-----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, KinUoojXMNIHNSKpbhABk0YMowdqibHJ8oy3KrscXHAyAeNCER9ikhC+VIrUdlzH YSaJpzOyg5X1IHy3EwR37w== 0000950117-99-001874.txt : 19990902 0000950117-99-001874.hdr.sgml : 19990902 ACCESSION NUMBER: 0000950117-99-001874 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19990901 EFFECTIVENESS DATE: 19990901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MITCHELL HUTCHINS LIR MONEY SERIES CENTRAL INDEX KEY: 0001060517 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 134010447 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 333-52965 FILM NUMBER: 99704589 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-08767 FILM NUMBER: 99704590 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 FORMER COMPANY: FORMER CONFORMED NAME: MITCHELL HUTCHINS INSTITUTIONAL SERIES DATE OF NAME CHANGE: 19980427 485BPOS 1 LIR MONEY SERIES POST-EFFECTIVE AMENDMENT As filed with the Securities and Exchange Commission on September 1, 1999 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 [X] Pre-Effective Amendment No. ---- [ ] Post-Effective Amendment No. 3 [X] ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 4 [X] MITCHELL HUTCHINS LIR MONEY SERIES (Formerly, 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: Effective Date of this Post-Effective Amendment. It is proposed that this filing will become effective: [ ] Immediately upon filing pursuant to Rule 485(b) [X] On September 1, 1999 pursuant to Rule 485(b) [ ] 60 days after filing pursuant to Rule 485(a)(1) [ ] On _____________ pursuant to Rule 485(a)(1) [ ] 75 days after filing pursuant to Rule 485(a)(2) [ ] On _____________ pursuant to Rule 485(a)(2) Title of Securities Being Registered: Shares of Beneficial Interest of Mitchell Hutchins LIR Select Money Fund. Mitchell Hutchins LIR Select Money Fund ------------------------------------ PROSPECTUS SEPTEMBER 1, 1999 ------------------------------------ This prospectus offers two classes of money market fund shares. Institutional shares are offered primarily to institutional investors and Financial Intermediary shares are offered to banks and other financial intermediaries for the benefit of their customers. Not FDIC insured. May lose value. No bank guarantee. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the fund's shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime. - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund Contents THE FUND - --------------------------------------------------------------------------------------------------------- What every investor 3 LIR Select Money Fund should know about 5 More About Risks and the fund Investment Strategies YOUR INVESTMENT - --------------------------------------------------------------------------------------------------------- Information for 6 Managing Your Fund Account managing your fund -- Buying Shares account -- Selling Shares -- Exchanging Shares -- Additional Information About Your Account -- Pricing and Valuation ADDITIONAL INFORMATION - --------------------------------------------------------------------------------------------------------- Additional important 9 Management information about 10 Dividends and Taxes the fund 11 Financial Highlights - --------------------------------------------------------------------------------------------------------- Where to learn more Back Cover about the fund
The fund is not a complete or balanced investment program. --------------- - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund Mitchell Hutchins LIR Select Money Fund INVESTMENT OBJECTIVE, STRATEGIES AND RISKS - -------------------------------------------------------------------------------- FUND OBJECTIVE Maximum current income consistent with liquidity and the preservation of capital. PRINCIPAL INVESTMENT STRATEGIES The fund is a money market fund and seeks to maintain a stable price of $1.00 per share. The fund invests in a diversified portfolio of high quality money market instruments of governmental and private issuers. Money market instruments are short-term debt obligations and similar securities. They also include longer term bonds that have variable interest rates or other special features that give them the financial characteristics of short-term debt. The fund may invest in foreign money market instruments only if they are denominated in U.S. dollars. Mitchell Hutchins Asset Management Inc., the fund's investment adviser, selects money market instruments for the fund based on its assessment of relative values and changes in market and economic conditions. PRINCIPAL RISKS An investment in the fund is not a bank deposit and is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. While the fund seeks to maintain the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Money market instruments generally have a low risk of loss, but they are not risk-free. The fund is subject to credit risk, which is the risk that issuers may fail, or become less able, to make payments when due. The fund also is subject to interest rate risk. When short-term interest rates rise, the value of the fund's investments generally will fall, and its yield will tend to lag behind prevailing rates. More information about these and other risks of an investment in the fund is provided below in 'More About Risks and Investment Strategies.' In particular, see the following headings: Credit Risk Interest Rate Risk Foreign Securities Risk Information on the fund's recent holdings can be found in its current annual/semi-annual reports (see back cover for information on ordering those reports). The fund commenced operations on August 10, 1998. As a result, the fund does not have performance information of at least one calendar year to include in a bar chart or table at this point in the prospectus, as some other funds might. You can obtain some idea of how the fund has performed by requesting copies of its annual/semi-annual reports or by speaking with your Financial Advisor. --------------- - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund EXPENSES AND FEE TABLES - -------------------------------------------------------------------------------- FEES AND EXPENSES These tables describe the fees and expenses that you may pay if you buy and hold shares of the fund. SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price)............................................. None Maximum Contingent Deferred Sales Charge (Load) (as a % of offering price)............................................. None
ANNUAL FUND OPERATING EXPENSES* (expenses that are deducted from fund assets)
INSTITUTIONAL SHARES FINANCIAL INTERMEDIARY SHARES -------------------- ----------------------------- Management Fees........................ 0.18% 0.18% Distribution and/or Service (12b-1) Fees................................. 0.00% 0.00% Other Expenses Shareholder Servicing Fee............ 0.00% 0.25% Miscellaneous Expenses............... 0.00% 0.00% 0.00% 0.25% ----- ----- Total Annual Fund Operating Expenses... 0.18% 0.43% ----- ----- ----- -----
- ------------ * Mitchell Hutchins has agreed to waive 0.03% of its management fee from September 1, 1999 through January 31, 2000, so that the effective total fund operating expenses during that period will be 0.15% for Institutional shares and 0.40% for Financial Intermediary shares. EXAMPLE This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. This example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Institutional shares.......... $18 $ 58 $101 $230 Financial Intermediary shares...................... 44 138 241 542
--------------- - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund MORE ABOUT RISKS AND INVESTMENT STRATEGIES - -------------------------------------------------------------------------------- PRINCIPAL RISKS The main risks of investing in the fund are described below. Other risks of investing in the fund, along with further detail about some of the risks described below, are discussed in the fund's Statement of Additional Information ('SAI'). Information on how you can obtain the SAI is on the back cover of this prospectus. Credit Risk. Credit risk is the risk that the issuer of a money market instrument will not make principal or interest payments when they are due. Even if an issuer does not default on a payment, a money market instrument's value may decline if the market believes that the issuer has become less able, or less willing, to make payments on time. Even the highest quality money market instruments are subject to some credit risk. Interest Rate Risk. The value of money market instruments generally can be expected to fall when short-term interest rates rise and to rise when short-term interest rates fall. Interest rate risk is the risk that interest rates will rise, so that the value of the fund's investments will fall. Also, the fund's yield will tend to lag behind changes in prevailing short-term interest rates. This means that the fund's income will tend to rise more slowly than increases in short-term interest rates. Similarly, when short-term interest rates are falling, the fund's income will tend to fall more slowly. Foreign Securities Risk. Foreign securities involve risks that normally are not associated with securities of U.S. issuers. These include risks relating to political, social and economic developments abroad and differences between U.S. and foreign regulatory requirements and market practices. ADDITIONAL RISKS Year 2000 Risk. The fund could be adversely affected by problems relating to the inability of computer systems used by Mitchell Hutchins and the fund's other service providers to recognize the year 2000. While year 2000-related computer problems could have a negative effect on the fund, Mitchell Hutchins is working to avoid these problems with respect to its own computer systems and to obtain assurances from other service providers that they are taking similar steps. Similarly, the issuers whose money market instruments are bought by the fund and the trading systems used by the fund could be adversely affected by this issue. The ability of an issuer or trading system to respond successfully to the issue requires both technological sophistication and diligence, and there can be no assurance that any steps taken will be sufficient to avoid an adverse impact on the fund. ADDITIONAL INVESTMENT STRATEGIES Like all money market funds, the fund is subject to maturity, quality and diversification requirements designed to help it maintain a stable price of $1.00 per share. In addition, Mitchell Hutchins may use a number of professional money management techniques to respond to --------------- - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund changing economic and money market conditions and to shifts in fiscal and monetary policy. These techniques include varying the fund's composition and weighted average maturity based upon its assessment of the relative values of various money market instruments and future interest rate patterns. Mitchell Hutchins also may buy or sell money market instruments to take advantage of yield differences. - -------------------------------------------------------------------------------- MANAGING YOUR FUND ACCOUNT - -------------------------------------------------------------------------------- BUYING SHARES 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 another bank in one day and thus may be made immediately available to the fund through its custodian. The fund offers two separate classes of shares -- Institutional shares and Financial Intermediary shares -- as an economical and convenient means for institutions to invest short-term funds that they hold for their own account or hold or manage for others. You may buy Institutional shares if you are an institutional investor. PaineWebber Incorporated, the distributor of the fund's shares, may, in its discretion, make Institutional shares available to individuals or other entities. You may buy Financial Intermediary shares only if you are a bank or other financial intermediary buying the shares for the benefit of your customers. Financial Intermediary shares bear special fees at the annual rate of 0.25% of average net assets for services that these financial intermediaries provide to the beneficial owners of the Financial Intermediary shares. Unless you specify otherwise, all shares purchased will be Institutional shares. You may buy fund shares by calling the fund's transfer agent, First Data Investor Services Group, Inc. at 1-888-LIR-FUND and speaking to a representative. You may also buy fund shares by contacting your Financial Advisor at PaineWebber or its correspondent firms, who are then responsible for sending the order to the transfer agent. The availability of fund shares to customers of PaineWebber's correspondent firms may vary depending on the arrangements between PaineWebber and those firms. You will buy shares at the net asset value next determined after receipt and acceptance of your purchase order by the transfer agent, subject to the fund receiving payment the same day. Your purchase order will be effective only if you wire payment in federal funds on the same business day that you place your order, and your wire must actually be credited to the fund's bank account by a Federal Reserve Bank that day. Otherwise, the order will be rejected. The fund effects orders to buy shares three times each business day at its net asset value determined as of noon (Eastern time), 2:30 p.m. (Eastern time) and 5:00 p.m. (Eastern time). A business day is any day that the fund's custodian, the fund's --------------- - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund transfer agent and PaineWebber are open for business. The fund and PaineWebber reserve the right to reject a purchase order or suspend the offering of fund shares. PaineWebber may return without notice money wired to the fund where the investor fails to place a corresponding share purchase order. WIRE INSTRUCTIONS: Instruct your bank to transfer federal funds by wire 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] LIR Select Money Fund ABA #021000018 PaineWebber or an investor's bank may impose a service charge for wire transfers. MINIMUM INVESTMENTS: To open an account. $10,000,000 To add to an account......... $ 100,000
If your account balance has fallen below $10,000,000, your purchase order to add to the account will be accepted only if the account balance will be at least $10,000,000 after that purchase. PaineWebber may waive these minimums. The fund may change its minimum investment requirements at any time. Financial intermediaries may establish different minimums for their customers who purchase Financial Intermediary shares through them, provided that the aggregate amounts purchased meet the above minimums. You may obtain additional information about these minimums from your financial intermediary. REMOTE TRADE ENTRY The fund may offer an electronic trade order entry (RTE) capability to eligible institutional investors who meet certain conditions. For more information on this option, contact your Financial Advisor or the transfer agent at 1-888-LIR-FUND. SELLING SHARES You may sell your shares by calling the transfer agent at 1-888-LIR FUND and speaking with a representative. You may also sell your shares by contacting your Financial Advisor or correspondent firm (if you previously designated them to give instructions to the transfer agent on your behalf); they are then responsible for sending the order to the transfer agent. Sell orders are effected three times each business day at the net asset value determined as of noon (Eastern time), 2:30 p.m. (Eastern time) and 5:00 p.m. (Eastern time). Your sales proceeds will be paid in federal funds wired to one or more accounts you have designated, normally on the business day the sale order is accepted. If you sell all the shares you own, dividends accrued for the month to date will be paid in federal funds and wired at the same time to the bank account(s) that you designate. If the transfer agent receives your order to sell shares late in the day, it will process your order and initiate a wire. However, your bank account may not receive the proceeds that day if a Federal Reserve Bank is experiencing delay in transfer of funds. Neither the fund, PaineWebber nor the transfer agent is responsible for the --------------- - -------------------------------------------------------------------------------- 7 - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund performance of your bank or any of its intermediaries. The transfer agent will process your orders to sell shares only if you have on file with it a properly completed account application, with signature guaranteed or other authentication acceptable to the transfer agent. The account application requires you to designate the bank account(s) or PaineWebber account for wiring sales proceeds. You must submit any change in the designated account(s) for sale proceeds in a form acceptable to the transfer agent. The transfer agent will not place the sales order if the information you provide does not correspond to the information on your application. If you have additional questions on selling shares you should contact your Financial Advisor or call the transfer agent at 1-888-LIR-FUND. EXCHANGING SHARES You may exchange shares of the fund for shares of the same class of any of the Liquid Institutional Reserves funds -- Money Market Fund, Government Securities Fund and Treasury Securities Fund. Those funds all have higher total operating expenses than the fund, but lower minimums for initial and subsequent purchases. You can place an exchange order by calling the transfer agent at 1-888-LIR FUND and speaking with a representative. You also can place an order through a PaineWebber Financial Advisor or correspondent firm (if you previously designated them to give instructions to the transfer agent on your behalf), who is then responsible for sending the order to the transfer agent. Your exchange order must be received by noon (Eastern time), for Government Securities Fund and Treasury Securities Fund to be effective on that business day. Your exchange order must be received by 2:30 p.m. (Eastern time) for Money Market Fund to be effective on that business day. Exchange orders received after those times will not be executed, and you will have to place an exchange order before these times on the following business day if you still wish to effect an exchange. If you exchange all your fund shares, the dividends accrued on those shares for the month to date will be invested in the shares of the other fund into which the exchange is made. Shareholders making their initial purchase of another fund through an exchange should allow more time and must provide the transfer agent with a properly completed account application for the new fund. These exchange orders should be received by the transfer agent at least one half hour before the previously mentioned deadlines to allow the transfer agent sufficient time to establish an account in the new fund in the investor's name. Otherwise, the transfer agent may not be able to effect the exchange. If the total investment in your account has been less than $10,000,000 for 30 consecutive days, the fund may exchange your shares for shares of Liquid Institutional Reserves -- Money Market Fund unless you elected in your account application to have the shares sold and the proceeds paid to you in federal funds wired to your designated account. The fund may modify or terminate the exchange privilege at any time. ADDITIONAL INFORMATION ABOUT YOUR ACCOUNT Financial Intermediary Shares. Financial intermediaries buying or holding shares for their customer accounts may charge those customers for cash management and other services provided in connection with their account. These charges may include account maintenance fees, compensating balance requirements or fees based --------------- - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund on account transactions, assets or income. The dividends payable to the financial intermediaries' customers, who are the beneficial owners of the shares, will be lower than those on Institutional shares by the amount of the fees paid by the fund for shareholder services. A customer should consider the terms of his account with a financial intermediary before purchasing shares. A financial intermediary buying or selling shares for its customers is responsible for transmitting orders to the transfer agent in accordance with its customer agreements and the procedures noted above. Institutional Shares. PaineWebber or Mitchell Hutchins (not the fund) may pay shareholder servicing fees to financial institutions that make Institutional shares available to their customers. The amount of these fees will be negotiated between PaineWebber and the financial institution. PRICING AND VALUATION The price of fund shares is based on net asset value and is determined separately for each class of shares. The net asset value is the total value of the fund divided by the total number of shares outstanding. In determining net asset value, the fund values its securities at their amortized cost. This method uses a constant amortization to maturity of the difference between the cost of the instrument to the fund and the amount due at maturity. The fund's net asset value per share is expected to be $1.00, although this value is not guaranteed. The fund's net asset value is determined three times each business day: noon (Eastern time), 2:30 p.m. (Eastern time) and 5:00 p.m. (Eastern time). Your price for buying or selling shares will be the net asset value that is next calculated after the fund accepts your order. - -------------------------------------------------------------------------------- MANAGEMENT - -------------------------------------------------------------------------------- INVESTMENT ADVISER Mitchell Hutchins is the investment adviser and administrator of the fund, and is located at 1285 Avenue of the Americas, New York, New York, 10019. Mitchell Hutchins is a wholly owned asset management subsidiary of PaineWebber. PaineWebber, the distributor of the fund's shares, is located at the same address and is wholly owned by Paine Webber Group Inc., a publicly owned financial services holding company. On July 31, 1999, Mitchell Hutchins was the adviser or sub-adviser of 33 investment companies with 75 separate portfolios and aggregate assets of approximately $48.0 billion. MANAGEMENT FEES Mitchell Hutchins' contract fee for the management services it provides to the fund is at the annual rate of 0.18% of the fund's average daily net assets. During its initial fiscal period ended April 30, 1999, Mitchell Hutchins waived part of this fee so that the fund paid management fees to Mitchell Hutchins at the --------------- - -------------------------------------------------------------------------------- 9 - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund annual rate of 0.07% of its average daily net assets. In exchange for this fee, Mitchell Hutchins has agreed to bear all expenses of the fund other than the management fees, shareholder service fees paid for Financial Intermediary shares, interest, taxes, extraordinary costs and the cost of securities purchased and sold by the fund, including any transaction costs. Although Mitchell Hutchins is not obligated to pay the fees and expenses of the fund's independent trustees, it is contractually obligated to reduce its management fee in an amount equal to those fees and expenses. Mitchell Hutchins estimates that these fees and expenses will be less than 0.01% of the fund's average net assets. Mitchell Hutchins has agreed to waive 0.03% of its management fees from September 1, 1999 through January 31, 2000, so that the effective management fees during that period will be 0.15%. OTHER INFORMATION The fund will maintain a rating from one or more rating agencies that provide ratings on money market funds. There can be no assurance that the fund will maintain any particular rating or maintain it with a particular rating agency. - -------------------------------------------------------------------------------- DIVIDENDS AND TAXES - -------------------------------------------------------------------------------- DIVIDENDS The fund declares dividends daily and pays them monthly. Dividends are paid on the last business day of a month or upon the sale of all the fund shares in a shareholder's account. The fund distributes any net short-term capital gain annually and anticipates that any short-term capital gain distribution would be declared during the month of December in a given year. The fund may make more frequent distributions if necessary to maintain its share price at $1.00. Shares earn dividends on the day they are purchased but do not earn dividends on the day they are sold. Dividends on Financial Intermediary shares will be lower than dividends on Institutional shares because of the higher expenses borne by Financial Intermediary shares. You will receive dividends in additional shares of the same class unless you elect to have the dividends transmitted by federal funds wire to either a designated bank account or PaineWebber account. You must notify the transfer agent in writing in a form acceptable to the transfer agent at least two business days prior to the end of the month if you wish to change this election for a particular monthly dividend. TAXES The dividends that you receive from the fund generally are subject to federal income tax regardless of whether you receive them in additional fund shares or in cash. If you hold fund shares through a tax-exempt account or plan, such as an IRA or 401(k) plan, dividends on your shares generally will not be subject to tax. The fund expects that its dividends will be taxed as ordinary income. The fund will tell you how you should treat its dividends for tax purposes. You should not recognize any capital gain on the sale of your shares so long as the fund maintains a share price of $1.00. --------------- - -------------------------------------------------------------------------------- 10 - -------------------------------------------------------------------------------- ------------------------------ Mitchell Hutchins LIR Select Money Fund FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following financial highlights table is intended to help you understand the fund's financial performance since it commenced operations on August 10, 1998. Certain information reflects financial results for a single fund share. In the table, 'total investment return' represents the rate that an investor would have earned on an investment in the fund (assuming reinvestment of all dividends). The information in the financial highlights has been audited by Ernst & Young, LLP independent auditors, whose report, along with the fund's financial statements, are included in the fund's annual report to shareholders. The annual report may be obtained without charge by calling 1-888-LIR-FUND.
FINANCIAL INSTITUTIONAL SHARES INTERMEDIARY SHARES -------------------- -------------------- FOR THE PERIOD FOR THE PERIOD AUGUST 10, 1998'D' DECEMBER 29, 1998'D' TO TO APRIL 30, 1999 FEBRUARY 9, 1999(2) -------------- ------------------- Net asset value, beginning of period.................... $ 1.00 $ 1.00 ---------- ------- Net investment income................................... 0.037 0.006 Dividends from net investment income.................... (0.037) (0.006) ---------- ------- Net asset value, end of period.......................... $ 1.00 $ 1.00 ---------- ------- ---------- ------- Total investment return(1).............................. 3.81% 0.57% ---------- ------- ---------- ------- Ratios/Supplemental Data: Net assets, end of period (000's)....................... $1,322,807 -- Expenses to average net assets net of waivers from adviser............................................... 0.07%* 0.32%* Expenses to average net assets before waivers from adviser............................................... 0.18%* 0.43%* Net investment income to average net assets net of waivers from adviser.................................. 5.06%* 4.81%* Net investment income to average net assets before waivers from adviser.................................. 4.95%* 4.70%*
- ------------ 'D' Issuance of shares. * Annualized. (1) Total investment return is calculated assuming a $1,000 investment on the first day of the period reported, reinvestment of all dividends at net asset value on the payable dates, and a sale at net asset value on the last day of the period reported. Total investment return for periods of less than one year has not been annualized. (2) At February 9, 1999, there were no longer any Financial Intermediary shares outstanding. Any further subscriptions of such shares would be at a $1.00 per share. --------------- - -------------------------------------------------------------------------------- 11 TICKER SYMBOL: Institutional Shares SELXX If you want more information about the fund, the following documents are available free upon request: ANNUAL/SEMI-ANNUAL REPORTS Additional information about the fund's investments is available in the fund's annual and semi-annual reports to shareholders. STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI provides more detailed information about the fund and is incorporated by reference into this prospectus. You may discuss your questions about the fund by contacting your Financial Advisor at PaineWebber or one of its correspondent firms. You may obtain free copies of annual and semi-annual reports and the SAI by contacting the fund directly at 1-888-LIR-FUND. You may review and copy information about the fund, including shareholder reports and the SAI, at the Public Reference Room of the Securities and Exchange Commission. You can get text-only copies of reports and other information about the fund and information about the operations of the SEC's Public Reference Room: For a fee, by writing to or calling the SEC's Public Reference Room, Washington, D.C. 20549-6009 Telephone: 1-800-SEC-0330 Free, from the SEC's Internet website at: http://www.sec.gov Mitchell Hutchins LIR Money Series -- Mitchell Hutchins LIR Select Money Fund Investment Company Act File No. 811-8767 'c' 1999 PaineWebber Incorporated MITCHELL HUTCHINS LIR SELECT MONEY FUND Prospectus ----------------------- September 1, 1999 MITCHELL HUTCHINS LIR SELECT MONEY FUND 1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 STATEMENT OF ADDITIONAL INFORMATION Mitchell Hutchins LIR Select Money Fund is a professionally managed money market fund. The Fund is a diversified series of Mitchell Hutchins LIR Money Series ("Trust") an open-end investment company. The fund's investment adviser and administrator is Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset management subsidiary of PaineWebber Incorporated ("PaineWebber"). PaineWebber is the fund's distributor. Portions of the fund's Annual Report to Shareholders are incorporated by reference into this Statement of Additional Information ("SAI"). The Annual Report accompanies this SAI. You may obtain an additional copy of the Annual Report by calling toll-free 1-888-LIR-FUND. This SAI is not a prospectus and should be read only in conjunction with the fund's current Prospectus, dated September 1, 1999. A copy of the Prospectus may be obtained by calling any PaineWebber Financial Advisor or correspondent firm or by calling toll-free 1-888-LIR-FUND. Customers of banks and financial intermediaries that purchase the Fund's Financial Intermediary Shares may obtain the Prospectus from their financial intermediaries. This SAI is dated September 1, 1999. TABLE OF CONTENTS
PAGE ---- The Fund and Its Investment Policies................................... 2 The Fund's Investments, Related Risks and Limitations.................. 2 Organization of the Trust; Trustees and Officers and Principal Holders of Securities......................................................... 9 Investment Advisory, Administration and Distribution Arrangements...... 16 Portfolio Transactions................................................. 18 Additional Information Regarding Redemptions........................... 19 Valuation of Shares.................................................... 19 Performance Information................................................ 20 Taxes.................................................................. 22 Other Information...................................................... 22 Financial Statements................................................... 23
THE FUND AND ITS INVESTMENT POLICIES The fund's investment objective may not be changed without shareholder approval. Except where noted, the other investment policies of the fund may be changed by its board without shareholder approval. As with other mutual funds, there is no assurance that the fund will achieve its investment objective. The fund's investment objective is earn maximum current income consistent with liquidity and preservation of capital. The fund invests in high quality money market instruments that have, or are deemed to have, remaining maturities of 13 months or less. Money market instruments are short-term debt-obligations and similar securities. These instruments include (1) U.S. and foreign government securities, (2) obligations of U.S. and foreign banks, (3) commercial paper and other short-term obligations of U.S. and foreign corporations, partnerships and trusts and similar entities, (4) funding agreements and other insurance company obligations, (5) repurchase agreements regarding any of the foregoing and (6) investment company securities. Money market instruments also include longer term bonds that have variable interest rates or other special features that give them the financial characteristics of short-term debt. The fund maintains a dollar-weighted average portfolio maturity of 90 days or less. The fund may invest in obligations (including certificates of deposit, bankers' acceptances, time deposits and similar obligations) of U.S. and foreign banks only if the institution has total assets at the time of purchase in excess of $1.5 billion. The fund's investments in non-negotiable time deposits of these institutions will be considered illiquid if they have maturities greater than seven days. The fund may purchase only those obligations that Mitchell Hutchins determines, pursuant to procedures adopted by the board, present minimal credit risks and are "First Tier Securities" as defined in Rule 2a-7 under the Investment Company Act of 1940, as amended ("Investment Company Act"). A First Tier Security is either (1) rated in the highest short-term rating category by at least two nationally recognized statistical rating agencies ("rating agencies"), (2) rated in the highest short-term rating category by a single rating agency if only that rating agency has assigned the obligation a short-term rating, (3) issued by an issuer that has received such a short-term rating with respect to a security that is comparable in 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. The fund generally may invest no more than 5% of its total assets in the securities of a single issuer (other than U.S. government securities). The fund may purchase only U.S. dollar-denominated obligations of foreign issuers. The fund may invest up to 10% of its net assets in illiquid securities. The fund may purchase securities on a when-issued or delayed delivery basis. The fund may lend its portfolio securities to qualified broker-dealers or institutional investors in an amount up to 33 1/3% of its total assets. The fund may borrow up to 33 1/3% of its total assets for temporary purposes, including reverse repurchase agreements. The costs associated with borrowing may reduce the fund's net income. The fund may invest in the securities of other investment companies. The fund may be rated by a rating agency. As of the date of this SAI, Duff & Phelps Credit Rating Co. (DCR) has given the fund a AAA rating. According to DCR, the AAA rating means the fund's ability to meet redemption requests in a timely manner for $1.00 per share is strong. This rating is based on the fund's risk management procedures, internal control systems, limitations on market risk and experienced management team. THE FUND'S INVESTMENTS, RELATED RISKS AND LIMITATIONS The following supplements the information contained in the Prospectus and above concerning the fund's investments, related risks and limitations. Except as otherwise indicated in the Prospectus or the SAI, the fund has established no policy limitations on its ability to use the investments or techniques discussed in these documents. New forms of money market instruments continue to be developed. The fund may invest in these instruments to the extent consistent with its investment objective. 2 YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER SECURITIES. The yields on the money market instruments in which the fund invests are dependent on a variety of factors, including general money market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the ratings of the issue. The ratings assigned by rating agencies represent their opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. Subsequent to its purchase by the fund, an issue may cease to be rated or its rating may be reduced. If a security in the fund's portfolio ceases to be a First Tier Security (as defined above) or Mitchell Hutchins becomes aware that a security has received a rating below the second highest rating by any rating agency, Mitchell Hutchins and, in certain cases, the fund's board, will consider whether the fund should continue to hold the obligation. A First Tier Security rated in the highest short-term category by a single rating agency at the time of purchase that subsequently receives a rating below the highest rating category from a different rating agency may continue to be considered a First Tier Security. U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. Treasury (such as Treasury bills, notes or bonds) and obligations issued or guaranteed as to principal and interest (but not as to market value) by the U.S. government, its agencies or its instrumentalities. U.S. government securities include mortgage-backed securities issued or guaranteed by government agencies or government-sponsored enterprises. Other U.S. government securities may be backed by the full faith and credit of the U.S. government or supported primarily or solely by the creditworthiness of the government-related issuer or, in the case of mortgage-backed securities, by pools of assets. U.S. government securities also include separately traded principal and interest components of securities issued or guaranteed by the U.S. Treasury, which are traded independently under the Separate Trading of Registered Interest and Principal of Securities ("STRIPS") program. Under the STRIPS programs, the principal and interest components are individually numbered and separately issued by the U.S. Treasury. COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The fund may purchase commercial paper, which includes short-term obligations issued by corporations, partnerships, trusts or other entities to finance short-term credit needs. The fund also may purchase other types of non-convertible debt obligations subject to maturity constraints imposed by Rule 2a-7 under the Investment Company Act. Descriptions of certain types of short-term obligations are provided below. ASSET-BACKED SECURITIES. The fund may invest in securities that are comprised of financial assets. Such assets may include motor vehicle and other installment sales contracts, home equity loans, leases of various types of real and personal property and receivables from revolving credit (credit card) agreements or other types of financial assets. Such assets are securitized through the use of trusts or special purpose corporations or other entities. Payments or distributions of principal and interest may be guaranteed up to a certain amount and for a certain time period by a letter of credit or pool insurance policy issued by a financial institution unaffiliated with the issuer, or other credit enhancements may be present. See "The Fund's Investments, Related Risks and Limitations -- Credit and Liquidity Enhancements." VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. The fund may purchase variable and floating rate securities with remaining maturities in excess of 13 months issued by U.S. government agencies or instrumentalities or guaranteed by the U.S. government. In addition, the fund may purchase variable and floating rate securities of other issuers with remaining maturities in excess of 13 months. The fund's investment in these securities must comply with conditions established by the Securities and Exchange Commission ("SEC") under which they may be considered to have remaining maturities of 13 months or less. The yields on these securities are adjusted in relation to changes in specific rates, such as the prime rate, and different securities may have different adjustment rates. Certain of these obligations carry a demand feature that gives the fund the right to tender them back to a specified party, usually the issuer or a remarketing agent, prior to maturity. See "The Fund's Investments, Related Risks and Limitations -- Credit and Liquidity Enhancements." 3 Generally, the fund may exercise demand features (1) upon a default under the terms of the underlying security, (2) to maintain its portfolio in accordance with its investment objective and policies or applicable legal or regulatory requirements or (3) as needed to provide liquidity to the fund in order to meet redemption requests. The ability of a bank or other financial institution to fulfill its obligations under a letter of credit, guarantee or other liquidity arrangement might be affected by possible financial difficulties of its borrowers, adverse interest rate or economic conditions, regulatory limitations or other factors. The interest rate on floating rate or variable rate securities ordinarily is readjusted on the basis of the prime rate of the bank that originated the financing or some other index or published rate, such as the 90-day U.S. Treasury bill rate, or is otherwise reset to reflect market rates of interest. Generally, these interest rate adjustments cause the market value of floating rate and variable rate securities to fluctuate less than the market value of fixed rate securities. VARIABLE AMOUNT MASTER DEMAND NOTES. The fund may invest in variable amount master demand notes, which are unsecured redeemable obligations that permit investment of varying amounts at fluctuating interest rates under a direct agreement between the fund and an issuer. The principal amount of these notes may be increased from time to time by the parties (subject to specified maximums) or decreased by the fund or the issuer. These notes are payable on demand and may or may not be rated. FUNDING AGREEMENTS AND GUARANTEED INVESTMENT CONTRACTS. The fund may invest in funding agreements and guaranteed investment contracts issued by insurance companies which are obligations of the insurance company or its separate account. Funding agreements permit the investment of varying amounts under a direct agreement between the fund and an insurance company and provide that the principal amount may be increased from time to time (subject to specified maximums) by agreement of the parties or decreased by either party. The fund expects to invest primarily in funding agreements and guaranteed investment contracts with floating or variable rates that are subject to demand features that permit the fund to tender its interest back to the issuer. To the extent the fund invests in funding agreements and guaranteed investment contracts that either do not have demand features or have demand features that may be exercised more than seven days after the date of acquisition, these investments will be subject to the fund's limitation on investments in illiquid securities. See "The Fund's Investments, Related Risks and Limitations -- Credit and Liquidity Enhancements" and "-- Illiquid Securities." INVESTING IN FOREIGN SECURITIES. The fund's investments in U.S. dollar-denominated securities of foreign issuers may involve risks that are different from investments in U.S. issuers. These risks may include future unfavorable political and economic developments, possible withholding taxes, seizure of foreign deposits, currency controls, interest limitations or other governmental restrictions that might affect the payment of principal or interest on the fund's investments. Additionally, there may be less publicly available information about foreign issuers because they may not be subject to the same regulatory requirements as domestic issuers. CREDIT AND LIQUIDITY ENHANCEMENTS. The fund may invest in securities that have credit or liquidity enhancements or the fund may purchase these types of enhancements in the secondary market. Such enhancements may be structured as demand features that permit the fund to sell the instrument at designated times and prices. These credit and liquidity enhancements may be backed by letters of credit or other instruments provided by banks or other financial institutions whose credit standing affects the credit quality of the underlying obligation. Changes in the credit quality of these financial institutions could cause losses to the fund. The credit and liquidity enhancements may have conditions that limit the ability of the fund to use them when the fund wishes to do so. ILLIQUID SECURITIES. The term "illiquid securities" means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which the fund has valued the securities and includes, among other things, repurchase agreements maturing in more than seven days and restricted securities other than those Mitchell Hutchins has determined are 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, as amended ("Securities Act") and may be sold only in privately negotiated or other exempted transactions or after a registration statement under the 4 Securities Act has become effective. Where registration is required, the fund may be obligated to pay all or part of the registration expenses and a considerable period may elapse between the time of the decision to sell and the time the fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the fund might obtain a less favorable price than prevailed when it decided to sell. However, not all restricted securities are illiquid. A large institutional market has developed for many U.S. and foreign securities that are not registered under the Securities Act. Institutional investors generally will not seek to sell these instruments to the general public, but instead will often depend either on an efficient institutional market in which such unregistered securities can be readily resold or on an issuer's ability to honor a demand for repayment. Therefore, the fact that there are contractual or legal restrictions on resale to the general public or certain institutions is not dispositive of the liquidity of such investments. Institutional markets for restricted securities also have developed as a result of Rule 144A under the Securities Act, which establishes a "safe harbor" from the registration requirements of that Act for resales of certain securities to qualified institutional buyers. Such markets include automated systems for the trading, clearance and settlement of unregistered securities of domestic and foreign issuers, such as the PORTAL System sponsored by the National Association of Securities Dealers, Inc. An insufficient number of qualified institutional buyers interested in purchasing Rule 144A-eligible restricted securities held by the fund, however, could affect adversely the marketability of such portfolio securities, and the fund might be unable to dispose of such securities promptly or at favorable prices. The board has delegated the function of making day-to-day determinations of liquidity to Mitchell Hutchins pursuant to guidelines approved by the board. Mitchell Hutchins takes into account a number of factors in reaching liquidity decisions, which may include (1) the frequency of trades for the security, (2) the number of dealers that make quotes for the security, (3) the nature of the security and how trading is effected (e.g., the time needed to sell the security, how bids are solicited and the mechanics of transfer) and (4) the existence of demand features or similar liquidity enhancements. Mitchell Hutchins monitors the liquidity of restricted securities in the fund's portfolio and reports periodically on such decisions to the board. REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the fund purchases securities or other obligations from a bank or securities dealer (or its affiliate) and simultaneously commits to resell them to the counterparty at an agreed-upon date or upon demand and at a price reflecting a market rate of interest unrelated to the coupon rate or maturity of the purchased obligations. Securities or other obligations subject to repurchase agreements may have maturities in excess of 13 months. The fund maintains custody of the underlying obligations prior to their repurchase, either through its regular custodian or through a special "tri-party" custodian or sub-custodian that maintains separate accounts for both the fund and its counterparty. Thus, the obligation of the counterparty to pay the repurchase price on the date agreed to or upon demand is, in effect, secured by such obligations. Repurchase agreements carry certain risks not associated with direct investments in securities, including a possible decline in the market value of the underlying obligations. If their value becomes less than the repurchase price, plus any agreed-upon additional amount, the counterparty must provide additional collateral so that at all times the collateral is at least equal to the repurchase price plus any agreed-upon additional amount. The difference between the total amount to be received upon repurchase of the obligations and the price that was paid by the fund upon acquisition is accrued as interest and included in its net investment income. Repurchase agreements involving obligations other than U.S. government securities (such as commercial paper, 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 seller or guarantor becomes insolvent, the fund may suffer delays, costs and possible losses in connection with the disposition of collateral. The fund intends to enter into repurchase agreements only with counterparties in transactions believed by Mitchell Hutchins to present minimum credit risks. REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the sale of securities held by the fund subject to its agreement to repurchase the securities at an agreed-upon date or upon demand and at a price 5 reflecting a market rate of interest. Reverse repurchase agreements are subject to the fund's limitation on borrowings and may be entered into only with banks and securities dealers. While a reverse repurchase agreement is outstanding, the fund will maintain, in a segregated account with its custodian, cash or liquid securities, marked to market daily, in an amount at least equal to its obligations under the reverse repurchase agreement. See "The Fund's Investments, Related Risks and Limitations -- Segregated Accounts." Reverse repurchase agreements involve the risk that the buyer of the securities sold by the fund might be unable to deliver them when the fund seeks to repurchase. If the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or trustee or receiver may receive an extension of time to determine whether to enforce that fund's obligation to repurchase the securities, and the fund's use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The fund may purchase securities on a "when-issued" basis or may purchase or sell securities for delayed delivery, i.e., for issuance or delivery to or by the fund later than the normal settlement date for such securities at a stated price and yield. The fund generally would not pay for such securities or start earning interest on them until they are received. However, when the fund undertakes a when-issued or delayed delivery obligation, it immediately assumes the risks of ownership, including the risks of price fluctuation. Failure of the issuer to deliver a security purchased by the fund on a when-issued or delayed delivery basis may result in the fund's incurring a loss or missing an opportunity to make an alternative investment. A security purchased on a when-issued or delayed delivery basis is recorded as an asset on the commitment date and is subject to changes in market value, generally based upon changes in the level of interest rates. Thus, fluctuation in the value of the security from the time of the commitment date will affect a fund's net asset value. When 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 "The Fund's Investments, Related Risks and Limitations--Segregated Accounts." The fund may sell the right to acquire the security prior to delivery if Mitchell Hutchins deems it advantageous to do so, which may result in a gain or loss to the fund. INVESTMENTS IN OTHER INVESTMENT COMPANIES. The fund may invest in securities of other money market funds, subject to Investment Company Act limitations, which at present restrict these investments in the aggregate to no more than 10% of the fund's total assets. The shares of other money market funds are subject to the management fees and other expenses of those funds. At the same time, the fund would continue to pay its own management fees and expenses with respect to all its investments, including shares of other money market funds. The fund may invest in the securities of other money market funds when Mitchell Hutchins believes that (1) the amounts to be invested are too small or are available too late in the day to be effectively invested in other money market instruments, (2) shares of other money market funds otherwise would provide a better return than direct investment in other money market instruments or (3) such investments would enhance the fund's liquidity. LENDING OF PORTFOLIO SECURITIES. The fund is authorized to lend its portfolio securities to broker-dealers or institutional investors that Mitchell Hutchins deems qualified. Lending securities enables the fund to earn additional income, but could result in a loss or delay in recovering these securities. The borrower of the fund's portfolio securities must maintain acceptable collateral with the fund's custodian in an amount, marked to market daily, at least equal to the market value of the securities loaned, plus accrued interest and dividends. Acceptable collateral is limited to cash, U.S. government securities and irrevocable letters of credit that meet certain guidelines established by Mitchell Hutchins. The fund may reinvest any cash collateral in money market investments or other short-term liquid investments. In determining whether to 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 interest, dividends 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. 6 Pursuant to procedures adopted by the board governing the fund's securities lending program, PaineWebber has been retained to serve as lending agent for the fund. The board also has authorized the payment of fees (including fees calculated as a percentage of invested cash collateral) to PaineWebber for these services. The board periodically reviews all portfolio securities loan transactions for which PaineWebber acted as lending agent. PaineWebber also has been approved as a borrower under the fund's securities lending program. SEGREGATED ACCOUNTS. When the fund enters into certain transactions that involve obligations to make future payments to third parties, including the purchase of securities on a when-issued or delayed delivery basis or reverse repurchase agreements, it will maintain with an approved custodian in a segregated account cash or liquid securities, marked to market daily, in an amount at least equal to the fund's obligation or commitment under such transactions. INVESTMENT LIMITATIONS OF THE FUND FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations cannot be changed for the fund without the affirmative vote of the lesser of (a) more than 50% of the outstanding shares of the fund or (b) 67% or more of the shares of the fund present at a shareholders' meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. If a percentage restriction is adhered to at the time of an investment or transaction, later changes in percentage resulting from a change in values of portfolio securities or amount of total assets will not be considered a violation of any of the following limitations. The fund will not: (1) purchase 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 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 7 paper, certificates of deposit, bankers' acceptances or similar instruments will not be considered the making of a loan. The following interpretation applies to, but is not a part of, this fundamental restriction: the fund's investments in master notes, funding agreements and similar instruments will not be considered to be the making of a loan. (5) engage in the business of underwriting securities of other issuers, except to the extent that the fund might be considered an underwriter under the federal securities laws in connection with its disposition of portfolio securities. (6) purchase or sell real estate, except that investments in securities of issuers that invest in real estate and investments in mortgage-backed securities, mortgage participations or other instruments supported by interests in real estate are not subject to this limitation, and except that the fund may exercise rights under agreements relating to such securities, including the right to enforce security interests and to hold real estate acquired by reason of such enforcement until that real estate can be liquidated in an orderly manner. (7) purchase or sell physical commodities unless acquired as a result of owning securities or other instruments, but the fund may purchase, sell or enter into financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are non-fundamental and may be changed by the vote of the board without shareholder approval. The fund will not: (1) purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions and except that the fund may make margin deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. (2) engage in short sales of securities or maintain a short position, except that the fund may (a) sell short "against the box" and (b) maintain short positions in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments. (3) purchase securities of other investment companies, except to the extent permitted by the Investment Company Act and except that this limitation does not apply to securities received or acquired as dividends, through offers of exchange, or as a result of reorganization, consolidation, or merger. (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. 8 ORGANIZATION OF THE TRUST; TRUSTEES AND OFFICERS AND PRINCIPAL HOLDERS OF SECURITIES The Trust was formed on April 29, 1998 as a business trust under the laws of Delaware and has one operating series. The board has authority to establish additional series and to issue an unlimited number of shares of each beneficial interest of each existing or future series, par value $0.001 per share. The board oversees the fund's operations. Trustees and executive officers of the Trust, their ages, business addresses and principal occupations during the past five years are:
NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS ---------------------- ------------------- ---------------------------------------------- Margo N. Alexander**; 52 Trustee and President Mrs. Alexander is chairman (since March 1999), chief executive officer and a director of Mitchell Hutchins (since January 1995), and an executive vice president and a director of PaineWebber (since March 1984). Mrs. Alexander is president and a director or trustee of 32 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Richard Q. Armstrong; 64 Trustee Mr. Armstrong is chairman and principal of R.Q.A. Enterprises R.Q.A. Enterprises (management consulting One Old Church Road firm) (since April 1991 and principal Unit #6 occupation since March 1995). Mr. Armstrong Greenwich, CT 06830 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 31 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser.
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NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS ---------------------- ------------------- ---------------------------------------------- E. Garrett Bewkes, Jr.**; 72 Trustee and Chairman of the Mr. Bewkes is a director of Paine Webber Group Board of Trustees Inc. ("PW Group") (holding company of PaineWebber and Mitchell Hutchins). Prior to December 1995, he was a consultant to PW Group. Prior to 1988, he was chairman of the board, president and chief executive officer of American Bakeries Company. Mr. Bewkes is a director of Interstate Bakeries Corporation. Mr. Bewkes is a director or trustee of 35 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Richard R. Burt; 52 Trustee Mr. Burt is chairman of IEP Advisors, Inc. 1275 Pennsylvania Ave, N.W. (international investments and consulting Washington, DC 20004 firm) (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. (gold mining), Powerhouse Technologies Inc. (provides technology to gaming and wagering industry) and Wierton Steel Corp. (makes and finishes steel products). He was the chief negotiator in the Strategic Arms Reduction Talks with the former Soviet Union (1989-1991) and the U.S. Ambassador to the Federal Republic of Germany (1985-1989). Mr. Burt is a director or trustee of 31 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Mary C. Farrell**; 49 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 31 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser.
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NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS ---------------------- ------------------- ---------------------------------------------- Meyer Feldberg; 57 Trustee Mr. Feldberg is Dean and Professor of Columbia University Management of the Graduate School of Business, 101 Uris Hall Columbia University. Prior to 1989, he was New York, NY 10027 president of the Illinois Institute of Technology. Dean Feldberg is also a director of Primedia, Inc. (publishing), Federated Department Stores, Inc. (operator of department stores) and Revlon, Inc. (cosmetics). Dean Feldberg is a director or trustee of 34 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. George W. Gowen; 69 Trustee Mr. Gowen is a partner in the law firm of 666 Third Avenue Dunnington, Bartholow & Miller. Prior to May New York, NY 10017 1994, he was a partner in the law firm of Fryer, Ross & Gowen. Mr. Gowen is a director or trustee of 34 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Frederic V. Malek; 62 Trustee Mr. Malek is chairman of Thayer Capital 1455 Pennsylvania Ave, N.W. Partners (merchant bank). From January 1992 to Suite 350 November 1992, he was campaign manager of Washington, DC 20004 Bush-Quayle `92. From 1990 to 1992, he was vice chairman and, from 1989 to 1990, he was president of Northwest Airlines Inc. and NWA Inc. (holding company of Northwest Airlines 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. (computing services), CB Richard Ellis, Inc. (real estate services), FPL Group, Inc. (electric services), Global Vacation Group (packaged vacations), HCR/Manor Care, Inc. (health care) and Northwest Airlines Inc. Mr. Malek is a director or trustee of 31 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser.
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NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS ---------------------- ------------------- ---------------------------------------------- Carl W. Schafer; 63 Trustee Mr. Schafer is president of the Atlantic 66 Witherspoon Street, #1100 Foundation (charitable foundation supporting Princeton, NJ 08542 mainly oceanographic exploration and research). He is a director of Base Ten Systems, Inc. (software), Roadway Express, Inc. (trucking), The Guardian Group of Mutual Funds, the Harding, Loevner Funds, Evans Systems, Inc. (motor fuels, convenience store and diversified company), Electronic Clearing House, Inc. (financial transactions processing), Frontier Oil Corporation and Nutraceutix, Inc. (biotechnology company). Prior to January 1993, he was chairman of the Investment Advisory Committee of the Howard Hughes Medical Institute. Mr. Schafer is a director or trustee of 31 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Brian M. Storms;** 44 Trustee Mr. Storms is president and chief operating officer of Mitchell Hutchins (since March 1999). Prior to March 1999, he was president of Prudential Investments (1996-1999). Prior to joining Prudential, he was a managing director at Fidelity Investments. Mr. Storms is a director or trustee of 31 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Anthony G. Balestrieri; 36 Vice President Mr. Balestrieri is a senior vice president and a portfolio manager in the short-term strategies group of Mitchell Hutchins. Mr. Balestrieri is a vice president of one investment company for which Mitchell Hutchins or PaineWebber serves as investment adviser. Kris L. Dorr; 35 Vice President Ms. Dorr is a first vice president and a portfolio manager in the short-term strategies group of Mitchell Hutchins. Ms. Dorr is a vice president of one investment company for which Mitchell Hutchins or PaineWebber serves as investment adviser. John J. Lee; 31 Vice President and Mr. Lee is a vice president and a manager of Assistant Treasurer the 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 32 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as an investment adviser.
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NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS ---------------------- ------------------- ---------------------------------------------- Kevin J. Mahoney; 33 Vice President and Mr. Mahoney is a first vice president and a Assistant Treasurer senior manager of the mutual fund finance department of Mitchell Hutchins. From August 1996 through March 1999, he was the manager of the mutual fund internal control group of Salomon Smith Barney. Prior to August 1996, he was an associate and assistant treasurer of BlackRock Financial Management L.P. Mr. Mahoney is a vice president and assistant treasurer of 32 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. 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. Mr. Markowitz is a vice president of one investment company for which Mitchell Hutchins or PaineWebber serves as investment adviser. Dennis McCauley; 52 Vice President Mr. McCauley is a managing director and chief investment officer--fixed income of Mitchell Hutchins. Prior to December 1994, he was director of fixed income investments of IBM Corporation. Mr. McCauley is a vice president of 22 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Ann E. Moran; 42 Vice President and Ms. Moran is a vice president and a manager of Assistant Treasurer the mutual fund finance department of Mitchell Hutchins. Ms. Moran is a vice president and assistant treasurer of 32 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Dianne E. O'Donnell; 47 Vice President and Secretary Ms. O'Donnell is a senior vice president and deputy general counsel of Mitchell Hutchins. Ms. O'Donnell is a vice president and secretary of 31 investment companies and a vice president and assistant secretary of one investment company for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Emil Polito; 38 Vice President Mr. Polito is a senior vice president and director of operations and control for Mitchell Hutchins. Mr. Polito is a vice president of 32 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser.
13
NAME AND ADDRESS*; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS ---------------------- ------------------- ---------------------------------------------- Victoria E. Schonfeld; 48 Vice President Ms. Schonfeld is a managing director and general counsel of Mitchell Hutchins (since May 1994) and a senior vice president of PaineWebber (since July 1995). Ms. Schonfeld is a vice president of 31 investment companies and a vice president and secretary of one investment company for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Paul H. Schubert; 36 Vice President and Treasurer Mr. Schubert is a senior vice president and director of the mutual fund finance department of Mitchell Hutchins. Mr. Schubert is a vice president and treasurer of 32 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Barney A. Taglialatela; 38 Vice President and Mr. Taglialatela is a vice president and a Assistant Treasurer manager of the mutual fund finance department of Mitchell Hutchins. Prior to February 1995, he was a manager of the mutual fund finance division of Kidder Peabody Asset Management, Inc. Mr. Taglialatela is a vice president and assistant treasurer of 32 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser. Keith A. Weller; 38 Vice President and Mr. Weller is a first vice president and Assistant Secretary associate general counsel of Mitchell Hutchins. Prior to May 1995, he was an attorney in private practice. Mr. Weller is a vice president and assistant secretary of 31 investment companies for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment adviser.
- ------------- * 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, Ms. Farrell and Mr. Storms are "interested persons" of the trust as defined in the Investment Company Act by virtue of their positions with Mitchell Hutchins, PaineWebber, and/or PW Group. The Trust pays each trustee who is not an "interested person" of the Trust $1,000 annually per series and up to $150 for each board meeting and each separate meeting of a board committee. The Trust has only one operating 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 committees 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 of the Trust own in the aggregate less than 1% of the outstanding shares of any class of the Trust. Because PaineWebber and Mitchell Hutchins perform substantially all the services necessary for the operation of the fund, the fund requires no employees. No officer, director or employee of Mitchell Hutchins or PaineWebber presently receives any compensation from the Trust for acting as a board member or officer. 14 The table below includes certain information relating to the compensation of the current board members who held office with the fund during the fiscal period ended April 30, 1999 and the compensation of those board members from all PaineWebber funds during the 1998 calendar year. COMPENSATION TABLE'D'
AGGREGATE TOTAL COMPENSATION FROM COMPENSATION FROM THE TRUST AND THE FUND NAME OF PERSON, POSITION THE TRUST* COMPLEX** ------------------------ ---------- --------- Richard Q. Armstrong, Trustee............................... $ 1,160 $ 101,372 Richard R. Burt, Trustee............................... 1,130 101,372 Meyer Feldberg, Trustee............................... 1,160 116,222 George W. Gowen, Trustee............................... 1,474 108,272 Frederic V. Malek, Trustee............................... 1,160 101,372 Carl W. Schafer, Trustee............................... 1,160 101,372
- -------------------- 'D' Only independent board members are compensated by the PaineWebber funds and identified above; board members who are "interested persons," as defined by the Investment Company Act, do not receive compensation from the funds. * Represents fees paid to each board member for the fund's initial fiscal period ended April 30, 1999. ** Represents total compensation paid during the calendar year ended December 31, 1998, to each board member by 31 investment companies (33 in the case of Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or one of their affiliates served as investment adviser. No fund within the PaineWebber fund complex has a bonus, pension, profit sharing or retirement plan. PRINCIPAL HOLDERS OF SECURITIES As of August 1, 1999, the fund's records showed the following shareholders as owning 5% or more of a class of the fund's shares:
NUMBER AND PERCENTAGE OF INSTITUTIONAL SHARES NAME AND ADDRESS BENEFICIALLY OWNED AS OF JULY 31, 1999 ---------------- -------------------------------------- Probusiness Service Inc..................................... 372,564,544 shares 23% State of Iowa -- State Treasurer............................. 175,000,000 shares 11% Fleetwood Enterprises........................................ 114,715,951 shares 7% Federal Agricultural Mortgage Corp........................... 113,176,119 7%
- -------------------- * Each shareholder listed above may be contacted c/o Mitchell Hutchins Asset Management Inc., 1285 Avenue of the Americas, New York, NY 10019. 15 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 July 31, 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. During the period August 10, 1998 (commencement of operations) to April 30, 1999, the fund paid (or accrued) to Mitchell Hutchins fees of $1,115,803, after giving effect to $668,641 in fee waivers by Mitchell Hutchins. Under the terms of the Advisory Contract, Mitchell Hutchins bears all expenses incurred in the fund's operation other than the 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 Investment Company 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 registration and qualifications, (3) fees and salaries payable 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 certificate (if any); (9) expenses of setting in type and printing prospectuses and supplements thereto, reports and statements to shareholders and proxy materials 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 the fund on 60 days' written notice to Mitchell Hutchins, as the case may be. The Advisory Contract is also terminable without penalty by 16 Mitchell Hutchins on 60 days' written notice to the other party. The Advisory Contract terminates automatically upon its assignment. NET ASSETS. The following table shows the approximate net assets as of July 31, 1999, sorted by category of investment objective, of the investment companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An investment company may fall into more than one of the categories below.
NET ASSETS INVESTMENT CATEGORY ($MIL) ------------------- ----------- Domestic (excluding Money Market) ........................................... $ 8,159.6 Global....................................................................... 4,524.1 Equity/Balanced.............................................................. 7,791.1 Fixed Income (excluding Money Market) ....................................... 4,892.6 Taxable Fixed Income ................................................. 3,363.8 Tax-Free Fixed Income ................................................ 1,528.8 Money Market Funds .......................................................... 35,370.8
PERSONAL TRADING POLICIES. Mitchell Hutchins personnel may invest in securities for their own accounts pursuant to a code of ethics that describes the fiduciary duty owed to shareholders of PaineWebber funds and other Mitchell Hutchins advisory accounts by all Mitchell Hutchins' directors, officers and employees, establishes procedures for personal investing and restricts certain transactions. For example, employee accounts generally must be maintained at PaineWebber, personal trades in most securities require pre-clearance and short-term trading and participation in initial public offerings generally are prohibited. In addition, the code of ethics puts restrictions on the timing of personal investing in relation to trades by PaineWebber Funds and other Mitchell Hutchins advisory clients. DISTRIBUTION ARRANGEMENTS. PaineWebber acts as distributor of each class of shares of the fund 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 fund. Shares of the fund 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. PaineWebber may pay shareholder servicing fees to banks and broker-dealers that make Institutional shares of the fund available to their customers. The annual rate of the shareholder servicing fees will not exceed five basis points (0.05%) multiplied by the average daily net asset value of Institutional shares held through the bank or broker-dealer by its institutional customers, and will be paid monthly. The cost of these shareholder servicing fees will be borne by PaineWebber or Mitchell Hutchins Asset Management Inc. and will not be charged to or reimbursed by the fund. FINANCIAL INTERMEDIARIES. Financial intermediaries, such as banks and savings associations, may purchase Financial Intermediary shares for the accounts of their customers. The Trust has adopted a shareholder services plan ("Plan") with respect to Financial 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 Intermediary shares. Under the Plan, the fund pays PaineWebber an annual fee at the annual rate of 0.25% of the average daily net assets 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 17 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-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 fund made payments through PaineWebber to financial intermediaries in the amount of $373 with respect to its Financial Intermediary shares that were outstanding during the fiscal period ended April 30, 1999. Under the terms of the service agreements, financial intermediaries are required 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. 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 trustees of the Trust who are not "interested persons" of the Trust as defined in the Investment Company Act and 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. Should future legislative, judicial or administrative action prohibit or restrict the activities of banks serving as financial intermediaries in connection 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 receipt of compensation from a fund through PaineWebber under a service agreement resulting from fiduciary funds being invested in Financial Intermediary shares. Before investing fiduciary funds in Financial Intermediary shares, financial 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 consult their legal advisors. PORTFOLIO TRANSACTIONS 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. During the period August 10, 1998 (commencement of operations) to April 30, 1999, the fund paid no brokerage commissions. For purchases or sales with broker-dealer firms that act as principal, Mitchell Hutchins seeks best execution. Although Mitchell Hutchins may receive certain research or execution services in connection with these transactions, it will not purchase securities at a higher price or sell securities at a lower price than would otherwise be paid if no weight was attributed to the services provided by the executing dealer. Mitchell Hutchins may engage in agency transactions in over-the-counter securities in return for research and execution services. These transactions are entered into only pursuant to procedures that are designed to ensure that the transaction (including 18 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. Research services and information received from brokers or dealers are supplemental to Mitchell Hutchins' own research efforts and, when utilized, are subject to internal analysis before being incorporated into their investment processes. Information and research services furnished by brokers or dealers through which or with which the fund effects securities transactions may be used by Mitchell Hutchins in advising other funds or accounts and, conversely, research services furnished to Mitchell Hutchins by brokers or dealers in connection with other funds or accounts that either of them advises may be used in advising the fund. Investment decisions for the fund and for other investment accounts managed by Mitchell Hutchins are made independently of each other in light of differing considerations for the various accounts. However, the same investment decision may occasionally be made for the fund and one or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated between the fund and such other account(s) as to amount according to a formula deemed equitable to the fund and such account(s). While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the fund is concerned, or upon its ability to complete its entire order, in other cases it is believed that coordination and the ability to participate in volume transactions will be beneficial to the fund. As of April 30, 1999, the fund owned securities issued by the following companies which are regular broker-dealers for the fund:
ISSUER TYPE OF SECURITY VALUE ------ ---------------- ----- Bear Stearns Companies Incorporated master note $ 55,000,000 Goldman Sachs Group Incorporated master note 45,000,000 Morgan Stanley, Dean Witter & Company master note 55,000,000 NationsBanks N.A. master note 50,000,000
ADDITIONAL INFORMATION REGARDING REDEMPTIONS ADDITIONAL REDEMPTION INFORMATION. The fund may suspend redemption privileges or postpone the date of payment during any period (1) when the New York Stock Exchange is closed or trading on the New York Stock Exchange is restricted as determined by the SEC, (2) when an emergency exists, as defined by the SEC, that makes it not reasonably practicable for the fund to dispose of securities owned by it or fairly to determine the value of its assets or (3) as the SEC may otherwise permit. The redemption price may be more or less than the shareholder's cost, depending on the market value of the fund's portfolio at the time; although the fund attempts to maintain a constant net asset value of $1.00 per share. 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, the shareholder may incur brokerage expenses in converting these securities into cash. 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 The Bank of New York ("BONY") as of 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 City offices of BONY, the fund's transfer agent (First Data Investors Services Group, Inc.) and PaineWebber 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, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day. 19 The fund values its portfolio securities in accordance with the amortized cost method of valuation under Rule 2a-7 ("Rule") under the Investment Company Act. To use amortized cost to value its portfolio securities, the fund must adhere to certain conditions under the Rule relating to its investments, some of which are discussed in this SAI. 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 for the purpose of maintaining a constant net asset value of $1.00 per share, which include a review of the extent of any deviation of net asset value per share, based on available market quotations, from the $1.00 amortized cost per share. If that deviation exceeds 1/2 of 1% for the fund, the board will promptly consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redeeming shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends and utilizing a net asset value per share as determined by using available market quotations. The fund will maintain a dollar-weighted average portfolio maturity of 90 days or less and will not purchase any instrument having, or deemed to have, a remaining maturity of more than 397 days, will limit portfolio investments, including repurchase agreements, to those U.S. dollar-denominated instruments that are of high quality under the Rule and that Mitchell Hutchins, acting pursuant to the procedures, determines present minimal credit risks, and will comply with certain reporting and recordkeeping procedures. There is no assurance that constant net asset value per share will be maintained. If amortized cost ceases to represent fair value per share, the board will take appropriate action. In determining the approximate market value of portfolio investments, the fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. Other assets, if any, are valued at fair value as determined in good faith by or under the direction of the board. PERFORMANCE INFORMATION The fund's performance data quoted in advertising and other promotional materials ("Performance Advertisements") represent past performance and are not intended to indicate future performance. The investment return will fluctuate. TOTAL RETURN CALCULATIONS. Average annual total return quotes ("Standardized Return") used in the fund's Performance Advertisements are calculated according to the following formula: P(1 + T)'pp'n = ERV where: P = a hypothetical initial payment of $1,000 to purchase shares of a specified class T = average annual total return of shares of that class n = number of years ERV = ending redeemable value of a hypothetical $1,000 payment at the beginning of that period.
Under the foregoing formula, the time periods used in Performance Advertisements will be based on rolling calendar quarters, updated to the last day of the most recent quarter prior to submission of the advertisement for publication. Total return, or "T" in the formula above, is computed by finding the average annual change in the value of an initial $1,000 investment over the period. All dividends are assumed to have been reinvested at net asset value. The following table shows performance information for the fund's shares outstanding for the period indicated. Any returns for periods of more than one year are expressed as an average annual return. 20
INSTITUTIONAL SHARES (INCEPTION DATE) (08/10/99) ---------------- ------------- Inception to April 30, 1999: Standardized Return................. 3.81%
The fund had Financial Intermediary shares outstanding only during the period December 29, 1998 to February 9, 1999. Accordingly, no performance information is provided for Financial Intermediary shares. CALCULATION OF YIELD. The fund computes its yield and effective yield quotations for each class of shares using standardized methods required by the SEC. The fund from time to time advertises for each class of shares (1) 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)'pp'365/7 ] - 1 The fund may also advertise other performance data, which may consist of the annual or cumulative return (including net short-term capital gain, if any) earned on a hypothetical investment in the fund since it began operations or for shorter periods. This return data may or may not assume reinvestment of dividends (compounding). Yield may fluctuate daily and does not provide a basis for determining future yields. Because the yield of 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. For the seven-day period ended April 30, 1999, the yield and effective yield of the fund's Institutional shares was 4.86% and 4.98%, respectively. The fund had Financial Intermediary shares outstanding only during the period December 29, 1998 to February 9, 1999. Accordingly, no yield information is provided for Financial Intermediary shares. 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 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 Smith Barney 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 21 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 performance 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 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. TAXES BACKUP WITHHOLDING. The fund is required to withhold 31% of all dividends and redemption proceeds payable to individuals and certain other non-corporate shareholders who do not provide the fund or PaineWebber with a correct taxpayer identification number or who otherwise are subject to backup withholding. QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to qualify for treatment as a regulated investment company ("RIC") under the Internal Revenue Code, the fund must distribute to its shareholders for each taxable year at least 90% of its investment company taxable income (consisting generally of net investment income and net short-term capital gains, if any) and must meet several additional requirements. Among these requirements are the following: (1) the fund must derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of securities and certain other income; (2) at the close of each quarter of the fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities that are limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the fund's total assets; and (3) at the close of each quarter of the fund's taxable year, not more than 25% of the value of its total assets may be invested in securities (other than U.S. government securities or the securities of other RICs) of any one issuer. If the fund failed to qualify for treatment as a RIC for any taxable year, (a) it would be taxed as an ordinary corporation on the full amount of its taxable income for that year without being able to deduct the distributions it makes to its shareholders and (b) the shareholders would treat all those distributions as dividends (that is, ordinary income) to the extent of the fund's earnings and profits. In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying for RIC treatment. OTHER INFORMATION DELAWARE BUSINESS TRUST. 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 22 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. CLASSES OF SHARES. A share of each class of the fund represents an interest in the fund's investment portfolio and has similar rights, privileges and preferences. Each share 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 costs. VOTING RIGHTS. Shareholders of the fund are entitled to one vote for each full share held and fractional votes for fractional shares held. Voting rights are not cumulative and, as a result, the holders of more than 50% of all the shares of the Trust may elect all its board members. 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 proportion as the vote of shares held for their customers. The fund does not hold annual meetings. Shareholders of record of no less than two-thirds of the outstanding shares of the Trust may remove a board member by vote cast in person or by proxy at a meeting called for that purpose. A meeting will be called to vote on the removal of a board member at the written request of holders of record of at least 10% of the outstanding shares of the Trust. PRIOR NAME. Prior to July 28, 1999, the Trust was known as "Mitchell Hutchins Institutional Series." CUSTODIAN; TRANSFER AND DIVIDEND 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 COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the fund. Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell Hutchins in connection with other matters. AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, serves as independent auditors for the fund. FINANCIAL STATEMENTS The fund's Annual Report to Shareholders for its initial fiscal period ended April 30, 1999 is a separate document supplied with this SAI, and the financial statements, accompanying notes and report of independent auditors appearing therein are incorporated herein by this reference. 23 YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION. THE FUND AND ITS DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL SHARES OF THE FUND IN ANY JURISDICTION WHERE THE FUND OR ITS DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES. ----------- Mitchell Hutchins LIR Select Money Fund. ------------------------------------------ Statement of Additional Information September 1, 1999 ------------------------------------------ PAINEWEBBER 'c'1999 PaineWebber Incorporated PART C. OTHER INFORMATION Item 23. Exhibits (1) (a) Trust Instrument (1) (b) Amendment to Trust Instrument effective July 28, 1999 (filed herewith) (2) By-Laws (1) (3) Instruments defining the rights of holders of Registrant's shares of beneficial interest (2) (4) Investment Advisory and Administration Contract for Mitchell Hutchins LIR Select Money Fund (filed herewith) (5) Distribution Contract for Mitchell Hutchins LIR Select Money Fund (filed herewith) (6) Bonus, profit sharing or pension plans - none (7) Custodian Agreement (filed herewith) (8) (a) Transfer Agency Agreement (filed herewith) (b) Shareholder Service Plan (filed herewith) (c) Shareholder Service Agreement (filed herewith) (9) Opinion and consent of counsel (filed herewith) (10) (a) Other opinions, appraisals, rulings and consents: Auditors' consent (filed herewith) (b) Consent of Duff & Phelps Credit Rating Company (filed herewith) (11) Omitted Financial Statements - none (12) Letter of investment intent (1) (13) Plan of Distribution pursuant to Rule 12b-1--none (14) and (27) Financial Data Schedule (not applicable) (15) Plan Pursuant to Rule 18f-3 (1) -
- ------------------------- (1) Incorporated by reference from Pre-Effective Amendment No. 1 to the registration statement, SEC File No. 333-52965, filed July 29, 1998. (2) 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 None. 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 C-1 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 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 with PaineWebber Incorporated ("PaineWebber") 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. C-2 Item 26. Business and Other Connections of Investment Adviser Mitchell Hutchins, a Delaware corporation, is a registered investment adviser and is a wholly owned subsidiary of PaineWebber which is, in turn, a wholly owned subsidiary of Paine Webber Group Inc. Mitchell Hutchins is primarily engaged in the investment advisory business. Information as to the officers and directors of Mitchell Hutchins is included in its Form ADV, as filed with the Securities and Exchange Commission (registration number 801-13219), and is incorporated herein by reference. Item 27. Principal Underwriters a) PaineWebber serves as principal underwriter and/or investment adviser for the following investment companies: LIQUID INSTITUTIONAL RESERVES PAINEWEBBER RMA MONEY FUND, INC. PAINEWEBBER RMA TAX-FREE FUND, INC. PAINEWEBBER MUNICIPAL MONEY MARKET SERIES PAINEWEBBER MANAGED MUNICIPAL TRUST 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 Trustee and President Executive Vice President and Director of PaineWebber Mary C. Farrell Trustee Managing Director, Senior Investment Strategist and member of the Investment Policy Committee
c) None Item 28. Location of Accounts and Records The books and other documents required by paragraphs (b)(4), (c) and (d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the physical possession of 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-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all the requirements for effectiveness of this Post-Effective Amendment to its Registration Statement under Rule 485(b) of the Securities Act of 1933 and has duly caused this Post-Effective Amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York, on the 30th day of August, 1999. MITCHELL HUTCHINS LIR MONEY 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 August 30, 1999 - --------------------------- (Chief Executive Officer) Margo N. Alexander * /s/ E. Garrett Bewkes, Jr. Trustee and Chairman August 30, 1999 - --------------------------- of the Board of Trustees E. Garrett Bewkes, Jr. * /s/ Richard Q. Armstrong Trustee August 30, 1999 - --------------------------- Richard Q. Armstrong * /s/ Richard R. Burt Trustee August 30, 1999 - ------------------------------------ Richard R. Burt * /s/ Mary C. Farrell Trustee August 30, 1999 - ------------------------------------ Mary C. Farrell * /s/ Meyer Feldberg Trustee August 30, 1999 - ------------------------------------ Meyer Feldberg * /s/ George W. Gowen Trustee August 30, 1999 - ------------------------------------ George W. Gowen * /s/ Frederic V. Malek Trustee August 30, 1999 - ------------------------------------ Frederic V. Malek * /s/ Carl W. Schafer Trustee August 30, 1999 - ------------------------------------ Carl W. Schafer * /s/ Brian M. Storms Trustee August 30, 1999 - ------------------------------------ Brian M. Storms ** /s/ Paul H. Schubert Vice President and Treasurer (Chief August 30, 1999 - ------------------------------------ Financial and Accounting Officer) Paul H. Schubert
* 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 LIR Money Series (formerly Mitchell Hutchins Institutional Series), SEC File 333-52965, filed May 19, 1998. ** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated May 14, 1999 and incorporated by reference from Post-Effective Amendment No. 61 to the registration statement of PaineWebber Managed Investments Trust, SEC File 2-91362, filed June 1, 1999. C-4 MITCHELL HUTCHINS LIR MONEY SERIES EXHIBIT INDEX
Exhibit Number - ------- (1) (a) Trust Instrument (1) (b) Amendment to Trust Instrument effective July 28, 1999 (filed herewith) (2) By-Laws (1) (3) Instruments defining the rights of holders of Registrant's shares of beneficial interest (2) (4) Investment Advisory and Administration Contract for Mitchell Hutchins LIR Select Money Fund (filed herewith) (5) Distribution Contract for Mitchell Hutchins LIR Select Money Fund (filed herewith) (6) Bonus, profit sharing or pension plans - none (7) Custodian Agreement (filed herewith) (8) (a) Transfer Agency Agreement (filed herewith) (b) Shareholder Service Plan (filed herewith) (c) Shareholder Service Agreement (filed herewith) (9) Opinion and consent of counsel (filed herewith) (10) (a) Other opinions, appraisals, rulings and consents: Auditors' consent (filed herewith) (b) Consent of Duff & Phelps Credit Rating Company (filed herewith) (11) Omitted Financial Statements - none (12) Letter of investment intent (1) (13) Plan of Distribution pursuant to Rule 12b-1 - none (14) and (27) Financial Data Schedule (not applicable) (15) Plan Pursuant to Rule 18f-3 (1)
- ----------- (1) Incorporated by reference from Pre-Effective Amendment No. 1 to the registration statement, SEC File No. 333-52965, filed July 29, 1998. (2) 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. STATEMENT OF DIFFERENCES The copyright symbol shall be expressed as............................... 'c' The registered trademark symbol shall be expressed as.................... 'r' The dagger symbol shall be expressed as.................................. 'D' Characters normally expressed as superscript shall be preceded by........ 'pp' EX-99.A 2 EXHIBIT 1(B) Exhibit No. 1(b) MITCHELL HUTCHINS LIR MONEY SERIES (formerly Mitchell Hutchins Institutional Series) CERTIFICATE OF VICE PRESIDENT AND SECRETARY I, Dianne E. O'Donnell, Vice President and Secretary of Mitchell Hutchins LIR Money Series ("Trust"), hereby certify that the board of trustees of the Trust adopted the following resolutions at a meeting held July 28, 1999, that the resolutions became effective on that date, and that the Amended and Restated Schedule A attached to this certificate is a true copy of the Amended and Restated Schedule A to the Trust's Trust Instrument that was approved by the board of trustees at its July 28, 1999 meeting: RESOLVED, that pursuant to Section 8 of Article X of the Trust's Trust Instrument, the name of the Trust be, and it hereby is, changed from "Mitchell Hutchins Institutional Series" to "Mitchell Hutchins LIR Money Series" and that the Trust Instrument be, and it hereby is, amended as follows: The last sentence of the introductory paragraph of the Trust Instrument is amended to read as follows: "The name of the Trust created by this Trust Instrument is Mitchell Hutchins LIR Money Series." Section (m) of Article I on the Trust Instrument is amended to read as follows: "(m) "Trust" means Mitchell Hutchins LIR Money Series established hereby, and reference to the Trust, when applicable to one or more Series, refers to that Series." All other references in the Trust Instrument to Mitchell Hutchins Institutional Series are changed to Mitchell Hutchins LIR Money Series. and be it further RESOLVED, that pursuant to Section 1 of Article IV of the Trust's Trust Instrument, there are hereby established and designated four new series of shares of beneficial interest in the Trust, each having the rights and privileges specified in the Trust's Trust Instrument, to be known as LIR Cash Reserves Fund, LIR Liquid Assets Fund; LIR Premier Money Market Fund and LIR Premier Tax-Free Money Market Fund, and be it further RESOLVED, that Schedule A of the Trust's Declaration of Trust be, and hereby is, amended and restated to reflect the name change of the Series and the establishment of the new series. Dated: August 10, 1999 By: /s/ Dianne E. O'Donnell ----------------------------------------- Dianne E. O'Donnell Vice President and Secretary Mitchell Hutchins Series Trust Subscribed and sworn before me this 10th day of August, 1999: /s/ Cristina Paradiso - ------------------------------ Cristina Paradiso Notary Public State of New York Qual. N.Y. Cty No. 01PA6017191 Comm. Exp. 12/07/2000 2 SCHEDULE A TO DECLARATION OF TRUST OF MITCHELL HUTCHINS LIR MONEY SERIES (AS AMENDED AND RESTATED JULY 28, 1999) Series of the Trust LIR Cash Reserves Fund LIR Liquid Assets Fund LIR Premier Money Market Fund LIR Premier Tax-Free Money Market Fund Mitchell Hutchins LIR Select Money Fund Classes of Shares of Mitchell Hutchins LIR Select Money Fund An unlimited number of shares of beneficial interest have been established by the Board as Institutional shares and Financial Intermediary shares of Mitchell Hutchins LIR Select Money Fund. The Institutional shares and 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. EX-99.D 3 EXHIBIT 4 Exhibit No. 4 INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT Contract made as of July 31, 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 required reports to each Series' shareholders and the Securities and Exchange Commission and other appropriate federal or state regulatory authorities. -2- (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 (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. -3- (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 LIR Select 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. (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. -4- (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. 11. Limitation of Liability of the Trustees, Officers and Shareholders of the Trust. The Trustees and officers of the Trust and the shareholders of any Series shall not be liable for any -5- 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, officers 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. /s/ Scott Griff By: /s/ Keith A. Weller - --------------------------- -------------------------- First Vice President First Vice President Attest: MITCHELL HUTCHINS INSTITUTIONAL SERIES /s/ Evelyn Chieffo By: /s/ Dianne E. O'Donnell - --------------------------- -------------------------- Assistant Secretary Vice President and Secretary -6- EX-99.E 4 EXHIBIT 5 Exhibit No. 5 MITCHELL HUTCHINS INSTITUTIONAL SERIES DISTRIBUTION CONTRACT CONTRACT made as of July 31, 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 LIR Select 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. PaineWebber 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 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 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 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, or any or all class or classes thereof, 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 PaineWebber 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 -3- relating to its affairs and activities as may be required by the Fund in connection with such qualifications. 7. Expenses of the Fund. The Fund shall bear all costs and expenses of registering the 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 -4- 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 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 -5- 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. 10. Limitation of Liability of the Trustees, Officers and Shareholders of the Fund. The trustees and officers 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, officers 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 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 a Series or class of Shares thereof, by vote of a majority of the outstanding voting securities of that Series or class. (c) Notwithstanding the foregoing, with respect to a Series or class of Shares thereof, 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 Series or class 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. -6- (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. 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 /s/ Keith A. Weller By: /s/ Dianne E. O'Donnell - --------------------------------------- ------------------------------- Vice President and Assistant Secretary Vice President and Secretary ATTEST: PAINEWEBBER INCORPORATED /s/ Dorothy F. Haughey By: /s/ Victoria Schonfeld - ------------------------------------------- ----------------------------- Vice President and Secretary Senior Vice President -7- EX-99.G 5 EXHIBIT 7 Exhibit No. 7 CUSTODY AGREEMENT Agreement made as of this 10th day of August, 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 held hereunder by the Custodian 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 or the Euro. 10. "Depository" shall mean The Depository Trust Company ("DTC"), Participants Trust Company ("PTC") and any other clearing agency registered with the Securities and Exchange Commission, and their respective 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. 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. - 2 - 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 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 - 3 - 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 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. - 4 - 29. "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. 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. (a) 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, and shall specify with respect to such Securities and money the Series to which the same are specifically allocated. The Custodian shall credit all such Securities and money in and to one or more accounts (collectively, the "custody account") for and in the name of each Series, and shall segregate, keep and maintain the custody account for each Series separate and apart. The Custodian will not be responsible for any Securities and money not actually received by it. (b) The custody account for each Series shall constitute a "securities account" within the meaning of Section 8-501 of the UCC, and the Custodian agrees that all Securities, Currency and other assets (other than Currency or money) of the Series that are credited to the custody account shall constitute "financial assets," as such term is defined in Section 8-102(a)(9) or the UCC. Except as specified in the next sentence, the Series to whose custody account such financial assets are to be credited shall have a "security entitlement," as that term is defined in Section 8-102(a)(17) the UCC, with the Custodian with respect to such financial assets. To the extent that any financial assets are registered in the name of, payable to the order of, or specially endorsed to the Fund or Series and have not been endorsed to the Custodian (or if applicable, the Book-Entry System, the Depository, a sub-custodian or one of their respective nominees) or in blank, the Custodian shall hold such financial assets in the custody account as custodian and bailee for and on behalf of such Series in accordance with the terms of this Agreement. (c) References in this Agreement to the deposit or maintenance of Securities or other financial assets with or in the Book-Entry System, the Depository or a - 5 - sub-custodian (including any Foreign Sub-Custodian) refer to the deposit and maintenance of financial assets of the Custodian that correspond to the security entitlements established in favor of the Series and do not alter the obligation of the Custodian, as a securities intermediary for the Fund and its Series, to credit those Securities to the custody account maintained by the Custodian for the appropriate Series pursuant to this Agreement. For purposes of this Agreement, "receipt" or "delivery" of a Security or other financial asset by or to the Custodian includes the acquisition by the Custodian of a security entitlement with respect to such financial asset. (d) 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. (e) 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 of the Custodian with the Book-Entry System or the Depository 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 custody account for the applicable Series. (f) Prior to the Custodian's accepting, utilizing and acting with respect to Clearing Member confirmations for Options and transactions in Options for a Series as provided in this Agreement, the Custodian shall have received 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 - 6 - 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. 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 the Book-Entry System or the Depository, 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- - 7 - 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; (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 - 8 - 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, 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 - 9 - 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 Futures Contract Options, as the case may be, confirming that such Security is held by such broker, dealer or futures commission 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 - 10 - 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 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 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. - 11 - 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 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 - 12 - 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 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; - 13 - 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 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 - 14 - 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) 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 - 15 - 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 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 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 - 16 - 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. 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 - 17 - 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 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 - 18 - 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 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 - 19 - 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. 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 - 20 - 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 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 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 - 21 - 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 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. - 22 - 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 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 - 23 - 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 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. - 24 - 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. 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 tendered to 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 - 25 - which may from time to time be offered by the Fund, the Custodian, unless otherwise instructed by a Certificate, shall, upon receipt of 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 in connection with the services performed by the Custodian pursuant to this Agreement, or for any indebtedness to The Bank of New York under the Fund's Cash Management and Related Services Agreement, 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. To secure any such loan, 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, 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. - 26 - 2. If the Fund borrows money for investment or for temporary or emergency purposes using Securities held by the Custodian hereunder as collateral for such borrowings, 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. If so requested by the Fund, the Custodian shall at the Fund's cost and expense enter into a control agreement with the lending bank and the Fund, on such terms as are reasonably acceptable to the Custodian, providing for the lending bank to obtain control of the collateral specified by the Fund. 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 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, - 27 - 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 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 - 28 - 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 upon reasonable 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, 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 - 29 - 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. 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. - 30 - 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. 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. 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 - 31 - 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 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 - 32 - 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 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 - 33 - 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: (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 obligation 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 - 34 - 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. 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 Custodian's account 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 - 35 - 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 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 - 36 - agrees to forward to the Custodian a Certificate or facsimile thereof confirming such Oral Instructions in such manner so that such Certificate or 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., 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 - 37 - 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 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 - 38 - 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 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. - 39 - 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 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. - 40 - 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: /s/ Dianne E. O'Donnell --------------------------------------- Name: Dianne E. O'Donnell Title: Secretary and Vice President [SEAL] Attest: /s/ Keith A. Weller - --------------------------------------- Name: Keith A. Weller Title: Vice President and Assistant Secretary THE BANK OF NEW YORK [SEAL] By: /s/ Stephen E. Grunston --------------------------------------- Name: Stephen E. Grunston Title: Vice President Attest: /s/ - --------------------------------------- - 41 - APPENDIX B SERIES Mitchell Hutchins LIR Select Money Fund - 42 - EX-99.H 6 EXHIBIT 8(A) Exhibit No. 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.) Article 3 Duties of FDISG. 2 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 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 3 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 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 4 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, 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 5 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 (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. 6 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 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 7 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. 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 8 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. 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"). 9 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 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 10 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 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 11 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. 18.2 Notwithstanding Section 18.1 above, FDISG may assign its rights and delegate its 12 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 with a copy to FDISG's General Counsel 13 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 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 14 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: /s/ Dianne E. O'Donnell ------------------------------------ Title: Secretary and Vice President --------------------------------- FIRST DATA INVESTOR SERVICES GROUP, INC. By: /s/ Gerald G. Kokos ------------------------------------ Title: Executive Vice President --------------------------------- 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-99.H 7 EXHIBIT 8(B) 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 LIR Select 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 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. 2 Section 9. Limitation of Liability of the Trustees, Officers and Shareholders of the Trust. The Trustees and officers 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, officers 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 July 31, 1998. MITCHELL HUTCHINS INSTITUTIONAL SERIES By /s/ Dianne E. O'Donnell ------------------------------------ PAINEWEBBER INCORPORATED By /s/ Victoria E. Schonfeld ------------------------------------ 3 EX-99.H 8 EXHIBIT 8(C) 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 other party. However, nothing in this Agreement shall be deemed to prohibit or restrict either 2 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: Colleen McDermott, with a copy to Dianne E. O'Donnell, Legal Department, at the same address. 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-99.I 9 EXHIBIT 9 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 August 30, 1999 Mitchell Hutchins LIR Money Series 1285 Avenue of the Americas New York, New York 10019 Ladies and Gentlemen: You have requested our opinion, as counsel to Mitchell Hutchins LIR Money 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 that may be issued during the time that Post-Effective Amendment No. 3 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) of 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. Mitchell Hutchins LIR Money Series August 30, 1999 Page 2 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-99.J 10 EXHIBIT 10(A) CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Financial Highlights" in the Prospectus and "Auditors" in the Statement of Additional Information and to the incorporation by reference of our report dated June 23, 1999 on Mitchell Hutchins LIR Select Money Fund, in this Registration Statement (Form N-1A No. 333-52965) of Mitchell Hutchins LIR Money Series (formerly Mitchell Hutchins Institutional Series). /s/ ERNST & YOUNG LLP ERNST & YOUNG LLP New York, New York August 31, 1999 EX-99.J 11 EXHIBIT 10(B) Exhibit No. 10(b) CONSENT OF DUFF & PHELPS RATING CO. We consent to the references to our firm and our rating of Mitchell Hutchins LIR Select Money Fund in the statement of additional information for that fund filed as part of this post-effective amendment to the registration statement of Mitchell Hutchins LIR Money Series (SEC File No. 333-52965). /s/ Daryl R. Leehaug ------------------------------------- DUFF & PHELPS CREDIT RATING CO. August 24, 1999 Chicago, Illinois -----END PRIVACY-ENHANCED MESSAGE-----