<PAGE>
As filed with the Securities and Exchange Commission on May 18, 1998
1933 Act Registration No.
--------
1940 Act Registration No. 811-8767
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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. ____ [_]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. ____
MITCHELL HUTCHINS INSTITUTIONAL SERIES
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, Esq.
BENJAMIN J. HASKIN, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered: Shares of Beneficial Interest.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
MITCHELL HUTCHINS INSTITUTIONAL SERIES
Contents of Registration Statement
This Registration Statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
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Mitchell Hutchins Institutional Series
Form N-1A Cross Reference Sheet
<TABLE>
<CAPTION>
Part A Item No. and Caption Prospectus Caption
--------------------------- ------------------
<C> <S> <C>
1. Cover Page Cover Page
2. Synopsis Highlights; Expense Table
3. Condensed Financial Information Performance
4. General Description of Registrant Highlights; Investment Objective and Policies;
General Information
5. Management of the Fund Management and Distribution Arrangements; General
Information
5A. Management's Discussion of Fund Not Applicable
Performance
6. Capital Stock and Other Securities Purchases; Redemptions; Dividends and Taxes; General
Information
7. Purchase of Securities Being Offered Purchases, Exchanges, Redemptions; Management and
Distribution Arrangements; Financial Intermediaries;
Determining the Shares' Net Asset Value
8. Redemption or Repurchase Exchanges; Redemptions; Financial Intermediaries
9. Pending Legal Proceedings Not Applicable
<CAPTION>
Part B Item No. and Caption Statement of Additional Information Caption
-------------------------- -------------------------------------------
<C> <S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objective and Policies Investment Policies and Restrictions; Portfolio Transactions
14. Management of the Fund Trustees and Officers; Principal Holders of Securities
15. Control Persons and Principal Holders of Trustees and Officers; Principal Holders of Securities
Securities
16. Investment Advisory and Other Services Investment Advisory, Administration and Distribution
Arrangements
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing of Additional Information Regarding Redemptions; Valuation of
Securities Being Offered Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory, Administration and Distribution
Arrangements
22. Calculation of Performance Data Calculation of Yield
23. Financial Statements To Be Supplied
</TABLE>
<PAGE>
Part C
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Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE +
+SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND DOES NOT SOLICIT AN OFFER TO BUY THESE SE- +
+CURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY , 1998
MITCHELL HUTCHINS LIR SELECT MONEY FUND
1285 AVENUE OF THE AMERICAS . NEW YORK, NEW YORK 10019
Professionally managed money market fund seeking:
. Maximum Current Income
. High Liquidity
. Conservation of Capital
Mitchell Hutchins LIR Select Money Fund is a series of Mitchell Hutchins
Institutional Series, a Delaware business trust ("Trust"). The Fund offers two
separate classes of shares--Institutional shares and Financial Intermediary
shares. Institutional shares are available for purchase primarily by
institutional investors. Financial Intermediary shares are available for
purchase by banks and other financial intermediaries for the benefit of their
customers. The Fund is newly organized and has no operating history.
This Prospectus concisely sets forth information that a prospective investor
should know about the Fund before investing. Please retain this Prospectus for
future reference. A Statement of Additional Information dated , 1998
(which is incorporated by reference herein) has been filed with the Securities
and Exchange Commission ("SEC" or "Commission"). The Statement of Additional
Information can be obtained without charge, and further inquiries can be made,
by contacting the Fund, your PaineWebber Investment Executive or PaineWebber's
correspondent firms, or by calling toll free 1-888-LIR-FUND. Customers of banks
and other financial intermediaries that purchase the Fund's Financial
Intermediary shares also may obtain the Statement of Additional Information
from their financial intermediaries. In addition, the Commission maintains a
website (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS
TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO
LOSE MONEY BY INVESTING IN THE FUND.
Not FDIC insured. May lose value. No bank guarantee.
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED , 1998
<PAGE>
HIGHLIGHTS
See elsewhere in the Prospectus for more information on the topics discussed
in these highlights.
The Fund: Professionally managed money market fund designed primarily
for institutions as an economical and convenient means for
the investment of short-term funds that they hold for their
own account or hold or manage for others.
The Fund offers investors the choice of investing in two
separate classes of shares.
. Institutional shares are available for purchase primarily
by institutional investors.
. Financial Intermediary shares are available for purchase
solely by banks and other financial intermediaries for
the benefit of their customers. Financial Intermediary
shares bear all fees payable by the Fund to those
financial intermediaries for certain services they
provide to the beneficial owners of those shares.
See "Purchases," "Redemptions," "Financial Intermediaries"
and "Valuation of Shares."
Investment Maximum current income consistent with liquidity and
Objective and conservation of capital. The Fund invests in a diversified
Policies: portfolio of high quality, short-term, U.S. dollar-
denominated money market instruments.
Distributor: PaineWebber Incorporated ("PaineWebber"). See "Management."
Investment
Adviser: Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"). See "Management"
Purchases: Shares may be purchased through PaineWebber, its
correspondent firms or through First Data Investor Services
Group, Inc., the Fund's transfer agent ("Transfer Agent").
See "Purchases."
Redemptions: Shares may be redeemed through PaineWebber, its
correspondent firms or the Transfer Agent. See
"Redemptions."
Dividends: Declared daily and paid monthly. All dividends are
automatically paid in Fund shares unless the shareholder
elects instead to have dividends transmitted by federal
funds wire to either a designated bank account or
PaineWebber account. See "Dividends and Taxes."
Minimum Initial
Purchase: $10,000,000; $100,000 minimum for subsequent purchases.
(Financial intermediaries may establish different minimums
for their customers who purchase shares through them.)
Public Offering Net asset value, which the Fund seeks to maintain at $1.00
Price: per share.
WHO SHOULD INVEST. The Fund is designed primarily for institutions as an
economical and convenient means for the investment of short-term funds that
they hold for their own account or hold or manage for others. These
institutions include corporations, banks, trust companies, insurance companies,
investment counsellors, pension funds, employee benefit plans, professional
firms, trusts, estates and educational, religious and charitable organizations.
See "Purchases" and "Management."
RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective. While the types of money market securities in which the
Fund invests generally are considered to have low risk
2
<PAGE>
of loss of principal or interest, these securities are not completely risk
free. The Fund may invest in U.S. dollar-denominated securities of foreign
issuers, which may present a greater degree of risk than investments in
securities of domestic issuers. During periods when interest rates are
declining or rising, the Fund's yield will tend to lag behind prevailing short-
term market rates. Redemption of shares by one or more shareholders during the
Fund's initial period of operations when the Fund may have a relatively small
number of investors may cause the Fund's portfolio to become less diversified,
resulting in greater risk. See "Investment Objective and Policies--Other
Investment Policies and Risks."
EXPENSES OF INVESTING IN THE FUND. The following tables are intended to
assist investors in understanding the expenses associated with investing in the
Fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales charge on purchases of shares........................................ None
Sales charge on reinvested dividends....................................... None
Redemption fee or deferred sales charge.................................... None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
---------------------------
FINANCIAL
INSTITUTIONAL INTERMEDIARY
SHARES SHARES
------------- -------------
<S> <C> <C> <C> <C>
Management Fees ................................... 0.18% 0.18%
Other Expenses:
Shareholder Servicing Fees........................ 0.00% 0.25%
Miscellaneous Expenses*........................... 0.00% 0.00%
Total Other Expenses .............................. 0.00% 0.25%
------ ------
Total Operating Expenses .......................... 0.18% 0.43%
====== ======
</TABLE>
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* Although the Fund pays the fees and expenses (including counsel fees) of its
Independent Trustees (the Trustees who are not "interested persons" of the
Fund or Mitchell Hutchins, as defined in the Investment Company Act of 1940
("1940 Act")), Mitchell Hutchins is contractually obligated to reduce its
management fee in an amount equal to these fees and expenses.
EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Institutional shares........................................... $2 $ 6
Financial Intermediary shares.................................. $4 $14
</TABLE>
This Example assumes that all dividends are reinvested and that the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in the years shown. The above tables and the assumption in the Example of a 5%
annual return are required by regulations of the SEC applicable to all mutual
funds; the assumed 5% annual return is not a prediction of, and does not
represent, the Fund's projected or actual performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to earn maximum current income consistent
with liquidity and the conservation of capital.
The Fund seeks to maintain a dollar-weighted average portfolio maturity of
90 days or less. All securities in which the Fund invests have or are deemed
to have remaining maturities of 397 days or less on the date of purchase.
The Fund invests in high quality, short-term, U.S. dollar-denominated money
market instruments of U.S. and foreign issuers. These instruments include gov-
ernment securities, obligations of banks, commercial paper and other short-
term obligations issued by corporations, partnerships, trusts or other enti-
ties, corporate bonds and notes, variable and floating rate securities, fund-
ing agreements, guaranteed investment contracts, variable amount master demand
notes, participation interests in any of the foregoing and repurchase agree-
ments. Participation interests are pro rata interests in securities held by
others.
The U.S. government securities in which the Fund may invest include direct
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and
obligations issued or guaranteed by U.S. government agencies and instrumental-
ities, including securities that are supported by the full faith and credit of
the United States (such as Government National Mortgage Association certifi-
cates ("GNMAs")), securities supported primarily or solely by the creditwor-
thiness of the issuer (such as securities of the Resolution Funding Corpora-
tion and the Tennessee Valley Authority) and securities that are supported
primarily or solely by specific pools of assets and the creditworthiness of a
U.S. government-related issuer (such as mortgage-backed securities issued by
Fannie Mae, also known as the Federal National Mortgage Association).
The Fund may invest in obligations (including certificates of deposit, bank-
ers' acceptances and similar obligations) of U.S. and foreign banks. The Fund
may invest in non-negotiable time deposits of U.S. banks, savings associations
and similar depository institutions only if the time deposits have maturities
of seven days or less.
The commercial paper and other short-term obligations purchased by the Fund
consist only of obligations that are "First Tier Securities" as defined in
Rule 2a-7 under the 1940 Act. As so defined, First Tier Securities include se-
curities that are rated in the highest short-term rating category by at least
two nationally recognized statistical rating organizations ("NRSROs") or by a
single NRSRO if only one NRSRO has assigned the obligation a short-term rat-
ing. The Fund also may rely on the short-term rating and credit quality of a
guarantee of a security (including bond insurance, letters of credit or uncon-
ditional demand features) or the issuer of the guarantee to determine whether
the security is eligible for purchase. First Tier Securities also include
unrated securities if Mitchell Hutchins has determined the obligations to be
of comparable quality to rated securities that so qualify. The Fund generally
may invest no more than 5% of its total assets in the securities of a single
issuer (other than securities issued by the U.S. government, its agencies and
instrumentalities).
OTHER INVESTMENT POLICIES AND RISKS
RISKS. While the types of money market instruments in which the Fund invests
generally are considered to have low risk of loss of principal or interest,
they are not completely risk free. An issuer or guarantor may be unable or un-
willing to pay interest or repay principal on its obligations for many rea-
sons, including adverse changes in its own financial condition or in economic
conditions generally.
The Fund's investments in U.S. dollar-denominated securities of foreign is-
suers may involve risks that are different from investments in U.S. issuers.
These risks may include future unfavorable political and economic develop-
ments, possible withholding taxes, seizure of foreign deposits, currency con-
trols, interest limitations or other governmental restrictions that might af-
fect the payment of principal or interest on the Fund's portfolio securities.
Additionally, there may be less publicly available information about foreign
issuers because they may not be subject to the same regulatory requirements as
domestic issuers.
During periods when interest rates are declining or rising, the Fund's yield
will tend to lag behind prevailing short-term market rates. This means that in
periods of declining interest rates the Fund's yield will tend to be somewhat
higher than prevailing short-term market rates, and in periods of rising in-
terest rates its yield generally will be somewhat lower. Also, when interest
rates are falling, net cash inflows from the continuous sale of the Fund's
shares are likely to be invested
4
<PAGE>
in portfolio instruments that produce lower yields than the balance of its
portfolio, thereby reducing its yield. In periods of rising interest rates the
opposite can be true.
Redemption of shares by one or more shareholders during the Fund's initial
period of operations, when the Fund may have a relatively small number of in-
vestors, may cause the Fund's portfolio to become less diversified, resulting
in greater risk.
U.S. GOVERNMENT SECURITIES. The Fund may also acquire custodial receipts
that evidence ownership of future interest payments, principal payments or
both that have been "stripped" from certain U.S. Treasury notes or bonds.
These custodial receipts are known by various names, including "Treasury In-
vestment Growth Receipts" ("TIGRs") and "Certificates of Accrual on Treasury
Securities" ("CATS"). The Fund may also invest in separately traded principal
and interest components of securities issued or guaranteed by the U.S. Trea-
sury. The principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the
U.S. Treasury.
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The Fund may purchase
commercial paper, which includes short-term obligations issued by corpora-
tions, partnerships, trusts or other entities to finance short-term credit
needs. The Fund may also purchase non-convertible debt obligations with no
more than 397 days remaining to maturity at the time of purchase. Short-term
obligations issued by trusts or special purpose entities may include certifi-
cates or notes that represent participations in or are backed by pools of
mortgages or credit card, automobile or other types of receivables or finan-
cial assets. The Fund may invest in funding agreements and guaranteed invest-
ment contracts issued by insurance companies which are obligations of the in-
surance company or its separate account. The Fund expects to invest in funding
agreements with floating or variable rates that are subject to demand features
that permit the Fund to tender its interest back to the issuer.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase variable and
floating rate securities with remaining maturities in excess of 13 months is-
sued by U.S. government agencies or instrumentalities or guaranteed by the
U.S. government. In addition, the Fund may purchase variable and floating rate
securities of other issuers with remaining maturities in excess of 13 months
if they are subject to a demand feature exercisable within 13 months or less.
The yield on these securities is adjusted in relation to changes in specific
rates, such as the prime rate, and different securities may have different ad-
justment rates. A demand feature gives the Fund the right to tender them back
to the issuer or a remarketing agent and receive the amortized cost of the se-
curity plus accrued interest prior to maturity. The demand feature may be
backed by letters of credit or other liquidity support arrangements provided
by banks or other financial institutions, whose credit standing affects the
credit quality of the obligation. Changes in the credit quality of these in-
stitutions could cause losses to the Fund and affect its share price.
VARIABLE AMOUNT MASTER DEMAND NOTES. Securities purchased by the Fund may
include variable amount master demand notes, which are unsecured redeemable
obligations that permit investment of varying amounts at fluctuating interest
rates under a direct agreement between the Fund and the issuer. The principal
amount of these notes may be increased from time to time by the parties (sub-
ject to specified maximums) or decreased by the Fund or the issuer. These
notes are payable on demand and are typically unrated.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
U.S. banks and dealers, and the obligations subject to repurchase agreements
may have maturities in excess of 13 months. Repurchase agreements are transac-
tions in which the Fund purchases obligations from a bank or recognized secu-
rities dealer (or its affiliate) and simultaneously commits to resell the ob-
ligations to that counter party at an agreed-upon date or upon demand and at a
price reflecting a market rate of interest unrelated to the coupon rate or ma-
turity of the purchased obligations.
Repurchase agreements carry certain risks not associated with direct invest-
ments in securities, including possible decline in the market value of the un-
derlying obligations. Repurchase agreements involving obligations other than
U.S. government securities (such as commercial paper, corporate bonds and
mortgage loans) may be subject to special risks and may not have the benefit
of certain protections in the event of the
5
<PAGE>
counter party's insolvency. If the seller or a guarantor becomes insolvent,
the Fund may suffer delays, costs and possible losses in connection with the
disposition of the collateral. The Fund intends to enter into repurchase
agreements only with counter parties in transactions believed by Mitchell
Hutchins to present minimal credit risks in accordance with guidelines estab-
lished by the board.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend its securities to quali-
fied broker-dealers or institutional investors in an amount up to 33 1/3% of
the Fund's total assets. Lending securities enables the Fund to earn addi-
tional income, but could result in a loss or delay in recovering these securi-
ties.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in il-
liquid securities. These include repurchase agreements maturing in more than
seven days and securities whose disposition is restricted under the federal
securities laws, other than those that Mitchell Hutchins has determined to be
liquid pursuant to guidelines established by the board. The Fund does not con-
sider securities that are eligible for resale under SEC Rule 144A to be illiq-
uid if Mitchell Hutchins has determined them to be liquid in accordance with
procedures approved by the board.
WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when-issued"
or forward commitment basis, that is, for delivery beyond the normal settle-
ment date at a stated price and yield. The Fund generally would not pay for
such securities or start earning interest on them until they are received.
However, when the Fund purchases securities on a when-issued basis, it immedi-
ately assumes the risks of ownership, including the risk of price fluctuation.
Failure by the issuer to deliver a security purchased on a when-issued basis
may result in a loss or missed opportunity to make an alternative investment.
OTHER INVESTMENT POLICIES. The Fund may borrow money from banks for tempo-
rary purposes in an aggregate amount not exceeding 33 1/3% of the value of its
total assets. The costs associated with borrowing money may reduce the Fund's
net income.
The Fund's investments in securities with remaining maturities in excess of
13 months, such as variable and floating rate securities and variable amount
master demand notes, must comply with conditions established by the SEC under
which these securities may be considered to have remaining maturities of 13
months or less.
In managing the Fund's portfolio, Mitchell Hutchins may employ a number of
professional money management techniques to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. These
techniques include varying the composition and the weighted average maturity
of the Fund's portfolio based upon its assessment of the relative values of
various money market instruments and future interest rate patterns. Mitchell
Hutchins may also seek to improve the Fund's yield by purchasing or selling
securities to take advantage of yield disparities among similar or dissimilar
money market instruments that regularly occur in the money markets.
New forms of money market instruments continue to be developed. The Fund may
invest in such instruments to the extent consistent with its investment objec-
tive.
The Fund's investment objective may not be changed without the approval of
its shareholders. Certain other investment limitations, as described in the
Statement of Additional Information, also may not be changed without share-
holder approval. All other investment policies may be changed by the board
without shareholder approval.
PURCHASES
The Fund accepts the settlement of purchase orders only in available federal
funds. ("Federal funds" are funds deposited by a commercial bank in an account
at a Federal Reserve Bank that can be transferred to a similar account of an-
other bank in one day and thus may be made immediately available to the Fund
through its custodian.)
The Fund offers investors the choice of investing in two separate classes of
shares--Institutional shares and Financial Intermediary shares. Institutional
shares are available for purchase by institutional investors, and, at the dis-
cretion of PaineWebber, for purchase by individuals or other entities. Finan-
cial Intermediary shares are available for purchase only by banks and other
financial intermediaries for the benefit of their customers. Financial Inter-
mediary shares bear all fees payable by the Fund to those financial intermedi-
aries for certain services they provide to the beneficial owners of these
shares.
The minimum initial investment is $10,000,000. The minimum subsequent invest-
6
<PAGE>
ment is the greater of $100,000 or the minimum required to bring a sharehold-
er's account balance to $10,000,000 if the account has fallen below that
amount. Both the initial minimum investment and the subsequent minimum invest-
ment may be waived at the discretion of PaineWebber. Subsequent purchases of
shares by a shareholder whose account balance has fallen below $10,000,000
will be accepted only if the account balance will be at least $10,000,000 af-
ter that purchase. Financial intermediaries purchasing shares for the accounts
of their customers may set a higher or lower minimum for initial and subse-
quent investments by their customers, provided that when their customers'
shareholdings are aggregated, the above noted minimums are met. Investors in-
terested in purchasing Financial Intermediary shares should consult their fi-
nancial institutions concerning any initial or subsequent minimum investment
requirements.
Shares of the Fund are offered for sale, without a sales charge, at the net
asset value per share next determined after receipt and acceptance of a pur-
chase order by the Transfer Agent, subject to timely receipt of federal funds
as provided below. An investor can place a purchase order by telephoning the
Transfer Agent at 1-888-LIR-FUND and speaking with a representative. Investors
may also place an order through a PaineWebber Investment Executive or corre-
spondent firm who must then relay the order to the Transfer Agent. The Fund
effects orders to purchase its shares twice on each Business Day at the net
asset value determined as of 12:00 noon (Eastern time), and as of 5:00 p.m.
(Eastern time). For the purchase of Fund shares to be effected on that Busi-
ness Day, the investor must wire federal funds to the Fund, care of the Trans-
fer Agent, and that wire must be credited to that bank account by a Federal
Reserve Bank on that Business Day. Otherwise, the order will be executed on
the following Business Day if federal funds have been received by that time.
Purchase orders may be initiated by any authorized party on the account, in-
cluding the shareholder's PaineWebber Investment Executive. A "Business Day"
is any day on which the New York offices of the Trust's custodian, The Bank of
New York ("Custodian"), the Transfer Agent, and the New York City offices of
PaineWebber and PaineWebber's bank are all open for business.
The Fund and PaineWebber reserve the right to reject any purchase order and
to suspend the offering of Fund shares for a period of time.
The availability of Fund shares to customers of PaineWebber's correspondent
firms may vary depending on the arrangements between PaineWebber and such
firms.
Investors who are purchasing shares should instruct their banks to transfer
federal funds by wire. Wire transfers should be directed to:
MH Institutional Funds
c/o The Bank of New York
CR DDA A/C #8900337516
FFC PW A/C #
[insert PaineWebber account name and account number]
ABA #021000018
Unless the investor otherwise specifies, all shares purchased will be Insti-
tutional shares.
REMOTE TRADE ENTRY. At its discretion, the Fund may offer eligible institu-
tional investors who meet certain conditions an electronic trade order entry
(RTE) capability. For more information on this option, please contact your
PaineWebber Investment Executive or the Transfer Agent at 1-888-LIR-FUND.
PaineWebber and/or an investor's bank may impose a service charge for wire
transfers.
EXCHANGES
Shareholders may exchange shares of the Fund for shares of the same class of
any of the three Liquid Institutional Reserves funds--Money Market Fund, Gov-
ernment Securities Fund and Treasury Securities Fund. These funds all have
higher total operating expenses than the Fund and lower minimums for initial
and subsequent purchases. Exchange orders from Fund shareholders accepted by
12:00 noon, Eastern time, are effected on that Business Day. Shareholders of
the three Liquid Institutional Reserves Funds may exchange their shares in
those funds for shares of the Fund. Shareholders of Liquid Institutional Re-
serves Money Market Fund may place their exchange orders up to 2:30 p.m.,
Eastern time, for the order to be effected on that Business Day. Shareholders
of the other Liquid Institutional Reserves funds must place their exchange or-
ders by 12:00 noon, Eastern time. Exchange orders accepted after the times
noted above are executed on the next Business Day.
Shareholders may place exchange orders by telephoning the Transfer Agent at
1-888-LIR-
7
<PAGE>
FUND and speaking with a representative. Investors may also place an exchange
order through a PaineWebber Investment Executive or correspondent firm, who
must then relay the order to the Transfer Agent as noted above. Exchange or-
ders may be initiated by any authorized party on a shareholder's account, in-
cluding the shareholder's PaineWebber Investment Executive.
AUTOMATIC EXCHANGE WHEN ACCOUNTS FALL BELOW $10,000,000. If, at any time,
the total investment in a shareholder's account has been less than $10,000,000
for 30 consecutive days, the Fund may exchange those shares for shares of Liq-
uid Institutional Reserves Money Market Fund unless the shareholder has
elected in its account application to have the shares redeemed and the pro-
ceeds of redemption paid to the shareholder.
REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their accounts
at any time at the net asset value per share next computed after the receipt
of a redemption request in proper form by the Transfer Agent. Redemption or-
ders are effected twice on each Business Day at the net asset value determined
as of 12:00 noon (Eastern time), and as of 5:00 p.m. (Eastern time) by tele-
phoning the Transfer Agent at 1-888-LIR-FUND and speaking with a representa-
tive. Investors may also place an order through a PaineWebber Investment Exec-
utive or correspondent firm which must then relay the order to the Transfer
Agent by the time noted above. Redemption orders may be initiated by any au-
thorized party on a shareholder's account, including the shareholder's
PaineWebber Investment Executive. Redemption proceeds will be paid by federal
funds wired to one or more of the bank accounts that have been designated by
the shareholder, normally on the Business Day the redemption request is ac-
cepted.
ADDITIONAL INFORMATION ON REDEMPTIONS. Shareholders with questions about re-
demption requirements should consult their PaineWebber Investment Executives,
correspondent firms or the Transfer Agent at 1-888-LIR-FUND. Shareholders will
earn dividends on redeemed shares up to (but not including) the day of redemp-
tion. The redemption price may be more or less than the purchase price, de-
pending on the market value of the Fund's portfolio; however, the Fund antici-
pates that its net asset value per share will normally be $1.00 per share. See
"Valuation of Shares."
There is no minimum amount for redemptions.
ADDITIONAL INFORMATION ON FINANCIAL INTERMEDIARY SHARES. The Fund's shares
are sold and redeemed without charge by the Fund. Financial intermediaries
purchasing or holding Financial Intermediary shares for their customer ac-
counts may charge customers for cash management and other services provided in
connection with their accounts, including, for instance, account maintenance
fees, compensating balance requirements or fees based on account transactions,
assets or income. The dividends payable to beneficial owners of Financial In-
termediary shares will be reduced by the amount of fees paid by the Fund for
services provided by financial intermediaries through which those shares are
purchased and held. See "Financial Intermediaries." A customer should consider
the terms of his or her account with a financial intermediary before purchas-
ing shares. A financial intermediary purchasing or redeeming shares on behalf
of its customers is responsible for transmitting orders to the Transfer Agent
in accordance with its customer agreements and the procedures noted above.
VALUATION OF SHARES
The Fund uses its best efforts to maintain its net asset value at $1.00 per
share. The Fund's net asset value per share is determined by dividing the
value of its investments and other assets minus its liabilities by the number
of Fund shares outstanding. The net asset value per share for each class is
determined twice each Business Day at 12:00 noon (Eastern time) and 5:00 p.m.
(Eastern time).
The Fund values its portfolio securities using the amortized cost method of
valuation, under which market value is approximated by amortizing the differ-
ence between the acquisition cost and value at maturity of an instrument on a
straight-line basis over its remaining life. All cash, receivables and current
payables are carried at their face value. Other assets are valued at fair
value as determined in good faith by or under the direction of the board.
8
<PAGE>
DIVIDENDS AND TAXES
DIVIDENDS. Each Business Day, the Fund declares as dividends all of its net
investment income. Shares are entitled to receive dividends beginning on the
date the purchase order is accepted; dividends are accrued to shareholder ac-
counts daily and are paid on the last Business Day of the month. Dividends are
automatically paid in additional Fund shares unless the shareholder elects in-
stead to have dividends transmitted by federal funds wire to either a desig-
nated bank account or PaineWebber account. Shares do not earn dividends on the
day of redemption.
The Fund distributes its net short-term capital gain, if any, annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The
Fund does not expect to realize net long-term capital gain and thus does not
anticipate payment of any long-term capital gain distributions. Dividends paid
on both classes of shares are calculated at the same time and in the same man-
ner. Dividends on Institutional shares are expected to be higher than those
paid on Financial Intermediary shares because of the higher expenses borne by
the Financial Intermediary shares.
FEDERAL TAX. The Fund intends to qualify for treatment as a regulated in-
vestment company under the Internal Revenue Code so that it will be relieved
of federal income tax on that part of its investment company taxable income
(consisting generally of taxable net investment income and net short-term cap-
ital gain, if any) that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income (whether paid in
cash or in additional Fund shares) are taxable to its shareholders as ordinary
income to the extent of its earnings and profits. Shareholders not subject to
tax on their income will not be required to pay tax on amounts distributed to
them. The Fund's dividends and distributions will not qualify for the divi-
dends-received deduction for corporations.
Some states permit shareholders to treat their portions of the Fund's divi-
dends that are attributable to interest on U.S. Treasury securities and cer-
tain U.S. government securities as in-
come that is exempt from state and local income taxes, if the Fund meets cer-
tain asset and diversification requirements. Dividends attributable to earn-
ings on repurchase agreements and securities loans are, as a general rule,
subject to state and local taxation.
The Fund notifies its shareholders following the end of each calendar year
of the tax status of all distributions paid (or deemed paid) during that year.
The notice sent by the Fund specifies the portions of its dividends that are
attributable to U.S. Treasury securities and specific types of other U.S. gov-
ernment securities.
The Fund is required to withhold 31% of all taxable dividends payable to any
individuals and certain other noncorporate shareholders who (1) do not provide
the Fund with a correct taxpayer identification number or (2) otherwise are
subject to backup withholding.
ADDITIONAL INFORMATION. The foregoing is only a summary of some of the im-
portant federal, state and local income tax considerations generally affecting
the Fund and its shareholders; see the Statement of Additional Information for
a further discussion. There may be other federal, state and local tax consid-
erations applicable to a particular investor. Prospective shareholders are
urged to consult their tax advisers.
MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
The board, as part of its overall management responsibility, oversees vari-
ous organizations responsible for the Fund's day-to-day management. Mitchell
Hutchins, the Funds' investment adviser and administrator, makes and imple-
ments all investment decisions and supervises all aspects of its operations.
The Fund incurs various expenses in its operations, such as the management
fee paid to Mitchell Hutchins, custody and transfer agency fees, shareholder
service fees paid for Financial Intermediary shares, professional fees, ex-
penses of board and shareholder meetings, fees and expenses relating to regis-
tration of its shares, taxes and governmental fees, fees and expenses of
trustees, costs of obtaining insurance, expenses of printing and distributing
shareholder materials,
9
<PAGE>
organizational expenses and extraordinary expenses, including costs or losses
in any litigation.
Mitchell Hutchins has agreed to bear all expenses of the Fund other than the
management fee, shareholder service fees paid for Financial Intermediary
shares, fees and expenses (including counsel fees) of the Independent Trust-
ees, interest, taxes and the cost (including brokerage commissions and other
transaction costs, if any) of securities purchased or sold by the Fund and any
losses incurred in connection therewith and extraordinary expenses. For its
services and its bearing these expenses, the Fund pays Mitchell Hutchins a
monthly fee at the annual rate of 0.18% of its average daily net assets. Al-
though Mitchell Hutchins is not obligated to pay the fees and expenses of the
Independent Trustees, it is contractually obligated to reduce its management
fee in an amount equal to those fees and expenses.
Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New
York 10019, and is a wholly owned asset management subsidiary of PaineWebber.
PaineWebber, the distributor of the Fund's shares, is located at the same ad-
dress and is wholly owned by Paine Webber Group Inc., a publicly owned finan-
cial services holding company. At May 31, 1998, Mitchell Hutchins was invest-
ment adviser or sub-adviser to registered investment companies with sepa-
rate portfolios and aggregate assets in excess of $ billion.
Mitchell Hutchins personnel may engage in securities transactions for their
own accounts pursuant to a code of ethics that establishes procedures for per-
sonal investing and restricts certain transactions.
FINANCIAL INTERMEDIARIES
Financial intermediaries, such as banks and savings associations, may pur-
chase Financial Intermediary shares for the accounts of their customers. The
Fund has adopted a shareholder services plan ("Plan") with respect to Finan-
cial Intermediary shares. PaineWebber implements the Plan on behalf of the
Trust by entering into a service agreement with each financial intermediary
that purchases Financial Intermediary shares requiring it to provide support
services to its customers who are the beneficial owners of Financial Interme-
diary shares.
Under the Plan, the Fund pays PaineWebber an annual fee at the annual rate
of 0.25% of the average daily net asset value of the Financial Intermediary
shares held by financial intermediaries on behalf of their customers. Under
each service agreement, PaineWebber pays an identical fee to the financial in-
termediary for providing the support services to its customers specified in
the service agreement. These services may include: aggregating and processing
purchase and redemption requests from customers and placing net purchase and
redemption orders with PaineWebber; providing customers with a service that
invests the assets of their accounts in Financial Intermediary shares;
processing dividend payments on behalf of customers; providing information pe-
riodically to customers showing their positions in Financial Intermediary
shares; arranging for bank wires; responding to customer inquiries relating to
the services performed by the financial intermediary; providing sub-accounting
with respect to Financial Intermediary shares beneficially owned by customers
or the information necessary for sub-accounting; forwarding shareholder commu-
nications from the Fund to customers, if required by law; and such other simi-
lar services as the Fund may reasonably request from time to time to the ex-
tent the financial intermediary is permitted to do so under federal and state
statutes, rules and regulations.
Under the terms of the service agreements, financial intermediaries are re-
quired to provide to their customers a schedule of any additional fees that
they may charge customers in connection with their investments in Financial
Intermediary shares. Financial Intermediary shares are available for purchase
only by financial intermediaries that have entered into service agreements
with PaineWebber in connection with their investment. Financial intermediaries
providing services to beneficial owners of Financial Intermediary shares in
certain states may be required to be registered as dealers under the laws of
those states.
Should future legislative, judicial or administrative action prohibit or re-
strict the activities of banks serving as financial intermediaries in connec-
tion with the provision of support services to their customers, the Trust and
PaineWebber might be required to alter or discontinue their arrangements with
financial intermediaries and change their method of operations with respect to
Financial Intermediary shares. It is not anticipated, however, that any change
in the Trust's
10
<PAGE>
method of operations would affect its net asset values per share or result in
a financial loss to any shareholder.
Conflict of interest restrictions may apply to a financial institution's re-
ceipt of compensation from the Fund through PaineWebber under a service agree-
ment resulting from fiduciary funds being invested in Financial Intermediary
shares. Before investing fiduciary funds in Financial Intermediary shares, fi-
nancial intermediaries, including investment advisers and other money managers
under the jurisdiction of the SEC, the Department of Labor or state securities
commissions and banks regulated by the Comptroller of the Currency should con-
sult their legal advisors.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not in-
tended to indicate future performance. The "current yield" of the Fund is the
income on an investment in the Fund over a specified seven-day period. This
income is then "annualized" (that is, assumed to be earned each week over a
52-week period) and shown as a percentage of the investment. The "effective
yield" is calculated similarly, but when annualized the income earned is as-
sumed to be reinvested. The "effective yield" will be higher than the "current
yield" because of the compounding effect of this assumed reinvestment.
Current yield and effective yield are calculated separately for Institu-
tional shares and Financial Intermediary shares. Since holders of Financial
Intermediary shares bear all service fees for the services rendered by finan-
cial intermediaries, the net yield on Financial Intermediary shares can be ex-
pected at any given time to be approximately 0.25% lower than the net yield on
Institutional shares. Any additional fees directly assessed by financial in-
termediaries will have the effect of further reducing the net yield realized
by a beneficial owner of Financial Intermediary shares.
The Fund may also advertise other performance data, which may consist of the
annual or cumulative return (including realized net short-term capital gain,
if any) earned on a hypothetical investment in the Fund since it began opera-
tions or for shorter periods. This return data may or may not assume reinvest-
ment of dividends (compounding).
GENERAL INFORMATION
The Fund is a newly created, diversified series of the Trust, an open-end
management investment company formed on April 29, 1998 as a business trust un-
der the laws of Delaware. The board has authority to issue an unlimited number
of shares of beneficial interest of separate series, par value $0.001 per
share.
Each share of the Fund has equal voting, dividend and liquidation rights,
except that beneficial owners of Financial Intermediary shares receive certain
services directly from financial intermediaries and bear the related service
fees.
The Fund does not hold annual shareholder meetings. There normally will be
no meetings of shareholders to elect trustees unless fewer than a majority of
the trustees holding office have been elected by shareholders.
Shareholders of record of no less than two-thirds of the outstanding shares
of the Fund may remove a trustee by vote cast in person or by proxy at a meet-
ing called for that purpose. The trustees are required to call a meeting of
shareholders of the Trust for the purposes of voting upon the question of re-
moval of any trustee when requested in writing to do so by the shareholders of
record of not less than 10% of the Trust's outstanding shares.
Shareholders of the Fund are entitled to one vote for each full share held
and fractional votes for fractional shares held. Voting rights are not cumula-
tive and, as a result, the holders of more than 50% of the shares of the Trust
may elect all of its trustees. The shares of the Fund will be voted together,
except that only the shareholders of a particular class of the Fund may vote
on matters affecting only that class. Financial intermediaries holding shares
for their own accounts must undertake to vote the shares in the same propor-
tions as the vote of shares held for their customers. As of the date of this
Prospectus, Mitchell Hutchins is the sole shareholder of the Fund and may be
deemed a controlling person of the Fund until additional investors purchase
Fund shares.
CERTIFICATES. To avoid additional operating expenses and for investor conve-
nience, share certificates are not issued. Ownership of shares of the Fund is
recorded on a share register by the Transfer Agent, and shareholders have the
same rights of ownership with respect to such shares as if certificates had
been issued.
11
<PAGE>
Mitchell Hutchins
LIR Select
Money
Fund
, 1998
TABLE OF CONTENTS
<TABLE>
<S> <C>
Highlights.................................................................. 2
Investment Objective and Policies........................................... 4
Purchases.................................................................... 6
Exchanges.................................................................... 7
Redemptions.................................................................. 8
Valuation of Shares.......................................................... 8
Dividends and Taxes.......................................................... 9
Management and Distribution Arrangements..................................... 9
Financial Intermediaries.....................................................10
Performance Information..................................................... 11
General Information......................................................... 11
</TABLE>
- --------------------------------------------------------------------------------
Investors should rely only on the information contained or referred to in this
Prospectus. The Fund and its distributor have not authorized anyone to provide
investors with information that is different. This Prospectus is not an offer
to sell shares of the Fund in any jurisdiction where the Fund or its
distributor may not lawfully sell those shares.
PaineWebber
(C)1998 PaineWebber Incorporated
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this Statement of Additional Information is not +
+ complete and may be changed. These securities may not be sold until +
+ the registration statement filed with the Securities and Exchange +
+ Commission is effective. This prospectus is not an offer to sell these +
+ securities and does not solicit an offer to buy these securities in +
+ any state where the offer is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
MITCHELL HUTCHINS LIR SELECT MONEY FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED MAY , 1998
Mitchell Hutchins LIR Select Money Fund ("Fund") is a diversified series of
PaineWebber Institutional Series ("Trust"), an open-end investment company
organized as a Delaware business trust. The Fund seeks maximum current income
consistent with liquidity and the conservation of capital and invests in a
diversified portfolio of high quality, short-term, U.S. dollar-denominated money
market instruments. The Fund offers two separate classes of shares--
Institutional shares and Financial Intermediary shares. The Fund is newly
organized and has no operating history.
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
asset management subsidiary of PaineWebber Incorporated ("PaineWebber"), serves
as the Fund's investment adviser and administrator. PaineWebber serves as
distributor of the Fund's shares.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Fund's current Prospectus, dated
_______________, 1998. A copy of the Prospectus may be obtained by contacting
any PaineWebber Investment Executive or correspondent firm or by calling 1-888-
LIR-FUND. Customers of banks and other financial intermediaries that purchase
the Fund's Financial Intermediary shares may obtain the Prospectus from their
financial intermediaries. This Statement of Additional Information is
dated __________, 1998.
INVESTMENT POLICIES AND RESTRICTIONS
The following supplements the information contained in the Prospectus
concerning the Fund's investment policies and limitations.
YIELDS AND RATINGS OF MONEY MARKET INVESTMENTS. The yields on the money market
instruments in which the Fund invests (such as U.S. government securities, bank
obligations, commercial paper and other short-term obligations) are dependent on
a variety of factors, including general money market conditions, conditions in
the particular market for the obligation, the financial condition of the issuer,
the size of the offering, the maturity of the obligation and the ratings of the
issue. The ratings of nationally recognized statistical rating organizations
("NRSROs") represent their opinions as to the quality of the obligations they
undertake to rate. Ratings, however, are general and are not absolute standards
of quality. Consequently, obligations with the same rating, maturity and
interest rate may have different market prices. Subsequent to its purchase by
the Fund, an issue may cease to be rated or its rating may be reduced. In the
event that a security in the Fund's portfolio ceases to be a "First Tier
Security," as defined in the Prospectus, or Mitchell Hutchins becomes aware that
a security has received a rating below the second highest rating by any NRSRO,
Mitchell Hutchins or the Trust's board of trustees ("board") will consider
whether the Fund should continue to hold the obligation. A First Tier Security
rated in the highest short-term rating category by a single NRSRO at the time of
purchase that subsequently receives a rating below the highest rating category
from a different NRSRO will continue to be considered a First Tier Security.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a Fund
purchases securities or other obligations from a bank or recognized securities
dealer and simultaneously commits to resell them to the bank or dealer at an
agreed-upon date or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased securities or
other obligations. The Fund maintains custody of the underlying securities or
obligations prior to their repurchase; thus, the obligation of the bank or
securities dealer to pay the repurchase price on the date agreed to or upon
demand is, in effect, secured by such securities or obligations. If their value
becomes less than the repurchase price, plus any agreed upon additional amount,
the other party to the agreement 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
<PAGE>
received upon repurchase of the securities or obligations and the price that was
paid by the Fund upon acquisition is accrued as interest and included in the
Fund's net investment income.
Repurchase agreements carry certain risks not associated with direct
investments in securities or other obligations. The Fund intends to enter into
repurchase agreements only with banks and dealers in transactions believed by
Mitchell Hutchins to present minimal credit risks in accordance with guidelines
established by the board. Mitchell Hutchins reviews and monitors the
creditworthiness of those institutions under the board's general supervision.
ILLIQUID SECURITIES. The Fund may not invest more than 10% of its net assets
in illiquid securities. The term "illiquid securities" for this purpose means
securities or other assets that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued them and includes, among other things, repurchase agreements maturing in
more than seven days and restricted securities other than those Mitchell
Hutchins has determined to be liquid pursuant to guidelines established by the
board.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933 ("1933 Act"), including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
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.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment in order to
satisfy share redemption orders. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified institutional buyers interested in purchasing
certain 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, including (1) the frequency of trades for the security, (2) the
number of dealers that make quotes for the security, (3) the number of dealers
that have undertaken to make a market in the security, (4) the number of other
potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities held by the Fund and reports periodically on such
decisions to the board.
FLOATING RATE AND VARIABLE RATE DEMAND INSTRUMENTS. The Fund may invest in
floating rate and variable rate securities with demand features. A demand
feature gives the Fund the right to sell the securities back to a specified
party, usually a remarketing agent, on a specified date, at a price equal to
their amortized cost value plus accrued interest. A demand feature is often
backed by a letter of credit, guarantee or other liquidity support arrangement
from a bank or other financial institution that may be drawn upon demand, after
specified notice, for all or any part of the exercise price of the demand
feature. Generally, the Fund intends to exercise demand features (1) upon a
default under the terms of the underlying security, (2) to maintain the Fund's
portfolio in accordance with its investment objective and policies or applicable
legal or regulatory requirements or (3) as needed to provide liquidity to the
Fund in order to meet redemption requests. The ability of a bank or other
financial institution to fulfill its obligations under a letter of credit,
guarantee or other liquidity arrangement might be affected by possible financial
difficulties of its borrowers, adverse interest rate or economic conditions,
regulatory limitations or other factors. The interest rate on floating rate or
variable rate securities ordinarily is readjusted on the basis of the prime
2
<PAGE>
rate of the bank that originated the financing or some other index or published
rate, such as the 90-day U.S. Treasury bill rate, or is otherwise reset to
reflect market rates of interest. Generally, these interest rate adjustments
cause the market value of floating rate and variable rate securities to
fluctuate less than the market value of fixed rate obligations.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As stated in the Prospectus, the
Fund may purchase securities on a "when-issued" or "delayed delivery" basis. A
security purchased on a when-issued or delayed delivery basis is recorded as an
asset on the commitment date and is subject to changes in market value,
generally based upon changes in the level of interest rates. Thus, fluctuation
in the value of the security from the time of the commitment date will affect
the Fund's net asset value. When the Fund commits to purchase securities on a
when-issued or delayed delivery basis, its custodian segregates assets to cover
the amount of the commitment. See "Investment Policies and Restrictions--
Segregated Accounts."
SEGREGATED ACCOUNTS. When the Fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis, the Fund will
maintain with an approved custodian in a segregated account cash or liquid
securities, marked to market daily, in an amount at least equal to the Fund's
obligation or commitment under such transactions.
LENDING OF PORTFOLIO SECURITIES. As indicated in the Prospectus, the Fund is
authorized to lend up to 33/1//3% of its total assets to broker-dealers or
institutional investors that Mitchell Hutchins deems qualified, but only when
the borrower maintains acceptable collateral with the Fund's custodian, marked
to market daily, in an amount at least equal to the market value of the
securities loaned, plus accrued interest and dividends. Acceptable collateral is
limited to cash, U.S. government securities and irrevocable letters of credit
that meet certain guidelines established by Mitchell Hutchins. The Fund may
reinvest the cash collateral in money market instruments or other short-term
liquid investments. In determining whether to lend securities to a particular
broker-dealer or institutional investor, Mitchell Hutchins will consider, and
during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. The Fund will
retain authority to terminate any loan at any time. The Fund may pay reasonable
fees in connection with a loan and may pay a negotiated portion of the interest
earned on the cash or money market instruments held as collateral to the
borrower or placing broker. The Fund will receive reasonable interest on the
loan or a flat fee from the borrower and amounts equivalent to any dividends,
interest or other distributions on the securities loaned. The Fund will regain
record ownership of loaned securities to exercise beneficial rights, such as
voting and subscription rights and rights to dividends, interest or other
distributions, when regaining such rights is considered to be in the Fund's
interest.
Pursuant to procedures approved by the board governing the Fund's securities
lending program, the board has approved retention of PaineWebber 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.
FUNDAMENTAL INVESTMENT LIMITATIONS. The following fundamental investment
limitations cannot be changed for the Fund without the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or
more of the shares of the Fund present at a shareholders' meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy. If a percentage restriction is adhered to at the time of an investment or
transaction, later changes in percentage resulting from changing values of
portfolio securities or amount of total assets will not be considered a
violation of any of the following limitations.
The Fund will not:
(1) purchase securities of any one issuer if, as a result, more than 5% of
the Fund's total assets would be invested in securities of that issuer
or the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or
3
<PAGE>
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 interpretation applies to, but is not a part of, this
fundamental restriction: With respect to this limitation, domestic and
foreign banking will be considered to be different industries.
(3) issue senior securities or borrow money, except as permitted under the
Investment Company Act of 1940 ("1940 Act") and then not in excess of
33 /1//3% of the Fund's total assets (including the amount of the
senior securities issued but reduced by any liabilities not
constituting senior securities) at the time of the issuance or
borrowing, except that the Fund may borrow up to an additional 5% of
its total assets (not including the amount borrowed) for temporary or
emergency purposes.
(4) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction,
the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and
investments in government obligations, commercial paper, certificates
of deposit, bankers' acceptances or similar instruments will not be
considered the making of a loan.
(5) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter
under the federal securities laws in connection with its disposition of
portfolio securities.
(6) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except
that the Fund may exercise rights under agreements relating to such
securities, including the right to enforce security 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 many purchase,
sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following investment restrictions
may be changed by the board without shareholder approval.
The Fund will not:
(1) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may
make deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments.
4
<PAGE>
(2) engage in short sales of securities or maintain a short position,
except that the Fund may (a) sell short "against the box" and (b)
maintain short positions in connection with its use of financial
options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.
(3) purchase securities of other investment companies, except to the extent
permitted by the 1940 Act and except that this limitation does not
apply to securities received or acquired as dividends, through offers
of exchange, or as a result of reorganization, consolidation or merger.
(4) purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding.
(5) invest more than 10% of its net assets in illiquid securities.
TRUSTEES AND OFFICERS; PRINCIPAL HOLDERS OF SECURITIES
The trustees and executive officers of the Trust, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
Position with Business Experience;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ ----------- --------------------
<S> <C> <C>
Margo N. Alexander**; 51 Trustee and Mrs. Alexander is president, chief executive officer
President and a director of Mitchell Hutchins (since January
1995), and an executive vice president and a director
of PaineWebber. Mrs. Alexander is president and a
director or trustee of 31 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Richard Q. Armstrong; 62 Trustee Mr. Armstrong is chairman and principal of RQA
78 West Brother Drive Enterprises (management consulting firm) (since April
Greenwich, CT 06830 1991 and principal occupation since March 1995). Mr.
Armstrong is also director of Hi Lo Automotive, Inc.
He 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). Mr. Armstrong was
a partner of The New England Consulting Group
(management consulting firm) (December 1992-September
1993). He was managing director of LVMH U.S.
Corporation (U.S. subsidiary of the French luxury
goods conglomerate, Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman of its wine and
spirits subsidiary, Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a director or trustee
of 30 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
E. Garrett Bewkes, Jr.**; 71 Trustee and Mr. Bewkes is a director of Paine Webber Group Inc.
Chairman of the ("PW Group") (holding company of PaineWebber and
Board of Trustees Mitchell Hutchins). Prior to December 1995, he was a
consultant to PW Group. Prior to 1988, he was
chairman of the board, president and chief executive
officer of American Bakeries Company. Mr. Bewkes is
also a director of Interstate Bakeries Corporation
and NaPro BioTherapeutics, Inc. Mr. Bewkes is a
director or trustee of 31 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Position with Business Experience;
Name and Address*; Age Trust Other Directorships
- ------------------------------------ ----------- --------------------
<S> <C> <C>
Richard R. Burt; 51 Trustee Mr. Burt is chairman of IEP Advisors, Inc.
1101 Connecticut Avenue, N.W. (international investments and consulting firm)
Washington, D.C. 20036 (since March 1994) and a partner of McKinsey &
Company (management consulting firm) (since 1991).
He is also a director of American Publishing Company
and Archer-Daniels-Midland Co. (agricultural
commodities). He was the chief negotiator in the
Strategic Arms Reduction Talks with the former Soviet
Union (1989-1991) and the U.S. Ambassador to the
Federal Republic of Germany (1985-1989). Mr. Burt is
a director or trustee of 30 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Mary C. Farrell**; 48 Trustee Ms. Farrell is a managing director, senior investment
strategist and member of the Investment Policy
Committee of PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a member of the
Financial Women's Association and Women's Economic
Roundtable and appears as a regular panelist on Wall
$treet Week with Louis Rukeyser. She also serves on
the Board of Overseers of New York University's Stern
School of Business. Ms. Farrell is a director or
trustee of 30 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
Meyer Feldberg; 55 Trustee Mr. Feldberg is Dean and Professor of Management of
Columbia University the Graduate School of Business, Columbia University.
101 Uris Hall Prior to 1989, he was president of the Illinois
New York, New York 10027 Institute of Technology. Dean Feldberg is also a
director of K-III Communications Corporation,
Federated Department Stores Inc. and Revlon, Inc.
Dean Feldberg is a director or trustee of 30
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
George W. Gowen; 67 Trustee Mr. Gowen is a partner in the law firm of Dunnington,
666 Third Avenue Bartholow & Miller. Prior to May 1994, he was a
New York, New York 10017 partner in the law firm of Fryer, Ross & Gowen. Mr.
Gowen is also a director of Columbia Real Estate
Investments, Inc. Mr. Gowen is a director or trustee
of 30 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Position with Business Experience;
Name and Address*; Age Trust Other Directorships
- ------------------------------------ ----------- --------------------
<S> <C> <C>
Frederic V. Malek; 61 Trustee Mr. Malek is chairman of Thayer Capital Partners
1455 Pennsylvania Avenue, N.W. (merchant bank). From January 1992 to November 1992,
Suite 350 he was campaign manager of Bush-Quayle `92. From 1990
Washington, D.C. 20004 to 1992, he was vice chairman and, from 1989 to 1990,
he was president of Northwest Airlines Inc., NWA Inc.
(holding company of Northwest Airlines Inc.) and
Wings Holdings Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline catering
and contract feeding), where he most recently was an
executive vice president and president of Marriott
Hotels and Resorts. Mr. Malek is also a director of
American Management Systems, Inc. (management
consulting and computer-related services), Automatic
Data Processing, Inc., CB Commercial Group, Inc.
(real estate services), Choice Hotels International
(hotel and hotel franchising), FPL Group, Inc.
(electric services), Integra, Inc. (bio-medical),
Manor Care, Inc. (health care), National Education
Corporation and Northwest Airlines Inc. Mr. Malek is
a director or trustee of 30 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Carl W. Schafer; 62 Trustee Mr. Schafer is president of the Atlantic Foundation
P.O. Box 1164 (charitable foundation supporting mainly
Princeton, NJ 08542 oceanographic exploration and research). He also is
a director of Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Evans Systems, Inc.
(a motor fuels, convenience store and diversified
company), Electronic Clearing House, Inc. (financial
transactions processing), Wainoco Oil Corporation and
Nutraceutix, Inc. (biotechnology company). Prior to
January 1993, he was chairman of the Investment
Advisory Committee of the Howard Hughes Medical
Institute. Mr. Schafer is a director or trustee of
30 investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
Dennis McCauley; 51 Vice President Mr. McCauley is a managing director and chief
investment officer--fixed income of Mitchell
Hutchins. Prior to December 1994, he was director of
fixed income investments of IBM Corporation. Mr.
McCauley is a vice president of 19 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Position with Business Experience;
Name and Address*; Age Trust Other Directorships
- ------------------------------------ ----------- --------------------
<S> <C> <C>
Ann E. Moran; 40 Vice President Ms. Moran is a vice president and a manager of the
and Assistant mutual fund finance division of Mitchell Hutchins.
Treasurer Ms. Moran is a vice president and assistant treasurer
of 30 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
Dianne E. O'Donnell; 45 Vice President Ms. O'Donnell is a senior vice president and deputy
and Secretary general counsel of Mitchell Hutchins. Ms. O'Donnell
is a vice president and secretary of 30 investment
companies and vice president and assistant secretary
of one investment company for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
Emil Polito; 37 Vice President Mr. Polito is a senior vice president and director of
operations and control for Mitchell Hutchins. From
March 1991 to September 1993 he was director of the
Mutual Funds Sales Support and Service Center for
Mitchell Hutchins and PaineWebber. Mr. Polito is
vice president of 30 investment companies for which
Mitchell Hutchins or PaineWebber services as
investment adviser.
Victoria E. Schonfeld; 47 Vice President Ms. Schonfeld is a managing director and general
counsel of Mitchell Hutchins. Prior to May 1994, she
was a partner in the law firm of Arnold & Porter.
Ms. Schonfeld is a vice president of 30 investment
companies and vice president and secretary of one
investment company for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Paul H. Schubert; 35 Vice President Mr. Schubert is a first vice president and the
and Treasurer director of the mutual fund finance division of
Mitchell Hutchins. From August 1992 to August 1994,
he was a vice president of Black-Rock Financial
Management, L.P. Prior to August 1992, he was an
audit manager with Ernst & Young LLP. Mr. Schubert
is a vice president and treasurer of 31 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Position with Business Experience;
Name and Address*; Age Trust Other Directorships
- ------------------------------------ ----------- --------------------
<S> <C> <C>
Barney A. Taglialatela; 37 Vice President Mr. Taglialatela is a vice president and a manager of
and Assistant the mutual fund finance division of Mitchell
Treasurer Hutchins. Prior to February 1995, he was a manager of
the mutual fund finance division of Kidder Peabody
Asset Management, Inc. Mr. Taglialatela is a vice
president and assistant treasurer of 31 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
Keith A. Weller; 36 Vice President Mr. Weller is a first vice president and associate
and Assistant general counsel of Mitchell Hutchins. Prior to May
Secretary 1995, he was an attorney in private practice. Mr.
Weller is a vice president and assistant secretary of
30 investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
Ian W. Williams; 40 Vice President Mr. Williams is a vice president and a manager of the
and Assistant mutual fund finance division of Mitchell Hutchins.
Treasurer Prior to June 1992, he was an audit senior accountant
with Price Waterhouse LLP. Mr. Williams is a vice
president and assistant treasurer of 31 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
- -------------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.s
** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are "interested persons" of the
Trust as defined in the 1940 Act by virtue of their positions with PW Group,
PaineWebber and/or Mitchell Hutchins.
The Trust pays trustees who are not "interested persons" of the Trust $
annually for each series and $150 for each board annually, plus any additional
amounts due for meeting and each meeting of a board committee board or committee
meetings. Each chairman of the (other than committee meetings held on the same
audit and contract review committee of individual day as a board meeting). The
Trust has only one funds within the PaineWebber fund complex receives series and
thus pays each such Trustee $ additional compensation aggregating $15,000
annually from the relevant funds. All trustees are reimbursed for any expenses
incurred in attending meetings. Trustees and officers own no outstanding shares
of the Fund. Because PaineWebber and Mitchell Hutchins perform substantially all
of the services necessary for the operation of the Trust, the Trust requires no
employees. No officer, director or employee of Mitchell Hutchins or PaineWebber
presently receives any compensation from the Trust for acting as a trustee or
officer.
9
<PAGE>
The table below shows the estimated compensation to be paid to each trustee
during the current fiscal year and the compensation of those trustees from other
PaineWebber funds during the calendar year ended December 31, 1997.
COMPENSATION TABLE+
<TABLE>
<CAPTION>
Estimated Total Compensation
Aggregate FROM THE TRUST
Compensation AND THE
Name of Persons, Position FROM THE TRUST* Fund Complex**
- ------------------------- ----------------- ----------------
<S> <C> <C>
Richard Q. Armstrong, Trustee.................................... $ $ 94,885
Richard R. Burt, Trustee......................................... $ $ 97,085
Meyer Feldberg, Trustee.......................................... $ $117,853
George W. Gowen, Trustee......................................... $ $101,567
Frederic V. Malek, Trustee....................................... $ $ 95,845
Carl W. Schafer, Trustee......................................... $ $ 94,885
</TABLE>
+ Only independent trustees are compensated by the Trust and identified above;
trustees who are "interested persons," as defined in the 1940 Act, do not
receive compensation.
* Estimated for the initial fiscal year of the Trust ending April 30, 1999.
** Represents total compensation paid to each trustee during the calendar year
ended December 31, 1997; no fund within the fund complex has a bonus,
pension, profit sharing or retirement plan.
PRINCIPAL HOLDERS OF SECURITIES. As of June __, 1998, Mitchell Hutchins held
all the outstanding shares of the Fund and thus may be deemed a controlling
person of the Fund until additional investors purchase shares.
INVESTMENT ADVISORY, ADMINISTRATION AND
DISTRIBUTION ARRANGEMENTS
Investment Advisory and Administration Arrangements. Mitchell Hutchins acts as
the Trust's investment adviser and administrator pursuant to a contract dated
June __, 1998 ("Advisory Contract"). Under the Advisory Contract, the Trust pays
Mitchell Hutchins an annual fee, computed daily and paid monthly, at an annual
rate of 0.18% of the Fund's average daily net assets
Under the terms of the Advisory Contract, Mitchell Hutchins bears all expenses
incurred in the Fund's operation other than the investment and advisory fee
payable under the Advisory Contract, the fees payable pursuant to the
shareholder service plan adopted by the Trust with respect to the Fund's
Financial Intermediary shares, fees and expenses (including counsel fees) of the
trustees of the Trust who are not "interested persons"of the Trust or Mitchell
Hutchins, as that term is defined in the 1940 Act ("Independent Trustees"),
interest, taxes and the cost (including brokerage commissions and other
transaction costs, if any) of securities purchased or sold by the Fund and any
losses incurred in connection therewith and extraordinary expenses (such as
costs of litigation to which the Trust or Fund is a party and of indemnifying
officers and trustees of the Trust).
Although Mitchell Hutchins is not obligated to pay the fees and expenses of
the Independent Trustees, the Advisory Contract requires that Mitchell Hutchins
reduce its management fee by an amount equal to those fees and expenses.
Expenses borne by Mitchell Hutchins include the following (or the Fund's share
of the following): (1) organizational expenses (if these expenses are amortized
over a period of more than one year, Mitchell Hutchins will bear in any one year
only that portion of the organizational expenses that would have been borne by
the Fund in that year), (2) filing fees and expenses relating to the
registration and qualification of the shares of the Fund under federal and state
securities laws and maintaining such registrations and qualifications, (3) fees
and salaries payable
10
<PAGE>
to the trustees (other than the Independent Trustees) and officers, (4) all
expenses incurred in connection with the services of the trustees (other than
the Independent Trustees), including travel expenses, (5) costs of any
liability, uncollectable items of deposit and other insurance or fidelity bonds,
(6) ordinary legal, accounting and auditing expenses, excluding legal fees of
special counsel for the Independent Trustees and, as noted above, excluding
extraordinary expenses, such as litigation or indemnification expenses, (7)
charges of custodians, transfer agents and other agents, (8) costs of preparing
share certificates (if any); (9) expenses of setting in type and printing
prospectuses and supplements thereto, reports and statements to shareholders and
proxy material for existing shareholders, (10) costs of mailing prospectuses and
supplements thereto, statements of additional information and supplements
thereto, reports and proxy materials to existing shareholders, (11) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations, (12) costs of mailing and tabulating
proxies and costs of meetings of shareholders, the board and any committees
thereof, (13) the cost of investment company literature and other publications
provided to the trustees and officers, (14) costs of mailing, stationery and
communications equipment, (15) expenses incident to any dividend, withdrawal or
redemption options, and (16) charges and expenses of any outside pricing service
used to value portfolio securities.
Under the Advisory Contract, Mitchell Hutchins will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of the Advisory Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Mitchell Hutchins in the performance of its duties or from reckless disregard of
its duties and obligations thereunder.
The Advisory Contract is terminable with respect to the Fund at any time
without penalty by vote of the board or by vote of the holders of a majority of
the outstanding voting securities of that Fund on 60 days' written notice to
Mitchell Hutchins, as the case may be. The Advisory Contract is also terminable
without penalty by Mitchell Hutchins on 60 days' written notice to the other
party. The Advisory Contract terminates automatically upon its assignment.
The following table shows the approximate net assets as of May __, 1998,
sorted by category of investment objective, of the investment companies as to
which Mitchell Hutchins serves as adviser or sub-adviser. An investment company
may fall into more than one of the categories below.
<TABLE>
<CAPTION>
INVESTMENT CATEGORY NET ASSETS
------------------- ----------
<S> <C>
( $ MIL)
Domestic (excluding Money Market)..............................................
Global.........................................................................
Equity/Balanced................................................................
Fixed Income (excluding Money Market)..........................................
Taxable Fixed Income.........................................................
Tax-Free Fixed Income........................................................
Money Market Funds.............................................................
</TABLE>
Mitchell Hutchins personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders of the PaineWebber mutual funds and other Mitchell Hutchins'
advisory accounts by all Mitchell Hutchins' directors, officers and employees,
establishes procedures for personal investing and restricts certain
transactions. For example, employee accounts generally must be maintained at
PaineWebber, personal trades in most securities require pre-clearance and short-
term trading and participation in initial public offerings generally are
prohibited. In addition, the code of ethics puts restrictions on the timing of
personal investing in relation to trades by PaineWebber mutual funds and other
Mitchell Hutchins advisory clients.
DISTRIBUTION ARRANGEMENTS. PaineWebber acts as distributor of shares of the
Trust under a distribution contract with the Trust, which requires PaineWebber
to use its best efforts, consistent with its other business, to sell shares of
the Trust. Shares of the Trust are offered on a continuous basis, except that
the Trust and PaineWebber reserve the right to reject any purchase order and to
suspend the offering of Fund shares for a period of time.
11
<PAGE>
PORTFOLIO TRANSACTIONS
The Advisory Contract authorizes Mitchell Hutchins (with the approval of the
board) to select brokers and dealers to execute purchases and sales of the
Fund's portfolio securities. The Advisory Contract directs Mitchell Hutchins to
use its best efforts to obtain the best available price and most favorable
execution with respect to all transactions for the Fund. To the extent that the
execution and price offered by more than one dealer are comparable, Mitchell
Hutchins may, in its discretion, effect transactions in portfolio securities
with dealers who provide the Fund with research, analysis, advice and similar
services. Although Mitchell Hutchins may receive certain research or execution
services in connection with these transactions, Mitchell Hutchins will not
purchase securities at a higher price or sell securities at a lower price than
would otherwise be paid had no services been provided by the executing dealer.
Moreover, Mitchell Hutchins will not enter into any explicit soft dollar
arrangements relating to principal transactions and will not receive in
principal transactions the types of services that could be purchased for hard
dollars. Research services furnished by the dealers with which the Fund effects
securities transactions may be used by Mitchell Hutchins in advising other funds
or accounts it advises and, conversely, research services furnished to Mitchell
Hutchins in connection with other funds or accounts that Mitchell Hutchins
advises may be used in advising the Fund. Information and research received from
dealers will be in addition to, and not in lieu of, the services required to be
performed by Mitchell Hutchins under the Advisory Contract.
Mitchell Hutchins may engage in agency transactions in over-the-counter equity
and debt securities in return for research and execution services. These
transactions are entered into only in compliance with procedures ensuring that
the transaction (including commissions) is at least as favorable as it would
have been if effected directly with a market-maker that did not provide research
or execution services. These procedures include a requirement that Mitchell
Hutchins obtain multiple quotes from dealers before executing the transactions
on an agency basis.
The Fund purchases portfolio securities from dealers and underwriters as well
as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.
Investment decisions for the Fund and for other investment accounts managed by
Mitchell Hutchins are made independently of each other in light of differing
considerations for the various accounts. However, the same investment decision
may occasionally be made for the Fund and one or more of such accounts. In such
cases, simultaneous transactions are inevitable. Purchases or sales are then
averaged as to price and allocated between the Fund and such other account(s) as
to amount according to a formula deemed equitable to the Fund and such
account(s). While in some cases this practice could have a detrimental effect
upon the price or value of the security as far as the Fund is concerned, or upon
its ability to complete its entire order, in other cases it is believed that
coordination and the ability to participate in volume transactions will be
beneficial to the Fund.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
The Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange ("NYSE") is closed or
trading on the NYSE is restricted as determined by the Securities and Exchange
Commission ("SEC"), (2) when an emergency exists, as defined by the SEC, which
makes it not reasonably practicable for the Fund to dispose of securities owned
by it or to determine fairly the market value of its assets or (3) as the SEC
may otherwise permit. The redemption price may be more or less than the
shareholder's cost, depending on the market value of the Fund's portfolio at the
time, although the Fund seeks to maintain a constant net asset value of $1.00
per share.
12
<PAGE>
If conditions exist that make cash payments undesirable, the Fund reserves the
right to honor any request for redemption by making payment in whole or in part
in securities chosen by the Fund and valued in the same way as they would be
valued for purposes of computing the Fund's net asset value. If payment is made
in securities, a shareholder may incur brokerage expenses in converting these
securities into cash.
VALUATION OF SHARES
The Fund's net asset value per share is determined by The Bank of New York
("BONY") as of 12:00 noon, Eastern time, and again at 5:00 p.m., Eastern time,
on each Business Day. As defined in the Prospectus, "Business Day" means any day
on which the New York offices of BONY, and the Fund's transfer agent, First Data
Investor Services Group, Inc. ("Transfer Agent") and the New York City offices
of PaineWebber and PaineWebber's bank (also The Bank of New York) are all open
for business. One or more of these institutions will be closed on the observance
of the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
The Fund values its portfolio securities in accordance with the amortized cost
method of valuation under Rule 2a-7 ("Rule") under the 1940 Act. To use
amortized cost to value its portfolio securities, the Fund must adhere to
certain conditions under that Rule relating to the Fund's investments, some of
which are discussed in the Prospectus. Amortized cost is an approximation of
market value of an instrument, whereby the difference between its acquisition
cost and value at maturity is amortized on a straight-line basis over the
remaining life of the instrument. The effect of changes in the market value of a
security as a result of fluctuating interest rates is not taken into account,
and thus the amortized cost method of valuation may result in the value of a
security being higher or lower than its actual market value. In the event that a
large number of redemptions take place at a time when interest rates have
increased, the Fund might have to sell portfolio securities prior to maturity
and at a price that might not be desirable.
The board has established procedures ("Procedures") for the purpose of
maintaining a constant net asset value of $1.00 per share, which include a
review of the extent of any deviation of net asset value per share, based on
available market quotations, from the $1.00 amortized cost per share. Should
that deviation exceed 1/2 of 1% for any Fund, the board will promptly consider
whether any action should be initiated to eliminate or reduce material dilution
or other unfair results to shareholders. Such action may include redeeming
shares in kind, selling portfolio securities prior to maturity, reducing or
withholding dividends and utilizing a net asset value per share as determined by
using available market quotations. The Fund will maintain a dollar-weighted
average portfolio maturity of 90 days or less and will not purchase any
instrument having, or deemed to have, a remaining maturity of more than 397
days, will limit portfolio investments, including repurchase agreements, to
those U.S. dollar-denominated instruments that are of high quality under the
Rule and that Mitchell Hutchins, acting pursuant to the Procedures, determines
present minimal credit risks, and will comply with certain reporting and
recordkeeping procedures. There is no assurance that constant net asset value
per share will be maintained. In the event amortized cost ceases to represent
fair value per share, the board will take appropriate action.
In determining the approximate market value of portfolio investments, the Fund
may employ outside organizations, which may use a matrix or formula method that
takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used.
TAXES
In order to qualify for treatment as a regulated investment company 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 taxable net investment income and net short-term capital gain, if
any) and must meet several additional requirements. Among these requirements
are the following: (1) the Fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of securities and certain other
income; (2) at the close of each quarter of the Fund's taxable
13
<PAGE>
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. government securities and other securities, with these
other securities 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) of any one issuer.
CALCULATION OF YIELD
The Fund computes its yield and effective yield quotations using standardized
methods required by the SEC. The Fund from time to time advertises (1) its
current yield based on a recently ended seven-day period, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7), with the resulting yield figure
carried to at least the nearest hundredth of one percent, and (2) its effective
yield based on the same seven-day period by compounding the base period return
by adding 1, raising the sum to a power equal to (365/7), and subtracting 1 from
the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)/365/7/]-1
Yield may fluctuate daily and does not provide a basis for determining future
yields. Because the yield of the Fund fluctuates, it cannot be compared with
yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
OTHER INFORMATION. The Fund's performance data quoted in advertising and other
promotional materials ("Performance Advertisements") represent past performance
and are not intended to predict or indicate future results. The return on an
investment in the Fund will fluctuate. In Performance Advertisements, the Fund
may compare its taxable yield with data published by Lipper Analytical Services,
Inc. for money funds ("Lipper"), CDA Investment Technologies, Inc. ("CDA"), IBC
Financial Data, Inc. ("IBC"), Wiesenberger Investment Companies Service
("Wiesenberger") or Investment Company Data Inc. ("ICD"), or with the
performance of recognized stock and other indexes, including the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, the
Morgan Stanley Capital International World Index, the Lehman Brothers Treasury
Bond Index, the Lehman Brothers Government/Corporate Bond Index, the Salomon
Brothers Government Bond Index and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. The Fund also may refer in such
materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper, CDA, IBC,
Wiesenberger or ICD. Performance Advertisements also may refer to discussions of
the Fund and comparative mutual fund data and ratings reported in independent
periodicals, including THE WALL STREET JOURNAL, MONEY MAGAZINE, FORBES, BUSINESS
WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES, THE CHICAGO
TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS. Comparisons in
Performance Advertisements may be in graphic form.
The Fund may also compare its performance with the performances of bank
certificates of deposit ("CDs") as measured by the CDA Certificate of Deposit
Index and the Bank Rate Monitor National Index and the average of yields of CDs
of major banks published by Banxquotes(R) Money Markets. In comparing the Fund's
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Bank accounts are insured in whole or in part by an agency of
the U.S. government and may offer a fixed rate of return. Fund shares are not
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.
14
<PAGE>
The Fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on the Fund investment are reinvested by being paid in
additional Fund shares, any future income of the Fund would increase the value,
not only of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of the Fund investment
would increase more quickly than if dividends had been paid in cash. The Fund
may also make available to shareholders a daily accrual factor or "mil rate"
representing dividends accrued to shareholder accounts on a given day or days.
Certain shareholders may find that this information facilitates accounting or
recordkeeping.
OTHER INFORMATION
The Trust is a Delaware business trust and has authority to issue an unlimited
number of shares of beneficial interest. The Trust may, without shareholder
approval, divide the authorized shares into an unlimited number of separate
series and divide the shares of any series into classes.
Although Delaware law statutorily limits the potential liabilities of a
Delaware business trust's shareholders to the same extent as it limits the
potential liabilities of a Delaware corporation, shareholders of the Fund could,
under certain conflicts of laws jurisprudence in various states, be held
personally liable for the obligations of the Trust or Fund. However, the Trust
Instrument of the Trust disclaims shareholder liability for acts or obligations
of the Trust or its series (the Fund). The Trust Instrument provides for
indemnification from the Fund's property for all losses and expenses of any Fund
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations, a possibility which Mitchell Hutchins believes is
remote and not material. Upon payment of any liability incurred by a shareholder
solely by reason of being or having been a shareholder of the Fund, the
shareholder paying such liability will be entitled to reimbursement from the
general assets of the Fund. The trustees intend to conduct the operations of the
Fund in such a way as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036, serves as counsel to the Fund. Kirkpatrick
& Lockhart LLP also acts as counsel to PaineWebber and Mitchell Hutchins in
connection with other matters.
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for the Fund.
FINANCIAL INTERMEDIARIES
The Trust has adopted a Shareholder Services Plan and Agreement ("Plan") with
respect to the Financial Intermediary shares of the Fund to assure that the
beneficial owners of the Financial Intermediary shares receive certain support
services. PaineWebber will implement the Plan by entering into a service
agreement with each financial intermediary that purchases Financial Intermediary
shares requiring it to provide support services to its customers who are the
beneficial owners of the Financial Intermediary shares. Under the Plan, the Fund
pays PaineWebber an annual fee at the annual rate of 0.25% of the average daily
net asset value of the Financial Intermediary shares held by financial
intermediaries on behalf of their customers. Under each service agreement,
PaineWebber pays an identical fee to the financial intermediary for providing
the support services to its customers specified in the service agreement. These
services may include: (i) aggregating and processing purchase and redemption
requests from customers and placing net purchase and redemption orders with
PaineWebber; (ii) providing customers with a service that invests the assets of
their accounts in Financial Intermediary shares; (iii) processing dividend
payments from the Trust on behalf of customers; (iv) providing information
periodically to customers showing their positions in Financial Intermediary
shares; (v) arranging for bank wires; (vi) responding to customer inquiries
relating to the services performed by the financial intermediary; (vii)
providing sub-accounting with respect to Financial Intermediary shares
beneficially owned by customers or the information necessary for sub-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.
15
<PAGE>
The Plan requires that PaineWebber provide to the board at least annually a
written report of the amounts expended by PaineWebber under service agreements
with financial intermediaries and the purposes for which such expenditures were
made. Each service agreement requires the financial intermediary to cooperate
with PaineWebber in providing information to the board with respect to amounts
expended and services provided under the service agreement. The Plan may be
terminated at any time, without penalty, by vote of the Independent Trustees who
have no direct or indirect financial interest in the operation of the Plan
("Disinterested Trustees"). Any amendment to the Plan must be approved by the
board and any material amendment must be approved by the Disinterested Trustees.
16
<PAGE>
FINANCIAL STATEMENTS
MITCHELL HUTCHINS INSTITUTIONAL SERIES
MITCHELL HUTCHINS LIR SELECT MONEY FUND
Statement of Assets and Liabilities
____________, 1998
<TABLE>
<S> <C>
Assets:
Cash................................................................................. $100,000
[Deferred] organizational expenses...................................................
Prepaid expenses.....................................................................
-------------------
Total assets.....................................................................
-------------------
Liabilities:
Organizational expenses payable......................................................
Payable to adviser...................................................................
-------------------
Total liabilities................................................................
-------------------
Net Assets (beneficial interest, $0.001 par value, issued and outstanding)................ $100,000
===================
INSTITUTIONAL SHARES
Net Assets................................................................................ $50,000
-------------------
Shares outstanding........................................................................ 50,000
-------------------
Net asset value, offering price and redemption value per share............................ $50,000
===================
FINANCIAL INTERMEDIARY SHARES
Net Assets................................................................................ $50,000
-------------------
Shares outstanding........................................................................ 50,000
-------------------
Net asset value, offering price and redemption value per share............................ $50,000
===================
</TABLE>
Organization
Mitchell Hutchins LIR Select Money Fund ("Fund") is a diversified
series of Mitchell Hutchins Institutional Series ("Trust"), an open-end
management investment company organized as a Delaware business trust on April
29, 1998. The Fund has had no operations other than the sale to Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), its investment adviser and
a wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"), of 50,000 shares of beneficial interest of the Institutional
class for the amount of $50,000, and 50,000 shares of beneficial interest of the
Financial Intermediary class for the amount of $50,000 on ________, 1998. The
Fund currently offers two classes of shares - Institutional shares and Financial
Intermediary shares. Each class is sold without any initial sales charges, and
without any contingent deferred sales charge. Each class represents assets of
the Fund, and the classes are identical except for differences in ongoing
service fees. The trustees of the Trust have authority to issue an unlimited
number of shares of beneficial interest, par value $0.001 per share.
[Costs incurred and to be incurred in connection with the organization
and initial registration of the Trust will be paid initially by Mitchell
Hutchins; however, the Trust will reimburse Mitchell Hutchins for such costs.
Such organizational costs, estimated at $_______, will be deferred and amortized
by the Fund on the straight line method over a period not to exceed 60 months
from the date the Fund commences investment operations. The
17
<PAGE>
portion of such deferred costs attributable to each year will be paid by
Mitchell Hutchins pursuant to the Advisory Contract described below. If any
initial shares are redeemed by any holder thereof during the amortization
period, the redemption proceeds shall be reduced by the pro rata portion of
unamortized expenses which the number of shares redeemed bears to the number of
initial shares then outstanding.]
Management Agreement
Mitchell Hutchins acts as the investment adviser and administrator to the Fund
pursuant to a contract ("Advisory Contract") with the Trust dated ________,
1998. Under the Advisory Contract, the Fund pays Mitchell Hutchins a fee,
computed daily and paid monthly, at an annual rate of 0.18% of average daily net
assets. Under the Advisory Contract, Mitchell Hutchins has agreed to pay all
Fund expenses other than the investment and advisory fee payable under the
Advisory Contract, the fees payable pursuant to the shareholder service plan
adopted by the Trust with respect to the Fund's Financial Intermediary shares,
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 (including counsel fees) of the trustees of the
Trust who are not "interested persons"of the Trust or Mitchell Hutchins, as that
term is defined in the 1940 Act, the Advisory Contract requires that Mitchell
Hutchins reduce its management fee by an amount equal to those fees and
expenses.
Shareholder Service Plan and Agreement
Under a Shareholder Service Plan and Agreement with respect to its
Financial Intermediary shares, the Fund pays PaineWebber monthly fees at the
annual rate of 0.25% of the average daily net assets of the Financial
Intermediary shares held by financial intermediaries on behalf of their
customers. Under Service Agreements with those financial intermediaries,
PaineWebber pays an identical fee to the financial intermediaries for certain
support services that they provide for the beneficial owners of the Financial
Intermediary shares.
18
<PAGE>
Mitchell Hutchins
LIR Select
Table of Contents Money
Fund
Investment Policies and Restrictions....................................... 1
Trustee and Officers; Principal Holders of Securities...................... 5
Investment Advisory, Administration and Advisory Arrangements.............. 10
Portfolio Transactions..................................................... 12
Additional Information Regarding Redemptions............................... 12
Valuation of Shares........................................................ 13
Taxes...................................................................... 13
Calculation of Yield....................................................... 14
Other Information.......................................................... 15
Financial Statements....................................................... 18
Investors should rely only on the information contained or referred to in the
Prospectus and this Statement of Additional Information. The Fund and its
distributor have not authorized anyone to provide investors with information
that is different. The Prospectus and this Statement of Additional Information
are not an offer to sell shares of the Fund in any jurisdiction where the Fund
or its distributor may not lawfully sell those shares.
PaineWebber
(C) 1988 PaineWebber Incorporated
19
<PAGE>
PART C. OTHER INFORMATION
--------------------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements: (to be filed)
(b) Exhibits:
(1) Trust Instrument (to be filed)
(2) By-Laws (to be filed)
(3) Voting trust agreement - none
(4) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (to be filed)
(5) Investment Advisory and Administration Contract (to be filed)
(6) Distribution Contract (to be filed)
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement (to be filed)
(9) (a) Transfer Agency Agreement (to be filed)
(b) Shareholder Service Plan (to be filed)
(c) Form of Shareholder Service Agreement (to be filed)
(10) Opinion of Counsel (to be filed)
(11) Other opinions, appraisals, rulings and consents:
Accountants' consent (to be filed)
(12) Financial Statements omitted from Part B - none
(13) Letter of investment intent (to be filed)
(14) Prototype Retirement Plan - none
(15) Plan Pursuant to Rule 12b-1 - none
(16) Schedule for Computation of Performance Quotations - none
(17) and
(27) Financial Data Schedule (not applicable)
(18) Plan Pursuant to Rule 18f-3 (to be filed)
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
None
Item 26. Number of Holders of Securities
-------------------------------
<TABLE>
<CAPTION>
Number of Record Holders as of
Title of Class May 1, 1998
-------------- ------------
<S> <C>
Shares of beneficial interest, par value $0.001 per share, in
Mitchell Hutchins LIR Select Money Fund
Institutional Shares 0
Financial Intermediary Shares 0
</TABLE>
C-1
<PAGE>
Item 27. Indemnification
---------------
Section 2 of Article IX of the Trust Instrument, "Indemnification,"
provides that the appropriate series of the Registrant will indemnify the
trustees and officers of the Registrant to the fullest extent permitted by law
against claims and expenses asserted against or incurred by them by virtue of
being or having been a trustee or officer; provided that no such person shall be
indemnified where there has been an adjudication or other determination, as
described in Article IX, that such person is liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office or
did not act in good faith in the reasonable belief that his action was in the
best interest of the Registrant. Section 2 of Article IX also provides that the
Registrant may maintain insurance policies covering such rights of
indemnification.
Additionally, "Limitation of Liability" in Section 1 of Article IX of
the Trust Instrument provides that the trustees or officers of the Registrant
shall not be personally liable to any person extending credit to, contracting
with or having a claim against the Registrant or a particular series; and that,
provided they have exercised reasonable care and have acted under the reasonable
belief that their actions are in the best interest of the Registrant, the
trustees and officers shall not be liable for neglect or wrongdoing by them or
any officer, agent, employee, investment adviser or independent contractor of
the Registrant.
Section 9 of the Investment Advisory and Administration Contract with
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") provides that
Mitchell Hutchins shall not be liable for any error of judgment or mistake of
law or for any loss suffered by any series of the Registrant in connection with
the matters to which the Contract relates, except for a loss resulting from the
willful misfeasance, bad faith, or gross negligence of Mitchell Hutchins in the
performance of its duties or from its reckless disregard of its obligations and
duties under the Contract. Section 10 of the Contract provides that the Trustees
shall not be liable for any obligations of the Trust or any series under the
Contract and that Mitchell Hutchins shall look only to the assets and property
of the Registrant in settlement of such right or claim and not to the assets and
property of the Trustees.
Section 9 of the Distribution Contract provides that the Trust will
indemnify PaineWebber and its officers, directors and controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by PaineWebber to the Trust for use in the Registration Statement; and
provided that this indemnity agreement shall not protect any such persons
against liabilities arising by reason of their bad faith, gross negligence or
willful misfeasance; and shall not inure to the benefit of any such persons
unless a court of competent jurisdiction or controlling precedent determines
that such result is not against public policy as expressed in the Securities Act
of 1933. Section 9 of the Distribution Contract also provides that PaineWebber
agrees to indemnify, defend and hold the Trust, its officers and Trustees free
and harmless of any claims arising out of any alleged untrue statement or any
alleged omission of material fact contained in information furnished by
PaineWebber for use in the Registration Statement or arising out of an agreement
between PaineWebber and any retail dealer, or arising out of supplementary
literature or advertising used by PaineWebber in connection with the Contract.
Section 10 of the Distribution Contract contains provisions similar to Section
10 of the Investment Advisory and Administration Contract, with respect to
Mitchell Hutchins and PaineWebber, as appropriate.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be provided to trustees, officers and
controlling persons of the Registrant, pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding or payment pursuant to any insurance policy) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
C-2
<PAGE>
Item 28. 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 29. Principal Underwriters
----------------------
a) Mitchell Hutchins serves as principal underwriter and/or investment
adviser for the following investment companies:
ALL AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
GLOBAL SMALL CAP FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
MANAGED HIGH YIELD FUND INC.
MITCHELL HUTCHINS PORTFOLIOS
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST INC.
b) PaineWebber is the Registrant's principal underwriter. The
directors and officers of PaineWebber, their principal business addresses, and
their positions and offices with PaineWebber are identified in its Form ADV
filed March 31, 1995, with the Securities and Exchange Commission (registration
number 801-7163) and such information is hereby incorporated herein by
reference. The information set forth below is furnished for those trustees 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.
<TABLE>
<CAPTION>
Positions and Offices
Name With Registrant Positions and Offices With Underwriter
- ---- --------------------- --------------------------------------
<S> <C> <C>
Margo N. Alexander President and Trustee Executive Vice President and Director of
PaineWebber
Mary C. Farrell Trustee Managing Director, Senior Investment
Strategist and Member of the Investment
Policy Committee of PaineWebber
</TABLE>
c) None
Item 30. 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,
C-3
<PAGE>
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 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York, on the 13th day of May, 1998.
MITCHELL HUTCHINS INSTITUTIONAL SERIES
By: /s/ Dianne E. O'Donnell
---------------------------------------
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated. The undersigned hereby severally constitute and appoint
Dianne E. O'Donnell, Keith A. Weller, Arthur J. Brown, Elinor W. Gammon, and
Robert A. Wittie, and each of them singly, our true and lawful attorneys, with
full power to sign for each of us, and in each of our names and in the
capacities indicated below, any and all amendments to the Registration Statement
of Mitchell Hutchins Institutional Series, and all instruments necessary or
desirable in connection therewith, filed with the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by said attorneys to any and all amendments to said registration statement.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander
- ----------------------------------- President and Trustee May 13, 1998
Margo N. Alexander (Chief Executive Officer)
/s/ E. Garrett Bewkes, Jr.
- ----------------------------------- Trustee and Chairman May 13, 1998
E. Garrett Bewkes, Jr. of the Board of Trustees
/s/ Richard Q. Armstrong
- ----------------------------------- Trustee May 13, 1998
Richard Q. Armstrong
/s/ Richard R. Burt
- ----------------------------------- Trustee May 13, 1998
Richard R. Burt
/s/ Mary C. Farrell
- ----------------------------------- Trustee May 13, 1998
Mary C. Farrell
/s/ Meyer Feldberg
- ----------------------------------- Trustee May 13, 1998
Meyer Feldberg
/s/ George W. Gowen
- ----------------------------------- Trustee May 13, 1998
George W. Gowen
/s/ Frederic V. Malek
- ----------------------------------- Trustee May 13, 1998
Frederic V. Malek
/s/ Carl W. Schafer
- ----------------------------------- Trustee May 13, 1998
Carl W. Schafer
/s/ Paul H. Schubert
- ----------------------------------- Vice President and Treasurer (Chief May 13, 1998
Paul H. Schubert Financial and Accounting Officer)
</TABLE>
<PAGE>
MITCHELL HUTCHINS INSTITUTIONAL SERIES
EXHIBIT INDEX
-------------
Exhibit
Number
- ------
(a) Financial Statements: (to be filed)
(b) Exhibits:
(1) Trust Instrument (to be filed)
(2) By-Laws (to be filed)
(3) Voting trust agreement - none
(4) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (to be filed)
(5) Investment Advisory and Administration Contract (to be filed)
(6) Distribution Contract (to be filed)
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement (to be filed)
(9) (a) Transfer Agency Agreement (to be filed)
(b) Shareholder Service Plan (to be filed)
(c) Form of Shareholder Service Agreement (to be filed)
(10) Opinion of Counsel (to be filed)
(11) Other opinions, appraisals, rulings and consents:
Accountants' consent (to be filed)
(12) Financial Statements omitted from Part B - none
(13) Letter of investment intent (to be filed)
(14) Prototype Retirement Plan - none
(15) Plan Pursuant to Rule 12b-1 - none
(16) Schedule for Computation of Performance Quotations - none
(17) and
(27) Financial Data Schedule (not applicable)
(18) Plan Pursuant to Rule 18f-3 (to be filed)
