<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
1285 AVENUE OF THE AMERICAS . NEW YORK, NEW YORK 10019
Professionally managed money market fund seeking:
. Maximum Current Income
. High Liquidity
. Preservation of Capital
Mitchell Hutchins LIR Select Money Fund is a series of Mitchell Hutchins
Institutional Series, a Delaware business trust ("Trust"). The Fund offers two
separate classes of shares--Institutional shares and Financial Intermediary
shares. Institutional shares are available for purchase primarily by
institutional investors. Financial Intermediary shares are available for
purchase by banks and other financial intermediaries for the benefit of their
customers. The Fund is newly organized and has no operating history.
This Prospectus concisely sets forth information that a prospective investor
should know about the Fund before investing. Please retain this Prospectus for
future reference. A Statement of Additional Information dated July 31, 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.
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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 JULY 31, 1998
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
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Highlights................................................................. 3
Investment Objective and Policies.......................................... 5
Purchases.................................................................. 8
Exchanges.................................................................. 9
Redemptions................................................................ 9
Valuation of Shares........................................................ 10
Dividends and Taxes........................................................ 10
Management and Distribution Arrangements................................... 11
Financial Intermediaries................................................... 12
Performance Information.................................................... 12
General Information........................................................ 13
</TABLE>
2
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HIGHLIGHTS
See elsewhere in the Prospectus for more information on the topics discussed
in these highlights.
The Fund: Professionally managed money market fund designed primarily
for institutions as an economical and convenient means for
the investment of short-term funds that they hold for their
own account or hold or manage for others.
The Fund offers investors the choice of investing in two
separate classes of shares.
. Institutional shares are available for purchase primarily
by institutional investors.
. Financial Intermediary shares are available for purchase
solely by banks and other financial intermediaries for
the benefit of their customers. Financial Intermediary
shares bear all fees payable by the Fund to those
financial intermediaries for certain services they
provide to the beneficial owners of those shares.
See "Purchases," "Redemptions," "Financial Intermediaries"
and "Valuation of Shares."
Investment Maximum current income consistent with liquidity and the
Objective and preservation of capital. The Fund invests in a diversified
Policies: portfolio of high quality, short-term, U.S. dollar-
denominated money market instruments.
Distributor: PaineWebber Incorporated ("PaineWebber"). See "Management."
Investment
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
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of loss of principal or interest, these securities are not completely risk
free. The Fund may invest in U.S. dollar-denominated securities of foreign
issuers, which may present a greater degree of risk than investments in
securities of domestic issuers. During periods when interest rates are
declining or rising, the Fund's yield will tend to lag behind prevailing short-
term market rates. Redemption of shares by one or more shareholders during the
Fund's initial period of operations when the Fund may have a relatively small
number of investors may cause the Fund to hold a higher portion of its assets
in the securities of fewer issuers, resulting in greater risk. See "Investment
Objective and Policies--Other Investment Policies and Risks."
EXPENSES OF INVESTING IN THE FUND. The following tables are intended to
assist investors in understanding the expenses associated with investing in the
Fund. "Miscellaneous Expenses" have been estimated for the current fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
<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
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<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%
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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. It is esti-
mated that these fees and expenses will be less than 0.01% of the Fund's av-
erage net assets.
EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
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<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.
4
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to earn maximum current income consistent
with liquidity and the preservation of capital.
The Fund seeks to maintain a dollar-weighted average portfolio maturity of
90 days or less. All securities in which the Fund invests have or are deemed
to have remaining maturities of 397 days or less on the date of purchase.
The Fund invests in high quality, short-term, U.S. dollar-denominated money
market instruments of U.S. and foreign issuers. These instruments include gov-
ernment securities, obligations of banks, commercial paper and other short-
term obligations issued by corporations, partnerships, trusts or other enti-
ties, corporate bonds and notes, variable and floating rate securities, fund-
ing agreements, guaranteed investment contracts, variable amount master demand
notes, participation interests in any of the foregoing and repurchase agree-
ments. Participation interests are pro rata interests in securities held by
others.
The U.S. government securities in which the Fund may invest include direct
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and
obligations issued or guaranteed by U.S. government agencies and instrumental-
ities, including securities that are supported by the full faith and credit of
the United States (such as Government National Mortgage Association certifi-
cates ("GNMAs")), securities supported primarily or solely by the creditwor-
thiness of the issuer (such as securities of the Resolution Funding Corpora-
tion and the Tennessee Valley Authority) and securities that are supported
primarily or solely by specific pools of assets and the creditworthiness of a
U.S. government-related issuer (such as mortgage-backed securities issued by
Fannie Mae, also known as the Federal National Mortgage Association).
The Fund may invest in obligations (including certificates of deposit, bank-
ers' acceptances and similar obligations) of U.S. and foreign banks. The Fund
may invest in non-negotiable time deposits of banks, savings associations and
similar depository institutions only if the time deposits have maturities of
seven days or less.
The securities purchased by the Fund consist only of obligations that are
"First Tier Securities" as defined in Rule 2a-7 under the 1940 Act. As so de-
fined, First Tier Securities include securities that are rated in the highest
short-term rating category by at least two nationally recognized statistical
rating organizations ("NRSROs") or by a single NRSRO if only one NRSRO has as-
signed the obligation a short-term rating. The Fund also may rely on the
short-term rating and credit quality of a guarantee of a security (including
bond insurance, letters of credit or unconditional demand features) or the is-
suer of the guarantee to determine whether the security is eligible for pur-
chase. First Tier Securities also include unrated securities if Mitchell
Hutchins has determined the obligations to be of comparable quality to rated
securities that so qualify. The Fund generally may invest no more than 5% of
its total assets in the securities of a single issuer (other than securities
issued by the U.S. government, its agencies and instrumentalities), except
that the Fund may invest up to 25% of its total assets in First Tier Securi-
ties of a single issuer for a period of up to three business days.
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
5
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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 to hold a higher portion of its assets in the se-
curities of fewer issuers.
YEAR 2000 RISKS. Like other mutual funds, financial and business organiza-
tions around the world, the Fund could be adversely affected if the computer
systems used by Mitchell Hutchins, other service providers and entities with
computer systems that are linked to the Fund's records do not properly process
and calculate date-related information and data from and after January 1,
2000. This is commonly known as the "Year 2000 Issue." Mitchell Hutchins is
taking steps that it believes are reasonably designed to address the Year 2000
Issue with respect to the computer systems that is uses and to obtain satis-
factory assurances that comparable steps are being taken by the Fund's other
major service providers. However, there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the Fund.
U.S. GOVERNMENT SECURITIES. The Fund may also acquire custodial receipts
that evidence ownership of future interest payments, principal payments or
both that have been "stripped" from certain U.S. Treasury notes or bonds.
These custodial receipts are known by various names, including "Treasury In-
vestment Growth Receipts" ("TIGRs") and "Certificates of Accrual on Treasury
Securities" ("CATS"). The Fund may also invest in separately traded principal
and interest components of securities issued or guaranteed by the U.S. Trea-
sury. The principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the
U.S. Treasury.
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The Fund may purchase
commercial paper, which includes short-term obligations issued by corpora-
tions, partnerships, trusts or other entities to finance short-term credit
needs. The Fund may also purchase non-convertible debt obligations with no
more than 397 days remaining to maturity at the time of purchase. Short-term
obligations issued by trusts or special purpose entities may include certifi-
cates or notes that represent participations in or are backed by pools of
mortgages or credit card, automobile or other types of receivables or finan-
cial assets. The Fund may invest in funding agreements and guaranteed invest-
ment contracts issued by insurance companies which are obligations of the in-
surance company or its separate account. Funding agreements permit the invest-
ment of varying amounts under a direct agreement between the Fund and an in-
surance company and provide that the principal amount may be increased from
time to time (subject to specified maximums) by agreement of the parties or
decreased by either party. The Fund expects to invest in funding agreements
with floating or variable rates that are subject to demand features that per-
mit the Fund to tender its interest back to the issuer.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase variable and
floating rate securities with remaining maturities in excess of 13 months is-
sued by U.S. government agencies or instrumentalities or guaranteed by the
U.S. government. In addition, the Fund may purchase variable and floating rate
securities of other issuers with remaining maturities in excess of 13 months
if they are subject to a demand feature exercisable within 13 months or less.
The yield on these securities is adjusted in relation to changes in specific
rates, such as the prime rate, and different securities may have different ad-
justment rates. A demand feature gives the Fund the right to tender them back
to the issuer or a remarketing agent and receive the amortized cost of the se-
curity plus accrued interest prior to maturity. The demand feature may be
backed by letters of credit or other liquidity support arrangements provided
by banks or other financial institutions, whose credit standing affects the
credit quality of the obligation. Changes in the credit quality of these in-
stitutions could cause losses to the Fund and affect its share price.
VARIABLE AMOUNT MASTER DEMAND NOTES. Securities purchased by the Fund may
include variable amount master demand notes, which are unsecured redeemable
obligations that permit investment of varying amounts at fluctuating interest
rates under a direct agreement between the Fund and the issuer. The principal
amount of these notes may be increased from time to time by the parties (sub-
ject to specified maximums) or
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decreased by the Fund or the issuer. These notes are payable on demand and may
be unrated.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
Fund purchases obligations from banks, securities dealers or their respective
affiliates and simultaneously commits to resell the obligations to the
counterparty at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased obligations. The Fund maintains custody of the underlying obliga-
tions prior to their repurchase, either through its regular custodian or
through a special "tri-party" custodian or sub-custodian that maintains sepa-
rate accounts for both the Fund and its counterparty. Thus, the obligation of
the counterparty to pay the repurchase price on the date agreed to or upon de-
mand is, in effect, secured by such obligations.
Repurchase agreements carry certain risks not associated with direct invest-
ments in securities, including possible decline in the market value of the un-
derlying obligations. Repurchase agreements involving obligations other than
U.S. government securities (such as commercial paper, corporate bonds and
mortgage loans) may be subject to special risks and may not have the benefit
of certain protections in the event of the counterparty's insolvency. If the
counterparty or a guarantor becomes insolvent, the Fund may suffer delays,
costs and possible losses in connection with the disposition of the collater-
al. The Fund intends to enter into repurchase agreements only with
counterparties in transactions believed by Mitchell Hutchins to present mini-
mal credit risks in accordance with guidelines established by the board.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend its securities to quali-
fied broker-dealers or institutional investors in an amount up to 33 1/3% of
the Fund's total assets. Lending securities enables the Fund to earn addi-
tional income, but could result in a loss or delay in recovering these securi-
ties.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in il-
liquid securities. These include repurchase agreements maturing in more than
seven days and securities whose disposition is restricted under the federal
securities laws, other than those that Mitchell Hutchins has determined to be
liquid pursuant to guidelines established by the board. The Fund does not con-
sider securities that are eligible for resale under SEC Rule 144A to be illiq-
uid if Mitchell Hutchins has determined them to be liquid in accordance with
procedures approved by the board. The Fund's investments in Rule 144A securi-
ties could increase the level of its illiquidity, however, to the extent that
qualified institutional buyers, for a time, become uninterested in purchasing
these securities.
WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when-issued"
or forward commitment basis, that is, for delivery beyond the normal settle-
ment date at a stated price and yield. The Fund generally would not pay for
such securities or start earning interest on them until they are received.
However, when the Fund purchases securities on a when-issued basis, it immedi-
ately assumes the risks of ownership, including the risk of price fluctuation.
Failure by the issuer to deliver a security purchased on a when-issued basis
may result in a loss or missed opportunity to make an alternative investment.
OTHER INVESTMENT POLICIES. The Fund may borrow money from banks for tempo-
rary purposes in an aggregate amount not exceeding 33 1/3% of the value of its
total assets. The costs associated with borrowing money may reduce the Fund's
net income. The Fund may invest up to 10% of its total assets in the securi-
ties of other money market funds.
The Fund's investments in securities with remaining maturities in excess of
13 months, such as variable and floating rate securities and variable amount
master demand notes, must comply with conditions established by the SEC under
which these securities may be considered to have remaining maturities of 13
months or less.
In managing the Fund's portfolio, Mitchell Hutchins may employ a number of
professional money management techniques to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. These
techniques include varying the composition and the weighted average maturity
of the Fund's portfolio based upon its assessment of the relative values of
various money market instruments and future interest rate patterns. Mitchell
Hutchins may also seek to improve the Fund's yield by purchasing or selling
securities to take advantage of yield disparities among similar or dissimilar
money market instruments that regularly occur in the money markets.
New forms of money market instruments continue to be developed. The Fund may
invest
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in such instruments to the extent consistent with its investment objective.
The Fund's investment objective may not be changed without the approval of
its shareholders. Certain other investment limitations, as described in the
Statement of Additional Information, also may not be changed without share-
holder approval. All other investment policies may be changed by the board
without shareholder approval.
PURCHASES
The Fund accepts the settlement of purchase orders only in available federal
funds. ("Federal funds" are funds deposited by a commercial bank in an account
at a Federal Reserve Bank that can be transferred to a similar account of an-
other bank in one day and thus may be made immediately available to the Fund
through its custodian.)
The Fund offers investors the choice of investing in two separate classes of
shares--Institutional shares and Financial Intermediary shares. Institutional
shares are available for purchase by institutional investors, and, at the dis-
cretion of PaineWebber, for purchase by individuals or other entities. Finan-
cial Intermediary shares are available for purchase only by banks and other
financial intermediaries for the benefit of their customers. Financial Inter-
mediary shares bear all fees payable by the Fund to those financial intermedi-
aries for certain services they provide to the beneficial owners of these
shares.
The minimum initial investment is $10,000,000. The minimum subsequent
investment is the greater of $100,000 or the minimum required to bring a
shareholder's account balance to $10,000,000 if the account has fallen below
that amount. Both the initial minimum investment and the subsequent minimum
investment may be waived at the discretion of PaineWebber. Subsequent pur-
chases of shares by a shareholder whose account balance has fallen below
$10,000,000 will be accepted only if the account balance will be at least
$10,000,000 after that purchase. Financial intermediaries purchasing shares
for the accounts of their customers may set a higher or lower minimum for ini-
tial and subsequent investments by their customers, provided that when their
customers' shareholdings are aggregated, the above noted minimums are met. In-
vestors interested in purchasing Financial Intermediary shares should consult
their financial institutions concerning any initial or subsequent minimum in-
vestment requirements.
Shares of the Fund are offered for sale, without a sales charge, at the net
asset value per share next determined after receipt and acceptance of a pur-
chase order by the Transfer Agent, subject to timely receipt of federal funds
as provided below. An investor can place a purchase order by telephoning the
Transfer Agent at 1-888-LIR-FUND and speaking with a representative. Investors
may also place an order through a PaineWebber Investment Executive or corre-
spondent firm who must then relay the order to the Transfer Agent. The Fund
effects orders to purchase its shares three times on each Business Day at the
net asset value determined as of 12:00 noon (Eastern time), 2:30 p.m. (Eastern
time) and 5:00 p.m. (Eastern time). For the purchase of Fund shares to be
effected on that Business Day, the investor must wire federal funds to the
Fund, care of the Transfer Agent, and that wire must be credited to the Fund's
bank account by a Federal Reserve Bank on that Business Day. Otherwise, the
order will be executed on the following Business Day if federal funds have
been received on that Business Day. Purchase orders may be initiated by any
authorized party on the account, including the shareholder's PaineWebber In-
vestment Executive. A "Business Day" is any day on which the New York offices
of the Trust's custodian, The Bank of New York ("Custodian"), the Transfer
Agent, PaineWebber and PaineWebber's bank are all open for business.
The Fund and PaineWebber reserve the right to reject any purchase order and
to suspend the offering of Fund shares for a period of time.
The availability of Fund shares to customers of PaineWebber's correspondent
firms may vary depending on the arrangements between PaineWebber and such
firms.
Investors who are purchasing shares should instruct their banks to transfer
federal funds by wire. Wire transfers should be directed to:
Mitchell Hutchins Institutional Funds
c/o The Bank of New York
CR DDA A/C #8900337516
FFC PW A/C #
[insert PaineWebber account name and account number]
ABA #021000018
Unless the investor otherwise specifies, all shares purchased will be Insti-
tutional shares.
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REMOTE TRADE ENTRY. At its discretion, the Fund may offer eligible institu-
tional investors who meet certain conditions an electronic trade order entry
(RTE) capability. For more information on this option, please contact your
PaineWebber Investment Executive or the Transfer Agent at 1-888-LIR-FUND.
PaineWebber and/or an investor's bank may impose a service charge for wire
transfers.
EXCHANGES
Shareholders may exchange shares of the Fund for shares of the same class of
any of the three Liquid Institutional Reserves funds--Money Market Fund, Gov-
ernment Securities Fund and Treasury Securities Fund. These funds all have
higher total operating expenses than the Fund and lower minimums for initial
and subsequent purchases. Exchange orders from Fund shareholders received by
12:00 noon, Eastern time, with respect to Government Securities Fund and Trea-
sury Securities Fund are effected on that Business Day. Exchange orders from
Fund shareholders received by 2:30 p.m., Eastern time, with respect to Money
Market Fund also are effected on that Business Day. Exchange orders received
after those times are executed on the next Business Day. If a shareholder ex-
changes all his or her Fund shares, the dividends accrued on those shares for
the month to date also will be invested in the shares of the other fund into
which the exchange is made.
Shareholders may place exchange orders by telephoning the Transfer Agent at
1-888-LIR-FUND and speaking with a representative. Investors may also place an
exchange order through a PaineWebber Investment Executive or correspondent
firm, who must then relay the order to the Transfer Agent as noted above. Ex-
change orders may be initiated by any authorized party on a shareholder's ac-
count, including the shareholder's PaineWebber Investment Executive.
The exchange privilege may be modified or terminated at any time and, when
required by SEC rules, on 60 days' notice. The exchange privilege is available
only in those jurisdictions where the sale of the fund shares to be acquired
is authorized.
AUTOMATIC EXCHANGE WHEN ACCOUNTS FALL BELOW $10,000,000. If, at any time,
the total investment in a shareholder's account has been less than $10,000,000
for 30 consecutive days, the Fund may exchange those shares for shares of Liq-
uid Institutional Reserves Money Market Fund unless the shareholder has
elected in its account application to have the shares redeemed and the pro-
ceeds of redemption paid to the shareholder.
REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their accounts
at any time at the net asset value per share next computed after the receipt
of a redemption request in proper form by the Transfer Agent. Redemption or-
ders are effected three times on each Business Day at the net asset value de-
termined as of 12:00 noon (Eastern time), 2:30 p.m. (Eastern time) and
5:00 p.m. (Eastern time) by telephoning the Transfer Agent at 1-888-LIR-FUND
and speaking with a representative. Investors may also place an order through
a PaineWebber Investment Executive or correspondent firm which must then relay
the order to the Transfer Agent by the time noted above. Redemption orders may
be initiated by any authorized party on a shareholder's account, including the
shareholder's PaineWebber Investment Executive. Redemption proceeds will be
paid by federal funds wired to one or more of the bank accounts that have been
designated by the shareholder, normally on the Business Day the redemption re-
quest is accepted. If a shareholder redeems all the shares owned, dividends
accrued for the month to date will be paid in federal funds and wired at the
same time to the bank account(s) designated by the shareholder.
Redemption requests placed later in the day--especially between 3:30 p.m.
and 5:00 p.m., Eastern time--will be processed by the Transfer Agent and a
wire will be initiated. However, receipt by the shareholder's designated bank
account may be delayed if a Federal Reserve Bank is experiencing delays in
transfers of funds. Neither the Fund nor the Transfer Agent is responsible for
the performance of a shareholder's receiving bank or any of its intermediar-
ies.
A properly completed account application with signature guaranteed or other
authentication acceptable to the Transfer Agent must be on file with the
Transfer Agent before a redemption request can be processed. The application
requires that the shareholder designate the bank account(s) or PaineWebber ac-
count to which redemption proceeds should be wired. Any change
9
<PAGE>
in the account designated must be submitted in a form deemed acceptable by the
Transfer Agent. If the information provided by a shareholder in a redemption
request does not correspond to the information on the application, the Trans-
fer Agent will not effect the transaction.
ADDITIONAL INFORMATION ON REDEMPTIONS. Shareholders with questions about re-
demption requirements should consult their PaineWebber Investment Executives,
correspondent firms or the Transfer Agent at 1-888-LIR-FUND. Shareholders will
earn dividends on redeemed shares up to (but not including) the day of redemp-
tion. The redemption price may be more or less than the purchase price, de-
pending on the market value of the Fund's portfolio; however, the Fund antici-
pates that its net asset value per share will normally be $1.00 per share. See
"Valuation of Shares."
There is no minimum amount for redemptions.
ADDITIONAL INFORMATION ON FINANCIAL INTERMEDIARY SHARES. The Fund's shares
are sold and redeemed without charge by the Fund. Financial intermediaries
purchasing or holding Financial Intermediary shares for their customer ac-
counts may charge customers for cash management and other services provided in
connection with their accounts, including, for instance, account maintenance
fees, compensating balance requirements or fees based on account transactions,
assets or income. The dividends payable to beneficial owners of Financial In-
termediary shares will be lower than those on Institutional shares by the
amount of fees paid by the Fund for services provided by financial intermedi-
aries through which those shares are purchased and held. See "Financial Inter-
mediaries." A customer should consider the terms of his or her account with a
financial intermediary before purchasing shares. A financial intermediary pur-
chasing or redeeming shares on behalf of its customers is responsible for
transmitting orders to the Transfer Agent in accordance with its customer
agreements and the procedures noted above.
VALUATION OF SHARES
The Fund uses its best efforts to maintain its net asset value at $1.00 per
share. The Fund's net asset value per share is determined by dividing the
value of its investments and other assets minus its liabilities by the number
of Fund shares outstanding. The net asset value per share for each class is
determined three times each Business Day as of 12:00 noon (Eastern time), 2:30
p.m. (Eastern time) and 5:00 p.m. (Eastern time).
The Fund values its portfolio securities using the amortized cost method of
valuation, under which market value is approximated by amortizing the differ-
ence between the acquisition cost and value at maturity of an instrument on a
straight-line basis over its remaining life. All cash, receivables and current
payables are carried at their face value. Other assets are valued at fair
value as determined in good faith by or under the direction of the board.
DIVIDENDS AND TAXES
DIVIDENDS. Each Business Day, the Fund declares as dividends all of its net
investment income. Shares are entitled to receive dividends beginning on the
date the purchase order is accepted; dividends are accrued to shareholder
accounts daily and are paid on the last Business Day of the month or upon re-
demption of a shareholder's entire Fund account. Dividends are automatically
paid in additional Fund shares unless the shareholder elects instead to have
dividends transmitted by federal funds wire to either a designated bank ac-
count or PaineWebber account. A shareholder must notify the Transfer Agent in
writing in a form deemed acceptable by the Transfer Agent at least two Busi-
ness Days prior to the end of the month if the shareholder wishes to change
this election with respect to a particular monthly dividend. Shares do not
earn dividends on the day of redemption.
The Fund distributes its net short-term capital gain, if any, annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The
Fund does not expect to realize net long-term capital gain and thus does not
anticipate payment of any long-term capital gain distributions. Dividends paid
on both classes of shares are calculated at the same time and in the same man-
ner. Dividends on Financial Intermediary shares are expected to be lower than
those paid on Institutional shares because of the higher expenses borne by the
Financial Intermediary shares.
TAXES. The Fund intends to qualify for treatment as a regulated investment
company under the Internal Revenue Code so that it will be relieved of federal
income tax on that part of its investment company taxable income (consisting
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generally of taxable net investment income and net short-term capital gain, if
any) that it distributes to its shareholders.
Dividends from the Fund's investment company taxable income (whether paid in
cash or in additional Fund shares) are taxable to its shareholders as ordinary
income to the extent of its earnings and profits. Shareholders not subject to
tax on their income will not be required to pay tax on amounts distributed to
them. The Fund's dividends will not qualify for the dividends-received deduc-
tion for corporations.
Some states and localities exempt from their income taxes the portions of
the Fund's dividends that are attributable to interest on U.S. Treasury secu-
rities and certain other U.S. government securities. Dividends attributable to
earnings on repurchase agreements and securities loans involving those securi-
ties are, as a general rule, not eligible for that exemption.
The Fund notifies its shareholders following the end of each calendar year
of the tax status of all distributions paid (or deemed paid) during that year.
The notice sent by the Fund specifies the portions of its dividends that are
attributable to U.S. Treasury securities and other U.S. government securities
generally exempt from state and local income taxes.
The Fund is required to withhold 31% of all dividends payable to any indi-
viduals and certain other noncorporate shareholders who (1) do not provide the
Fund with a correct taxpayer identification number or (2) otherwise are sub-
ject to backup withholding.
ADDITIONAL INFORMATION. The foregoing is only a summary of some of the im-
portant federal, state and local income tax considerations generally affecting
the Fund and its shareholders; see the Statement of Additional Information for
a further discussion. There may be other federal, state and local tax consid-
erations applicable to a particular investor. Prospective shareholders are
urged to consult their tax advisers.
MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
The board, as part of its overall management responsibility, oversees vari-
ous organizations responsible for the Fund's day-to-day management. Mitchell
Hutchins, the Fund's investment adviser and administrator, makes and imple-
ments all investment decisions and supervises all aspects of its operations.
The Fund incurs various expenses in its operations, such as the management
fee paid to Mitchell Hutchins, custody and transfer agency fees, shareholder
service fees paid for Financial Intermediary shares, professional fees, ex-
penses of board and shareholder meetings, fees and expenses relating to regis-
tration of its shares, taxes and governmental fees, fees and expenses of
trustees, costs of obtaining insurance, expenses of printing and distributing
shareholder materials, organizational expenses and extraordinary expenses, in-
cluding costs or losses in any litigation.
Mitchell Hutchins has agreed to bear all expenses of the Fund other than the
management fee, shareholder service fees paid for Financial Intermediary
shares, fees and expenses (including counsel fees) of the Independent Trust-
ees, interest, taxes and the cost (including brokerage commissions and other
transaction costs, if any) of securities purchased or sold by the Fund and any
losses incurred in connection therewith and extraordinary expenses. For its
services and its bearing these expenses, the Fund pays Mitchell Hutchins a
monthly fee at the annual rate of 0.18% of its average daily net assets. Al-
though Mitchell Hutchins is not obligated to pay the fees and expenses of the
Independent Trustees, it is contractually obligated to reduce its management
fee in an amount equal to those fees and expenses.
Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New
York 10019, and is a wholly owned asset management subsidiary of PaineWebber.
PaineWebber, the distributor of the Fund's shares, is located at the same ad-
dress and is wholly owned by Paine Webber Group Inc., a publicly owned finan-
cial services holding company. At June 30, 1998, Mitchell Hutchins was invest-
ment adviser or sub-adviser to 32 registered investment companies with 69 sep-
arate portfolios and aggregate assets of approximately $40.3 billion.
In accordance with procedures adopted by the board, the Fund may pay fees to
PaineWebber for its services as lending agent in its portfolio securities
lending program. Mitchell Hutchins investment personnel may engage in securi-
ties transactions for their own accounts pursuant to a code of ethics that es-
tablishes procedures for personal investing and restricts certain transac-
tions.
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FINANCIAL INTERMEDIARIES
Financial intermediaries, such as banks and savings associations, may pur-
chase Financial Intermediary shares for the accounts of their customers. The
Fund has adopted a shareholder services plan ("Plan") with respect to Finan-
cial Intermediary shares. PaineWebber implements the Plan on behalf of the
Trust by entering into a service agreement with each financial intermediary
that purchases Financial Intermediary shares requiring it to provide support
services to its customers who are the beneficial owners of Financial Interme-
diary shares.
Under the Plan, the Fund pays PaineWebber an annual fee at the annual rate
of 0.25% of the average daily net asset value of the Financial Intermediary
shares held by financial intermediaries on behalf of their customers. Under
each service agreement, PaineWebber pays an identical fee to the financial in-
termediary for providing the support services to its customers specified in
the service agreement. These services may include: aggregating and processing
purchase and redemption requests from customers and placing net purchase and
redemption orders with PaineWebber; providing customers with a service that
invests the assets of their accounts in Financial Intermediary shares;
processing dividend payments on behalf of customers; providing information pe-
riodically to customers showing their positions in Financial Intermediary
shares; arranging for bank wires; responding to customer inquiries relating to
the services performed by the financial intermediary; providing sub-accounting
with respect to Financial Intermediary shares beneficially owned by customers
or the information necessary for sub-accounting; forwarding shareholder commu-
nications from the Fund to customers, if required by law; and such other simi-
lar services as the Fund may reasonably request from time to time to the ex-
tent the financial intermediary is permitted to do so under federal and state
statutes, rules and regulations.
Under the terms of the service agreements, financial intermediaries are re-
quired to provide to their customers a schedule of any additional fees that
they may charge customers in connection with their investments in Financial
Intermediary shares. Financial Intermediary shares are available for purchase
only by financial intermediaries that have entered into service agreements
with PaineWebber in connection with their investment. Financial intermediaries
providing services to beneficial owners of Financial Intermediary shares in
certain states may be required to be registered as dealers under the laws of
those states.
Should future legislative, judicial or administrative action prohibit or re-
strict the activities of banks serving as financial intermediaries in connec-
tion with the provision of support services to their customers, the Trust and
PaineWebber might be required to alter or discontinue their arrangements with
financial intermediaries and change their method of operations with respect to
Financial Intermediary shares. It is not anticipated, however, that any change
in the Trust's method of operations would affect its net asset values per
share or result in a financial loss to any shareholder.
Conflict of interest restrictions may apply to a financial institution's re-
ceipt of compensation from the Fund through PaineWebber under a service agree-
ment resulting from fiduciary funds being invested in Financial Intermediary
shares. Before investing fiduciary funds in Financial Intermediary shares, fi-
nancial intermediaries, including investment advisers and other money managers
under the jurisdiction of the SEC, the Department of Labor or state securities
commissions and banks regulated by the Comptroller of the Currency should con-
sult their legal advisors.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not in-
tended to indicate future performance. The "current yield" of the Fund is the
income on an investment in the Fund over a specified seven-day period. This
income is then "annualized" (that is, assumed to be earned each week over a
52-week period) and shown as a percentage of the investment. The "effective
yield" is calculated similarly, but when annualized the income earned is as-
sumed to be reinvested. The "effective yield" will be higher than the "current
yield" because of the compounding effect of this assumed reinvestment.
Current yield and effective yield are calculated separately for Institu-
tional shares and Financial Intermediary shares. Since holders of Financial
Intermediary shares bear all service fees for the services rendered by finan-
cial intermediaries, the net yield on Financial Intermediary shares can be ex-
pected at any given time to
12
<PAGE>
be approximately 0.25% lower than the net yield on Institutional shares. Any
additional fees directly assessed by financial intermediaries will have the
effect of further reducing the net yield realized by a beneficial owner of Fi-
nancial Intermediary shares.
The Fund may also advertise other performance data, which may consist of the
annual or cumulative return (including realized net short-term capital gain,
if any) earned on a hypothetical investment in the Fund since it began opera-
tions or for shorter periods. This return data may or may not assume reinvest-
ment of dividends (compounding).
GENERAL INFORMATION
The Fund is a newly organized, diversified series of the Trust, an open-end
management investment company formed on April 29, 1998 as a business trust un-
der the laws of Delaware. The board has authority to issue an unlimited number
of shares of beneficial interest of separate series, par value $0.001 per
share.
Each share of the Fund has equal voting, dividend and liquidation rights,
except that beneficial owners of Financial Intermediary shares receive certain
services directly from financial intermediaries and bear the related service
fees.
The Fund does not hold annual shareholder meetings. There normally will be
no meetings of shareholders to elect trustees unless fewer than a majority of
the trustees holding office have been elected by shareholders.
Shareholders of record of no less than two-thirds of the outstanding shares
of the Fund may remove a trustee by vote cast in person or by proxy at a meet-
ing called for that purpose. The trustees are required to call a meeting of
shareholders of the Trust for the purposes of voting upon the question of re-
moval of any trustee when requested in writing to do so by the shareholders of
record of not less than 10% of the Trust's outstanding shares.
Shareholders of the Fund are entitled to one vote for each full share held
and fractional votes for fractional shares held. Voting rights are not cumula-
tive and, as a result, the holders of more than 50% of the shares of the Trust
may elect all of its trustees. The shares of the Fund will be voted together,
except that only the shareholders of a particular class of the Fund may vote
on matters affecting only that class. Financial intermediaries holding shares
for their own accounts must undertake to vote the shares in the same propor-
tions as the vote of shares held for their customers. As of the date of this
Prospectus, Mitchell Hutchins is the sole shareholder of the Fund and may be
deemed a controlling person of the Fund until additional investors purchase
Fund shares.
CERTIFICATES. To avoid additional operating expenses and for investor conve-
nience, share certificates are not issued. Ownership of shares of the Fund is
recorded on a share register by the Transfer Agent, and shareholders have the
same rights of ownership with respect to such shares as if certificates had
been issued.
REPORTS. Shareholders will receive audited annual and unaudited semiannual
financial statements of the Fund. All purchases and redemptions of Fund shares
are confirmed to shareholders at least quarterly.
CUSTODIAN AND TRANSFER AGENT. The Bank of New York, 48 Wall Street, New
York, New York 10286, is custodian of the Fund's assets. First Data Investor
Services Group, Inc., whose principal business address is 4400 Computer Drive,
Westborough, Massachusetts 01581-5159, is the Fund's transfer and dividend
disbursing agent.
13
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
JULY 31, 1998
[_] LIQUID INSTITUTIONAL RESERVES
Money Market Fund
Government Securities Fund
Treasury Securities Fund
A prospectus containing more complete information for any of the above funds
into which exchanges may be made, including charges and expenses, can be
obtained from a PaineWebber Investment Executive or correspondent firm. Please
read it carefully before investing. It is important you have all the
information you need to make a sound investment decision.
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
S629
<PAGE>
SUPPLEMENT TO THE
MITCHELL HUTCHINS LIR SELECT MONEY FUND
PROSPECTUS DATED JULY 31, 1998
August 4, 1998
Dear Investor,
Mitchell Hutchins Asset Management Inc. has agreed to waive 15 basis
points of its 18 basis point management fee during the Fund's initial start-up
phase through September 13, 1998. Until that date, management fees will be 3
basis points (0.03%).
