-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ITGUdLPG+GmNGBEUBqgRdIJ9EkZ1QhmWmTFLz7JH3ie8H9CwZr3arLP94mbnXbHp 4GIRaeeVz6oW0kwkCRE6cQ== 0000928385-98-001510.txt : 19980803 0000928385-98-001510.hdr.sgml : 19980803 ACCESSION NUMBER: 0000928385-98-001510 CONFORMED SUBMISSION TYPE: N-1A/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19980729 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MITCHELL HUTCHINS INSTITUTIONAL SERIES CENTRAL INDEX KEY: 0001060517 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: N-1A/A SEC ACT: SEC FILE NUMBER: 333-52965 FILM NUMBER: 98672935 BUSINESS ADDRESS: STREET 1: MITCHELL HUTCHINS ASSET MANAGEMENT INC STREET 2: 1285 AVENUE OF THE AMERICAS 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 MAIL ADDRESS: STREET 1: MITCHELL HUTCHINS ASSET MANAGEMENT INC STREET 2: 1285 AVENUE OF THE AMERICAS 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 N-1A/A 1 PRE-EFFECTIVE AMEND. NO. 1 TO FORM N-1A As filed with the Securities and Exchange Commission on July 29, 1998 1933 Act Registration No. 333-52965 --------- 1940 Act Registration No. 811-8767 -------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_] Pre-Effective Amendment No. 1 [X] ----- --- Post-Effective Amendment No. ______ [_] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_] Amendment No. 1 ----- MITCHELL HUTCHINS INSTITUTIONAL SERIES (Exact name of registrant as specified in charter) 1285 Avenue of the Americas New York, New York 10019 (Address of principal executive offices) Registrant's telephone number, including area code: (212) 713-2000 DIANNE E. O'DONNELL, Esq. Mitchell Hutchins Asset Management Inc. 1285 Avenue of the Americas New York, New York 10019 (Name and address of agent for service) Copies to: ELINOR W. GAMMON, Esq. BENJAMIN J. HASKIN, Esq. Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, N.W., Second Floor Washington, D.C. 20036-1800 Telephone: (202) 778-9000 Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. Title of Securities Being Registered: Shares of Beneficial Interest Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. MITCHELL HUTCHINS INSTITUTIONAL SERIES Contents of Registration Statement This Registration Statement consists of the following papers and documents: Cover Sheet Contents of Registration Statement Cross Reference Sheet Part A - Prospectus Part B - Statement of Additional Information Part C - Other Information Signature Page Exhibits Mitchell Hutchins Institutional Series Form N-1A Cross Reference Sheet
Part A Item No. and Caption Prospectus Caption --------------------------- ------------------ 1. Cover Page Cover Page 2. Synopsis Highlights; Expense Table 3. Condensed Financial Information Performance 4. General Description of Registrant Highlights; Investment Objective and Policies; General Information 5. Management of the Fund Management and Distribution Arrangements; General Information 5A. Management's Discussion of Fund Not Applicable Performance 6. Capital Stock and Other Securities Purchases; Redemptions; Dividends and Taxes; General Information 7. Purchase of Securities Being Offered Purchases, Exchanges, Redemptions; Management and Distribution Arrangements; Financial Intermediaries; Determining the Shares' Net Asset Value 8. Redemption or Repurchase Exchanges; Redemptions; Financial Intermediaries 9. Pending Legal Proceedings Not Applicable Part B Item No. and Caption Statement of Additional Information Caption --------------------------- -------------------------------------------------- 10. Cover Page Cover Page 11. Table of Contents Table of Contents 12. General Information and History Not Applicable 13. Investment Objective and Policies Investment Policies and Restrictions; Portfolio Transactions 14. Management of the Fund Trustees and Officers; Principal Holders of Securities 15. Control Persons and Principal Holders of Trustees and Officers; Principal Holders of Securities Securities 16. Investment Advisory and Other Services Investment Advisory, Administration and Distribution Arrangements 17. Brokerage Allocation Portfolio Transactions 18. Capital Stock and Other Securities Other Information 19. Purchase, Redemption and Pricing of Additional Information Regarding Redemptions; Valuation of Securities Being Offered Shares 20. Tax Status Taxes
Part B Item No. and Caption Statement of Additional Information Caption --------------------------- -------------------------------------------------- 21. Underwriters Investment Advisory, Administration and Distribution Arrangements 22. Calculation of Performance Data Calculation of Yield 23. Financial Statements To Be Supplied
Part C - ------ Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C of this Registration Statement. MITCHELL HUTCHINS LIR SELECT MONEY FUND 1285 AVENUE OF THE AMERICAS . NEW YORK, NEW YORK 10019 Professionally managed money market fund seeking: . Maximum Current Income . High Liquidity . Preservation of Capital Mitchell Hutchins LIR Select Money Fund is a series of Mitchell Hutchins Institutional Series, a Delaware business trust ("Trust"). The Fund offers two separate classes of shares--Institutional shares and Financial Intermediary shares. Institutional shares are available for purchase primarily by institutional investors. Financial Intermediary shares are available for purchase by banks and other financial intermediaries for the benefit of their customers. The Fund is newly organized and has no operating history. This Prospectus concisely sets forth information that a prospective investor should know about the Fund before investing. Please retain this Prospectus for future reference. A Statement of Additional Information dated , 1998 (which is incorporated by reference herein) has been filed with the Securities and Exchange Commission ("SEC" or "Commission"). The Statement of Additional Information can be obtained without charge, and further inquiries can be made, by contacting the Fund, your PaineWebber Investment Executive or PaineWebber's correspondent firms, or by calling toll free 1-888-LIR-FUND. Customers of banks and other financial intermediaries that purchase the Fund's Financial Intermediary shares also may obtain the Statement of Additional Information from their financial intermediaries. In addition, the Commission maintains a website (http://www.sec.gov) that contains the Statement of Additional Information, material incorporated by reference and other information regarding registrants that file electronically with the Commission. AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. Not FDIC insured. May lose value. No bank guarantee. - ------------------------------------------------------------------------------- THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS DATED , 1998 HIGHLIGHTS See elsewhere in the Prospectus for more information on the topics discussed in these highlights. The Fund: Professionally managed money market fund designed primarily for institutions as an economical and convenient means for the investment of short-term funds that they hold for their own account or hold or manage for others. The Fund offers investors the choice of investing in two separate classes of shares. . Institutional shares are available for purchase primarily by institutional investors. . Financial Intermediary shares are available for purchase solely by banks and other financial intermediaries for the benefit of their customers. Financial Intermediary shares bear all fees payable by the Fund to those financial intermediaries for certain services they provide to the beneficial owners of those shares. See "Purchases," "Redemptions," "Financial Intermediaries" and "Valuation of Shares." Investment Maximum current income consistent with liquidity and the Objective and preservation of capital. The Fund invests in a diversified Policies: portfolio of high quality, short-term, U.S. dollar- denominated money market instruments. Distributor: PaineWebber Incorporated ("PaineWebber"). See "Management." Investment Mitchell Hutchins Asset Management Inc. ("Mitchell Adviser: Hutchins"). See "Management." Purchases: Shares may be purchased through PaineWebber, its correspondent firms or through First Data Investor Services Group, Inc., the Fund's transfer agent ("Transfer Agent"). See "Purchases." Redemptions: Shares may be redeemed through PaineWebber, its correspondent firms or the Transfer Agent. See "Redemptions." Dividends: Declared daily and paid monthly. All dividends are automatically paid in Fund shares unless the shareholder elects instead to have dividends transmitted by federal funds wire to either a designated bank account or PaineWebber account. See "Dividends and Taxes." Minimum Initial $10,000,000; $100,000 minimum for subsequent purchases. Purchase: (Financial intermediaries may establish different minimums for their customers who purchase shares through them.) Public Offering Net asset value, which the Fund seeks to maintain at $1.00 Price: per share. WHO SHOULD INVEST. The Fund is designed primarily for institutions as an economical and convenient means for the investment of short-term funds that they hold for their own account or hold or manage for others. These institutions include corporations, banks, trust companies, insurance companies, investment counsellors, pension funds, employee benefit plans, professional firms, trusts, estates and educational, religious and charitable organizations. See "Purchases" and "Management." RISK FACTORS. There can be no assurance that the Fund will achieve its investment objective. While the types of money market securities in which the Fund invests generally are considered to have low risk 2 of loss of principal or interest, these securities are not completely risk free. The Fund may invest in U.S. dollar-denominated securities of foreign issuers, which may present a greater degree of risk than investments in securities of domestic issuers. During periods when interest rates are declining or rising, the Fund's yield will tend to lag behind prevailing short- term market rates. Redemption of shares by one or more shareholders during the Fund's initial period of operations when the Fund may have a relatively small number of investors may cause the Fund to hold a higher portion of its assets in the securities of fewer issuers, resulting in greater risk. See "Investment Objective and Policies--Other Investment Policies and Risks." EXPENSES OF INVESTING IN THE FUND. The following tables are intended to assist investors in understanding the expenses associated with investing in the Fund. "Miscellaneous Expenses" have been estimated for the current fiscal year. SHAREHOLDER TRANSACTION EXPENSES Sales charge on purchases of shares........................................ None Sales charge on reinvested dividends....................................... None Redemption fee or deferred sales charge.................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
--------------------------- FINANCIAL INSTITUTIONAL INTERMEDIARY SHARES SHARES ------------- ------------- Management Fees ................................... 0.18% 0.18% Other Expenses: Shareholder Servicing Fees........................ 0.00% 0.25% Miscellaneous Expenses*........................... 0.00% 0.00% Total Other Expenses .............................. 0.00% 0.25% ------ ------ Total Operating Expenses .......................... 0.18% 0.43% ====== ======
- -------- * Although the Fund pays the fees and expenses (including counsel fees) of its Independent Trustees (the Trustees who are not "interested persons" of the Fund or Mitchell Hutchins, as defined in the Investment Company Act of 1940 ("1940 Act")), Mitchell Hutchins is contractually obligated to reduce its management fee in an amount equal to these fees and expenses. It is esti- mated that these fees and expenses will be less than 0.01% of the Fund's av- erage net assets. EXAMPLE OF EFFECT OF FUND EXPENSES An investor would pay directly or indirectly the following expenses on a $1,000 investment in the Fund, assuming a 5% annual return:
1 YEAR 3 YEARS ------ ------- Institutional shares........................................... $2 $ 6 Financial Intermediary shares.................................. $4 $14
This Example assumes that all dividends are reinvested and that the percentage amounts listed under Annual Fund Operating Expenses remain the same in the years shown. The above tables and the assumption in the Example of a 5% annual return are required by regulations of the SEC applicable to all mutual funds; the assumed 5% annual return is not a prediction of, and does not represent, the Fund's projected or actual performance. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. 3 INVESTMENT OBJECTIVE AND POLICIES The Fund's investment objective is to earn maximum current income consistent with liquidity and the preservation of capital. The Fund seeks to maintain a dollar-weighted average portfolio maturity of 90 days or less. All securities in which the Fund invests have or are deemed to have remaining maturities of 397 days or less on the date of purchase. The Fund invests in high quality, short-term, U.S. dollar-denominated money market instruments of U.S. and foreign issuers. These instruments include gov- ernment securities, obligations of banks, commercial paper and other short- term obligations issued by corporations, partnerships, trusts or other enti- ties, corporate bonds and notes, variable and floating rate securities, fund- ing agreements, guaranteed investment contracts, variable amount master demand notes, participation interests in any of the foregoing and repurchase agree- ments. Participation interests are pro rata interests in securities held by others. The U.S. government securities in which the Fund may invest include direct obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and obligations issued or guaranteed by U.S. government agencies and instrumental- ities, including securities that are supported by the full faith and credit of the United States (such as Government National Mortgage Association certifi- cates ("GNMAs")), securities supported primarily or solely by the creditwor- thiness of the issuer (such as securities of the Resolution Funding Corpora- tion and the Tennessee Valley Authority) and securities that are supported primarily or solely by specific pools of assets and the creditworthiness of a U.S. government-related issuer (such as mortgage-backed securities issued by Fannie Mae, also known as the Federal National Mortgage Association). The Fund may invest in obligations (including certificates of deposit, bank- ers' acceptances and similar obligations) of U.S. and foreign banks. The Fund may invest in non-negotiable time deposits of banks, savings associations and similar depository institutions only if the time deposits have maturities of seven days or less. The securities purchased by the Fund consist only of obligations that are "First Tier Securities" as defined in Rule 2a-7 under the 1940 Act. As so de- fined, First Tier Securities include securities that are rated in the highest short-term rating category by at least two nationally recognized statistical rating organizations ("NRSROs") or by a single NRSRO if only one NRSRO has as- signed the obligation a short-term rating. The Fund also may rely on the short-term rating and credit quality of a guarantee of a security (including bond insurance, letters of credit or unconditional demand features) or the is- suer of the guarantee to determine whether the security is eligible for pur- chase. First Tier Securities also include unrated securities if Mitchell Hutchins has determined the obligations to be of comparable quality to rated securities that so qualify. The Fund generally may invest no more than 5% of its total assets in the securities of a single issuer (other than securities issued by the U.S. government, its agencies and instrumentalities). OTHER INVESTMENT POLICIES AND RISKS RISKS. While the types of money market instruments in which the Fund invests generally are considered to have low risk of loss of principal or interest, they are not completely risk free. An issuer or guarantor may be unable or un- willing to pay interest or repay principal on its obligations for many rea- sons, including adverse changes in its own financial condition or in economic conditions generally. The Fund's investments in U.S. dollar-denominated securities of foreign is- suers may involve risks that are different from investments in U.S. issuers. These risks may include future unfavorable political and economic develop- ments, possible withholding taxes, seizure of foreign deposits, currency con- trols, interest limitations or other governmental restrictions that might af- fect the payment of principal or interest on the Fund's portfolio securities. Additionally, there may be less publicly available information about foreign issuers because they may not be subject to the same regulatory requirements as domestic issuers. During periods when interest rates are declining or rising, the Fund's yield will tend to lag behind prevailing short-term market rates. This means that in periods of declining interest rates the Fund's yield will tend to be somewhat higher than prevailing short-term market rates, and in periods of rising in- terest rates its yield generally will be somewhat lower. Also, when interest rates are falling, net cash inflows from the continuous sale of the Fund's shares are likely to be invested in portfolio instruments that produce lower yields 4 than the balance of its portfolio, thereby reducing its yield. In periods of rising interest rates the opposite can be true. Redemption of shares by one or more shareholders during the Fund's initial period of operations, when the Fund may have a relatively small number of in- vestors, may cause the Fund to hold a higher portion of its assets in the se- curities of fewer issuers. YEAR 2000 RISKS. Like other mutual funds, financial and business organiza- tions around the world, the Fund could be adversely affected if the computer systems used by Mitchell Hutchins, other service providers and entities with computer systems that are linked to the Fund's records do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." Mitchell Hutchins is taking steps that it believes are reasonably designed to address the Year 2000 Issue with respect to the computer systems that is uses and to obtain satis- factory assurances that comparable steps are being taken by the Fund's other major service providers. However, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. U.S. GOVERNMENT SECURITIES. The Fund may also acquire custodial receipts that evidence ownership of future interest payments, principal payments or both that have been "stripped" from certain U.S. Treasury notes or bonds. These custodial receipts are known by various names, including "Treasury In- vestment Growth Receipts" ("TIGRs") and "Certificates of Accrual on Treasury Securities" ("CATS"). The Fund may also invest in separately traded principal and interest components of securities issued or guaranteed by the U.S. Trea- sury. 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. COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The Fund may purchase commercial paper, which includes short-term obligations issued by corpora- tions, partnerships, trusts or other entities to finance short-term credit needs. The Fund may also purchase non-convertible debt obligations with no more than 397 days remaining to maturity at the time of purchase. Short-term obligations issued by trusts or special purpose entities may include certifi- cates or notes that represent participations in or are backed by pools of mortgages or credit card, automobile or other types of receivables or finan- cial assets. The Fund may invest in funding agreements and guaranteed invest- ment contracts issued by insurance companies which are obligations of the in- surance company or its separate account. Funding agreements permit the invest- ment of varying amounts under a direct agreement between the Fund and an in- surance company and provide that the principal amount may be increased from time to time (subject to specified maximums) by agreement of the parties or decreased by either party. The Fund expects to invest in funding agreements with floating or variable rates that are subject to demand features that per- mit the Fund to tender its interest back to the issuer. VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase variable and floating rate securities with remaining maturities in excess of 13 months is- sued by U.S. government agencies or instrumentalities or guaranteed by the U.S. government. In addition, the Fund may purchase variable and floating rate securities of other issuers with remaining maturities in excess of 13 months if they are subject to a demand feature exercisable within 13 months or less. The yield on these securities is adjusted in relation to changes in specific rates, such as the prime rate, and different securities may have different ad- justment rates. A demand feature gives the Fund the right to tender them back to the issuer or a remarketing agent and receive the amortized cost of the se- curity plus accrued interest prior to maturity. The demand feature may be backed by letters of credit or other liquidity support arrangements provided by banks or other financial institutions, whose credit standing affects the credit quality of the obligation. Changes in the credit quality of these in- stitutions could cause losses to the Fund and affect its share price. VARIABLE AMOUNT MASTER DEMAND NOTES. Securities purchased by the Fund may include variable amount master demand notes, which are unsecured redeemable obligations that permit 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 (sub- ject to specified maximums) or 5 decreased by the Fund or the issuer. These notes are payable on demand and may be unrated. REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the Fund purchases obligations from banks, securities dealers or their respective affiliates and simultaneously commits to resell the obligations to the counterparty at an agreed-upon date or upon demand and at a price reflecting a market rate of interest unrelated to the coupon rate or maturity of the purchased obligations. The Fund maintains custody of the underlying obliga- tions prior to their repurchase, either through its regular custodian or through a special "tri-party" custodian or sub-custodian that maintains sepa- rate accounts for both the Fund and its counterparty. Thus, the obligation of the counterparty to pay the repurchase price on the date agreed to or upon de- mand is, in effect, secured by such obligations. Repurchase agreements carry certain risks not associated with direct invest- ments in securities, including possible decline in the market value of the un- derlying obligations. Repurchase agreements involving obligations other than U.S. government securities (such as commercial paper, corporate bonds and mortgage loans) may be subject to special risks and may not have the benefit of certain protections in the event of the counterparty's insolvency. If the counterparty or a guarantor becomes insolvent, the Fund may suffer delays, costs and possible losses in connection with the disposition of the collater- al. The Fund intends to enter into repurchase agreements only with counterparties in transactions believed by Mitchell Hutchins to present mini- mal credit risks in accordance with guidelines established by the board. LENDING OF PORTFOLIO SECURITIES. The Fund may lend its securities to quali- fied broker-dealers or institutional investors in an amount up to 33 1/3% of the Fund's total assets. Lending securities enables the Fund to earn addi- tional income, but could result in a loss or delay in recovering these securi- ties. ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in il- liquid securities. These include repurchase agreements maturing in more than seven days and securities whose disposition is restricted under the federal securities laws, other than those that Mitchell Hutchins has determined to be liquid pursuant to guidelines established by the board. The Fund does not con- sider securities that are eligible for resale under SEC Rule 144A to be illiq- uid if Mitchell Hutchins has determined them to be liquid in accordance with procedures approved by the board. The Fund's investments in Rule 144A securi- ties could increase the level of its illiquidity, however, to the extent that qualified institutional buyers, for a time, become uninterested in purchasing these securities. WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when-issued" or forward commitment basis, that is, for delivery beyond the normal settle- ment date at a stated price and yield. The Fund generally would not pay for such securities or start earning interest on them until they are received. However, when the Fund purchases securities on a when-issued basis, it immedi- ately 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. OTHER INVESTMENT POLICIES. The Fund may borrow money from banks for tempo- rary purposes in an aggregate amount not exceeding 33 1/3% of the value of its total assets. The costs associated with borrowing money may reduce the Fund's net income. The Fund may invest up to 10% of its total assets in the securi- ties of other money market funds. The Fund's investments in securities with remaining maturities in excess of 13 months, such as variable and floating rate securities and variable amount master demand notes, must comply with conditions established by the SEC under which these securities may be considered to have remaining maturities of 13 months or less. In managing the Fund's portfolio, Mitchell Hutchins may employ a number of professional money management techniques to respond to changing economic and money market conditions and to shifts in fiscal and monetary policy. These techniques include varying the composition and the weighted average maturity of the Fund's portfolio based upon its assessment of the relative values of various money market instruments and future interest rate patterns. Mitchell Hutchins may also seek to improve the Fund's yield by purchasing or selling securities to take advantage of yield disparities among similar or dissimilar money market instruments that regularly occur in the money markets. New forms of money market instruments continue to be developed. The Fund may invest 6 in such instruments to the extent consistent with its investment objective. The Fund's investment objective may not be changed without the approval of its shareholders. Certain other investment limitations, as described in the Statement of Additional Information, also may not be changed without share- holder approval. All other investment policies may be changed by the board without shareholder approval. PURCHASES The Fund accepts the settlement of purchase orders only in available federal funds. ("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 an- other bank in one day and thus may be made immediately available to the Fund through its custodian.) The Fund offers investors the choice of investing in two separate classes of shares--Institutional shares and Financial Intermediary shares. Institutional shares are available for purchase by institutional investors, and, at the dis- cretion of PaineWebber, for purchase by individuals or other entities. Finan- cial Intermediary shares are available for purchase only by banks and other financial intermediaries for the benefit of their customers. Financial Inter- mediary shares bear all fees payable by the Fund to those financial intermedi- aries for certain services they provide to the beneficial owners of these shares. The minimum initial investment is $10,000,000. The minimum subsequent investment is the greater of $100,000 or the minimum required to bring a shareholder's account balance to $10,000,000 if the account has fallen below that amount. Both the initial minimum investment and the subsequent minimum investment may be waived at the discretion of PaineWebber. Subsequent pur- chases of shares by a shareholder whose account balance has fallen below $10,000,000 will be accepted only if the account balance will be at least $10,000,000 after that purchase. Financial intermediaries purchasing shares for the accounts of their customers may set a higher or lower minimum for ini- tial and subsequent investments by their customers, provided that when their customers' shareholdings are aggregated, the above noted minimums are met. In- vestors interested in purchasing Financial Intermediary shares should consult their financial institutions concerning any initial or subsequent minimum in- vestment requirements. Shares of the Fund are offered for sale, without a sales charge, at the net asset value per share next determined after receipt and acceptance of a pur- chase order by the Transfer Agent, subject to timely receipt of federal funds as provided below. An investor can place a purchase order by telephoning the Transfer Agent at 1-888-LIR-FUND and speaking with a representative. Investors may also place an order through a PaineWebber Investment Executive or corre- spondent firm who must then relay the order to the Transfer Agent. The Fund effects orders to purchase its shares three times on each Business Day at the net asset value determined as of 12:00 noon (Eastern time), as of 2:30 p.m. (Eastern Time) and as of 5:00 p.m. (Eastern time). For the purchase of Fund shares to be effected on that Business Day, the investor must wire federal funds to the Fund, care of the Transfer Agent, and that wire must be credited to the Fund's bank account by a Federal Reserve Bank on that Business Day. Otherwise, the order will be executed on the following Business Day if federal funds have been received on that Business Day. Purchase orders may be initi- ated by any authorized party on the account, including the shareholder's PaineWebber Investment Executive. A "Business Day" is any day on which the New York offices of the Trust's custodian, The Bank of New York ("Custodian"), the Transfer Agent, PaineWebber and PaineWebber's bank are all open for business. The Fund and PaineWebber reserve the right to reject any purchase order and to suspend the offering of Fund shares for a period of time. The availability of Fund shares to customers of PaineWebber's correspondent firms may vary depending on the arrangements between PaineWebber and such firms. Investors who are purchasing shares should instruct their banks to transfer federal funds by wire. Wire transfers should be directed to: Mitchell Hutchins Institutional Funds c/o The Bank of New York CR DDA A/C #8900337516 FFC PW A/C # [insert PaineWebber account name and account number] ABA #021000018 Unless the investor otherwise specifies, all shares purchased will be Insti- tutional shares. 7 REMOTE TRADE ENTRY. At its discretion, the Fund may offer eligible institu- tional investors who meet certain conditions an electronic trade order entry (RTE) capability. For more information on this option, please contact your PaineWebber Investment Executive or the Transfer Agent at 1-888-LIR-FUND. PaineWebber and/or an investor's bank may impose a service charge for wire transfers. EXCHANGES Shareholders may exchange shares of the Fund for shares of the same class of any of the three Liquid Institutional Reserves funds--Money Market Fund, Gov- ernment Securities Fund and Treasury Securities Fund. These funds all have higher total operating expenses than the Fund and lower minimums for initial and subsequent purchases. Exchange orders from Fund shareholders received by 12:00 noon, Eastern time, with respect to Government Securities Fund and Trea- sury Securities Fund are effected on that Business Day. Exchange orders from Fund shareholders received by 2:30 p.m., Eastern time, with respect to Money Market Fund also are effected on that Business Day. Exchange orders received after those times are executed on the next Business Day. If a shareholder ex- changes all his or her Fund shares, the dividends accrued on those shares for the month to date also will be invested in the shares of the other fund into which the exchange is made. Shareholders may place exchange orders by telephoning the Transfer Agent at 1-888-LIR-FUND and speaking with a representative. Investors may also place an exchange order through a PaineWebber Investment Executive or correspondent firm, who must then relay the order to the Transfer Agent as noted above. Ex- change orders may be initiated by any authorized party on a shareholder's ac- count, including the shareholder's PaineWebber Investment Executive. The exchange privilege may be modified or terminated at any time and, when re- quired by SEC rules, on 60 days' notice. The exchange privilege is available only in those jurisdictions where the sale of the fund shares to be acquired is authorized. AUTOMATIC EXCHANGE WHEN ACCOUNTS FALL BELOW $10,000,000. If, at any time, the total investment in a shareholder's account has been less than $10,000,000 for 30 consecutive days, the Fund may exchange those shares for shares of Liq- uid Institutional Reserves Money Market Fund unless the shareholder has elected in its account application to have the shares redeemed and the pro- ceeds of redemption paid to the shareholder. REDEMPTIONS Shareholders may redeem all or any portion of the shares in their accounts at any time at the net asset value per share next computed after the receipt of a redemption request in proper form by the Transfer Agent. Redemption or- ders are effected three times on each Business Day at the net asset value de- termined as of 12:00 noon (Eastern time), 2:30 p.m. (Eastern time) and as of 5:00 p.m. (Eastern time) by telephoning the Transfer Agent at 1-888-LIR-FUND and speaking with a representative. Investors may also place an order through a PaineWebber Investment Executive or correspondent firm which must then relay the order to the Transfer Agent by the time noted above. Redemption orders may be initiated by any authorized party on a shareholder's account, including the shareholder's PaineWebber Investment Executive. Redemption proceeds will be paid by federal funds wired to one or more of the bank accounts that have been designated by the shareholder, normally on the Business Day the redemption re- quest is accepted. If a shareholder redeems all the shares owned, dividends accrued for the month to date will be paid in federal funds and wired at the same time to the bank account(s) designated by the shareholder. Redemption requests placed later in the day--especially between 3:30 p.m. and 5:00 p.m., Eastern time--will be processed by the Transfer Agent and a wire will be initiated. However, receipt by the shareholder's designated bank account may be delayed if a Federal Reserve Bank is experiencing delays in transfers of funds. Neither the Fund nor the Transfer Agent is responsible for the performance of a shareholder's receiving bank or any of its intermediar- ies. A properly completed account application with signature guaranteed or other authentication acceptable to the Transfer Agent must be on file with the Transfer Agent before a redemption request can be processed. The application requires that the shareholder designate the bank account(s) or PaineWebber ac- count to which redemption proceeds should be wired. Any change 8 in the account designated must be submitted in a form deemed acceptable by the Transfer Agent. If the information provided by a shareholder in a redemption request does not correspond to the information on the application, the Trans- fer Agent will not effect the transaction. ADDITIONAL INFORMATION ON REDEMPTIONS. Shareholders with questions about re- demption requirements should consult their PaineWebber Investment Executives, correspondent firms or the Transfer Agent at 1-888-LIR-FUND. Shareholders will earn dividends on redeemed shares up to (but not including) the day of redemp- tion. The redemption price may be more or less than the purchase price, de- pending on the market value of the Fund's portfolio; however, the Fund antici- pates that its net asset value per share will normally be $1.00 per share. See "Valuation of Shares." There is no minimum amount for redemptions. ADDITIONAL INFORMATION ON FINANCIAL INTERMEDIARY SHARES. The Fund's shares are sold and redeemed without charge by the Fund. Financial intermediaries purchasing or holding Financial Intermediary shares for their customer ac- counts may charge customers for cash management and other services provided in connection with their accounts, including, for instance, account maintenance fees, compensating balance requirements or fees based on account transactions, assets or income. The dividends payable to beneficial owners of Financial In- termediary shares will be lower than those on Institutional shares by the amount of fees paid by the Fund for services provided by financial intermedi- aries through which those shares are purchased and held. See "Financial Inter- mediaries." A customer should consider the terms of his or her account with a financial intermediary before purchasing shares. A financial intermediary pur- chasing or redeeming shares on behalf of its customers is responsible for transmitting orders to the Transfer Agent in accordance with its customer agreements and the procedures noted above. VALUATION OF SHARES The Fund uses its best efforts to maintain its net asset value at $1.00 per share. The Fund's net asset value per share is determined by dividing the value of its investments and other assets minus its liabilities by the number of Fund shares outstanding. The net asset value per share for each class is determined three times each Business Day at 12:00 noon (Eastern time), 2:30 p.m. (Eastern time) and 5:00 p.m. (Eastern time). The Fund values its portfolio securities using the amortized cost method of valuation, under which market value is approximated by amortizing the differ- ence 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. DIVIDENDS AND TAXES DIVIDENDS. Each Business Day, the Fund declares as dividends all of its net investment income. Shares are entitled to receive dividends beginning on the date the purchase order is accepted; dividends are accrued to shareholder accounts daily and are paid on the last Business Day of the month or upon re- demption of a shareholder's entire Fund account. Dividends are automatically paid in additional Fund shares unless the shareholder elects instead to have dividends transmitted by federal funds wire to either a designated bank ac- count or PaineWebber account. A shareholder must notify the Transfer Agent in writing in a form deemed acceptable by the Transfer Agent at least two Busi- ness Days prior to the end of the month if the shareholder wishes to change this election with respect to a particular monthly dividend. Shares do not earn dividends on the day of redemption. The 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 Fund does not expect to realize net long-term capital gain and thus does not anticipate payment of any long-term capital gain distributions. Dividends paid on both classes of shares are calculated at the same time and in the same man- ner. Dividends on Financial Intermediary shares are expected to be lower than those paid on Institutional shares because of the higher expenses borne by the Financial Intermediary shares. TAXES. The Fund intends to qualify for treatment as a regulated investment company under the Internal Revenue Code so that it will be relieved of federal income tax on that part of its investment company taxable income (consisting 9 generally of taxable net investment income and net short-term capital gain, if any) that it distributes to its shareholders. Dividends from the Fund's investment company taxable income (whether paid in cash or in additional Fund shares) are taxable to its shareholders as ordinary income to the extent of its earnings and profits. Shareholders not subject to tax on their income will not be required to pay tax on amounts distributed to them. The Fund's dividends will not qualify for the dividends-received deduc- tion for corporations. Some states and localities exempt from their income taxes the portions of the Fund's dividends that are attributable to interest on U.S. Treasury secu- rities and certain other U.S. government securities. Dividends attributable to earnings on repurchase agreements and securities loans involving those securi- ties are, as a general rule, not eligible for that exemption. The 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 the Fund specifies the portions of its dividends that are attributable to U.S. Treasury securities and other U.S. government securities generally exempt from state and local income taxes. The Fund is required to withhold 31% of all dividends payable to any indi- viduals and certain other noncorporate shareholders who (1) do not provide the Fund with a correct taxpayer identification number or (2) otherwise are sub- ject to backup withholding. ADDITIONAL INFORMATION. The foregoing is only a summary of some of the im- portant federal, state and local income tax considerations generally affecting the Fund and its shareholders; see the Statement of Additional Information for a further discussion. There may be other federal, state and local tax consid- erations applicable to a particular investor. Prospective shareholders are urged to consult their tax advisers. MANAGEMENT AND DISTRIBUTION ARRANGEMENTS The board, as part of its overall management responsibility, oversees vari- ous organizations responsible for the Fund's day-to-day management. Mitchell Hutchins, the Fund's investment adviser and administrator, makes and imple- ments all investment decisions and supervises all aspects of its operations. The Fund incurs various expenses in its operations, such as the management fee paid to Mitchell Hutchins, custody and transfer agency fees, shareholder service fees paid for Financial Intermediary shares, professional fees, ex- penses of board and shareholder meetings, fees and expenses relating to regis- tration of its shares, taxes and governmental fees, fees and expenses of trustees, costs of obtaining insurance, expenses of printing and distributing shareholder materials, organizational expenses and extraordinary expenses, in- cluding costs or losses in any litigation. Mitchell Hutchins has agreed to bear all expenses of the Fund other than the management fee, shareholder service fees paid for Financial Intermediary shares, fees and expenses (including counsel fees) of the Independent Trust- ees, interest, taxes and the cost (including brokerage commissions and other transaction costs, if any) of securities purchased or sold by the Fund and any losses incurred in connection therewith and extraordinary expenses. For its services and its bearing these expenses, the Fund pays Mitchell Hutchins a monthly fee at the annual rate of 0.18% of its average daily net assets. Al- though Mitchell Hutchins is not obligated to pay the fees and expenses of the Independent Trustees, it is contractually obligated to reduce its management fee in an amount equal to those fees and expenses. Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New York 10019, and is a wholly owned asset management subsidiary of PaineWebber. PaineWebber, the distributor of the Fund's shares, is located at the same ad- dress and is wholly owned by Paine Webber Group Inc., a publicly owned finan- cial services holding company. At June 30, 1998, Mitchell Hutchins was invest- ment adviser or sub-adviser to 32 registered investment companies with 69 sep- arate portfolios and aggregate assets of approximately $40.3 billion. In accordance with procedures adopted by the board, the Fund may pay fees to PaineWebber for its services as lending agent in its portfolio securities lending program. Mitchell Hutchins investment personnel may engage in securi- ties transactions for their own accounts pursuant to a code of ethics that es- tablishes procedures for personal investing and restricts certain transac- tions. 10 FINANCIAL INTERMEDIARIES Financial intermediaries, such as banks and savings associations, may pur- chase Financial Intermediary shares for the accounts of their customers. The Fund has adopted a shareholder services plan ("Plan") with respect to Finan- cial Intermediary shares. PaineWebber implements the Plan on behalf of the Trust by entering into a service agreement with each financial intermediary that purchases Financial Intermediary shares requiring it to provide support services to its customers who are the beneficial owners of Financial Interme- diary shares. Under the Plan, the Fund pays PaineWebber an annual fee at the annual rate of 0.25% of the average daily net asset value of the Financial Intermediary shares held by financial intermediaries on behalf of their customers. Under each service agreement, PaineWebber pays an identical fee to the financial in- termediary for providing the support services to its customers specified in the service agreement. These services may include: aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with PaineWebber; providing customers with a service that invests the assets of their accounts in Financial Intermediary shares; processing dividend payments on behalf of customers; providing information pe- riodically to customers showing their positions in Financial Intermediary shares; arranging for bank wires; responding to customer inquiries relating to the services performed by the financial intermediary; providing sub-accounting with respect to Financial Intermediary shares beneficially owned by customers or the information necessary for sub-accounting; forwarding shareholder commu- nications from the Fund to customers, if required by law; and such other simi- lar services as the Fund may reasonably request from time to time to the ex- tent the financial intermediary is permitted to do so under federal and state statutes, rules and regulations. Under the terms of the service agreements, financial intermediaries are re- quired to provide to their customers a schedule of any additional fees that they may charge customers in connection with their investments in Financial Intermediary shares. Financial Intermediary shares are available for purchase only by financial intermediaries that have entered into service agreements with PaineWebber in connection with their investment. Financial intermediaries providing services to beneficial owners of Financial Intermediary shares in certain states may be required to be registered as dealers under the laws of those states. Should future legislative, judicial or administrative action prohibit or re- strict the activities of banks serving as financial intermediaries in connec- tion with the provision of support services to their customers, the Trust and PaineWebber might be required to alter or discontinue their arrangements with financial intermediaries and change their method of operations with respect to Financial Intermediary shares. It is not anticipated, however, that any change in the Trust's method of operations would affect its net asset values per share or result in a financial loss to any shareholder. Conflict of interest restrictions may apply to a financial institution's re- ceipt of compensation from the Fund through PaineWebber under a service agree- ment resulting from fiduciary funds being invested in Financial Intermediary shares. Before investing fiduciary funds in Financial Intermediary shares, fi- nancial intermediaries, including investment advisers and other money managers under the jurisdiction of the SEC, the Department of Labor or state securities commissions and banks regulated by the Comptroller of the Currency should con- sult their legal advisors. PERFORMANCE INFORMATION From time to time the Fund may advertise its "current yield" and "effective yield." Both yield figures are based on historical earnings and are not in- tended to indicate future performance. The "current yield" of the Fund is the income on an investment in the Fund over a specified seven-day period. This income is then "annualized" (that is, assumed to be earned each week over a 52-week period) and shown as a percentage of the investment. The "effective yield" is calculated similarly, but when annualized the income earned is as- sumed to be reinvested. The "effective yield" will be higher than the "current yield" because of the compounding effect of this assumed reinvestment. Current yield and effective yield are calculated separately for Institu- tional shares and Financial Intermediary shares. Since holders of Financial Intermediary shares bear all service fees for the services rendered by finan- cial intermediaries, the net yield on Financial Intermediary shares can be ex- pected at any given time to 11 be approximately 0.25% lower than the net yield on Institutional shares. Any additional fees directly assessed by financial intermediaries will have the effect of further reducing the net yield realized by a beneficial owner of Fi- nancial Intermediary shares. The Fund may also advertise other performance data, which may consist of the annual or cumulative return (including realized net short-term capital gain, if any) earned on a hypothetical investment in the Fund since it began opera- tions or for shorter periods. This return data may or may not assume reinvest- ment of dividends (compounding). GENERAL INFORMATION The Fund is a newly organized, diversified series of the Trust, an open-end management investment company formed on April 29, 1998 as a business trust un- der the laws of Delaware. The board has authority to issue an unlimited number of shares of beneficial interest of separate series, par value $0.001 per share. Each share of the Fund has equal voting, dividend and liquidation rights, except that beneficial owners of Financial Intermediary shares receive certain services directly from financial intermediaries and bear the related service fees. The Fund does not hold annual shareholder meetings. There normally will be no meetings of shareholders to elect trustees unless fewer than a majority of the trustees holding office have been elected by shareholders. Shareholders of record of no less than two-thirds of the outstanding shares of the Fund may remove a trustee by vote cast in person or by proxy at a meet- ing 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 re- moval 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. Shareholders of the Fund are entitled to one vote for each full share held and fractional votes for fractional shares held. Voting rights are not cumula- tive and, as a result, the holders of more than 50% of the shares of the Trust may elect all of its trustees. The shares of the Fund will be voted together, except that only the shareholders of a particular class of the Fund may vote on matters affecting only that class. Financial intermediaries holding shares for their own accounts must undertake to vote the shares in the same propor- tions as the vote of shares held for their customers. As of the date of this Prospectus, Mitchell Hutchins is the sole shareholder of the Fund and may be deemed a controlling person of the Fund until additional investors purchase Fund shares. CERTIFICATES. To avoid additional operating expenses and for investor conve- nience, share certificates are not issued. Ownership of shares of the Fund is recorded on a share 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 will receive audited annual and unaudited semiannual financial statements of the Fund. All purchases and redemptions of Fund shares are confirmed to shareholders at least quarterly. CUSTODIAN AND TRANSFER AGENT. The Bank of New York, 48 Wall Street, New York, New York 10286, is custodian of the Fund's assets. First Data Investor Services Group, Inc., whose principal business address is 4400 Computer Drive, Westborough, Massachusetts 01581-5159, is the Fund's transfer and dividend disbursing agent. 12 Mitchell Hutchins LIR Select Money Fund , 1998 S629 TABLE OF CONTENTS Highlights.................................................................. 2 Investment Objective and Policies........................................... 4 Purchases................................................................... 7 Exchanges................................................................... 8 Redemptions................................................................. 8 Valuation of Shares......................................................... 9 Dividends and Taxes......................................................... 9 Management and Distribution Arrangements.................................... 10 Financial Intermediaries.................................................... 11 Performance Information..................................................... 11 General Information......................................................... 12
- -------------------------------------------------------------------------------- Investors should rely only on the information contained or referred to in this Prospectus. The Fund and its distributor have not authorized anyone to provide investors with information that is different. This Prospectus is not an offer to sell shares of the Fund in any jurisdiction where the Fund or its distributor may not lawfully sell those shares. PaineWebber (C)1998 PaineWebber Incorporated MITCHELL HUTCHINS LIR SELECT MONEY FUND 1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 Mitchell Hutchins LIR Select Money Fund ("Fund") is a diversified series of Mitchell Hutchins Institutional Series ("Trust"), an open-end investment company organized as a Delaware business trust. The Fund seeks maximum current income consistent with liquidity and the preservation of capital and invests in a diversified portfolio of high quality, short-term, U.S. dollar-denominated money market instruments. The Fund offers two separate classes of shares Institutional shares and Financial Intermediary shares. The Fund is newly organized and has no operating history. Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset management subsidiary of PaineWebber Incorporated ("PaineWebber"), serves as the Fund's investment adviser and administrator. PaineWebber serves as distributor of the Fund's shares. This Statement of Additional Information is not a prospectus and should be read only in conjunction with the Fund's current Prospectus, dated _______________, 1998. A copy of the Prospectus may be obtained by contacting any PaineWebber Investment Executive or correspondent firm or by calling 1-888- LIR-FUND. Customers of banks and other financial intermediaries that purchase the Fund's Financial Intermediary shares may obtain the Prospectus from their financial intermediaries. This Statement of Additional Information is dated __________, 1998. INVESTMENT POLICIES AND RESTRICTIONS The following supplements the information contained in the Prospectus concerning the Fund's investment policies and limitations. YIELDS AND RATINGS OF MONEY MARKET INVESTMENTS. The yields on the money market instruments in which the Fund invests (such as U.S. government securities, bank obligations, commercial paper and other short-term obligations) are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings of nationally recognized statistical rating organizations ("NRSROs") represent their opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. Subsequent to its purchase by the Fund, an issue may cease to be rated or its rating may be reduced. The Fund may only purchase securities at are "First Tier Securities." To qualify as a First Tier Security, a security must either be (1) rated in the highest short-term rating category by at least two NRSROs, (2) rated in the highest short-term rating category by a single NRSRO if only that NRSRO has assigned the obligation a short-term rating, (3) issued by an issuer that has received such a short-term rating with respect to a security that is comparable in terms of priority and security, (4) subject to a guarantee rated in the highest short-term rating category or issued by a guarantor that has received the highest short-term rating for a comparable debt obligation or (5) unrated, but determined by Mitchell Hutchins to be of comparable quality. If a security in the Fund's portfolio ceases to be a First Tier Security or Mitchell Hutchins becomes aware that a security has received a rating below the second highest rating by any NRSRO, Mitchell Hutchins or the Trust's board of trustees ("board") will consider whether the Fund should continue to hold the obligation. A First Tier Security rated in the highest short-term rating category by a single NRSRO at the time of purchase that subsequently receives a rating below the highest rating category from a different NRSRO may continue to be considered a First Tier Security. REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a Fund purchases securities or other obligations and simultaneously commits to resell them to the counterparty at an agreed-upon date or upon demand and at a price reflecting a market rate of interest unrelated to the coupon rate or maturity of the purchased securities or other obligations. The Fund maintains custody of the underlying securities or obligations prior to their repurchase, either through its regular custodian or through a special "tri-party" custodian or sub- custodian that maintains separate accounts for both the Fund and its counterparty. Thus, the obligation of the counterparty to pay the repurchase price on the date agreed to or upon demand is, in effect, secured by such securities or obligations. If their value becomes less than the repurchase price, plus any agreed upon additional amount, the counterparty must provide additional collateral so that at all times the collateral is at least equal to the repurchase price plus any agreed upon additional amount. The difference between the total amount to be received upon repurchase of the securities or obligations and the price that was paid by the Fund upon acquisition is accrued as interest and included in the Fund's net investment income. ILLIQUID SECURITIES. The Fund may not invest more than 10% of its net assets in illiquid securities. The term "illiquid securities" for this purpose means securities or other assets that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which the Fund has valued them and includes, among other things, repurchase agreements maturing in more than seven days and restricted securities other than those Mitchell Hutchins has determined to be liquid pursuant to guidelines established by the board. To the extent the Fund invests in illiquid securities, it may not be able readily to liquidate such investments and may have to sell other investments if necessary to raise cash to meet its obligations. Restricted securities are not registered under the Securities Act of 1933 ("1933 Act") and may be sold only in privately negotiated or other exempted transactions or after a 1933 Act registration statement has become effective. Where registration is required, the Fund may be obligated to pay all or part of the registration expenses and a considerable period may elapse between the time of the decision to sell and the time the Fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than prevailed when it decided to sell. However, not all restricted securities are illiquid. A large institutional market has developed for many U.S. and foreign securities that are not registered under the 1933 Act. Institutional investors generally will not seek to sell these instruments to the general public, but instead will often depend either on an efficient institutional market in which such unregistered securities can be readily resold or on an issuer's ability to honor a demand for repayment. Therefore, the fact that there are contractual or legal restrictions on resale to the general public or certain institutions is not dispositive of the liquidity of such investments. Institutional markets for restricted securities also have developed as a result of Rule 144A, which establishes a "safe harbor" from the registration requirements of the 1933 Act for resales of certain securities to qualified institutional buyers, providing both readily ascertainable values for restricted securities and the ability to liquidate an investment in order to satisfy share redemption orders. Such markets include automated systems for the trading, clearance and settlement of unregistered securities of domestic and foreign issuers, such as the PORTAL System sponsored by the National Association of Securities Dealers, Inc. An insufficient number of qualified institutional buyers interested in purchasing Rule 144A-eligible securities held by the Fund, however, could affect adversely the marketability of such portfolio securities, and the Fund might be unable to dispose of such securities promptly or at favorable prices. The board has delegated the function of making day-to-day determinations of liquidity to Mitchell Hutchins, pursuant to guidelines approved by the board. Mitchell Hutchins takes into account a number of factors in reaching liquidity decisions, including (1) the frequency of trades for the security, (2) the number of dealers that make quotes for the security, (3) the number of dealers that have undertaken to make a market in the security, (4) the number of other potential purchasers and (5) the nature of the security and how trading is effected (e.g., the time needed to sell the security, how offers are solicited and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of restricted securities held by the Fund and reports periodically on such decisions to the board. 2 FLOATING RATE AND VARIABLE RATE DEMAND INSTRUMENTS. The Fund may invest in floating rate and variable rate securities with demand features. A demand feature gives the Fund the right to sell the securities back to a specified party, usually a remarketing agent, on a specified date, at a price equal to their amortized cost value plus accrued interest. A demand feature is often backed by a letter of credit, guarantee or other liquidity support arrangement from a bank or other financial institution that may be drawn upon demand, after specified notice, for all or any part of the exercise price of the demand feature. Generally, the Fund intends to exercise demand features (1) upon a default under the terms of the underlying security, (2) to maintain the Fund's portfolio in accordance with its investment objective and policies or applicable legal or regulatory requirements or (3) as needed to provide liquidity to the Fund in order to meet redemption requests. The ability of a bank or other financial institution to fulfill its obligations under a letter of credit, guarantee or other liquidity arrangement might be affected by possible financial difficulties of its borrowers, adverse interest rate or economic conditions, regulatory limitations or other factors. The interest rate on floating rate or variable rate securities ordinarily is readjusted on the basis of the prime rate of the bank that originated the financing or some other index or published rate, such as the 90-day U.S. Treasury bill rate, or is otherwise reset to reflect market rates of interest. Generally, these interest rate adjustments cause the market value of floating rate and variable rate securities to fluctuate less than the market value of fixed rate obligations. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As stated in the Prospectus, the Fund may purchase securities on a "when-issued" or "delayed delivery" basis. A security purchased on a when-issued or delayed delivery basis is recorded as an asset on the commitment date and is subject to changes in market value, generally based upon changes in the level of interest rates. Thus, fluctuation in the value of the security from the time of the commitment date will affect the Fund's net asset value. When the Fund commits to purchase securities on a when-issued or delayed delivery basis, its custodian segregates assets to cover the amount of the commitment. See "Investment Policies and Restrictions-- Segregated Accounts." SEGREGATED ACCOUNTS. When the Fund enters into certain transactions that involve obligations to make future payments to third parties, including the purchase of securities on a when-issued or delayed delivery basis, the Fund will maintain with an approved custodian in a segregated account cash or liquid securities, marked to market daily, in an amount at least equal to the Fund's obligation or commitment under such transactions. LENDING OF PORTFOLIO SECURITIES. The Fund is authorized to lend up to 33 1/3% of its total assets to broker-dealers or institutional investors that Mitchell Hutchins deems qualified, but only when the borrower maintains acceptable collateral with the Fund's custodian, marked to market daily, at least equal to the market value of the securities loaned, plus accrued interest and dividends. Acceptable collateral is limited to cash, U.S. government securities and irrevocable letters of credit that meet certain guidelines established by Mitchell Hutchins. The Fund may reinvest the cash collateral in money market instruments or other short-term liquid investments. In determining whether to lend securities to a particular broker-dealer or institutional investor, Mitchell Hutchins will consider, and during the period of the loan will monitor, all relevant facts and circumstances, including the creditworthiness of the borrower. The Fund will retain authority to terminate any of its loans at any time. The Fund may pay reasonable fees in connection with a loan and may pay the borrower or placing broker a negotiated portion of the interest earned on the reinvestment of cash held as collateral. The Fund will receive amounts equivalent to any dividends, interest or other distributions on the securities loaned. The Fund will regain record ownership of loaned securities to exercise beneficial rights, such as voting and subscription rights, when regaining such rights is considered to be in the Fund's interest. Pursuant to procedures approved by the board governing the Fund's securities lending program, PaineWebber has been retained to serve as lending agent for the Fund. The board also has authorized the payment of fees (including fees calculated as a percentage of invested cash collateral) to PaineWebber for these services. The board periodically reviews all portfolio securities loan transactions for which PaineWebber acted as lending agent. OTHER POLICIES. The Fund will not invest in the following instruments during the coming year: options, futures, currency contracts, swap transactions and short sales "against the box." 3 FUNDAMENTAL INVESTMENT LIMITATIONS. The following fundamental investment limitations cannot be changed for the Fund without the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares of the Fund present at a shareholders' meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. If a percentage restriction is adhered to at the time of an investment or transaction, later changes in percentage resulting from changing values of portfolio securities or amount of total assets will not be considered a violation of any of the following limitations. The Fund will not: (1) purchase securities of any one issuer if, as a result, more than 5% of the Fund's total assets would be invested in securities of that issuer or the Fund would own or hold more than 10% of the outstanding voting securities of that issuer, except that up to 25% of the Fund's total assets may be invested without regard to this limitation, and except that this limitation does not apply to securities issued or guaranteed by the U.S. government, its agencies and instrumentalities or to securities issued by other investment companies. The following interpretation applies to, but is not a part of, this fundamental restriction: Mortgage- and asset-backed securities will not be considered to have been issued by the same issuer by reason of the securities having the same sponsor, and mortgage- and asset-backed securities issued by a finance or other special purpose subsidiary that are not guaranteed by the parent company will be considered to be issued by a separate issuer from the parent company. (2) purchase any security if, as a result of that purchase, 25% or more of the Fund's total assets would be invested in securities of issuers having their principal business activities in the same industry, except that this limitation does not apply to securities issued or guaranteed by the U.S. government, its agencies or instrumentalities or to municipal securities or to certificates of deposit and bankers' acceptances of domestic branches of U.S. banks. The following interpretations apply to, but are not a part of, this fundamental restriction: (a) domestic and foreign banking will be considered to be different industries; and (b) asset-backed securities will be grouped in industries based upon their underlying assets and not treated as constituting a single, separate industry. (3) issue senior securities or borrow money, except as permitted under the Investment Company Act of 1940 ("1940 Act") and then not in excess of 33 1/3% of the Fund's total assets (including the amount of the senior securities issued but reduced by any liabilities not constituting senior securities) at the time of the issuance or borrowing, except that the Fund may borrow up to an additional 5% of its total assets (not including the amount borrowed) for temporary or emergency purposes. (4) make loans, except through loans of portfolio securities or through repurchase agreements, provided that for purposes of this restriction, the acquisition of bonds, debentures, other debt securities or instruments, or participations or other interests therein and investments in government obligations, commercial paper, certificates of deposit, bankers' acceptances or similar instruments will not be considered the making of a loan. (5) engage in the business of underwriting securities of other issuers, except to the extent that the Fund might be considered an underwriter under the federal securities laws in connection with its disposition of portfolio securities. (6) purchase or sell real estate, except that investments in securities of issuers that invest in real estate and investments in mortgage-backed securities, mortgage participations or other instruments supported by interests in real estate are not subject to this limitation, and except that the Fund may exercise rights under agreements relating to such securities, including the right to enforce security 4 interests and to hold real estate acquired by reason of such enforcement until that real estate can be liquidated in an orderly manner. (7) purchase or sell physical commodities unless acquired as a result of owning securities or other instruments, but the Fund may purchase, sell or enter into financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following investment restrictions may be changed by the board without shareholder approval. The Fund will not: (1) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions and except that the Fund may make deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. (2) engage in short sales of securities or maintain a short position, except that the Fund may (a) sell short "against the box" and (b) maintain short positions in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. (3) purchase securities of other investment companies, except to the extent permitted by the 1940 Act and except that this limitation does not apply to securities received or acquired as dividends, through offers of exchange or as a result of reorganization, consolidation or merger. (4) purchase portfolio securities while borrowings in excess of 5% of its total assets are outstanding. (5) invest more than 10% of its net assets in illiquid securities. 5 TRUSTEES AND OFFICERS; PRINCIPAL HOLDERS OF SECURITIES The trustees and executive officers of the Trust, their ages, business addresses and principal occupations during the past five years are:
Position with Business Experience; NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS - ------------------------------------ ------------------- ------------------------------------------------------ Margo N. Alexander**; 51 Trustee and Mrs. Alexander is president, chief executive officer President and a director of Mitchell Hutchins (since January 1995), and an executive vice president and a director of PaineWebber (since March 1984). Mrs. Alexander is president and a director or trustee of 31 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. Richard Q. Armstrong; 63 Trustee Mr. Armstrong is chairman and principal of RQA 78 West Brother Drive Enterprises (management consulting firm) (since April Greenwich, CT 06830 1991 and principal occupation since March 1995). Mr. Armstrong was chairman of the board, chief executive officer and co-owner of Adirondack Beverages (producer and distributor of soft drinks and sparkling/still waters) (October 1993-March 1995). He was a partner of The New England Consulting Group (management consulting firm) (December 1992-September 1993). He was managing director of LVMH U.S. Corporation (U.S. subsidiary of the French luxury goods conglomerate, Louis Vuitton Moet Hennessey Corporation) (1987-1991) and chairman of its wine and spirits subsidiary, Schieffelin & Somerset Company (1987-1991). Mr. Armstrong is a director or trustee of 30 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. E. Garrett Bewkes, Jr.**; 71 Trustee and Mr. Bewkes is a director of Paine Webber Group Inc. Chairman of the ("PW Group") (holding company of PaineWebber and Board of Trustees Mitchell Hutchins). Prior to December 1995, he was a consultant to PW Group. Prior to 1988, he was chairman of the board, president and chief executive officer of American Bakeries Company. Mr. Bewkes is also a director of Interstate Bakeries Corporation and NaPro BioTherapeutics, Inc. Mr. Bewkes is a director or trustee of 31 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser.
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Position with Business Experience; NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS - ------------------------------------ ------------------- ------------------------------------------------------ Richard R. Burt; 51 Trustee Mr. Burt is chairman of IEP Advisors, Inc. 1101 Connecticut Avenue, N.W. (international investments and consulting firm) Washington, D.C. 20036 (since March 1994) and a partner of McKinsey & Company (management consulting firm) (since 1991). He is also a director of Archer-Daniels-Midland Co. (agricultural commodities). Hollinger International Co, (publishing), Homestake Mining Corp., Powerhouse Technologies, Inc. and Wierton Steel Corp He was the chief negotiator in the Strategic Arms Reduction Talks with the former Soviet Union (1989-1991) and the U.S. Ambassador to the Federal Republic of Germany (1985-1989). Mr. Burt is a director or trustee of 30 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. Mary C. Farrell**; 48 Trustee Ms. Farrell is a managing director, senior investment strategist and member of the Investment Policy Committee of PaineWebber. Ms. Farrell joined PaineWebber in 1982. She is a member of the Financial Women's Association and Women's Economic Roundtable and appears as a regular panelist on Wall $treet Week with Louis Rukeyser. She also serves on the Board of Overseers of New York University's Stern School of Business. Ms. Farrell is a director or trustee of 30 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. Meyer Feldberg; 56 Trustee Mr. Feldberg is Dean and Professor of Management of Columbia University the Graduate School of Business, Columbia University. 101 Uris Hall Prior to 1989, he was president of the Illinois New York, New York 10027 Institute of Technology. Dean Feldberg is also a director of Primedia Inc., Federated Department Stores Inc. and Revlon, Inc. Dean Feldberg is a director or trustee of 30 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. George W. Gowen; 68 Trustee Mr. Gowen is a partner in the law firm of Dunnington, 666 Third Avenue Bartholow & Miller. Prior to May 1994, he was a New York, New York 10017 partner in the law firm of Fryer, Ross & Gowen. Mr. Gowen is also a director of Columbia Real Estate Investments, Inc. Mr. Gowen is a director or trustee of 30 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser.
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Position with Business Experience; NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS - ------------------------------------ ------------------- ------------------------------------------------------ Frederic V. Malek; 61 Trustee Mr. Malek is chairman of Thayer Capital Partners 1455 Pennsylvania Avenue, N.W. (merchant bank). From January 1992 to November 1992, Suite 350 he was campaign manager of Bush-Quayle `92. From 1990 Washington, D.C. 20004 to 1992, he was vice chairman and, from 1989 to 1990, he was president of Northwest Airlines Inc., NWA Inc. (holding company of Northwest Airlines Inc.) and Wings Holdings Inc. (holding company of NWA Inc.). Prior to 1989, he was employed by the Marriott Corporation (hotels, restaurants, airline catering and contract feeding), where he most recently was an executive vice president and president of Marriott Hotels and Resorts. Mr. Malek is also a director of American Management Systems, Inc. (management consulting and computer-related services), Automatic Data Processing, Inc., CB Commercial Group, Inc. (real estate services), Choice Hotels International (hotel and hotel franchising), FPL Group, Inc. (electric services), Manor Care, Inc. (health care) and Northwest Airlines Inc. Mr. Malek is a director or trustee of 30 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. Carl W. Schafer; 62 Trustee Mr. Schafer is president of the Atlantic Foundation 66 Witherspoon Street, #1100 (charitable foundation supporting mainly Princeton, NJ 08542 oceanographic exploration and research). He also is a director of Base Ten Systems, Inc. (software), Roadway Express, Inc. (trucking), The Guardian Group of Mutual Funds, the Harding, Loevner Funds, Evans Systems, Inc. (a motor fuels, convenience store and diversified company), Electronic Clearing House, Inc. (financial transactions processing), Frontier Oil Corporation and Nutraceutix, Inc. (biotechnology company). Prior to January 1993, he was chairman of the Investment Advisory Committee of the Howard Hughes Medical Institute. Mr. Schafer is a director or trustee of 30 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. Anthony G. Balestrieri; 35 Vice President Mr. Balestrieri is a senior vice president and a portfolio manager in the short-term strategies group of Mitchell Hutchins. Prior to April 1994, he was a fixed income portfolio manager at Bankers Trust. Mr. Balestrieri is a vice president of one investment company for which Mitchell Hutchins or PaineWebber serves as investment adviser.
8 Kris L. Dorr; 34 Vice President Ms. Dorr is a first vice president and a portfolio manager in the short-term strategies group of Mitchell Hutchins. Prior to 1994, she was a vice president and a portfolio manager in the money market mutual funds group of Kidder Peabody Asset Management, Inc.. Ms. Dorr is a vice president of one investment company for which Mitchell Hutchins or PaineWebber serves as investment adviser. John J. Lee; 29 Vice President and Mr. Lee is a vice president and a manager of the Assistant Treasurer mutual fund finance department of Mitchell Hutchins. Prior to September 1997, he was an audit manager in the financial services practice of Ernst & Young LLP. Mr. Lee is a vice president and assistant treasurer of 31 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. Michael H. Markowitz; 33 Vice President Mr. Markowitz is a first vice president and a portfolio manager in the short-term strategies group of Mitchell Hutchins. Prior to 1994, he was an assistant treasurer and a portfolio manager in the global investment management group at Bankers Trust. Mr. Markowitz is a vice president of one investment company for which Mitchell Hutchins or PaineWebber serves as investment adviser. Dennis McCauley; 51 Vice President Mr. McCauley is a managing director and chief investment officer--fixed income of Mitchell Hutchins. Prior to December 1994, he was director of fixed income investments of IBM Corporation. Mr. McCauley is a vice president of 21 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser.
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Position with Business Experience; NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS - ------------------------------------ ------------------- ------------------------------------------------------ Ann E. Moran; 41 Vice President Ms. Moran is a vice president and a manager of the and Assistant mutual fund finance department of Mitchell Hutchins. Treasurer Ms. Moran is a vice president and assistant treasurer of 31 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. Dianne E. O'Donnell; 46 Vice President Ms. O'Donnell is a senior vice president and deputy and Secretary general counsel of Mitchell Hutchins. Ms. O'Donnell is a vice president and secretary of 30 investment companies and vice president and assistant secretary of one investment company for which Mitchell Hutchins or PaineWebber serves as investment adviser. Emil Polito; 37 Vice President Mr. Polito is a senior vice president and director of operations and control for Mitchell Hutchins. From March 1991 to September 1993 he was director of the Mutual Funds Sales Support and Service Center for Mitchell Hutchins and PaineWebber. Mr. Polito is vice president of 31 investment companies for which Mitchell Hutchins or PaineWebber services as investment adviser. Victoria E. Schonfeld; 47 Vice President Ms. Schonfeld is a managing director and general counsel of Mitchell Hutchins. Prior to May 1994, she was a partner in the law firm of Arnold & Porter. Ms. Schonfeld is a vice president of 30 investment companies and vice president and secretary of one investment company for which Mitchell Hutchins or PaineWebber serves as investment adviser. Paul H. Schubert; 35 Vice President Mr. Schubert is a senior vice president and the and Treasurer director of the mutual fund finance department of Mitchell Hutchins. From August 1992 to August 1994, he was a vice president of Black-Rock Financial Management, L.P. Prior to August 1992, he was an audit manager with Ernst & Young LLP. Mr. Schubert is a vice president and treasurer of 31 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser.
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Position with Business Experience; NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS - ------------------------------------ ------------------- ------------------------------------------------------ Barney A. Taglialatela; 37 Vice President Mr. Taglialatela is a vice president and a manager of and Assistant the mutual fund finance department of Mitchell Treasurer Hutchins. Prior to February 1995, he was a manager of the mutual fund finance division of Kidder Peabody Asset Management, Inc. Mr. Taglialatela is a vice president and assistant treasurer of 31 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser. Keith A. Weller; 36 Vice President Mr. Weller is a first vice president and associate and Assistant general counsel of Mitchell Hutchins. Prior to May Secretary 1995, he was an attorney in private practice. Mr. Weller is a vice president and assistant secretary of 30 investment companies for which Mitchell Hutchins or PaineWebber serves as investment adviser.
* Unless otherwise indicated, the business address of each listed person is 1285 Avenue of the Americas, New York, New York 10019. ** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are "interested persons" of the Trust as defined in the 1940 Act by virtue of their positions with PW Group, PaineWebber and/or Mitchell Hutchins. - ------------------- The Trust pays trustees who are not "interested persons" of the Trust $ 1,000 annually for each series and $150 for each board meeting and each meeting of a board committee (other than committee meetings held on the same day as a board meeting). The Trust has only one series and thus pays each such Trustee $1,000 annually, plus any additional amounts due for board or committee meetings. Each chairman of the audit and contract review committee of individual funds within the PaineWebber fund complex receives additional compensation aggregating $15,000 annually from the relevant funds. All trustees are reimbursed for any expenses incurred in attending meetings. Trustees and officers own no outstanding shares of the Fund. Because PaineWebber and Mitchell Hutchins perform substantially all of the services necessary for the operation of the Trust, the Trust requires no employees. No officer, director or employee of Mitchell Hutchins or PaineWebber presently receives any compensation from the Trust for acting as a trustee or officer. 11 The table below shows the estimated compensation to be paid to each trustee during the current fiscal year and the compensation of those trustees from other PaineWebber funds during the calendar year ended December 31, 1997. COMPENSATION TABLE+
Estimated Total Compensation Aggregate FROM THE TRUST Compensation AND THE Name of Persons, Position FROM THE TRUST* Fund Complex** - ------------------------- --------------- -------------- Richard Q. Armstrong, Trustee....................................... $1,750 $94,885 Richard R. Burt, Trustee............................................ $1,750 $ 97,085 Meyer Feldberg, Trustee............................................. $1,750 $117,853 George W. Gowen, Trustee............................................ $2,205 $101,567 Frederic V. Malek, Trustee.......................................... $1,750 $95,845 Carl W. Schafer, Trustee............................................ $1,750 $94,885
+ Only independent trustees are compensated by the Trust and identified above; trustees who are "interested persons," as defined in the 1940 Act, do not receive compensation. * Estimated for the initial fiscal year of the Trust ending April 30, 1999. ** Represents total compensation paid to each trustee during the calendar year ended December 31, 1997; no fund within the fund complex has a bonus, pension, profit sharing or retirement plan. PRINCIPAL HOLDERS OF SECURITIES. As of July 27, 1998, Mitchell Hutchins held all the outstanding shares of the Fund and thus may be deemed a controlling person of the Fund until additional investors purchase shares. INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS Investment Advisory and Administration Arrangements. Mitchell Hutchins acts as the Trust's investment adviser and administrator pursuant to a contract dated _____________, 1998 ("Advisory Contract"). Under the Advisory Contract, the Trust pays Mitchell Hutchins an annual fee, computed daily and paid monthly, at an annual rate of 0.18% of the Fund's average daily net assets Under the terms of the Advisory Contract, Mitchell Hutchins bears all expenses incurred in the Fund's operation other than the investment advisory fee payable under the Advisory Contract, the fees payable pursuant to the shareholder service plan adopted by the Trust with respect to the Fund's Financial Intermediary shares, fees and expenses (including counsel fees) of the trustees of the Trust who are not "interested persons"of the Trust or Mitchell Hutchins, as that term is defined in the 1940 Act ("Independent Trustees"), interest, taxes and the cost (including brokerage commissions and other transaction costs, if any) of securities purchased or sold by the Fund and any losses incurred in connection therewith and extraordinary expenses (such as costs of litigation to which the Trust or Fund is a party and of indemnifying officers and trustees of the Trust). Although Mitchell Hutchins is not obligated to pay the fees and expenses of the Independent Trustees, the Advisory Contract requires that Mitchell Hutchins reduce its management fee by an amount equal to those fees and expenses. Expenses borne by Mitchell Hutchins include the following (or the Fund's share of the following): (1) organizational expenses (if these expenses are amortized over a period of more than one year, Mitchell Hutchins will bear in any one year only that portion of the organizational expenses that would have been borne by the Fund in that year), (2) filing fees and expenses relating to the registration and qualification of the shares of the Fund under federal and state securities laws and maintaining such registrations and qualifications, (3) fees and salaries payable 12 to the trustees (other than the Independent Trustees) and officers, (4) all expenses incurred in connection with the services of the trustees (other than the Independent Trustees), including travel expenses, (5) costs of any liability, uncollectable items of deposit and other insurance or fidelity bonds, (6) ordinary legal, accounting and auditing expenses, excluding legal fees of special counsel for the Independent Trustees and, as noted above, excluding extraordinary expenses, such as litigation or indemnification expenses, (7) charges of custodians, transfer agents and other agents, (8) costs of preparing share certificates (if any); (9) expenses of setting in type and printing prospectuses and supplements thereto, reports and statements to shareholders and proxy material for existing shareholders, (10) costs of mailing prospectuses and supplements thereto, statements of additional information and supplements thereto, reports and proxy materials to existing shareholders, (11) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations, (12) costs of mailing and tabulating proxies and costs of meetings of shareholders, the board and any committees thereof, (13) the cost of investment company literature and other publications provided to the trustees and officers, (14) costs of mailing, stationery and communications equipment, (15) expenses incident to any dividend, withdrawal or redemption options, and (16) charges and expenses of any outside pricing service used to value portfolio securities. Under the Advisory Contract, Mitchell Hutchins will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the performance of the Advisory Contract, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of Mitchell Hutchins in the performance of its duties or from reckless disregard of its duties and obligations thereunder. The Advisory Contract is terminable with respect to the Fund at any time without penalty by vote of the board or by vote of the holders of a majority of the outstanding voting securities of that Fund on 60 days' written notice to Mitchell Hutchins, as the case may be. The Advisory Contract is also terminable without penalty by Mitchell Hutchins on 60 days' written notice to the other party. The Advisory Contract terminates automatically upon its assignment. The following table shows the approximate net assets as of June 30, 1998, sorted by category of investment objective, of the investment companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An investment company may fall into more than one of the categories below.
INVESTMENT CATEGORY NET ASSETS ------------------- ---------- ( $ MIL) Domestic (excluding Money Market).................................... $ 7,856.5 Global............................................................... 3,875.8 Equity/Balanced...................................................... 6,513.6 Fixed Income (excluding Money Market)................................ 5,218.7 Taxable Fixed Income............................................... 3,641.0 Tax-Free Fixed Income.............................................. 1,577.7 Money Market Funds................................................... 28,628.1
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 mutual funds and other Mitchell Hutchins advisory clients. DISTRIBUTION ARRANGEMENTS. PaineWebber acts as distributor of shares of the Trust under a distribution contract with the Trust, which requires PaineWebber to use its best efforts, consistent with its other business, to sell shares of the Trust. Shares of the Trust are offered on a continuous basis, except that the Trust and PaineWebber reserve the right to reject any purchase order and to suspend the offering of Fund shares for a period of time. 13 PORTFOLIO TRANSACTIONS The Advisory Contract authorizes Mitchell Hutchins (with the approval of the board) to select brokers and dealers to execute purchases and sales of the Fund's portfolio securities. The Advisory Contract directs Mitchell Hutchins to use its best efforts to obtain the best available price and most favorable execution with respect to all transactions for the Fund. To the extent that the execution and price offered by more than one dealer are comparable, Mitchell Hutchins may, in its discretion, effect transactions in portfolio securities with dealers who provide the Fund with research, analysis, advice and similar services. Although Mitchell Hutchins may receive certain research or execution services in connection with these transactions, Mitchell Hutchins will not purchase securities at a higher price or sell securities at a lower price than would otherwise be paid had no services been provided by the executing dealer. Moreover, Mitchell Hutchins will not enter into any explicit soft dollar arrangements relating to principal transactions and will not receive in principal transactions the types of services that could be purchased for hard dollars. Research services furnished by the dealers with which the Fund effects securities transactions may be used by Mitchell Hutchins in advising other funds or accounts it advises and, conversely, research services furnished to Mitchell Hutchins in connection with other funds or accounts that Mitchell Hutchins advises may be used in advising the Fund. Information and research received from dealers will be in addition to, and not in lieu of, the services required to be performed by Mitchell Hutchins under the Advisory Contract. Mitchell Hutchins may engage in agency transactions in over-the-counter equity and debt securities in return for research and execution services. These transactions are entered into only in compliance with procedures ensuring that the transaction (including commissions) is at least as favorable as it would have been if effected directly with a market-maker that did not provide research or execution services. These procedures include a requirement that Mitchell Hutchins obtain multiple quotes from dealers before executing the transactions on an agency basis. The Fund purchases portfolio securities from dealers and underwriters as well as from issuers. Securities are usually traded on a net basis with dealers acting as principal for their own accounts without a stated commission. Prices paid to dealers in principal transactions generally include a "spread," which is the difference between the prices at which the dealer is willing to purchase and sell a specific security at the time. When securities are purchased directly from an issuer, no commissions or discounts are paid. When securities are purchased in underwritten offerings, they include a fixed amount of compensation to the underwriter. Investment decisions for the Fund and for other investment accounts managed by Mitchell Hutchins are made independently of each other in light of differing considerations for the various accounts. However, the same investment decision may occasionally be made for the Fund and one or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated between the Fund and such other account(s) as to amount according to a formula deemed equitable to the Fund and such account(s). While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Fund is concerned, or upon its ability to complete its entire order, in other cases it is believed that coordination and the ability to participate in volume transactions will be beneficial to the Fund. ADDITIONAL INFORMATION REGARDING REDEMPTIONS The Fund may suspend redemption privileges or postpone the date of payment during any period (1) when the New York Stock Exchange ("NYSE") is closed or trading on the NYSE is restricted as determined by the Securities and Exchange Commission ("SEC"), (2) when an emergency exists, as defined by the SEC, which makes it not reasonably practicable for the Fund to dispose of securities owned by it or to determine fairly the market value of its assets or (3) as the SEC may otherwise permit. The redemption price may be more or less than the shareholder's cost, depending on the market value of the Fund's portfolio at the time, although the Fund seeks to maintain a constant net asset value of $1.00 per share. 14 If conditions exist that make cash payments undesirable, the Fund reserves the right to honor any request for redemption by making payment in whole or in part in securities chosen by the Fund and valued in the same way as they would be valued for purposes of computing the Fund's net asset value. If payment is made in securities, a shareholder may incur brokerage expenses in converting these securities into cash. VALUATION OF SHARES The Fund's net asset value per share is determined by The Bank of New York ("BONY") as of 12:00 noon, Eastern time, 2:30 p.m., Eastern time, and again at 5:00 p.m., Eastern time, on each Business Day. As defined in the Prospectus, "Business Day" means any day on which the New York offices of BONY, the Fund's transfer agent, First Data Investor Services Group, Inc. ("Transfer Agent") PaineWebber and PaineWebber's bank (also The Bank of New York) are all open for business. One or more of these institutions will be closed on the observance of the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. The Fund values its portfolio securities in accordance with the amortized cost method of valuation under Rule 2a-7 ("Rule") under the 1940 Act. To use amortized cost to value its portfolio securities, the Fund must adhere to certain conditions under the Rule relating to its investments, some of which are discussed in the Prospectus. Amortized cost is an approximation of market value of an instrument, whereby the difference between its acquisition cost and value at maturity is amortized on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account, and thus the amortized cost method of valuation may result in the value of a security being higher or lower than its actual market value. If a large number of redemptions take place at a time when interest rates have increased, the Fund might have to sell portfolio securities prior to maturity and at a price that might not be desirable. The board has established procedures ("Procedures") for the purpose of maintaining a constant net asset value of $1.00 per share, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. If that deviation exceeds 1/2 of 1% for any Fund, the board will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends and utilizing a net asset value per share as determined by using available market quotations. The Fund will maintain a dollar-weighted average portfolio maturity of 90 days or less and will not purchase any instrument having, or deemed to have, a remaining maturity of more than 397 days, will limit portfolio investments, including repurchase agreements, to those U.S. dollar-denominated instruments that are of high quality under the Rule and that Mitchell Hutchins, acting pursuant to the Procedures, determines present minimal credit risks, and will comply with certain reporting and recordkeeping procedures. There is no assurance that constant net asset value per share will be maintained. If amortized cost ceases to represent fair value per share, the board will take appropriate action. In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. TAXES To qualify for treatment as a regulated investment company ("RIC") under the Internal Revenue Code, the Fund must distribute to its shareholders for each taxable year at least 90% of its investment company taxable income (consisting generally of net investment income and net short-term capital gain, if any) and must meet several additional requirements. Among these requirements are the following: (1) the Fund must derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of securities and certain other income; (2) at the close of each quarter of the Fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities that are limited, in respect of any one issuer, to 15 an amount that does not exceed 5% of the value of the Fund's total assets; and (3) at the close of each quarter of the Fund's taxable year, not more than 25% of the value of its total assets may be invested in securities (other than U.S. government securities and securities of other RICs) of any one issuer. If the Fund failed to qualify for treatment as a RIC for any taxable year, it would be taxed as an ordinary corporation on its taxable income for that year (even if that income was distributed to its shareholders) and all distributions out of its earnings and profits would be taxable to its shareholders as dividends (that is, ordinary income). CALCULATION OF YIELD The Fund computes its yield and effective yield quotations using standardized methods required by the SEC. The Fund from time to time advertises (1) its current yield based on a recently ended seven-day period, computed by determining the net change, exclusive of capital changes, in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from that shareholder account, dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then multiplying the base period return by (365/7), with the resulting yield figure carried to at least the nearest hundredth of one percent, and (2) its effective yield based on the same seven-day period by compounding the base period return by adding 1, raising the sum to a power equal to (365/7), and subtracting 1 from the result, according to the following formula: EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)/365/7/] - 1 Yield may fluctuate daily and does not provide a basis for determining future yields. Because the yield of the Fund fluctuates, it cannot be compared with yields on savings accounts or other investment alternatives that provide an agreed-to or guaranteed fixed yield for a stated period of time. However, yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the yield of one money market fund to another, consideration should be given to each fund's investment policies, including the types of investments made, the average maturity of the portfolio securities and whether there are any special account charges that may reduce the yield. OTHER INFORMATION. The Fund's performance data quoted in advertising and other promotional materials ("Performance Advertisements") represent past performance and are not intended to predict or indicate future results. The return on an investment in the Fund will fluctuate. In Performance Advertisements, the Fund may compare its taxable yield with data published by Lipper Analytical Services, Inc. for money funds ("Lipper"), CDA Investment Technologies, Inc. ("CDA"), IBC Financial Data, Inc. ("IBC"), Wiesenberger Investment Companies Service ("Wiesenberger") or Investment Company Data Inc. ("ICD"), or with the performance of recognized stock and other indexes, including the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, the Morgan Stanley Capital International World Index, the Lehman Brothers Treasury Bond Index, the Lehman Brothers Government/Corporate Bond Index, the Salomon Brothers Government Bond Index and changes in the Consumer Price Index as published by the U.S. Department of Commerce. The Fund also may refer in such materials to mutual fund performance rankings and other data, such as comparative asset, expense and fee levels, published by Lipper, CDA, IBC, Wiesenberger or ICD. Performance Advertisements also may refer to discussions of the Fund and comparative mutual fund data and ratings reported in independent periodicals, including THE WALL STREET JOURNAL, MONEY MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS. Comparisons in Performance Advertisements may be in graphic form. The Fund may also compare its performance with the performances of bank certificates of deposit ("CDs") as measured by the CDA Certificate of Deposit Index and the Bank Rate Monitor National Index and the average of yields of CDs of major banks published by Banxquotes(R) Money Markets. In comparing the Fund's performance to CD performance, investors should keep in mind that bank CDs are insured in whole or in part by an agency of the U.S. government and offer fixed principal and fixed or variable rates of interest, and that bank CD yields may vary depending on the financial institution offering the CD and prevailing interest rates. Bank accounts are insured in whole or in part by an agency of the U.S. government and may offer a fixed rate of return. Fund shares are not 16 insured or guaranteed by the U.S. government and returns thereon will fluctuate. While the Fund seeks to maintain a stable net asset value of $1.00 per share, there can be no assurance that it will be able to do so. The Fund may include discussions or illustrations of the effects of compounding in Performance Advertisements. "Compounding" refers to the fact that, if dividends on the Fund investment are reinvested by being paid in additional Fund shares, any future income of the Fund would increase the value, not only of the original Fund investment, but also of the additional Fund shares received through reinvestment. As a result, the value of the Fund investment would increase more quickly than if dividends had been paid in cash. The Fund may also make available to shareholders a daily accrual factor or "mil rate" representing dividends accrued to shareholder accounts on a given day or days. Certain shareholders may find that this information facilitates accounting or recordkeeping. OTHER INFORMATION The Trust is a Delaware business trust and has authority to issue an unlimited number of shares of beneficial interest. The Trust may, without shareholder approval, divide the authorized shares into an unlimited number of separate series and divide the shares of any series into classes. Although Delaware law statutorily limits the potential liabilities of a Delaware business trust's shareholders to the same extent as it limits the potential liabilities of a Delaware corporation, shareholders of the Fund could, under certain conflicts of laws jurisprudence in various states, be held personally liable for the obligations of the Trust or Fund. However, the Trust Instrument of the Trust disclaims shareholder liability for acts or obligations of the Trust or its series (the Fund). The Trust Instrument provides for indemnification from the Fund's property for all losses and expenses of any Fund shareholder held personally liable for the obligations of the Fund. Thus, the risk of a shareholder's incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund itself would be unable to meet its obligations, a possibility which Mitchell Hutchins believes is remote and not material. Upon payment of any liability incurred by a shareholder solely by reason of being or having been a shareholder of the Fund, the shareholder paying such liability will be entitled to reimbursement from the general assets of the Fund. The trustees intend to conduct the operations of the Fund in such a way as to avoid, as far as possible, ultimate liability of the shareholders for liabilities of the Fund. COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036, serves as counsel to the Fund. Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell Hutchins in connection with other matters. AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, serves as independent auditors for the Fund. FINANCIAL INTERMEDIARIES The Trust has adopted a Shareholder Services Plan and Agreement ("Plan") with respect to the Financial Intermediary shares of the Fund to assure that the beneficial owners of the Financial Intermediary shares receive certain support services. PaineWebber will implement the Plan by entering into a service agreement with each financial intermediary that purchases Financial Intermediary shares requiring it to provide support services to its customers who are the beneficial owners of the Financial Intermediary shares. Under the Plan, the Fund pays PaineWebber an annual fee at the annual rate of 0.25% of the average daily net asset value of the Financial Intermediary shares held by financial intermediaries on behalf of their customers. Under each service agreement, PaineWebber pays an identical fee to the financial intermediary for providing the support services to its customers specified in the service agreement. These services may include: (i) aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with PaineWebber; (ii) providing customers with a service that invests the assets of their accounts in Financial Intermediary shares; (iii) processing dividend payments from the Trust on behalf of customers; (iv) providing information periodically to customers showing their positions in Financial Intermediary shares; (v) arranging for bank wires; (vi) responding to customer inquiries relating to the services performed by the financial intermediary; (vii) providing sub-accounting with respect to Financial Intermediary shares beneficially owned by customers or the information necessary for sub- 17 accounting; (viii) forwarding shareholder communications from the Trust (such as proxies, shareholder reports and dividend, distribution and tax notices) to customers, if required by law; and (ix) other similar services if requested by the Trust. The Plan requires that PaineWebber provide to the board at least annually a written report of the amounts expended by PaineWebber under service agreements with financial intermediaries and the purposes for which such expenditures were made. Each service agreement requires the financial intermediary to cooperate with PaineWebber in providing information to the board with respect to amounts expended and services provided under the service agreement. The Plan may be terminated at any time, without penalty, by vote of the Independent Trustees who have no direct or indirect financial interest in the operation of the Plan ("Disinterested Trustees"). Any amendment to the Plan must be approved by the board and any material amendment must be approved by the Disinterested Trustees. 18 FINANCIAL STATEMENTS MITCHELL HUTCHINS INSTITUTIONAL SERIES MITCHELL HUTCHINS LIR SELECT MONEY FUND Statement of Assets and Liabilities July 22, 1998
Assets: - ------ Cash....................................................... $100,000 Total assets............................................. 100,000 Liabilities Total liabilities........................................ 0 Net Assets (beneficial interest, $0.001 par value, issued and outstanding)............................. $100,000 INSTITUTIONAL SHARES Net Assets.................................................... $100,000 Shares outstanding............................................ 100,000 Net asset value, offering price and redemption value per share $1.00
ORGANIZATION - ------------ Mitchell Hutchins LIR Select Money Fund ("Fund") is a diversified series of Mitchell Hutchins Institutional Series ("Trust"), an open-end management investment company organized as a Delaware business trust on April 29, 1998. The Fund has had no operations other than the sale to Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), its investment adviser, a wholly owned subsidiary of PaineWebber Incorporated ("PaineWebber"), of 100,000 shares of beneficial interest of the Institutional class for the amount of $100,000 on July 22, 1998. The Fund currently offers two classes of shares Institutional shares and Financial Intermediary shares. Each class is sold without any initial sales charges, and without any contingent deferred sales charge. Each class represents assets of the Fund, and the classes are identical except for differences in ongoing service fees. The trustees of the Trust have authority to issue an unlimited number of shares of beneficial interest, par value $0.001 per share. MANAGEMENT AGREEMENT Mitchell Hutchins acts as the investment adviser and administrator to the Fund pursuant to a contract ("Advisory Contract") with the Trust dated ________, 1998. Under the Advisory Contract, the Fund pays Mitchell Hutchins a fee, computed daily and paid monthly, at an annual rate of 0.18% of average daily net assets. Under the Advisory Contract, Mitchell Hutchins has agreed to pay all Fund expenses other than investment and advisory fees, the fees payable pursuant to the shareholder service plan adopted by the Trust with respect to the Fund's Financial Intermediary shares, interest, taxes and the cost (including brokerage commissions and other transaction costs, if any) of securities purchased or sold by the Fund and any losses incurred in connection therewith and extraordinary 19 expenses (such as costs of litigation to which the Trust or Fund is a party and of indemnifying officers and trustees of the Trust). Mitchell Hutchins has also agreed to pay all costs in connection with the organization and initial registration of the Fund under the Advisory Contract. Although Mitchell Hutchins is not obligated to pay the fees and expenses (including counsel fees) of the trustees of the Trust who are not "interested persons" of the Fund or Mitchell Hutchins, as that term is defined in the 1940 Act, the Advisory Contract requires that Mitchell Hutchins reduce its management fee by an amount equal to those fees and expenses. SHAREHOLDER SERVICE PLAN AND AGREEMENT Under a Shareholder Service Plan and Agreement with respect to its Financial Intermediary shares, the Fund pays PaineWebber monthly fees at the annual rate of 0.25% of the average daily net assets of the Financial Intermediary shares held by financial intermediaries on behalf of their customers. Under Service Agreements with those financial intermediaries, PaineWebber pays an identical fee to the financial intermediaries for certain support services that they provide for the beneficial owners of the Financial Intermediary shares. 20 REPORT OF INDEPENDENT AUDITORS Shareholder and Board of Trustees Mitchell Hutchins LIR Select Money Fund We have audited the accompanying statement of assets and liabilities of the Mitchell Hutchins LIR Select Money Fund as of July 22, 1998. This statement of assets and liabilities is the responsibility of the Fund's management. Our responsibility is to express an opinion on this statement of assets and liabilities based on our audit. We conducted our audit in accordance with generally acceptable auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether this statement of assets and liabilities is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of assets and liabilities. An audit also includes assessing the accounting principals used and significant estimates made by management, as well as evaluating the overall statement of assets and liabilities presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the statement of assets and liabilities referred to above presents fairly, in all material respects, the financial position of Mitchell Hutchins LIR Select Money Fund at July 22, 1998, in conformity with generally accepted accounting principals. /s/ Ernst & Young LLP ERNST & YOUNG LLP New York, New York July 24, 1998 21
Mitchell Hutchins LIR SELECT MONEY TABLE OF CONTENTS FUND Investment Policies and Restrictions.................... 1 Trustee and Officers; Principal Holders of Securities... 6 Investment Advisory, Administration and Advisory Arrangements................................... 12 Portfolio Transactions.................................. 14 Additional Information Regarding Redemptions............ 14 Valuation of Shares..................................... 15 Taxes................................................... 15 Calculation of Yield.................................... 16 Other Information....................................... 17 Financial Statements.................................... 19
Investors should rely only on the information contained or referred to in the Prospectus and this Statement of Additional Information. The Fund and its distributor have not authorized anyone to provide investors with information that is different. The Prospectus and this Statement of Additional Information are not an offer to sell shares of the Fund in any jurisdiction where the Fund or its distributor may not lawfully sell those shares. PAINEWEBBER (C) 1998 PaineWebber Incorporated 22 PART C. OTHER INFORMATION --------------------------
Item 23. Exhibits -------- (1) Trust Instrument (filed herewith) (2) By-Laws (filed herewith (3) Instruments defining the rights of holders of Registrant's shares of beneficial interest 1/ - (4) Form of Investment Advisory and Administration Contract (filed herewith) (5) Form of Distribution Contract (filed herewith) (6) Bonus, profit sharing or pension plans - none (7) Form of Custodian Agreement (filed herewith) (8) (a) Form of Transfer Agency Agreement (filed herewith) (b) Form of Shareholder Service Plan (filed herewith) (c) Form of Shareholder Service Agreement (filed herewith) (9) Opinion of Counsel (filed herewith) (10) Other opinions, appraisals, rulings and consents: Auditors consent (filed herewith) (11) Omitted Financial Statements - none (12) Letter of investment intent (filed herewith) (13) Plan Pursuant to Rule 12b-1 - none (14) and (27) Financial Data Schedule (not applicable) (15) Plan Pursuant to Rule 18f-3 (filed herewith)
- ---------------------- 1/ Incorporated by reference from Articles IV, VI and X of Registrant's - - Trust Instrument and from Articles VI and IX of Registrant's By- Laws. Item 24. Persons Controlled by or under Common Control with Registrant ------------------------------------------------------------- As of July 27, 1998, PaineWebber Incorporated ("PaineWebber") was the sole shareholder and thus a controlling person of the Registrant. PaineWebber and Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") (the Registrant's investment adviser and administrator) are wholly owned direct or indirect subsidiaries of Paine Webber Group, Inc. PaineWebber, Mitchell Hutchins and Paine Webber Group, Inc. are Delaware corporations. Item 25. Indemnification --------------- Section 2 of Article IX of the Trust Instrument, "Indemnification," provides that the appropriate series of the Registrant will indemnify the trustees and officers of the Registrant to the fullest extent permitted by law against claims and expenses asserted against or incurred by them by virtue of being or having been a trustee or officer; provided that no such person shall be indemnified where there has been an adjudication or other determination, as described in C-1 Article IX, that such person is liable to the Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office or did not act in good faith in the reasonable belief that his action was in the best interest of the Registrant. Section 2 of Article IX also provides that the Registrant may maintain insurance policies covering such rights of indemnification. Additionally, "Limitation of Liability" in Section 1 of Article IX of the Trust Instrument provides that the trustees or officers of the Registrant shall not be personally liable to any person extending credit to, contracting with or having a claim against the Registrant or a particular series; and that, provided they have exercised reasonable care and have acted under the reasonable belief that their actions are in the best interest of the Registrant, the trustees and officers shall not be liable for neglect or wrongdoing by them or any officer, agent, employee, investment adviser or independent contractor of the Registrant. Section 9 of the Investment Advisory and Administration Contract with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") provides that Mitchell Hutchins shall not be liable for any error of judgment or mistake of law or for any loss suffered by any series of the Registrant in connection with the matters to which the Contract relates, except for a loss resulting from the willful misfeasance, bad faith, or gross negligence of Mitchell Hutchins in the performance of its duties or from its reckless disregard of its obligations and duties under the Contract. Section 10 of the Contract provides that the Trustees shall not be liable for any obligations of the Trust or any series under the Contract and that Mitchell Hutchins shall look only to the assets and property of the Registrant in settlement of such right or claim and not to the assets and property of the Trustees. Section 9 of the Distribution Contract provides that the Trust will indemnify PaineWebber and its officers, directors and controlling persons against all liabilities arising from any alleged untrue statement of material fact in the Registration Statement or from any alleged omission to state in the Registration Statement a material fact required to be stated in it or necessary to make the statements in it, in light of the circumstances under which they were made, not misleading, except insofar as liability arises from untrue statements or omissions made in reliance upon and in conformity with information furnished by PaineWebber to the Trust for use in the Registration Statement; and provided that this indemnity agreement shall not protect any such persons against liabilities arising by reason of their bad faith, gross negligence or willful misfeasance; and shall not inure to the benefit of any such persons unless a court of competent jurisdiction or controlling precedent determines that such result is not against public policy as expressed in the Securities Act of 1933. Section 9 of the Distribution Contract also provides that PaineWebber agrees to indemnify, defend and hold the Trust, its officers and Trustees free and harmless of any claims arising out of any alleged untrue statement or any alleged omission of material fact contained in information furnished by PaineWebber for use in the Registration Statement or arising out of an agreement between PaineWebber and any retail dealer, or arising out of supplementary literature or advertising used by PaineWebber in connection with the Contract. Section 10 of the Distribution Contract contains provisions similar to Section 10 of the Investment Advisory and Administration Contract, with respect to Mitchell Hutchins and PaineWebber, as appropriate. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be provided to trustees, officers and controlling persons of the Registrant, pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in connection with the successful defense of any action, suit or proceeding or payment pursuant to any insurance policy) is asserted against the Registrant by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 26. Business and Other Connections of Investment Adviser ---------------------------------------------------- Mitchell Hutchins, a Delaware corporation, is a registered investment adviser and is a wholly owned subsidiary of PaineWebber which is, in turn, a wholly owned subsidiary of Paine Webber Group Inc. Mitchell C-2 Hutchins is primarily engaged in the investment advisory business. Information as to the officers and directors of Mitchell Hutchins is included in its Form ADV, as filed with the Securities and Exchange Commission (registration number 801-13219), and is incorporated herein by reference. Item 27. Principal Underwriters ---------------------- a) Mitchell Hutchins serves as principal underwriter and/or investment adviser for the following investment companies: ALL AMERICAN TERM TRUST INC. GLOBAL HIGH INCOME DOLLAR FUND INC. GLOBAL SMALL CAP FUND INC. INSURED MUNICIPAL INCOME FUND INC. INVESTMENT GRADE MUNICPAL INCOME FUND INC. MANAGED HIGH YIELD FUND INC. MANAGED HIGH YIELD PLUS FUND INC. MITCHELL HUTCHINS PORTFOLIOS MITCHELL HUTCHINS SERIES TRUST PAINEWEBBER AMERICA FUND PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC. PAINEWEBBER INDEX TRUST PAINEWEBBER INVESTMENT SERIES PAINEWEBBER INVESTMENT TRUST PAINEWEBBER INVESTMENT TRUST II PAINEWEBBER MANAGED ASSETS TRUST PAINEWEBBER MANAGED INVESTMENTS TRUST PAINEWEBBER MASTER SERIES, INC. PAINEWEBBER MUNICIPAL SERIES PAINEWEBBER MUTUAL FUND TRUST PAINEWEBBER OLYMPUS FUND PAINEWEBBER SECURITIES TRUST STRATEGIC GLOBAL INCOME FUND, INC. 2002 TARGET TERM TRUST INC. b) PaineWebber is the Registrant's principal underwriter. The directors and officers of PaineWebber, their principal business addresses, and their positions and offices with PaineWebber are identified in its Form ADV, as filed with the Securities and Exchange Commission (registration number 801-7163) 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 Trust. Unless otherwise indicated, the principal business address of each person named is 1285 Avenue of the Americas, New York, NY 10019.
Positions and Offices Name With Registrant Positions and Offices With Underwriter - ---- --------------- -------------------------------------- Margo N. Alexander President and Trustee Executive Vice President and Director of PaineWebber Mary C. Farrell Trustee Managing Director, Senior Investment Strategist and Member of the Investment Policy Committee of PaineWebber
c) None C-3 Item 28. Location of Accounts and Records -------------------------------- The books and other documents required by paragraphs (b)(4), (c) and (d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the physical possession of Registrant's investment adviser, Mitchell Hutchins, 1285 Avenue of the Americas, New York, New York 10019. All other accounts, books and documents required by Rule 31a-1 are maintained in the physical possession of Registrant's transfer agent and custodian. Item 29. Management Services ------------------- Not applicable. Item 30. Undertakings ------------ None. C-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Pre-Effective Amendment No. 1 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York, on the 28th day of July, 1998. MITCHELL HUTCHINS INSTITUTIONAL 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, this Post- Effective Amendment has been signed below by the following persons in the capacities and on the dates indicated:
Signature Title Date - --------- ----- ---- /s/ Margo N. Alexander President and Trustee July 28, 1998 - -------------------------------------------- Margo N. Alexander * (Chief Executive Officer) /s/ E. Garrett Bewkes, Jr. Trustee and Chairman July 28, 1998 - -------------------------------------------- E. Garrett Bewkes, Jr. * of the Board of Trustees /s/ Richard Q. Armstrong Trustee July 28, 1998 - -------------------------------------------- Richard Q. Armstrong * /s/ Richard R. Burt Trustee July 28, 1998 - -------------------------------------------- Richard R. Burt * /s/ Mary C. Farrell Trustee July 28, 1998 - -------------------------------------------- Mary C. Farrell * /s/ Meyer Feldberg Trustee July 28, 1998 - -------------------------------------------- Meyer Feldberg * /s/ George W. Gowen Trustee July 28, 1998 - -------------------------------------------- George W. Gowen * /s/ Frederic V. Malek Trustee July 28, 1998 - -------------------------------------------- Frederic V. Malek * /s/ Carl W. Schafer Trustee July 28, 1998 - -------------------------------------------- Carl W. Schafer * /s/ Paul H. Schubert Vice President and Treasurer (Chief July 28, 1998 - -------------------------------------------- Paul H. Schubert Financial and Accounting Officer)
SIGNATURES (CONTINUED) * Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated May 13, 1998 and incorporated by reference from the Initial Registration Statement of Mitchell Hutchins Institutional Series, SEC File 333-52965, filed May 19, 1998. MITCHELL HUTCHINS INSTITUTIONAL SERIES EXHIBIT INDEX -------------
Exhibit Number - ------ (1) Trust Instrument (filed herewith) (2) By-Laws (filed herewith) (3) Instruments defining the rights of holders of Registrant's shares of beneficial interest 1/ - (4) Form of Investment Advisory and Administration Contract (filed herewith) (5) Form of Distribution Contract (filed herewith) (6) Bonus, profit sharing or pension plans - none (7) Form of Custodian Agreement (filed herewith) (8) (a) Form of Transfer Agency Agreement (filed herewith) (b) Form of Shareholder Service Plan (filed herewith) (c) Form of Shareholder Service Agreement (filed herewith) (9) Opinion of Counsel (filed herewith) (10) Other opinions, appraisals, rulings and consents: Auditors consent (filed herewith) (11) Omitted Financial Statements - none (12) Letter of investment intent (filed herewith) (13) Plan Pursuant to Rule 12b-1 - none (14) and (27) Financial Data Schedule (not applicable) (15) Plan Pursuant to Rule 18f-3 (filed herewith)
- ----------------- 1/ Incorporated by reference from Articles IV, VI and X of Registrant's Trust - - Instrument and from Articles VI and IX of Registrant's By-Laws. EX-1 2 EXHIBIT 1 -- TRUST AGREEMENT Exhibit No.1 MITCHELL HUTCHINS INSTITUTIONAL SERIES TRUST INSTRUMENT April 29, 1998 TABLE OF CONTENTS PAGE ---- ARTICLE I - --------- DEFINITIONS....................................................................1 - ----------- ARTICLE II TRUSTEES.......................................................................2 - -------- Section 1. Management of the Trust......................................2 ----------------------- Section 2. Initial Trustees; Number and Election of Trustees............2 ------------------------------------------------- Section 3. Term of Office...............................................2 -------------- Section 4. Vacancies; Appointment of Trustees...........................3 ---------------------------------- Section 5. Temporary Vacancy or Absence.................................3 ---------------------------- Section 6. Chairman.....................................................3 -------- Section 7. Action by the Trustees.......................................3 ---------------------- Section 8. Ownership of Trust Property..................................4 --------------------------- Section 9. Effect of Trustees Not Serving...............................4 ------------------------------ Section 10. Trustees, etc. as Shareholders...............................4 ------------------------------ ARTICLE III - ----------- POWERS OF THE TRUSTEES.........................................................4 - ---------------------- Section 1. Powers.......................................................4 ------ Section 2. Certain Transactions.........................................7 -------------------- ARTICLE IV - ---------- SERIES; CLASSES; SHARES........................................................8 - ----------------------- Section 1. Establishment of Series or Class.............................8 -------------------------------- Section 2. Shares.......................................................8 ------ Section 3. Investment in the Trust......................................9 ----------------------- Section 4. Assets and Liabilities of Series.............................9 -------------------------------- Section 5. Ownership and Transfer of Shares............................10 -------------------------------- Section 6. Status of Shares; Limitation of Shareholder Liability.......10 ----------------------------------------------------- ARTICLE V - --------- DISTRIBUTIONS AND REDEMPTIONS.................................................10 - ----------------------------- Section 1. Distributions...............................................10 ------------- Section 2. Redemptions.................................................11 ----------- Section 3. Determination of Net Asset Value............................11 -------------------------------- i Section 4. Suspension of Right of Redemption...........................12 --------------------------------- Section 5. Redemptions Necessary for Qualification as Regulated ---------------------------------------------------- Investment Company..........................................12 ------------------ ARTICLE VI - ---------- SHAREHOLDERS' VOTING POWERS AND MEETINGS......................................12 - ---------------------------------------- Section 1. Voting Power................................................12 ------------ Section 2. Meetings of Shareholders....................................13 ------------------------ Section 3. Quorum; Required Vote.......................................13 --------------------- ARTICLE VII - ----------- CONTRACTS WITH SERVICE PROVIDERS..............................................14 - -------------------------------- Section 1. Investment Adviser..........................................14 ------------------ Section 2. Principal Underwriter.......................................14 --------------------- Section 3. Transfer Agency, Shareholder Services, and Administration --------------------------------------------------------- Agreements..................................................14 ---------- Section 4. Custodian...................................................14 --------- Section 5. Parties to Contracts with Service Providers.................14 ------------------------------------------- Section 6. Requirements of the 1940 Act................................15 ---------------------------- ARTICLE VIII - ------------ EXPENSES OF THE TRUST AND SERIES..............................................15 - -------------------------------- ARTICLE IX - ---------- LIMITATION OF LIABILITY AND INDEMNIFICATION...................................16 - ------------------------------------------- Section 1. Limitation of Liability.....................................16 ----------------------- Section 2. Indemnification.............................................16 --------------- Section 3. Indemnification of Shareholder..............................18 ------------------------------ ARTICLE X - --------- MISCELLANEOUS.................................................................18 - ------------- Section 1. Trust Not a Partnership.....................................18 ----------------------- Section 2. Trustee Action; Expert Advice; No Bond or Surety............18 ------------------------------------------------ Section 3. Record Dates................................................18 ------------ Section 4. Termination of the Trust....................................19 ------------------------ Section 5. Reorganization..............................................20 -------------- Section 6. Trust Instrument............................................20 ---------------- Section 7. Applicable Law..............................................20 -------------- Section 8. Amendments..................................................21 ---------- Section 9. Fiscal Year.................................................21 ----------- Section 10. Severability................................................21 ------------ ii MITCHELL HUTCHINS INSTITUTIONAL SERIES TRUST INSTRUMENT This TRUST INSTRUMENT is made on April 29, 1998, by the Trustees, to establish a business trust for the investment and reinvestment of funds contributed to the Trust by investors. The Trustees declare that all money and property contributed to the Trust shall be held and managed in trust pursuant to this Trust Instrument. The name of the Trust created by this Trust Instrument is Mitchell Hutchins Institutional Series. ARTICLE I --------- DEFINITIONS ----------- Unless otherwise provided or required by the context: (a) "By-laws" means the By-laws of the Trust adopted by the Trustees, as amended from time to time; (b) "Class" means a class of Shares in a Series established pursuant to Article IV; (c) "Commission," "Interested Person," and "Principal Underwriter" have the meanings provided in the 1940 Act; (d) "Covered Person" means a person so defined in Article IX, Section 2; (e) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code entitled "Treatment of Delaware Business Trusts," as amended from time to time; (f) "Majority Shareholder Vote" means "the vote of a majority of the outstanding voting securities" as defined in the 1940 Act; (g) "Net Asset Value" means the net asset value of each Series of the Trust, determined as provided in Article V, Section 3; (h) "Registered Investment Company" means a company registered as a management investment company under the 1940 Act. (i) "Outstanding Shares" means Shares shown on the books of the Trust or its transfer agent as then issued and outstanding, but does not include Shares which have been repurchased or redeemed by the Trust; (j) "Series" means a series of Shares established pursuant to Article IV; (k) "Shareholder" means a record owner of Outstanding Shares; (l) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest of each Series or Class is divided from time to time (including whole Shares and fractions of Shares); (m) "Trust" means Mitchell Hutchins Institutional Series established hereby, and reference to the Trust, when applicable to one or more Series, refers to that Series; (n) "Trustees" means the persons who have signed this Trust Instrument, so long as they shall continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly qualified and serving as Trustees in accordance with Article II, in all cases in their capacities as Trustees hereunder; (o) "Trust Property" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the Trust or any Series or the Trustees on behalf of the Trust or any Series; and (p) The "1940 Act" means the Investment Company Act of 1940, as amended from time to time. ARTICLE II TRUSTEES -------- Section 1. Management of the Trust. The business and affairs of the ----------------------- Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. No Shareholder shall have any right to conduct any Trust business solely by reason of being a Shareholder. The Trustees may execute all instruments and take all action they deem necessary or desirable to promote the interests of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Section 2. Initial Trustees; Number and Election of Trustees. The ------------------------------------------------- initial Trustees shall be the persons initially signing this Trust Instrument. The number of Trustees (other than the initial Trustees) shall be fixed from time to time by a majority of the Trustees; provided, that there shall be at least two (2) Trustees. The Shareholders shall elect the Trustees (other than the initial Trustees) on such dates as the Trustees may fix from time to time. Section 3. Term of Office. Each Trustee shall hold office for life or -------------- until his or her successor is elected or the Trust terminates; except that (a) any Trustee may resign by delivering to the other Trustees or to any Trust officer a written resignation effective upon such delivery or a later date specified therein; (b) any Trustee may be removed with or without cause at any time by a written instrument signed by at least two-thirds of the other Trustees, specifying the effective date of removal; (c) any Trustee who requests to be retired, or who has become physically or mentally incapacitated or is otherwise unable to serve, may be retired by a written instrument signed by a majority of the other Trustees, specifying the effective date of retirement; and (d) any Trustee may be removed at any meeting of the Shareholders by a vote of at least two-thirds of the Outstanding Shares. 2 Section 4. Vacancies; Appointment of Trustees. Whenever a vacancy shall ---------------------------------- exist in the Board of Trustees, regardless of the reason for such vacancy, the remaining Trustees shall appoint any person as they determine in their sole discretion to fill that vacancy, consistent with the limitations under the 1940 Act. Such appointment shall be made by a written instrument signed by a majority of the Trustees or by a resolution of the Trustees, duly adopted and recorded in the records of the Trust, specifying the effective date of the appointment. The Trustees may appoint a new Trustee as provided above in anticipation of a vacancy expected to occur because of the retirement, resignation, or removal of a Trustee, or an increase in number of Trustees, provided that such appointment shall become effective only at or after the expected vacancy occurs. As soon as any such Trustee has accepted his or her appointment in writing, the trust estate shall vest in the new Trustee, together with the continuing Trustees, without any further act or conveyance, and he or she shall be deemed a Trustee hereunder. Section 5. Temporary Vacancy or Absence. Whenever a vacancy in the ---------------------------- Board of Trustees shall occur, until such vacancy is filled, or while any Trustee is absent from his or her domicile (unless that Trustee has made arrangements to be informed about, and to participate in, the affairs of the Trust during such absence), or is physically or mentally incapacitated, the remaining Trustees shall have all the powers hereunder and their certificate as to such vacancy, absence, or incapacity shall be conclusive. Any Trustee may, by power of attorney, delegate his or her powers as Trustee for a period not exceeding six (6) months at any one time to any other Trustee or Trustees to the extent permitted by the 1940 Act. Section 6. Chairman. The Trustees shall appoint one of their number to -------- be Chairman of the Board of Trustees. The Chairman shall preside at all meetings of the Trustees, shall be responsible for the execution of policies established by the Trustees and the administration of the Trust, and may be the chief executive, financial and/or accounting officer of the Trust. Section 7. Action by the Trustees. The Trustees shall act by majority ---------------------- vote at a meeting duly called (including a meeting by telephonic or other electronic means, unless the 1940 Act requires that a particular action be taken only at a meeting of Trustees in person) at which a quorum is present or by written consent of a majority of Trustees (or such greater number as may be required by applicable law) without a meeting. A majority of the Trustees shall constitute a quorum at any meeting. Meetings of the Trustees may be called orally or in writing by the Chairman of the Board of Trustees or by any two other Trustees. Notice of the time, date and place of all Trustees meetings shall be given to each Trustee by telephone, facsimile or other electronic mechanism sent to his or her home or business address at least twenty-four hours in advance of the meeting or by written notice mailed to his or her home or business address at least seventy-two hours in advance of the meeting. Notice need not be given to any Trustee who attends the meeting without objecting to the lack of notice or who signs a waiver of notice either before or after the meeting. Subject to the requirements of the 1940 Act, the Trustees by majority vote may delegate to any Trustee or Trustees authority to approve particular matters or take particular actions on behalf of the Trust. Any written consent or waiver may be provided and delivered to the Trust by facsimile or other similar electronic mechanism. 3 Section 8. Ownership of Trust Property. The Trust Property of the Trust --------------------------- and of each Series shall be held separate and apart from any assets now or hereafter held in any capacity other than as Trustee hereunder by the Trustees or any successor Trustees. All of the Trust Property and legal title thereto shall at all times be considered as vested in the Trustees on behalf of the Trust, except that the Trustees may cause legal title to any Trust Property to be held by or in the name of the Trust, or in the name of any person as nominee. No Shareholder shall be deemed to have a severable ownership in any individual asset of the Trust or of any Series or any right of partition or possession thereof, but each Shareholder shall have, as provided in Article IV, a proportionate undivided beneficial interest in the Trust or Series represented by Shares. Section 9. Effect of Trustees Not Serving. The death, resignation, ------------------------------ retirement, removal, incapacity, or inability or refusal to serve of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Trust Instrument. Section 10. Trustees, etc. as Shareholders. Subject to any restrictions ------------------------------ in the By-laws, any Trustee, officer, agent or independent contractor of the Trust may acquire, own and dispose of Shares to the same extent as any other Shareholder; the Trustees may issue and sell Shares to and buy Shares from any such person or any firm or company in which such person is interested, subject only to any general limitations herein. ARTICLE III ----------- POWERS OF THE TRUSTEES ---------------------- Section 1. Powers. The Trustees shall have exclusive and absolute ------ control over the Trust Property and over the business of the Trust to the same extent as if they were the sole owners of the Trust Property and business in their own right, but with such powers of delegation as may be permitted in this Trust Instrument. The Trustees in all instances shall act as principals, free of the control of the Shareholders. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. The Trustees shall not in any way be bound or limited by current or future laws or customs applicable to trust investments, but shall have full power and authority to make any investments which they, in their sole discretion, deem proper to accomplish the purposes of the Trust. The Trustees may exercise all of their powers without recourse to any court or other authority. Subject to any applicable limitation herein or in the By-laws, operating documents or resolutions of the Trust, the Trustees shall have power and authority, without limitation: (a) To operate as and carry on the business of a Registered Investment Company and to exercise all the powers necessary and proper to conduct such a business (b) To subscribe for, invest in, reinvest in, purchase, or otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute, or otherwise deal in or dispose of any form of property, including cash (U.S. currency), foreign currencies and related instruments, and securities (including common and preferred stocks, warrants, bonds, debentures, time notes, and all other evidences of indebtedness, negotiable or non-negotiable instruments, obligations, certificates of deposit or 4 indebtedness, commercial paper, repurchase agreements, reverse repurchase agreements, convertible securities, forward contracts, options, and futures contracts) issued, guaranteed, or sponsored by any state, territory, or possession of the United States or the District of Columbia or their political subdivisions, agencies, or instrumentalities, or by the U.S. government, any foreign government, or any agency, instrumentality, or political subdivision thereof, or by any international instrumentality, or by any bank, savings institution, corporation, or other business entity organized under the laws of the United States (including a Registered Investment Company or any series thereof, subject to the provisions of the 1940 Act) or under foreign laws, without regard to whether any such securities mature before or after the possible termination of the Trust; 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; and to hold cash or other property uninvested, without in any event being bound or limited by any current or future law or custom concerning investments by trustees; (c) To adopt By-laws not inconsistent with this Trust Instrument providing for the conduct of the business of the Trust and to amend and repeal them to the extent such right is not reserved to the Shareholders; (d) To elect and remove such officers and appoint and terminate such agents as they deem appropriate; (e) To employ as custodian of any assets of the Trust, subject to any provisions herein or in the By-laws, one or more banks, trust companies or companies that are members of a national securities exchange, or other entities permitted by the Commission to serve as such; (f) To retain one or more transfer agents and Shareholder servicing agents, or both; (g) To provide for the distribution of Shares either through a Principal Underwriter as provided herein or by the Trust itself, or both, or pursuant to a distribution plan of any kind; (h) To set record dates in the manner provided for herein or in the By- laws; (i) To delegate such authority as they consider desirable to any officers of the Trust and to any agent, independent contractor, manager, investment adviser, custodian or underwriter; (j) To sell, exchange or otherwise dispose of any or all of the assets of the Trust, subject to Article X, Section 4; (k) To vote or give assent, or exercise any rights of ownership, with respect to other securities or property; and to execute and deliver powers of attorney delegating such power to other persons; (l) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities or other property; (m) To hold any security or other property (i) in a form not indicating any trust, whether in bearer, book entry, unregistered or other negotiable form, or (ii) either in the Trust's or Trustees' 5 own name or in the name of a custodian or a nominee or nominees, subject to safeguards according to the usual practice of business trusts or investment companies; (n) To establish separate and distinct Series with separately defined investment objectives and policies and distinct investment purposes, and with separate Shares representing beneficial interests in such Series, and to establish separate Classes, all in accordance with the provisions of Article IV; (o) To incur and pay all expenses that in the Trustees' opinion are necessary or incidental to carry out any of the purposes of this Trust Instrument; to pay reasonable compensation to themselves as Trustees from the Trust Property or the assets belonging to any appropriate Series or Class; to pay themselves such compensation for special services, including legal and brokerage services, and such reimbursement for expenses reasonably incurred by themselves on behalf of the Trust or any Series or Class, as they in good faith may deem reasonable; and to fix the compensation of all officers and employees of the Trust; (p) To the full extent permitted by Section 3804 of the Delaware Act, to allocate assets, liabilities and expenses of the Trust to a particular Series and liabilities and expenses to a particular Class or to apportion the same between or among two or more Series or Classes, provided that any liabilities or expenses incurred by a particular Series or Class shall be payable solely out of the assets belonging to that Series or Class as provided for in Article IV, Section 4; (q) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or concern whose securities are held by 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; (r) 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; (s) To make distributions of income and of capital gains to Shareholders in the manner hereinafter provided for; (t) To borrow money or otherwise obtain credit and to secure the same by mortgaging, pledging, or otherwise subjecting as security any assets of the Trust, including the lending of portfolio securities, and to endorse, guarantee, or undertake the performance of any obligation, contract, or engagement of any other person, firm, association, or corporation; (u) To establish, from time to time, a minimum total investment for Shareholders, and to require the redemption of the Shares of any Shareholders whose investment is less than such minimum; (v) To purchase, and pay for, out of Trust Property or the assets belonging to any appropriate Series, insurance policies insuring the Shareholders, Trustees, officers, employees, agents, and/or independent contractors of the Trust (including the investment adviser of any Series) against all claims arising by reason of holding any such position or by reason of any action taken or 6 omitted by any such person in such capacity, whether or not the Trust would have the power to indemnify such person against such claim; (w) To establish committees for such purposes, with such membership, and with such responsibilities as the Trustees may consider proper, including a committee consisting of fewer than all of the Trustees then in office, which may act for and bind the Trustees and the Trust with respect to the institution, prosecution, dismissal, settlement, review or investigation of any legal action, suit or proceeding, pending or threatened; (x) To interpret the investment policies, practices, or limitations of any Series; (y) To establish a registered office and have a registered agent in the State of Delaware; (z) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold, resell, reissue, dispose of and otherwise deal in Shares; to establish terms and conditions regarding the issuance, sale, repurchase, redemption, cancellation, retirement, acquisition, holding, resale, reissuance, disposition of or dealing in Shares; and, subject to Articles IV and V, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property of the Trust or of the particular Series with respect to which such Shares are issued; and (aa) To carry on any other business in connection with or incidental to any of the foregoing powers, to do everything necessary or desirable to accomplish any purpose or to further any of the foregoing powers, and to take every other action incidental to the foregoing business or purposes, objects or powers. (bb) To select such name for the Trust, or any Series or Class, as the Trustees deem proper in their discretion, without Shareholder approval, in which event the Trust may hold its property and conduct its activities under such other name The clauses above shall be construed as objects and powers, and the enumeration of specific powers shall not limit in any way the general powers of the Trustees. Any action by one or more of the Trustees in their capacity as such hereunder shall be deemed an action on behalf of the Trust or the applicable Series, and not an action in an individual capacity. No one dealing with the Trustees shall be under any obligation to make any inquiry concerning the authority of the Trustees, or to see to the application of any payments made or property transferred to the Trustees or upon their order. In construing this Trust Instrument, the presumption shall be in favor of a grant of power to the Trustees. Section 2. Certain Transactions. Except as prohibited by applicable -------------------- law, the Trustees may, on behalf of the Trust, buy any securities from or sell any securities to, or lend any assets of the Trust to, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal, or have any such dealings with any investment adviser, administrator, distributor or transfer agent for the Trust or with any Interested Person of such person. The Trust may employ any such person or entity in which such person is an Interested Person, as broker, legal counsel, registrar, investment adviser, administrator, distributor, transfer agent, dividend disbursing agent, custodian or in any other capacity upon customary terms. 7 ARTICLE IV ---------- SERIES; CLASSES; SHARES ----------------------- Section 1. Establishment of Series or Class. The Trust shall consist of -------------------------------- one or more Series. The Trustees hereby establish the Series listed in Schedule A attached hereto and made a part hereof. Each additional Series shall be established by the adoption of a resolution by the Trustees. The Trustees may designate the relative rights and preferences of the Shares of each Series. The Trustees may divide the Shares of any Series into Classes and hereby establish the Classes listed in Schedule A. In such case each Class of a Series shall represent a proportional beneficial interest in the assets of that Series and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that expenses allocated to a Class may be borne solely by such Class as determined by the Trustees and a Series or Class may have exclusive voting rights with respect to matters affecting only that Series or Class. The Trust shall maintain separate and distinct records for each Series and hold and account for the assets thereof separately from the other assets of the Trust or of any other Series. A Series may issue any number of Shares and need not issue Shares. Each Share of a Series shall represent an equal beneficial interest in the net assets belonging to that Series, except to the extent of expenses separately allocated to Classes thereof as permitted herein. Each holder of Shares of a Series shall be entitled to receive his or her pro rata share of all distributions made with respect to such Series, provided that, if Classes of a Series are outstanding, each holder of Shares of a Class shall be entitled to receive his or her pro rata share of all distributions made with respect to such Class of the Series. Upon redemption of his or her Shares, such Shareholder shall be paid solely out of the assets and property of such Series. Section 2. Shares. The beneficial interest in the Trust shall be ------ divided into Shares of one or more separate and distinct Series or Classes established by the Trustees. The number of Shares of the Trust and of each Series and Class is unlimited and each Share shall have a par value of $0.001 per Share. All Shares issued hereunder shall be fully paid and nonassessable. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust. The Trustees shall have full power and authority, in their sole discretion and without obtaining Shareholder approval: to issue original or additional Shares and fractional Shares at such times and on such terms and conditions as they deem appropriate; to establish and to change in any manner Shares of any Series or Classes with such preferences, terms of conversion, voting powers, rights and privileges as the Trustees may determine (but the Trustees may not change Outstanding Shares in a manner materially adverse to the Shareholders of such Shares); to divide or combine the Shares of any Series or Classes into a greater or lesser number; to classify or reclassify any unissued Shares of any Series or Classes into one or more Series or Classes of Shares; to abolish any one or more Series or Classes of Shares; to issue Shares to acquire other assets (including assets subject to, and in connection with, the assumption of liabilities) and businesses; and to take such other action with respect to the Shares as the Trustees may deem desirable. Section 3. Investment in the Trust. The Trustees shall accept ----------------------- investments in any Series from such persons and on such terms as they may from time to time authorize. At the Trustees' discretion, such investments, subject to applicable law, may be in the form of cash or securities in which that Series is authorized to invest, valued as provided in Article V, Section 3. Investments in a Series shall be credited to each Shareholder's account in the form of full and fractional Shares 8 at the Net Asset Value per Share next determined after the investment is received or accepted in good form as may be determined by the Trustees; provided, however, that the Trustees may, in their sole discretion, (a) impose a sales charge upon investments in any Series or Class, or (b) determine the Net Asset Value per Share of the initial capital contribution. The Trustees shall have the right to refuse to accept investments in any Series at any time without any cause or reason therefor whatsoever. Section 4. Assets and Liabilities of Series. 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 be held and accounted for separately from the other assets of the Trust and every other Series and are referred to as "assets belonging to" that Series. The assets belonging to a Series shall belong only to that Series for all purposes, and to no other Series, subject only to the rights of creditors of that Series. Any assets, income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular Series shall be allocated by the Trustees between and among one or more Series as the Trustees deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes, and such assets, earnings, income, profits or funds, or payments and proceeds thereof shall be referred to as assets belonging to that Series. The assets belonging to a Series shall be so recorded upon the books of the Trust, and shall be held by the Trustees in trust for the benefit of the Shareholders of that Series. The assets belonging to a Series shall be charged with the liabilities of that Series and all expenses, costs, charges and reserves attributable to that Series, except that liabilities and expenses allocated solely to a particular Class shall be borne by that Class. Any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular Series or Class shall be allocated and charged by the Trustees between or among any one or more of the Series or Classes in such manner as the Trustees deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series or Classes for all purposes. Without limiting the foregoing, but subject to the right of the Trustees to allocate general liabilities, expenses, costs, charges or reserves as herein provided, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series shall be enforceable against the assets of such Series only, and not against the assets of the Trust generally or of any other Series. Notice of this contractual limitation on liabilities among Series may, in the Trustees' discretion, be set forth in the certificate of trust of the Trust (whether originally or by amendment) as filed or to be filed in the Office of the Secretary of State of the State of Delaware pursuant to the Delaware Act, and upon giving of such notice in the certificate of trust, the statutory provisions of Section 3804 of the Delaware Act relating to limitations on liabilities among Series (and the statutory effect under Section 3804 of setting forth such notice in the certificate of trust) shall become applicable to the Trust and each Series. Any person extending credit to, contracting with or having any claim against any Series may look only to the assets of that Series to satisfy or enforce any debt, with respect to that Series. No Shareholder or former 9 Shareholder of any Series shall have a claim on or any right to any assets allocated or belonging to any other Series. Section 5. Ownership and Transfer of Shares. The Trust shall maintain a -------------------------------- register containing the names and addresses of the Shareholders of each Series and Class thereof, the number of Shares of each Series and Class held by such Shareholders, and a record of all Share transfers. The register shall be conclusive as to the identity of Shareholders of record and the number of Shares held by them from time to time. The Trustees shall not be required to, but may authorize the issuance of certificates representing Shares and adopt rules governing their use. The Trustees may make rules governing the transfer of Shares, whether or not represented by certificates. Section 6. Status of Shares; Limitation of Shareholder Liability. ----------------------------------------------------- Shares shall be deemed to be personal property giving Shareholders only the rights provided in this Trust Instrument. Every Shareholder, by virtue of having acquired a Share, shall be held expressly to have assented to and agreed to be bound by the terms of this Trust Instrument and to have become a party hereto. No Shareholder shall be personally liable for the debts, liabilities, obligations and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or any Series. Neither the Trust nor the Trustees shall have any power to bind any Shareholder personally or to demand payment from any Shareholder for anything, other than as agreed by the Shareholder. Shareholders shall have the same limitation of personal liability as is extended to shareholders of a private corporation for profit incorporated in the State of Delaware. Every written obligation of the Trust or any Series may contain a statement to the effect that such obligation may only be enforced against the assets of the Trust or such Series; however, the omission of such statement shall not operate to bind or create personal liability for any Shareholder or Trustee. ARTICLE V --------- DISTRIBUTIONS AND REDEMPTIONS ----------------------------- Section 1. Distributions. The Trustees may declare and pay dividends ------------- and other distributions, including dividends on Shares of a particular Series and other distributions from the assets belonging to that Series. The amount and payment of dividends or distributions and their form, whether they are in cash, Shares or other Trust Property, shall be determined by the Trustees. Dividends and other distributions may be paid pursuant to a standing resolution adopted once or more often as the Trustees determine. All dividends and other distributions on Shares of a particular Series shall be distributed pro rata to the Shareholders of that Series in proportion to the number of Shares of that Series they held on the record date established for such payment, except that such dividends and distributions shall appropriately reflect expenses allocated to a particular Class of such Series. The Trustees may adopt and offer to Shareholders such dividend reinvestment plans, cash dividend payout plans or similar plans as the Trustees deem appropriate. Section 2. Redemptions . Each Shareholder of a Series shall have the ----------- right at such times as may be permitted by the Trustees to require the Series to redeem all or any part of his or her Shares at a redemption price per Share equal to the Net Asset Value per Share at such time as the Trustees shall have prescribed by resolution less such charges as are determined by the Trustees and 10 described in the Trust's Registration Statement for that Series under the Securities Act of 1933 or any prospectus or statement of additional information contained therein, as supplemented. In the absence of such resolution, the redemption price per Share shall be the Net Asset Value next determined after receipt by the Series of a request for redemption in proper form less such charges as are determined by the Trustees and described in the Trust's Registration Statement for that Series under the Securities Act of 1933 or any prospectus or statement of additional information contained therein, as supplemented. The Trustees may specify conditions, prices, and places of redemption, and may specify binding requirements for the proper form or forms of requests for redemption. Payment of the redemption price may be wholly or partly in securities or other assets at the value of such securities or assets used in such determination of Net Asset Value, or may be in cash. Upon redemption, Shares may be reissued from time to time. The Trustees may require Shareholders to redeem Shares for any reason under terms set by the Trustees, including the failure of a Shareholder to supply a personal identification number if required to do so, or to have the minimum investment required, or to pay when due for the purchase of Shares issued to him or her. To the extent permitted by law, the Trustees may retain the proceeds of any redemption of Shares required by them for payment of amounts due and owing by a Shareholder to the Trust or any Series or Class. Notwithstanding the foregoing, the Trustees may postpone payment of the redemption price and may suspend the right of the Shareholders to require any Series or Class to redeem Shares during any period of time when and to the extent permissible under the 1940 Act. Section 3. Determination of Net Asset Value. The Trustees shall cause -------------------------------- the Net Asset Value of Shares of each Series or Class to be determined from time to time in a manner consistent with applicable laws and regulations. The Trustees may delegate the power and duty to determine Net Asset Value per Share to one or more Trustees or officers of the Trust or to an investment manager, administrator or investment adviser, custodian, depository or other agent appointed for such purpose. The Net Asset Value of Shares shall be determined separately for each Series or Class at such times as may be prescribed by the Trustees or, in the absence of action by the Trustees, as of the close of regular trading on the New York Stock Exchange on each day for all or part of which such Exchange is open for unrestricted trading. Section 4. Suspension of Right of Redemption. If, as referred to in --------------------------------- Section 2 of this Article, the Trustees postpone payment of the redemption price and suspend the right of Shareholders to redeem their Shares, such suspension shall take effect at the time the Trustees shall specify, but not later than the close of business on the business day next following the declaration of suspension. Thereafter Shareholders shall have no right of redemption or payment until the Trustees declare the end of the suspension. If the right of redemption is suspended, a Shareholder may either withdraw his request for redemption or receive payment based on the Net Asset Value per Share next determined after the suspension terminates. Section 5. Redemptions Necessary for Qualification as Regulated Investment --------------------------------------------------------------- Company. If the Trustees shall determine that direct or indirect ownership of - ------- Shares of any Series has or may become concentrated in any person to an extent which would disqualify any Series as a regulated investment company under the Internal Revenue Code, then the Trustees shall have the power (but 11 not the obligation) by lot or other means they deem equitable to (a) call for redemption by any such person of a number, or principal amount, of Shares sufficient to maintain or bring the direct or indirect ownership of Shares into conformity with the requirements for such qualification and (b) refuse to transfer or issue Shares to any person whose acquisition of Shares in question would, in the Trustees' judgment, result in such disqualification. Any such redemption shall be effected at the redemption price and in the manner provided in this Article. Shareholders shall upon demand disclose to the Trustees in writing such information concerning direct and indirect ownership of Shares as the Trustees deem necessary to comply with the requirements of any taxing authority. ARTICLE VI ---------- SHAREHOLDERS' VOTING POWERS AND MEETINGS ---------------------------------------- Section 1. Voting Power. The Shareholders shall have power to vote only ------------ with respect to (a) the election of Trustees as provided in Section 2 of this Article; (b) the removal of Trustees as provided in Article II, Section 3(d); (c) any investment advisory or management contract as provided in Article VII, Section 1; (d) any termination of the Trust as provided in Article X, Section 4; (e) the amendment of this Trust Instrument to the extent and as provided in Article X, Section 8; and (f) such additional matters relating to the Trust as may be required or authorized by law, this Trust Instrument, or the By-laws or any registration of the Trust with the Commission or any State, or as the Trustees may consider desirable. On any matter submitted to a vote of the Shareholders, all Shares shall be voted by individual Series, except (a) when required by the 1940 Act, Shares shall be voted in the aggregate and not by individual Series, and (b) when the Trustees have determined that the matter affects only the interests of one or more Classes, then the Shareholders of only such Class or Classes shall be entitled to vote thereon. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote, and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy or in any manner provided for in the By-laws. The By-laws may provide that proxies may be given by any electronic or telecommunications device or in any other manner, but if a proposal by anyone other than the officers or Trustees is submitted to a vote of the Shareholders of any Series or Class, or if there is a proxy contest or proxy solicitation or proposal in opposition to any proposal by the officers or Trustees, Shares may be voted only in person or by written proxy. Until Shares of a Series or Class thereof are issued, as to that Series or Class, the Trustees may exercise all rights of Shareholders and may take any action required or permitted to be taken by Shareholders by law, this Trust Instrument or the By-laws. Section 2. Meetings of Shareholders. The first Shareholders' meeting of ------------------------ the Trust (but not the first shareholders' meeting of a Series that is not also the first shareholders' meeting of the Trust) shall be held to elect Trustees at such time and place as the Trustees designate. Annual meetings shall not be required. Special meetings of the Shareholders of any Series or Class may be called by the Trustees and shall be called by the Trustees upon the written request of Shareholders owning at least ten percent of the Outstanding Shares of such Series or Class, or at least ten percent of the Outstanding Shares of the Trust entitled to vote. Special meetings of Shareholders shall be held, notice of such meetings shall be delivered and waiver of notice shall occur according to the 12 provisions of the Trust's By-laws. Any action that may be taken at a meeting of Shareholders may be taken without a meeting according to the procedures set forth in the By-laws. Section 3. Quorum; Required Vote. One-third of the Outstanding Shares of --------------------- each Series or Class, or one-third of the Outstanding Shares of the Trust, entitled to vote in person or by proxy shall be a quorum for the transaction of business at a Shareholders' meeting with respect to such Series or Class, or with respect to the entire Trust, respectively. Any lesser number shall be sufficient for adjournments. Any adjourned session of a Shareholders' meeting may be reconvened within a reasonable time without further notice. Except when a Majority Shareholder Vote or other larger vote is required by law, this Trust Instrument or the By-laws, a majority of the Outstanding Shares voted, in person or by proxy, shall decide any matters to be voted upon with respect to the entire Trust and a plurality of such Outstanding Shares voted shall elect a Trustee; provided, that if this Trust Instrument or applicable law permits or requires that Shares be voted on any matter by an individual Series or Class, then a majority of the Outstanding Shares voted, in person or by proxy, of that Series or Class (or, if required by law, regulation, Commission order, or no- action letter, a Majority Shareholder Vote or other larger vote of that Series or Class) voted, in person or by proxy, on the matter shall decide that matter insofar as that Series or Class is concerned. Shareholders may act as to the Trust or any Series or Class by the written consent of a majority (or such greater amount as may be required by applicable law) of the Outstanding Shares of the Trust or of such Series or Class, as the case may be. ARTICLE VII ----------- CONTRACTS WITH SERVICE PROVIDERS -------------------------------- Section 1. Investment Adviser. The Trustees may enter into one or more ------------------ investment advisory contracts on behalf of the Trust or any Series, providing for investment advisory services, statistical and research facilities and services, and other facilities and services to be furnished to the Trust or Series on terms and conditions acceptable to the Trustees. Any such contract may provide for the investment adviser to effect purchases, sales or exchanges of portfolio securities or other Trust Property on behalf of the Trustees or may authorize any officer or agent of the Trust to effect such purchases, sales or exchanges pursuant to recommendations of the investment adviser. The Trustees may authorize the investment adviser to employ one or more sub-advisers or servicing agents. Section 2. Principal Underwriter. The Trustees may enter into contracts --------------------- on behalf of the Trust or any Series or Class, providing for the distribution and sale of Shares by the other party, either directly or as sales agent, on terms and conditions acceptable to the Trustees. The Trustees may adopt a plan or plans of distribution with respect to Shares of any Series or Class and enter into any related agreements, whereby the Series or Class finances directly or indirectly any activity that is primarily intended to result in sales of its Shares, subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1 thereunder, and other applicable rules and regulations. Section 3. Transfer Agency, Shareholder Services, and Administration --------------------------------------------------------- Agreements. The Trustees, on behalf of the Trust or any Series or Class, may - ---------- enter into transfer agency agreements, 13 Shareholder service agreements, and administration and management agreements with any party or parties on terms and conditions acceptable to the Trustees. Section 4. Custodian. The Trustees shall at all times place and maintain --------- the securities and similar investments of the Trust and of each Series with a custodian meeting the requirements of Section 17(f) of the 1940 Act and the rules thereunder or as otherwise permitted by the Commission or its staff. The Trustees, on behalf of the Trust or any Series, may enter into an agreement with a custodian on terms and conditions acceptable to the Trustees, providing for the custodian, among other things, (a) to hold the securities owned by the Trust or any Series and deliver the same upon written order or oral order confirmed in writing, (b) to receive and receipt for any moneys due to the Trust or any Series and deposit the same in its own banking department or elsewhere, (c) to disburse such funds upon orders or vouchers, and (d) to employ one or more sub- custodians. Section 5. Parties to Contracts with Service Providers. The Trustees ------------------------------------------- may enter into any contract referred to in this Article with any entity, although one or more of the Trustees or officers of the Trust may be an officer, director, trustee, partner, shareholder, or member of such entity, and no such contract shall be invalidated or rendered void or voidable because of such relationship. No person having such a relationship shall be disqualified from voting on or executing a contract in his or her capacity as Trustee and/or Shareholder, or be liable merely by reason of such relationship for any loss or expense to the Trust with respect to such a contract or accountable for any profit realized directly or indirectly therefrom; provided, that the contract was reasonable and fair and not inconsistent with this Trust Instrument or the By-laws. Section 6. Requirements of the 1940 Act. Any contract referred to in ---------------------------- Sections 1 and 2 of this Article shall be consistent with and subject to the applicable requirements of Section 15 of the 1940 Act and the rules and orders thereunder with respect to its continuance in effect, its termination, and the method of authorization and approval of such contract or renewal. No amendment to a contract referred to in Section 1 of this Article shall be effective unless assented to in a manner consistent with the requirements of Section 15 of the 1940 Act, and the rules and orders thereunder, if applicable. ARTICLE VIII ------------ EXPENSES OF THE TRUST AND SERIES -------------------------------- Subject to Article IV, Section 4, the Trust or a particular Series shall pay, or shall reimburse the Trustees from the Trust estate or the assets belonging to the particular Series, for their expenses and disbursements, including, but not limited to, interest charges, taxes, brokerage fees and commissions; expenses of issue, repurchase and redemption of Shares; insurance premiums; applicable fees, interest charges and expenses of third parties, including the Trust's investment advisers, managers, administrators, distributors, custodians, transfer agents and fund accountants; fees of pricing, interest, dividend, credit and other reporting services; costs of membership in trade associations; telecommunications expenses; funds transmission expenses; auditing, legal and compliance expenses; costs of forming the Trust and its Series and maintaining its existence; costs of preparing and printing the prospectuses of the Trust and each Series, statements of additional 14 information and reports for Shareholders and delivering them to Shareholders; expenses of meetings of Shareholders and proxy solicitations therefor (unless otherwise agreed to by another party); costs of maintaining books and accounts; costs of reproduction, stationery and supplies; fees and expenses of the Trustees; compensation of the Trust's officers and employees and costs of other personnel performing services for the Trust or any Series; costs of Trustee meetings; Commission registration fees and related expenses; state or foreign securities laws registration fees and related expenses; and for such non- recurring items as may arise, including litigation to which the Trust or a Series (or a Trustee or officer of the Trust acting as such) is a party, and for all losses and liabilities by them incurred in administering the Trust. The Trustees shall have a lien on the assets belonging to the appropriate Series, or in the case of an expense allocable to more than one Series, on the assets of each such Series, prior to any rights or interests of the Shareholders thereto, for the reimbursement to them of such expenses, disbursements, losses and liabilities. ARTICLE IX ---------- LIMITATION OF LIABILITY AND INDEMNIFICATION ------------------------------------------- Section 1. Limitation of Liability. All persons contracting with or ----------------------- having any claim against the Trust or a particular Series shall look only to the assets of the Trust or such Series for payment under such contract or claim; and neither the Trustees nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Any written instrument or obligation on behalf of the Trust or any Series may contain a statement to the foregoing effect, but the absence of such statement shall not operate to make any Trustee or officer of the Trust liable thereunder. Provided they have exercised reasonable care and have acted under the reasonable belief that their actions are in the best interest of the Trust, the Trustees and officers of the Trust shall not be responsible or liable for any act or omission or for neglect or wrongdoing of them or any officer, agent, employee, investment adviser or independent contractor of the Trust, but nothing contained in this Trust Instrument or in the Delaware Act shall protect any Trustee or officer of the Trust against liability to the Trust or to Shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Section 2. Indemnification. (a) Subject to the exceptions and limitations --------------- contained in subsections (b) and (c) below: (i) every person who is, or has been, a Trustee or an officer, employee, investment manager and administrator, director, officer or employee of an investment manager and administrator, investment adviser or agent of the Trust ("Covered Person") shall be indemnified by the Trust or the appropriate Series to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a Covered Person and against amounts paid or incurred by him or her in the settlement thereof; and 15 (ii) as used herein, the words "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal 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. (b) No indemnification shall be provided hereunder to a Covered Person who is, or has been: an investment manager and administrator; director, officer or employee of an investment manager and administrator; an investment adviser or an agent of the Trust and: (i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, or (B) not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Trust; or (ii) in the event of a settlement, unless there has been a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office; (A) by the court or other body approving the settlement; (B) by the vote of at least a majority of those Trustees who are neither Interested Persons of the Trust nor are parties to the proceeding based upon a review of readily available facts (as opposed to a full trial-type inquiry); or (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry). (c) No indemnification shall be provided hereunder to a Covered Person who is, or has been, a Trustee or an officer or employee of the Trust, and (i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, or (B) not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Trust; or (ii) in the event of a settlement, unless there has been a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office; (A) by the court or other body approving the settlement; (B) by the vote of at least a majority of those Trustees who are neither Interested Persons of the Trust nor are parties to the proceeding based upon a review of readily available facts (as opposed to a full trial-type inquiry); or (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry). 16 (d) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not be exclusive of or affect any other rights to which any Covered Person may now or hereafter be entitled, and shall inure to the benefit of the heirs, executors and administrators of a Covered Person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel (other than Trustees and officers) and other persons may be entitled to by contract or otherwise under law. (e) To the maximum extent permitted by applicable law, expenses in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding of the character described in subsection (a) of this Section may be paid by the Trust or applicable Series from time to time prior to final disposition thereof upon receipt of an undertaking by or on behalf of such Covered Person that such amount will be paid over by him or her to the Trust or applicable Series if it is ultimately determined that he or she is not entitled to indemnification under this Section; provided, however, that either (i) such Covered Person shall have provided appropriate security for such undertaking, (ii) the Trust is insured against losses arising out of any such advance payments or (iii) either a majority of the Trustees who are neither Interested Persons of the Trust nor parties to the proceeding, or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a full trial-type inquiry) that there is reason to believe that such Covered Person will not be disqualified from indemnification under this Section. (f) Any repeal or modification of this Article IX by the Shareholders of the Trust, or adoption or modification of any other provision of the Trust Instrument or By-laws inconsistent with this Article, shall be prospective only, to the extent that such repeal or modification would, if applied retrospectively, adversely affect any limitation on the liability of any Covered Person or indemnification available to any Covered Person with respect to any act or omission which occurred prior to such repeal, modification or adoption. Section 3. Indemnification of Shareholder. If any Shareholder or former ------------------------------ Shareholder of any Series shall be held personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators or other legal representatives or in the case of any entity, its general successor) shall be entitled out of the assets belonging to the applicable Series to be held harmless from and indemnified against all loss and expense arising from such liability. The Trust, on behalf of the affected Series, shall, upon request by such Shareholder, assume the defense of any claim made against such Shareholder for any act or obligation of the Series and satisfy any judgment thereon from the assets of the Series. ARTICLE X --------- MISCELLANEOUS ------------- Section 1. Trust Not a Partnership. This Trust Instrument creates a ----------------------- trust and not a partnership. No Trustee shall have any power to bind personally either the Trust's officers or any Shareholder. 17 Section 2. Trustee Action; Expert Advice; No Bond or Surety. The ------------------------------------------------ exercise by the Trustees of their powers and discretion hereunder in good faith and with reasonable care under the circumstances then prevailing shall be binding upon everyone interested. Subject to the provisions of Article IX, the Trustees shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Trust Instrument, and subject to the provisions of Article IX, shall not be liable for any act or omission in accordance with such advice or for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is obtained. Section 3. Record Dates. The Trustees may fix in advance a date up to ------------ ninety (90) days before the date of any Shareholders' meeting, or the date for the payment of any dividends or other distributions, or the date for the allotment of rights, or the date when any change or conversion or exchange of Shares shall go into effect as a record date for the determination of the Shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of such dividend or other distribution, or to receive any such allotment of rights, or to exercise such rights in respect of any such change, conversion or exchange of Shares. Record dates for adjourned meetings of Shareholders shall be set according to the Trust's By-laws. Section 4. Termination of the Trust. (a) This Trust shall have ------------------------ perpetual existence. Subject to a Majority Shareholder Vote of the Trust or of each Series to be affected, the Trustees may (i) sell and convey all or substantially all of the assets of the Trust or any affected Series to another Series or to another entity which is a Registered Investment Company, or a series thereof, for adequate consideration, which may include the assumption of all outstanding obligations, taxes and other liabilities, accrued or contingent, of the Trust or any affected Series, and which may include shares of or interests in such Series, entity, or series thereof; or (ii) at any time sell and convert into money all or substantially all of the assets of the Trust or any affected Series. Upon making reasonable provision for the payment of all known liabilities of the Trust or any affected Series in either (i) or (ii), by such assumption or otherwise, the Trustees shall distribute the remaining proceeds or assets (as the case may be) ratably among the Shareholders of the Trust or any affected Series then outstanding; however, the payment to any particular Class of such Series may be reduced by any fees, expenses or charges allocated to that Class. Nothing in this Trust Instrument shall preclude the Trustees from distributing such remaining proceeds or assets so that holders of the Shares of a particular Class of the Trust or any affected Series receive as their ratable distribution shares solely of an analogous class, as determined by the Trustees, of a Registered Investment Company or series thereof. (b) The Trustees may take any of the actions specified in subsection (a) (i) and (ii) above without obtaining a Majority Shareholder Vote of the Trust or any Series if a majority of the Trustees determines that the continuation of the Trust or Series is not in the best interests of the Trust, such Series, or their respective Shareholders as a result of factors or events adversely 18 affecting the ability of the Trust or such Series to conduct its business and operations in an economically viable manner. Such factors and events may include the inability of the Trust or a Series to maintain its assets at an appropriate size, changes in laws or regulations governing the Trust or the Series or affecting assets of the type in which the Trust or Series invests, or economic developments or trends having a significant adverse impact on the business or operations of the Trust or such Series. (c) Upon completion of the distribution of the remaining proceeds or assets pursuant to subsection (a), the Trust or affected Series shall terminate and the Trustees and the Trust shall be discharged of any and all further liabilities and duties hereunder with respect thereto and the right, title and interest of all parties therein shall be canceled and discharged. Upon termination of the Trust, following completion of winding up of its business, the Trustees shall cause a certificate of cancellation of the Trust's certificate of trust to be filed in accordance with the Delaware Act, which certificate of cancellation may be signed by any one Trustee. Section 5. Reorganization. Notwithstanding anything else herein, to -------------- change the Trust's form of organization the Trustees may, without Shareholder approval, (a) cause the Trust to merge or consolidate with or into one or more entities, if the surviving or resulting entity is the Trust or another open-end management investment company under the 1940 Act, or a series thereof, that will succeed to or assume the Trust's registration under the 1940 Act, or (b) cause the Trust to incorporate to the extent permitted by law. Any agreement of merger or consolidation or certificate of merger may be signed by a majority of Trustees and facsimile signatures conveyed by electronic or telecommunication means shall be valid. Pursuant to and in accordance with the provisions of Section 3815(f) of the Delaware Act, an agreement of merger or consolidation approved by the Trustees in accordance with this Section 5 may effect any amendment to the Trust Instrument or effect the adoption of a new trust instrument of the Trust if it is the surviving or resulting trust in the merger or consolidation. Section 6. Trust Instrument. The original or a copy of this Trust ---------------- Instrument and of each amendment hereto or Trust Instrument supplemental shall be kept at the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by a Trustee or an officer of the Trust as to the authenticity of the Trust Instrument or any such amendments or supplements and as to any matters in connection with the Trust. The masculine gender herein shall include the feminine and neuter genders. Headings herein are for convenience only and shall not affect the construction of this Trust Instrument. This Trust Instrument may be executed in any number of counterparts, each of which shall be deemed an original. Section 7. Applicable Law. This Trust Instrument and the Trust created -------------- hereunder are governed by and shall be construed and administered according to the Delaware Act and the applicable laws of the State of Delaware; provided, however, that there shall not be applicable to the Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware Code, or (b) any provisions of the laws (statutory or common) of the State of Delaware (other than the Delaware Act) pertaining to trusts which relate to or regulate (i) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, 19 (ii) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (iii) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (iv) fees or other sums payable to trustees, officers, agents or employees of a trust, (v) the allocation of receipts and expenditures to income or principal, (vi) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding of trust assets, or (vii) the establishment of fiduciary or other standards of responsibilities or limitations on the acts or powers of trustees, which are inconsistent with the limitations or liabilities or authorities and powers of the Trustees set forth or referenced in this Trust Instrument. The Trust shall be of the type commonly called a Delaware business trust, and, without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust under Delaware law. The Trust specifically reserves the right to exercise any of the powers or privileges afforded to trusts or actions that may be engaged in by trusts under the Delaware Act, and the absence of a specific reference herein to any such power, privilege or action shall not imply that the Trust may not exercise such power or privilege or take such actions. Section 8. Amendments. The Trustees may, without any Shareholder vote, ---------- amend or otherwise supplement this Trust Instrument by making an amendment, a Trust Instrument supplemental hereto or an amended and restated trust instrument; provided, that Shareholders shall have the right to vote on any amendment (a) which would affect the voting rights of Shareholders granted in Article VI, Section 1, (b) to this Section 8, (c) required to be approved by Shareholders by law or by the Trust's registration statement(s) filed with the Commission, or (d) submitted to them by the Trustees in their discretion. Any amendment submitted to Shareholders which the Trustees determine would affect the Shareholders of any Series shall be authorized by vote of the Shareholders of such Series and no vote shall be required of Shareholders of a Series not affected. Notwithstanding anything else herein, any amendment to Article IX which would have the effect of reducing the indemnification and other rights provided thereby to Trustees, officers, employees, and agents of the Trust or to Shareholders or former Shareholders, and any repeal or amendment of this sentence shall each require the affirmative vote of the holders of two-thirds of the Outstanding Shares of the Trust entitled to vote thereon. Section 9. Fiscal Year. The fiscal year of the Trust shall end on a ----------- specified date as set forth in the By-laws or in a resolution adopted by the Trustees. The Trustees may change the fiscal year of the Trust or any Series without Shareholder approval. Section 10. Severability. The provisions of this Trust Instrument are ------------ severable. If the Trustees determine, with the advice of counsel, that any provision hereof conflicts with the 1940 Act, the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Trust Instrument; provided, however, that such determination shall not affect any of the remaining provisions of this Trust Instrument or render invalid or improper any action taken or omitted prior to such determination. If any provision hereof shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach to such provision only in such jurisdiction and shall not affect such provision in any other jurisdiction or any other provision of this Trust Instrument. 20 SCHEDULE A Series of the Trust - ------------------- Mitchell Hutchins LIR Select Money Fund Classes of Shares of Each Series - -------------------------------- The Board establishes an unlimited number of shares of beneficial interest as Institutional shares and Financial Intermediary shares of Mitchell Hutchins LIR Select Money Fund. The Institutional shares and the Financial Intermediary shares represent interests in the assets of only that Series and have the same preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of shares, except as provided in the Trust's Trust Instrument. 21 IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have executed this Trust Instrument as of the date first above written. /s/ Victoria E. Schonfeld ------------------------- Victoria E. Schonfeld, as Trustee and not individually Address: 1285 Avenue of the Americas New York, New York 10019 STATE OF NEW YORK ) ss CITY OF NEW YORK ) Before me this 29th day of April, 1998, personally appeared the above-named Victoria E. Schonfeld, known to me to be the person who executed the foregoing instrument and who acknowledged that she executed the same. /s/ Keith A. Weller ------------------- Notary Public Keith A. Weller Notary Public, State of New York No. 02WE5026923 Qualified in New York County My commission expires: Commission Expires April 25, 2000 --------------------------------- /s/ Dianne E. O'Donnell ----------------------- Dianne E. O'Donnell, as Trustee and not individually Address: 1285 Avenue of the Americas New York, New York 10019 STATE OF NEW YORK ) ss CITY OF NEW YORK ) Before me this 29th day of April, 1998, personally appeared the above-named Dianne E. O'Donnell, known to me to be the person who executed the foregoing instrument and who acknowledged that she executed the same. /s/ Keith A. Weller ------------------- Notary Public Keith A. Weller Notary Public, State of New York No. 02WE5026923 Qualified in New York County My commission expires: Commission Expires April 25, 2000 --------------------------------- 22 EX-2 3 EXHIBIT 2 - BYLAWS Exhibit No. 2 BY-LAWS OF MITCHELL HUTCHINS INSTITUTIONAL SERIES April 29, 1998 TABLE OF CONTENTS Page ARTICLE I PRINCIPAL OFFICE AND SEAL............................................1 Section 1. Principal Office..............................................1 Section 2. Seal..........................................................1 ARTICLE II MEETINGS OF TRUSTEES................................................1 Section 1. Action by Trustees............................................1 Section 2. Compensation of Trustees......................................1 Section 3. Retirement of Trustees........................................1 ARTICLE III COMMITTEES.........................................................2 Section 1. Establishment.................................................2 Section 2. Proceedings; Quorum; Action...................................2 Section 3. Compensation of Committee Members.............................2 ARTICLE IV OFFICERS............................................................2 Section 1. General.......................................................2 Section 2. Election......................................................2 Section 3. Vacancies and Newly Created Offices...........................3 Section 4. Removal and Resignation.......................................3 Section 5. Chairman......................................................3 Section 6. President.....................................................3 Section 7. Vice President(s).............................................3 Section 8. Treasurer and Assistant Treasurer(s)..........................4 Section 9. Secretary and Assistant Secretaries...........................4 Section 10. Compensation of Officers......................................4 Section 11. Surety Bond...................................................4 ARTICLE V MEETINGS OF SHAREHOLDERS.............................................5 Section 1. No Annual Meetings............................................5 Section 2. Special Meetings..............................................5 Section 3. Notice of Meetings; Waiver....................................5 Section 4. Adjourned Meetings............................................5 Section 5. Validity of Proxies...........................................6 Section 6. Record Date...................................................6 Section 7. Action Without a Meeting......................................7 ARTICLE VI SHARES OF BENEFICIAL INTEREST.......................................7 Section 1. No Share Certificates.........................................7 Section 2. Transfer of Shares............................................7 i ARTICLE VII CUSTODY OF SECURITIES..............................................7 Section 1. Employment of a Custodian......................................7 Section 2. Termination of Custodian Agreement.............................7 Section 3. Other Arrangements.............................................7 ARTICLE VIII FISCAL YEAR AND ACCOUNTANT........................................8 Section 1. Fiscal Year....................................................8 Section 2. Accountant.....................................................8 ARTICLE IX AMENDMENTS..........................................................8 Section 1. General........................................................8 Section 2. By Shareholders Only...........................................8 ARTICLE X NET ASSET VALUE......................................................8 ARTICLE XI MISCELLANEOUS.......................................................9 Section 1. Inspection of Books............................................9 Section 2. Severability...................................................9 Section 3. Headings.......................................................9 ii BY-LAWS OF MITCHELL HUTCHINS INSTITUTIONAL SERIES These By-laws of Mitchell Hutchins Institutional Series (the "Trust"), a Delaware business trust, are subject to the Trust Instrument of the Trust dated as of April 29, 1998, as from time to time amended, supplemented or restated (the "Trust Instrument"). Capitalized terms used herein have the same meanings as in the Trust Instrument. ARTICLE I --------- PRINCIPAL OFFICE AND SEAL ------------------------- Section 1. Principal Office. The principal office of the Trust shall be --------- ----------------- located in New York, New York, or such other location as the Trustees determine. The Trust may establish and maintain other offices and places of business as the Trustees determine. Section 2. Seal. The Trustees may adopt a seal for the Trust in such form ---------- ---- and with such inscription as the Trustees determine. Any Trustee or officer of the Trust shall have authority to affix the seal to any document. ARTICLE II ---------- MEETINGS OF TRUSTEES -------------------- Section 1. Action by Trustees. Trustees may take actions at meetings held --------- ------------------ at such places and times as the Trustees may determine, or without meetings, all as provided in Article II, Section 7, of the Trust Instrument. Section 2. Compensation of Trustees. Each Trustee who is neither an --------- ------------------------ employee of an investment adviser of the Trust or any Series nor an employee of an entity affiliated with the investment adviser may receive such compensation from the Trust for services as the Trustees may determine. Each Trustee may receive such reimbursement for expenses as the Trustees may determine. Section 3. Retirement of Trustees. Each Trustee who has attained the age --------- ---------------------- of seventy-two (72) years as of December 31 of any year shall retire from service as a Trustee on such date unless that retirement would cause the Trust to be required to call a meeting of Shareholders to fill the resulting vacancy on the Board of Trustees. Notwithstanding anything in this Section, a Trustee may retire at any time as provided for in the Trust Instrument. ARTICLE III ----------- COMMITTEES ---------- Section 1. Establishment. The Trustees may designate one or more --------- ------------- committees of the Trustees, which may include an Executive Committee, a Nominating Committee, and an Audit Committee. The Trustees shall determine the number of members of each committee and its powers and shall appoint its members and its chair. Each committee member shall serve at the pleasure of the Trustees. The Trustees may abolish any committee at any time. Each committee shall maintain records of its meetings and report its actions to the Trustees. The Trustees may rescind any action of any committee, but such rescission shall not have retroactive effect. The Trustees may delegate to any committee any of its powers, subject to the limitations of applicable law. Section 2. Proceedings; Quorum; Action. Each committee may adopt such --------- --------------------------- rules governing its proceedings, quorum and manner of acting as it shall deem proper and desirable. In the absence of such rules, a majority of any committee shall constitute a quorum, and a committee shall act by the vote of a majority of a quorum. Section 3. Compensation of Committee Members. Each committee member who is --------- ---------------------------------- not an "interested person" of the Trust, as defined in the 1940 Act ("Disinterested Trustees") may receive such compensation from the Trust for services as the Trustees may determine. Each Trustee may receive such reimbursement for expenses as the Trustees may determine. ARTICLE IV ---------- OFFICERS -------- Section 1. General. The officers of the Trust shall be a Chairman, a --------- ------- President, one or more Vice Presidents, a Treasurer, and a Secretary, and may include one or more Assistant Treasurers or Assistant Secretaries and such other officers ("Other Officers") as the Trustees may determine. Section 2. Election. Tenure and Qualifications of Officers. The Trustees --------- -------- shall elect the officers of the Trust. Each officer elected by the Trustees shall hold office until his or her successor shall have been elected and qualified or until his or her earlier death, inability to serve, or resignation. Any person may hold one or more offices, except that the Chairman and the Secretary may not be the same individual. A person who holds more than one office in the Trust may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer. No officer other than the Chairman need be a Trustee or Shareholder. Section 3. Vacancies and Newly Created Offices. Whenever a vacancy shall --------- ----------------------------------- occur in any office or if any new office is created, the Trustees may fill such vacancy or new office. Section 4. Removal and Resignation. Officers serve at the pleasure of the --------- ----------------------- Trustees and may be removed at any time with or without cause. The Trustees may delegate this power to the Chairman or President with respect to any Other Officer. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer may resign from office at any time by delivering a written resignation to the Trustees, Chairman, or the President. Unless otherwise specified therein, such resignation shall take effect upon delivery. Section 5. Chairman. The Chairman shall preside at all meetings of the --------- -------- Trustees and shall in general exercise the powers and perform the duties of the Chairman of the Trustees. The 2 Chairman shall exercise such other powers and perform such other duties as the Trustees may assign to the Chairman. Section 6. President. The President shall be the chief executive officer --------- --------- of the Trust. The President shall preside at any Shareholders' meetings. Subject to the direction of the Trustees, the President shall have general charge, supervision and control over the Trust's business affairs and shall be responsible for the management thereof and the execution of policies established by the Trustees. Except as the Trustees may otherwise order, the President shall have the power to grant, issue, execute or sign powers of attorney, proxies, agreements or other documents. The President also shall have the power to employ attorneys, accountants and other advisers and agents for the Trust, except as otherwise required by the 1940 Act. At the request or in the absence or disability of the Chairman, the President shall perform all the duties of the Chairman and, when so acting, shall have all the powers of the Chairman. Section 7. Vice President(s). The Vice President(s) shall have such powers --------- ----------------- and perform such duties as the Trustees or the Chairman may determine. At the request or in the absence or disability of the President, the Vice President (or, if there are two or more Vice Presidents, then the senior of the Vice Presidents present and able to act) shall perform all the duties of the President and, when so acting, shall have all the powers of the President. The Trustees may designate a Vice President as the principal financial officer of the Trust or to serve one or more other functions. If a Vice President is designated as principal financial officer of the Trust, he or she shall have general charge of the finances and books of the Trust and shall report to the Trustees annually regarding the financial condition of each Series as soon as possible after the close of such Series's fiscal year. The Trustees also may designate one of the Vice Presidents as Executive Vice President. Section 8. Treasurer and Assistant Treasurer(s). --------- ------------------------------------ The Treasurer may be designated as the principal financial officer or as the principal accounting officer of the Trust. If designated as principal financial officer, the Treasurer shall have general charge of the finances and books of the Trust, and shall report to the Trustees annually regarding the financial condition of each Series as soon as possible after the close of such Series' fiscal year. The Treasurer shall be responsible for the delivery of all funds and securities of the Trust to such company as the Trustees shall retain as Custodian. The Treasurer shall furnish such reports concerning the financial condition of the Trust as the Trustees may request. The Treasurer shall perform all acts incidental to the office of Treasurer, subject to the Trustees' supervision, and shall perform such additional duties as the Trustees may designate. Any Assistant Treasurer may perform such duties of the Treasurer as the Trustees or the Treasurer may assign, and, in the absence of the Treasurer, may perform all the duties of the Treasurer. Section 9. Secretary and Assistant Secretaries. --------- ----------------------------------- The Secretary shall record all votes and proceedings of the meetings of Trustees and Shareholders in books to be kept for that purpose. The Secretary shall be responsible for giving 3 and serving notices of the Trust. The Secretary shall have custody of any seal of the Trust and shall be responsible for the records of the Trust, including the Share register and such other books and documents as may be required by the Trustees or by law. The Secretary shall perform all acts incidental to the office of Secretary, subject to the supervision of the Trustees, and shall perform such additional duties as the Trustees may designate. Any Assistant Secretary may perform such duties of the Secretary as the Trustees or the Secretary may assign, and, in the absence of the Secretary, may perform all the duties of the Secretary. Section 10. Compensation of Officers. ---------- ------------------------ Each officer may receive such compensation from the Trust for services and reimbursement for expenses as the Trustees may determine. Section 11. Surety Bond. ---------- ----------- The Trustees may require any officer or agent of the Trust to execute a bond (including, without limitation, any bond required by the 1940 Act and the rules and regulations of the Securities and Exchange Commission ("Commission")) to the Trust in such sum and with such surety or sureties as the Trustees may determine, conditioned upon the faithful performance of his or her duties to the Trust, including responsibility for negligence and for the accounting of any of the Trust's property, funds or securities that may come into his or her hands. ARTICLE V --------- MEETINGS OF SHAREHOLDERS ------------------------ Section 1. No Annual Meetings. --------- ------------------ There shall be no annual Shareholders' meetings, unless required by law. Section 2. Special Meetings. --------- ---------------- The Secretary shall call a special meeting of Shareholders of any Series or Class whenever ordered by the Trustees. The Secretary also shall call a special meeting of Shareholders of any Series or Class upon the written request of Shareholders owning at least ten percent of the Outstanding Shares of such Series or Class entitled to vote at such meeting; provided, that (1) such request shall state the purposes of such meeting and the matters proposed to be acted on, and (2) the Shareholders requesting such meeting shall have paid to the Trust the reasonably estimated cost of preparing and mailing the notice thereof, which the Secretary shall determine and specify to such Shareholders. If the Secretary fails for more than thirty days to call a special meeting when required to do so, the Trustees or the Shareholders requesting such a meeting may, in the name of the Secretary, call the meeting by giving the required notice. The Secretary shall not call a special meeting upon the request of Shareholders of any Series or Class to consider any matter 4 that is substantially the same as a matter voted upon at any special meeting of Shareholders of such Series or Class held during the preceding twelve months, unless requested by the holders of a majority of the Outstanding Shares of such Series or Class entitled to be voted at such meeting. A special meeting of Shareholders of any Series or Class shall be held at such time and place as is determined by the Trustees and stated in the notice of that meeting. Section 3. Notice of Meetings; Waiver. --------- -------------------------- The Secretary shall call a special meeting of Shareholders by giving written notice of the place, date, time, and purposes of that meeting at least fifteen days before the date of such meeting. The Secretary may deliver or mail, postage prepaid, the written notice of any meeting to each Shareholder entitled to vote at such meeting. If mailed, notice shall be deemed to be given when deposited in the United States mail directed to the Shareholder at his or her address as it appears on the records of the Trust. Section 4. Adjourned Meetings. --------- ------------------ A Shareholders' meeting may be adjourned one or more times for any reason, including the failure of a quorum to attend the meeting. No notice of adjournment of a meeting to another time or place need be given to Shareholders if such time and place are announced at the meeting at which the adjournment is taken or reasonable notice is given to Persons present at the meeting, and if the adjourned meeting is held within a reasonable time after the date set for the original meeting. Determination of reasonable notice and a reasonable time for purposes of the foregoing sentence is to be made by the officers of the Trust. Any business that might have been transacted at the original meeting may be transacted at any adjourned meeting. If after the adjournment a new record date is fixed for the adjourned meeting, the Secretary shall give notice of the adjourned meeting to Shareholders of record entitled to vote at such meeting. Any irregularities in the notice of any meeting or the nonreceipt of any such notice by any of the Shareholders shall not invalidate any action otherwise properly taken at any such meeting. Section 5. Validity of Proxies. --------- ------------------- Subject to the provisions of the Trust Instrument, Shareholders entitled to vote may vote either in person or by proxy; provided, that either (1) the Shareholder or his or her duly authorized attorney has signed and dated a written instrument authorizing such proxy to act, or (2) the Trustees adopt by resolution an electronic, telephonic, computerized or other alternative to execution of a written instrument authorizing the proxy to act, but if a proposal by anyone other than the officers or Trustees is submitted to a vote of the Shareholders of any Series or Class, or if there is a proxy contest or proxy solicitation or proposal in opposition to any proposal by the officers or Trustees, Shares may be voted only in person or by written proxy. Unless the proxy provides otherwise, it shall not be valid for more than eleven months before the date of the meeting. All proxies shall be delivered to the Secretary or other person responsible for recording the proceedings before being voted. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of such proxy the Trust receives a specific written notice to the contrary from any one of them. Unless 5 otherwise specifically limited by their terms, proxies shall entitle the Shareholder to vote at any adjournment of a Shareholders' meeting. 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. At every meeting of Shareholders, unless the voting is conducted by inspectors, the chairman of the meeting shall decide all questions concerning the qualifications of voters, the validity of proxies, and the acceptance or rejection of votes. Subject to the provisions of the Delaware Business Trust Act, the Trust Instrument, or these By-laws, the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder shall govern all matters concerning the giving, voting or validity of proxies, as if the Trust were a Delaware corporation and the Shareholders were shareholders of a Delaware corporation. Section 6. Record Date. --------- ----------- The Trustees may fix in advance a date up to ninety days before the date of any Shareholders' meeting as a record date for the determination of the Shareholders entitled to notice of, and to vote at, any such meeting. The Shareholders of record entitled to vote at a Shareholders' meeting shall be deemed the Shareholders of record at any meeting reconvened after one or more adjournments, unless the Trustees have fixed a new record date. Section 7. Action Without a Meeting. --------- ------------------------ Shareholders may take any action without a meeting if a majority (or such greater amount as may be required by law) of the Outstanding Shares entitled to vote on the matter consent to the action in writing and such written consents are filed with the records of Shareholders' meetings. Such written consent shall be treated for all purposes as a vote at a meeting of the Shareholders. ARTICLE VI ---------- SHARES OF BENEFICIAL INTEREST ----------------------------- Section 1. No Share Certificates. --------- --------------------- Neither the Trust nor any Series or Class shall issue certificates certifying the ownership of Shares, unless the Trustees may otherwise specifically authorize such certificates. Section 2. Transfer of Shares. --------- ------------------ Shares shall be transferable only by a transfer recorded on the books of the Trust by the Shareholder of record in person or by his or her duly authorized attorney or legal representative. Shares may be freely transferred and the Trustees may, from time to time, adopt rules and regulations regarding the method of transfer of such Shares. 6 ARTICLE VII ----------- CUSTODY OF SECURITIES --------------------- Section 1. Employment of a Custodian. --------- ------------------------- The Trust shall at all times place and maintain all cash, securities and other assets of the Trust and of each Series in the custody of a custodian meeting the requirements set forth in Article VII, Section 4 of the Trust Instrument ("Custodian"). The Custodian shall be appointed from time to time by the Board of Trustees, who shall determine its remuneration. Section 2. Termination of Custodian Agreement. --------- ---------------------------------- Upon termination of any Custodian Agreement or the inability of the Custodian to continue to serve as custodian, in either case with respect to the Trust or any Series, the Board of Trustees shall (a) use its best efforts to obtain a successor Custodian; and (b) require that the cash, securities and other assets owned by the Trust or any Series be delivered directly to the successor Custodian. Section 3. Other Arrangements. --------- ------------------ The Trust may make such other arrangements for the custody of its assets (including deposit arrangements) as may be required by any applicable law, rule or regulation. ARTICLE VIII ------------ FISCAL YEAR AND ACCOUNTANT -------------------------- Section 1. Fiscal Year. --------- ----------- The fiscal year of the Trust shall end on April 30 or such other date with respect to the Trust or a Series of the Trust as the Trustees may hereafter determine by resolution. Section 2. Accountant. --------- ---------- The Trust shall employ independent certified public accountants as its Accountant to examine the accounts of the Trust and to sign and certify financial statements filed by the Trust. The Accountant's certificates and reports shall be addressed both to the Trustees and to the Shareholders. A majority of the Disinterested Trustees shall select the Accountant, acting upon the recommendation of the Audit Committee. The employment of the Accountant shall be conditioned upon the right of the Trust to terminate such employment without any penalty by vote of a Majority Shareholder Vote at any Shareholders' meeting called for that purpose. 7 ARTICLE IX ---------- AMENDMENTS ---------- Section 1. General. --------- ------- Except as provided in Section 2 of this Article, these By-laws may be amended by the Trustees, or by the affirmative vote of a majority of the Outstanding Shares entitled to vote at any meeting. Section 2. By Shareholders Only. --------- -------------------- After the issue of any Shares, this Article may only be amended by the affirmative vote of the holders of the lesser of (a) at least two-thirds of the Outstanding Shares present and entitled to vote at any meeting, or (b) at least fifty percent of the Outstanding Shares. ARTICLE X --------- NET ASSET VALUE --------------- The term "Net Asset Value" of any Series shall mean that amount by which the assets belonging to that Series exceed its liabilities, all as determined by or under the direction of the Trustees. Net Asset Value per Share shall be determined separately for each Series and each Class and shall be determined on such days and at such times as the Trustees may determine. The Trustees shall make such determination with respect to securities for which market quotations are readily available, at the market value of such securities, and with respect to other securities and assets, at the fair value as determined in good faith by the Trustees; provided, however, that the Trustees, without Shareholder approval, may alter the method of appraising portfolio securities insofar as permitted under the 1940 Act and the rules, regulations and interpretations thereof promulgated or issued by the SEC or insofar as permitted by any order of the SEC applicable to the Series or to the Class. The Trustees may delegate any of their powers and duties under this Article X with respect to appraisal of assets and liabilities. At any time the Trustees may cause the Net Asset Value per Share last determined to be determined again in a similar manner and may fix the time when such redetermined values shall become effective. ARTICLE XI ---------- MISCELLANEOUS ------------- Section 1. Inspection of Books. --------- ------------------- The Board of Trustees shall from time to time determine whether and to what extent, and at what times and places, and under what conditions the accounts and books of the Trust or any Series or Class shall be open to the inspection of Shareholders. No Shareholder shall have any right to inspect any account or book or document of the Trust except as conferred by law or otherwise by the Board of Trustees or by resolution of Shareholders. 8 Section 2. Severability. --------- ------------ The provisions of these By-laws are severable. If the Board of Trustees determine, with the advice of counsel, that any provision hereof conflicts with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of these By-laws; provided, however, that such determination shall not affect any of the remaining provisions of these By-laws or render invalid or improper any action taken or omitted prior to such determination. If any provision hereof shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision only in such jurisdiction and shall not affect any other provision of these Bylaws. Section 3. Headings. --------- -------- Headings are placed in these By-laws for convenience of reference only and in case of any conflict, the text of these By-laws rather than the headings shall control. 9 EX-4 4 EXHIBIT 4 -- FORM OF INVESTMENT ADVISORY Exhibit No. 4 INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT Contract made as of_________, 1998 between MITCHELL HUTCHINS INSTITUTIONAL SERIES, a Delaware business trust ("Trust"), and MITCHELL HUTCHINS ASSET MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered as a broker-dealer under the Securities Exchange Act of 1934, as amended ("1934 Act"), and as an investment adviser under the Investment Advisers Act of 1940, as amended. WHEREAS the Trust is registered under the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end management investment company, and intends to offer for public sale distinct series of shares of beneficial interest ("Series"), each corresponding to a distinct portfolio; and WHEREAS the Trust desires to retain Mitchell Hutchins as investment adviser and administrator to furnish certain administrative, investment advisory and portfolio management services to the Trust and each Series as now exists and as hereafter may be established (provided that the Board of Trustees ("Board") approves the applicability of this Contract to such subsequent Series), and Mitchell Hutchins is willing to furnish such services; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. Appointment. The Trust hereby appoints Mitchell Hutchins as investment ----------- adviser and administrator of the Trust and each Series for the period and on the terms set forth in this Contract. Mitchell Hutchins accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. Duties as Investment Adviser. ---------------------------- (a) Subject to the supervision of the Board, Mitchell Hutchins will provide a continuous investment program for each Series, including investment research and management with respect to all securities and investments and cash equivalents in each Series. Mitchell Hutchins will determine from time to time what securities and other investments will be purchased, retained or sold by each Series. (b) Mitchell Hutchins agrees that in placing orders with brokers, 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, use brokers who provide the Series with research, analysis, advice and similar services to execute portfolio transactions on behalf of the Series, and Mitchell Hutchins may pay to those brokers in return for brokerage and research services a higher commission than may be charged by other brokers, 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 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 Mitchell Hutchins, or any affiliated person thereof, except in accordance with the federal securities laws and the rules and regulations thereunder. Whenever Mitchell Hutchins simultaneously places orders to purchase or sell the same security on behalf of a Series and one or more other accounts advised by Mitchell Hutchins, such orders will be allocated as to price and amount among all such accounts in a manner believed to be equitable to each account. The Trust recognizes that in some cases this procedure may adversely affect the results obtained for the Series. (c) Mitchell Hutchins will oversee the maintenance of all books and records with respect to the securities transactions of each Series, and will furnish the Board with such periodic and special reports as the Board reasonably may request. In compliance with the requirements of Rule 31a-3 under the 1940 Act, Mitchell Hutchins hereby agrees that all records which it maintains for the Trust are the property of the Trust, agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for the Trust and which are required to be maintained by Rule 31a-1 under the 1940 Act and further agrees to surrender promptly to the Trust any records which it maintains for the Trust upon request by the Trust. (d) Mitchell Hutchins will oversee the computation of the net asset value and the net income of each Series as described in the currently effective registration statement of the Trust 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 Trust hereby authorizes Mitchell Hutchins and any entity or person associated with Mitchell Hutchins which is a member of a national securities exchange to effect any transaction on such exchange for the account of any Series, which transaction is permitted by Section 11(a) of the 1934 Act, and the Trust hereby consents to the retention of compensation by Mitchell Hutchins or any person or entity associated with Mitchell Hutchins. 3. Duties as Administrator. Mitchell Hutchins will administer the affairs ----------------------- of the Trust and each Series subject to the supervision of the Board and the following understandings: (a) Mitchell Hutchins will supervise all aspects of the operations of the Trust 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 Trust and each Series. (b) Mitchell Hutchins will provide the Trust and each Series with such corporate, administrative and clerical personnel (including officers of the Trust) and services as are reasonably deemed necessary or advisable by the Board, including the maintenance of certain books and records of the Trust and each Series. (c) Mitchell Hutchins will arrange for the periodic preparation, updating, filing and dissemination (as applicable) of the Trust's Registration Statement, proxy material, tax returns and -2- required reports to each Series' shareholders and the Securities and Exchange Commission and other appropriate federal or state regulatory authorities. (d) Mitchell Hutchins will provide the Trust and each Series with, or obtain for it, adequate office space and all necessary office equipment and services, including telephone service, heat, utilities, stationery supplies and similar items. (e) Mitchell Hutchins will provide the Board on a regular basis with economic and investment analyses and reports and make available to the Board upon request any economic, statistical and investment services normally available to institutional or other customers of Mitchell Hutchins. 4. Further Duties. In all matters relating to the performance of this -------------- Contract, Mitchell Hutchins will act in conformity with the Trust Instrument, By-Laws and Registration Statement of the Trust and with the instructions and directions of the Board and will comply with the requirements of the 1940 Act, the rules thereunder, and all other applicable federal and state laws and regulations. 5. Delegation of Mitchell Hutchins' Duties as Investment Adviser and ----------------------------------------------------------------- Administrator. With respect to any or all Series, Mitchell Hutchins may enter - ------------- into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with a sub-adviser or sub-administrator in which Mitchell Hutchins delegates to such sub-adviser or sub-administrator any or all 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 applicable duties and conditions to which Mitchell Hutchins 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 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 Trust, 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) Mitchell Hutchins will bear all expenses incurred in the operation of each Series to which this Contract is applicable, including the Series' allocable share of the expenses of the Trust, other than (i) the investment and advisory fee payable under this Contract, (ii) the fees payable pursuant to any Shareholder Service Plan adopted by the Trust with respect to the Series or a class of shares of the Series, (iii) fees and expenses of the Independent Trustees (defined in paragraph 10(a) below), including counsel fees of the Independent Trustees, (iv) interest, taxes and the cost (including brokerage commissions and other transaction costs, if any) of securities purchased or sold by the Series and any losses incurred in connection therewith and (v) extraordinary expenses -3- (such as costs of litigation to which the Trust or a Series is a party and of indemnifying officers and Trustees of the Trust), which will be borne by the Trust or Series, as applicable. (b) The expenses to be borne by Mitchell Hutchins include the following (or each Series' proportionate share of the following): (i) expenses of organizing the Trust and the Series; (ii) filing fees and expenses relating to the registration and qualification of the Series' shares and the Trust under federal and/or state securities laws and maintaining such registration and qualifications; (iii) fees and salaries payable to the Trust's Trustees and officers; (iv) all expenses incurred in connection with the services of Trustees other than the Independent Trustees, including travel expenses; (v) costs of any liability, uncollectible items of deposit and other insurance and fidelity bonds; (vi) legal, accounting and auditing expenses, other than the legal fees of special counsel for the Independent Trustees; (vii) charges of custodians, transfer agents and other agents (including any lending agent); (viii) costs of preparing share certificates; (ix) expenses of setting in type and printing prospectuses and supplements thereto, statements of additional information and supplements thereto, reports and proxy materials for existing shareholders; (x) costs of mailing prospectuses and supplements thereto, statements of additional information and supplements thereto, reports and proxy materials to existing shareholders; (xi) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (xii) the cost of mailing and tabulating proxies and costs of meetings of shareholders, the Board and any committees thereof; (xii) the cost of investment company literature and other publications provided by the Trust to its Trustees and officers; (xiii) costs of mailing, stationery and communications equipment; (xiv) expenses incident to any dividend, withdrawal or redemption options; (xv) charges and expenses of any outside pricing service used to value portfolio securities; and (xvi) interest on borrowings of the Fund. (c) The payment or assumption by Mitchell Hutchins of any expenses of the Trust or a Series that Mitchell Hutchins is not required by this Contract to pay or assume shall not obligate Mitchell Hutchins to pay or assume the same or any similar expense of the Trust 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 Trust's existing Series, Mitchell Hutchins Institutional Money Fund, the Trust will pay to Mitchell Hutchins a fee, computed daily and paid monthly, at an annual rate of 0.18% of such Series' average daily net assets less that Series' allocable share of the accrued fees and expenses of the Independent Trustees (including counsel fees of the Independent Trustees). (b) For the services provided and the expenses assumed pursuant to this Contract with respect to any Series hereafter established and for which the Board approves the applicability of this Contract, the Trust will pay to Mitchell Hutchins from the assets of such Series a fee in an amount to be agreed upon in a written fee agreement ("Fee Agreement") executed by the Trust on behalf of such Series and by Mitchell Hutchins. All such Fee Agreements shall provide that they are subject to all terms and conditions of this Contract. -4- (c) The fee shall be computed daily and paid monthly to Mitchell Hutchins on or before the first business day of the next succeeding calendar month. (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 Mitchell Hutchins. Mitchell Hutchins and -------------------------------------------- its delegates, including any Sub-Adviser or Sub-Administrator to any Series or the Trust, shall not be liable for any error of judgment or mistake of law or for any loss suffered by any Series, the Trust 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 Mitchell Hutchins, who may be or become an officer, Trustee, employee or agent of the Trust shall be deemed, when rendering services to any Series or the Trust or acting with respect to any business of such Series or the Trust, to be rendering such service to or acting solely for the Series or the Trust and not as an officer, director, employee, or agent or one under the control or direction of Mitchell Hutchins even though paid by it. 10. Duration and Termination. ------------------------ (a) This Contract shall become effective upon the date hereabove written provided that, with respect to any Series, this Contract shall not take effect unless it has first been approved (i) by a vote of a majority of those Trustees of the Trust who are not parties to this Contract or interested persons of any such party ("Independent Trustees") 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 the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval, and (ii) by the Board or, with respect to any given Series, by vote of a majority of the outstanding voting securities of such Series. (c) Notwithstanding the foregoing, with respect to any Series this Contract may be terminated at any time, without the payment of any penalty, by vote of the board or by a vote of a majority of the outstanding voting securities of such Series on sixty days' written notice to Mitchell Hutchins or by Mitchell Hutchins at any time, without the payment of any penalty, on sixty days' written notice to the Trust. 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. -5- 11. Limitation of Liability of the Trustees and Shareholders of the Trust. --------------------------------------------------------------------- The Trustees of the Trust and the shareholders of any Series shall not be liable for any obligations of any Series or the Trust under this Contract, and Mitchell Hutchins agrees that, in asserting any rights or claims under this Contract, it shall look only to the assets and property of the Trust in settlement of such right or claim, and not to such Trustees or shareholders. 12. Amendment of this Contract. No provision of this Contract may be -------------------------- changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, 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. 13. 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. To the extent that the applicable laws of the State of Delaware conflict with the applicable provisions of the 1940 Act, the latter shall control. 14. Miscellaneous. The captions in this 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 1940 Act and the rules and regulations thereunder, subject to such exemptions as may be granted by the Securities and Exchange Commission. Where the effect of a requirement of the 1940 Act reflected in any provision of this Contract is relaxed by a rule, regulation, order or other action 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, order or other action. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers and delivered as of the day and year first above written. Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC. By - -------------------------- ------------------------------------ Attest: MITCHELL HUTCHINS INSTITUTIONAL SERIES By - -------------------------- ------------------------------------ -6- EX-5 5 EXHIBIT 5 -- FORM OF DISTRIBUTION CONTRACT Exhibit No. 5 MITCHELL HUTCHINS INSTITUTIONAL SERIES DISTRIBUTION CONTRACT CONTRACT made as of ____________________, 1998 between MITCHELL HUTCHINS INSTITUTIONAL SERIES, a Delaware business trust ("Fund"), and PAINEWEBBER INCORPORATED, a Delaware corporation ("PaineWebber"). WHEREAS the Fund is registered under the Investment Company Act of l940, as amended ("l940 Act"), as an open-end management investment company and currently has one distinct series of shares of beneficial interest ("Series"), which corresponds to a distinct portfolio and has been designated as Mitchell Hutchins Instituitonal Money Fund,; and WHEREAS the Fund's board of trustees ("Board") has established an unlimited number of shares of beneficial interest of the above-referenced Series as Institutional shares and Financial Intermediary shares ("Shares"); and WHEREAS the Fund desires to retain PaineWebber as principal distributor in connection with the offering and sale of the Shares of the above-referenced Series and of such other Series as may hereafter be designated by the Board and have Shares established; and WHEREAS PaineWebber is willing to act as principal distributor of the Shares of each such Series on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. Appointment. The Fund hereby appoints PaineWebber as its exclusive agent ----------- to be the principal distributor to sell and to arrange for the sale of the Shares on the terms and for the period set forth in this Contract. Mitchell Hutchins hereby accepts such appointment and agrees to act hereunder. It is understood, however, that this appointment does not preclude sales of the Shares directly through the Fund's transfer agent in the manner set forth in the Registration Statement. As used in this Contract, the term "Registration Statement" shall mean the currently effective registration statement of the Fund, and any supplements thereto, under the Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act. 2. Services and Duties of PaineWebber. ---------------------------------- (a) PaineWebber agrees to sell the Shares on a best efforts basis from time to time during the term of this Contract as agent for the Fund and upon the terms described in the Registration Statement. (b) Upon the later of the date of this Contract or the initial offering of the Shares by a Series, PaineWebber will hold itself available to receive purchase orders, satisfactory to PaineWebber, for Shares of that Series and will accept such orders on behalf of the Fund as of the time of receipt of such orders and promptly transmit such orders as are accepted to the Fund's transfer agent. Purchase orders shall be deemed effective at the time and in the manner set forth in the Registration Statement. (c) PaineWebber in its discretion may enter into agreements to sell Shares to such registered and qualified retail dealers, including but not limited to Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") as it may select. In making agreements with such dealers, PaineWebber shall act only as principal and not as agent for the Fund. (d) The offering price of the Shares of each Series shall be the net asset value per Share as next determined by the Fund following receipt of an order at PaineWebber's principal office. The Fund shall promptly furnish PaineWebber with a statement of each computation of net asset value. (e) PaineWebber shall not be obligated to sell any certain number of Shares. (f) To facilitate redemption of Shares by shareholders directly or through dealers, PaineWebber is authorized but not required on behalf of the Fund to repurchase Shares presented to it by shareholders and dealers at the price determined in accordance with, and in the manner set forth in, the Registration Statement. (g) PaineWebber shall have the right to use any list of shareholders of the Fund or any other list of investors which it obtains in connection with its provision of services under this Contract; provided, however, that PaineWebber shall not sell or knowingly provide such list or lists to any unaffiliated person. 3. Authorization to Enter into Exclusive Dealer Contracts and to Delegate ---------------------------------------------------------------------- Duties as Distributor. With respect to the Shares of any or all Series, - --------------------- PaineWebber may enter into an exclusive dealer agreement with Mitchell Hutchins or any other registered and qualified dealer with respect to sales of the Shares. In a separate contract or as part of any such exclusive dealer agreement, PaineWebber also may delegate to Mitchell Hutchins or another registered and qualified dealer ("sub-distributor") any or all of its duties specified in this Contract, provided that such separate contract or exclusive dealer agreement imposes on the sub-distributor bound thereby all applicable duties and conditions to which PaineWebber is subject under this Contract, and further provided that such separate contract or exclusive dealer agreement meets all requirements of the 1940 Act and rules thereunder. 4. Services Not Exclusive. The services furnished by PaineWebber hereunder ---------------------- are not to be deemed exclusive and PaineWebber shall be free to furnish similar services to others so long as its services under this Contract are not impaired thereby. Nothing in this Contract shall limit or restrict the right of any director, officer or employee of PaineWebber, who may also be a 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 or a dissimilar nature. -2- 5. Compensation and Reimbursement of Distribution Expenses. The Fund shall ------------------------------------------------------- have no obligation to compensate or reimburse PaineWebber for any services performed by it hereunder. 6. Duties of the Fund. ------------------- (a) The Fund reserves the right at any time to withdraw offering Shares of any or all Series by written notice to PaineWebber at its principal office. (b) The Fund shall determine in its sole discretion whether certificates shall be issued with respect to the Shares. If the Fund has determined that certificates shall be issued, the Fund will not cause certificates representing Shares to be issued unless so requested by shareholders. If such request is transmitted by PaineWebber, the Fund will cause certificates evidencing Shares to be issued in such names and denominations as PaineWebber shall from time to time direct. (c) The Fund shall keep PaineWebber fully informed of its affairs and shall make available to PaineWebber copies of all information, financial statements, and other papers which PaineWebber may reasonably request for use in connection with the distribution of Shares, including, without limitation, certified copies of any financial statements prepared for the Fund by its independent public accountant and such reasonable number of copies of the most current prospectus, statement of additional information, and annual and interim reports of any Series as Mitchell Hutchins may request, and the Fund shall cooperate fully in the efforts of PaineWebber to sell and arrange for the sale of the Shares of the Series and in the performance of PaineWebber under this Contract. (d) The Fund shall take, from time to time, all necessary action, including payment of the related filing fee, as may be necessary to register the Shares under the 1933 Act to the end that there will be available for sale such number of Shares as PaineWebber may be expected to sell. The Fund agrees to file, from time to time, such amendments, reports, and other documents as may be necessary in order that there will be no untrue statement of a material fact in the Registration Statement, nor any omission of a material fact which omission would make the statements therein misleading. (e) The Fund shall use its best efforts to qualify and maintain the qualification of an appropriate number of Shares of each Series for sale under the securities laws of such states or other jurisdictions as PaineWebber and the Fund may approve, and, if necessary or appropriate in connection therewith, to qualify and maintain the qualification of the Fund as a broker or dealer in such jurisdictions; provided that the Fund shall not be required to amend its Trust Instrument or By-Laws to comply with the laws of any jurisdiction, to maintain an office in any jurisdiction, to change the terms of the offering of the Shares in any jurisdiction from the terms set forth in its Registration Statement, to qualify as a foreign corporation in any jurisdiction, or to consent to service of process in any jurisdiction other than with respect to claims arising out of the offering of the Shares. PaineWebber shall furnish such information and other material relating to its affairs and activities as may be required by the Fund in connection with such qualifications. -3- 7. Expenses of the Fund. The Fund shall bear all costs and expenses of --------------------- registering the Shares with the Securities and Exchange Commission and qualifying the shares with state and other regulatory bodies, and shall assume expenses related to communications with shareholders of each Series, including (i) fees and disbursements of its counsel and independent public accountant; (ii) the preparation, filing and printing of registration statements and/or prospectuses or statements of additional information required under the federal securities laws; (iii) the preparation and mailing of annual and interim reports, prospectuses, statements of additional information and proxy materials to shareholders; and (iv) the qualifications of Shares for sale and of the Fund as a broker or dealer under the securities laws of such jurisdictions as shall be selected by the Fund and PaineWebber pursuant to Paragraph 6(e) hereof, and the costs and expenses payable to each such jurisdiction for continuing qualification therein. 8. Expenses of PaineWebber. PaineWebber shall bear all costs and expenses of ----------------------- (i) preparing, printing and distributing any materials not prepared by the Fund and other materials used by PaineWebber in connection with the sale of Shares under this Contract, including the additional cost of printing copies of prospectuses, statements of additional information, and annual and interim shareholder reports other than copies thereof required for distribution to existing shareholders or for filing with any federal or state securities authorities; (ii) any expenses of advertising incurred by PaineWebber in connection with such offering; (iii) the expenses of registration or qualification of PaineWebber as a broker or dealer under federal or state laws and the expenses of continuing such registration or qualification; and (iv) all compensation paid to PaineWebber's employees and others for selling Shares, and all expenses of PaineWebber, its employees and others who engage in or support the sale of Shares as may be incurred in connection with their sales efforts. 9. Indemnification. --------------- (a) The Fund agrees to indemnify, defend and hold PaineWebber, its officers and directors, and any person who controls PaineWebber within the meaning of Section 15 of the 1933 Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which PaineWebber, its officers, directors or any such controlling person may incur under the 1933 Act, or under common law or otherwise, arising out of or based upon any alleged untrue statement of a material fact contained in the Registration Statement or arising out of or based upon any alleged omission to state a material fact required to be stated in the Registration Statement or necessary to make the statements therein not misleading, except insofar as such claims, demands, liabilities or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information furnished in writing by PaineWebber to the Fund for use in the Registration Statement; provided, however, that this indemnity agreement shall not inure to the benefit of any person who is also an officer or trustee of the Fund or who controls the Fund within the meaning of Section 15 of the 1933 Act, unless a court of competent jurisdiction shall determine, or it shall have been determined by controlling precedent, that such result would not be against public policy as expressed in the 1933 Act; and further provided, that in no event shall anything contained herein be so construed as to protect -4- PaineWebber against any liability to the Fund or to the shareholders of any Series to which PaineWebber would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations under this Contract. The Fund shall not be liable to PaineWebber under this indemnity agreement with respect to any claim made against PaineWebber or any person indemnified unless PaineWebber or other such person shall have notified the Fund in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon PaineWebber or such other person (or after PaineWebber or the person shall have received notice of service on any designated agent). However, failure to notify the Fund of any claim shall not relieve the Fund from any liability which it may have to PaineWebber or any person against whom such action is brought otherwise than on account of this indemnity agreement. The Fund shall be entitled to participate at its own expense in the defense or, if it so elects, to assume the defense of any suit brought to enforce any claims subject to this indemnity agreement. If the Fund elects to assume the defense of any such claim, the defense shall be conducted by counsel chosen by the Fund and satisfactory to indemnified defendants in the suit whose approval shall not be unreasonably withheld. In the event that the Fund elects to assume the defense of any suit and retain counsel, the indemnified defendants shall bear the fees and expenses of any additional counsel retained by them. If the Fund does not elect to assume the defense of a suit, it will reimburse the indemnified defendants for the reasonable fees and expenses of any counsel retained by the indemnified defendants. The Fund agrees to notify PaineWebber promptly of the commencement of any litigation or proceedings against it or any of its officers or trustees in connection with the issuance or sale of any of its Shares. (b) PaineWebber agrees to indemnify, defend, and hold the Fund, its officers and trustees, and any person who controls the Fund within the meaning of Section 15 of the 1933 Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending against such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Fund, its trustees or officers, or any such controlling person may incur under the 1933 Act or under common law or otherwise arising out of or based upon any alleged untrue statement of a material fact contained in information furnished in writing by PaineWebber to the Fund for use in the Registration Statement, arising out of or based upon any alleged omission to state a material fact in connection with such information required to be stated in the Registration Statement necessary to make such information not misleading, or arising out of any agreement between PaineWebber and any retail dealer, or arising out of any supplemental sales literature or advertising used by PaineWebber in connection with its duties under this Contract. PaineWebber shall be entitled to participate, at its own expense, in the defense or, if it so elects, to assume the defense of any suit brought to enforce the claim, but if PaineWebber elects to assume the defense, the defense shall be conducted by counsel chosen by PaineWebber and satisfactory to the indemnified defendants whose approval shall not be unreasonably withheld. In the event that PaineWebber elects to assume the defense of any suit and retain counsel, the defendants in the suit shall bear the fees and expenses of any additional counsel retained by them. If PaineWebber does not elect to assume the defense of any suit, it will reimburse the indemnified defendants in the suit for the reasonable fees and expenses of any counsel retained by them. -5- 10. Limitation of Liability of the Trustees and Shareholders of the Fund. -------------------------------------------------------------------- The trustees of the Fund and the shareholders of any Series shall not be liable for any obligations of the Fund or any Series under this Contract, and PaineWebber agrees that, in asserting any rights or claims under this Contract, it shall look only to the assets and property of the Fund or the particular Series in settlement of such right or claims, and not to such trustees or shareholders. 11. Services Provided to the Fund by Employees of PaineWebber. Any person, --------------------------------------------------------- even though also an officer, director, employee or agent of PaineWebber, who may be or become an officer, trustee, employee or agent of the Fund, shall be deemed, when rendering services to the Fund or acting in any business of the Fund, to be rendering such services to or acting solely for the Fund and not as an officer, director, employee or agent or one under the control or direction of PaineWebber even though paid by PaineWebber. 12. Duration and Termination. ------------------------ (a) This Contract shall become effective upon the date written above, provided that, with respect to any Series, this Contract shall not take effect with respect to a class of Shares of that Series unless such action has first been approved by vote of a majority of the Board and by vote of a majority of those trustees of the Fund who are not interested persons of the Fund, and have no direct or indirect financial interest in this Contract or in any agreements related thereto (all such Trustees collectively being referred to herein as the "Independent Trustees"), cast in person at a meeting called for the purpose of voting on such action. (b) Unless sooner terminated as provided herein, this Contract shall continue in effect for one year from the above written date. Thereafter, if not terminated, this Contract shall continue automatically for successive periods of twelve months each, provided that such continuance is specifically approved at least annually (i) by a vote of a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval, and (ii) by the Board or with respect to a class of Shares of any given Series by vote of a majority of the outstanding voting securities of the that class of Shares of such Series. (c) Notwithstanding the foregoing, with respect to a class of Shares of any Series, this Contract may be terminated at any time, without the payment of any penalty, by vote of the Board, by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding voting securities of that class of Shares of such Series on sixty days' written notice to PaineWebber or by PaineWebber at any time, without the payment of any penalty, on sixty days' written notice to the Fund or such Series. This Contract will automatically terminate in the event of its assignment. (d) Termination of this Contract with respect to any given Series or class of Shares of a Series shall in no way affect the continued validity of this Contract or the performance thereunder with respect to any other Series or class of Shares. 13. 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. -6- 14. Governing Law. This Contract shall be construed in accordance with the ------------- laws of the State of Delaware and the 1940 Act. To the extent that the applicable laws of the State of Delaware conflict with the applicable provisions of the l940 Act, the latter shall control. 15. Notice. Any notice required or permitted to be given by either party to ------ the other shall be deemed sufficient upon receipt in writing at the other party's principal offices. 16. Miscellaneous. The captions in this Contract are included for ------------- convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Contract shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Contract shall not be affected thereby. This Contract shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. As used in this Contract, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the l940 Act. IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed by their officers designated as of the day and year first above written. ATTEST: MITCHELL HUTCHINS INSTITUTIONAL SERIES By: -------------------------------- ----------------------------------- ATTEST: PAINEWEBBER INCORPORATED By: --------------------------------- ----------------------------------- -7- EX-7 6 EXHIBIT 7 -- FORM OF CUSTODIAN AGREEMENT CUSTODY AGREEMENT Agreement made as of this day of June, 1998, between MITCHELL HUTCHINS INSTITUTIONAL SERIES, a Delaware business trust organized and existing under the laws of the State of Delaware, having its principal office and place of business at 1285 Avenue of the Americas, New York, New York 10019 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a banking business, having its principal office and place of business at One Wall Street, New York, New York 10286 (hereinafter called the "Custodian" when providing services pursuant to this agreement). W I T N E S S E T H : that for and in consideration of the mutual promises hereinafter set forth, the Fund and the Custodian agree as follows: ARTICLE I. DEFINITIONS Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: 1. "Authorized Persons" shall be deemed to include any person, whether or not such person is an officer or employee of the Fund, duly authorized by the Board of Trustees of the Fund to execute any Certificate, instruction, notice or other instrument on behalf of the Fund and listed in the Certificate annexed hereto as Appendix A or such other Certificate as may be received by the Custodian from time to time. 2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry system for United States and federal agency securities, its successor or successors and its nominee or nominees. 3. "Call Option" shall mean an exchange traded option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities. 4. "Certificate" shall mean any notice, instruction, or other instrument in writing, authorized or required by this Agreement to be given to the Custodian which is actually received by the Custodian and signed on behalf of the Fund by any two Authorized Persons, and the term Certificate shall also include Instructions. 5. "Clearing Member" shall mean a registered broker-dealer which is a clearing member under the rules of O.C.C. and a member of a national securities exchange qualified to act as a custodian for an investment company, or any broker-dealer reasonably believed by the Custodian to be such a clearing member. 6. "Collateral Account" shall mean a segregated account so denominated which is specifically allocated to a Series and pledged to the Custodian as security for, and in consideration of, the Custodian's issuance of (a) any Put Option guarantee letter or similar document described in paragraph 8 of Article V herein, or (b) any receipt described in Article V or VIII herein. 7. "Composite Currency Unit" shall mean the European Currency Unit or any other composite unit consisting of the aggregate of specified amounts of specified Currencies as such unit may be constituted from time to time. 8. "Covered Call Option" shall mean an exchange traded Option entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities (excluding Futures Contracts) which are owned by the writer thereof and subject to appropriate restrictions. 9. "Currency" shall mean money denominated in a lawful currency of any country or the European Currency Unit. 10. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing agency registered with the Securities and Exchange Commission, its successor or successors and its nominee or nominees. The term "Depository" shall further mean and include any other person authorized to act as a depository under the Investment Company Act of 1940, its successor or successors and its nominee or nominees, specifically identified in a certified copy of a resolution of the Fund's Board of Trustees specifically approving deposits therein by the Custodian. -2- 11. "Financial Futures Contract" shall mean the firm commitment to buy or sell fixed income securities including, without limitation, U.S. Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit, and Eurodollar certificates of deposit, during a specified month at an agreed upon price. 12. "Futures Contract" shall mean a Financial Futures Contract and/or Stock Index Futures Contracts. 13. "Futures Contract Option" shall mean an Option with respect to a Futures Contract. 14. "FX Transaction" shall mean any transaction for the purchase by one party of an agreed amount in one Currency against the sale by it to the other party of an agreed amount in another Currency. 15. "Instructions" shall mean instructions communications transmitted by electronic or telecommunications media including S.W.I.F.T., computer-to-computer interface, dedicated transmission line, facsimile transmission signed by an Authorized Person and tested telex. 16. "Margin Account" shall mean a segregated account in the name of a broker, dealer, futures commission merchant, or a Clearing Member, or in the name of the Fund for the benefit of a broker, dealer, futures commission merchant, or Clearing Member, or otherwise, in accordance with an agreement between the Fund, the Custodian and a broker, dealer, futures commission merchant or a Clearing Member (a "Margin Account Agreement"), separate and distinct from the custody account, in which certain Securities and/or money of the Fund shall be deposited and withdrawn from time to time in connection with such transactions as the Fund may from time to time determine. Securities held in the Book-Entry System or the Depository shall be deemed to have been deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting an appropriate entry in its books and records. 17. "Money Market Security" shall be deemed to include, without limitation, certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as to interest and principal by the government of the United States or agencies or instrumentalities thereof, any tax, bond or revenue anticipation note issued by any state or municipal government or public authority, commercial paper, certificates of deposit and bankers' acceptances, repurchase agreements with respect to the same and bank time deposits, where the purchase and -3- sale of such securities normally requires settlement in federal funds on the same day as such purchase or sale. 18. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency registered under Section 17A of the Securities Exchange Act of 1934, its successor or successors, and its nominee or nominees. 19. "Option" shall mean a Call Option, Covered Call Option, Stock Index Option and/or a Put Option. 20. "Oral Instructions" shall mean verbal instructions actually received by the Custodian from an Authorized Person or from a person reasonably believed by the Custodian to be an Authorized Person. 21. "Put Option" shall mean an exchange traded Option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and tender of the specified underlying Securities, to sell such Securities to the writer thereof for the exercise price. 22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to which the Fund sells Securities and agrees to repurchase such Securities at a described or specified date and price. 23. "Security" shall be deemed to include, without limitation, Money Market Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures Contracts, Stock Index Futures Contract Options, Financial Futures Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks and other securities having characteristics similar to common stocks, preferred stocks, debt obligations issued by state or municipal governments and by public authorities, (including, without limitation, general obligation bonds, revenue bonds, industrial bonds and industrial development bonds), bonds, debentures, notes, mortgages or other obligations, and any certificates, receipts, warrants or other instruments representing rights to receive, purchase, sell or subscribe for the same, or evidencing or representing any other rights or interest therein, or any property or assets. 24. "Senior Security Account" shall mean an account maintained and specifically allocated to a Series under the terms of this Agreement as a segregated account, by recordation or otherwise, within the custody account in which certain -4- Securities and/or other assets of the Fund specifically allocated to such Series shall be deposited and withdrawn from time to time in accordance with Certificates received by the Custodian in connection with such transactions as the Fund may from time to time determine. 25. "Series" shall mean the various portfolios, if any, of the Fund listed on Appendix B hereto as amended from time to time. 26. "Shares" shall mean the shares of beneficial interest of the Fund, each of which is, in the case of a Fund having Series, allocated to a particular Series. 27. "Stock Index Futures Contract" shall mean a bilateral agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to a specified dollar amount times the difference between the value of a particular stock index at the close of the last business day of the contract and the price at which the futures contract is originally struck. 28. "Stock Index Option" shall mean an exchange traded option entitling the holder, upon timely exercise, to receive an amount of cash determined by reference to the difference between the exercise price and the value of the index on the date of exercise. ARTICLE II. APPOINTMENT OF CUSTODIAN 1. The Fund hereby constitutes and appoints the Custodian as custodian of the Securities and money at any time owned by the Fund during the period of this Agreement. 2. The Custodian hereby accepts appointment as such custodian and agrees to perform the duties thereof as hereinafter set forth. ARTICLE III. CUSTODY OF CASH AND SECURITIES 1. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, the Fund will deliver or cause to be delivered to the Custodian all Securities and all money owned by it, at any time during the period of this Agreement, -5- and shall specify with respect to such Securities and money the Series to which the same are specifically allocated. For purposes of this Agreement, "receipt" of Securities and money shall include the acquisition of a security entitlement as that term is defined in the New York Uniform Commercial Code ("UCC") with respect thereto. The Custodian shall segregate, keep and maintain the assets of the Series separate and apart. The Custodian will not be responsible for any Securities and money not actually received by it. The Custodian will be entitled to reverse any credits made on the Fund's behalf where such credits have been previously made and money is not finally collected; provided that if such reversal is thirty (30) days or more after the credit was issued, the Custodian will give five (5) days prior notice of such reversal. The Fund shall deliver to the Custodian a certified resolution of the Board of Trustees of the Fund, substantially in the form of Exhibit A hereto, approving, authorizing and instructing the Custodian on a continuous and on- going basis to deposit in the Book-Entry System all Securities eligible to be maintained indirectly through it, regardless of the Series to which the same are specifically allocated and to utilize the Book-Entry System to the extent possible in connection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities and deliveries and returns of Securities collateral. Prior to a deposit of Securities specifically allocated to a Series in the Depository, the Fund shall deliver to the Custodian a certified resolution of the Board of Trustees of the Fund, substantially in the form of Exhibit B hereto, approving, authorizing and instructing the Custodian on a continuous and ongoing basis until instructed to the contrary by a Certificate actually received by the Custodian to deposit in the Depository all Securities specifically allocated to such Series eligible for deposit therein, and to utilize the Depository to the extent possible with respect to such Securities in connection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities, and deliveries and returns of Securities collateral. Securities and money maintained indirectly through either the Book-Entry System or the Depository will be represented in accounts which include only assets held by the Custodian for customers, including, but not limited to, accounts in which the Custodian acts in a fiduciary or representative capacity and will be specifically allocated on the Custodian's books to the separate account for the applicable Series. Prior to the Custodian's accepting, utilizing and acting with respect to Clearing Member confirma-tions for Options and transactions in Options for a Series as provided in this Agreement, the Custodian shall have received -6- a certified resolution of the Fund's Board of Trustees, substantially in the form of Exhibit C hereto, approving, authorizing and instructing the Custodian on a continuous and on-going basis, until instructed to the contrary by a Certificate actually received by the Custodian, to accept, utilize and act in accordance with such confirmations as provided in this Agreement with respect to such Series. All Securities are to be held or disposed of by the Custodian for, and subject at all times to the instructions of, the Fund pursuant to the terms of this Agreement. The Custodian shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any Securities except as provided by the terms of this Agreement, and shall have the sole right to release and deliver Securities held pursuant to this Agreement. 2. The Custodian shall establish and maintain separate accounts, in the name of each Series, and shall credit to the separate account for each Series all money received by it for the account of the Fund with respect to such Series. Money credited to a separate account for a Series shall be subject to draft, orders, or charges of the Custodian pursuant to this Agreement and shall be disbursed by the Custodian only: (a) as hereinafter provided; (b) pursuant to Certificates setting forth the name and address of the person to whom the payment is to be made, the Series account from which payment is to be made and the purpose for which payment is to be made; or (c) in payment of the fees and in reimbursement of the expenses and liabilities of the Custodian attributable to such Series. 3. Promptly after the close of business on each day, the Custodian shall furnish the Fund with confirmations and a summary, on a per Series basis, of all transfers to or from the account of the Fund for a Series, either hereunder or with any co-custodian or sub- custodian appointed in accordance with this Agreement during said day. Where Securities are transferred to the account of the Fund for a Series, the Custodian shall also by book-entry or otherwise identify as belonging to such Series a quantity of Securities in a fungible bulk of Securities registered in the name of the Custodian (or its nominee) or shown on the Custodian's account on the books of the Book-Entry System or the Depository. At least monthly and from time to time, the Custodian shall furnish the Fund with a detailed statement, on a per Series -7- basis, of the Securities and money held by the Custodian for the Fund. 4. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, all Securities maintained by the Custodian hereunder, which are issued or issuable only in bearer form, except such Securities as are maintained indirectly through in the Book- Entry System, shall be held by the Custodian in that form; all other Securities held hereunder may be registered in the name of the Fund, in the name of any duly appointed registered nominee of the Custodian as the Custodian may from time to time determine, or in the name of the Book-Entry System or the Depository or their successor or successors, or their nominee or nominees. The Fund agrees to furnish to the Custodian appropriate instruments to enable the Custodian to hold or deliver in proper form for transfer, or to register in the name of its registered nominee or in the name of the Book-Entry System or the Depository any Securities which it may hold hereunder and which may from time to time be registered in the name of the Fund. The Custodian shall hold all such Securities specifically allocated to a Series which are not held in the Book-Entry System or in the Depository in a separate account in the name of such Series physically segregated at all times from those of any other person or persons. 5. Except as otherwise provided in this Agreement and unless otherwise instructed to the contrary by a Certificate, the Custodian by itself, or indirectly through the use of the Book-Entry System or the Depository with respect to Securities maintained hereunder, shall with respect to all Securities held for the Fund hereunder in accordance with preceding paragraph 4: (a) promptly collect all income, dividends and distributions due or payable; (b) promptly give notice to the Fund and promptly present payment and collect the amount payable upon such Securities which are called, but only if either (i) the Custodian receives a written notice of such call, or (ii) notice of such call appears in one or more of the publications listed in Appendix C annexed hereto, which may be amended at any time by the Custodian without the prior notification or consent of the Fund; (c) promptly present for payment and collect the amount payable upon all Securities which mature; -8- (d) promptly surrender Securities in temporary form for definitive Securities; (e) promptly execute, as custodian, any necessary declarations or certificates of ownership under the Federal Income Tax Laws or the laws or regulations of any other taxing authority now or hereafter in effect; (f) hold directly, or through the Book-Entry System or the Depository with respect to Securities therein deposited, for the account of a Series, all rights and similar securities issued with respect to any Securities held by the Custodian for such Series hereunder; (g) deliver to the Fund all notices, proxies, proxy soliciting materials, consents and other written information (including, without limitation, notices of tender offers and exchange offers, pendency of calls, maturities of Securities and expiration of rights) relating to Securities held pursuant to this Agreement which are actually received by the Custodian, such proxies and other similar materials to be executed by the registered owner (if Securities are registered otherwise than in the name of the Fund), but without indicating the manner in which proxies or consents are to be voted; and (h) pursuant to Certificates to pay interest, taxes, management fees or operating expenses (including, without limitation thereto, Board of Trustees' fees and expenses, and fees for legal, accounting and auditing services), which Certificates set forth the name and address of the person to whom payment is to be made, state the purpose of such payment and designate the Series for whose account the payment is to be made. 6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or through the use of the Book-Entry System or the Depository, shall: (a) promptly execute and deliver to such persons as may be designated in such Certificate proxies, consents, authorizations, and any other instruments whereby the authority of the Fund as owner of any Securities held by the Custodian hereunder for the Series specified in such Certificate may be exercised; (b) promptly deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate in exchange for other Securities or cash issued or paid in connection with the liquidation, reorganization, -9- refinancing, merger, consolidation or recapitalization of any corporation, or the exercise of any right, warrant or conversion privilege and receive and hold hereunder specifically allocated to such Series any cash or other Securities received in exchange; (c) promptly deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any corporation, and receive and hold hereunder specifically allocated to such Series such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery; (d) promptly make such transfers or exchanges of the assets of the Series specified in such Certificate, and take such other steps as shall be stated in such Certificate to be for the purpose of effectuating any duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Fund; and (e) promptly present for payment and collect the amount payable upon Securities not described in preceding paragraph 5(b) of this Article which may be called as specified in the Certificate. 7. Notwithstanding any provision elsewhere contained herein, the Custodian shall not be required to obtain possession of any instrument or certificate representing any Futures Contract, any Option, or any Futures Contract Option until after it shall have determined, or shall have received a Certificate from the Fund stating, that any such instruments or certificates are available. The Fund shall deliver to the Custodian such a Certificate no later than the business day preceding the availability of any such instrument or certificate. Prior to such availability, the Custodian shall comply with Section 17(f) of the Investment Company Act of 1940, as amended, in connection with the purchase, sale, settlement, closing-out or writing of Futures Contracts, Options, or Futures Contract Options by making payments or deliveries specified in Certificates received by the Custodian in connection with any such purchase, sale, writing, settlement or closing-out upon its receipt from a broker, dealer, or futures commission merchant of a statement or confirmation reasonably believed by the Custodian to be in the form customarily used by brokers, dealers, or futures commission merchants with respect to such Futures Contracts, Options, or -10- Futures Contract Options, as the case may be, confirming that such Security is held by such broker, dealer or futures com-mission merchant, in book-entry form or otherwise, in the name of the Custodian (or any nominee of the Custodian) as custodian for the Fund, provided, however, that notwithstanding the foregoing, payments to or deliveries from the Margin Account, and payments with respect to Securities to which a Margin Account relates, shall be made in accordance with the terms and conditions of the Margin Account Agreement. Whenever any such instruments or certificates are available, the Custodian shall, notwithstanding any provision in this Agreement to the contrary, make payment for any Futures Contract, Option, or Futures Contract Option for which such instruments or such certificates are available only against the delivery to the Custodian of such instrument or such certificate, and deliver any Futures Contract, Option or Futures Contract Option for which such instruments or such certificates are available only against receipt by the Custodian of payment therefor. Any such instrument or certificate delivered to the Custodian shall be held by the Custodian hereunder in accordance with, and subject to, the provisions of this Agreement. ARTICLE IV. PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN OPTIONS, FUTURES CONTRACTS AND FUTURES CONTRACT OPTIONS 1. Promptly after each purchase of Securities by the Fund, other than a purchase of an Option, a Futures Contract, or a Futures Contract Option, the Fund shall deliver to the Custodian (i) with respect to each purchase of Securities which are not Money Market Securities, a Certificate, and (ii) with respect to each purchase of Money Market Securities, a Certificate or Oral Instructions, specifying with respect to each such purchase: (i) the Series to which such Securities are to be specifically allocated; (ii) the name of the issuer and the title of the Securities; (iii) the number of shares or the principal amount purchased and accrued interest, if any; (iv) the date of purchase and settlement; (v) the purchase price per unit; (vi) the total amount payable upon such purchase; (vii) the name of the person from whom or the broker through whom the purchase was made, and the name of the clearing broker, if any; and (viii) the name of the broker to whom payment is to be made. The Custodian shall, upon receipt of Securities purchased by or for the Fund, pay to the broker specified in the Certificate out of the money held for the account of such Series the total amount payable upon such -11- purchase, provided that the same conforms to the total amount payable as set forth in such Certificate or Oral Instructions. 2. Promptly after each sale of Securities by the Fund, other than a sale of any Option, Futures Contract, Futures Contract Option, or any Reverse Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect to each sale of Securities which are not Money Market Securities, a Certificate, and (ii) with respect to each sale of Money Market Securities, a Certificate or Oral Instructions, specifying with respect to each such sale: (i) the Series to which such Securities were specifically allocated; (ii) the name of the issuer and the title of the Security; (iii) the number of shares or principal amount sold, and accrued interest, if any; (iv) the date of sale; (v) the sale price per unit; (vi) the total amount payable to the Fund upon such sale; (vii) the name of the broker through whom or the person to whom the sale was made, and the name of the clearing broker, if any; and (viii) the name of the broker to whom the Securities are to be delivered. The Custodian shall deliver the Securities specifically allocated to such Series to the broker specified in the Certificate against payment of the total amount payable to the Fund upon such sale, provided that the same conforms to the total amount payable as set forth in such Certificate or Oral Instructions. ARTICLE V. OPTIONS 1. Promptly after the purchase of any Option by the Fund, the Fund shall deliver to the Custodian a Certificate specifying with respect to each Option purchased: (a) the Series to which such Option is specifically allocated; (b) the type of Option (put or call); (c) the name of the issuer and the title and number of shares subject to such Option or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Stock Index Options purchased; (d) the expiration date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the total amount payable by the Fund in connection with such purchase; (h) the name of the Clearing Member through whom such Option was purchased; and (i) the name of the broker to whom payment is to be made. The Custodian shall pay, upon receipt of a Clearing Member's statement confirming the purchase of such Option held by such Clearing Member for the account of the Custodian (or any duly appointed and registered nominee of the Custodian) as custodian for the Fund, out of money held for the account of the Series to which such Option is to be -12- specifically allocated, the total amount payable upon such purchase to the Clearing Member through whom the purchase was made, provided that the same conforms to the total amount payable as set forth in such Certificate. 2. Promptly after the sale of any Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate specifying with respect to each such sale: (a) the Series to which such Option was specifically allocated; (b) the type of Option (put or call); (c) the name of the issuer and the title and number of shares subject to such Option or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Stock Index Options sold; (d) the date of sale; (i) the sale price; (e) the date of settlement; (f) the total amount payable to the Fund upon such sale; and (g) the name of the Clearing Member through whom the sale was made. The Custodian shall consent to the delivery of the Option sold by the Clearing Member which previously supplied the confirmation described in preceding paragraph 1 of this Article with respect to such Option against payment to the Custodian of the total amount payable to the Fund, provided that the same conforms to the total amount payable as set forth in such Certificate. 3. Promptly after the exercise by the Fund of any Call Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate specifying with respect to such Call Option: (a) the Series to which such Call Option was specifically allocated; (b) the name of the issuer and the title and number of shares subject to the Call Option; (c) the expiration date; (d) the date of exercise and settlement; (e) the exercise price per share; (f) the total amount to be paid by the Fund upon such exercise; and (g) the name of the Clearing Member through whom such Call Option was exercised. The Custodian shall, upon receipt of the Securities underlying the Call Option which was exercised, pay out of the money held for the account of the Series to which such Call Option was specifically allocated the total amount payable to the Clearing Member through whom the Call Option was exercised, provided that the same conforms to the total amount payable as set forth in such Certificate. 4. Promptly after the exercise by the Fund of any Put Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate specifying with respect to such Put Option: (a) the Series to which such Put Option was specifically allocated; (b) the name of the issuer and the title and number of shares subject to the Put Option; (c) the expiration date; (d) the date of exercise -13- and settlement; (e) the exercise price per share; (f) the total amount to be paid to the Fund upon such exercise; and (g) the name of the Clearing Member through whom such Put Option was exercised. The Custodian shall, upon receipt of the amount payable upon the exercise of the Put Option, deliver or direct the Depository to deliver the Securities specifically allocated to such Series, provided the same conforms to the amount payable to the Fund as set forth in such Certificate. 5. Promptly after the exercise by the Fund of any Stock Index Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series to which such Stock Index Option was specifically allocated; (b) the type of Stock Index Option (put or call); (c) the number of Options being exercised; (d) the stock index to which such Option relates; (e) the expiration date; (f) the exercise price; (g) the total amount to be received by the Fund in connection with such exercise; and (h) the Clearing Member from whom such payment is to be received. 6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Covered Call Option: (a) the Series for which such Covered Call Option was written; (b) the name of the issuer and the title and number of shares for which the Covered Call Option was written and which underlie the same; (c) the expiration date; (d) the exercise price; (e) the premium to be received by the Fund; (f) the date such Covered Call Option was written; and (g) the name of the Clearing Member through whom the premium is to be received. The Custodian shall deliver or cause to be delivered, in exchange for receipt of the premium specified in the Certificate with respect to such Covered Call Option, such receipts as are required in accordance with the customs prevailing among Clearing Members dealing in Covered Call Options and shall impose, or direct the Depository to impose, upon the underlying Securities specified in the Certificate specifically allocated to such Series such restrictions as may be required by such receipts. Notwithstanding the foregoing, the Custodian has the right, upon prior written notification to the Fund, at any time to refuse to issue any receipts for Securities in the possession of the Custodian and not deposited with the Depository underlying a Covered Call Option. 7. Whenever a Covered Call Option written by the Fund and described in the preceding paragraph of this Article is exercised, the Fund shall promptly deliver to the Custodian a Certificate instructing the Custodian to deliver, or to direct -14- the Depository to deliver, the Securities subject to such Covered Call Option and specifying: (a) the Series for which such Covered Call Option was written; (b) the name of the issuer and the title and number of shares subject to the Covered Call Option; (c) the Clearing Member to whom the underlying Securities are to be delivered; and (d) the total amount payable to the Fund upon such delivery. Upon the return and/or cancellation of any receipts delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver, or direct the Depository to deliver, the underlying Securities as specified in the Certificate against payment of the amount to be received as set forth in such Certificate. 8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Put Option: (a) the Series for which such Put Option was written; (b) the name of the issuer and the title and number of shares for which the Put Option is written and which underlie the same; (c) the expiration date; (d) the exercise price; (e) the premium to be received by the Fund; (f) the date such Put Option is written; (g) the name of the Clearing Member through whom the premium is to be received and to whom a Put Option guarantee letter is to be delivered; (h) the amount of cash, and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Senior Security Account for such Series; and (i) the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be deposited into the Collateral Account for such Series. The Custodian shall, after making the deposits into the Collateral Account specified in the Certificate, issue a Put Option guarantee letter substantially in the form utilized by the Custodian on the date hereof, and deliver the same to the Clearing Member specified in the Certificate against receipt of the premium specified in said Certificate. Notwithstanding the foregoing, the Custodian shall be under no obligation to issue any Put Option guarantee letter or similar document if it is unable to make any of the representations contained therein. 9. Whenever a Put Option written by the Fund and described in the preceding paragraph is exercised, the Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the Series to which such Put Option was written; (b) the name of the issuer and title and number of shares subject to the Put Option; (c) the Clearing Member from whom the underlying Securities are to be received; (d) the total amount payable by the Fund upon such delivery; (e) the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be withdrawn from the Collateral Account for such Series and (f) the amount of cash and/or the -15- amount and kind of Securities, specifically allocated to such Series, if any, to be withdrawn from the Senior Security Account. Upon the return and/or cancellation of any Put Option guarantee letter or similar document issued by the Custodian in connection with such Put Option, the Custodian shall pay out of the money held for the account of the Series to which such Put Option was specifically allocated the total amount payable to the Clearing Member specified in the Certificate as set forth in such Certificate against delivery of such Securities, and shall make the withdrawals specified in such Certificate. 10. Whenever the Fund writes a Stock Index Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series for which such Stock Index Option was written; (b) whether such Stock Index Option is a put or a call; (c) the number of options written; (d) the stock index to which such Option relates; (e) the expiration date; (f) the exercise price; (g) the Clearing Member through whom such Option was written; (h) the premium to be received by the Fund; (i) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Senior Security Account for such Series; (j) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Collateral Account for such Series; and (k) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in a Margin Account, and the name in which such account is to be or has been established. The Custodian shall, upon receipt of the premium specified in the Certificate, make the deposits, if any, into the Senior Security Account specified in the Certificate, and either (1) deliver such receipts, if any, which the Custodian has specifically agreed to issue, which are in accordance with the customs prevailing among Clearing Members in Stock Index Options and make the deposits into the Collateral Account specified in the Certificate, or (2) make the deposits into the Margin Account specified in the Certificate. 11. Whenever a Stock Index Option written by the Fund and described in the preceding paragraph of this Article is exercised, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series for which such Stock Index Option was written; (b) such information as may be necessary to identify the Stock Index Option being exercised; (c) the Clearing Member through whom such Stock Index Option is being exercised; (d) the total amount payable upon such exercise, and whether such amount is to be paid by or to the Fund; (e) -16- the amount of cash and/or amount and kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the amount of cash and/or amount and kind of Securities, if any, to be withdrawn from the Senior Security Account for such Series; and the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Collateral Account for such Series. Upon the return and/or cancellation of the receipt, if any, delivered pursuant to the preceding paragraph of this Article, the Custodian shall pay out of the money held for the account of the Series to which such Stock Index Option was specifically allocated to the Clearing Member specified in the Certificate the total amount payable, if any, as specified therein. 12. Whenever the Fund purchases any Option identical to a previously written Option described in paragraphs, 6, 8 or 10 of this Article in a transaction expressly designated as a "Closing Purchase Transaction" in order to liquidate its position as a writer of an Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to the Option being purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the Series for which the Option was written; (c) the name of the issuer and the title and number of shares subject to the Option, or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Options held; (d) the exercise price; (e) the premium to be paid by the Fund; (f) the expiration date; (g) the type of Option (put or call); (h) the date of such purchase; (i) the name of the Clearing Member to whom the premium is to be paid; and (j) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Collateral Account, a specified Margin Account, or the Senior Security Account for such Series. Upon the Custodian's payment of the premium and the return and/or cancellation of any receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the Option being liquidated through the Closing Purchase Transaction, the Custodian shall remove, or direct the Depository to remove, the previously imposed restrictions on the Securities underlying the Call Option. 13. Upon the expiration, exercise or consummation of a Closing Purchase Transaction with respect to any Option purchased or written by the Fund and described in this Article, the Custodian shall delete such Option from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein, and upon the return and/or cancellation of any receipts issued by the Custodian, shall make such withdrawals from the Collateral Account, and the Margin Account and/or the Senior Security Account as may be specified -17- in a Certificate received in connection with such expiration, exercise, or consummation. ARTICLE VI. FUTURES CONTRACTS 1. Whenever the Fund shall enter into a Futures Contract, the Fund shall deliver to the Custodian a Certificate specifying with respect to such Futures Contract, (or with respect to any number of identical Futures Contract(s)): (a) the Series for which the Futures Contract is being entered; (b) the category of Futures Contract (the name of the underlying stock index or financial instrument); (c) the number of identical Futures Contracts entered into; (d) the delivery or settlement date of the Futures Contract(s); (e) the date the Futures Contract(s) was (were) entered into and the maturity date; (f) whether the Fund is buying (going long) or selling (going short) on such Futures Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in the Senior Security Account for such Series; (h) the name of the broker, dealer, or futures commission merchant through whom the Futures Contract was entered into; and (i) the amount of fee or commission, if any, to be paid and the name of the broker, dealer, or futures commission merchant to whom such amount is to be paid. The Custodian shall make the deposits, if any, to the Margin Account in accordance with the terms and conditions of the Margin Account Agreement. The Custodian shall make payment out of the money specifically allocated to such Series of the fee or commission, if any, specified in the Certificate and deposit in the Senior Security Account for such Series the amount of cash and/or the amount and kind of Securities specified in said Certificate. 2. (a) Any variation margin payment or similar payment required to be made by the Fund to a broker, dealer, or futures commission merchant with respect to an outstanding Futures Contract, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. (b) Any variation margin payment or similar payment from a broker, dealer, or futures commission merchant to the Fund with respect to an outstanding Futures Contract, shall be received and dealt with by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 3. Whenever a Futures Contract held by the Custodian hereunder is retained by the Fund until delivery or settlement -18- is made on such Futures Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a) the Futures Contract and the Series to which the same relates; (b) with respect to a Stock Index Futures Contract, the total cash settlement amount to be paid or received, and with respect to a Financial Futures Contract, the Securities and/or amount of cash to be delivered or received; (c) the broker, dealer, or futures commission merchant to or from whom payment or delivery is to be made or received; and (d) the amount of cash and/or Securities to be withdrawn from the Senior Security Account for such Series. The Custodian shall make the payment or delivery specified in the Certificate, and delete such Futures Contract from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein. 4. Whenever the Fund shall enter into a Futures Contract to offset a Futures Contract held by the Custodian hereunder, the Fund shall deliver to the Custodian a Certificate specifying: (a) the items of information required in a Certificate described in paragraph 1 of this Article, and (b) the Futures Contract being offset. The Custodian shall make payment out of the money specifically allocated to such Series of the fee or commission, if any, specified in the Certificate and delete the Futures Contract being offset from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein, and make such withdrawals from the Senior Security Account for such Series as may be specified in such Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 5. Notwithstanding any other provision in this Agreement to the contrary, the Custodian shall deliver cash and Securities to a futures commission merchant upon receipt of a Certificate from the Fund specifying: (a) the name of the futures commission merchant; (b) the specific cash and Securities to be delivered; (c) the date of such delivery; and (d) the date of the agreement between the Fund and such futures commission merchant entered pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a Certificate by the Fund shall constitute (x) a representation and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized, executed and delivered by the Fund and the futures commission merchant and complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable for the acts or omissions of any such futures commission merchant. -19- ARTICLE VII. FUTURES CONTRACT OPTIONS 1. Promptly after the purchase of any Futures Contract Option by the Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (i) the Series to which such Option is specifically allocated; (ii) the type of Futures Contract Option (put or call); (iii) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option purchased; (iv) the expiration date; (v) the exercise price; (vi) the dates of purchase and settlement; (vii) the amount of premium to be paid by the Fund upon such purchase; (viii) the name of the broker or futures commission merchant through whom such option was purchased; and (ix) the name of the broker, or futures commission merchant, to whom payment is to be made. The Custodian shall pay out of the money specifically allocated to such Series, the total amount to be paid upon such purchase to the broker or futures commissions merchant through whom the purchase was made, provided that the same conforms to the amount set forth in such Certificate. 2. Promptly after the sale of any Futures Contract Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to each such sale: (a) the Series to which such Futures Contract Option was specifically allocated; (i) the type of Futures Contract Option (put or call); (ii) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option; (iii) the date of sale; (iv) the sale price; (v) the date of settlement; (vi) the total amount payable to the Fund upon such sale; and (vii) the name of the broker or futures commission merchant through whom the sale was made. The Custodian shall consent to the cancellation of the Futures Contract Option being closed against payment to the Custodian of the total amount payable to the Fund, provided the same conforms to the total amount payable as set forth in such Certificate. 3. Whenever a Futures Contract Option purchased by the Fund pursuant to paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the Series to which such Futures Contract Option was specifically allocated; (b) the particular Futures Contract Option (put or call) being exercised; (c) the type of Futures Contract underlying the Futures Contract Option; (d) the date of exercise; (e) the name of the broker or futures -20- commission merchant through whom the Futures Contract Option is exercised; (f) the net total amount, if any, payable by the Fund; (g) the amount, if any, to be received by the Fund; and (h) the amount of cash and/or the amount and kind of Securities to be deposited in the Senior Security Account for such Series. The Custodian shall make, out of the money and Securities specifically allocated to such Series, the payments, if any, and the deposits, if any, into the Senior Security Account as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 4. Whenever the Fund writes a Futures Contract Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (a) the Series for which such Futures Contract Option was written; (b) the type of Futures Contract Option (put or call); (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option; (d) the expiration date; (e) the exercise price; (f) the premium to be received by the Fund; (g) the name of the broker or futures commission merchant through whom the premium is to be received; and (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in the Senior Security Account for such Series. The Custodian shall, upon receipt of the premium specified in the Certificate, make out of the money and Securities specifically allocated to such Series the deposits into the Senior Security Account, if any, as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 5. Whenever a Futures Contract Option written by the Fund which is a call is exercised, the Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the Series to which such Futures Contract Option was specifically allocated; (b) the particular Futures Contract Option exercised; (c) the type of Futures Contract underlying the Futures Contract Option; (d) the name of the broker or futures commission merchant through whom such Futures Contract Option was exercised; (e) the net total amount, if any, payable to the Fund upon such exercise; (f) the net total amount, if any, payable by the Fund upon such exercise; and (g) the amount of cash and/or the amount and kind of Securities to be deposited in the Senior Security Account for such Series. The Custodian shall, upon its receipt of the net total amount payable to the Fund, if any, specified in such Certificate make the payments, if any, and the deposits, if any, into the Senior Security -21- Account as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 6. Whenever a Futures Contract Option which is written by the Fund and which is a put is exercised, the Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the Series to which such Option was specifically allocated; (b) the particular Futures Contract Option exercised; (c) the type of Futures Contract underlying such Futures Contract Option; (d) the name of the broker or futures commission merchant through whom such Futures Contract Option is exercised; (e) the net total amount, if any, payable to the Fund upon such exercise; (f) the net total amount, if any, payable by the Fund upon such exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn from or deposited in, the Senior Security Account for such Series, if any. The Custodian shall, upon its receipt of the net total amount payable to the Fund, if any, specified in the Certificate, make out of the money and Securities specifically allocated to such Series, the payments, if any, and the deposits, if any, into the Senior Security Account as specified in the Certificate. The deposits to and/or withdrawals from the Margin Account, if any, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 7. Whenever the Fund purchases any Futures Contract Option identical to a previously written Futures Contract Option described in this Article in order to liquidate its position as a writer of such Futures Contract Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to the Futures Contract Option being purchased: (a) the Series to which such Option is specifically allocated; (b) that the transaction is a closing transaction; (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Option Contract; (d) the exercise price; (e) the premium to be paid by the Fund; (f) the expiration date; (g) the name of the broker or futures commission merchant to whom the premium is to be paid; and (h) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Senior Security Account for such Series. The Custodian shall effect the withdrawals from the Senior Security Account specified in the Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. -22- 8. Upon the expiration, exercise, or consummation of a closing transaction with respect to, any Futures Contract Option written or purchased by the Fund and described in this Article, the Custodian shall (a) delete such Futures Contract Option from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in the case of an exercise such deposits into the Senior Security Account as may be specified in a Certificate. The deposits to and/or withdrawals from the Margin Account, if any, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 9. Futures Contracts acquired by the Fund through the exercise of a Futures Contract Option described in this Article shall be subject to Article VI hereof. 10. Notwithstanding any other provision in this Agreement to the contrary, the Custodian shall deliver cash and Securities to a futures commission merchant upon receipt of a Certificate from the Fund specifying: (a) the name of the futures commission merchant; (b) the specific cash and Securities to be delivered; (c) the date of such delivery; and (d) the date of the agreement between the Fund and such futures commission merchant entered pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a Certificate by the Fund shall constitute (x) a representation and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized, executed and delivered by the Fund and the futures commission merchant and complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable for the acts or omissions of any such futures commission merchant. ARTICLE VIII. SHORT SALES 1. Promptly after any short sales by any Series of the Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the Series for which such short sale was made; (b) the name of the issuer and the title of the Security; (c) the number of shares or principal amount sold, and accrued interest or dividends, if any; (d) the dates of the sale and settlement; (e) the sale price per unit; (f) the total amount credited to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and kind of Securities, if any, which are to be deposited in a Margin Account and the name in which such Margin Account has been or is to be -23- established; (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in a Senior Security Account, and (i) the name of the broker through whom such short sale was made. The Custodian shall upon its receipt of a statement from such broker confirming such sale and that the total amount credited to the Fund upon such sale, if any, as specified in the Certificate is held by such broker for the account of the Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a receipt or make the deposits into the Margin Account and the Senior Security Account specified in the Certificate. 2. In connection with the closing-out of any short sale, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to each such closing-out: (a) the Series for which such transaction is being made; (b) the name of the issuer and the title of the Security; (c) the number of shares or the principal amount, and accrued interest or dividends, if any, required to effect such closing-out to be delivered to the broker; (d) the dates of closing- out and settlement; (e) the purchase price per unit; (f) the net total amount payable to the Fund upon such closing-out; (g) the net total amount payable to the broker upon such closing-out; (h) the amount of cash and the amount and kind of Securities to be withdrawn, if any, from the Margin Account; (i) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Senior Security Account; and (j) the name of the broker through whom the Fund is effecting such closing-out. The Custodian shall, upon receipt of the net total amount payable to the Fund upon such closing-out, and the return and/or cancellation of the receipts, if any, issued by the Custodian with respect to the short sale being closed-out, pay out of the money held for the account of the Fund to the broker the net total amount payable to the broker, and make the withdrawals from the Margin Account and the Senior Security Account, as the same are specified in the Certificate. ARTICLE IX. REVERSE REPURCHASE AGREEMENTS 1. Promptly after the Fund enters a Reverse Repurchase Agreement with respect to Securities and money held by the Custodian hereunder, the Fund shall deliver to the Custodian a Certificate, or in the event such Reverse Repurchase Agreement is a Money Market Security, a Certificate or Oral Instructions specifying: (a) the Series for which the Reverse Repurchase Agreement is entered; (b) the total amount payable to the Fund -24- in connection with such Reverse Repurchase Agreement and specifically allocated to such Series; (c) the broker or dealer through or with whom the Reverse Repurchase Agreement is entered; (d) the amount and kind of Securities to be delivered by the Fund to such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and (f) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in a Senior Security Account for such Series in connection with such Reverse Repurchase Agreement. The Custodian shall, upon receipt of the total amount payable to the Fund specified in the Certificate or Oral Instructions make the delivery to the broker or dealer, and the deposits, if any, to the Senior Security Account, specified in such Certificate or Oral Instructions. 2. Upon the termination of a Reverse Repurchase Agreement described in preceding paragraph 1 of this Article, the Fund shall promptly deliver a Certificate or, in the event such Reverse Repurchase Agreement is a Money Market Security, a Certificate or Oral Instructions to the Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and the Series for which same was entered; (b) the total amount payable by the Fund in connection with such termination; (c) the amount and kind of Securities to be received by the Fund and specifically allocated to such Series in connection with such termination; (d) the date of termination; (e) the name of the broker or dealer with or through whom the Reverse Repurchase Agreement is to be terminated; and (f) the amount of cash and/or the amount and kind of Securities to be withdrawn from the Senior Securities Account for such Series. The Custodian shall, upon receipt of the amount and kind of Securities to be received by the Fund specified in the Certificate or Oral Instructions, make the payment to the broker or dealer, and the withdrawals, if any, from the Senior Security Account, specified in such Certificate or Oral Instructions. ARTICLE X. LOAN OF PORTFOLIO SECURITIES OF THE FUND 1. Promptly after each loan of portfolio Securities specifically allocated to a Series held by the Custodian hereunder, the Fund shall deliver or cause to be delivered to the Custodian a Certificate specifying with respect to each such loan: (a) the Series to which the loaned Securities are specifically allocated; (b) the name of the issuer and the title of the Securities, (c) the number of shares or the -25- principal amount loaned, (d) the date of loan and delivery, (e) the total amount to be delivered to the Custodian against the loan of the Securities, including the amount of cash collateral and the premium, if any, separately identified, and (f) the name of the broker, dealer, or financial institution to which the loan was made. The Custodian shall deliver the Securities thus designated to the broker, dealer or financial institution to which the loan was made upon receipt of the total amount designated as to be delivered against the loan of Securities. The Custodian may accept payment in connection with a delivery otherwise than through the Book-Entry System or Depository only in the form of a certified or bank cashier's check payable to the order of the Fund or the Custodian drawn on New York Clearing House funds and may deliver Securities in accordance with the customs prevailing among dealers in securities. 2. Promptly after each termination of the loan of Securities by the Fund, the Fund shall deliver or cause to be delivered to the Custodian a Certificate specifying with respect to each such loan termination and return of Securities: (a) the Series to which the loaned Securities are specifically allocated; (b) the name of the issuer and the title of the Securities to be returned, (c) the number of shares or the principal amount to be returned, (d) the date of termination, (e) the total amount to be delivered by the Custodian (including the cash collateral for such Securities minus any offsetting credits as described in said Certificate), and (f) the name of the broker, dealer, or financial institution from which the Securities will be returned. The Custodian shall receive all Securities returned from the broker, dealer, or financial institution to which such Securities were loaned and upon receipt thereof shall pay, out of the money held for the account of the Fund, the total amount payable upon such return of Securities as set forth in the Certificate. ARTICLE XI. CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY ACCOUNTS, AND COLLATERAL ACCOUNTS 1. The Custodian shall, from time to time, make such deposits to, or withdrawals from, a Senior Security Account as specified in a Certificate received by the Custodian. Such Certificate shall specify the Series for which such deposit or withdrawal is to be made and the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be deposited in, or withdrawn from, such Senior -26- Security Account for such Series. In the event that the Fund fails to specify in a Certificate the Series, the name of the issuer, the title and the number of shares or the principal amount of any particular Securities to be deposited by the Custodian into, or withdrawn from, a Senior Securities Account, the Custodian shall be under no obligation to make any such deposit or withdrawal and shall so notify the Fund. 2. The Custodian shall make deliveries or payments from a Margin Account to the broker, dealer, futures commission merchant or Clearing Member in whose name, or for whose benefit, the account was established as specified in the Margin Account Agreement. 3. Amounts received by the Custodian as payments or distributions with respect to Securities deposited in any Margin Account shall be dealt with in accordance with the terms and conditions of the Margin Account Agreement. 4. The Custodian shall have a continuing lien and security interest in and to any property at any time held by the Custodian in any Collateral Account described herein. In accordance with applicable law the Custodian may enforce its lien and realize on any such property whenever the Custodian has made payment or delivery pursuant to any Put Option guarantee letter or similar document or any receipt issued hereunder by the Custodian. In the event the Custodian should realize on any such property net proceeds which are less than the Custodian's obligations under any Put Option guarantee letter or similar document or any receipt, such deficiency shall be a debt owed the Custodian by the Fund within the scope of Article XIV herein. 5. On each business day the Custodian shall furnish the Fund with a statement with respect to each Margin Account in which money or Securities are held specifying as of the close of business on the previous business day: (a) the name of the Margin Account; (b) the amount and kind of Securities held therein; and (c) the amount of money held therein. The Custodian shall make available upon request to any broker, dealer, or futures commission merchant specified in the name of a Margin Account a copy of the statement furnished the Fund with respect to such Margin Account. 6. Promptly after the close of business on each business day in which cash and/or Securities are maintained in a Collateral Account for any Series, the Custodian shall furnish the Fund with a statement with respect to such Collateral Account specifying the amount of cash and/or the amount and kind -27- of Securities held therein. No later than the close of business next succeeding the delivery to the Fund of such statement, the Fund shall furnish to the Custodian a Certificate specifying the then market value of the Securities described in such statement. In the event such then market value is indicated to be less than the Custodian's obligation with respect to any outstanding Put Option guarantee letter or similar document, the Fund shall promptly specify in a Certificate the additional cash and/or Securities to be deposited in such Collateral Account to eliminate such deficiency. ARTICLE XII. PAYMENT OF DIVIDENDS OR DISTRIBUTIONS 1. The Fund shall furnish to the Custodian a copy of the resolution of the Board of Trustees of the Fund, certified by the Secretary or any Assistant Secretary, either (i) setting forth with respect to the Series specified therein the date of the declaration of a dividend or distribution, the date of payment thereof, the record date as of which shareholders entitled to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on the payment date, or (ii) authorizing with respect to the Series specified therein the declaration of dividends and distributions on a daily basis and authorizing the Custodian to rely on Oral Instructions or a Certificate setting forth the date of the declaration of such dividend or distribution, the date of payment thereof, the record date as of which shareholders entitled to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent on the payment date. 2. Upon the payment date specified in such resolution, Oral Instructions or Certificate, as the case may be, the Custodian shall pay out of the money held for the account of each Series the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with respect to such Series. -28- ARTICLE XIII. SALE AND REDEMPTION OF SHARES 1. Whenever the Fund shall sell any Shares, it shall deliver to the Custodian a Certificate duly specifying: (a) the Series, the number of Shares sold, trade date, and price; and (b) the amount of money to be received by the Custodian for the sale of such Shares and specifically allocated to the separate account in the name of such Series. 2. Upon receipt of such money from the Transfer Agent, the Custodian shall credit such money to the separate account in the name of the Series for which such money was received. 3. Upon issuance of any Shares of any Series described in the foregoing provisions of this Article, the Custodian shall pay, out of the money held for the account of such Series, all original issue or other taxes required to be paid by the Fund in connection with such issuance upon the receipt of a Certificate specifying the amount to be paid. 4. Except as provided hereinafter, whenever the Fund desires the Custodian to make payment out of the money held by the Custodian hereunder in connection with a redemption of any Shares, it shall furnish to the Custodian a Certificate specifying: (a) the number and Series of Shares redeemed; and (b) the amount to be paid for such Shares. 5. Upon receipt from the Transfer Agent of an advice setting forth the Series and number of Shares received by the Transfer Agent for redemption and that such Shares are in good form for redemption, the Custodian shall make payment to the Transfer Agent out of the money held in the separate account in the name of the Series the total amount specified in the Certificate issued pursuant to the foregoing paragraph 4 of this Article. 6. Notwithstanding the above provisions regarding the redemption of any Shares, whenever any Shares are redeemed pursuant to any check redemption privilege which may from time to time be offered by the Fund, the Custodian, unless otherwise instructed by a Certificate, shall, upon receipt of -29- an advice from the Fund or its agent setting forth that the redemption is in good form for redemption in accordance with the check redemption procedure, honor the check presented as part of such check redemption privilege out of the money held in the separate account of the Series of the Shares being redeemed. ARTICLE XIV. OVERDRAFTS OR INDEBTEDNESS 1. If the Custodian should in its sole discretion advance funds on behalf of any Series which results in an overdraft because the money held by the Custodian in the separate account for such Series shall be insufficient to pay the total amount payable upon a purchase of Securities specifically allocated to such Series, as set forth in a Certificate or Oral Instructions, or which results in an overdraft in the separate account of such Series for some other reason, or if the Fund is for any other reason indebted to the Custodian with respect to a Series, including any indebtedness to The Bank of New York under the Fund's Cash Management and Related Services Agreement (except a borrowing for investment or for temporary or emergency purposes using Securities as collateral pursuant to a separate agreement and subject to the provisions of paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to be a loan made by the Custodian to the Fund for such Series payable on demand and shall bear interest from the date incurred at a rate per annum (based on a 360-day year for the actual number of days involved) equal to 1/2% over Custodian's prime commercial lending rate in effect from time to time, such rate to be adjusted on the effective date of any change in such prime commercial lending rate but in no event to be less than 6% per annum. In addition, the Fund hereby agrees that the Custodian shall have a continuing lien, security interest, and security entitlement in and to any property including any investment property or any financial asset specifically allocated to such Series at any time held by it for the benefit of such Series or in which the Fund may have an interest which is then in the Custodian's possession or control or in possession or control of any third party acting in the Custodian's behalf, provided that the amount of such lien shall be limited to property having a value from time to time equal to the amount of the overdraft or indebtedness plus interest thereon. The Fund authorizes the Custodian, in its sole discretion, at any time to charge any such overdraft or indebtedness together with interest due thereon against any balance of account standing to such Series' credit on the Custodian's books. In addition, -30- the Fund hereby covenants that on each Business Day on which either it intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a third party, or which next succeeds a Business Day on which at the close of business the Fund had outstanding a Reverse Repurchase Agreement or such a borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian, in writing, of each such borrowing, shall specify the Series to which the same relates, and shall not incur any indebtedness not so specified other than from the Custodian. 2. The Fund will cause to be delivered to the Custodian by any bank (including, if the borrowing is pursuant to a separate agreement, the Custodian) from which it borrows money for investment or for temporary or emergency purposes using Securities held by the Custodian hereunder as collateral for such borrowings, a notice or undertaking in the form currently employed by any such bank setting forth the amount which such bank will loan to the Fund against delivery of a stated amount of collateral. The Fund shall promptly deliver to the Custodian a Certificate specifying with respect to each such borrowing: (a) the Series to which such borrowing relates; (b) the name of the bank, (c) the amount and terms of the borrowing, which may be set forth by incorporating by reference an attached promissory note, duly endorsed by the Fund, or other loan agreement, (d) the time and date, if known, on which the loan is to be entered into, (e) the date on which the loan becomes due and payable, (f) the total amount payable to the Fund on the borrowing date, (g) the market value of Securities to be delivered as collateral for such loan, including the name of the issuer, the title and the number of shares or the principal amount of any particular Securities, and (h) a statement specifying whether such loan is for investment purposes or for temporary or emergency purposes and that such loan is in conformance with the Investment Company Act of 1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing date specified in a Certificate the specified collateral and the executed promissory note, if any, against delivery by the lending bank of the total amount of the loan payable, provided that the same conforms to the total amount payable as set forth in the Certificate. The Custodian may, at the option of the lending bank, keep such collateral in its possession, but such collateral shall be subject to all rights therein given the lending bank by virtue of any promissory note or loan agreement. The Custodian shall deliver such Securities as additional collateral as may be specified in a Certificate to collateralize further any transaction described in this paragraph. The Fund shall cause all Securities released from collateral status to be returned directly to the Custodian, and the Custodian shall receive from time to time such return -31- of collateral as may be tendered to it. In the event that the Fund fails to specify in a Certificate the Series, the name of the issuer, the title and number of shares or the principal amount of any particular Securities to be delivered as collateral by the Custodian, the Custodian shall not be under any obligation to deliver any Securities. ARTICLE XV. INSTRUCTIONS 1. With respect to any software provided by the Custodian to a Fund or its agents in order for the Fund or its agents to transmit Instructions to the Custodian (the "Software"), the Custodian grants to such Fund and its agents a personal, nontransferable and nonexclusive license to use the Software solely for the purpose of transmitting Instructions to, and receiving communications from, the Custodian in connection with its account(s). The Fund shall use the Software solely for its own internal and proper business purposes, and not in the operation of a service bureau, and agrees not to sell, reproduce, lease or otherwise provide, directly or indirectly, the Software or any portion thereof to any third party (other than its agents) without the prior written consent of the Custodian. The Fund acknowledges that the Custodian and its suppliers have title and exclusive proprietary rights to the Software, including any trade secrets or other ideas, concepts, know how, methodologies, or information incorporated therein and the exclusive rights to any copyrights, trademarks and patents (including registrations and applications for registration of either) or statutory or legal protections available with respect thereof. The Fund further acknowledges that all or a part of the Software may be copyrighted or trademarked (or a registration or claim made therefor) by the Custodian or its suppliers. The Fund shall not take any action with respect to the Software inconsistent with the foregoing acknowledgments, nor shall the Fund attempt to decompile, reverse engineer or modify the Software. The Fund may not copy, sell, lease or provide, directly or indirectly, any of the Software or any portion thereof to any other person or entity without the Custodian's prior written consent. The Fund may not remove any statutory copyright notice, or other notice including the software or on any media containing the Software. The Fund shall reproduce any such notice on any reproduction of the Software and shall add statutory copyright notice or other notice to the Software or media upon the Bank's request. Custodian agrees to provide reasonable training, instruction manuals and access to Custodian's "help desk" in connection -32- with the Fund's user support necessary to use of the Software. At the Fund's request, Custodian agrees to permit reasonable testing of the Software by the Fund. 2. The Fund shall obtain and maintain at its own cost and expense all equipment and services, including but not limited to communications services, necessary for it to utilize the Software and transmit Instructions to the Custodian. The Custodian shall not be responsible for the reliability, compatibility with the Software or availability of any such equipment or services or the performance or nonperformance by any nonparty to this Custody Agreement. 3. The Fund acknowledges that the Software, all data bases made available to the Fund by utilizing the Software (other than data bases relating solely to the assets of the Fund and transactions with respect thereto), and any proprietary data, processes, information and documentation (other than which are or become part of the public domain or are legally required to be made available to the public) (collectively, the "Information"), are the exclusive and confidential property of the Custodian. The Fund shall keep the Information confidential by using the same care and discretion that the Fund uses with respect to its own confidential property and trade secrets and shall neither make nor permit any disclosure (except as provided above) without the prior written consent of the Custodian. Upon termination of this Agreement or the Software license granted hereunder for any reason, the Fund shall return to the Custodian all copies of the Information which are in its possession or under its control or which the Fund distributed to third parties. The provisions of this Article shall not affect the copyright status of any of the Information which may be copyrighted and shall apply to all Information whether or not copyrighted. 4. The Custodian reserves the right to modify, at its own expense, the Software from time to time without prior notice and the Fund shall install new releases of the Software as the Custodian may direct. The Fund agrees not to modify or attempt to modify the Software without the Custodian's prior written consent. The Fund acknowledges that any modifications to the Software, whether by the Fund or the Custodian and whether with or without the Custodian's consent, shall become the property of the Custodian. 5. The Custodian and its manufacturers and suppliers make no warranties or representations of any kind with regard to the Software or the method(s) by which the Fund may transmit Instructions to the Custodian, express or implied, -33- including but not limited to any implied warranties of merchantability or fitness for a particular purpose. 6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED ------------------- BY UNITED STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE FUND OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S. LAWS PROHIBITED. The Fund hereby authorizes Custodian to report its name and address to government agencies to which Custodian is required to provide such information by law. 7. Where the method for transmitting Instructions by the Fund involves an automatic systems acknowledgment by the Custodian of its receipt of such Instructions, then in the absence of such acknowledgment the Custodian shall not be liable for any failure to act pursuant to such Instructions, the Fund may not claim that such Instructions were received by the Custodian, and the Fund shall deliver a Certificate by some other means. 8. (a) The Fund agrees that where it delivers to the Custodian Instructions hereunder, it shall be the Fund's sole responsibility to ensure that only persons duly authorized by the Fund transmit such Instructions to the Custodian. The Fund will cause all persons transmitting Instructions to the Custodian to treat applicable user and authorization codes, passwords and authentication keys with extreme care, and authorizes the Custodian to act in accordance with and rely upon Instructions received by it pursuant hereto, provided, however, that upon notification from the Fund of a breach in security or errors in the Software, the Custodian will follow such Instructions as the Fund may provide and its authority to act upon Instructions received through the Software shall be revoked until Custodian received a hard copy signed Certificate. (b) The Fund hereby represents, acknowledges and agrees that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Custodian. 9. The Fund hereby represents, warrants and covenants to the Custodian that this Agreement has been duly approved by a resolution of its Board of Trustees, and that its transmission of Instructions pursuant hereto shall at all times comply with the Investment Company Act. -34- 10. The Fund shall notify the Custodian of any errors, omissions or interruptions in, or delay or unavailability of, its ability to send Instructions as promptly as practicable, and in any event within 24 hours after the earliest of (i) discovery thereof, (ii) the Business Day on which discovery should have occurred through the exercise of reasonable care and (iii) in the case of any error, the date of actual receipt of the earliest notice which reflects such error, it being agreed that discovery and receipt of notice may only occur on a business day. The Custodian shall promptly advise the Fund whenever the Custodian learns of any errors, omissions or interruption in, or delay or unavailability of, the Fund's ability to send Instructions. 11. Custodian will indemnify and hold harmless the Fund with respect to any liability, damages, loss or claim incurred by or brought against Fund by reason any claim or infringement against any patent, copyright, license or other property right arising out or by reason of the Fund's use of the Software in the form provided under this Section. Custodian at its own expense will defend such action or claim brought against Fund to the extent that it is based on a claim that the Software in the form provided by Custodian infringes any patents, copyrights, license or other property right, provided that -------- Custodian is provided with reasonable written notice of such claim, provided that the Fund has not settled, compromised or confessed any such claim without the Custodian's written consent, in which event Custodian shall have no liability or obligation hereunder, and provided Fund cooperates with and assists Custodian in the defense of such claim. Custodian shall have the right to control the defense of all such claims, lawsuits and other proceedings. If, as a result of any claim of infringement against any patent, copyright, license or other property right, Custodian is enjoined from using the Software, or if Custodian believes that the System is likely to become the subject of a claim of infringement, Custodian at its option may in its sole discretion either (a) at its expenses procure the right for the Fund to continue to use the Software, or (b), replace or modify the Software so as to make it non-infringing, or (c) may discontinue the license granted herein upon written notice to Customer. 12. The Custodian agrees that it will, on behalf of itself and its affiliates, agents, officers and employees, treat all information relating to transactions affected by the Fund as confidential and not to be disclosed to any person, other than the Fund and its other service providers or as may be disclosed in the examination of any books or records by any person lawfully entitled to examine the same, except as may be authorized by the Fund by way of a Certificate. -35- Notwithstanding the foregoing, Custodian may disclose any such information to its counsel, its regulators, its auditors and to any other person when it is advised by its counsel that it may be liable for a failure to do so. ARTICLE XVI. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES 1. The Custodian is authorized and instructed to employ, as sub-custodian for each Series' Securities for which the primary market is outside the United States ("Foreign Securities") and other assets, the foreign banking institutions and foreign securities depositories and clearing agencies designated on Schedule I hereto ("Foreign Sub-Custodians"). The Fund may designate any additional foreign sub-custodian with which the Custodian has an agreement for such entity to act as the Custodian's agent, as its sub-custodian and any such additional foreign sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the employment of any one or more Foreign Sub- Custodians for maintaining custody of the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from Schedule I. 2. Each delivery of a Certificate to the Custodian in connection with a transaction involving the use of a Foreign Sub- Custodian shall constitute a representation and warranty by the Fund that its Board of Trustees, or its third party foreign custody manager as defined in Rule 17f-5 under the Investment Company Act of 1940, as amended, if any, has determined that use of such Foreign Sub-Custodian satisfies the requirements of such Investment Company Act of 1940 and such Rule 17f-5 thereunder. 3. The Custodian shall identify on its books as belonging to each Series of the Fund the Foreign Securities of such Series held by each Foreign Sub-Custodian. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims by the Fund or any Series against a Foreign Sub- Custodian as a consequence of any loss, damage, cost, expense, liability or claim sustained or incurred by the Fund or any Series if and to the extent that the Fund or such Series has not been made whole for any such loss, damage, cost, expense, liability or claim. -36- 4. Upon request of the Fund, the Custodian will, consistent with the terms of the applicable Foreign Sub-Custodian agreement, use reasonable efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any Foreign Sub-Custodian insofar as such books and records relate to the performance of such Foreign Sub-Custodian under its agreement with the Custodian on behalf of the Fund. 5. Until the Fund has entered into a Delegation Agreement with the Custodian pursuant to Rule 17f-5 (as amended on May 15, 1997) under the Investment Company Act of 1940 or similar agreement, the Custodian shall furnish annually to the Fund, as mutually agreed upon, information concerning the Foreign Sub-Custodians employed by the Custodian. Such Information shall be similar in kind and scope to that furnished to the Fund in connection with the Fund's initial approval of such Foreign Sub-Custodian. The Custodian also agrees to use reasonable and diligent efforts to enforce its rights under the relevant Foreign Sub-Custodian Agreement. 6. The Custodian shall transmit promptly to the Fund all notices, reports or other written information received pertaining to the Fund's Foreign Securities, including without limitation, notices of corporate action, proxies and proxy solicitation materials. 7. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for securities received for the account of any Series and delivery of securities maintained for the account of such Series may be effected in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivery of securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. 8. Notwithstanding any other provision in this Agreement to the contrary, with respect to any losses or damages arising out of or relating to any actions or omissions of any Foreign Sub-Custodian the sole responsibility and liability of the Custodian shall be to take appropriate action at the Fund's expense to recover such loss or damage from the Foreign Sub-Custodian. It is expressly understood and agreed that the Custodian's sole responsibility and liability shall -37- be limited to amounts so recovered from the Foreign Sub-Custodian. ARTICLE XVII. FX TRANSACTIONS 1. Whenever the Fund shall enter into an FX Transaction, the Fund shall promptly deliver to the Custodian a Certificate or Oral Instructions specifying with respect to such FX Transaction: (i) the Series to which such FX Transaction is specifically allocated; (b) the type and amount of Currency to be purchased by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the date on which the Currency to be purchased is to be delivered; (e) the date on which the Currency to be sold is to be delivered; and (f) the name of the person from whom or through whom such currencies are to be purchased and sold. Unless otherwise instructed by a Certificate or Oral Instructions, the Custodian shall deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to be sold on the date on which such delivery is to be made, as set forth in the Certificate, and shall receive, or instruct a Foreign Sub-Custodian to receive, the Currency to be purchased on the date as set forth in the Certificate. 2. Where the Currency to be sold is to be delivered on the same day as the Currency to be purchased, as specified in the Certificate or Oral Instructions, the Custodian or a Foreign Sub- Custodian may arrange for such deliveries and receipts to be made in accordance with the customs prevailing from time to time among brokers or dealers in Currencies, and such receipt and delivery may not be completed simultaneously. The Fund assumes all responsibility and liability for all credit risks involved in connection with such receipts and deliveries, which responsibility and liability shall continue until the Currency to be received by the Fund has been received in full. 3. Any FX Transaction effected by the Custodian in connection with this Agreement may be entered with the Custodian, any office, branch or subsidiary of The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as principal or otherwise through customary banking channels. The Fund may issue a standing Certificate with respect to FX Transactions but the Custodian may establish rules or limitations concerning any foreign exchange facility made available to the Fund. The Fund shall bear all risks of investing in Securities or holding Currency. Without limiting -38- the foregoing, the Fund shall bear the risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign depositories, exchange controls, asset freezes or other laws, rules, regulations or orders shall prohibit or impose burdens or costs on the transfer to, by or for the account of the Fund of Securities or any cash held outside the Fund's jurisdiction or denominated in Currency other than its home jurisdiction or the conversion of cash from one Currency into another currency. The Custodian shall not be obligated to substitute another Currency for a Currency (including a Currency that is a component of a Composite Currency Unit) whose transferability, convertibility or availability has been affected by such law, regulation, rule or procedure. Neither the Custodian nor any Foreign Sub-Custodian shall be liable to the Fund for any loss resulting from any of the foregoing events. ARTICLE XVIII. CONCERNING THE CUSTODIAN 1. The Custodian shall use reasonable care in the performance of its duties hereunder, and except as hereinafter provided neither the Custodian nor its nominee shall be liable for any loss or damage, including reasonable counsel fees, resulting from its action or omission to act or otherwise, either hereunder or under any Margin Account Agreement, except for any such loss or damage arising out of its own negligence or willful misconduct. In no event shall the Custodian be liable to the Fund or any third party for special, indirect or consequential damages or lost profits or loss of business, arising under or in connection with this Agreement, even if previously informed of the possibility of such damages and regardless of the form of action. The Custodian may, with respect to questions of law arising hereunder or under any Margin Account Agreement, apply for and obtain the advice and opinion of counsel to the Fund (at the Fund's expense), or of its own counsel (at its expense) and shall be fully protected with respect to anything done or omitted by it in good faith in conformity with such advice or opinion. The Custodian shall be liable to the Fund for any loss or damage resulting from the use of the Book-Entry System or any Depository arising by reason of any negligence or willful misconduct on the part of the Custodian or any of its employees or agents. 2. Without limiting the generality of the foregoing, the Custodian shall be under no obligation to inquire into, and shall not be liable for: -39- (a) the validity of the issue of any Securities purchased, sold, or written by or for the Fund, the legality of the purchase, sale or writing thereof, or the propriety of the amount paid or received therefor; (b) the legality of the sale or redemption of any Shares, or the propriety of the amount to be received or paid therefor; (c) the legality of the declaration or payment of any dividend by the Fund; (d) the legality of any borrowing by the Fund using Securities as collateral; (e) the legality of any loan of portfolio Securities, nor shall the Custodian be under any duty or obligation to see to it that any cash collateral delivered to it by a broker, dealer, or financial institution or held by it at any time as a result of such loan of portfolio Securities of the Fund is adequate collateral for the Fund against any loss it might sustain as a result of such loan. The Custodian specifically, but not by way of limitation, shall not be under any duty or obligation periodically to check or notify the Fund that the amount of such cash collateral held by it for the Fund is sufficient collateral for the Fund, but such duty or obligation shall be the sole responsibility of the Fund. In addition, the Custodian shall be under no duty or obliga-tion to see that any broker, dealer or financial institution to which portfolio Securities of the Fund are lent pursuant to Article X of this Agreement makes payment to it of any dividends or interest which are payable to or for the account of the Fund during the period of such loan or at the termination of such loan, provided, however, that the Custodian shall promptly notify the Fund in the event that such dividends or interest are not paid and received when due; or (f) the sufficiency or value of any amounts of money and/or Securities held in any Margin Account, Senior Security Account or Collateral Account in connection with transactions by the Fund. In addition, the Custodian shall be under no duty or obligation to see that any broker, dealer, futures commission merchant or Clearing Member makes payment to the Fund of any variation margin payment or similar payment which the Fund may be entitled to receive from such broker, dealer, futures commission merchant or Clearing Member, to see that any payment received by the Custodian from any broker, dealer, futures commission merchant or Clearing Member is the amount the Fund is entitled to receive, or to notify the Fund of the Custodian's receipt or non-receipt of any such payment. -40- 3. The Custodian shall not be liable for, or considered to be the Custodian of, any money, whether or not represented by any check, draft, or other instrument for the payment of money, received by it on behalf of the Fund until the Custodian actually receives and collects such money directly or by the final crediting of the account representing the Fund's interest at the Book-Entry System or the Depository. 4. The Custodian shall have no responsibility and shall not be liable for ascertaining or acting upon any calls, conversions, exchange offers, tenders, interest rate changes or similar matters relating to Securities held in the Depository, unless the Custodian shall have actually received timely notice from the Depository. In no event shall the Custodian have any responsibility or liability for the failure of the Depository to collect, or for the late collection or late crediting by the Depository of any amount payable upon Securities deposited in the Depository which may mature or be redeemed, retired, called or otherwise become payable. However, upon receipt of a Certificate from the Fund of an overdue amount on Securities held in the Depository the Custodian shall make a claim against the Depository on behalf of the Fund, except that the Custodian shall not be under any obligation to appear in, prosecute or defend any action, suit or proceeding in respect to any Securities held by the Depository which in its reasonable opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required. 5. The Custodian shall not be under any duty or obligation to take action to effect collection of any amount due to the Fund from the Transfer Agent of the Fund nor to take any action to effect payment or distribution by the Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of the Fund in accordance with this Agreement. 6. The Custodian shall not be under any duty or obligation to take action to effect collection of any amount if the Securities upon which such amount is payable are in default, or if payment is refused after due demand or presentation, unless and until (i) it shall be directed to take such action by a Certificate and (ii) it shall be assured to its satisfaction of reimbursement of its costs and expenses in connection with any such action. 7. The Custodian may in addition to the employment of Foreign Sub-Custodians pursuant to Article XVI appoint one or more banking institutions as Depository or Depositories, as Sub-Custodian or Sub- Custodians, or as Co-Custodian or -41- Co-Custodians including, but not limited to, banking institutions located in foreign countries, of Securities and money at any time owned by the Fund, upon such terms and conditions as may be approved in a Certificate or contained in an agreement executed by the Custodian, the Fund and the appointed institution. 8. The Custodian shall not be under any duty or obligation (i) to ascertain whether any Securities at any time delivered to, or held by it or by any Foreign Sub-Custodian, for the account of the Fund and specifically allocated to a Series are such as properly may be held by the Fund or such Series under the provisions of its then current prospectus, or (ii) to ascertain whether any transactions by the Fund, whether or not involving the Custodian, are such transactions as may properly be engaged in by the Fund. 9. The Custodian shall be entitled to receive and the Fund agrees to pay to the Custodian all reasonable out-of-pocket expenses and such compensation as may be agreed upon in writing from time to time between the Custodian and the Fund. The Custodian may charge such compensation as is agreed to in writing and any expenses with respect to a Series incurred by the Custodian in the performance of its duties pursuant to such agreement against any money specifically allocated to such Series. Unless and until the Fund instructs the Custodian by a Certificate to apportion any loss, damage, liability or expense among the Series in a specified manner, the Custodian shall also be entitled to charge against any money held by it for the account of a Series such Series' pro rata share (based on such Series, net asset value at the time of the charge to the aggregate net asset value of all Series at that time) of the amount of any loss, damage, liability or expense, including counsel fees, for which it shall be entitled to reimbursement under the provisions of this Agreement. The expenses for which the Custodian shall be entitled to reimbursement hereunder shall include, but are not limited to, the expenses of sub-custodians and foreign branches of the Custodian incurred in settling outside of New York City transactions involving the purchase and sale of Securities of the Fund. 10. The Custodian shall be entitled to rely upon any Certificate, notice or other instrument in writing received by the Custodian and reasonably believed by the Custodian to be a Certificate. The Custodian shall be entitled to rely upon any Oral Instructions actually received by the Custodian hereinabove provided for. The Fund agrees to forward to the Custodian a Certificate or facsimile thereof confirming such Oral Instructions in such manner so that such Certificate or -42- facsimile thereof is received by the Custodian, whether by hand delivery, telecopier or other similar device, or otherwise, by the close of business of the same day that such Oral Instructions are given to the Custodian. The Fund agrees that the fact that such confirming instructions are not received, or that contrary instructions are received, by the Custodian shall in no way affect the validity of the transactions or enforceability of the transactions hereby authorized by the Fund. The Fund agrees that the Custodian shall incur no liability to the Fund in acting upon Oral Instructions given to the Custodian hereunder concerning such transactions provided such instructions reasonably appear to have been received from an Authorized Person. 11. The Custodian shall be entitled to rely upon any instrument, instruction or notice received by the Custodian and reasonably believed by the Custodian to be given in accordance with the terms and conditions of any Margin Account Agreement. Without limiting the generality of the foregoing, the Custodian shall be under no duty to inquire into, and shall not be liable for, the accuracy of any statements or representations contained in any such instrument or other notice including, without limitation, any specification of any amount to be paid to a broker, dealer, futures commission merchant or Clearing Member. 12. The books and records pertaining to the Fund which are in the possession of the Custodian shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the Investment Company Act of 1940, as amended, and other applicable securities laws and rules and regulations. The Fund, or the Fund's authorized representatives, including the Fund's independent accountants shall have access to such books and records during the Custodian's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Custodian to the Fund or the Fund's authorized representative, and the Fund shall reimburse the Custodian its reasonable expenses of providing such copies. Upon reasonable request of the Fund, the Custodian shall provide in hard copy or on micro- film, whichever the Custodian elects, any records included in any such delivery which are maintained by the Custodian on a computer disc, or are similarly maintained, and the Fund shall reimburse the Custodian for its reasonable expenses of providing such hard copy or micro-film. 13. The Custodian shall provide the Fund with any report obtained by the Custodian on the system of internal accounting control of the Book-Entry System, the Depository or O.C.C., -43- and with such reports on its own systems of internal accounting control as the Fund may reasonably request from time to time. 14. The Fund agrees to indemnify the Custodian against and save the Custodian harmless from all liability, claims, losses and demands whatsoever, including reasonable attorney's fees, howsoever arising or incurred because of or in connection with this Agreement, including the Custodian's payment or non-payment of checks pursuant to paragraph 6 of Article XIII as part of any check redemption privilege program of the Fund, except for any such liability, claim, loss and demand arising out of the Custodian's own negligence or willful misconduct. 15. Subject to the foregoing provisions of this Agreement, including, without limitation, those contained in Article XVI and XVII the Custodian may deliver and receive Securities, and receipts with respect to such Securities, and arrange for payments to be made and received by the Custodian in accordance with the customs prevailing from time to time among brokers or dealers in such Securities. When the Custodian is instructed to deliver Securities against payment, delivery of such Securities and receipt of payment therefor may not be completed simultaneously. The Fund assumes all responsibility and liability for all credit risks involved in connection with the Custodian's delivery of Securities pursuant to instructions of the Fund, which responsibility and liability shall continue until final payment in full has been received by the Custodian. 16. Upon the occurrence of any event which causes or may cause any loss, damage or expense to the Fund or a Series the Custodian shall exercise its rights and remedies under the related agreement. 17. The Custodian shall have no duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied in this Agreement against the Custodian. ARTICLE XIX. TERMINATION 1. Either of the parties hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not -44- less than ninety (90) days after the date of giving of such notice. In the event such notice is given by the Fund, it shall be accompanied by a copy of a resolution of the Board of Trustees of the Fund, certified by the Secretary or any Assistant Secretary, electing to terminate this Agreement and designating a successor custodian or custodians, each of which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. In the event such notice is given by the Custodian, the Fund shall, on or before the termination date, deliver to the Custodian a copy of a resolution of the Board of Trustees of the Fund, certified by the Secretary or any Assistant Secretary, designating a successor custodian or custodians. In the absence of such designation by the Fund, the Custodian may designate a successor custodian which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon the date set forth in such notice this Agreement shall terminate, and the Custodian shall upon receipt of a notice of acceptance by the successor custodian on that date deliver directly to the successor custodian all Securities and money then owned by the Fund and held by it as Custodian, after deducting all fees, expenses and other amounts for the payment or reimbursement of which it shall then be entitled. 2. If a successor custodian is not designated by the Fund or the Custodian in accordance with the preceding paragraph, the Fund shall upon the date specified in the notice of termination of this Agreement and upon the delivery by the Custodian of all Securities (other than Securities held in the Book-Entry System which cannot be delivered to the Fund) and money then owned by the Fund be deemed to be its own custodian and the Custodian shall thereby be relieved of all duties and responsibilities pursuant to this Agreement, other than the duty with respect to Securities held in the Book Entry System which cannot be delivered to the Fund to hold such Securities hereunder in accordance with this Agreement. 3. Notwithstanding the foregoing, the Fund may terminate this Agreement upon the date specified in a written notice in the event of the "Bankruptcy" of The Bank of New York. As used in this sub- paragraph, the term "Bankruptcy" shall mean The Bank of New York's making a general assignment, arrangement or composition with or for the benefit of its creditors, or instituting or having instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or the entry of an order for relief under any applicable bankruptcy law or any relief under any bankruptcy or insolvency law or other similar law affecting creditors rights, or if a petition is presented for the winding up or -45- liquidation of the party or the resolution is passed for its winding up or liquidation, or it seeks, or becomes subject to, the appointment of an administrator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets or its taking any action in furtherance of, or indicating its consent to approval of, or acquiescence in any of the foregoing. ARTICLE XX. MISCELLANEOUS 1. Annexed hereto as Appendix A is a Certificate signed by two of the present Authorized Persons of the Fund under its seal, setting forth the names and the signatures of the present Authorized Persons. The Fund agrees to furnish to the Custodian a new Certificate in similar form in the event that any such present Authorized Person ceases to be an Authorized Person or in the event that other or additional Authorized Persons are elected or appointed. Until such new Certificate shall be received, the Custodian shall be fully protected in acting under the provisions of this Agreement upon Oral Instructions or signatures of the Authorized Persons as set forth in the last delivered Certificate. 2. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Custodian, shall be sufficiently given if addressed to the Custodian and mailed or delivered to it at its offices at 90 Washington Street, New York, New York 10286, or at such other place as the Custodian may from time to time designate in writing. 3. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Fund shall be sufficiently given if addressed to the Fund and mailed or delivered to it at its office at the address for the Fund first above written, or at such other place as the Fund may from time to time designate in writing. 4. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties with the same formality as this Agreement and approved by a resolution of the Board of Trustees of the Fund. 5. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Fund without the written consent of the -46- Custodian, or by the Custodian without the written consent of the Fund, authorized or approved by a resolution of the Fund's Board of Trustees. 6. This Agreement and any account established thereunder shall be construed in accordance with the laws of the State of New York without giving effect to conflict of laws principles thereof. Each party hereby consents to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder and hereby waives its right to trial by jury. 7. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument. 8. A copy of the Trust Instrument of the Fund is on file with the Secretary of the State of Delaware, and notice is hereby given that this instrument is executed on behalf of the Board of Trustees of the Fund as Trustees and not individually and that the obligations of this instrument are not binding upon any of the Trustees or shareholders individually but are binding only upon the assets and property of the Fund. 9. With respect to any obligation of the Fund, on behalf of any Series, arising out of this Agreement, the Custodian shall look for payment or satisfaction of such obligation solely to the assets and property of the Series to which such obligation relates as though the Series had separately contracted with the Custodian by separate written instrument with respect to each Series. -47- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers, thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year first above written. MITCHELL HUTCHINS INSTITUTIONAL SERIES By: ---------------------------- Name: Title: [SEAL] Attest: ----------------------- THE BANK OF NEW YORK [SEAL] By: ---------------------------- Name: Title: Attest: ----------------------- EX-8.A 7 EXHIBIT 8(A) -- FORM OF TRANSFER AGENCY AGREEMENT Exhibit 8(a) TRANSFER AGENCY AND SERVICES AGREEMENT THIS AGREEMENT, dated as of this 3rd day of August, 1998 between MITCHELL HUTCHINS INSTITUTIONAL SERIES (the "Fund"), a Delaware business trust having its principal place of business at 1285 Avenue of the Americas, New York, NY 10019 and FIRST DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts corporation with principal offices at 4400 Computer Drive, Westboro, Massachusetts 01581. 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; WHEREAS, the Fund initially intends to offer Shares in that Portfolio identified in the attached Exhibit 1, such Portfolio, together with all other Portfolios subsequently established by the Fund shall be subject to this Agreement in accordance with Article 14; WHEREAS, the Fund, on behalf of the Portfolios, desires to appoint FDISG as its transfer agent, dividend disbursing agent and agent in connection with certain other activities and FDISG desires to accept such appointment; NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, the Fund and FDISG agree as follows: Article 1 Definitions. ----------- 1.1 Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: (a) "Articles of Incorporation" shall mean the Articles of Incorporation, Declaration of Trust, or other similar organizational document as the case may be, of the Fund as the same may be amended from time to time. (b) "Authorized Person" shall be deemed to include (i) any authorized officer of the Fund; or (ii) any person, whether or not such person is an officer or employee of the Fund, duly authorized to give Oral Instructions or Written Instructions on behalf of the Fund as indicated in writing to FDISG from time to time. (c) "Board of Directors" shall mean the Board of Directors or Board of Trustees of the Fund, as the case may be. (d) "Commission" shall mean the Securities and Exchange Commission. (e) "Custodian" refers to any custodian or subcustodian of securities and other property which the Fund may from time to time deposit, or cause to be deposited or held under the name or account of such a custodian pursuant to a Custodian Agreement. (f) "1934 Act" shall mean the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, all as amended from time to time. (g) "1940 Act" shall mean the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, all as amended from time to time. (h) "Oral Instructions" shall mean instructions, other than Written Instructions, actually received by FDISG from a person reasonably believed by FDISG to be an Authorized Person; (i) "Portfolio" shall mean each separate series of shares offered by the Fund representing interests in a separate portfolio of securities and other assets; (j) "Prospectus" shall mean the most recently dated Fund Prospectus and Statement of Additional Information, including any supplements thereto, if any, which has become effective under the Securities Act of 1933 and the 1940 Act. (k) "Shares" refers collectively to such shares of capital stock or beneficial interest, as the case may be, or class thereof, of each respective Portfolio of the Fund as may be issued from time to time. (l) "Shareholder" shall mean a record owner of Shares of each respective Portfolio of the Fund. (m) "Written Instructions" shall mean a written communication signed by a person reasonably believed by FDISG to be an Authorized Person and actually received by FDISG. Written Instructions shall include manually executed originals and authorized electronic transmissions, including telefacsimile of a manually executed original or other process. Article 2 Appointment of FDISG. -------------------- The Fund, on behalf of the Portfolios, hereby appoints and constitutes FDISG as transfer agent and dividend disbursing agent for Shares of each respective Portfolio of the Fund and as shareholder servicing agent for the Fund, and FDISG hereby accepts such appointments and agrees to perform the duties hereinafter set forth. (As used herein, "shareholder servicing agent" refers to the services contemplated by this Agreement and not to those described in the Prospectus as being provided by financial intermediaries, such as banks and savings associations, to the holders of the Fund's Financial Intermediary shares.) 2 Article 3 Duties of FDISG. --------------- 3.1 FDISG shall be responsible for: (a) Administering and/or performing the customary services of a transfer agent; acting as service agent in connection with dividend and distribution functions; and performing shareholder account and administrative agent functions in connection with the issuance, transfer and redemption or repurchase (including coordination with the Custodian) of Shares of each Portfolio, as more fully described in the written schedule of Duties of FDISG annexed hereto as Schedule A and incorporated herein, and in accordance with the terms of the Prospectus of the Fund on behalf of the applicable Portfolio, applicable law and the procedures established from time to time between FDISG and the Fund. (b) Recording the issuance of Shares and maintaining pursuant to Rule 17Ad-10(e) of the 1934 Act a record of the total number of Shares of each Portfolio which are authorized, based upon data provided to it by the Fund, and issued and outstanding. FDISG shall provide the Fund on a regular basis with the total number of Shares of each Portfolio which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Fund. (c) Notwithstanding any of the foregoing provisions of this Agreement, FDISG shall be under no duty or obligation to inquire into, and shall not be liable for: (i) the legality of the issuance or sale of any Shares or the sufficiency of the amount to be received therefor; (ii) the legality of the redemption of any Shares, or the propriety of the amount to be paid therefor; (iii) the legality of the declaration of any dividend by the Board of Directors, or the legality of the issuance of any Shares in payment of any dividend; or (iv) the legality of any recapitalization or readjustment of the Shares. 3.2 In addition, the Fund shall (i) identify to FDISG in writing those transactions and assets to be treated as exempt from blue sky reporting for each State and (ii) verify the establishment of transactions for each State on the system prior to activation and thereafter monitor the daily activity for each State. The responsibility of FDISG for the Fund's blue sky State registration status is solely limited to the initial establishment of transactions subject to blue sky compliance by the Fund and the reporting of such transactions to the Fund as provided above. 3.3 In addition to the duties set forth herein, FDISG shall perform such other duties and functions, and shall be paid such amounts therefor, as may from time to time be agreed upon in writing between the Fund and FDISG. 3.4 FDISG 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 3 that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund. The Fund agrees to reimburse FDISG for all reasonable out of pocket expenses incurred by FDISG in connection with FDISG's compliance with this Section 3.4. 3.5 In addition to performing the foregoing services, the Fund hereby engages FDISG as its non-exclusive service provider with respect to the Print/Mail Services as set forth in Schedule B for the fees also identified in Schedule B. FDISG agrees to perform the services and its obligations subject to the terms and conditions of this Agreement, recognizing that certain of such communications with Shareholders will originate directly from PaineWebber and not be subject to the charges set forth in Schedule B. Article 4 Recordkeeping and Other Information. ----------------------------------- 4.1 FDISG shall create and maintain all records required of it pursuant to its duties hereunder and as set forth in Schedule A in accordance with all applicable laws, rules and regulations, including records required by Section 31(a) of the 1940 Act. Where applicable, such records shall be maintained by FDISG for the periods and in the places required by Rule 31a-2 under the 1940 Act. 4.2 To the extent required by Section 31 of the 1940 Act, FDISG agrees that all such records prepared or maintained by FDISG relating to the services to be performed by FDISG hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such section, and will be surrendered promptly to the Fund on and in accordance with the Fund's request. 4.3 In case of any requests or demands for the inspection of Shareholder records of the Fund, FDISG will endeavor to notify the Fund of such request and secure Written Instructions as to the handling of such request. FDISG reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to comply with such request. Article 5 Fund Instructions. ----------------- 5.1 FDISG will have no liability when acting upon Written or Oral Instructions reasonably believed by FDISG to have been executed or orally communicated by an Authorized Person and will not be held to have any notice of any change of authority of any person until receipt of a Written Instruction thereof from the Fund. FDISG will also have no liability when processing Share certificates which it reasonably believes to bear the proper manual or facsimile signatures of the officers of the Fund and the proper countersignature of FDISG. 5.2 At any time, FDISG may request Written Instructions from the Fund and may seek advice from legal counsel for the Fund, or its own legal counsel, with respect to any matter arising in connection with this Agreement, and it shall not be liable for any action taken or not taken or suffered by it in good faith in accordance with such Written Instructions or in 4 accordance with the opinion of counsel for the Fund or for FDISG, except that FDISG remains liable for any action taken or not taken by it which constitutes willful misfeasance, bad faith or negligence by FDISG or its employees or the reckless disregard by FDISG or its employees of its duties and obligations under this Agreement. Written Instructions requested by FDISG will be provided by the Fund within a reasonable period of time. 5.3 FDISG, its officers, agents or employees, shall accept Oral Instructions or Written Instructions given to them by any person representing or acting on behalf of the Fund only if said representative is an Authorized Person. The Fund agrees that all Oral Instructions shall be followed within one business day by confirming Written Instructions, and that the Fund's failure to so confirm shall not impair in any respect FDISG's right to rely on Oral Instructions. Article 6 Compensation. ------------ 6.1 The Fund on behalf of each of the Portfolios will compensate FDISG for the performance of its obligations hereunder in accordance with the fees set forth in the written Fee Schedule annexed hereto as Schedule B and incorporated herein. 6.2 In addition to those fees set forth in Section 6.1 above, the Fund on behalf of each of the Portfolios agrees to pay, and will be billed separately for, reasonable out-of-pocket expenses incurred by FDISG in the performance of its duties hereunder. Out-of-pocket expenses shall include, but shall not be limited to, the items specified in the written schedule of out-of-pocket charges annexed hereto as Schedule C and incorporated herein. Schedule C may be modified by written agreement between the parties. Unspecified out-of-pocket expenses shall be limited to those out-of-pocket expenses reasonably incurred by FDISG in the performance of its obligations hereunder and pre-approved by the Fund. 6.3 The Fund on behalf of each of the Portfolios agrees to pay all fees and out-of-pocket expenses within fifteen (15) days following the receipt of the respective invoice. 6.4 Any compensation agreed to hereunder may be adjusted from time to time by attaching to Schedule B a revised Fee Schedule executed and dated by the parties hereto. Article 7 Documents. --------- In connection with the appointment of FDISG, the Fund shall, on or before the date this Agreement goes into effect, but in any case within a reasonable period of time for FDISG to prepare to perform its duties hereunder, deliver or caused to be delivered to FDISG the documents set forth in the written schedule of Fund Documents annexed hereto as Schedule D. Article 8 Transfer Agent System. --------------------- 8.1 FDISG shall retain title to and ownership of any and all data bases, computer programs, screen formats, report formats, interactive design techniques, derivative works, inventions, discoveries, patentable or copyrightable matters, concepts, expertise, patents, 5 copyrights, trade secrets, and other related legal rights utilized by FDISG in connection with the services provided by FDISG to the Fund herein (the "FDISG System") provided, however, it is understood that the Fund shall retain ownership of all Shareholder records and information maintained by FDISG on the FDISG System. 8.2 FDISG hereby grants to the Fund a limited license to the FDISG System for the sole and limited purpose of having FDISG provide the services contemplated hereunder and nothing contained in this Agreement shall be construed or interpreted otherwise and such license shall immediately terminate with the termination of this Agreement. 8.3 In the event that the Fund, including any affiliate or agent of the Fund, or any third party acting on behalf of the Fund is provided with direct access to the FDISG System for either account inquiry or to transmit transaction information, including but not limited to maintenance, exchanges, purchases and redemptions, such direct access capability shall be limited to direct entry to the FDISG System by means of on-line mainframe terminal entry or PC emulation of such mainframe terminal entry and any other non-conforming method of transmission of information to the FDISG System is strictly prohibited without the prior written consent of FDISG. 8.4 In the event that the Fund, including any affiliate or agent of the Fund, or any third party desires to transmit certain transaction instructions directly to the FDISG System and produce reports associated with these transactions from a remote location, FDISG agrees to make available its proprietary Remote Trade Entry ("RTE") Software. The Fund's use of RTE shall be in accordance with the terms of this Agreement. Any third party utilizing RTE shall execute and be bound by the terms and conditions of the Remote Trade Entry License Agreement attached hereto as Exhibit 1 or such other agreement that is acceptable to both the Fund and FDISG. FDISG hereby acknowledges that Shareholders which utilize RTE shall in no event be deemed to be agents of the Fund. Article 9 Representations and Warranties. ------------------------------ 9.1 FDISG represents and warrants to the Fund that: (a) it is a corporation duly organized, existing and in good standing under the laws of the Commonwealth of Massachusetts; (b) it is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement; (c) all requisite corporate proceedings have been taken to authorize it to enter into this Agreement; (d) it is duly registered with its appropriate regulatory agency as a transfer agent and such registration will remain in effect for the duration of this Agreement; and 6 (e) it has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. 9.2 The Fund represents and warrants to FDISG that: (a) it is duly organized, existing and in good standing under the laws of the jurisdiction in which it is organized; (b) it is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into this Agreement; (c) all corporate proceedings required by said Articles of Incorporation, By-Laws and applicable laws have been taken to authorize it to enter into this Agreement; (d) a registration statement under the Securities Act of 1933, as amended, and the 1940 Act on behalf of each of the Portfolios is currently effective and will remain effective, and all appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Fund being offered for sale; and (e) all outstanding Shares are validly issued, fully paid and non- assessable and when Shares are hereafter issued in accordance with the terms of the Fund's Articles of Incorporation and its Prospectus with respect to each Portfolio, such Shares shall be validly issued, fully paid and non-assessable. Article 10 Indemnification. --------------- 10.1 Except as set forth in Sections 10.2 and 10.3 below, FDISG shall not be responsible for and the Fund on behalf of each Portfolio shall indemnify and hold FDISG harmless from and against any and all claims, costs, expenses (including reasonable attorneys' fees), losses, damages, charges, payments and liabilities of any sort or kind which may be asserted against FDISG or for which FDISG may be held to be liable (a "Claim") arising out of or attributable to any of the following: (a) any actions of FDISG required to be taken pursuant to this Agreement; (b) FDISG's reasonable reliance on, or reasonable use of information, data, records and documents (including but not limited to magnetic tapes, computer printouts, hard copies and microfilm copies) received by FDISG from the Fund, or any authorized third party acting on behalf of the Fund in the performance of FDISG's duties and obligations hereunder; (c) the reliance on, or the implementation of, any Written or Oral Instructions or any other instructions or requests of the Fund on behalf of the applicable Portfolio; (d) the offer or sales of shares in violation of any requirement under the 7 securities laws or regulations of any state that such shares be registered in such state or in violation of any stop order or other determination or ruling by any state with respect to the offer or sale of such shares in such state; and (e) the Fund's refusal or failure to comply with the terms of this Agreement, or any Claim which arises out of the Fund's negligence or misconduct or the breach of any representation or warranty of the Fund made herein. 10.2 FDISG shall not be indemnified under Section 10.1 against any liability (or any expense incidental to such liability) arising out of the willful misfeasance, bad faith or negligence of FDISG or its employees or the reckless disregard by FDISG or its employees of its duties and obligations under this Agreement. 10.3 FDISG shall indemnify and hold the Fund, on behalf of each Portfolio, harmless from and against any and all claims, costs, expenses (including reasonable attorneys' fees), losses, damages, charges, payments and liabilities of any sort or kind which may be asserted against the Fund or for which the Fund may be held to be liable (a "Claim") arising out of or attributable to the willful misfeasance, bad faith or negligence of FDISG or its employees or the reckless disregard by FDISG or its employees of it duties and obligations under this Agreement. 10.4 In any case in which a party may be asked to indemnify or hold the other party harmless, the party seeking indemnification ("Indemnified Party") will notify the other party promptly after identifying any situation which it believes presents or appears to present a claim for indemnification against the other party, although the failure to do so shall not prevent recovery by the Indemnified Party, and shall keep the other party advised with respect to all developments concerning such situation. The party who may be required to indemnify ("Indemnifying Party") shall have the option to defend the Indemnified Party against any Claim which may be the subject of this indemnification and in the event that the Indemnifying Party so elects, such defense shall be conducted by counsel chosen by the Indemnifying Party and satisfactory to the Indemnified Party, and thereupon the Indemnifying Party shall take over complete defense of the Claim and the Indemnified Party shall sustain no further legal or other expenses in respect of such Claim. The Indemnified Party will not confess any Claim or make any compromise in any case in which the Indemnifying Party will be asked to provide indemnification, except with the Indemnifying Party's prior written consent. The obligations of the parties hereto under this Article 10 shall survive the termination of this Agreement. 10.5 Any claim for indemnification under this Agreement must be made prior to the earlier of: (a) one year after the Indemnifying Party becomes aware of the event for which indemnification is claimed; or (b) one year after the earlier of the termination of this Agreement or the expiration of the term of this Agreement. 8 10.6 Except for remedies that cannot be waived as a matter of law (and injunctive or provisional relief), the provisions of this Article 10 shall be the sole and exclusive remedy for claims or other actions or proceedings to which a party's indemnification obligations pursuant to this Article 10 may apply. Article 11 Standard of Care and Limitation of Liability -------------------------------------------- 11.1 FDISG shall at all times act in good faith and agrees to use its best efforts within commercially reasonable limits to ensure the accuracy of all services performed under this Agreement, but assumes no responsibility for loss or damage to the Fund unless said errors are caused by FDISG's own negligence, bad faith, willful misconduct or that of its employees, or the reckless disregard by FDISG or its employees of its duties and obligations under this Agreement. 11.2 Neither party may assert any cause of action against the other party under this Agreement that accrued more than two (2) years prior to the filing of the suit (or commencement of arbitration proceedings) alleging such cause of action. 11.3 Each party shall have the duty to mitigate damages for which the other party may become responsible. 11.4 The members of the Board of Directors of the Fund and the Shareholders of any Portfolio shall not be liable for any obligations of the Fund or the Portfolios under this Agreement, and FDISG agrees, that in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Fund or the particular Portfolio in settlement of such right or claims, and not to such members of the Board of Directors or Shareholders. FDISG further agrees that it will look only to the assets and property of a particular Portfolio in asserting any right or claims under this Agreement with respect to services rendered with respect to that Portfolio and will not seek to obtain settlement of such rights or claims from the assets of any other Portfolio of the Fund. Article 12 Consequential Damages. --------------------- 12.1 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL EITHER PARTY TO THIS AGREEMENT, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY TO THE OTHER CONTRACTING PARTY FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Article 13 Term and Termination. -------------------- 9 13.1 This Agreement shall be effective on the date first written above and shall continue for a period of five (5) years (the "Initial Term"). 13.2 Upon the expiration of the Initial Term, this Agreement shall automatically renew for successive terms of one (1) year ("Renewal Terms") each provided that it may be terminated by either party during a Renewal Term upon written notice given at least sixty (60) days prior to termination. 13.3 In the event a termination notice is given by the Fund, it shall be accompanied by a resolution of the Board of Directors, certified by the Secretary of the Fund, designating a successor transfer agent or transfer agents. Upon such termination and at the expense of the Fund, FDISG will deliver to such successor a certified list of shareholders of the Fund (with names and addresses), and all other relevant books, records, correspondence and other Fund records or data in the possession of FDISG, and FDISG will cooperate with the Fund and any successor transfer agent or agents in the substitution process. 13.4 If a party hereto is guilty of a material failure to perform its duties and obligations hereunder (a "Defaulting Party") the other party (the "Non-Defaulting Party") may give written notice thereof to the Defaulting Party, and if such material breach shall not have been remedied within thirty (30) days after such written notice is given, then the Non-Defaulting Party may terminate this Agreement by giving thirty (30) days written notice of such termination to the Defaulting Party. If FDISG is the Non-Defaulting Party, its termination of this Agreement shall not constitute a waiver of any other rights or remedies of FDISG with respect to services performed prior to such termination or rights of FDISG to be reimbursed for out-of-pocket expenses. In all cases, termination by the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party of any other rights it might have under this Agreement or otherwise against the Defaulting Party. Article 14 Additional Portfolios. --------------------- 14.1 In the event that the Fund establishes one or more Portfolios in addition to the Portfolio identified in Exhibit 1, with respect to which the Fund desires to have FDISG render services as transfer agent under the terms hereof, the Fund shall so notify FDISG in writing, and if FDISG agrees in writing to provide such services, Exhibit 1 shall be amended to include such additional Portfolios. Article 15 Confidentiality. --------------- 15.1 The parties agree that the Proprietary Information (defined below) and the contents of this Agreement (collectively "Confidential Information") are confidential information of the parties and their respective licensors. The Fund and FDISG shall exercise at least the same degree of care, but not less than reasonable care, to safeguard the confidentiality of the Confidential Information of the other as it would exercise to protect its own confidential information of a similar nature. The Fund and FDISG shall not duplicate, sell or disclose to others the Confidential Information of the other, in whole or in part, without the prior written 10 permission of the other party, except as may be required by applicable law or at the request of the Commission or other governmental agency. The parties further agree that a breach of this Section 15.1 would irreparably damage the other party and accordingly agree that each of them is entitled, without bond or other security, to an injunction or injunctions to prevent breaches of this provision. The Fund and FDISG may, however, disclose Confidential Information to their respective parent corporation, their respective affiliates, their subsidiaries and affiliated companies and employees, provided that each shall use reasonable efforts to ensure that the Confidential Information is not duplicated or disclosed in breach of this Agreement. The Fund and FDISG may also disclose the Confidential Information to independent contractors, auditors, and professional advisors. Notwithstanding the previous sentence, in no event shall either the Fund or FDISG disclose the Confidential Information to any competitor of the other without specific, prior written consent. 15.2 Proprietary Information means: (a) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing strategies, finance, operations, customer relationships, customer profiles, the Fund's shareholders, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of the Fund or FDISG, their respective subsidiaries and affiliated companies (including, with respect to the Fund, its investment adviser and principal underwriter) and the customers, clients and suppliers of any of them; (b) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords the Fund or FDISG a competitive advantage over its competitors; and (c) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, know-how, show-how and trade secrets, whether or not patentable or copyrightable. 15.3 Confidential Information includes, without limitation, all documents, inventions, substances, engineering and laboratory notebooks, drawings, diagrams, specifications, bills of material, equipment, prototypes and models, and any other tangible manifestation of the foregoing of either party which now exist or come into the control or possession of the other. Article 16 Security and Disaster Recovery ------------------------------ 16.1 FDISG represents and warrants that, to the best of its knowledge, the various procedures and systems which FDISG has implemented with regard to the safeguarding from loss or damage attributable to fire, theft or any other cause (including provision for 24 hours a day restricted access) of the Fund's blank checks, certificates, records and other data and 11 FDISG'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. FDISG shall review such systems and procedures on a periodic basis and the Fund shall have access to review these systems and procedures. 16.2 FDISG, or an affiliate of FDISG, 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, FDISG shall, at no additional expense to the Fund, take all reasonable steps to minimize service interruptions. FDISG shall 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 FDISG and provided further that FDISG has complied with the provisions of this Article 16. Article 17 Force Majeure. ------------- 17.1 Subject to the provisions of Article 16, no party shall be liable for any default or delay in the performance of its obligations under this Agreement if and to the extent such default or delay is caused, directly or indirectly, by (i) fire, flood, elements of nature or other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or civil disorders in any country, (iii) any act or omission of the other party or any governmental authority; (iv) any labor disputes (whether or not the employees' demands are reasonable or within the party's power to satisfy); or (v) nonperformance by a third party or any similar cause beyond the reasonable control of such party, including without limitation, failures or fluctuations in telecommunications or other equipment. In any such event, the non-performing party shall be excused from any further performance and observance of the obligations so affected only for as long as such circumstances prevail and such party continues to use commercially reasonable efforts to recommence performance or observance as soon as practicable. Article 18 Assignment and Subcontracting. ----------------------------- 18.1 This Agreement, its benefits and obligations shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned or otherwise transferred by either party hereto, without the prior written consent of the other party, which consent shall not be unreasonably withheld; provided, however, that FDISG may, in its sole discretion, assign all its right, title and interest in this Agreement to an affiliate, parent or subsidiary, or to the purchaser of substantially all of its business. FDISG may, in its sole discretion, engage subcontractors to perform any of the obligations contained in this Agreement to be performed by FDISG; however, such subcontractors shall be bound by the terms of this Agreement as though an original party hereto, and FDISG shall be responsible for the performance of such subcontractors under the terms and conditions of this Agreement as if such performance were its own, unless such subcontractors are PaineWebber Incorporated, Mitchell Hutchins Asset Management, Inc. or an affiliated person of either. 12 18.2 Notwithstanding Section 18.1 above, FDISG may assign its rights and delegate its duties under the Agreement to PaineWebber Incorporated or Mitchell Hutchins Asset Management Inc., or an affiliated person of either, upon mutual prior written acknowledgment of such assignment by FDISG and the Fund. Article 19 Arbitration. ----------- 19.1 Any claim or controversy arising out of or relating to this Agreement, or breach hereof, shall be settled by arbitration administered by the National Association of Securities Dealers in New York, New York in accordance with its applicable rules, except that the Federal Rules of Evidence and the Federal Rules of Civil Procedure with respect to the discovery process shall apply. 19.2 The parties hereby agree that judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. 19.3 The parties acknowledge and agree that the performance of the obligations under this Agreement necessitates the use of instrumentalities of interstate commerce and, notwithstanding other general choice of law provisions in this Agreement, the parties agree that the Federal Arbitration Act shall govern and control with respect to the provisions of this Article 19. Article 20 Notice. ------ Any notice or other instrument authorized or required by this Agreement to be given in writing to the Fund or FDISG, shall be sufficiently given if addressed to that party and received by it at its office set forth below or at such other place as it may from time to time designate in writing. To the Fund: Mitchell Hutchins Institutional Series 1285 Avenue of the Americas New York, NY 10019 Attention: Colleen McDermott with copies to: Dianne E. O'Donnell, Secretary To FDISG: First Data Investor Services Group, Inc. 4400 Computer Drive Westboro, Massachusetts 01581 Attention: President 13 with a copy to FDISG's General Counsel Article 21 Governing Law/Venue. ------------------- The laws of the State of New York, excluding the laws on conflicts of laws, shall govern the interpretation, validity, and enforcement of this Agreement. All actions arising from or related to this Agreement shall be brought in the state and federal courts sitting in New York City, and FDISG and the Fund hereby submit themselves to the exclusive jurisdiction of those courts. Article 22 Counterparts. ------------ This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; but such counterparts shall, together, constitute only one instrument. Article 23 Captions. -------- The captions of this Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. Article 24 Publicity. --------- Neither FDISG nor the Fund shall release or publish news releases, public announcements, advertising or other publicity relating to this Agreement or to the transactions contemplated by it without the prior review and written approval of the other party; provided, however, that either party may make such disclosures as are required by legal, accounting or regulatory requirements. Article 25 Relationship of Parties. ----------------------- 25.1 The parties agree that they are independent contractors and not partners or co-venturers and nothing contained herein shall be interpreted or construed otherwise. 25.2 Upon reasonable notice by the Fund, FDISG shall make available during regular business hours such of its facilities and premises employed in connection with the performance of its duties under this Agreement for reasonable visitation by the Fund, or any person retained by the Fund, as may be necessary for the Fund to evaluate the quality of the services performed by FDISG pursuant hereto. Article 26 Entire Agreement; Severability. ------------------------------ 26.1 This Agreement, including Schedules, Addenda, and Exhibits hereto, constitutes the entire Agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous proposals, agreements, contracts, representations, and understandings, whether written or oral, between the parties with respect to the subject matter 14 hereof. No change, termination, modification, or waiver of any term or condition of the Agreement shall be valid unless in writing signed by each party. No such writing shall be effective as against FDISG unless said writing is executed by a Senior Vice President, Executive Vice President, or President of FDISG. A party's waiver of a breach of any term or condition in the Agreement shall not be deemed a waiver of any subsequent breach of the same or another term or condition. 26.2 The parties intend every provision of this Agreement to be severable. If a court of competent jurisdiction determines that any term or provision is illegal or invalid for any reason, the illegality or invalidity shall not affect the validity of the remainder of this Agreement. In such case, the parties shall in good faith modify or substitute such provision consistent with the original intent of the parties. Without limiting the generality of this paragraph, if a court determines that any remedy stated in this Agreement has failed of its essential purpose, then all other provisions of this Agreement, including the limitations on liability and exclusion of damages, shall remain fully effective. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, as of the day and year first above written. MITCHELL HUTCHINS INSTITUTIONAL SERIES By: -------------------------- Title: ----------------------- FIRST DATA INVESTOR SERVICES GROUP, INC. By: -------------------------- Title: ----------------------- 15 Exhibit 1 LIST OF PORTFOLIOS ------------------ Mitchell Hutchins LIR Select Money Fund 16 Schedule A DUTIES OF FDISG --------------- 1. Shareholder Information. FDISG shall maintain a record of the number ----------------------- of Shares held by each Shareholder of record which shall include name, address and taxpayer identification number. FDISG has been informed by the Fund that it has not and does not intend to issue share certificates. 2. Shareholder Services. FDISG shall respond as appropriate to all -------------------- inquiries and communications from Shareholders relating to Shareholder accounts with respect to its duties hereunder and as may be from time to time mutually agreed upon between FDISG and the Fund. As part of these services, FDISG shall provide toll-free lines (at the expense of the Fund) for direct shareholder use, plus customer liaison staff for on-line inquiry response. 3. Mailing Communications to Shareholders; Proxy Materials. FDISG will ------------------------------------------------------- address and mail to Shareholders whose Fund accounts are not linked to a PaineWebber account (each a "Fund-only account"), all reports to such Shareholders, and dividend and distribution notices. At the expense of the Fund, FDISG shall provide such Shareholder account information as is reasonably necessary to facilitate the mailing and tabulation of proxy material for the Fund's meetings of Shareholders. FDISG understands that the Fund normally retains the services of other service providers in connection with proxy solicitations. However, in connection with meetings of Shareholders, if requested in advance by the Fund, FDISG will prepare Shareholder lists, mail and certify as to the mailing of proxy materials, process and tabulate returned proxy cards, report on proxies voted prior to meetings, act as inspector of election at meetings and certify Shares voted at meetings. If the Fund retains a third party in connection with a proxy solicitation, FDISG agrees to take reasonable steps to facilitate such party's activities. 4. Sales of Shares --------------- (a) FDISG shall not be required to issue any Shares of the Fund where it has received a Written Instruction from the Fund or official notice from any appropriate authority that the sale of the Shares of the Fund has been suspended or discontinued. The existence of such Written Instructions or such official notice shall be conclusive evidence of the right of FDISG to rely on such Written Instructions or official notice. FDISG recognizes that the Fund and PaineWebber reserve the right to reject any purchase order and to suspend the offering of Fund Shares for a period of time as provided in the Prospectus; the Fund will provide FDISG with Written Instructions in connection with the exercise of this right. (b) In the event that any wire of Federal Funds for the payment of money in connection with the sale of Shares is not received or voided or reversed for any reason, FDISG will endeavor to: (I) give prompt notice of such occurrence to the Fund or its designee; (ii) place a stop transfer order against all Shares issued as a result of such order, if any; and (iii) take such actions as FDISG may from time to time deem appropriate. 17 (c) FDISG shall maintain necessary communication with the Fund's custodian in order to report daily sales activity and transmit sales proceeds to such custodian on a daily basis for those days on which the Fund is open for business. 5. Transfer and Repurchase ----------------------- (a) FDISG shall process all requests to transfer or redeem Shares in accordance with the transfer or repurchase procedures set forth in the Fund's Prospectus. (b) FDISG will transfer or repurchase Shares upon receipt of Oral or Written Instructions accompanied by such documents as FDISG reasonably may deem necessary or otherwise pursuant to the Prospectus. (c) FDISG reserves the right to refuse to transfer or repurchase Shares until it is satisfied that the endorsement on the instructions is valid and genuine. FDISG also reserves the right to refuse to transfer or repurchase Shares until it is satisfied that the requested transfer or repurchase is legally authorized, and it shall incur no liability for the refusal, in good faith, to make transfers or repurchases which FDISG, in its good judgment, deems improper or unauthorized, or until it is reasonably satisfied that there is no basis to any claims adverse to such transfer or repurchase. (d) When Shares are redeemed, FDISG shall, upon receipt of the instructions and documents in proper form, deliver to the Custodian and the Fund or its designee a notification setting forth the number of Shares to be repurchased. Such repurchased shares shall be reflected on appropriate accounts maintained by FDISG reflecting outstanding Shares of the Fund and Shares attributed to individual accounts. (e) FDISG shall, upon receipt of the monies provided to it by the Custodian for the repurchase of Shares, pay such monies as are received from the Custodian, all in accordance with the procedures described in the written instruction received by FDISG from the Fund. (f) FDISG shall not process or effect any repurchase with respect to Shares of the Fund after receipt by FDISG or its agent of notification of the suspension of the determination of the net asset value of the Fund. 6. Dividends --------- (a) Upon the declaration of each dividend and each capital gains distribution by the Board of Directors of the Fund with respect to Shares of the Fund, the Fund shall furnish or cause to be furnished to FDISG Written Instructions setting forth the date of the declaration of such dividend or distribution, the ex-dividend date, the date of payment thereof, the record date as of which Shareholders entitled to payment shall be determined, the amount payable per Share to the Shareholders of record as of that date, the total amount payable on the payment date and whether such dividend or distribution is to be paid in Shares at net asset value. 18 (b) On or before the payment date specified in such resolution of the Board of Directors, the Fund will provide FDISG with sufficient cash to make payment to the Shareholders of record as of such payment date. (c) If FDISG does not receive sufficient cash from the Fund to make total dividend and/or distribution payments to all Shareholders of the Fund as of the payable date, FDISG will, upon notifying the Fund, withhold payment to all such Shareholders until sufficient cash is provided to FDISG. 7. Additional Services. -------------------- (a) Calculate Shareholder Servicing Fee payments and broker trail commissions. (b) Monitor and maintain all systems necessary to implement and operate the multi-class distribution system, as described in the Prospectus, provided, however, that such systems shall not be materially different from those used by FDISG in connection with providing services to its other clients utilizing a multi-class structure. (c) Send duplicate confirmations and statements to brokers of their clients' activity, whether executed through the broker-dealer or directly with FDISG if requested by the Fund to do so with regard to Fund-only accounts only. 8. In addition to and neither in lieu nor in contravention of the services set forth above, FDISG shall: (i) perform all the customary services of a transfer agent, registrar, dividend and distribution disbursing agent and agent of the dividend reinvestment plan as described in the Fund's prospectus and herein consistent with those requirements in effect as at the date of this Agreement. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached fee schedule, include but are not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies (if requested by the Fund), tabulating proxies (if requested by the Fund), mailing Shareholder reports to current Shareholders (unless the Fund selects another service provider for this task and so informs FDISG), withholding taxes on U.S. resident and non-resident alien accounts for "Fund - only accounts" where applicable, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all Fund - only account Shareholders. If the Fund retains another service provider with respect to a Shareholder mailing, FDISG agrees to take reasonable steps, at the expense of the Fund, to facilitate such other service provider's activities, including providing Shareholder account information. 19 EX-8.B 8 EXHIBIT 8(B) -- FORM OF SHAREHOLDER SERVICE Exhibit No. 8(b) MITCHELL HUTCHINS INSTITUTIONAL SERIES FINANCIAL INTERMEDIARY SHARES SHAREHOLDER SERVICES PLAN AND AGREEMENT --------------------------------------- This Shareholder Services Plan and Agreement ("Plan") is adopted by Mitchell Hutchins Institutional Series ("Trust"), a business trust organized under the laws of the State of Delaware pursuant to a Trust Instrument dated April 29, 1998, as amended from time to time, with respect to the Trust's Financial Intermediary shares, a class of shares issued by the Trust's current Series, Mitchell Hutchins Institutional Money Fund, and such other series of the Trust as may be established in the future with Financial Intermediary shares (collectively, "Funds"), and is entered into by PaineWebber Incorporated ("PaineWebber") and the Trust, subject to the following terms and conditions: Section 1. Service Arrangements. -------------------- PaineWebber, in respect of each Fund, may enter into a shareholder service agreement ("Service Agreement"), substantially in the form attached hereto as Appendix A, with each financial intermediary that purchases Financial Intermediary shares. Each Service Agreement will require the financial intermediary to provide support services to its customers ("Customers") who are the beneficial owners of Financial Intermediary shares. Such services may include, without limitation: (i) assisting Customers in changing dividend options, account designations and addresses; (ii) aggregating and processing purchase and redemption requests from Customers and placing net purchase and redemption orders with PaineWebber; (iii) transmitting and receiving funds in connection with Customer orders to purchase and redeem Financial Intermediary shares; (iv) processing dividend payments on behalf of Customers; (v) providing information periodically to Customers showing their position in Financial Intermediary shares; (vi) arranging for bank wires; (vii) responding to Customer inquiries regarding account status and history, the manner in which purchases and redemptions of Financial Intermediary shares may be made and other matters; (viii) providing sub-accounting with respect to Financial Intermediary shares beneficially owned by Customers or the information to the Trust necessary for sub-accounting; (ix) forwarding communications from the Trust (for example, proxies, shareholder reports, annual and semiannual financial statements and dividend, distribution and tax notices) to Customers; (x) providing the necessary personnel and facilities to establish and maintain shareholder accounts and records; and (xi) such other similar services as PaineWebber or a Customer may reasonably request from time to time, to the extent the Financial Intermediary is permitted to perform such services under Federal and state statutes, rules and regulations. Section 2. Compensation. ------------ Each Fund will pay PaineWebber an annual fee which PaineWebber will pay over to each financial intermediary (the "Service Payment") for the services provided by the financial intermediary. The Service Payment will be calculated daily and paid monthly by the Trust at the annual rate of 0.25% of the average daily net asset value of the Financial Intermediary shares held by a financial intermediary that has entered into a Service Agreement with PaineWebber on behalf of the financial intermediary's Customers. All expenses incurred by a Fund in respect of Service Payments shall be borne entirely by the holders of Financial Intermediary shares of that Fund. Section 3. Approval by Board of Trustees. ----------------------------- This Plan will not take effect until approved by a majority of both (i) the full Board of Trustees of the Trust ("Board"), and (ii) those Trustees who are not "interested persons" of the Trust (as defined in the Investment Company Act of 1940, as amended ("1940 Act")) and who have no direct or indirect financial interest in the operation of this Plan (the "Disinterested Trustees"). Section 4. Continuance of the Plan. ----------------------- The Plan will continue in effect from year to year so long as such continuance is specifically approved annually by the Board in accordance with the procedure specified in Section 3 above. Section 5. Termination. ----------- The Plan may be terminated at any time, without penalty, by vote of a majority of the Disinterested Trustees. The Plan will terminate automatically in the event of its assignment, as defined in the 1940 Act. Section 6. Amendment. --------- The Plan may be amended from time to time by the Board, provided, however, that all material amendments of the Plan must be approved in accordance with the procedures specified in Section 3 above. Section 7. Shareholder Voting. ------------------ To the extent that matters pertaining to the Plan or to the Financial Intermediary shares are submitted to shareholders for approval, only the holders of Financial Intermediary shares shall be entitled to vote thereon. Section 8. Reports to the Trustees and Records. ----------------------------------- (a) While the Plan is in effect, PaineWebber shall provide to the Board, at such times as the Board shall request and in no event less frequently than annually, and the Board shall review, a written report of the amounts expended by PaineWebber under Service Agreements with financial intermediaries and the purposes for which such expenditures were made. (b) The Trust shall preserve copies of the Plan and any Service Agreements, any other agreements relating to the Plan and any reports made pursuant to Section 8(a) above for a period 2 of not less than six years from the date of the Plan, each Service Agreement, agreement or report, the first two years in an easily accessible place. Section 9. Limitation of Liability of the Trustees and Shareholders of the --------------------------------------------------------------- Trust. - ----- The Trustees of the Trust and the shareholders of any Fund shall not be liable for any obligation of the Trust or any Fund under this Plan, and PaineWebber agrees that, in asserting any rights or claims under this Plan, it shall look only to the assets and property of the Trust or the particular Fund in settlement of such right or claims, and not to such Trustees or shareholders. Section 10. Governing Law. -------------- This Plan shall be construed in accordance with the laws of the State of New York and the 1940 Act, provided, however, that Section 9 above will be construed in accordance with the laws of the State of Delaware. To the extent the applicable laws of the State of New York or the State of Delaware conflict with the applicable provisions of the 1940 Act, the latter shall control. Section 11. Effective Date. -------------- The Plan will become effective as of _______________, 1998. MITCHELL HUTCHINS INSTITUTIONAL SERIES By ---------------------------- PAINEWEBBER INCORPORATED By ---------------------------- 3 EX-8.C 9 EXHIBIT 8(C) -- FORM OF SHAREHOLDER SERVICE Exhibit No. 8(c) MITCHELL HUTCHINS INSTITUTIONAL SERIES FINANCIAL INTERMEDIARY SHARES SHAREHOLDER SERVICE AGREEMENT ----------------------------- PaineWebber Incorporated ("Firm"), as distributor of the Financial Intermediary shares of Mitchell Hutchins Institutional Series ( "Trust") and the counterparty named below ("Financial Intermediary") wish to enter into an agreement ("Agreement") pursuant to which the Financial Intermediary will provide services to certain shareholders of, and administer certain shareholder accounts in, Financial Intermediary shares ("Shares") of the Trust. In consideration of the mutual covenants herein contained, it is agreed by and between the Firm and the Financial Intermediary as follows: Section 1. Services to Be Provided. The Financial Intermediary will ----------------------- provide shareholder and administrative services for its customers ("Customers") who own Shares. Such services may include, without limitation: (i) assisting Customers in changing dividend options, account designations and addresses; (ii) aggregating and processing purchase and redemption requests from Customers and placing net purchase and redemption orders with the Firm; (iii) transmitting and receiving funds in connection with Customer orders to purchase and redeem Shares; (iv) processing dividend payments on behalf of Customers; (v) providing information periodically to Customers showing their position in Shares; (vi) arranging for bank wires; (vii) responding to Customer inquiries regarding account status and history, the manner in which purchases and redemptions of Shares may be made and other matters pertaining to the Shares; (viii) providing sub-accounting with respect to Shares beneficially owned by Customers or the information to the Trust necessary for sub-accounting; (ix) forwarding shareholder communications from the Trust (for example, proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to Customers; (x) providing necessary personnel and facilities to establish and maintain shareholder accounts and records; and (xi) such other similar services as the Firm or a Customer may reasonably request from time to time to the extent the Financial Intermediary is permitted to perform such services under Federal and state statutes, rules and regulations. Section 2. Financial Intermediary as Agent for Its Customers. The ------------------------------------------------- Financial Intermediary agrees that, in all activities covered by this Agreement; the Financial Intermediary will act as agent for its customers; it is not authorized to act as agent for the Firm or the Trust. This Agreement shall not make either party the legal representative of the other, nor shall either party have the right or authority to assume, create or incur any liability or any obligation of any kind, express or implied, against or in the name of or on behalf of the other party. Section 3. Information Concerning the Trust and the Shares. The ----------------------------------------------- Financial Intermediary agrees that neither it nor any of its employees or agents are authorized to make any representation concerning the Shares or the Trust, except those contained in the then-current Prospectus and Statement of Additional Information for the Trust, copies of which will be supplied by the Firm in reasonable quantities upon request, or in other material approved in writing by the Firm. Section 4. Compensation. The Firm will pay the Financial Intermediary an ------------ annual fee (the "Service Payment") for its services in connection with the Shares beneficially owned by its Customers. The Service Payment will be calculated daily and paid monthly by the Firm at the annual rate of 0.25% of the average daily net asset value of the Shares held by the Financial Intermediary for its Customers. For purposes of calculating the fee payable to the Financial Intermediary, the average daily net asset value of the Shares will be calculated in accordance with the procedure set forth in the Trust's then current Prospectus and Statement of Additional Information. The Financial Intermediary agrees that no trustee, officer or shareholder of the Trust (or any of its series) shall be liable for the performance of the Firm's obligations hereunder or for the Service Payment. Section 5. Right to Suspend Sales. The Firm and the Trust reserve the ---------------------- right, at their discretion, to suspend the sale of Shares of any series or withdraw the Shares of any series from sale. Section 6. Other Duties of the Financial Intermediary. (a) The Financial ------------------------------------------ Intermediary agrees to provide the Firm and the Trust such information relating to its services hereunder as may be required to be maintained by the Firm and the Trust under applicable regulatory and self-regulatory agencies or authorities, and to cooperate with the Firm in providing information to the Trust and its Board of Trustees with respect to amounts expended and services provided under this Agreement. (b) In the event an issue pertaining to the Shares is submitted for shareholder approval, the Financial Intermediary will vote any Shares of a series held for its own account, or over which it otherwise has discretion to vote, in the same proportions as the votes cast by those Shares of the same series held for its Customer's accounts for which instructions have been received from the beneficial owners or other persons entitled to vote. Section 7. Representations of Financial Intermediary. (a) The Financial ----------------------------------------- Intermediary represents and warrants that its Customers are aware of and have agreed to the arrangements provided for in this Agreement and that the compensation payable to the Financial Intermediary hereunder, together with any other compensation payable to the Financial Intermediary in connection with the investment of their assets in the Shares, will be properly disclosed by the Financial Intermediary to its Customers and authorized by them. (b) The Financial Intermediary represents and warrants that, in providing services hereunder, it will act in accordance with federal and state law, and rules and regulations thereunder, applicable to it and its Customer's accounts. Section 8. Customer Lists. Each party agrees that it (and/or its -------------- affiliates) will not use any list of customers of the other party that may be obtained in connection with this Agreement for the purpose of solicitation of any product or service without the express written consent of the 2 other party. However, nothing in this Agreement shall be deemed to prohibit or restrict either party (or its affiliates) in any way from solicitations of any product or service directed at, without limitation, the general public, any segment thereof, or any specific individual, provided such solicitation is not based upon such list. Section 9. Indemnification. (a) The Financial Intermediary will --------------- indemnify and hold the Firm and the Trust harmless from any claim, demand, loss, expense or cause of action resulting from the misconduct or negligence, as measured by industry standards, of the Financial Intermediary, its agents or employees, in carrying out the Financial Intermediary's obligations under this Agreement. Such indemnification will survive the termination of this Agreement. (b) The Firm will indemnify and hold the Financial Intermediary harmless from any claim, loss, expense or cause of action resulting from the misconduct or negligence, as measured by industry standards, of the Firm, its agents or employees, in carrying out the Firm's obligations under this Agreement. Section 10. Duration of Agreement. This Agreement will continue in effect --------------------- for one year from its Effective Date, and thereafter will continue automatically for successive annual periods; provided, however, that the Agreement is subject to termination as provided below and subject to termination at any time without penalty with respect to the Trust or a particular series thereof if a majority of the Trust's Trustees who are not interested persons of the Trust (as defined in the Investment Company Act of 1940 ("1940 Act")), or a majority of the Shares of the Trust or a particular series thereof (as defined in the 1940 Act) vote to terminate the Agreement. Section 11. Amendment and Termination of the Agreement. This Agreement ------------------------------------------ may be amended upon written agreement of the parties. Either party to the Agreement may terminate the Agreement, without cause or penalty, by giving the other party at least thirty (30) days' written notice of its intention to terminate. This Agreement will terminate automatically in the event of its assignment (as defined in the 1940 Act). Section 12. Effective Date. This Agreement will become effective on the -------------- date set forth below. Section 13. Notices. All notices required or permitted to be given under ------- this Agreement shall be given in writing and delivered by personal delivery, by postage prepaid mail, or by facsimile machine or a similar means of same day delivery (with a confirming copy by mail). All notices to the Firm shall be given or sent to its offices located at 1285 Avenue of the Americas, New York, New York 10019, ATTN: ______________. All notices to the Financial Intermediary shall be given or sent to it at the address specified by it below. Either party may change the address to which notices shall be sent by giving notice to the other party in accordance with this paragraph 13. Section 14. Miscellaneous. (a) This Agreement shall be construed in ------------- accordance with the laws of the State of New York, without giving effect to the conflict of law provisions thereof, and the 1940 Act. To the extent that the applicable laws of the State of New York conflict with the applicable provisions of the 1940 Act, the latter shall control. 3 (b) The captions in this Agreement are included for convenience of reference only and in no way defined or limit any of the provisions of this Agreement or otherwise affect their construction or effect. (c) In the case that any provision in this Agreement shall be found by a court of competent jurisdiction to be invalid, illegal or unenforceable, such provision shall be construed and enforced as if it had been more narrowly drawn so as not to be invalid, illegal or unenforceable, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. PAINEWEBBER INCORPORATED By: --------------------- PLEASE RETURN TWO SIGNED COPIES OF THIS AGREEMENT TO PAINEWEBBER INCORPORATED. UPON ACCEPTANCE BY PAINEWEBBER, ONE COUNTERSIGNED COPY WILL BE RETURNED TO YOU FOR YOUR FILES. Name of Financial Intermediary: -------------------------------------- Address: ------------------------------------------------------------- ------------------------------------------------------------- By: ------------------------------------------------------------------ Authorized Representative ------------------------------------------------------------------ (Name and Title; please print or type) ACCEPTED AND AGREED: PAINEWEBBER INCORPORATED By: -------------------------- Dated: ----------------------- 4 EX-9 10 EXHIBIT 9 -- OPTION OF COUNSEL Exhibit No. 9 KIRKPATRICK & LOCKHART LLP 1800 MASSACHUSETTS AVENUE, N.W. 2ND FLOOR WASHINGTON, D.C. 20036-1800 TELEPHONE 202-778-9000 FACSIMILE 202-778-9100 WWW.KL.COM July 28, 1998 Mitchell Hutchins Institutional Series 1285 Avenue of the Americas New York, New York 10019 Ladies and Gentlemen: You have requested our opinion, as counsel to Mitchell Hutchins Institutional Series ("Trust"), as to certain matters regarding the issuance of certain Shares of the Trust. As used in this letter, the term "Shares" means the Institutional and Financial Intermediary shares of beneficial interest of the series of the Trust listed below during the time that Pre-Effective Amendment No. 1 to the Trust's Registration Statement on Form N-1A ("PEA") is effective and has not been superseded by a post-effective amendment. The series of the Trust is Mitchell Hutchins LIR Select Money Fund. As such counsel, we have examined certified or other copies, believed by us to be genuine, of the Trust's Trust Instrument and by-laws and such resolutions and minutes of meetings of the Trust's Board of Trustees as we have deemed relevant to our opinion, as set forth herein. Our opinion is limited to the laws and facts in existence on the date hereof, and it is further limited to the laws (other than the conflict of law rules) in the State of Delaware that in our experience are normally applicable to the issuance of shares by investment companies organized as business trusts in that State and to the Securities Act of 1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the regulations of the Securities and Exchange Commission ("SEC") thereunder. Based on the foregoing, we are of the opinion that the issuance of the Shares has been duly authorized by the Trust and that, when sold in accordance with the terms contemplated by the PEA, including receipt by the Trust of full payment for the Shares and compliance with the 1933 Act and the 1940 Act, the Shares will have been validly issued, fully paid and non-assessable. We hereby consent to this opinion accompanying the PEA when it is filed with the SEC and to the reference to our firm in the statement of additional information that is being filed as part of the PEA. Very truly yours, /s/ Kirkpatrick & Lockhart LLP KIRKPATRICK & LOCKHART LLP EX-10 11 EXHIBIT 10 -- AUDITORS' CONSENT Ex 10 CONSENT OF INDEPENDENT AUDITORS We consent to the reference made to our firm under the caption "Auditors" in the Statement of Additional Information and to the use of our report dated July 24, 1998 on Mitchell Hutchins LIR Select Money Fund in this Registration Statement (Form N-1A No. 333-52965) of Mitchell Hutchins Institutional Series. /s/ Ernst & Young LLP ERNST & YOUNG LLP New York, New York July 24, 1998 EX-12 12 EXHIBIT 12 -- LETTER OF INVESTMENT INTENT [LETTERHEAD OF MITCHELL HUTCHINS ASSET MANAGEMENT INC. APPEARS HERE] Exhibit No. 12 MITCHELL HUTCHINS July 27, 1998 Mitchell Hutchins Institutional Series 1285 Avenue of the Americas New York, New York 10019 Ladies and Gentlemen: We are writing in connection with the 100,000 Institutional shares of Mitchell Hutchins LIR Select Money Fund, which we have purchased from you at a price of $1.00 per share. This is to advise you that such shares were purchased for investment only with no present intention of selling such shares, and we do not now have any intention of selling such shares. Very truly yours, /s/ Dianne E. O'Donnell Dianne E. O'Donnell Senior Vice President EX-15 13 EXHIBIT 15 -- PLAN PURSUANT TO RULE 18F-3 Exhibit No. 15 MITCHELL HUTCHINS INSTITUTIONAL SERIES MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3 Mitchell Hutchins Institutional Series hereby adopts this Multiple Class Plan pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended ("1940 Act"), on behalf of its current series, Mitchell Hutchins Institutional Money Fund and any series that may be established in the future (referred to hereinafter collectively as the "Funds" and individually as a "Fund"). A. GENERAL DESCRIPTION OF CLASSES THAT ARE OFFERED: ----------------------------------------------- 1. INSTITUTIONAL SHARES. Institutional shares of each Fund may be sold to the general public without imposition of an initial sales charge or contingent deferred sales charge ("CDSC") and are not subject to any service or distribution fees. FINANCIAL INTERMEDIARY SHARES. Financial Intermediary shares are sold without imposition of an initial sales charge or CDSC and are not subject to any distribution fees. Financial Intermediary shares of each Fund are available for purchase only by banks and other financial intermediaries for the benefit of their customers. Financial Intermediary shares of each Fund are subject to an annual service fee of .25% of the average daily net assets of the Financial Intermediary shares of the Fund, paid in accordance with a plan adopted by Mitchell Hutchins Institutional Series to assure that the banks and other financial intermediaries that purchase Financial Intermediary shares on for the benefit of their customers provide certain support services to those customers and are compensated for those services. B. EXPENSE ALLOCATIONS OF EACH CLASS: --------------------------------- Certain expenses may be attributable to a particular Class of shares of each Fund ("Class Expenses"). Class Expenses are charged directly to the net assets of the particular Class and, thus, are borne on a pro rata basis by the outstanding shares of that Class. In addition to the service fees described above, each Class may also pay a different amount of the following other expenses: 1. printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses, and proxies to current shareholders of a specific Class; 2. Blue Sky fees incurred by a specific Class of shares; 3. SEC registration fees incurred by a specific Class of shares; Mitchell Hutchins Institutional Series Multiple Class Plan Page 2 4. expenses of administrative personnel and services required to support the shareholders of a specific Class of shares; 5. Trustees' fees incurred as a result of issues relating to a specific Class of shares; 6. litigation expenses or other legal expenses relating to a specific Class of shares; and 7. transfer agent fees identified as being attributable to a specific Class. C. EXCHANGE PRIVILEGES: ------------------- Shares may be exchanged for shares of the corresponding Class of Liquid Institutional Reserves Money Market Fund when a shareholder fails to maintain minimum account levels as specified from time to time in a Fund's prospectus. Shares of a Fund are not otherwise exchangeable. D. CLASS DESIGNATION: ----------------- Subject to approval by the Board of Trustees of Mitchell Hutchins Institutional Series, a Fund may alter the nomenclature for the designations of one or more of its Classes of shares. E. ADDITIONAL INFORMATION: ---------------------- This Multiple Class Plan is qualified by and subject to the terms of the then current prospectus for the applicable Classes; provided, however, that none of the terms set forth in any such prospectus shall be inconsistent with the terms of the Classes contained in this Plan. The prospectus for each Fund contains additional information about the Classes and each Fund's multiple class structure. The payment of Class Expenses by a Fund's adviser and administrator or other party is not considered to be inconsistent with the terms of the Classes contained in this Plan. F. DATE OF EFFECTIVENESS: --------------------- This Multiple Class Plan is effective as of the date hereof, provided that this Plan shall not become effective with respect to any Fund unless such action has first been approved by the vote of a majority of the Board of Trustees and by vote of a majority of those Trustees who are not interested persons of Mitchell Hutchins Institutional Series. May 13, 1998 -----END PRIVACY-ENHANCED MESSAGE-----