SECURITIES

PaineWebber to Establish Fund to Repay Losses: The company said it will pump $33 million into the $1-billion government bond fund to repay investors who lost money on the securities firm’s holdings of mortgage derivatives. PaineWebber Group Inc. also said it will buy the mortgage derivative securities owned by the Short-Term U.S. Government Income Fund, and it agreed in principle to settle class-action litigation by some fund investors. Government bond funds are rated AAA and are considered among the safest investments. PaineWebber’s moves follow a 5.7% decline in its short-term fund’s value between January and May, including a plunge of 4% on May 6. The fund was unusual because its mortgage-backed bonds were an especially risky type whose value was based on the value of some other asset.