EXHIBIT 5(a)
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of April 13, 1995 between PAINEWEBBER/XXXXXX, XXXXXXX CASH
RESERVE FUND, INC., a Maryland corporation ('Fund'), and PAINEWEBBER
INCORPORATED ('Manager'), a Delaware corporation registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended ('1934 Act'), and as an
investment adviser under the Investment Advisers Act of 1940, as amended.
WHEREAS the Fund is registered under the Investment Company Act of 1940, as
amended ('1940 Act'), as an open-end management investment company, and intends
to offer for public sale distinct shares of common stock ('Shares'); and
WHEREAS the Fund desires to retain Manager as investment adviser and
administrator to furnish certain administrative, investment advisory and
portfolio management services to the Fund and Manager is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Manager as investment adviser
and administrator of the Fund for the period and on the terms set forth in
this Contract. Manager accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Duties as Investment Adviser.
(a) Subject to the supervision of the Fund's Board of Directors
('Board'), Manager will provide a continuous investment program for the
Fund, including investment research and management with respect to all
securities and investments and cash equivalents in the Fund. Manager will
determine from time to time what securities and other investments will be
purchased, retained or sold by the Fund.
(b) Manager agrees that in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of the Fund, Manager may, in
its discretion, use brokers who provide the Fund with research, analysis,
advice and similar services to execute portfolio transactions on behalf of
the Fund, and Manager may pay to those brokers in return for brokerage and
research services a higher commission than may be charged by other brokers,
subject to Manager's determining in good faith that such commission is
reasonable in terms either of the particular transaction or of the overall
responsibility of Manager to the Fund and its other clients and that
the total commissions paid by the Fund will be reasonable in relation
to the benefits to the Fund over the long term. In no instance will
portfolio securities be purchased from or sold to Manager, or
any affiliated person thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder, or any
applicable exemptive orders. Whenever Manager simultaneously places orders
to purchase or sell the same security on behalf of the Fund and one or more
other accounts advised by Manager, such orders will be allocated as to
price and amount among all such accounts in a manner believed to be
equitable to each account. The Fund recognizes that in some cases this
procedure may adversely affect the results obtained for the Fund.
(c) Manager will oversee the maintenance of all books and records with
respect to the securities transactions of the Fund, and will furnish the
Board with such periodic and special reports as the Board reasonably may
request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Manager hereby agrees that all records which it maintains for the Fund
are the property of the Fund, agrees to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any records which it maintains for the
Fund and which are required to be maintained by Rule 31a-1 under the 1940
Act and further agrees to surrender promptly to the Fund any records which
it maintains for the Fund upon request by the Fund.
(d) Manager will oversee the computation of the net asset value and
the net income of the Fund as described in the currently effective
registration statement of the Fund under the Securities Act of 1933, as
amended, and the 1940 Act and any supplements thereto ('Registration
Statement') or as more frequently requested by the Board.
(e) The Fund hereby authorizes Manager and any entity or person
associated with Manager which is a member of a national securities exchange
to effect any transaction on such exchange for the account of the Fund,
which transaction is permitted by Section 11(a) of the 1934 Act, and the
Fund hereby consents to the retention of compensation by Manager or any
person or entity associated with Manager for such transaction.
2
3. Duties as Administrator. Manager will administer the affairs of the
Fund subject to the supervision of the Board and the following
understandings:
(a) Manager will supervise all aspects of the operations of the
Fund, including oversight of transfer agency, custodial and accounting
services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board
of its responsibility for and control of the conduct of the affairs of
the Fund.
(b) Manager will provide the Fund with such corporate,
administrative and clerical personnel (including officers of the Fund)
and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the
Fund.
(c) Manager will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the
Fund's Registration Statement, proxy material, tax returns and required
reports to the Fund's shareholders and the Securities and Exchange
Commission and other appropriate federal or state regulatory
authorities.
(d) Manager will provide the Fund with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar
items.
(e) Manager will provide the Board on a regular basis with economic
and investment analyses and reports and make available to the Board upon
request any economic, statistical and investment services normally
available to institutional or other customers of Manager.
4. Further Duties. In all matters relating to the performance of this
Contract, Manager will act in conformity with the Articles of
Incorporation, By-Laws and currently effective Registration Statement of
the Fund, as delivered to Manager and upon which it shall be entitled to
rely, and with the instructions and directions of the Board, and will
comply with the requirements of the 1940 Act, the rules thereunder, and all
other applicable federal and state laws and regulations.
5. Delegation of Manager's Duties as Investment Adviser and
Administrator. Manager may enter into one or more contracts ('Sub-Advisory
or Sub-Administration Contract') with a sub-adviser or sub-administrator in
which Manager delegates to such sub-adviser or sub-administrator any or all
of its duties specified in Paragraphs 2 and 3 of this Contract, provided
that each Sub-Advisory or Sub-Administration Contract imposes on the
sub-adviser or sub-
3
administrator bound thereby all the duties and conditions to which Manager
is subject by Paragraphs 2, 3 and 4 of this Contract, and further provided
that each Sub-Advisory or Sub-Administration Contract meets all
requirements of the 1940 Act and rules thereunder.
6. Services Not Exclusive. The services furnished by Manager hereunder
are not to be deemed exclusive and Manager shall be free to furnish similar
services to others so long as its services under this Contract are not
impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Manager, who may also be a
Direetor, officer or employee of the Fund, to engage in any other business
or to devote his or her time and attention in part to the management or
other aspects of any other business, whether of a similar nature or a
dissimilar nature.
7. Expenses.
(a) During the term of this Contract, the Fund will bear all expenses,
not specifically assumed by Manager, incurred in its operations and the
offering of its shares.
(b) Expenses borne by the Fund will include but not be limited to the
following (or the Fund's proportionate share of the following): (i) the
cost (including brokerage commissions) of securities purchased or sold by
the Fund and any losses incurred in connection therewith; (ii) fees payable
to and expenses incurred on behalf of the Fund by Manager under this
Contract; (iii) expenses of organizing the Fund; (iv) filing fees and
expenses relating to the registration and qualification of the Fund's
shares and the Fund under federal and/or state securities laws and
maintaining such registration and qualification; (v) fees and salaries
payable to the Fund's Directors and officers who are not interested persons
of the Fund or Manager; (vi) all expenses incurred in connection with the
Directors' services, including travel expenses in the case of Directors who
are not interested persons of the Fund or Manager; (vii) taxes (including
any income or franchise taxes) and governmental fees; (viii) costs of any
liability, uncollectible items of deposit and other insurance and fidelity
bonds; (ix) any costs, expenses or losses arising out of a liability of or
claim for damages or other relief asserted against the Fund for violation
of any law and any indemnification relating thereto; (x) legal, accounting
and auditing expenses, including legal fees of special counsel for those
Directors of the Fund who are not interested persons of the Fund; (xi)
charges of custodians, transfer agents and other agents; (xii) costs of
preparing share certificates; (xiii) expenses of setting in type and
printing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials for
existing shareholders; (xiv) costs of mailing prospectuses and supplements
4
thereto, statements of additional information and supplements thereto,
reports and proxy materials to existing shareholders; (xv) any
extraordinary expenses (including fees and disbursements of counsel, costs
of actions, suits or proceedings to which the Fund is a party and the
expenses the Fund may incur as a result of its legal obligation to provide
indemnification to its officers, Directors, agents and shareholders or to
Manager) incurred by the Fund; (xvi) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (xvii) cost of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xviii) the
cost of investment company literature and other publications provided by
the Fund to its Directors and officers; (xix) costs of mailing, stationery
and communications equipment; (xx) expenses incident to any dividend,
withdrawal or redemption options; (xxi) charges and expenses of any outside
pricing service used to value portfolio securities and (xxii) interest on
borrowings of the Fund.
(c) Manager will assume the cost of any compensation for services
provided to the Fund received by the officers of the Fund and by those
Directors who are interested persons of the Fund.
(d) The payment or assumption by Manager of any expenses of the Fund
that Manager is not required by this Contract to pay or assume shall not
obligate Manager to pay or assume the same or any similar expense of the
Fund on any subsequent occasion.
8. Compensation.
(a) For the services provided and the expenses assumed pursuant to
this Contract with respect to the Fund, the Fund will pay to Manager a fee,
computed daily and paid monthly, at an annual rate of .50% of the Fund's
average daily net assets up to $750 million; .475% of the Fund's average
daily net assets from $750 million to $1 billion; .45% of the Fund's daily
net assets from $1 billion to $1.25 billion; .425% of the Fund's average
daily net assets from $1.25 billion to $1.5 billion; and .40% of the Fund's
average daily net assets over $1.5 billion.
(b) The fee shall be computed daily and paid monthly to Manager on or
before the first business day of the next succeeding calendar month.
(c) 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.
5
9. Limitation of Liability of Manager. Manager and its delegates,
including any Sub-Adviser or Sub-Administrator to the Fund, shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Fund or any of its shareholders, in connection with the matters to
which this Contract relates, except to the extent that such a loss results
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Contract. Any person, even though also an
officer, director, employee, or agent of Manager, who may be or become an
officer, Director, employee or agent of the Fund shall be deemed, when
rendering services to the Fund or acting with respect to any business of
the Fund, to be rendering such service to or acting for the Fund and not as
an officer, director, employee, or agent or one under the control or
direction of Manager even though paid by it.
10. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove
written provided that, with respect to the Fund, this Contract shall not
take effect unless it has first been approved (i) by a vote of a majority
of those Directors of the Fund who are not parties to this Contract or
interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of
the Fund's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter,
if not terminated, this Contract shall continue automatically for
successive periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of
those Directors of the Fund who are not parties to this Contract or
interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by
vote of a majority of the outstanding voting securities of the Fund with
respect to the Fund.
(c) Notwithstanding the foregoing, with respect to the Fund 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 the Fund on sixty days' written notice to Manager or by
Manager at any time, without the payment of any penalty, on sixty days'
written notice to the Fund. This Contract will automatically terminate in
the event of its assignment.
11. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally,
6
but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought, and
no material amendment of this Contract as to the Fund shall be effective
until approved by vote of a majority of the Fund's outstanding voting
securities.
12. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Delaware, without giving effect to the conflicts
of laws principles thereof, and in accordance with the 1940 Act. 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.
13. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Contract shall
not be affected thereby. This Contract shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
As used in this Contract, the terms 'majority of the outstanding voting
securities', 'affiliated person', 'interested person', 'assignment',
'broker', 'investment adviser', 'national securities exchange', 'net
assets', 'prospectus', 'sale', 'sell' and 'security' shall have the same
meaning as such terms have in the 1940 Act, subject to such exemption as
may be granted by the Securities and Exchange Commission by any rule,
regulation or order. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Contract is affected by a rule,
regulation or order of the Securities and Exchange Commission, whether of
special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
Attest: PAINEWEBBER INCORPORATED
XXXXXXXX XXXXXXX By XXXXXX XXXXXX
--------------------------- ----------------------------
Attest: PAINEWEBBER/XXXXXX, XXXXXXX
CASH RESERVE FUND, INC.
XXXXXXXX XXXXXXX By XXXXXX X. X'XXXXXXX
--------------------------- ----------------------------
7
