligations of the
Trust under any such instrument are not binding upon any of the Trustees or
Shareholders individually, but bind only the Trust Estate, and may contain
any further recital which they or he may deem appropriate, but the omission
of such recital shall not operate to bind the Trustees individually. The
Trustees may maintain insurance for the protection of the Trust Property,
its Shareholders, Trustees, officers, employees and agents in such amount
as the Trustees shall deem adequate to cover possible tort liability, and
such other insurance as the Trustees in their sole judgment deem advisable.
Section 6. Reliance on Experts, Etc. Each Trustee and officer
--------- ------------------------
or employee of the Trust shall, in the performance of his duties, be fully
and completely Justified and protected with regard to any act or any
failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust, upon an opinion of counsel, or upon
reports made to the Trust by any of its officers or employees or by the
Manager, the Distributor, transfer agent, selected dealers, accountants,
appraisers or other experts or consultants selected with reasonable care by
the Trustees, officers or employees of the
<PAGE>
Trust, regardless of whether such counsel or expert also may be a Trustee.
Section 7. Merged Corporations. For the purposes of this
--------- -------------------
Article VII references to "the Trust" include any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, employees or agents as
well as the resulting or surviving entity; so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or
is or was serving at the request of such a constituent corporation as a
trustee, director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the
same position under the provisions of this Article VII with respect to the
resulting or surviving entity as he would have with respect to such a
constituent corporation if its separate existence had continued.
ARTICLE VIII
Section 1. Duration. The Trust shall continue without
--------- --------
limitation of time but subject to the provisions of this Article VIII.
Section 2. Termination of Trust. (a) The Trust or any series
--------- --------------------
of the Trust may be terminated by an instrument in writing signed by a
majority of the Trustees, or by the affirmative vote of the holders of a
majority of the Shares of the Trust or series outstanding and entitled to
vote, at any meeting of Shareholders. Upon the termination of the Trust or
any series,
(i) the Trust or any series shall carry on no business
except for the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of
the Trust or series and all of the powers of the Trustees under
this Declaration of Trust shall continue until the affairs of the
Trust or series shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust or series,
collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust
Property or property of the series to one or more persons at
public or private sale for consideration which may consist in
whole or in part of cash, securities or other property of any
kind, discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business; and
<PAGE>
(iii) after paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary for
their protection, the Trustees may distribute the remaining Trust
Property or property of the series, in cash or in kind or partly
each, among the Shareholders of the Trust or series according to
their respective rights.
(b) after termination of the Trust or any series and distribution
to the Shareholders as herein provided, a majority of the Trustees shall
execute and lodge among the records of the Trust an instrument in writing
setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder,
and the rights and interests of all Shareholders of the Trust or series
shall thereupon cease.
Section 3. Amendment Procedure. (a) This Declaration of Trust
--------- -------------------
may be amended by a vote of the holders of a majority of the Shares
outstanding and entitled to vote. Amendments shall be effective upon the
taking of action as provided in this section or at such later time as shall
be specified in the applicable vote or instrument. The Trustees may also
amend this Declaration of Trust without the vote or consent of Shareholders
if they deem it necessary to conform this Declaration of Trust to the
requirements of applicable federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended (including those provisions of such Code
relating to the retention of the exemption from federal income tax with
respect to dividends paid by the Trust out of interest income received on
Municipal Obligations), but the Trustees shall not be liable for failing so
to do. The Trustees also may amend this Declaration of Trust without the
vote or consent of Shareholders if they deem it necessary or desirable to
change the name of the Trust or to make any other changes in the
Declaration of Trust which do not materially adversely affect the rights of
Shareholders hereunder.
(b) No amendment may be made under this Section 3 which would
change any rights with respect to any Shares of the Trust or series by
reducing the amount payable thereon upon liquidation of the Trust or series
or by diminishing or eliminating any voting rights pertaining thereto,
except with the vote or consent of the holders of two-thirds of the Shares
of the Trust or Series outstanding and entitled to vote. Nothing contained
in this Declaration of Trust shall permit the amendment of this Declaration
of Trust to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.
<PAGE>
(c) A certificate signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the Declaration
of Trust, as amended, and executed by a majority of the Trustees, shall be
conclusive evidence of such amendment when lodged among the records of the
Trust.
Section 4. Merger, Consolidation and Sale of Assets. The Trust
--------- ----------------------------------------
or any series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property or the property of any series,
including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders of the
Trust or series called for the purpose by the affirmative vote of the
holders of a majority of the Shares of the Trust or series.
Section 5. Incorporation. With the approval of the holders of a
--------- -------------
majority of the Shares of the Trust or any series outstanding and entitled
to vote, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of
the Trust Property or the property of any series or to carry on
any business in which the Trust or the series shall directly or indirectly
have any interest, and to sell, convey and transfer the Trust Property or
the property of any series to any such corporation, trust, association or
organization in exchange for the Shares or securities thereof or otherwise,
and to lend money to, subscribe for the Shares or securities of, and enter
into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust,
association or organization in which the Trust or the series holds or is
about to acquire shares or any other interest. The Trustees also may cause
a merger or consolidation between the Trust or any series or any successor
thereto and any such corporation, trust, partnership, association or other
organization if and to the extent permitted by law, as provided under the
law then in effect. Nothing contained herein shall be construed as
requiring approval of Shareholders for the Trustees to organize or assist
in organizing one or more corporations, trusts, partnerships, associations
or other organizations and selling, conveying or transferring a portion of
the Trust Property to such organization or entities.
ARTICLE IX
Other General Provisions
Section 1. Liability of Third Persons Dealing with Trustees. No
--------- ------------------------------------------------
person dealing with the Trustees shall be bound to
<PAGE>
make any inquiry concerning the validity of any transaction made or to be
made by the Trustees pursuant hereto or to see to the application of any
payments made or property transferred to the Trust or upon its order.
Section 2. Filing of Copies, References, Headings. The original
--------- --------------------------------------
or a copy of this instrument and of each amendment hereto and of each
Declaration of Trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each such amendment and supplemental Declaration of Trust
shall be filed by the Trust with the Secretary of The Commonwealth of
Massachusetts and the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required. Anyone dealing
with the Trust may rely on a certificate by an officer of the Trust as to
whether or not any such amendments or supplemental Declarations of Trust
have been made and as to matters in connection with the Trust hereunder;
and, with the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this instrument or of
any such amendment or supplemental Declaration of Trust. In this instrument
or in any such amendment or supplemental Declaration of Trust, references
to this instrument, and all expressions like "herein," "hereof," and
"hereunder," shall be deemed to refer to this instrument as amended or
affected by any such amendment or supplemental Declaration of Trust.
Headings are placed herein for convenience of reference only and in case of
any conflict, the text of this instrument, rather than the headings, shall
control. This instrument may be executed in any number of counterparts each
of which shall be deemed an original.
Section 3. Applicable Law. The Trust set forth in this
--------- --------------
instrument is made in The Commonwealth of Massachusetts, and it is created
under and is to be governed by and construed and administered according to
the laws of said Commonwealth. The Trust shall be of the type commonly
called a Massachusetts business trust, and without limiting the provisions
hereof, the
<PAGE>
Trust may exercise all powers which are ordinarily exercised by such a
trust.
IN WITNESS WHEREOF, the undersigned Trustees have hereunto set
their hand for themselves and their assigns as of the day and year first
above written.
/s/ George V. Grune, Jr.
-----------------------------------
George V. Grune, Jr., as Trustee
and not individually
/s/ David J. Beaubien
-----------------------------------
David J. Beaubien, as Trustee
and not individually
/s/ Harry G. Bowles
-----------------------------------
Harry G. Bowles, as Trustee
and not individually
-----------------------------------
Robert W. Donahue, as Trustee
and not individually
/s/ David A. Hartman
-----------------------------------
David A. Hartman, as Trustee
and not individually
/s/ William W. Hewitt, Jr.
-----------------------------------
William W. Hewitt, Jr., as Trustee
and not individually
<PAGE>
/s/ Russell H. Johnson
-----------------------------------
Russell H. Johnson, as Trustee
and not individually
/s/ Thomas R. Jordan
-----------------------------------
Thomas R. Jordan, as Trustee
and not individually
/s/ Carl W. Schafer
-----------------------------------
Carl W. Schafer, as Trustee
and not individually
/s/ Gilbert R. Ott, Jr.
-----------------------------------
Gilbert R. Ott, Jr., as Trustee
and not individually
<PAGE>
STATE OF NEW YORK )
: SS:
COUNTY OF NEW YORK )
On this 28th day of August, 1991, the individuals described in
and who executed the foregoing instrument, personally appeared before me
and they severally acknowledged the foregoing instrument to be their free
act and deed.
/s/ Frances T. Hayes
-----------------------------------
Notary Public
My commission expires:
(Notary Seal)
FRANCES T. HAYES
Notary Public, State of New York
No. 43-4767830
Qualified in Richmond County
Certificate Filed in New York County
Commission Expires November 30, 1992
--
Exhibit 1(b)
CERTIFICATE OF AMENDMENT
OF
DECLARATION OF TRUST
OF
KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
The undersigned, being a Trustee of Kidder, Peabody Municipal Money
Market Series (the "Trust"), a Massachusetts business trust, hereby
certifies pursuant to Section 8.3 of Article VIII and Section 2 of Article
IX of the Declaration of Trust of KIDDER, PEABODY MUNICIPAL MONEY MARKET
SERIES, that the Trustees of the Trust have duly adopted at the Board of
Trustees meeting held on December 14, 1994 (adjourned to December 16, 1994),
and ratified at the Board of Trustees meeting held on January 25, 1995, the
following amendment to the Amended and Restated Declaration of Trust of the
Trust dated the 28th day of August, 1991, in the manner provided in such
Declaration of Trust.
VOTED: that the Amended and Restated Declaration of Trust dated
August 28, 1991, be, and it hereby is, amended to change the
name of the Trust from "Kidder, Peabody Municipal Money
Market Series" to "PaineWebber/Kidder, Peabody Municipal
Money Market Series" in the following manner:
Section 1.1. Name. This Trust shall be known as
----
"PaineWebber/Kidder, Peabody Municipal Money Market Series".
<PAGE>
-2-
IN WITNESS WHEREOF, the undersigned, being a Trustee of the Trust, has
signed this Certificate of Amendment in duplicate, as of the 16th
day of February, 1995.
/s/ [SIGNATURE]
-------------------------
Trustee
Exhibit 5(a)
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of April 13, 1995 between PAINEWEBBER/KIDDER PEABODY
MUNICIPAL MONEY MARKET SERIES, a Massachusetts business trust ("Fund"), and
PAINEWEBBER INCORPORATED ("Manager"), a Delaware corporation registered as
a broker-dealer under the Securities Exchange Act of 1934, as amended
("1934 Act"), and as an investment adviser under the Investment Advisers
Act of 1940, as amended.
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment
company, and intends to offer for public sale distinct shares of beneficial
interest ("Shares"), which may be offered in separate and distinct classes
of shares, each corresponding to a distinct portfolio ("Series"); and
WHEREAS the Fund desires to retain Manager as investment adviser and
administrator to furnish certain administrative, investment advisory and
portfolio management services to the Fund and each Series as now exists and
as hereafter may be established, and Manager is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Manager as investment
-----------
adviser and administrator of the Fund and each Series for the period and on
the terms set forth in this Contract. Manager accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. Duties as Investment Adviser.
----------------------------
(a) Subject to the supervision of the Fund's Board of Trustees
("Board"), Manager will provide a continuous investment program for each
Series, including investment research and management with respect to all
securities and investments and cash equivalents in each Series. Manager
will determine from time to time what securities and other investments will
be purchased, retained or sold by each Series.
<PAGE>
(b) Manager agrees that in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of any Series, Manager may, in its discretion, use
brokers who provide the Series with research, analysis, advice and similar
services to execute portfolio transactions on behalf of the Series, and
Manager may pay to those brokers in return for brokerage and research
services a higher commission than may be charged by other brokers, subject
to Manager's determining in good faith that such commission is reasonable
in terms either of the particular transaction or of the overall
responsibility of Manager to such Series and its other clients and that the
total commissions paid by such Series will be reasonable in relation to the
benefits to the Series over the long term. In no instance will portfolio
securities be purchased from or sold to Manager, or any affiliated person
thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder, or any applicable exemptive orders.
Whenever Manager simultaneously places orders to purchase or sell the same
security on behalf of a Series and one or more other accounts advised by
Manager, such orders will be allocated as to price and amount among all
such accounts in a manner believed to be equitable to each account. The
Fund recognizes that in some cases this procedure may adversely affect the
results obtained for the Series.
(c) Manager will oversee the maintenance of all books and records
with respect to the securities transactions of each Series, and will
furnish the Board with such periodic and special reports as the Board
reasonably may request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Manager hereby agrees that all records which it
maintains for the Fund are the property of the Fund, agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any records which
it maintains for the Fund and which are required to be maintained by Rule
31a-1 under the 1940 Act and further agrees to surrender promptly to the
Fund any records which it maintains for the Fund upon request by the Fund.
(d) Manager will oversee the computation of the net asset value and
the net income of each Series as described in the currently effective
registration statement of the Fund under the Securities Act of 1933, as
amended, and the 1940 Act and any supplements thereto ("Registration
Statement") or as more frequently requested by the Board.
(e) The Fund hereby authorizes Manager and any entity or person
associated with Manager which is a member of a national securities exchange
to effect any transaction on such exchange for the account of any Series,
which transaction is permitted by Section 11(a) of the 1934 Act, and the
Fund hereby consents to the
- 2 -
<PAGE>
retention of compensation by Manager or any person or entity associated
with Manager for such transaction.
3. Duties as Administrator. Manager will administer the affairs of
-----------------------
the Fund and each Series subject to the supervision of the Board and the
following understandings:
(a) Manager will supervise all aspects of the operations of the Fund
and each Series, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however,
that nothing herein contained shall be deemed to relieve or deprive the
Board of its responsibility for and control of the conduct of the affairs
of the Fund and each Series.
(b) Manager will provide the Fund and each Series with such
corporate, administrative and clerical personnel (including officers of the
Fund) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Fund
and each Series.
(c) Manager will arrange, but not pay, for the periodic preparation,
updating, filing and dissemination (as applicable) of the Fund's
Registration Statement, proxy material, tax returns and required reports to
each Series' shareholders and the Securities and Exchange Commission and
other appropriate federal or state regulatory authorities.
(d) Manager will provide the Fund and each Series with, or obtain for
it, adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and
similar items.
(e) Manager will provide the Board on a regular basis with economic
and investment analyses and reports and make available to the Board upon
request any economic, statistical and investment services normally
available to institutional or other customers of Manager.
4. Further Duties. In all matters relating to the performance of
--------------
this Contract, Manager will act in conformity with the Declaration of
Trust, By-Laws and currently effective Registration Statement of the Fund,
as delivered to Manager and upon which it shall be entitled to rely, and
with the instructions and directions of the Board, and will comply with the
requirements of the 1940 Act, the rules thereunder, and all other
applicable federal and state laws and regulations.
5. Delegation of Manager's Duties as Investment Adviser and
--------------------------------------------------------
Administrator. With respect to any or all Series, Manager may enter into
- -------------
one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
a sub-adviser or sub-administrator
- 3 -
<PAGE>
in which Manager delegates to such sub-adviser or sub-administrator any or
all of its duties specified in Paragraphs 2 and 3 of this Contract,
provided that each Sub-Advisory or Sub-Administration Contract imposes on
the sub-adviser or sub-administrator bound thereby all the duties and
conditions to which Manager is subject by Paragraphs 2, 3 and 4 of this
Contract, and further provided that each Sub-Advisory or Sub-Administration
Contract meets all requirements of the 1940 Act and rules thereunder.
6. Services Not Exclusive. The services furnished by Manager
----------------------
hereunder are not to be deemed exclusive and Manager shall be free to
furnish similar services to others so long as its services under this
Contract are not impaired thereby. Nothing in this Contract shall limit or
restrict the right of any director, officer or employee of Manager, who may
also be a Trustee, officer or employee of the Fund, to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar
nature or a dissimilar nature.
7. Expenses.
--------
(a) During the term of this Contract, each Series will bear all
expenses, not specifically assumed by Manager, incurred in its operations
and the offering of its shares.
(b) Expenses borne by each Series will include but not be limited to
the following (or each Series' proportionate share of the following): (i)
the cost (including brokerage commissions) of securities purchased or sold
by the Series and any losses incurred in connection therewith; (ii) fees
payable to and expenses incurred on behalf of the Series by Manager under
this Contract; (iii) expenses of organizing the Fund and the Series; (iv)
filing fees and expenses relating to the registration and qualification of
the Series' shares and the Fund under federal and/or state securities laws
and maintaining such registration and qualification; (v) fees and salaries
payable to the Fund's Trustees and officers who are not interested persons
of the Fund or Manager; (vi) all expenses incurred in connection with the
Trustees' services, including travel expenses in the case of Trustees who
are not interested persons of the Fund or Manager; (vii) taxes (including
any income or franchise taxes) and governmental fees; (viii) costs of any
liability, uncollectible items of deposit and other insurance and fidelity
bonds; (ix) any costs, expenses or losses arising out of a liability of or
claim for damages or other relief asserted against the Fund or Series for
violation of any law and any indemnification relating thereto; (x) legal,
accounting and auditing expenses, including legal fees of special counsel
for those Trustees of the Fund who are not interested persons of the Fund;
(xi) charges of custodians, transfer agents and other agents; (xii) costs
of preparing share certificates; (xiii) expenses of
- 4 -
<PAGE>
setting in type and printing prospectuses and supplements thereto,
statements of additional information and supplements thereto, reports and
proxy materials for existing shareholders; (xiv) costs of mailing
prospectuses and supplements thereto, statements of additional information
and supplements thereto, reports and proxy materials to existing
shareholders; (xv) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which
the Fund is a party and the expenses the Fund may incur as a result of its
legal obligation to provide indemnification to its officers, Trustees,
agents and shareholders or to Manager) incurred by the Fund or Series;
(xvi) fees, voluntary assessments and other expenses incurred in connection
with membership in investment company organizations; (xvii) cost of mailing
and tabulating proxies and costs of meetings of shareholders, the Board and
any committees thereof; (xviii) the cost of investment company literature
and other publications provided by the Fund to its Trustees and officers;
(xix) costs of mailing, stationery and communications equipment; (xx)
expenses incident to any dividend, withdrawal or redemption options; (xxi)
charges and expenses of any outside pricing service used to value portfolio
securities and (xxii) interest on borrowings of the Fund.
(c) Manager will assume the cost of any compensation for services
provided to the Fund received by the officers of the Fund and by those
Trustees who are interested persons of the Fund.
(d) The payment or assumption by Manager of any expenses of the Fund
or a Series that Manager is not required by this Contract to pay or assume
shall not obligate Manager to pay or assume the same or any similar expense
of the Fund or a Series on any subsequent occasion.
8. Compensation.
------------
(a) For the services provided and the expenses assumed pursuant to
this Contract with respect to the Connecticut Series, New Jersey Series and
New York Series, the Fund will pay to Manager a fee, computed daily and
paid monthly, at an annual rate of .50% of each such Series' average daily
net assets.
(b) For the services provided and the expenses assumed pursuant to
this Contract with respect to any Series hereafter established, the Trust
will pay to Manager from the assets of such Series a fee in an amount to be
agreed upon in a written fee agreement ("Fee Agreement") executed by the
Fund on behalf of such Series and by Manager. All such Fee Agreements
shall provide that they are subject to all terms and conditions of this
Contract.
(c) The fee shall be computed daily and paid monthly to Manager on or
before the first business day of the next succeeding calendar month.
- 5 -
<PAGE>
(d) If this Contract becomes effective or terminates before the end
of any month, the fee for the period from the effective day to the end of
the month or from the beginning of such month to the date of termination,
as the case may be, shall be prorated according to the proportion which
such period bears to the full month in which such effectiveness or
termination occurs.
9. Limitation of Liability of Manager. Manager and its delegates,
----------------------------------
including any Sub-Adviser or Sub-Administrator to the Fund, shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by any Series, the Fund or any of its shareholders, in connection with the
matters to which this Contract relates, except to the extent that such a
loss results from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract. Any person, even though
also an officer, director, employee, or agent of Manager, who may be or
become an officer, Trustee, employee or agent of the Fund shall be deemed,
when rendering services to any Series or the Fund or acting with respect to
any business of such Series or the Fund, to be rendering such service to or
acting solely for the Series or the Fund and not as an officer, director,
employee, or agent or one under the control or direction of Manager even
though paid by it.
10. Duration and Termination.
------------------------
(a) This Contract shall become effective upon the date hereabove
written provided that, with respect to any Series, this Contract shall not
take effect unless it has first been approved (i) by a vote of a majority
of those Trustees of the Fund who are not parties to this Contract or
interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of
that Series' outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter,
if not terminated, this Contract shall continue automatically for
successive periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of
those Trustees of the Fund who are not parties to this Contract or
interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by
vote of a majority of the outstanding voting securities of a Series with
respect to that Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty,
by vote of the Board or by a vote of a majority of the
- 6 -
<PAGE>
outstanding voting securities of such Series on sixty days' written notice
to Manager or by Manager at any time, without the payment of any penalty,
on sixty days' written notice to the Fund. Termination of this Contract
with respect to any given Series shall in no way affect the continued
validity of this Contract or the performance thereunder with respect to any
other Series. This Contract will automatically terminate in the event of
its assignment.
11. Amendment of this Contract. No provision of this Contract may be
--------------------------
changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought, and no material amendment of
this Contract as to any given Series shall be effective until approved by
vote of a majority of such Series' outstanding voting securities.
12. Governing Law. This Contract shall be construed in accordance
-------------
with the laws of the State of Delaware, without giving effect to the
conflicts of laws principles thereof, and in accordance with the 1940 Act,
provided, however, that Section 13 below will be construed in accordance
with the laws of the Commonwealth of Massachusetts. To the extent that the
applicable laws of the State of Delaware or the Commonwealth of
Massachusetts conflict with the applicable provisions of the 1940 Act, the
latter shall control.
13. Limitation of Liability of the Trustees and Shareholders of the
---------------------------------------------------------------
Trust. No Trustee, shareholder, officer, employee or agent of any Series
- ------
shall be liable for any obligations of any Series or the Fund under this
Contract, and Manager agrees that, in asserting any rights or claims under
this Contract, it shall look only to the assets and property of the Fund in
settlement of such right or claim, and not to such Trustee, shareholder,
officer, employee or agent. The Fund represents that a copy of its
Declaration of Trust is on file with the Secretary of the Commonwealth of
Massachusetts and the Boston City Clerk.
14. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Contract shall
not be affected thereby. This Contract shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
As used in this Contract, the terms "majority of the outstanding voting
securities", "affiliated person", "interested person", "assignment",
"broker", "investment adviser", "national securities exchange", "net
assets", "prospectus", "sale", "sell" and "security" shall have the same
meaning as such terms have in the
- 7 -
<PAGE>
1940 Act, subject to such exemption as may be granted by the Securities and
Exchange Commission by any rule, regulation or order. Where the effect of
a requirement of the 1940 Act reflected in any provision of this Contract
is affected by a rule, regulation or order of the Securities and Exchange
Commission, whether of special or general application, such provision shall
be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
Attest: PAINEWEBBER INCORPORATED
By _____________________________________
- ---------------------
Attest: PAINEWEBBER/KIDDER, PEABODY MUNICIPAL
MONEY MARKET SERIES
By _____________________________________
- ---------------------
- 8 -
Exhibit 5(b)
SUB-ADVISORY AND SUB-ADMINISTRATION AGREEMENT
Contract made as of April 13, 1995, between PAINEWEBBER INCORPORATED
("PaineWebber"), a Delaware corporation registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended ("1934 Act") and as an
investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act"), and MITCHELL HUTCHINS ASSET MANAGEMENT INC. ("Mitchell
Hutchins"), a Delaware corporation registered as a broker-dealer under the
1934 Act and as an investment adviser under the Advisers Act.
WHEREAS PaineWebber has entered into an Investment Advisory and
Administration Contract dated April 13, 1995 ("Advisory Contract") with
PaineWebber/Kidder, Peabody Municipal Money Market Series ("Fund"), an
open-end investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"), which offers for public sale distinct series
of shares of beneficial interest ("Series"), each corresponding to a
distinct portfolio; and
WHEREAS under the Advisory Contract PaineWebber has agreed to provide
certain investment advisory and administrative services to the Series as
now exist and as hereafter may be established; and
WHEREAS the Advisory Contract authorizes PaineWebber to delegate
certain of its duties as investment adviser and administrator under the
Advisory Contract to a sub-adviser or sub-administrator; and
WHEREAS PaineWebber wishes to retain Mitchell Hutchins as sub-adviser
and sub-administrator to provide certain investment advisory and
administrative services to PaineWebber and each Series of the Fund as
listed in Schedule A to this agreement, as such schedule may be revised
from time to time, and Mitchell Hutchins is willing to render such services
as described herein upon the terms set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. PaineWebber hereby appoints Mitchell Hutchins as
-----------
its sub-adviser and sub-administrator with respect to each Series and
Mitchell Hutchins accepts such appointment and agrees that it will furnish
the services set forth in Paragraph 2.
<PAGE>
2. Services and Duties of Mitchell Hutchins.
----------------------------------------
(a) Subject to the supervision of the Board of Trustees ("Board") and
PaineWebber, Mitchell Hutchins will provide a continuous investment program
for each Series, including investment research and management with respect
to all securities, investments and cash equivalents held in the portfolio
of each Series. Mitchell Hutchins will determine from time to time what
investments will be purchased, retained or sold by each Series. Mitchell
Hutchins will be responsible for placing purchase and sale orders for
investments and for other related transactions. Mitchell Hutchins will
provide services under this agreement in accordance with the Series'
investment objective, policies and restrictions as stated in the Series'
Prospectuses.
(b) Mitchell Hutchins agrees that, in placing orders with brokers, it
will attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of any Series, Mitchell Hutchins may, in its
discretion, effect securities transactions with brokers and dealers who
provide the Series with research, analysis, advice and similar services,
and Mitchell Hutchins may pay to those brokers and dealers, in return for
brokerage and research services and analysis, a higher commission than may
be charged by other brokers and dealers, subject to Mitchell Hutchins'
determining in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of
Mitchell Hutchins and its affiliates to such Series and its other clients
and that the total commissions paid by such Series will be reasonable in
relation to the benefits to such Series over the long term. In no instance
will portfolio securities be purchased from or sold to PaineWebber,
Mitchell Hutchins or any affiliated person thereof, except in accordance
with the federal securities laws and the rules and regulations thereunder,
or any applicable exemptive orders. Whenever Mitchell Hutchins
simultaneously places orders to purchase or sell the same security on
behalf of a Series and one or more other accounts advised by Mitchell
Hutchins, such orders will be allocated as to price and amount among all
such accounts in a manner believed to be equitable to each account. The
Fund recognizes that in some cases this procedure may adversely affect the
results obtained for a Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series and will
furnish the Board with such periodic and special reports as PaineWebber or
the Board reasonably may request. In compliance with the requirements of
Rule 31a-2 under the 1940 Act, Mitchell Hutchins hereby agrees that all
records which it maintains for the Fund are the property of the Fund,
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940
- 2 -
<PAGE>
Act any records which it maintains for the Fund and which are required to
be maintained by Rule 31a-1 under the 1940 Act, and further agrees to
surrender promptly to the Fund any records which it maintains for the Fund
upon request by the Fund.
(d) Mitchell Hutchins will oversee the computation of the net asset
value and net income of each Series as described in the currently effective
registration statement of the Fund under the Securities Act of 1933, as
amended, and 1940 Act and any supplements thereto ("Registration
Statement") or as more frequently requested by the Board.
(e) Mitchell Hutchins will assist in administering the affairs of the
Fund and each Series, subject to the supervision of the Board and
PaineWebber, and further subject to the following understandings:
(i) Mitchell Hutchins will supervise all aspects of the operation
of the Fund and each Series except as hereinafter set forth; provided,
however, that nothing herein contained shall be deemed to relieve or
deprive the Board of its responsibility for and control of the conduct of
affairs of the Fund and each Series.
(ii) Mitchell Hutchins will provide the Fund and each Series with
such administrative and clerical personnel (including officers of the Fund)
as are reasonably deemed necessary or advisable by the Board and
PaineWebber and Mitchell Hutchins will pay the salaries of all such
personnel.
(iii) Mitchell Hutchins will provide the Fund and each Series
with such administrative and clerical services as are reasonably deemed
necessary or advisable by the Board and PaineWebber, including the
maintenance of certain of the books and records of the Fund and each
Series.
(iv) Mitchell Hutchins will arrange, but not pay for, the
periodic preparation, updating, filing and dissemination (as applicable) of
the Fund's Registration Statement, proxy material, tax returns and reports
to shareholders of each Series, the Securities and Exchange Commission and
other appropriate federal or state regulatory authorities.
(v) Mitchell Hutchins will provide the Fund and each Series with,
or obtain for it, adequate office space and all necessary office equipment
and services, including telephone service, heat, utilities, stationery
supplies and similar items.
3. Duties Retained by PaineWebber. PaineWebber will continue to
------------------------------
provide to the Board and each Series the services described in subparagraph
3(e) of the Advisory Contract.
- 3 -
<PAGE>
4. Further Duties. In all matters relating to the performance of
--------------
this Contract, Mitchell Hutchins will act in conformity with the Fund's
Declaration of Trust, By-Laws and Registration Statement of the Fund and
with the written instructions and directions of the Board and PaineWebber,
and will comply with the requirements of the 1940 Act, the Investment
Advisers Act of 1940 ("Advisers Act"), the rules thereunder, and all other
applicable federal and state laws and regulations.
5. Services Not Exclusive. The services furnished by Mitchell
----------------------
Hutchins hereunder are not to be deemed exclusive, and Mitchell Hutchins
shall be free to furnish similar services to others so long as its services
under this Contract are not impaired thereby. Nothing in this Contract
shall limit or restrict the right of any director, officer or employee of
Mitchell Hutchins, who may also be a trustee, officer or employee of the
Fund, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar nature or a dissimilar nature.
6. Expenses. During the term of this Contract, Mitchell Hutchins
--------
will pay all expenses incurred by it in connection with its services under
this Contract.
7. Compensation. For the services provided and the expenses assumed
------------
by Mitchell Hutchins pursuant to this Contract with respect to each Series,
PaineWebber will pay to Mitchell Hutchins a fee equal to 20% of the fee
received by PaineWebber from the Fund pursuant to the Advisory Contract
with respect to such Series, such compensation to be paid monthly.
8. Limitation of Liability. Mitchell Hutchins and its delegates
-----------------------
will not be liable for any error of judgment or mistake of law or for any
loss suffered by PaineWebber or the Fund or the shareholders of any Series
in connection with the performance of this Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract. Any person, even though
also an officer, director, employee, or agent of Mitchell Hutchins, who may
be or become an officer, trustee, employee or agent of the Fund shall be
deemed, when rendering services to any Series of the Fund or acting with
respect to any business of such Series or the Fund, to be rendering such
services to or acting solely for the Series or the Fund and not as an
officer, director, employee, or agent or one under the control or direction
of Mitchell Hutchins even though paid by it.
- 4 -
<PAGE>
9. Duration and Termination.
------------------------
(a) This Contract will become effective upon the date first above
written, provided that, with respect to any Series, this Contract shall not
take effect unless it has first been approved (i) by a vote of a majority
of those trustees of the Fund who are not parties to this Contract or
interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by vote of a majority
of that Series' outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract will
continue in effect for two years from the above written date. Thereafter,
if not terminated, this Contract will continue automatically for successive
periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of
those trustees of the Fund who are not parties to this Contract or
interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or, with
respect to any given Series, by vote of a majority of the outstanding
voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Contract may be terminated by any party hereto at any time, without the
payment of any penalty, on sixty days' written notice to the other party;
this Contract also may be terminated at any time, without the payment of
any penalty, by vote of the Board or by a vote of a majority of the
outstanding voting securities of such Series on sixty days' written notice
to Mitchell Hutchins and PaineWebber. Termination of this Contract with
respect to any given Series shall in no way affect the continued validity
of this Contract or the performance thereunder with respect to any other
Series. This Contract will terminate automatically in the event of its
assignment or upon termination of the Advisory Contract.
10. Amendment of this Agreement. No provision of this Contract may
---------------------------
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of
this Contract as to any given Series shall be effective until approved by
vote of a majority of such Series' outstanding voting securities.
11. Governing Law. This Contract shall be construed in accordance
-------------
with the laws of the State of Delaware without giving effect to the
conflicts of laws principles thereof and the 1940 Act provided, however,
that Section 12 will be construed in accordance with the laws of the
Commonwealth of Massachusetts. To the extent that the applicable laws of
the State of Delaware or the
- 5 -
<PAGE>
Commonwealth of Massachusetts conflict with the applicable provisions of
the 1940 Act, the latter shall control.
12. Limitation of Liability of the Trustees and Shareholders of the
---------------------------------------------------------------
Trust. No Trustee, shareholder, officer, employee or agent of any Series
- -----
shall be liable for any obligations of any Series or the Fund under this
Contract, and Mitchell Hutchins agrees that, in asserting any rights or
claims under this Contract, it shall look only to the assets and property
of the Fund in settlement of such right or claim, and not to such Trustee,
shareholder, officer, employee or agent. The Fund represents that a copy
of its Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and the Boston City Clerk.
13. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Contract shall
not be affected thereby. This Contract shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
As used in this Contract, the terms "majority of the outstanding voting
securities," "affiliated person," "interested person," "assignment,"
"broker," "investment adviser," "net assets," "sale," "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act, subject to
such exemption as may be granted by the SEC by any rule, regulation or
order. Where the effect of a requirement of the federal securities laws
reflected in any provision of this Agreement is affected by a rule,
regulation or order of the SEC, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized signatories as of the date and year
first above written.
PAINEWEBBER INCORPORATED
Attest:
By:
- --------------------------- -------------------------------
Title:
------------------------------
MITCHELL HUTCHINS ASSET
Attest: MANAGEMENT INC.
By:
- --------------------------- -------------------------------
Title:
------------------------------
- 7 -
<PAGE>
SCHEDULE A
----------
1. PaineWebber/Kidder, Peabody Municipal Money Market Series -
Connecticut Series
2. PaineWebber/Kidder, Peabody Municipal Money Market Series -
New Jersey Series
3. PaineWebber/Kidder, Peabody Municipal Money Market Series -
New York Series
- 8 -
Exhibit 8
CUSTODIAN CONTRACT
Between
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
and
STATE STREET BANK AND TRUST COMPANY
MMSERIES.CUS
Global/Series/Trust
21E593
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be Held By
It . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States. 2
2.1 Holding Investments . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . 4
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . 5
2.5 Availability of Federal Funds . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . 5
2.7 Payment of Fund Monies . . . . . . . . . . . . . 6
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . 7
2.9 Appointment of Agents . . . . . . . . . . . . . . 7
2.10 Deposit of Fund Assets in Securities System . . . 7
2.11 Fund Assets Held in the Custodian's Direct
Paper System . . . . . . . . . . . . . . . . . . 9
2.12 Segregated Account . . . . . . . . . . . . . . 10
2.13 Ownership Certificates for Tax Purposes . . . . 10
2.14 Proxies . . . . . . . . . . . . . . . . . . . . 10
2.15 Communications Relating to Portfolio Securities 11
3. Payments for Sales or Repurchases or Redemptions
of Shares of the Fund . . . . . . . . . . . . . . . 11
4. Proper Instructions . . . . . . . . . . . . . . . . 11
5. Actions Permitted Without Express Authority . . . . 12
6. Evidence of Authority . . . . . . . . . . . . . . . 12
7. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income . 13
8. Records . . . . . . . . . . . . . . . . . . . . . . 13
9. Opinion of Fund's Independent Accountants . . . . . 13
10. Reports to Fund by Independent Public Accountants . 14
<PAGE>
11. Compensation of Custodian . . . . . . . . . . . . . . 14
12. Responsibility of Custodian . . . . . . . . . . . . . 14
13. Mitigation by Custodian . . . . . . . . . . . . . . . 16
14. Notification of Litigation; Right to Proceed . . . . 16
15. Effective Period, Termination and Amendment . . . . . 16
16. Successor Custodian . . . . . . . . . . . . . . . . . 17
17. Interpretive and Additional Provisions . . . . . . . 18
18. Additional Funds . . . . . . . . . . . . . . . . . . 18
19. Massachusetts Law to Apply . . . . . . . . . . . . . 18
20. Limitation of Trustee, Officer and Shareholder
Liability . . . . . . . . . . . . . . . . . . . . . . 19
21. No Liability of Other Portfolios . . . . . . . . . . 19
22. Confidentiality . . . . . . . . . . . . . . . . . . . 19
23. Assignment . . . . . . . . . . . . . . . . . . . . . 19
24. Severability . . . . . . . . . . . . . . . . . . . . 19
25. Prior Contracts . . . . . . . . . . . . . . . . . . . 20
26. Shareholder Communications Election . . . . . . . . . 20
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between PaineWebber/Kidder, Peabody Municipal Money
Market Series, a business trust organized and existing under the laws of
Massachusetts, having its principal place of business at 1285 Avenue of the
Americas, New York, New York 10019 hereinafter called the "Fund" and State
Street Bank and Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian".
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently has established six series of shares, two
of which, the Connecticut Series and the New Jersey Series, are covered by
this contract (the Connecticut Series and the New Jersey Series, together
with all other series subsequently established by the Fund and made subject
to this Contract in accordance with Article 19, being herein referred to as
the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets
of the Portfolios of the Fund, including securities which the Fund, on
behalf of the applicable Portfolio desires to be held in places within the
United States ("domestic securities") pursuant to the provisions of the
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to
deliver to the Custodian all securities and cash of the Portfolios, and all
payments of income, payments of principal or capital distributions received
by it with respect to all securities owned by the Portfolio(s) from time to
time, and the cash consideration received by it for such new or treasury
shares of beneficial interest of the Fund representing interests in the
Portfolios, ("Shares") as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
4), the Custodian shall, on behalf of the applicable Portfolio(s), from time
to time, employ one or more sub-custodians, located in the United States but
only in accordance with an applicable vote by the Board of Trustees of the
Fund on behalf of the applicable Portfolio(s), and provided that the
Custodian shall have no more or less responsibility or liability to the
Fund on account of any
<PAGE>
actions or omissions of any sub-custodian so employed than any such sub-
custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By
--------------------------------------------------------------------
the Custodian in the United States
----------------------------------
2.1 Holding Investments. The Custodian shall hold and physically
-------------------
segregate for the account of each Portfolio all non-cash property, to
be held by it in the United States including all domestic securities
owned by such Portfolio, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies, (each, a
"U.S. Securities System") and (b) commercial paper of an issuer for
which State Street Bank and Trust Company acts as issuing and paying
agent ("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian (the "Direct Paper System")
pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
----------------------
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund on behalf of
the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or
2
-
<PAGE>
nominee name of any agent appointed pursuant to Section 2.9 or
into the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number of
bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in any
--------
such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Fund on behalf of the Portfolio, but only against receipt of
--- ----
adequate collateral as agreed upon from time to time by the
Custodian and the Fund on behalf of the Portfolio, which may be
in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be credited
to the Custodian's account in the book-entry system authorized by
the U.S. Department of the Treasury, the Custodian will not be
held liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, but only against receipt of
--- ----
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the
3
-
<PAGE>
Securities Exchange Act of 1934 (the "Exchange Act") and a member
of The National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange,
or of any similar organization or organizations, regarding escrow
or other arrangements in connection with transactions by the
Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of,
--- ----
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the Portfolio
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
--------------------------
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
------
in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment
adviser as the Portfolio, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms
of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to
4
-
<PAGE>
timely collect income due the Fund on such securities and to notify
the Fund on a best efforts basis only of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender
or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
-------------
account or accounts in the United States in the name of each Portfolio
of the Fund, which shall contain only property held by the Custodian
as custodian for the applicable Portfolio, subject only to draft or
order by the Custodian acting pursuant to the terms of this Contract,
and shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the
Portfolio, other than cash maintained by the Portfolio in a bank
account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
--------
qualified to act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
-----------------------------
on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the Fund
on behalf of a Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in payment for
Shares of such Portfolio which are deposited into the Portfolio's
account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
--------------------
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit
such income, as collected, to such Portfolio's custodian account.
Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items
requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due each
Portfolio on securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Fund. The Custodian will
have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as
5
-
<PAGE>
may be necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Portfolio is
properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
----------------------
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or options
on futures contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name
of the Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for transfer;
(b) in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in Section
2.10 hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in
Section 2.11; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in Article 4;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 3 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and
6
-
<PAGE>
operating expenses of the Fund whether or not such expenses are
to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short; and
7) For any other proper purpose, but only upon receipt of, in
--- ----
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
--------------------------------------------------------------------
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received
by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
---------------------
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
--------
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder. In the event of any loss, damage or expense
suffered or incurred by the Fund or a Portfolio caused by or resulting
from the negligence or willful misconduct of any agent appointed by
the Custodian pursuant to this Section 2.9, the Custodian shall
promptly reimburse the Fund or the applicable Portfolio in the amount
of such loss, damage or expense.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
--------------------------------------------
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to
7
-
<PAGE>
herein as "U.S. Securities Systems" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon (i) receipt of advice
from the U.S. Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Portfolio. Copies of all
advices from the U.S. Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and
be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day' s transactions in the
U.S. Securities System for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial certificate required by Article 15 hereof;
and
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the
8
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Portfolio resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Portfolio has
not been made whole for any such loss or damage. The Custodian
agrees to cooperate with Fund in connection with the enforcement
of the Fund's subrogation rights.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The
-------------------------------------------------------
Custodian may deposit and/or maintain securities owned by a Portfolio
in the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio; and
9
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6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
------------------
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by
the Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the maintenance
of segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
--- ----
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
---------------------------------------
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities
-------
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Portfolio such proxies, all
proxy soliciting materials and all notices relating to such
securities.
10
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<PAGE>
2.15 Communications Relating to Portfolio Securities. Subject to the
-----------------------------------------------
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund for each Portfolio all written information (including,
without limitation, pendency of calls and maturities of domestic
securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund on
behalf of the Portfolio and the maturity of futures contracts
purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to
the Portfolio all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer. If the
Fund on behalf of the Portfolio desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the
Fund on behalf of the Portfolio shall notify the Custodian at least
three business days prior to the date on which the Custodian is to
take such action.
3. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
----------------------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund on behalf of each such Portfolio
and the Transfer Agent of any receipt by it of payments for Shares of such
Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the
Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares of a Portfolio, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares of
a Portfolio, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
4. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing
signed or initialed by two or more persons as the Board of Trustees shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a
11
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<PAGE>
specific statement of the purpose for which such action is requested and
may be in the form of standing instructions. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to
have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a certificate of
the Secretary or an Assistant Secretary as to the authorization by the
Board of Trustees of the Fund accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may
include communications effected directly between electro-mechanical or
electronic devices provided that the Board of Trustees and the Custodian
are satisfied that such procedures afford adequate safeguards for the
Portfolios' assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three -
party agreement which requires a segregated asset account in accordance
with Section 2.12.
5. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from
the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, provided that all such payments shall be accounted
--------
for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Portfolio
except as otherwise directed by the Board of Trustees of the
Fund.
6. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed
by it to be genuine and to have been properly executed by or on behalf of
the Fund. The Custodian may receive and accept a certified copy of a vote
of the Board of Trustees of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Trustees pursuant to the
Declaration of Trust as described in such vote,
12
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<PAGE>
and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
7. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
---------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to
keep the books of account of each Portfolio and/or compute the net asset
value per share of the outstanding shares of each Portfolio or, if directed
in writing to do so by the Fund on behalf of the Portfolio, shall itself
keep such books of account and/or compute such net asset value per share.
If so directed, the Custodian shall also calculate daily the net income of
the Portfolio as described in the Fund's currently effective prospectus
related to such Portfolio and shall advise the Fund and the Transfer Agent
daily of the total amounts of such net income and, if instructed in writing
by an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share and the daily
income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
8. Records
-------
The Custodian shall with respect to each Portfolio create, maintain
and retain all records relating to its activities and obligations under
this Contract in such manner as will meet the obligations of the Fund under
the Investment Company Act of 1940, with particular attention to Section 31
thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the
property of the Fund and shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund, attorneys for and auditors employed by the
Fund, and employees and agents of the Securities and Exchange Commission.
The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian
and shall, when requested to do so by the Fund and for such compensation as
shall be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
9. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from
year to year favorable opinions from the Fund's independent accountants
with respect to its activities hereunder in connection with the preparation
of the Fund's Form N-1A, and Form N-SAR or other annual reports to the
Securities and Exchange Commission and with respect to any other
requirements of such Commission.
13
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<PAGE>
10. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports
by independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities deposited
and/or maintained in a Securities System, relating to the services provided
by the Custodian under this Contract; such reports, shall be of sufficient
scope and in sufficient detail, as may reasonably be required by the Fund
to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
11. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between the Fund on behalf of each applicable Portfolio and the Custodian.
12. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper
party or parties, including any futures commission merchant acting pursuant
to the terms of a three-party futures or options agreement. The Custodian
shall be held to the exercise of reasonable care in carrying out the
provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct, the Custodian shall be without liability to the Fund for any
loss, liability, claim or expense resulting from or caused by; (i) errors
by the Fund or the Investment Advisor in their instructions to the
Custodian; (ii) the insolvency of or acts or omissions by a Securities
System; and (iii) any provision of any present or future law or regulation
or order of the United States of America, or any state thereof, or any
other country, or political subdivision thereof or of any court of
competent jurisdiction.
14
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<PAGE>
If the Fund on behalf of a Portfolio requires the Custodian to take
any action with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund or the Portfolio being liable
for the payment of money or incurring liability of some other form, the
Fund on behalf of the Portfolio, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in
an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) for the benefit of a Portfolio including the purchase or sale
of foreign exchange or of contracts for foreign exchange ("Advance") or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection
with the performance of this Contract, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or willful
misconduct ("Liability"), then in such event property equal in value to not
more than 125 % of such Advance and accrued interest on the Advance or the
anticipated amount of such Liability, held at any time for the account of
the appropriate Portfolio by the Custodian or sub-custodian may be held as
security for such Liability or for such Advance and accrued interest on the
Advance. The Custodian shall designate the security or securities
constituting security for an Advance or Liability (the "Designated
Securities") by notice in writing to the Fund (which may be sent by tested
telefax or telex). In the event the value of the Designated Securities
shall decline to less than 110% of the amount of such Advance and accrued
interest on the Advance or the anticipated amount of such Liability, then
the Custodian may designate in the same manner an additional security for
such obligation ("Additional Securities "), but the aggregate value of the
Designated Securities and Additional Securities shall not be in excess of
125 % of the amount of such Advance and the accrued interest on the Advance
or the anticipated amount of such Liability. At the request of the Fund, on
behalf of a Portfolio, the Custodian shall agree to substitution of a
security or securities which have a value equal to the value of the
Designated or Additional Securities which the Fund desires be released from
their status as security, and such release from status as security shall be
effective upon the Custodian and the Fund agreeing in writing as to the
identity of the substituted security or securities, which shall thereupon
become Designated Securities.
Notwithstanding the above, the Custodian shall, at the request of the
Fund, on behalf of a Portfolio, immediately release from their status as
security any or all of the Designated Securities or Additional Securities
upon the Custodian's receipt from such Portfolio of cash or cash
equivalents in an amount equal to 100% of the value of the Designated
Securities or Additional Securities that the Fund desires to be released
from their status as security pursuant to this Section. Interest, dividends
and other distributions paid or received on the Designated Securities and
Additional Securities, other than payments of principal or payments upon
retirement,
15
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<PAGE>
redemption or repurchase, shall remain the property of the Portfolio and
shall not be subject to this Section.
13. Mitigation by Custodian
-----------------------
Upon the occurrence of any event connected with the duties of the
Custodian under this Contract which causes or may cause any loss, damage or
expense to the Fund or any Portfolio, (i) the Custodian shall, and (ii)
shall exercise reasonable efforts to cause any sub-custodian to, use
reasonable efforts and take all reasonable steps under the circumstances to
mitigate the effect of such event and to avoid continuing harm to the Fund
and the Portfolios.
14. Notification of Litigation: Right to Proceed
--------------------------------------------
The Fund shall not be liable for indemnification under this Contract
to the extent that the Fund's ability to defend against any litigation or
proceeding brought against the Custodian in respect of which indemnity may
be sought under this Contract is prejudiced by the Custodian's failure to
give prompt notice of the commencement of any such litigation or
proceeding. With respect to claims in such litigation or proceeding for
which indemnity by the Fund may be sought and, subject to applicable law
and the ruling of any court of competent jurisdiction, the Fund shall be
entitled to participate in any such litigation or proceeding and, after
written notice from the Fund to the Custodian, the Fund may assume the
defense of such litigation or proceeding with counsel of its choice at its
own expense in respect of that portion of the litigation for which the Fund
may be subject to an indemnification obligation; provided, however, that
the Custodian shall be entitled to participate in the defense of any such
litigation or proceeding. If the Fund has acknowledged in writing its
obligation to indemnify the Custodian with respect to such litigation or
proceeding, the Custodian's participation shall be at its own expense and
the Fund shall control the defense of the litigation or proceeding. If the
Fund is not permitted to participate in or control such litigation or
proceeding under applicable law or by a ruling of a court of competent
jurisdiction, the Custodian shall reasonably prosecute such litigation or
proceeding. The Custodian shall not consent to the entry of any judgment or
enter into any settlement in any such litigation or proceeding without
providing the Fund with adequate notice of any such settlement or judgment,
and without the Fund's prior written consent. The Custodian shall submit
written evidence to the Fund with respect to any cost or expense for which
it is seeking indemnification in such form and detail as the Fund may
reasonably request.
15. Effective Period. Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and
may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than
16
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<PAGE>
thirty (30) days after the date of such delivery or mailing; provided,
---------
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Trustees of the
Fund has approved the initial use of a particular Securities System by such
Portfolio, as required by Rule 17f-4 under the Investment Company Act of
1940, as amended and that the Custodian shall not with respect to a
Portfolio act under Section 2.11 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has approved the initial use of the Direct Paper System
by such Portfolio; provided further, however, that the Fund shall not amend
-------- -------
or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Declaration of Trust, and
further provided, that the Fund on behalf of one or more of the Portfolios
may at any time by action of its Board of Trustees (i) substitute another
bank or trust company for the Custodian by giving notice as described above
to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be
due as of the date of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.
16. Successor Custodian
-------------------
If a successor custodian for the Fund, of one or more of the
Portfolios shall be appointed by the Board of Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer,
all securities of each applicable Portfolio then held by it hereunder and
shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the
Board of Trustees of the Fund, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance with
such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees shall have
been delivered to the Custodian on or before the date when such termination
shall become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the Investment
Company Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than
17
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<PAGE>
$25,000,000, all securities, funds and other properties held by the
Custodian on behalf of each applicable Portfolio and all instruments held
by the Custodian relative thereto and all other property held by it under
this Contract on behalf of each applicable Portfolio and to transfer to an
account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to
or of the Board of Trustees to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period
as the Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and effect.
17. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree
on such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor
of this Contract. Any such interpretive or additional provisions shall be
in a writing signed by both parties and shall be annexed hereto, provided
--------
that no such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the Declaration
of Trust of the Fund. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
18. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to the Connecticut Series and the New Jersey Series with respect
to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if
the Custodian agrees in writing to provide such services, such series of
Shares shall become a Portfolio hereunder.
19. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
18
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<PAGE>
20. Limitation of Trustee, Officer, and Shareholder Liability
---------------------------------------------------------
It is expressly agreed that the obligations of the Fund and each
Portfolio hereunder shall not be binding upon any of the Trustees,
officers, agents or employees of the Fund or upon the shareholders of any
Portfolio personally, but shall only bind the assets and property of the
Fund, as provided in its Declaration of Trust. The execution and delivery
of this Contract have been authorized by the Trustees of the Fund, and this
Contract has been executed and delivered by an authorized officer of the
Fund acting as such; neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Fund, as
provided in its Declaration of Trust.
21. No Liability of Other Portfolios
--------------------------------
Notwithstanding any other provision of this Contract, the parties
agree that the assets and liabilities of each Portfolio are separate and
distinct from the assets and liabilities of each other Portfolio and that
no Portfolio shall be liable or shall be charged for any debt, obligation
or liability of any other Portfolio, whether arising under this Contract or
otherwise.
22. Confidentiality
---------------
The Custodian agrees that all books records, information and data
pertaining to the business of the Fund which are exchanged or received
pursuant to the negotiation or carrying out of this Contract shall remain
confidential, shall not be voluntarily disclosed to any other person,
except as may be required by law, and shall not be used by the Custodian
for any purpose not directly related to the business of the Fund, except
with the Fund's prior written consent.
23. Assignment
----------
Neither the Fund nor the Custodian shall have the right to assign any
of its rights or obligations under this Contract without the prior written
consent of the other party.
24. Severability
------------
If any provision of this Contract is held to be unenforceable as a
matter of law, the other terms and provisions of this Contract shall not be
affected thereby and shall remain in full force and effect.
19
--
<PAGE>
25. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and
the Custodian relating to the custody of the Fund's assets.
26. Shareholder Communications Election
-----------------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by
issuers of securities for the names, addresses and holdings of beneficial
owners of securities of that issuer held by the bank unless the beneficial
owner has expressly objected to disclosure of this information. In order to
comply with the rule, the Custodian needs the Fund to indicate whether it
authorizes the Custodian to provide the Fund's name, address, and share
position to requesting companies whose securities the Fund owns. If the
Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes"
or does not check either "yes" or "no" below, the Custodian is required by
the rule to treat the Fund as consenting to disclosure of this information
for all securities owned by the Fund or any funds or accounts established
by the Fund. For the Fund's protection, the Rule prohibits the requesting
company from using the Fund's name and address for any purpose other than
corporate communications. Please indicate below whether the Fund consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
20
--
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the 1st day of April, 1995.
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL
MONEY MARKET SERIES
By: /s/ Dianne E. O'Donnell
-------------------------------------
Secretary and Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ [SIGNATURE]
-------------------------------------
Executive Vice President
21
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Exhibit 9
TRANSFER AGENCY SERVICES AND SHAREHOLDER SERVICES AGREEMENT
TERMS AND CONDITIONS
This Agreement is made as of January 30, 1995, to be effective as of
such date as is agreed to in writing by the parties, by and between
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES (the "Fund"), a
Massachusetts business trust and PFPC INC. ("PFPC"), a Delaware
corporation, which is an indirect wholly-owned subsidiary of PNC Bank Corp.
The Fund is registered as an open-end management series investment
company under the Investment Company Act of 1940, as amended ("1940 Act").
The Fund wishes to retain PFPC to serve as the transfer agent, registrar,
dividend disbursing agent and shareholder servicing agent for such series
listed in Appendix C to this agreement, as amended from time to time (the
"Series"), and PFPC wishes to furnish such services.
In consideration of the promises and mutual covenants herein
contained, the parties agree as follows:
1. Definitions.
-----------
(a) "Authorized Person". The term "Authorized Person"
-------------------
shall mean any officer of the Fund and any other person who is duly
authorized by the Fund's Governing Board to give Oral and Written
Instructions on behalf of the Fund. Such persons are listed in the
Certificate attached hereto as the Authorized Persons Appendix or any
amendment thereto as may be received by PFPC from time to time.
1
-
<PAGE>
If PFPC provides more than one service hereunder, the Fund's designation of
Authorized Persons may vary by service.
(b) "Governing Board". The term "Governing Board" shall mean
-----------------
the Fund's Board of Directors if the Fund is a corporation or the Fund's
Board of Trustees if the Fund is a trust, or, where duly authorized, a
competent committee thereof.
(c) "Oral Instructions". The term "Oral Instructions" shall
-------------------
mean oral instructions received by PFPC from an Authorized Person by
telephone or in person.
(d) "SEC". The term "SEC" shall mean the Securities and
-----
Exchange Commission.
(e) "Securities Laws". The term "Securities Laws" shall mean
-----------------
the 1933 Act, the 1934 Act and the 1940 Act. The terms the "1933 Act" shall
mean the Securities Act of 1933, a amended, and the "1934 Act" shall mean
the Securities Exchange Act of 1934, a amended.
(f) "Shares". The term "Shares" shall mean the shares of
--------
beneficial interest of any Series or class of the Fund.
(g) "Written Instructions". The term "Written Instructions"
----------------------
shall mean written instructions signed by one Authorized Person and
received by PFPC. The instructions may be delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PFPC to serve as transfer
-----------
agent, registrar, dividend disbursing agent and shareholder servicing agent
to each of its Series, in accordance
2
-
<PAGE>
with the terms set forth in this Agreement, and PFPC accepts such
appointment and agrees to furnish such services.
3. Delivery of Documents. The Fund has provided or, where
---------------------
applicable, will provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of the
Fund's Governing Board, approving the appointment of PFPC to provide
services to each Series and approving this agreement;
(b) A copy of the Fund's most recent Post-Effective Amendment to
its Registration Statement on Form N-1A under the 1933 Act and 1940 Act as
filed with the SEC;
(c) A copy of the Fund's investment advisory and administration
agreement or agreements;
(d) A copy of the Fund's distribution agreement or agreements;
(e) Copies of any shareholder servicing agreements made in
respect of the Fund; and
(f) Copies of any and all amendments or supplements to the
foregoing.
4. Compliance with Government Rules and Regulations. PFPC
------------------------------------------------
undertakes to comply with all applicable requirements of the Securities
Laws, and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to all duties to be performed by PFPC
hereunder. Except as specifically set forth herein, PFPC assumes no
responsibility for such compliance by the Fund.
3
-
<PAGE>
5. Instructions. Unless otherwise provided in this Agreement, PFPC
------------
shall act only upon Oral and Written Instructions. PFPC shall be entitled
to rely upon any Oral and Written Instruction it receives from an
Authorized Person pursuant to this Agreement. PFPC may assume that any Oral
or Written Instruction received hereunder is not in any way inconsistent
with the provisions of organizational documents or of any vote, resolution
or proceeding of the Fund's Governing Board or of the Fund's shareholders,
unless and until it receives Written Instructions to the contrary.
The Fund agrees to forward to PFPC Written Instructions confirming
Oral Instructions so that PFPC receives the Written Instructions by the
close of business on the next business day after such Oral Instructions are
received. The fact that such confirming Written Instructions are not
received by PFPC shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions.
Where Oral or Written Instructions reasonably appear to have been received
from an Authorized Person, PFPC shall incur no liability to the Fund in
acting upon such instructions provided that PFPC's actions comply with the
other provisions of this Agreement.
6. Right to Receive Advice.
-----------------------
(a) Advice of the Fund. If PFPC is in doubt as to any action it
------------------
should or should not take, PFPC will request directions or advice,
including Oral or Written Instructions, from the Fund.
4
-
<PAGE>
(b) Advice of Counsel. If PFPC shall be in doubt as to any
-----------------
question of law pertaining to any action it should or should not take, PFPC
may request advice at its own cost from such counsel of its own choosing
(who may be counsel for the Fund, the Fund's investment adviser or PFPC, at
the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between
------------------
directions, advice or Oral or Written Instructions PFPC receives from the
Fund and the advice it receives from counsel, PFPC may rely upon and follow
the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities provided
for in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action
------------------
it takes or does not take in reliance upon directions, advice or Oral or
Written Instructions it receives from the Fund or from counsel in
accordance with this Agreement and which PFPC believes, in good faith, to
be consistent with those directions, advice or Oral or Written
Instructions.
Nothing in this paragraph shall be construed to impose an obligation
upon PFPC (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or
Oral or Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC's properly taking or not
taking such action.
5
-
<PAGE>
Nothing in this subsection shall excuse PFPC when an action or omission on
the part of PFPC constitutes willful misfeasance, bad faith, negligence or
reckless disregard of PFPC of any duties, obligations or responsibilities
provided for in this Agreement.
7. Records and Visits. PFPC shall prepare and maintain in complete
------------------
and accurate form all books and records necessary for it to serve as
transfer agent, registrar, dividend disbursing agent and shareholder
servicing agent to the Fund, including (a) all those records required to be
prepared and maintained by the Fund under the 1940 Act, by other applicable
Securities Laws, rules and regulations and by state laws and (b) such books
and records as are necessary for PFPC to perform all of the services it
agrees to provide in this Agreement and the appendices attached hereto,
including but not limited to the books and records necessary to effect the
conversion of Class B Shares, the calculation of any contingent deferred
sales charges and the calculation of front-end sales charges. The books and
records pertaining to the Fund which are in the possession, or under the
control, of PFPC shall be the property of the Fund. The Fund or the Fund's
Authorized Persons shall have access to such books and records at all times
during PFPC's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by PFPC to the
Fund or to an Authorized Person of the Fund. Upon reasonable notice by the
Fund, PFPC shall make available during regular business hours its
facilities and premises employed in connection with its performance of this
Agreement for reasonable
6
-
<PAGE>
visits by the Fund, any agent or person designated by the Fund or any
regulatory agency having authority over the Fund.
8. Confidentiality. PFPC agrees on its own behalf and that of its
---------------
employees to keep confidential all records of the Fund and information
relating to the Fund and its shareholders (past, present and future), its
investment adviser and its principal underwriter, unless the release of
such records or information is otherwise consented to, in writing, by the
Fund prior to its release. The Fund agrees that such consent shall not be
unreasonably withheld, and may not be withheld where PFPC may be exposed to
civil or criminal contempt proceedings or when required to divulge such
information or records to duly constituted authorities.
9. Cooperation With Accountants. PFPC shall cooperate with the
----------------------------
Fund's independent public accountants and shall take all reasonable actions
in the performance of its obligations under this Agreement to ensure that
the necessary information is made available to such accountants for the
expression of their opinion, as required by the Fund.
10. Disaster Recovery. PFPC shall enter into and shall maintain in
-----------------
effect with appropriate parties one or more agreements making reasonable
provision for periodic backup of computer files and data with respect to
the Fund and emergency use of electronic data processing equipment. In the
event of equipment failures, PFPC shall, at no additional expense to the
Fund, take all reasonable steps to minimize service interruptions. PFPC
shall
7
<PAGE>
have no liability with respect to the loss of data or service interruptions
caused by equipment failures, provided such loss or interruption is not
caused by the negligence of PFPC and provided further that PFPC has
complied with the provisions of this Paragraph 10.
11. Compensation. As compensation for services rendered by PFPC
------------
during the term of this Agreement, the Fund will pay to PFPC a fee or fees
as may be agreed to, from time to time, in writing by the Fund and PFPC.
12. Indemnification.
---------------
(a) The Fund agrees to indemnify and hold harmless PFPC and its
nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws, and any state and foreign securities and blue sky laws,
and amendments thereto), and expenses, including, without limitation,
reasonable attorneys' fees and disbursements arising directly or indirectly
from any action or omission to act which PFPC (i) at the request of or on
the direction of or in reliance on the advice of the Fund or (ii) upon Oral
or Written Instructions. Neither PFPC, nor any of its nominees, shall be
indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC's or its nominees' own willful misfeasance,
bad faith, negligence or reckless disregard of its duties and obligations
under this Agreement.
8
<PAGE>
(b) PFPC agrees to indemnify and hold harmless the Fund from all
taxes, charges, expenses, assessments, claims and liabilities arising from
PFPC's obligations pursuant to this Agreement (including, without
limitation, liabilities arising under the Securities Laws, and any state
and foreign securities and blue sky laws, and amendments thereto) and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, arising directly or indirectly out of PFPC's or its
nominee's own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement.
(c) In order that the indemnification provisions contained in
this Paragraph 12 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other party's
prior written consent.
13. Insurance. PFPC shall maintain insurance of the types and in the
---------
amounts deemed by it to be appropriate. To the extent that policies of
insurance may provide for coverage of claims for liability or indemnity by
the parties set forth in this Agreement,
9
<PAGE>
the contracts of insurance shall take precedence, and no provision of this
Agreement shall be construed to relieve an insurer of any obligation to pay
claims to the Fund, PFPC or other insured party which would otherwise be a
covered claim in the absence of any provision of this Agreement.
14. Security. PFPC represents and warrants that, to the best of its
--------
knowledge, the various procedures and systems which PFPC has implemented
with regard to the safeguarding from loss or damage attributable to fire,
theft or any other cause (including provision for twenty-four hours a day
restricted access) of the Fund's blank checks, certificates, records and
other data and PFPC's equipment, facilities and other property used in the
performance of its obligations hereunder are adequate, and that it will
make such changes therein from time to time as in its judgment are required
for the secure performance of its obligations hereunder. PFPC shall review
such systems and procedures on a periodic basis and the Fund shall have
access to review these systems and procedures.
15. Responsibility of PFPC. PFPC shall be under no duty to take any
----------------------
action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by PFPC in writing. PFPC shall be obligated
to exercise due care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts in performing
services provided for under this Agreement. PFPC shall be liable only for
any damages arising out of or in connection with PFPC's performance of or
omission or failure to perform its duties under this
10
<PAGE>
Agreement to the extent such damages arise out of PFPC's negligence,
reckless disregard of its duties, bad faith or willful misfeasance.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC, in connection with its duties under this
Agreement, shall not be under any duty or obligation to inquire into and
shall not be liable for (a) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other instrument
which conforms to the applicable requirements of this Agreement, and which
PFPC reasonably believes to be genuine; or (b) subject to the provisions of
Paragraph 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
16. Description of Services. PFPC shall perform the duties of the
-----------------------
transfer agent, registrar, dividend disbursing agent and shareholder
servicing agent of the Fund and its specified Series.
(a) Purchase of Shares. PFPC shall issue and credit an account
------------------
of an investor in the manner described in each Series prospectus once it
receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder account;
and
11
<PAGE>
(iii) Confirmation of receipt or crediting of funds for such
order from the Series' custodian.
(b) Redemption of Shares. PFPC shall redeem a Series' Shares
--------------------
only if that function is properly authorized by the Fund's organizational
documents or resolution of the Fund's Governing Board. Shares shall be
redeemed and payment therefor shall be made in accordance with each Series'
prospectus when the shareholder tenders his or her Shares in proper form
and directs the method of redemption.
(c) Dividends and Distributions. Upon receipt of a resolution of
----------------------------
the Fund's Governing Board authorizing the declaration and payment of
dividends and distributions, PFPC shall issue dividends and distributions
declared by the Fund in Shares, or, upon shareholder election, pay such
dividends and distributions in cash if provided for in each Series'
prospectus. Such issuance or payment, as well as payments upon redemption
as described above, shall be made after deduction and payment of the
required amount of funds to be withheld in accordance with any applicable
tax law or other laws, rules or regulations. PFPC shall mail to each
Series' shareholders such tax forms and other information, or permissible
substitute notice, relating to dividends and distributions paid by the Fund
as are required to be filed and mailed by applicable law, rule or
regulation.
PFPC shall prepare, maintain and file with the IRS and other
appropriate taxing authorities reports relating to all dividends above a
stipulated amount paid by the Fund to its shareholders as required by tax
or other law, rule or regulation.
12
<PAGE>
(d) PFPC will provide the services listed on Appendix A and
Appendix B on an ongoing basis. Performance of certain of these services,
with accompanying responsibilities and liabilities, may be delegated and
assigned to PaineWebber Incorporated or Mitchell Hutchins Asset Management
Inc. or to an affiliated person of either.
17. Duration and Termination.
------------------------
(a) This Agreement shall continue until January 30, 1997 and
shall automatically be renewed thereafter on a year-to-year basis and with
respect to the year-to-year renewal, provided that the Fund's Governing
Board approves such renewal; and provided further that this Agreement may
be terminated by either party for cause.
(b) With respect to the Fund, cause includes, but is not limited
to: (i) PFPC's material breach of this Agreement causing it to fail to
substantially perform its duties under this Agreement. In order for such
material breach to constitute "cause" under this Paragraph, PFPC must receive
written notice from the Fund specifying the material breach and PFPC shall not
have corrected such breach within a 15-day period; (ii) financial difficulties
of PFPC evidenced by the authorization or commencement of a voluntary or
involuntary bankruptcy under the U.S. Bankruptcy Code or any applicable
bankruptcy or similar law, or under any applicable law of any jurisdiction
relating to the liquidation or reorganization of debt, the appointment of a
receiver or to the modification or alleviation of the rights of creditors;
and (iii)
13
<PAGE>
issuance of an administrative or court order against PFPC with regard to
the material violation or alleged material violation of the Securities Laws
or other applicable laws related to its business of performing transfer
agency services.
(c) With respect to PFPC, cause includes, but is not limited to,
the failure of the Fund to pay the compensation set forth in writing
pursuant to Paragraph 11 of this Agreement.
(d) Any notice of termination for cause in conformity with
subparagraphs (a), (b) and (c) of this Paragraph by the Fund shall be
effective thirty (30) days from the date of such notice. Any notice of
termination for cause by PFPC shall be effective 90 days from the date of
such notice.
(e) Upon the termination hereof, the Fund shall pay to PFPC such
compensation as may be due for the period prior to the date of such
termination. In the event that the Fund designates a successor to any of
PFPC's obligations under this Agreement, PFPC shall, at the direction and
expense of the Fund, transfer to such successor all relevant books, records
and other data established or maintained by PFPC hereunder including a
certified list of the shareholders of each Series of the Fund with name,
address, and if provided taxpayer identification or Social Security number,
and a complete record of the account of each shareholder. To the extent
that PFPC incurs expenses related to a transfer of responsibilities to a
successor, other than expenses involved in PFPC's providing the Fund's
books and records to the successor, PFPC shall be entitled to be reimbursed
for such expenses, including any
14
<PAGE>
out-of-pocket expenses reasonably incurred by PFPC in connection with the
transfer.
(f) Any termination effected pursuant to this Paragraph shall
not affect the rights and obligations of the parties under Paragraph 12
hereof.
(g) Notwithstanding the foregoing, this Agreement shall
terminate with respect to the Fund and any Series thereof upon the
liquidation, merger or other dissolution of the Fund or Series or upon the
Fund's ceasing to be registered investment company.
19. Registration as a Transfer Agent. PFPC represents that it is
--------------------------------
currently registered with the appropriate federal agency for the
registration of transfer agents, or is otherwise permitted to lawfully
conduct its activities without such registration and that it will remain so
registered for the duration of this Agreement. PFPC agrees that it will
promptly notify the Fund in the event of any material change in its status
as a registered transfer agent. Should PFPC fail to be registered with the
SEC as a transfer agent at any time during this Agreement, and such failure
to register does not permit PFPC to lawfully conduct its activities, the
Fund may terminate this Agreement upon five days written notice to PFPC.
20. Notices. All notices and other communications, other than Oral
-------
or Written Instructions, shall be in writing or by confirming telegram,
cable, telex or facsimile sending device. Notice shall be addressed (a) if
to PFPC at PFPC's address, 400 Bellevue Parkway, Wilmington, Delaware
19809; (b) if to the Fund, at 1285 Avenue of the Americas, 15th Floor, New
York, N.Y. 10005;
15
<PAGE>
or (c) if to neither of the foregoing, at such other address as shall have
been notified to the sender of any such notice or other communication. If
the notice is sent by confirming telegram, cable telex or facsimile sending
device during regular business hours, it shall be deemed to have been given
immediately. If sent during a time other than regular business hours, such
notice shall be deemed to have been given at the opening of the next
business day. If notice is sent by first-class mail, it shall be deemed to
have been given three business days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it is
delivered. All postage, cable, telegram, telex and facsimile sending device
charges arising from the sending of a notice hereunder shall be paid by the
sender.
21. Amendments. This Agreement, or any term thereof, may be changed
----------
or waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
22. Additional Series. In the event that the Fund establishes one or
-----------------
more investment Series in addition to and with respect to which it desires
to have PFPC render services as transfer agent, registrar, dividend
disbursing agent and shareholder servicing agent under the terms set forth
in this Agreement, it shall so notify PFPC in writing, and PFPC shall agree
in writing to provide such services, and such investment Series shall
become a Series hereunder, subject to such additional terms, fees and
conditions as are agreed to by the parties.
23. Assignment and Delegation.
-------------------------
16
<PAGE>
(a) PFPC may, at its owns expense, assign its rights and
delegate its duties hereunder to any wholly-owned direct or indirect
subsidiary of PNC Bank, National Association or PNC Bank Corp., provided
that (i) PFPC gives the Fund thirty (30) days' prior written notice; (ii)
the delegate agrees with PFPC to comply with all relevant provisions of the
Securities Laws; and (iii) PFPC and such delegate promptly provide such
information as the Fund may request and respond to such questions as the
Fund may ask relating to the delegation, including, without limitation, the
capabilities of the delegate. The assignment and delegation of any of
PFPC's duties under this subparagraph (a) shall not relieve PFPC of any of
its responsibilities or liabilities under this Agreement.
(b) PFPC may assign its rights and delegate its duties hereunder
to PaineWebber Incorporated or Mitchell Hutchins Asset Management Inc. or
affiliated person of either provided that (i) PFPC gives the Fund thirty
(30) days' prior written notice; (ii) the delegate agrees to comply with
all relevant provisions of the Securities Laws; and (iii) PFPC and such
delegate promptly provide such information as the Fund may request and
respond to such questions as the Fund may ask relative to the delegation,
including, without limitation, the capabilities of the delegate. In
assigning its rights and delegating its duties under this paragraph, PFPC
may impose such conditions or limitations as it determines appropriate
including the condition that PFPC be retained as a sub-transfer agent.
17
<PAGE>
(c) In the event that PFPC assigns its rights and delegates its
duties under this section, no amendment of the terms of this Agreement
shall become effective without the written consent of PFPC.
24. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
25. Further Actions. Each party agrees to perform such further acts
---------------
and execute such further documents as are necessary to effectuate the
purposes hereof.
26. Limitation of Liability. The Trust and PFPC agree that the
-----------------------
obligations of the Trust under this Agreement will not be binding upon any
of the Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Trust, individually, but are
binding only upon the assets and property of the Trust, as provided in the
Declaration of Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the Trust, and signed by an authorized
officer of the Trust, acting as such, and neither the authorization by the
Trustees nor the execution and delivery by the officer will be deemed to
have been made by any of them individually or to impose any liability on
any of them personally, but will bind only the trust property of the Trust
as provided in the Declaration of Trust. No Series of the Trust will be
liable for any claims against any other Series.
27. Miscellaneous. This Agreement embodies the entire agreement and
-------------
understanding between the parties and supersedes all
18
<PAGE>
prior agreements and understandings relating to the subject matter hereof,
provided that the parties may embody in one or more separate documents
their agreement, if any, with respect to services to be performed and
compensation to be paid under this Agreement.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware Law, except that, to the extent provision of the
Securities Laws govern the subject matter of this Agreement, such
Securities Laws will controlling. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding and inure to the benefit of the parties hereto
and their respective successors and assigns.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on the day and year first
above written.
PFPC INC.
By: /s/ [SIGNATURE]
--------------------------------
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
By: /s/ Dianne E. O'Donnell
--------------------------------
20
<PAGE>
APPENDIX A
Description of Services
-----------------------
(a) Services Provided on an Ongoing Basis by PFPC to the Fund, If
-------------------------------------------------------------
Applicable.
-----------
(i) Calculate 12b-1 payments and broker trail commissions;
(ii) Develop, monitor and maintain all systems necessary to
implement and operate the three-tier distribution system,
including Class B conversion feature, as described in the
registration statement and related documents of the Fund, as
they may be amended from time to time;
(iii) Calculate contingent deferred sales charge amounts upon
redemption of Fund Shares and deduct such amounts from
redemption proceeds;
(iv) Calculate front-end sales load amounts at time of purchase
of Shares;
(v) Determine dates of Class B conversion and effect same;
(vi) Establish and maintain proper shareholder registrations,
unless requested by the Fund;
(vii) Review new applications with correspondence to
shareholders to complete or correct information;
(viii) Direct payment processing of checks or wires;
(ix) Prepare and certify stockholder lists in conjunction with
proxy solicitations;
(x) Countersign share certificates;
(xi) Prepare and mail to shareholders confirmation of activity;
(xii) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
(xiii) Send duplicate confirmations to broker-dealers of their
clients' activity, whether executed through the broker-
dealer or directly with PFPC;
A-1
<PAGE>
(xiv) Provide periodic shareholder lists, outstanding share
calculations and related statistics to the Fund;
(xv) Provide detailed data for underwriter/broker confirmations;
(xvi) Periodic mailing of year-end tax and statement information;
(xvii) Notify on a daily basis the investment advisor, accounting
agent, and custodian of fund activity; and
(xviii) Perform other participating broker-dealer shareholder
services as may be agreed upon from time to time.
(b) Services Provided by PFPC Under Oral or Written Instructions of
---------------------------------------------------------------
the Fund.
--------
(i) Accept and post daily Series and class purchases and
redemptions;
(ii) Accept, post and perform shareholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates.
(c) Shareholder Account Services.
----------------------------
(i) PFPC may arrange, in accordance with the Series' prospectus,
for issuance of Shares obtained through:
- The transfer of funds from shareholders' account at
financial institutions; and
- Any pre-authorized check plan.
(ii) PFPC, if requested, shall arrange for a shareholder's:
- Exchange of Shares for shares of a fund for which the
Fund has exchange privileges;
A-2
<PAGE>
- Systematic withdrawal from an account where that
shareholder participates in a systematic withdrawal
plan; and/or
- Redemption of Shares from an account with a
checkwriting privilege.
(d) Communications to Shareholders. Upon timely written
------------------------------
instructions, PFPC shall mail all communications by the Fund to
its shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of fund Shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
If requested by the Fund, PFPC will receive and tabulate the proxy cards
for the meetings of the Fund's shareholders and supply personnel to serve
as inspectors of election.
(e) Records. PFPC shall maintain records of the accounts for each
-------
shareholder showing the following information:
(i) Name, address and United States Tax Identification or Social
Security number;
(ii) Number and class of Shares held and number and class of
Shares for which certificates, if any, have been issued,
including certificate numbers and denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions paid and
the date and price for all transactions on a shareholder's
account;
(iv) Any stop or restraining order placed against a shareholder's
account;
(v) Any correspondence relating to the current maintenance of a
shareholder's account;
(vi) Information with respect to withholdings; and
A-3
<PAGE>
(vii) Any information required in order for the transfer agent to
perform any calculations contemplated or required by this
Agreement.
(f) Lost or Stolen Certificates. PFPC shall place a stop notice
---------------------------
against any certificate reported to be lost or stolen and comply
with all applicable federal regulatory requirements for
reporting such loss or alleged misappropriation.
A new certificate shall be registered and issued upon:
(i) Shareholder's pledge of a lost instrument bond or such other
and appropriate indemnity bond issued by a surety company
approved by PFPC; and
(ii) Completion of a release and indemnification agreement signed
by the shareholder to protect PFPC.
(g) Shareholder Inspection of Stock Records. Upon requests from Fund
---------------------------------------
shareholders to inspect stock records, PFPC will notify the Fund
and require instructions granting or denying such request prior
to taking any action. Unless PFPC has acted contrary to the
Fund's instructions, the Fund agrees to release PFPC from any
liability for refusal of permission for a particular shareholder
to inspect the Fund's shareholder records.
A-4
<PAGE>
APPENDIX B
PFPC will perform or arrange for others to perform the following
activities, some or all of which may be delegated and assigned by PFPC to
PaineWebber Incorporated ("PaineWebber") or Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins") or to an affiliated person of either:
(i) providing, to the extent reasonable, uninterrupted
processing of new accounts, shareholder account
changes, sales and redemption activity, dividend
calculations and payments, check settlements, blue sky
reporting, tax reporting, recordkeeping, communication
with all shareholders, resolution of discrepancies and
shareholder inquiries and adjustments, maintenance of
dual system, development and maintenance of repricing
system, and development and maintenance of correction
system;
(ii) develop and maintain all systems for custodian
interface and reporting, and underwriter interface and
reporting;
(iii) develop and maintain all systems necessary to implement
and operate the three-tier distribution system,
including Class B conversion features as described in
the registration statement and related documents of the
Fund, as they may be amended from time to time; and
(iv) provide administrative, technical and legal support for
the foregoing services.
In undertaking its activities and responsibilities under this Appendix,
PFPC will not be responsible, except to the extent caused by PFPC's own
willful misfeasance, bad faith, negligence or reckless disregard of its
duties and obligations under this agreement, for any charges or fees
billed, expenses incurred or penalties, imposed by any party, including the
Fund or any current or prior services providers of the Fund, without the
prior written approval by PFPC.
B-1
<PAGE>
APPENDIX C
PaineWebber/Kidder, Peabody Municipal Money Market New York Series
PaineWebber/Kidder, Peabody Municipal Money Market New Jersey
Series
PaineWebber/Kidder, Peabody Municipal Money Market Connecticut
Series
Exhibit 11(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial
Highlights" and "Financial Statements" and to the incorporation by
reference of our report dated December 11, 1995 on PaineWebber/Kidder,
Peabody Municipal Money Market Series, in this Registration Statement (Form
N-1A 33-36766).
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
February 28, 1996
Exhibit 11(b)
CONSENT OF INDEPENDENT AUDITORS
PaineWebber/Kidder, Peabody Municipal Money Market Series
(Formerly the Kidder, Peabody Municipal Money Market Series;
Consisting of the PaineWebber RMA Connecticut Municipal Money Fund &
the PaineWebber RMA New Jersey Municipal Money Fund):
We consent to the incorporation by reference in the Statement of Additional
Information in this Post-Effective Amendment No. 7 to Registration
Statement No. 33-36766 of our report dated November 30, 1994, appearing in
the annual report to shareholders for the year ended October 31, 1994.
Deloitte & Touche LLP
New York, New York
February 29, 1996
Exhibit 15(a)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
WHEREAS, Kidder, Peabody Municipal Money Market Series (the
"Fund") is engaged in business as an open-end management investment company
and is registered as such under the Investment Company Act of 1940, as
amended (the "Act"); and
WHEREAS, the Fund desires to adopt a Plan of Distribution
pursuant to Rule 12b-1 (the "Plan") under the Act, and the Trustees have
determined that there is a reasonable likelihood that adoption of this Plan
will benefit the Fund and its shareholders; and
WHEREAS, the Fund currently employs Kidder, Peabody & Co.
Incorporated ("Kidder, Peabody") as exclusive principal underwriter of
shares of beneficial interest of each series of the Fund set forth on
Exhibit A hereto, as such Exhibit may be revised from time to time (each, a
"Series"); and
WHEREAS, the Fund and Kidder, Peabody propose, subject to the
adoption of the Plan to enter into a Distribution Agreement (the
"Distribution Agreement") pursuant to which the Fund will continue to
employ Kidder, Peabody as such exclusive principal underwriter;
NOW, THEREFORE, the Fund hereby adopts, and Kidder, Peabody
hereby agrees to the terms of, this Plan in accordance with Rule 12b-1
under the Act on the following terms and conditions:
1. The Fund shall reimburse Kidder, Peabody as the exclusive principal
underwriter of shares of each Series for its expenses in respect of
the distribution of such Series' shares at a rate not to exceed the
percentage of the average daily net assets of such Series set forth
opposite its name on Exhibit A. The amount of such reimbursement
shall be accrued daily at such rate and paid monthly or at such other
intervals as the Trustees shall determine and shall be reconciled
with Kidder, Peabody's actual expenses, but not greater than such
rate per annum, on an annual basis. The Fund is not authorized
hereunder to reimburse Kidder, Peabody for expenses incurred more
than 12 months prior to the date of such reimbursement.
2. The expenses for which reimbursement is authorized hereunder are
those which Kidder, Peabody may spend on any activities
<PAGE>
primarily intended to result in the sale of each Series' shares and
the maintenance of accounts and account balances with the Fund,
including, but not limited to, compensation to and expenses of Kidder,
Peabody's Registered Representatives, other selected broker-dealers
or their Registered Representatives, or other employees of Kidder,
Peabody who engage in or support distribution of the Series' shares,
service shareholder accounts or provide other services to current or
prospective shareholders of the Series; printing of prospectuses and
reports for other than existing shareholders; and preparation,
printing and distribution of sales literature and advertising
material. As to each Series, it is understood that Kidder, Peabody
currently intends that approximately the percentage per annum of the
average daily net assets of such Series set forth opposite its name on
Exhibit A shall be paid to Registered Representatives proportionately
in respect of such Series' share balances maintained by clients of
such Registered Representatives, and the balance on other activities.
At least annually and in advance of any annual continuance of the Plan
as contemplated by paragraph 3, Kidder, Peabody shall prepare and
present to the Trustees a marketing plan and budgets, including
reasonable estimates and projections of its contemplated distribution
activities and attendant expenses, for the succeeding 12 month period.
3. As to each Series, the Plan will become effective immediately upon
approval by (a) a majority of the outstanding voting securities of
such Series, and (b) a majority of both (i) the Trustees of the Fund
and (ii) those Trustees of the Fund who are not "interested persons"
of the Fund (as defined in the Act) and have no direct or indirect
financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees"), cast in person at a meeting
(or meetings) called for the purpose of voting on this Plan. As to
each Series, this Plan will continue in effect for a period of one
year from its effective date, unless terminated pursuant to its terms.
As to each Series, this Plan shall, unless terminated as hereinafter
provided, continue in full force and effect from year to year
thereafter for so long as such continuance is specifically approved at
least annually by votes of a majority of both (a) the Trustees of the
Fund and (b) the Rule 12b-1 Trustees, cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan.
4. Agreements related to the Plan shall be subject to the approval of the
Trustees and the Rule 12b-1 Trustees in the manner required for
continuance of this Plan, and shall be subject to the annual
continuance thereof in the same manner. It is currently contemplated
that the only such related
<PAGE>
agreement shall be the Distribution Agreement.
5. Kidder, Peabody shall provide to the Trustees of the Fund and the
Trustees shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were
made. Such reports shall provide a comparison with the budgets
presented pursuant to paragraph 2 and shall explain material
discrepancies between actual and budgeted expenditures.
6. As to each Series, this Plan may be terminated at any time by vote of
a majority of the Rule 12b-1 Trustees, or by a vote of a majority of
the outstanding voting securities of such Series. As to each Series,
upon termination as provided in this paragraph 6, the Fund shall
immediately cease to make any payments hereunder or under any related
agreement with respect to such Series.
7. This Plan may not be amended to increase materially the amount of
distribution expenses which a Series may bear as provided in paragraph
2 hereof, unless such amendment is approved by a vote of at least a
majority (as defined in the Act) of the outstanding voting securities
of such Series and no material amendment to this Plan shall be made
unless approved in the manner provided for annual continuance in
paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the Trustees who are not
interested persons.
9. The Fund shall preserve copies of this Plan, any related agreements
and all plans presented and reports made pursuant to paragraphs 2 and
5 hereof for a period of not less than six years from the date of this
Plan, or the agreements or such plans and reports, as the case may be,
the first two years in an easily accessible place.
10. No Trustee, shareholder, officer, employee or agent of the Fund shall
be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Fund, but the Fund
estate only shall be liable.
IN WITNESS WHEREOF, the Fund and Kidder, Peabody have
<PAGE>
executed this Plan on the day and year set forth below in New York, New
York.
Date: September 19, 1990 KIDDER, PEABODY MUNICIPAL
MONEY MARKET SERIES
By:
/s/ [DANIEL HARTMAN]
----------------------------
/s/ [SIGNATURE]
----------------------------
Attest:
KIDDER, PEABODY & CO, INCORPORATED
By:
/s/ [SIGNATURE]
-----------------------------
/s/ [SIGNATURE]
-----------------------------
Attest:
<PAGE>
EXHIBIT A
---------
Registered
Representatives
Annual Fee as a Annual Fee as
Percentage of a Percentage of
Average Daily Average Daily
Name of Series Net Assets Net Assets
- -------------- --------------- ---------------
Connecticut Series .12 of 1% .10 of 1%
New Jersey Series .12 of 1% .10 of 1%
New York Series .12 of 1% .10 of 1%
Exhibit 15(b)
AMENDMENT TO
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
WHEREAS, pursuant to resolutions adopted by the Board of Directors of
Kidder, Peabody Municipal Money Market Series ("Fund") on December 16,
1994, PaineWebber Incorporated ("PaineWebber") was appointed distributor of
the Fund's shares, and it was determined to change the name of the Fund to
the "PaineWebber/Kidder, Peabody Municipal Money Market Series" and the
name of its series to "PaineWebber/Kidder, Peabody Municipal Money Market
New York Series, PaineWebber/Kidder, Peabody Municipal Money Market New
Jersey Series and PaineWebber/Kidder, Peabody Municipal Money Market
Connecticut Series" (collectively, the "Series");
NOW, THEREFORE, the Fund hereby adopts, on behalf of the Series, the
following amendments to the above-referenced plan ("Plan"):
1. All references to the "Kidder, Peabody Municipal Money
Market Series" contained in the Plan are hereby replaced with
"PaineWebber/Kidder, Peabody Municipal Money Market Series."
2. All references to "New York Series," "New Jersey Series"
and "Connecticut Series" contained in the Plan and Exhibit A
thereto, are hereby replaced with "PaineWebber/Kidder, Peabody
Municipal Money Market New York Series," "PaineWebber/Kidder,
Peabody Municipal Money Market New Jersey Series" and
"PaineWebber/ Kidder, Peabody Municipal Money Market Connecticut
Series," respectively.
3. All references to "Kidder, Peabody & Co. Incorporated"
contained in the Plan are hereby replaced with "PaineWebber
Incorporated," and all references to "Kidder, Peabody" contained
in the Plan are hereby replaced with "PaineWebber."
IN WITNESS WHEREOF, the Fund and PaineWebber have executed this
"Amendment to the Plan of Distribution Pursuant to Rule
12b-1 of Kidder, Peabody Municipal Money Market Series" on the day and year
set forth below.
Date: January ___, 1995
PAINEWEBBER/KIDDER, PEABODY
MUNICIPAL MONEY MARKET SERIES
By: ________________________
Attest: __________________
PAINEWEBBER INCORPORATED
By: ________________________
Attest: __________________
EXHIBIT 18
POWER OF ATTORNEY
I, Margo N. Alexander, Trustee and President of PaineWebber/Kidder, Peabody
California Tax Exempt Money Fund, PaineWebber/Kidder, Peabody Premium Account
Fund, PaineWebber/Kidder, Peabody Municipal Money Market Series, Mitchell
Hutchins/Kidder, Peabody Investment Trust, Mitchell Hutchins/Kidder, Peabody
Investment Trust II, Mitchell Hutchins/Kidder, Peabody Investment Trust III,
Institutional Series Trust, and Liquid Institutional Reserves (collectively, the
"Funds"), hereby constitute and appoint Victoria E. Schonfeld, Dianne E.
O'Donnell, Gregory K. Todd and Scott Griff, and each of them singly, my true and
lawful attorneys, with full power to them to sign for me, and in my capacity as
Trustee and President for each of the Funds, any and all amendments to each of
the particular registration statements of the Funds, and all instruments
necessary or desirable in connection therewith, filed with the Securities and
Exchange Commission, hereby ratifying and confirming my signature as it may be
signed by said attorneys to any and all amendments to said registration
statements.
Pursuant to the requirements of the Securities Act of 1933, this instrument
has been signed below by the following in the capacity and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MARGO N. ALEXANDER Trustee and President December 28, 1995
....................................
(Margo N. Alexander)
</TABLE>
<PAGE>
EXHIBIT 18
POWER OF ATTORNEY
I, David J. Beaubien, Trustee of PaineWebber/Kidder, Peabody California Tax
Exempt Money Fund, PaineWebber/Kidder, Peabody Premium Account Fund,
PaineWebber/Kidder, Peabody Municipal Money Market Series, Mitchell
Hutchins/Kidder, Peabody Investment Trust, Mitchell Hutchins/Kidder, Peabody
Investment Trust II, Mitchell Hutchins/Kidder, Peabody Investment Trust III,
Institutional Series Trust, and Liquid Institutional Reserves (collectively, the
"Funds"), hereby constitute and appoint Victoria E. Schonfeld, Dianne E.
O'Donnell, Gregory K. Todd and Scott Griff, and each of them singly, my true and
lawful attorneys, with full power to them to sign for me, and in my capacity as
Trustee for each of the Funds, any and all amendments to each of the particular
registration statements of the Funds, and all instruments necessary or desirable
in connection therewith, filed with the Securities and Exchange Commission,
hereby ratifying and confirming my signature as it may be signed by said
attorneys to any and all amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this instrument
has been signed below by the following in the capacity and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DAVID J. BEAUBIEN Trustee March 8, 1995
....................................
(David J. Beaubien)
</TABLE>
<PAGE>
EXHIBIT 18
POWER OF ATTORNEY
I, William W. Hewitt, Jr., Trustee of PaineWebber/Kidder, Peabody California
Tax Exempt Money Fund, PaineWebber/Kidder, Peabody Premium Account Fund,
PaineWebber/Kidder, Peabody Municipal Money Market Series, Mitchell
Hutchins/Kidder, Peabody Investment Trust, Mitchell Hutchins/Kidder, Peabody
Investment Trust II, Mitchell Hutchins/Kidder, Peabody Investment Trust III,
Institutional Series Trust, and Liquid Institutional Reserves (collectively, the
"Funds"), hereby constitute and appoint Victoria E. Schonfeld, Dianne E.
O'Donnell, Gregory K. Todd and Scott Griff, and each of them singly, my true and
lawful attorneys, with full power to them to sign for me, and in my capacity as
Trustee for each of the Funds, any and all amendments to each of the particular
registration statements of the Funds, and all instruments necessary or desirable
in connection therewith, filed with the Securities and Exchange Commission,
hereby ratifying and confirming my signature as it may be signed by said
attorneys to any and all amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this instrument
has been signed below by the following in the capacity and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM W. HEWITT, JR. Trustee March 8, 1995
....................................
(William W. Hewitt, Jr.)
</TABLE>
<PAGE>
EXHIBIT 18
POWER OF ATTORNEY
I, Carl W. Schafer, Trustee of PaineWebber/Kidder, Peabody California Tax
Exempt Money Fund, PaineWebber/Kidder, Peabody Premium Account Fund,
PaineWebber/Kidder, Peabody Municipal Money Market Series, Mitchell
Hutchins/Kidder, Peabody Investment Trust, Mitchell Hutchins/Kidder, Peabody
Investment Trust II, Mitchell Hutchins/Kidder, Peabody Investment Trust III,
Institutional Series Trust, and Liquid Institutional Reserves (collectively, the
"Funds"), hereby constitute and appoint Victoria E. Schonfeld, Dianne E.
O'Donnell, Gregory K. Todd and Scott Griff, and each of them singly, my true and
lawful attorneys, with full power to them to sign for me, and in my capacity as
Trustee for each of the Funds, any and all amendments to each of the particular
registration statements of the Funds, and all instruments necessary or desirable
in connection therewith, filed with the Securities and Exchange Commission,
hereby ratifying and confirming my signature as it may be signed by said
attorneys to any and all amendments to said registration statements.
Pursuant to the requirements of the Securities Act of 1933, this instrument
has been signed below by the following in the capacity and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ CARL W. SCHAFER Trustee March 8, 1995
....................................
(Carl W. Schafer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000868055
<NAME> PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
<SERIES>
<NUMBER> 1
<NAME> CONNECTICUT SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-01-1995
<INVESTMENTS-AT-COST> 22,078
<INVESTMENTS-AT-VALUE> 22,078
<RECEIVABLES> 120
<ASSETS-OTHER> 101
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,999
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 90
<TOTAL-LIABILITIES> 90
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,207
<SHARES-COMMON-STOCK> 22,207
<SHARES-COMMON-PRIOR> 25,771
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 22,209
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 878
<OTHER-INCOME> 0
<EXPENSES-NET> (243)
<NET-INVESTMENT-INCOME> 635
<REALIZED-GAINS-CURRENT> 1
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 636
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (635)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 77,747
<NUMBER-OF-SHARES-REDEEMED> (81,908)
<SHARES-REINVESTED> 597
<NET-CHANGE-IN-ASSETS> (3,554)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 9
<GROSS-ADVISORY-FEES> 121
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 243
<AVERAGE-NET-ASSETS> 24,130
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.026
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.026)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000868055
<NAME> PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES
<SERIES>
<NUMBER> 2
<NAME> NEW JERSEY SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 35,995
<INVESTMENTS-AT-VALUE> 35,995
<RECEIVABLES> 238
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 197
<TOTAL-ASSETS> 36430
<PAYABLE-FOR-SECURITIES> 104
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 120
<TOTAL-LIABILITIES> 224
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,208
<SHARES-COMMON-STOCK> 36,208
<SHARES-COMMON-PRIOR> 32,003
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 36,206
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,229
<OTHER-INCOME> 0
<EXPENSES-NET> (313)
<NET-INVESTMENT-INCOME> 916
<REALIZED-GAINS-CURRENT> (2)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 914
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (916)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 191,790
<NUMBER-OF-SHARES-REDEEMED> (188,445)
<SHARES-REINVESTED> 860
<NET-CHANGE-IN-ASSETS> 4,225
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (22)
<GROSS-ADVISORY-FEES> 168
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 313
<AVERAGE-NET-ASSETS> 33,573
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.027
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.027)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
