As filed with the Securities and Exchange Commission on October 27, 1999
1933 Act Registration No. 333-52965
1940 Act Registration No. 811-8767
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 5 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 6 [ X ]
MITCHELL HUTCHINS LIR MONEY SERIES
(Exact name of registrant as specified in charter)
51 West 52nd Street
New York, New York 10019-6114
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, ESQ.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, ESQ.
BENJAMIN J. HASKIN, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
[ ] On pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] On pursuant to Rule 485(a)(1)
[ X ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On pursuant to Rule 485(a)(2)
Title of Securities Being Registered: Shares of Beneficial Interest of LIR
Cash Reserves Fund and LIR Liquid Assets Fund.
<PAGE>
LIR CASH RESERVES FUND
-------------------------------
PRELIMINARY PROSPECTUS
DECEMBER __, 1999
SUBJECT TO COMPLETION
-------------------------------
This preliminary prospectus offers shares of a money market fund only to
eligible benefit plans that participate in the PaineWebber ACCESS (servicemark)
program, but only if Mitchell Hutchins and its affiliates do not serve as the
sub-adviser for the client in PaineWebber ACCESS. The fund may be made available
to clients in other programs in the future.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this preliminary
prospectus is complete or accurate. To state otherwise is a crime.
[FOR THE LEFT HAND MARGIN: The information in this preliminary prospectus is not
complete and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.]
<PAGE>
LIR Cash Reserves Fund
- ------------------------------------------------------------
CONTENTS
THE FUND
------------------------------------------------------------
What every investor LIR Cash Reserves Fund
should know about
the fund More About Risks and Investment Strategies
YOUR INVESTMENT
------------------------------------------------------------
Information for Managing Your Fund Account
managing your fund --- Buying Shares
account --- Selling Shares
--- Pricing and Valuation
ADDITIONAL INFORMATION
------------------------------------------------------------
Additional important Management
information about
the fund Dividends and Taxes
------------------------------------------------------------
Where to learn more Back Cover
about the fund
-------------------------------
The fund is not a complete
or balanced investment program.
-------------------------------
2
<PAGE>
LIR Cash Reserves Fund
- ------------------------------------------------------------
LIR CASH RESERVES FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
FUND OBJECTIVE
To provide as high a level of current interest income as is consistent with
maintaining liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality money
market instruments of governmental and private issuers.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests in foreign money market instruments only if they are
denominated in U.S. dollars.
Mitchell Hutchins Asset Management Inc., the fund's investment adviser, selects
money market instruments for the fund based on its assessment of relative values
and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risk. When short-term interest rates rise, the value of
the fund's investments generally will fall, and its yield will tend to lag
behind prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
o Credit Risk
o Interest Rate Risk
o Foreign Securities Risk
The fund is newly organized. As a result, the fund has no operating history or
performance information to include in a bar chart or table reflecting average
annual returns.
3
<PAGE>
LIR Cash Reserves Fund
- ------------------------------------------------------------
EXPENSES AND FEE TABLES
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)..................... None
Maximum Contingent Deferred Sales Charge (Load)
(as a % of offering price)..................... None
Redemption Fees................................... None
Exchange Fees..................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from the fund as a
percentage of average net assets)
Management Fees*.................................. 0.33%
Distribution and/or Service (12b-1) Fees.......... None
Other Expenses**.................................. 0.23%
Total Annual Fund Operating Expenses.............. 0.56%
Expense Reimbursements/Management Fee Waivers*.... 0.09%
----
Net Expenses *.................................... 0.47%
* The fund and Mitchell Hutchins have entered into an expense
reimbursement/management fee waiver agreement. Mitchell Hutchins has agreed to
reimburse fund expenses to the extent that the fund's expenses through the end
of the fund's first three fiscal years otherwise would exceed the "Net Expenses"
rate shown above. The fund has agreed to repay Mitchell Hutchins for those
reimbursed expenses if the fund can do so over the following three years without
causing its expenses in any of those years to exceed the "Net Expenses" rate.
Mitchell Hutchins has also agreed to waive 0.04% of its 0.33% management fee
through the end of the fund's first three fiscal years.
** Other expenses are based on estimated amounts for the current fiscal year.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
$48 $151
4
<PAGE>
LIR Cash Reserves Fund
- ------------------------------------------------------------
MORE ABOUT RISKS AND INVESTMENT STRATEGIES
PRINCIPAL RISKS
The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further detail about some of the risks
described below, are discussed in the fund's Statement of Additional Information
("SAI"). Information on how you can obtain the SAI is on the back cover of this
prospectus.
CREDIT RISK. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even the highest quality money market
instruments are subject to some credit risk.
INTEREST RATE RISK. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of the fund's investments will fall. Also, the fund's
yield will tend to lag behind changes in prevailing short-term interest rates.
This means that the fund's income will tend to rise more slowly than increases
in short-term interest rates. Similarly, when short-term interest rates are
falling, the fund's income will tend to fall more slowly.
FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
YEAR 2000 RISK. The fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.
Similarly, the issuers whose money market instruments are bought by the fund and
the trading systems used by the fund could be adversely affected by this issue.
The ability of an issuer or trading system to respond successfully to the issue
requires both technological sophistication and diligence, and there can be no
assurance that any steps taken will be sufficient to avoid an adverse impact on
the fund.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the fund is subject to maturity, quality and
diversification requirements designed to help it maintain a stable price of
$1.00 per share. The fund's investment strategies are designed to comply with
these requirements.
5
<PAGE>
LIR Cash Reserves Fund
- ------------------------------------------------------------
YOUR INVESTMENT
MANAGING YOUR FUND ACCOUNT
BUYING SHARES
The fund offers its shares to eligible benefit plans, including individual
retirement accounts, through brokerage accounts established as eligible benefit
plan sweep accounts at PaineWebber Incorporated or Mitchell Hutchins. The types
of eligible benefit plans that are permitted to buy fund shares are described
below. You can open an eligible benefit plan sweep account by contacting your
Financial Advisor.
Fund shares are currently available only to eligible benefit plans participating
in the PaineWebber ACCESS (servicemark) program if Mitchell Hutchins or an
affiliate does not serve as sub-adviser to the eligible benefit plan (I.E.,
PaineWebber, Mitchell Hutchins or their affiliates do not exercise any
investment discretion over account assets.) The fund may be made available to
other programs in the future.
BUYING SHARES AUTOMATICALLY
The fund is designed to automatically invest free credit cash balances held in
your account in shares of the fund. If you are eligible to buy fund shares, the
fund will be offered as the money market sweep fund for the automatic investment
of free credit cash balances. You should contact your Financial Advisor to
determine if another money market fund is available for your account. (Neither
your Financial Advisor, Mitchell Hutchins nor any affiliate may recommend a
specific money market fund for automatic investment of such account balances.)
All free cash credit balances (that is, immediately available funds) of $1.00 or
more in your brokerage account are automatically invested in the fund on a daily
basis and are purchased daily for settlement the next business day. These
amounts include proceeds of securities sold in your account. All remaining free
cash credit balances under $1.00 are invested in fund shares monthly. There is
no sales charge or commission paid for the automatic purchase of shares.
Your purchase of fund shares will be effective at the next determination of net
asset value on any business day after federal funds become available to the
fund. Federal funds are funds deposited by a commercial bank in an account at a
Federal Reserve Bank that can be transferred to a similar account of another
bank in one day and thus can be made immediately available to the fund. A
business day is any day that the Boston offices of the fund's custodian and the
New York City offices of Mitchell Hutchins are open for business.
The fund and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of fund shares.
The fund pays no sales commission, sales load, or distribution fees to the
principal underwriter and its affiliates, or any other person, in connection
with the sale of fund shares. Neither Mitchell Hutchins nor any affiliate
exercises any discretion with respect to the timing or frequency of the
automatic investment of free cash balances.
Please consult your Financial Advisor for more information about this automatic
purchase feature.
6
<PAGE>
LIR Cash Reserves Fund
- -----------------------------------------------------------------------------
BENEFIT PLANS ELIGIBLE TO BUY FUND SHARES
Eligible benefit plans that may buy fund shares include, but are not limited to
o individual retirement accounts (traditional, rollover and "SIMPLE" IRAs)
o simplified employee pension plans
o cash or deferred arrangements (I.E., 401(k) plans, including SIMPLE 401(k)
plans)
o profit sharing plans
o money purchase plans
o defined benefit plans
o target benefit plans
o church plans
o government plans
o self-employed plans (i.e., "KEOGHs")
Other benefit plans may be eligible to buy fund shares. Contact your Financial
Advisor for more information regarding these benefit plans.
Although the amount that you may contribute to an eligible benefit plan in any
one year is subject to certain limitations, you may invest assets already held
in an eligible benefit plan in the fund without regard to these limitations.
SELLING SHARES
Your fund shares will be sold automatically to settle any outstanding securities
purchases or debits to your brokerage account.
If the proceeds from selling your fund shares remain in the eligible benefit
plan sweep account, certain adverse tax consequences otherwise applicable to
eligible benefit plan distributions will not occur.
6A
<PAGE>
LIR Cash Reserves Fund
- -----------------------------------------------------------------------------
ADDITIONAL INFORMATION
Investment programs buying or holding shares for their client accounts may
charge clients for cash management and other services provided in connection
with their accounts.
You should consider the terms of your investment program before purchasing
shares.
PRICING AND VALUATION
The price of fund shares is based on the net asset value. The net asset value
per share for the fund is the total value of the fund divided by the total
number shares outstanding. In determining net asset value, the fund values its
securities at their amortized cost. This method uses a constant amortization to
maturity of the difference between the cost of the instrument to the fund and
the amount due at maturity. The fund's net asset value per share is expected to
be $1.00 per share, although this value is not guaranteed.
The net asset value per share for the fund is determined twice each business day
at noon and the close of regular trading on the New York Stock Exchange
(generally, 4:00 p.m., Eastern time), on days that the New York Stock Exchange
is open, except Columbus Day and Veterans Day. Your price for buying or selling
or exchanging your shares will be the net asset value that is next calculated
after the fund accepts your order.
7
<PAGE>
LIR Cash Reserves Fund
- -----------------------------------------------------------------------------
ADDITIONAL INFORMATION
MANAGEMENT
INVESTMENT ADVISER
Mitchell Hutchins is the investment adviser, principal underwriter and
administrator of the fund. Mitchell Hutchins is located at 51 West 52nd Street,
New York, New York 10019-6114. Mitchell Hutchins is a wholly owned asset
management subsidiary of PaineWebber Incorporated, which is wholly owned by
Paine Webber Group Inc., a publicly owned financial services holding company. On
September 30, 1999, Mitchell Hutchins managed over $59 billion in client assets
with Mitchell Hutchins or PaineWebber as the adviser or sub-adviser of 33
investment companies with 75 separate portfolios and aggregate assets of
approximately $47.3 billion.
ADVISORY FEES
The fund pays advisory and administration fees to Mitchell Hutchins at the
annual contract rate of 0.33% of its average daily net assets. Mitchell Hutchins
has agreed to waive 0.04% of its 0.33% management fee through the end of the
fund's first three fiscal years.
In addition to the advisory and administration fees paid to Mitchell Hutchins as
described above, the fund pays all expenses not assumed by Mitchell Hutchins as
investment adviser and administrator. These expenses include, without
limitation, interest charges, taxes, expenses of issue and redemption of shares,
fees and expenses of registering and qualifying the fund and its shares for
distribution under federal and state regulations, custodial fees, auditing and
legal expenses, expenses of determining net asset value of the fund's shares,
reports to shareholders, expenses of shareholder meetings, expenses of printing
and mailing prospectuses and proxy materials to existing shareholders, and its
proportionate share of insurance premiums and professional association dues or
assessments. See "Investment Advisory and Distribution Arrangements" in the SAI.
8
<PAGE>
LIR Cash Reserves Fund
- -----------------------------------------------------------------------------
DIVIDENDS AND TAXES
DIVIDENDS
The fund declares dividends daily and pays them monthly. The fund distributes
any net short-term capital gain annually, but may make more frequent
distributions if necessary to maintain its share price at $1.00 per share.
Your dividends will be reinvested in additional shares of the fund, unless you
elect to receive them in cash. Contact your Financial Advisor at PaineWebber or
your financial services firm if you prefer to receive dividends in cash.
TAXES
Eligible benefit plan participants ordinarily do not pay taxes on dividends they
receive on fund shares until they withdraw the proceeds from the eligible
benefit plan. Generally, withdrawals from an eligible benefit plan will be
taxable as ordinary income and withdrawals will be subject to an additional tax
equal to 10% of the amount distributed (unless the withdrawals are used to pay
certain higher education expenses and certain acquisition costs of first time
home buyers) if made prior to the time the participant:
o reaches age 59 1/2;
o becomes permanently disabled; or
o reaches at least age 55 and is separated from service of the employer who
sponsored the plan.
The failure of an eligible benefit plan to distribute sufficient income after a
participant reaches age 70 1/2 may be subject to an excise tax. Moreover,
certain contributions to an eligible benefit plan in excess of the amounts
permitted by law may be subject to an excise tax.
The fund notifies its shareholders following the end of each calendar year of
the amount of all dividends paid that year.
9
<PAGE>
[BACK COVER]
If you want more information about the fund, the following document is available
free upon request:
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about the fund by contacting your Financial
Advisor. You may obtain free copies of the SAI by contacting the fund directly
at [1-800-________________________________].
You may review and copy information about the fund, including the SAI, at the
Public Reference Room of the Securities and Exchange Commission. You can get
text-only copies of information about the fund and other information about the
funds and information about the operations of the SEC's Public Reference Room:
o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov
Mitchell Hutchins LIR Money Series
- --LIR Cash Reserves Fund
Investment Company Act File No. 811-06281
(Copyright)1999 PaineWebber Incorporated
<PAGE>
LIR LIQUID ASSETS FUND
-------------------------------
PRELIMINARY PROSPECTUS
DECEMBER __, 1999
SUBJECT TO COMPLETION
-------------------------------
This preliminary prospectus offers shares of a money market fund only to
eligible benefit plans that participate in certain PaineWebber investment
programs and that have arrangements with Mitchell Hutchins or an affiliate to
serve as investment manager for the client or investment program.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this preliminary
prospectus is complete or accurate. To state otherwise is a crime.
[For the left hand margin: The information in this preliminary prospectus is not
complete and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted. ]
<PAGE>
CONTENTS
THE FUND
----------------------------------------------------------------
What every investor LIR Liquid Assets Fund
should know about
the fund More About Risks and Investment Strategies
YOUR INVESTMENT
----------------------------------------------------------------
Information for Managing Your Fund Account
managing your fund ------ Buying Shares
account ------ Selling Shares
------ Pricing and Valuation
ADDITIONAL INFORMATION
----------------------------------------------------------------
Additional important Management
information about
the fund Dividends and Taxes
----------------------------------------------------------------
Where to learn more Back Cover
about the fund
-------------------------------
The fund is not a complete
or balanced investment program.
-------------------------------
2
<PAGE>
LIR Liquid Assets Fund
- ----------------------------
LIR LIQUID ASSETS FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
------------------------------------------
FUND OBJECTIVE
To provide as high a level of current interest income as is consistent with
maintaining liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality money
market instruments of governmental and private issuers.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests in foreign money market instruments only if they are
denominated in U.S. dollars.
Mitchell Hutchins Asset Management Inc., the fund's investment adviser, selects
money market instruments for the fund based on its assessment of relative values
and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risk. When short-term interest rates rise, the value of
the fund's investments generally will fall, and its yield will tend to lag
behind prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
o Credit Risk
o Interest Rate Risk
o Foreign Securities Risk
The fund is newly organized. As a result, the fund has no operating history or
performance information to include in a bar chart or table reflecting average
annual returns.
3
<PAGE>
LIR Liquid Assets Fund
- ----------------------------
EXPENSES AND FEE TABLES
Fees and Expenses These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge (Load)Imposed on Purchases None
(as a % of offering price)..............
Maximum Contingent Deferred Sales Charge (Load)
(as a % of offering
price)................................ None
Redemption Fees.......................... None
Exchange Fees............................ None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as
a percentage of average net assets)
Management Fees*............................ 0.03%
Distribution and/or Service (12b-1)Fees..... None
Other Expenses**............................ 0.18%
----
Total Annual Fund Operating Expenses........ 0.21%
====
* The fund reimburses Mitchell Hutchins for its direct costs and expenses
incurred in managing the fund's portfolio, which are included in "Management
Fees" above. The fund also reimburses Mitchell Hutchins for its direct costs
and expenses in administering the fund. Mitchell Hutchins' direct costs for
management and administration services exclude any costs attributable to
overhead or any profit charge. These fees are estimated amounts. Mitchell
Hutchins periodically will review fund expenses in an effort to confirm that
only direct costs and expenses are paid to Mitchell Hutchins by the fund. See
"Additional Information - Management."
**Other expenses are based on estimated amounts for the current fiscal year.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
$22 $68
4
<PAGE>
LIR Liquid Assets Fund
- ----------------------------
MORE ABOUT RISKS AND INVESTMENT STRATEGIES
- ------------------------------------------
PRINCIPAL RISKS
The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further detail about some of the risks
described below, are discussed in the fund's Statement of Additional Information
("SAI"). Information on how you can obtain the SAI is on the back cover of this
prospectus.
Credit Risk. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even the highest quality money market
instruments are subject to some credit risk.
Interest Rate Risk. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of the fund's investments will fall. Also, the fund's
yield will tend to lag behind changes in prevailing short-term interest rates.
This means that the fund's income will tend to rise more slowly than increases
in short-term interest rates. Similarly, when short-term interest rates are
falling, the fund's income will tend to fall more slowly.
Foreign Securities Risk. Foreign securities involve risks that normally are
not associated with securities of U.S. issuers. These include risks relating
to political, social and economic developments abroad and differences between
U.S. and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
Year 2000 Risk. The fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.
Similarly, the issuers whose money market instruments are bought by the fund and
the trading systems used by the fund could be adversely affected by this issue.
The ability of an issuer or trading system to respond successfully to the issue
requires both technological sophistication and diligence, and there can be no
assurance that any steps taken will be sufficient to avoid an adverse impact on
the fund.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the fund is subject to maturity, quality and
diversification requirements designed to help it maintain a stable price of
$1.00 per share. The fund's investment strategies are designed to comply with
these requirements.
5
<PAGE>
LIR Liquid Assets Fund
- -----------------------------
YOUR INVESTMENT
MANAGING YOUR FUND ACCOUNT
- --------------------------
BUYING SHARES
The fund offers its shares only to eligible benefit plans, including individual
retirement accounts, through brokerage accounts established as eligible benefit
plan sweep accounts at PaineWebber Incorporated or Mitchell Hutchins. The types
of eligible benefit plans that are permitted to buy fund shares are described
below. You can open an eligible benefit plan sweep account by contacting your
Financial Advisor.
Fund shares are available only to eligible benefit plans that participate in
certain investment programs offered and managed by Mitchell Hutchins or an
affiliate, including any of the following eligible investment programs:
o PaineWebber ACCESS (servicemark);
o PaineWebber Managed Account Consulting (MAC);
o PaineWebber Portfolio Management Program (PMP); and
o PaineWebber Selections (servicemark).
The fund may be made available to other programs in the future. Eligible benefit
plans may purchase fund shares only if Mitchell Hutchins or an affiliate serves
as investment manager (i.e., PaineWebber, Mitchell Hutchins or an affiliate
exercises investment discretion with respect to account assets). If you are
eligible to buy fund shares, the fund will be offered as the money market sweep
fund for the automatic investment of free credit cash balances. You should
contact your Financial Advisor to determine if another money market fund is
available for your account. (Neither your Financial Advisor, Mitchell Hutchins
nor any affiliate may recommend a specific money market fund for automatic
investment of such account balances.)
BUYING SHARES AUTOMATICALLY
The fund is designed to automatically invest free credit cash balances held in
your account in shares of the fund for the investment programs listed above. All
free cash credit balances (that is, immediately available funds) of $1.00 or
more in your brokerage account are automatically invested in the fund on a daily
basis and are purchased daily for settlement the next business day. These
amounts include proceeds of securities sold in your account. All remaining free
cash credit balances under $1.00 are invested in fund shares monthly. There is
no sales charge or commission paid for the automatic purchase of shares.
Your purchase of fund shares will be effective at the next determination of net
asset value on any business day after federal funds become available to the
fund.
Federal funds are funds deposited by a commercial bank in an account at a
Federal Reserve Bank that can be transferred to a similar account of another
bank in one day and thus can be made immediately available to the fund. A
business day is any day that the Boston offices of the fund's custodian and the
New York City offices of Mitchell Hutchins are open for business.
The fund and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of fund shares.
The fund pays no sales commission, sales load, or distribution fees to the
principal underwriter and its affiliates, or any other person, in connection
with the sale of fund shares.
Neither Mitchell Hutchins nor any affiliate exercises any discretion with
respect to the timing or frequency of the automatic investment of free cash
balances.
Please consult your Financial Advisor for more information about this automatic
purchase feature.
6
<PAGE>
BENEFIT PLANS ELIGIBLE TO BUY FUND SHARES
Eligible benefit plans that may buy fund shares include, but are not limited to
o individual retirement accounts (traditional, rollover and "SIMPLE" IRAs)
o simplified employee pension plans
o cash or deferred arrangements (i.e., 401(k) plans, including SIMPLE
401(k) plans)
o profit sharing plans
o money purchase plans
o defined benefit plans
o target benefit plans
o church plans
o government plans
o self-employed plans (i.e., "KEOGHs")
Other benefit plans may be eligible to buy fund shares. Contact your Financial
Advisor for more information regarding these benefit plans.
Although the amount that you may contribute to an eligible benefit plan in any
one year is subject to certain limitations, you may invest assets already held
in an eligible benefit plan in the fund without regard to these limitations.
6A
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LIR Liquid Assets Fund
- ------------------------------
SELLING SHARES
- --------------
Your fund shares will be sold automatically to settle any outstanding securities
purchases or debits to your brokerage account.
If the proceeds from selling your fund shares remain in the eligible benefit
plan sweep account, certain adverse tax consequences otherwise applicable to
eligible benefit plan distributions will not occur.
ADDITIONAL INFORMATION
Investment programs buying or holding shares for their client accounts may
charge clients for cash management and other services provided in connection
with their accounts.
You should consider the terms of your investment program before purchasing
shares.
PRICING AND VALUATION
- ---------------------
The price of fund shares is based on the net asset value. The net asset value
per share for the fund is the total value of the fund divided by the total
number shares outstanding. In determining net asset value, the fund values its
securities at their amortized cost. This method uses a constant amortization to
maturity of the difference between the cost of the instrument to the fund and
the amount due at maturity. The fund's net asset value per share is expected to
be $1.00 per share, although this value is not guaranteed.
The net asset value per share for the fund is determined twice each business day
at noon and the close of regular trading on the New York Stock Exchange
(generally, 4:00 p.m., Eastern time), on days that the New York Stock Exchange
is open, except Columbus Day and Veterans Day. Your price for buying or selling
or exchanging your shares will be the net asset value that is next calculated
after the fund accepts your order.
7
<PAGE>
LIR Liquid Assets Fund
- ----------------------------
ADDITIONAL
INFORMATION
MANAGEMENT
- ----------
INVESTMENT ADVISER
Mitchell Hutchins is the investment adviser and administrator of the fund, and
its principal underwriter. Mitchell Hutchins is located at 51 West 52nd Street,
New York, New York 10019-6114. Mitchell Hutchins is a wholly owned asset
management subsidiary of PaineWebber Incorporated, which is wholly owned by
Paine Webber Group Inc., a publicly owned financial services holding company. On
September 30, 1999, Mitchell Hutchins managed over $59 billion in client assets
with Mitchell Hutchins or PaineWebber as the adviser or sub-adviser of 33
investment companies with 75 separate portfolios and aggregate assets of
approximately $47.3 billion.
ADVISORY FEES
The fund pays advisory and administration fees to Mitchell Hutchins that are
limited to reimbursements for direct costs, excluding any profit or overhead,
for the expenses Mitchell Hutchins incurs pursuant to an agreement with the
fund. Mitchell Hutchins has advised the fund that it expects advisory and
administration fees to approximate an annual rate of 0.03% of the average daily
net assets of the fund for its initial fiscal year. These fees are estimated
amounts. Mitchell Hutchins periodically will review fund expenses in an effort
to confirm that only direct costs and expenses are paid to Mitchell Hutchins by
the fund.
Under the agreement with the fund, Mitchell Hutchins manages the investment
operations of the fund and also administers the fund's business affairs.
Mitchell Hutchins is reimbursed by the fund for its direct advisory and
administrative costs and expenses, excluding any profit or overhead, incurred in
providing services to the fund. Mitchell Hutchins' costs include the following:
(i) paying the salaries and expenses of the fund's officers and other personnel
engaged in administering the fund's business; (ii) monitoring financial and
shareholder accounting services provided by the fund's custodian and transfer
agent, respectively; (iii) responding to shareholder inquiries and disseminating
information to shareholders; (iv) monitoring compliance with the fund's
registration statement and other operating documents, with federal and state
securities laws and rules thereunder and with the Internal Revenue Code; (v)
preparing semi-annual and annual reports to shareholders; (vi) preparing filings
required by the SEC; (vii) assisting in the preparation of the federal, state
and local tax returns; (viii) assisting with the payment of notice filing fees
under state securities laws; (ix) organizing annual and special meetings of the
fund's shareholders; and (x) paying any other costs and expenses Mitchell
Hutchins incurs in managing the portfolio of the fund. The fund will incur other
expenses in its operations. See "Investment Advisory and Distribution
Arrangements" in the SAI.
8
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LIR Liquid Assets Fund
- -----------------------------
DIVIDENDS AND TAXES
- -------------------
DIVIDENDS
The fund declares dividends daily and pays them monthly. The fund distributes
any net short-term capital gain annually, but may make more frequent
distributions if necessary to maintain its share price at $1.00 per share.
Your dividends will be reinvested in additional shares of the fund, unless you
elect to receive them in cash. Contact your Financial Advisor at PaineWebber or
your financial services firm if you prefer to receive dividends in cash.
TAXES
Eligible benefit plan participants ordinarily do not pay taxes on dividends they
receive on fund shares until they withdraw the proceeds from the benefit plan.
Generally, withdrawals from an eligible benefit plan will be taxable as ordinary
income and withdrawals will be subject to an additional tax equal to 10% of the
amount distributed (unless the withdrawals are used to pay certain higher
education expenses and certain acquisition costs of first time home buyers) if
made prior to the time the participant:
o reaches age 59 1/2;
o becomes permanently disabled; or
o reaches at least age 55 and is separated from service of the employer
who sponsored the plan.
The failure of an eligible benefit plan to distribute sufficient income after a
participant reaches age 70 1/2 may be subject to an excise tax. Moreover,
certain contributions to a benefit plan in excess of the amounts permitted by
law may be subject to an excise tax.
The fund notifies its shareholders following the end of each calendar year of
the amount of all dividends paid that year.
9
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[BACK COVER]
If you want more information about the fund, the following document is available
free upon request:
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about the fund by contacting your Financial
Advisor. You may obtain free copies of the SAI by contacting the fund directly
at [1-800- ].
You may review and copy information about the fund, including the SAI, at the
Public Reference Room of the Securities and Exchange Commission. You can get
text-only copies of information about the fund and other information about the
fund and information about the operations of the SEC's public reference room:
o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov
Mitchell Hutchins LIR Money Series
- --LIR Liquid Assets Fund
Investment Company Act File No. 811-06281
(Copyright)1999 PaineWebber Incorporated
<PAGE>
LIR CASH RESERVES FUND
LIR LIQUID ASSETS FUND
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
PRELIMINARY
STATEMENT OF ADDITIONAL INFORMATION
Subject to Completion
LIR Cash Reserves Fund ("Cash Reserves Fund") and LIR Liquid Assets Fund
("Liquid Assets Fund") are series of Mitchell Hutchins LIR Money Series, a
Delaware business trust ("Trust"). Mitchell Hutchins LIR Money Series is a
no-load, open-end investment company offering shares in five separate,
diversified, money market funds. Each fund seeks to provide as high a level of
current interest income as is consistent with maintaining liquidity and
stability of principal.
Each fund offers shares to eligible investment programs that have
arrangements with PaineWebber Incorporated ("PaineWebber") and Mitchell Hutchins
for the benefit of their clients. The funds' investment adviser, administrator
and distributor is Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned asset management subsidiary of PaineWebber.
This Preliminary Statement of Additional Information is not a Prospectus
and should be read only in conjunction with a fund's Preliminary Prospectus,
dated December __, 1999. A copy of each fund's Preliminary Prospectus may be
obtained by calling toll-free [ ]. The Preliminary Prospectuses contain more
information about the funds. You should read a fund's Preliminary Prospectus
carefully before investing. This Preliminary Statement of Additional Information
is dated December __, 1999.
TABLE OF CONTENTS
PAGE
The Funds and Their Investment Policies.........
The Funds' Investments, Related Risks and
Limitations.....................................
Organization of the Trust; Trustees and Officers
and Principal
Holders of Securities........................
Investment Advisory, Administation and
Distribution Arrangements....................
Portfolio Transactions..........................
Additional Purchase and Redemption Information;
Service Organizations........................
Valuation of Shares.............................
Performance Information.........................
Taxes...........................................
Other Information...............................
[FOR THE LEFT HAND MARGIN: The information in the Prospectuses and this
Statement of Additional Information is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. The Prospectuses and this
Statement of Additional Information are not an offer to sell these securities
and are not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted. ]
<PAGE>
THE FUNDS AND THEIR INVESTMENT POLICIES
Each fund's investment objective may not be changed without shareholder
approval. Except where noted, the other investment policies of a fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that a fund will achieve its investment objective.
Each fund's investment objective is to provide as high a level of current
interest income as is consistent with maintaining liquidity and stability of
principal. The funds invest in high quality money market instruments that have,
or are deemed to have, remaining maturities of 13 months or less. Money market
instruments are short-term debt obligations and similar securities. These
instruments include (1) U.S. and foreign government securities, (2) obligations
of U.S. and foreign banks, (3) commercial paper and other short-term obligations
of U.S. and foreign corporations, partnerships, trusts and similar entities, (4)
repurchase agreements regarding any of the foregoing and (5) investment company
securities. Money market instruments also include longer term bonds that have
variable interest rates or other special features that give them the financial
characteristics of short-term debt.
The funds may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks only if the institution has total assets at the time of purchase in excess
of $1.5 billion. Each fund's investments in non-negotiable time deposits of
these institutions will be considered illiquid if they have maturities greater
than seven days.
The funds may purchase only those obligations that Mitchell Hutchins
determines, pursuant to procedures adopted by the board, present minimal credit
risks and are "First Tier Securities" as defined in Rule 2a-7 under the
Investment Company Act of 1940, as amended ("Investment Company Act"). A First
Tier Security is either (1) rated in the highest short-term rating category by
at least two nationally recognized statistical rating agencies ("rating
agencies"), (2) rated in the highest short-term rating category by a single
rating agency if only that rating agency has assigned the obligation a
short-term rating, (3) issued by an issuer that has received such a short-term
rating with respect to a security that is comparable in priority and security,
(4) subject to a guarantee rated in the highest short-term rating category or
issued by a guarantor that has received the highest short-term rating for a
comparable debt obligation or (5) unrated, but determined by Mitchell Hutchins
to be of comparable quality.
Each fund generally may invest no more than 5% of its total assets in the
securities of a single issuer (other than U.S. government securities), except
that the fund may invest up to 25% of its total assets in First Tier Securities
of a single issuer for a period of up to three business days. The funds may
purchase only U.S. dollar-denominated obligations of foreign issuers.
Each fund may invest up to 10% of its net assets in illiquid securities.
The funds may purchase securities on a when-issued or delayed delivery basis.
Each fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33 1/3% of its total assets. Each
fund may borrow up to 10% of its total assets for temporary purposes, including
reverse repurchase agreements. The costs associated with borrowing may reduce
the fund's net income. The funds may invest in the securities of other
investment companies.
THE FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS
The following supplements the information contained in the Prospectuses
and above concerning the funds' investments, related risks and limitations.
Except as otherwise indicated in the Prospectuses or the Statement of Additional
Information, the funds have established no policy limitations on their ability
to use the investments or techniques discussed in these documents.
YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER
SECURITIES. The yields on the money market instruments in which each fund
invests (such as U.S. government securities, commercial paper and bank
obligations) are dependent on a variety of factors, including general money
market conditions, conditions in the particular market for the obligation, the
2
<PAGE>
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue. The ratings assigned by rating agencies
represent their opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.
Subsequent to its purchase by a fund, an issue may cease to be rated or
its rating may be reduced. If a security in a fund's portfolio ceases to be a
First Tier Security (as defined above) or Mitchell Hutchins becomes aware that a
security has received a rating below the second highest rating by any rating
agency, Mitchell Hutchins and, in certain cases, the fund's board, will consider
whether the fund should continue to hold the obligation. A First Tier Security
rated in the highest short-term category at the time of purchase that
subsequently receives a rating below the highest rating category from a
different rating agency may continue to be considered a First Tier Security.
U.S. GOVERNMENT SECURITIES. Each fund may purchase U.S. government
securities, which include direct obligations of the U.S. Treasury (such as
Treasury bills, notes or bonds) and obligations issued or guaranteed as to
principal and interest (but not as to market value) by the U.S. government, its
agencies or its instrumentalities. These U.S. government securities may include
mortgage-backed securities issued or guaranteed by government agencies or
government-sponsored enterprises. Other U.S. government securities may be backed
by the full faith and credit of the U.S. government or supported primarily or
solely by the creditworthiness of the government-related issuer or, in the case
of mortgage-backed securities, by pools of assets.
U.S. government securities also include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury,
which are traded independently under the Separate Trading of Registered Interest
and Principal of Securities ("STRIPS") program. Under the STRIPS programs, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury.
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. Each fund may purchase
commercial paper, which includes short-term obligations issued by corporations,
partnerships, trusts or other entities to finance short-term credit needs. A
fund also may purchase non-convertible debt obligations subject to maturity
contstraints imposed by Rule 2a-7 under the Investment Company Act. Descriptions
of certain types of short-term obligations are provided below.
ASSET-BACKED SECURITIES. Each fund may invest in securities that are
comprised of financial assets. Such assets may include motor vehicle and other
installment sales contracts, home equity loans, leases of various types of real
and personal property and receivables from revolving credit (credit card)
agreements or other types of financial assets. Such assets are securitized
through the use of trusts or special purpose corporations or other entities.
Payments or distributions of principal and interest may be guaranteed up to a
certain amount and for a certain time period by a letter of credit or pool
insurance policy issued by a financial institution unaffiliated with the issuer,
or other credit enhancements may be present. See "The Funds' Investments,
Related Risks and Limitations -- Credit and Liquidity Enhancements."
VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. Each fund
may purchase variable and floating rate securities with remaining maturities in
excess of 13 months issued by U.S. government agencies or instrumentalities or
guaranteed by the U.S. government. In addition, a fund may purchase variable and
floating rate securities of other issuers with remaining maturities in excess of
13 months if the securities are subject to a demand feature exercisable within
13 months or less. The yields on these securities are adjusted in relation to
changes in specific rates, such as the prime rate, and different securities may
have different adjustment rates. A fund's investments in these securities must
comply with conditions established by the Securities and Exchange Commission
("SEC") under which they may be considered to have remaining maturities of 13
months or less. Certain of these obligations carry a demand feature that gives
the fund the right to tender them back to a specified party, usually the issuer
or a remarketing agent, prior to maturity. See "The Funds' Investments, Related
Risks and Limitations -- Credit and Liquidity Enhancements."
Generally, a fund may exercise demand features (1) upon a default under
the terms of the underlying security, (2) to maintain its portfolio in
accordance with its investment objective and policies or applicable legal or
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<PAGE>
regulatory requirements or (3) as needed to provide liquidity to the fund in
order to meet redemption requests. The ability of a bank or other financial
institution to fulfill its obligations under a letter of credit, guarantee or
other liquidity arrangement might be affected by possible financial difficulties
of its borrowers, adverse interest rate or economic conditions, regulatory
limitations or other factors. The interest rate on floating rate or variable
rate securities ordinarily is readjusted on the basis of the prime rate of the
bank that originated the financing or some other index or published rate, such
as the 90-day U.S. Treasury bill rate, or is otherwise reset to reflect market
rates of interest. Generally, these interest rate adjustments cause the market
value of floating rate and variable rate securities to fluctuate less than the
market value of fixed rate securities.
VARIABLE AMOUNT MASTER DEMAND NOTES. Each fund may invest in variable
amount master demand notes, which are unsecured redeemable obligations that
permit investment of varying amounts at fluctuating interest rates under a
direct agreement between a fund and an issuer. The principal amount of these
notes may be increased from time to time by the parties (subject to specified
maximums) or decreased by a fund or the issuer. These notes are payable on
demand and may or may not be rated.
INVESTING IN FOREIGN SECURITIES. Each fund's investments in U.S.
dollar-denominated securities of foreign issuers may involve risks that are
different from investments in U.S. issuers. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect the payment of principal or interest
on the fund's investments. Additionally, there may be less publicly available
information about foreign issuers because they may not be subject to the same
regulatory requirements as domestic issuers.
CREDIT AND LIQUIDITY ENHANCEMENTS. Each fund may invest in securities that
have credit or liquidity enhancements or a fund may purchase these types of
enhancements in the secondary market. Such enhancements may be structured as
demand features that permit a fund to sell the instrument at designated times
and prices. These credit and liquidity enhancements may be backed by letters of
credit or other instruments provided by banks or other financial institutions
whose credit standing affects the credit quality of the underlying obligation.
The credit and liquidity enhancements may have conditions that limit the ability
of a fund to use them when a fund wishes to do so. Changes in the credit quality
of these financial institutions could cause losses to a fund and affect its
share price.
ILLIQUID SECURITIES. The term "illiquid securities" for purposes of the
Prospectuses and Statement of Additional Information means securities that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which a fund has valued the securities and includes,
among other things, repurchase agreements maturing in more than seven days and
restricted securities other than those Mitchell Hutchins has determined are
liquid pursuant to guidelines established by the board. To the extent each fund
invests in illiquid securities, it may not be able to liquidate such investments
readily and may have to sell other investments if necessary to raise cash to
meet its obligations.
Restricted securities are not registered under the Securities Act of 1933,
as amended ("Securities Act") and may be sold only in privately negotiated or
other exempted transactions or after a registration statement under the
Securities Act has become effective. Where registration is required, a fund may
be obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the fund
might obtain a less favorable price than prevailed when it decided to sell.
However, not all restricted securities are illiquid. A large institutional
market has developed for many U.S. and foreign securities that are not
registered under the Securities Act. Institutional investors generally will not
seek to sell these instruments to the general public, but instead will often
depend either on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a "safe harbor" from the registration
4
<PAGE>
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a fund, however, could affect adversely the marketability of such portfolio
securities, and the fund might be unable to dispose of such securities promptly
or at favorable prices.
The board has delegated the function of making day-to-day determinations
of liquidity to Mitchell Hutchins pursuant to guidelines approved by the board.
Mitchell Hutchins takes into account a number of factors in reaching liquidity
decisions, which may include (1) the frequency of trades for the security, (2)
the number of dealers that make quotes for the security, (3) the nature of the
security and how trading is effected (E.G., the time needed to sell the
security, how bids are solicited and the mechanics of transfer) and (4) the
existence of demand features or similar liquidity enhancements. Mitchell
Hutchins monitors the liquidity of restricted securities in each fund's
portfolio and reports periodically on such decisions to the board.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
fund purchases securities or other obligations from a bank or securities dealer
(or its affiliate) and simultaneously commits to resell them to the counterparty
at an agreed-upon date or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased obligations.
Securities or other obligations subject to repurchase agreements may have
maturities in excess of 13 months. The fund maintains custody of the underlying
obligations prior to their repurchase, either through its regular custodian or
through a special "tri-party" custodian or sub-custodian that maintains separate
accounts for both the fund and its counterparty. Thus, the obligation of the
counterparty to pay the repurchase price on the date agreed to or upon demand
is, in effect, secured by such obligations. Repurchase agreements carry certain
risks not associated with direct investments in securities, including a possible
decline in the market value of the underlying obligations. If their value
becomes less than the repurchase price, plus any agreed-upon additional amount,
the counterparty must provide additional collateral so that at all times the
collateral is at least equal to the repurchase price plus any agreed-upon
additional amount. The difference between the total amount to be received upon
repurchase of the obligations and the price that was paid by the fund upon
acquisition is accrued as interest and included in its net investment income.
Repurchase agreements involving obligations other than U.S. government
securities (such as commercial paper and corporate bonds) may be subject to
special risks and may not have the benefit of certain protections in the event
of the counterparty's insolvency. If the seller or guarantor becomes insolvent,
the fund may suffer delays, costs and possible losses in connection with the
disposition of collateral. Each fund intends to enter into repurchase agreements
only in transactions with counterparties believed by Mitchell Hutchins to
present minimum credit risks.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the
sale of securities held by a fund subject to its agreement to repurchase the
securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to a fund's
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<PAGE>
limitation on borrowings and may be entered into only with banks and securities
dealers. While a reverse repurchase agreement is outstanding, a fund will
maintain, in a segregated account with its custodian, cash or liquid securities,
marked to market daily, in an amount at least equal to its obligations under the
reverse repurchase agreement. See "The Funds' Investments, Related Risks and
Limitations -- Segregated Accounts."
Reverse repurchase agreements involve the risk that the buyer of the
securities sold by the fund might be unable to deliver them when a fund seeks to
repurchase. If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, such buyer or trustee or receiver may
receive an extension of time to determine whether to enforce that fund's
obligation to repurchase the securities, and a fund's use of the proceeds of the
reverse repurchase agreement may effectively be restricted pending such
decision.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each fund may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery, I.E., for issuance or delivery to or by the fund later than
the normal settlement date for such securities at a stated price and yield. A
fund generally would not pay for such securities or start earning interest on
them until they are received. However, when a fund undertakes a when-issued or
delayed delivery obligation, it immediately assumes the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by a fund on a when-issued or delayed delivery basis may
result in the fund's incurring a loss or missing an opportunity to make an
alternative investment.
A security purchased on a when-issued or delayed delivery basis is
recorded as an asset on the commitment date and is subject to changes in market
value, generally based upon changes in the level of interest rates. Thus,
fluctuation in the value of the security from the time of the commitment date
will affect the fund's net asset value. When a fund commits to purchase
securities on a when-issued or delayed delivery basis, its custodian segregates
assets to cover the amount of the commitment. See "The Funds' Investments,
Related Risks and Limitations--Segregated Accounts." A fund may sell the right
to acquire the security prior to delivery if Mitchell Hutchins deems it
advantageous to do so, which may result in a gain or loss to the fund.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each fund may invest in
securities of other money market funds, subject to Investment Company Act
limitations, which at present restrict these investments in the aggregate to no
more than 10% of each fund's total assets. The shares of other money market
funds are subject to the management fees and other expenses of those funds. At
the same time, a fund would continue to pay its own management fees and expenses
with respect to all its investments, including shares of other money market
funds. A fund may invest in the securities of other money market funds when
Mitchell Hutchins believes that (1) the amounts to be invested are too small or
are available too late in the day to be effectively invested in other money
market instruments, (2) shares of other money market funds otherwise would
provide a better return than direct investment in other money market instruments
or (3) such investments would enhance the fund's liquidity.
LENDING OF PORTFOLIO SECURITIES. Each fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables a fund to earn additional
income, but could result in a loss or delay in recovering these securities. The
borrower of the fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, at least equal
to the market value of the securities loaned, plus accrued interest and
dividends. Acceptable collateral is limited to cash, U.S. government securities
and irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. The fund may reinvest any cash collateral in money market
investments or other short-term liquid investments. In determining whether to
lend securities to a particular broker-dealer or institutional investor,
Mitchell Hutchins will consider, and during the period of the loan will monitor,
all relevant facts and circumstances, including the creditworthiness of the
borrower. The fund will retain authority to terminate any of its loans at any
time. The fund may pay fees in connection with a loan and may pay the borrower
or placing broker a negotiated portion of the interest earned on the
reinvestment of cash held as collateral. The fund will receive amounts
equivalent to any interest, dividends or other distributions on the securities
loaned. The fund will regain record ownership of loaned securities to exercise
beneficial rights, such as voting and subscription rights, when regaining such
rights is considered to be in the fund's interest.
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Pursuant to procedures adopted by the board governing each fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for the fund. The board also has authorized the payment of fees (including
fees calculated as a percentage of invested cash collateral) to PaineWebber for
these services. The board periodically reviews all portfolio securities loan
transactions for which PaineWebber acted as lending agent. PaineWebber also has
been approved as a borrower under the fund's securities lending program.
SEGREGATED ACCOUNTS. When a fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis or reverse
repurchase agreements, they 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 each fund's obligation or commitment under such
transactions.
6A
<PAGE>
INVESTMENT LIMITATIONS OF THE FUNDS
FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations
cannot be changed for a fund without the affirmative vote of the lesser of (a)
more than 50% of the outstanding shares of the fund or (b) 67% or more of the
shares of the fund present at a shareholders' meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy. If a
percentage restriction is adhered to at the time of an investment or
transaction, later changes in percentage resulting from a change in values of
portfolio securities or amount of total assets will not be considered a
violation of any of the following limitations.
Each fund will not:
(1)...purchase securities of any one issuer if, as a result, more than 5%
of the fund's total assets would be invested in securities of that issuer or the
fund would own or hold more than 10% of the outstanding voting securities of
that issuer, except that up to 25% of the fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its agencies
and instrumentalities or to securities issued by other investment companies.
The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.
(2)...purchase any security if, as a result of that purchase, 25% or more
of the fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to municipal securities or to
certificates of deposit and bankers' acceptances of domestic branches of U.S.
banks.
The following interpretations apply to, but are not a part of, this
fundamental restriction: (a) domestic and foreign banking will be considered to
be different industries; and (b) asset-backed securities will be grouped in
industries based upon their underlying assets and not treated as constituting a
single, separate industry.
(3)...issue senior securities or borrow money, except as permitted under
the Investment Company Act and then not in excess of 33-1/3% of the fund's total
assets (including the amount of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the time of the issuance or
borrowing, except that the fund may borrow up to an additional 5% of its total
assets (not including the amount borrowed) for temporary or emergency purposes.
(4)...make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances or
similar instruments will not be considered the making of a loan.
The following interpretation applies to, but is not a part of, this
fundamental restriction: the fund's investments in master notes and similar
instruments will not be considered to be the making of a loan.
(5)...engage in the business of underwriting securities of other issuers,
except to the extent that the fund might be considered an underwriter under the
federal securities laws in connection with its disposition of portfolio
securities.
7
<PAGE>
(6) purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by interests
in real estate are not subject to this limitation, and except that the fund may
exercise rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an orderly
manner.
(7) purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but the fund may purchase, sell or enter
into financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without shareholder
approval. If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of that restriction.
Each fund will not:
(1) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the fund may
make margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(2) engage in short sales of securities or maintain a short position,
except that the fund may (a) sell short "against the box" and (b) maintain short
positions in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments.
(3) purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act and except that this limitation
does not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of reorganization, consolidation, or merger.
(4) purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding.
(5) invest more than 10% of its net assets in illiquid securities.
8
<PAGE>
ORGANIZATION OF THE TRUST; TRUSTEES AND OFFICERS AND
PRINCIPAL HOLDERS OF SECURITIES
The Trust was organized on April 29, 1998, as a business trust under the
laws of Delaware and has five series. The Trust has authority to issue an
unlimited number of shares of beneficial interest of separate series, par value
$0.001 per share. The Trust is governed by a board of trustees, which oversees
the funds' operations. The board also is authorized to establish additional
series. The trustees and executive officers of the Trust, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Margo N. Alexander*+; 52 Trustee and Mrs. Alexander is chairman
President (since March 1999), chief
executive officer and a director
of Mitchell Hutchins (since
January 1995), and an executive
vice president and a director of
PaineWebber (since March 1984).
Mrs. Alexander is president and a
director or trustee of 32
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
Richard Q. Armstrong; 64 Trustee Mr. Armstrong is chairman and
R.Q.A. Enterprises principal of R.Q.A. Enterprises
(management consulting firm)
One Old Church Road (since April 1991 and principal
Unit #6 occupation since March 1995).
Greenwich, CT 06830 Mr. Armstrong was chairman of
the board, chief executive
officer and co-owner of
Adirondack Beverages (producer
and distributor of soft drinks
and sparkling/still waters)
(October 1993-March 1995). He was
a partner of The New England
Consulting Group (management
consulting firm) (December
1992-September 1993). He was
managing director of LVMH U.S.
Corporation (U.S. subsidiary of
the French luxury goods
conglomerate, Louis Vuitton Moet
Hennessey Corporation)
(1987-1991) and chairman of its
wine and spirits subsidiary,
Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a
director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
9
<PAGE>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Trustee and Mr. Bewkes is a director of
Jr.**+; 72 Chairman of the Paine Webber Group Inc. ("PW
Board of Trustees Group") (holding company of
PaineWebber and Mitchell
Hutchins). Prior to December
1995, he was a consultant to PW
Group. Prior to 1988, he was
chairman of the board,
president and chief executive
officer of American Bakeries
Company (baker and distributor
of bakery products). Mr. Bewkes
is a director of Interstate
Bakeries Corporation
(distributes and sells fresh
bakery products through
supermarkets). Mr. Bewkes is a
director or trustee of 35
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Richard R. Burt; 52 Trustee Mr. Burt is chairman of IEP
1275 Pennsylvania Ave, Advisors, Inc. (international
N.W. investments and consulting
Washington, DC 20004 firm) (since March 1994) and a
partner of McKinsey & Company
(management consulting firm)
(since 1991). He is also a
director of
Archer-Daniels-Midland Co.
(agricultural commodities),
Hollinger International Co.
(publishing), Homestake Mining
Corp. (gold mining), Powerhouse
Technologies Inc. (provides
technology to gaming and
wagering industry) and Weirton
Steel Corp. (makes and finishes
steel products). He was the
chief negotiator in the
Strategic Arms Reduction Talks
with the former Soviet Union
(1989-1991) and the U.S.
Ambassador to the Federal
Republic of Germany
(1985-1989). Mr. Burt is a
director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Mary C. Farrell**+; 49 Trustee Ms. Farrell is a managing
director, senior investment
strategist and member of the
Investment Policy Committee of
PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a
member of the Financial Women's
Association and Women's
Economic Roundtable and appears
as a regular panelist on Wall
$treet Week with Louis
Rukeyser. She also serves on
the Board of Overseers of New
York University's Stern School
of Business. Ms. Farrell is a
director or trustee of 30
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
10
<PAGE>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Meyer Feldberg; 57 Trustee Mr. Feldberg is Dean and
Columbia University Professor of Management of the
101 Uris Hall Graduate School of Business,
New York, NY 10027 Columbia University. Prior to
1989, he was president of the
Illinois Institute of
Technology. Dean Feldberg is
also a director of Primedia,
Inc. (publishing), Federated
Department Stores, Inc.
(operator of department stores)
and Revlon, Inc. (cosmetics).
Dean Feldberg is a director or
trustee of 34 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
George W. Gowen; 70 Trustee Mr. Gowen is a partner in the
666 Third Avenue law firm of Dunnington,
New York, NY 10017 Bartholow & Miller. Prior to
May 1994, he was a partner in the
law firm of Fryer, Ross & Gowen.
Mr. Gowen is a director or
trustee of 34 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Frederic V. Malek; 62 Trustee Mr. Malek is chairman of Thayer
1455 Pennsylvania Ave, Capital Partners (merchant
N.W. bank). From January 1992 to
Suite 350 November 1992, he was campaign
Washington, DC 20004 manager of Bush-Quayle `92.
From 1990 to 1992, he was vice
chairman and, from 1989 to
1990, he was president of
Northwest Airlines Inc. and NWA
Inc. (holding company of
Northwest Airlines Inc.). Prior
to 1989, he was employed by the
Marriott Corporation (hotels,
restaurants, airline catering
and contract feeding), where he
most recently was an executive
vice president and president
of Marriott Hotels and Resorts.
Mr. Malek is also a director of
Aegis Communications, Inc.
(tele-services), American
Management Systems, Inc.
(management consulting and
computer related services),
Automatic Data Processing, Inc.
(computing services), CB
Richard Ellis, Inc. (real
estate services), FPL Group,
Inc. (electric services),
Global Vacation Group (packaged
vacations), HCR/Manor Care,
Inc. (health care) and
Northwest Airlines Inc. Mr.
Malek is a director or trustee
of 31 investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
11
<PAGE>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Carl W. Schafer; 63 Trustee Mr. Schafer is president of the
66 Witherspoon Street, Atlantic Foundation (charitable
#1100 foundation supporting mainly
Princeton, NJ 08542 oceanographic exploration and
research). He is a director of
Base Ten Systems, Inc.
(software), Roadway Express,
Inc. (trucking), The Guardian
Group of Mutual Funds, the
Harding, Loevner Funds, Evans
Systems, Inc. (motor fuels,
convenience store and
diversified company),
Electronic Clearing House, Inc.
(financial transactions
processing), Frontier Oil
Corporation and Nutraceutix,
Inc. (biotechnology company).
Prior to January 1993, he was
chairman of the Investment
Advisory Committee of the
Howard Hughes Medical
Institute. Mr. Schafer is a
director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Brian M. Storms*+; 45 Trustee Mr. Storms is president and
chief operating officer of
Mitchell Hutchins (since March
1999). Prior to March 1999, he
was president of Prudential
Investments (1996-1999). Prior
to joining Prudential, he was a
managing director at Fidelity
Investments. Mr. Storms is a
director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Kris L. Dorr*; 35 Vice President Ms. Dorr is a first vice
president and a portfolio
manager in the short-term
strategies group of Mitchell
Hutchins. Ms. Dorr is a vice
president of one investment
company for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Elbridge T. Gerry III*; Vice President Mr. Gerry is a senior vice
42 president and a portfolio
manager of Mitchell Hutchins.
Prior to January 1996, he was
with J. P. Morgan Private
Banking where he was
responsible for managing
municipal assets, including
several municipal bond funds.
Mr. Gerry is a vice president
of five investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
12
<PAGE>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
John J. Lee**; 31 Vice President and Mr. Lee is a vice president and
Assistant Treasurer a manager of the mutual fund
finance department of Mitchell
Hutchins. Prior to September
1997, he was an audit manager in
the financial services practice
of Ernst & Young LLP. Mr. Lee is
a vice president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as an
investment adviser.
Kevin J. Mahoney**; 33 Vice President and Mr. Mahoney is a first vice
Assistant Treasurer president and a senior manager
of the mutual fund finance
department of Mitchell
Hutchins. From August 1996
through March 1999, he was the
manager of the mutual fund
internal control group of
Salomon Smith Barney. Prior to
August 1996, he was an
associate and assistant
treasurer of BlackRock
Financial Management L.P. Mr.
Mahoney is a vice president and
assistant treasurer of 32
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Michael H. Markowitz*; Vice President Mr. Markowitz is a first vice
33 president and a portfolio
manager in the short-term
strategies group of Mitchell
Hutchins. Mr. Markowitz is a
vice president of one
investment company for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Dennis McCauley*; 52 Vice President Mr. McCauley is a managing
director and chief investment
officer--fixed income of
Mitchell Hutchins. Prior to
December 1994, he was director
of fixed income investments of
IBM Corporation. Mr. McCauley
is a vice president of 22
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Kevin P. McIntyre*; 33 Vice President Mr. McIntyre is a vice
president and a portfolio
manager of Mitchell Hutchins.
Mr. McIntyre is a vice
president of one investment
company for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
13
<PAGE>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Ann E. Moran**; 42 Vice President and Ms. Moran is a vice president
Assistant Treasurer and a manager of the mutual
fund finance department of
Mitchell Hutchins. Ms. Moran is
a vice president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Dianne E. O'Donnell**; 47 Vice President and Ms. O'Donnell is a senior vice
Secretary president and deputy general
counsel of Mitchell Hutchins.
Ms. O'Donnell is a vice
president and secretary of 31
investment companies and a vice
president and assistant
secretary of one investment
company for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Emil Polito*; 38 Vice President Mr. Polito is a senior vice
president and director of
operations and control for
Mitchell Hutchins. Mr. Polito
is a vice president of 32
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Susan Ryan*; 39 Vice President Ms. Ryan is a senior vice
president and a portfolio manager
of Mitchell Hutchins and has
been with Mitchell Hutchins
since 1982. Ms. Ryan is a vice
president of five investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Victoria E. Schonfeld**; Vice President Ms. Schonfeld is a managing
48 director and general counsel of
Mitchell Hutchins (since May
1994) and a senior vice president
of PaineWebber (since July 1995).
Ms. Schonfeld is a vice president
of 31 investment companies and a
vice president and secretary of
one investment company for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
Paul H. Schubert**; 36 Vice President and Mr. Schubert is a senior vice
Treasurer president and director of the
mutual fund finance department
of Mitchell Hutchins. Mr.
Schubert is a vice president
and treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
14
<PAGE>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Barney A. Taglialatela**; Vice President and Mr. Taglialatela is a vice
38 Assistant Treasurer president and a manager of the
mutual fund finance department
of Mitchell Hutchins. Prior to
February 1995, he was a manager
of the mutual fund finance
division of Kidder Peabody
Asset Management, Inc. Mr.
Taglialatela is a vice
president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Debbie Vermann*; 41 Vice President Ms. Vermann is a vice president
and a portfolio manager of
Mitchell Hutchins. Ms. Vermann
is a vice president of three
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Keith A. Weller**; 38 Vice President and Mr. Weller is a first vice
Assistant Secretary president and associate general
counsel of Mitchell Hutchins.
Prior to May 1995, he was an
attorney in private practice.
Mr. Weller is a vice president
and assistant secretary of 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
</TABLE>
- -------------
* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.
** This persons's business address is 1285 Avenue of the Americas, New York, New
York 10019.
+ Mrs. Alexander, Mr. Bewkes, Ms. Farrell and Mr. Storms are "interested
persons" of the funds as defined in the Investment Company Act of by virtue
of their positions with Mitchell Hutchins, PaineWebber and/or PW Group.
The Trust pays each board member who is not an "interested person" of the
Trust $1,000 for each series annually and up to $150 per series for each board
meeting and each separate meeting of a board committee. Each chairman of the
audit and contract review committees of individual funds within the PaineWebber
fund complex receives additional compensation, aggregating $15,000 annually,
from the relevant funds. All board members are reimbursed for any expenses
incurred in attending meetings. Board members and officers of the Trust own in
the aggregate less than 1% of the outstanding shares of each fund. Because
Mitchell Hutchins performs substantially all 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 board member or officer.
The table below includes certain information relating to the compensation
of the Trust's current board members who held office with the Trust during the
fiscal year ended April 30, 1999, and the compensation of those board members
from all or with other PaineWebber funds during the 1998 calendar year.
15
<PAGE>
COMPENSATION TABLE+
ESTIMATED
AGGREGATE
COMPENSATION TOTAL COMPENSATION
FROM THE FROM THE TRUST AND
NAME OF PERSON, POSITION TRUST* THE FUND COMPLEX**
------------------------ ----- -------------------
Richard Q. Armstrong, $101,372
Trustee
Richard R. Burt, $101,372
Trustee
Meyer Feldberg, $116,222
Trustee
George W. Gowen, $108,272
Trustee
Frederic V. Malek, $101,372
Trustee
Carl W. Schafer, $101,372
Trustee
- --------------------
+ Only independent board members are compensated by the PaineWebber funds and
identified above; board members who are "interested persons," as defined by
the Investment Company Act, do not receive compensation from the funds.
* Represents fees estimated to be paid to each board member by the Trust for
the funds' first full fiscal year of operations.
** Represents total compensation paid during the calendar year ended December
31, 1998, to each board member by 31 investment companies (34 in the case of
Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or one
of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.
PRINCIPAL HOLDERS OF SECURITIES
As of December ___, 1999, Mitchell Hutchins held all the outstanding
shares of the funds 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 on behalf of each fund
pursuant two separate contracts ( the "Cash Reserves Contract" and the "Liquid
Assets Contract," respectively) (collectively, the "Advisory and Administration
Contracts"). Under the Cash Reserves Contract, Cash Reserves Fund pays Mitchell
Hutchins an annual fee, computed daily and paid monthly, at the rate of 0.33% of
average daily net assets.
Under the terms of the Cash Reserves Contract, Cash Reserves Fund bears
all expenses incurred in its operation that are not specifically assumed by
Mitchell Hutchins. Expenses borne by the fund include the following: (1) 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; (2) fees payable to and expenses incurred on behalf of the fund by
Mitchell Hutchins; (3) organizational expenses; (4) filing fees and expenses
relating to the registration and qualification of fund shares under federal and
state securities laws and maintaining such registrations and qualifications; (5)
16
<PAGE>
fees and salaries payable to the trustees and officers who are not interested
persons of the fund or Mitchell Hutchins; (6) all expenses incurred in
connection with the board members' services, including travel expenses; (7)
taxes (including any income or franchise taxes) and governmental fees; (8) costs
of any liability, uncollectible items of deposit and other insurance or fidelity
bonds; (9) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the Trust or a fund for violation
of any law; (10) legal, accounting and auditing expenses, including legal fees
of special counsel for those trustees who are not interested persons of the
Trust; (11) charges of custodians, transfer agents and other agents; (12)
expenses of setting in type and printing prospectuses and statements of
additional information and supplements thereto, reports and statements to
shareholders and proxy material for existing shareholders; costs of mailing such
materials to existing shareholders; (13) costs of mailing prospectuses and
supplements thereto, statements of additional information and supplements
thereto, reports and proxy materials to existing shareholders; (14) any
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Trust is a party and the expenses the
Trust may incur as a result of its legal obligation to provide indemnification
to its officers, trustees, agents and shareholders) incurred by a fund; (15)
fees, voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; (16) costs of mailing and
tabulating proxies and costs of meetings of shareholders, the board and any
committees thereof; (17) the cost of investment company literature and other
publications provided to the trustees and officers; and (18) costs of mailing,
stationery and communications equipment.
Under the terms of the Liquid Assets Contract, Mitchell Hutchins manages
the investment operations of the Liquid Assets Fund and also administers the
fund's business affairs. In return, the Liquid Assets Fund will pay to Mitchell
Hutchins a fee, computed daily and paid monthly. Where the services are provided
directly by Mitchell Hutchins or an affiliate, the fees will be limited to
reimbursement of Mitchell Hutchins' direct advisory/administrative costs and
expenses and will exclude any profit or overhead charges. Where Mitchell
Hutchins arranges for an unaffiliated person to provide services, the fund will
reimburse Mitchell Hutchins for the cost of the services provided by the
unaffiliated person, but no additional profit or overhead charge will be
included or the fund will pay the service provider directly. (These fees and
expenses of the fund are referred to as "Direct Expenses.") Mitchell Hutchins
has advised the fund that it expects its direct advisory/administrative costs
and expenses to approximate an annual rate of 0.03% of the average daily net
assets of the fund for its initial fiscal year. These expenses are estimated
amounts in addition to other expenses of the fund. Mitchell Hutchins
periodically will review fund expenses in an effort to confirm that only direct
costs and expenses are paid to Mitchell Hutchins by the fund.
The Direct Expenses borne by the fund will include but not be limited to
the following (or the fund's proportionate share of the following): (i) expenses
of paying the salaries and expenses of the Trust's officers and other personnel
engaged in administering the Trust's business; (ii) expenses of monitoring
financial and shareholder accounting services provided by the Trust's custodian
and transfer agent, respectively; (iii) expenses of responding to shareholder
inquiries and disseminating information to shareholders; (iv) expenses of
monitoring compliance with the Trust's registration statements and other
operating documents, with federal and state securities laws and rules thereunder
and with the Internal Revenue Code of 1986, as amended; (v) expenses of
preparing semi-annual and annual reports to shareholders; (vi) expenses of
preparing filings required by the SEC; (vii) expenses of assisting in the
preparation of federal, state and local tax returns; (viii) expenses of
assisting with the payment of notice filing fees under state securities laws;
(ix) expenses of organizing annual and special meetings of shareholders; (ix)
the cost (including brokerage commissions) of securities purchased or sold by
the fund and any losses incurred in connection therewith; (x) expenses incurred
on behalf of the fund by Mitchell Hutchins under this Contract; (xi) expenses of
organizing the Trust and the fund; (xiii) filing fees and expenses relating to
the registration and qualification of the fund's shares and the Trust under
federal and/or state securities laws and maintaining such registration and
qualifications; (xiv) fees and salaries payable to the Trust's trustees and
officers who are not interested persons of the Trust or Mitchell Hutchins; (xv)
all expenses incurred in connection with the trustees' services, including
travel expenses; (xvi) taxes (including any income or franchise taxes) and
governmental fees; (xvii) costs of any liability, uncollectible items of deposit
17
<PAGE>
and other insurance and fidelity bonds; (xviii) any costs, expenses or losses
arising out of a liability of or claim for damages or other relief asserted
against the Trust or the fund for violation of any law; (xvix) legal, accounting
and auditing expenses, including legal fees of special counsel for those
trustees of the Trust who are not interested persons of the Trust; (xx) charges
of custodians, transfer agents and other agents (including any lending agent);
(xxi) costs of preparing any share certificates; (xxii) expenses of setting in
type and printing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials for existing
shareholders; (xxiii) costs of mailing prospectuses and supplements thereto,
statements of additional information and supplements thereto, reports and proxy
materials to existing shareholders; (xxiv) any extraordinary expenses (including
fees and disbursements of counsel, costs of actions, suits or proceedings to
which the Trust is a party and the expenses the Trust may incur as a result of
its legal obligation to provide indemnification to its officers, trustees,
agents and shareholders) incurred by the Trust or the fund; (xxv) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (xxvi) the cost of mailing and tabulating
proxies and costs of meetings of shareholders, the Board and any committees
thereof; (xxvii) the cost of investment company literature and other
publications provided by the Trust to its trustees and officers; (xxviii) costs
of mailing, stationery and communications equipment; (xxix) expenses incident to
any dividend, withdrawal or redemption options; (xxx) charges and expenses of
any outside pricing service used to value portfolio securities; and (xxxi)
interest on borrowings of the fund; and (xxxii) any other costs and expenses
incurred in managing the portfolio of a fund.
General expenses of the Trust not readily identifiable as belonging to a
fund or to the Trust's other series are allocated among series by or under the
direction of the board of trustees in such manner as the board deems fair and
equitable. Services provided by Mitchell Hutchins under the Advisory and
Administration Contracts, as discussed above, include the provision of a
continuous investment program for the funds and supervision of all matters
relating to the administration and operation of the funds.
Under the Advisory and Administration Contracts, Mitchell Hutchins will
not be liable for any error of judgment of mistake of law or for any loss
suffered by the funds in connection with the performance of the Advisory and
Administration Contracts, 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 and Administration Contracts terminate automatically upon
assignment, and each is terminable at any time without penalty by the board or
by vote of the holders of a majority of a fund's outstanding voting securities
on 60 days' written notice to Mitchell Hutchins, or by Mitchell Hutchins on 60
days' written notice to the fund.
NET ASSETS. The following table shows the approximate net assets as of
July 31, 1999, sorted by category of investment objective, of the investment
companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An
investment company may fall into more than one of the categories below.
NET ASSETS
INVESTMENT CATEGORY ($MIL)
------------------- ------
Domestic (excluding Money Market)................. $ 8,159.6
Global............................................ 4,524.1
Equity/Balanced................................... 7,791.1
Fixed Income (excluding Money Market)............. 4,892.6
Taxable Fixed Income..................... 3,363.8
Tax-Free Fixed Income.................... 1,528.8
Money Market Funds................................ 35,370.8
PERSONAL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to a code of ethics that describes
the fiduciary duty owed to shareholders of PaineWebber funds and other Mitchell
Hutchins advisory accounts by all Mitchell Hutchins' directors, officers and
employees, establishes procedures for personal investing and restricts certain
transactions. For example, employee accounts generally must be maintained at
PaineWebber, personal trades in most securities require pre-clearance and
short-term trading and participation in initial public offerings generally are
prohibited. In addition, the code of ethics puts restrictions on the timing of
personal investing in relation to trades by PaineWebber Funds and other Mitchell
Hutchins advisory clients.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of
each fund's shares under a distribution contract with the Trust ("Distribution
Contract"), which requires Mitchell Hutchins to use its best efforts, consistent
with its other business, to sell shares of the funds. Shares of the funds are
offered continuously.
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PORTFOLIO TRANSACTIONS
The funds purchase 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.
For purchases or sales with broker-dealer firms that act as principal,
Mitchell Hutchins seeks best execution. Although Mitchell Hutchins may receive
certain research or execution services in connection with these transactions, it
will not purchase securities at a higher price or sell securities at a lower
price than would otherwise be paid if no weight was attributed to the services
provided by the executing dealer. Mitchell Hutchins may engage in agency
transactions in over-the-counter securities in return for research and execution
services. These transactions are entered into only pursuant to procedures that
are designed to ensure that the transaction (including commissions) is at least
as favorable as it would have been if effected directly with a market-maker that
did not provide research or execution services.
Research services and information received from brokers or dealers are
supplemental to Mitchell Hutchins' own research efforts and, when utilized, are
subject to internal analysis before being incorporated into their investment
processes. Information and research services furnished by brokers or dealers
through which or with which the funds effect securities transactions may be used
by Mitchell Hutchins in advising other funds or accounts and, conversely,
research services furnished to Mitchell Hutchins by brokers or dealers in
connection with other funds or accounts that either of them advises may be used
in advising the funds.
Investment decisions for a 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 a fund and one or more accounts. In those cases,
simultaneous transactions are inevitable. Purchases or sales are then averaged
as to price and allocated between that fund and the other account(s) as to
amount according to a formula deemed equitable to the fund and the other
account(s). While in some cases this practice could have a detrimental effect
upon the price or value of the security as far as a fund is concerned, or upon
its ability to complete its entire order, in other cases it is believed that
simultaneous transactions and the ability to participate in volume transactions
will benefit the fund.
ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION; SERVICE ORGANIZATIONS
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION. Shares of Cash Reserves
Fund are offered only to clients who participate in certain eligible investment
programs as described in the prospectus. A PaineWebber or Mitchell Hutchins
client who applies to participate in these programs will be eligible to purchase
shares of the fund upon acceptance of the application by PaineWebber.
Eligibility of participants is within the discretion of PaineWebber. In the
event a client of PaineWebber leaves the program, the client may not continue to
hold shares of the fund.
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Shares of Liquid Assets Fund are offered only to clients who (a)
participate in certain eligible investment programs as described in the
prospectus; and (b) are "eligible benefit plans." Eligible benefit plans include
any of the following: [employee benefit plans as defined in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), including
government plans as defined in section 3(32) of ERISA and church plans as
defined in section 3(33) of ERISA; pension, profit-sharing or other employee
benefit plans qualified under section 401 of the Code; deferred compensation and
annuity plans under section 457 or 403(b)(7) of the Code; and individual
retirement accounts as defined in section 408(a) of the Code. ] A PaineWebber or
Mitchell Hutchins client who applies to participate in eligible programs will be
eligible to purchase shares of the fund upon acceptance of the application by
PaineWebber. Eligibility of participants is within the discretion of
PaineWebber. In the event a client of PaineWebber leaves a program, the client
may not continue to hold shares of the fund.
Each 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 SEC, (2) when
an emergency exists, as defined by the SEC, that makes it not reasonably
practicable for a fund to dispose of securities owned by it or fairly to
determine the value of its assets or (3) as the SEC may otherwise permit. The
redemption price may be more or less than the shareholder's cost, depending on
the market value of a fund's portfolio at the time; although the funds
attempt to maintain a constant net asset value of $1.00 per share.
Under normal circumstances, the funds will redeem shares when so requested
by a shareholder's broker-dealer, the shareholder's Financial Advisor or his or
her financial institution. Such a redemption order will be executed at the net
asset value next determined after the order is received by Mitchell Hutchins.
Redemptions of each fund's shares effected through a broker-dealer or other
financial institution may be subject to a service charge by that broker-dealer
or other financial institution.
SERVICE ORGANIZATIONS. The funds may authorize service organizations, and
their agents, to accept on their behalf purchase and redemption orders that are
in "good form" in accordance with the policies of those service organizations.
The funds will be deemed to have received these purchase and redemption orders
when a service organization or its agent accepts them. Like all customer orders,
these orders will be priced based on each fund's net asset value next computed
after receipt of the order by the service organizations or their agents. Service
organizations may include retirement plan service providers who aggregate
purchase and redemption instructions received from numerous retirement plans or
plan participants.
VALUATION OF SHARES
The funds' net asset values per share are determined by the funds'
custodian, State Street Bank and Trust Company, twice each business day at noon
and the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern
time), on days when the NYSE is open, except Columbus Day and Veterans Day.
Generally, the net asset value will not be determined on 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. Your price for buying or selling your shares
will be the net asset value that is next calculated after the fund accepts
your order.
Each fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ("Rule") under the Investment Company
Act. To use amortized cost to value its portfolio securities, a fund must adhere
to certain conditions under the Rule relating to its investments, some of which
are discussed in this Statement of Additional Information. Amortized cost is an
approximation of market value of an instrument, whereby the difference between
its acquisition cost and value at maturity is amortized on a straight-line basis
over the remaining life of the instrument. The effect of changes in the market
value of a security as a result of fluctuating interest rates is not taken into
account, and thus the amortized cost method of valuation may result in the value
of a security being higher or lower than its actual market value. If a large
number of redemptions take place at a time when interest rates have increased, a
fund might have to sell portfolio securities prior to maturity and at a price
that might not be desirable.
The board has established procedures for the purpose of maintaining a
constant net asset value of $1.00 per share, which include a review of the
extent of any deviation of net asset value per share, based on available market
quotations, from the $1.00 amortized cost per share. If that deviation exceeds
20
<PAGE>
1/2 of 1% for each 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. Each fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less and will not purchase any instrument
having, or deemed to have, a remaining maturity of more than 397 days, will
limit portfolio investments, including repurchase agreements, to those U.S.
dollar-denominated instruments that are of high quality under the Rule and that
Mitchell Hutchins, acting pursuant to the procedures, determines present minimal
credit risks, and will comply with certain reporting and recordkeeping
procedures. There is no assurance that constant net asset value per share will
be maintained. If amortized cost ceases to represent fair value per share, the
board will take appropriate action.
In determining the approximate market value of portfolio investments, the
funds 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.
PERFORMANCE INFORMATION
The funds' performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represent past performance and are not
intended to indicate future performance. The investment return will fluctuate.
TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in each fund's Performance Advertisements are
calculated according to the following formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares
T = average annual total return of shares
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at the
beginning of that period.
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. All dividends are assumed to have been reinvested at net asset value.
Each fund may also advertise other performance data, which may consist of
the annual or cumultaive return (including net short-term capital gain,if any)
earned on a hypothetical investment in the fund since it began operations or for
shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).
CALCULATION OF YIELD. Each fund computes its yield and effective yield
quotations using standardized methods required by the SEC. The funds from time
to time advertise (1) their 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) their 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:
21
<PAGE>
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7] - 1
The funds may also advertise other performance data, which may consist of
the annual or cumulative return (including net short-term capital gain, if any)
earned on a hypothetical investment in each fund since they began operations or
for shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of each 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 funds' 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 each fund will fluctuate. In Performance
Advertisements, the funds may compare its yield with data published by Lipper
Analytical Services, Inc. for money funds ("Lipper"), CDA Investment
Technologies, Inc. ("CDA"), IBC Financial Data, Inc. ("IBC"), Wiesenberger
Investment Companies Service ("Wiesenberger") or Investment Company Data Inc.
("ICD"), or with the performance of recognized stock and other indexes,
including the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Morgan Stanley Capital International World Index, the
Lehman Brothers Treasury Bond Index, the Lehman Brothers Government/Corporate
Bond Index, the Salomon Brothers Government Bond Index and changes in the
Consumer Price Index as published by the U.S. Department of Commerce. The funds
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 funds 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 funds may also compare their performance with the performance of bank
certificates of deposit ("CDs") as measured by the CDA Certificate of Deposit
Index and the Bank Rate Monitor National Index and the average of yields of CDs
of major banks published by Banxquotes(R) Money Markets. In comparing a 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 funds seek to maintain a stable net asset value of $1.00 per share,
there can be no assurance that they will be able to do so.
The funds may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on fund shares are reinvested by being paid in additional
fund shares, any future income of the funds would increase the value, not only
of the original funds' investments, but also of the additional fund shares
received through reinvestment. As a result, the value of the funds' investment
would increase more quickly than if dividends had been paid in cash. The funds
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.
22
<PAGE>
TAXES
To qualify for treatment as a regulated investment company ("RIC") under
the Code, each fund must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of net
investment income and net short-term capital gains, if any) and must meet
several additional requirements. Among these requirements are the following: (1)
the fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities and certain other income; (2) at the
close of each quarter of the fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. government
securities, securities of other RICs and other securities that are limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the fund's total assets; and (3) at the close of each quarter of the fund's
taxable year, not more than 25% of the value of its total assets may be invested
in securities (other than U.S. government securities or the securities of other
RICs) of any one issuer. If a fund failed to qualify for treatment as a RIC for
any taxable year, (a) it would be taxed as an ordinary corporation on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (b) the shareholders would treat
all those distributions as dividends (that is, ordinary income) to the extent of
the fund's earnings and profits. In addition, the fund could be required to
recognize unrealized gains, pay substantial taxes and interest, and make
substantial distributions before requalifying for RIC treatment.
OTHER INFORMATION
DELAWARE BUSINESS TRUST. Although Delaware law statutorily limits the
potential liabilities of a Delaware business trust's shareholders to the same
extent as it limits the potential liabilities of a Delaware corporation,
shareholders of the funds could, under certain conflicts of laws jurisprudence
in various states, be held personally liable for the obligations of the Trust or
a fund. However, the Trust Instrument of the Trust disclaims shareholder
liability for acts or obligations of the Trust or its series (the funds). The
Trust Instrument provides for indemnification from a 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 a 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 funds in such a way as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of each fund.
VOTING RIGHTS. Shareholders of the funds are entitled to one vote for each
full share held and fractional votes for fractional shares held. Voting rights
are not cumulative and, as a result, the holders of more than 50% of all the
shares of the Trust may elect all its board members. The shares of each fund
will be voted together.
The funds do not hold annual 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 the shareholders. Shareholders of record of
no less than two-thirds of the outstanding shares of the Trust may remove a
trustee by vote cast in person or by proxy at a meeting called for that purpose.
A meeting will be called to vote on the removal of a trustee at the written
request of holders of record of at least 10% of the outstanding shares of the
Trust.
PRIOR NAME. Prior to July 28, 1999, the Trust was known as "Mitchell
Hutchins Institutional Series."
CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. The funds'
custodian, State Street Bank and Trust Company, located at One Heritage Drive,
North Quincy, Massachusetts 02171, serves as custodian and recordkeeping agent
for the funds. PFPC Inc., a subsidiary of PNC Bank, N.A., located at 400
Bellevue Parkway, Wilmington, DE 19809, serves as the funds' transfer and
dividend disbursing agent.
23
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COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the funds.
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 accountants for the funds.
24
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[BACK COVER]
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN A FUND'S
PRELIMINARY PROSPECTUS AND THIS PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION.
THE FUNDS AND THEIR DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THE PRELIMINARY PROSPECTUSES AND THIS PRELIMINARY
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL SHARES OF THE FUNDS
IN ANY JURISDICTION WHERE THE FUNDS OR THEIR DISTRIBUTOR MAY NOT LAWFULLY SELL
THOSE SHARES.
-----------
(Copyright)1999 PaineWebber Incorporated
LIR Cash Reserves Fund
LIR Liquid Assets Fund
------------------------------------------
Preliminary
Statement of Additional Information
December __, 1999
------------------------------------------
<PAGE>
PART C. OTHER INFORMATION
Item 23. EXHIBITS
--------
(1) (a) Trust Instrument(1)/
(b) Amendment to Trust Instrument effective July 28, 1999 (2)/
(2) By-Laws (1)/
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (3)/
(4) (a) Investment Advisory and Administration Contract for
Mitchell Hutchins LIR Select Money Fund (2)/
(b) Investment Advisory and Administration Contract for LIR Premier
Money Market Fund and LIR Premier Tax-Free Money Market Fund
(to be filed)
(c) Form of Investment Advisory and Administration Contract for LIR Cash
Reserves Fund (filed herewith)
(d) Form of Investment Advisory and Administration Contract for LIR
Liquid Assets Fund (filed herewith)
(5) (a) Distribution Contract for Mitchell Hutchins LIR Select Money
Fund (2)/
(b) Distribution Contract for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (to be filed)
(c) Distribution Contract for LIR Cash Reserves Fund and LIR Liquid
Assets Fund (to be filed)
(6) Bonus, profit sharing or pension plans - none
(7) (a) Custodian Agreement for LIR Select Money Fund (2)/
(b) Custodian Agreement for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (to be filed)
(c) Custodian Agreement for LIR Cash Reserves Fund and LIR Liquid Assets
Fund (to be filed)
(8) (a) (i) Transfer Agency Agreement for LIR Select Money Fund (2)/
(ii) Transfer Agency Agreement for LIR Premier Money Market Fund
and LIR Premier Tax-Free Money Market Fund (to be filed)
(iii) Transfer Agency Agreement for LIR Cash Reserves Fund and
LIR Liquid Assets Fund (to be filed)
(b) Shareholder Service Plan (2)/
(c) Shareholder Service Agreement (2)/
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Auditors' consent
(not applicable)
(11) Omitted Financial Statements - none
(12) Letter of investment intent (1)/
(13) (a) Plan of Distribution pursuant to Rule 12b-1 (to be filed)
(b) Plan Agreement for LIR Premier Money Market Fund and LIR Premier
Tax-Free Money Market Fund (to be filed)
C-1
<PAGE>
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 (1)/
1/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
registration statement, SEC File No. 333-52965, filed July 29, 1998.
2/ Incorporated by reference from Post-Effective Amendment No. 3 to the
registration statement, SEC File No. 333-52965, filed September 1, 1999.
3/ Incorporated by reference from Articles IV, VI and X of Registrant's Trust
Instrument and from Articles VI and IX of Registrant's By-Laws.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
None.
Item 25. INDEMNIFICATION
---------------
Section 2 of Article IX of the Trust Instrument, "Indemnification,"
provides that the appropriate series of the Registrant will indemnify the
trustees and officers of the Registrant to the fullest extent permitted by law
against claims 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
C-2
<PAGE>
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.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
----------------------------------------------------
Mitchell Hutchins, a Delaware corporation, is a registered investment
adviser and is a wholly owned subsidiary of PaineWebber which is, in turn, a
wholly owned subsidiary of Paine Webber Group Inc. Mitchell Hutchins is
primarily engaged in the investment advisory business. Information as to the
officers and directors of Mitchell Hutchins is included in its Form ADV, as
filed with the Securities and Exchange Commission (registration number
801-13219), and is incorporated herein by reference.
Item 27. PRINCIPAL UNDERWRITERS
----------------------
a) PaineWebber and Mitchell Hutchins serves as principal underwriter
and/or investment adviser for the following investment companies:
2002 TARGET TERM TRUST INC.
ALL AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
GLOBAL SMALL CAP FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICPAL INCOME FUND INC.
LIQUID INSTITUTIONAL RESERVES
MANAGED HIGH YIELD FUND INC.
MANAGED HIGH YIELD PLUS FUND INC.
MITCHELL HUTCHINS LIR MONEY SERIES
MITCHELL HUTCHINS PORTFOLIOS
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER CASHFUND, INC.
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
C-3
<PAGE>
PAINEWEBBER MANAGED MUNICIPAL TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL MONEY MARKET SERIES
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER RMA MONEY FUND, INC.
PAINEWEBBER RMA TAX-FREE FUND, INC.
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
b) PaineWebber and Mitchell Hutchins serve as the Registrant's principal
underwriters. The directors and officers of PaineWebber, their
principal business addresses, and their positions and offices with
PaineWebber are identified in its Form ADV, as filed with the
Securities and Exchange Commission (registration number 801-7163).
The directors and officers of Mitchell Hutchins, their principal
business addresses and their positions and offices with Mitchell
Hutchins are identified in its Form ADV, as filed with the
Securities and Exchange Commission (registration number 801-13219).
The foregoing information is hereby incorporated herein by
reference. The information set forth below is furnished for those
directors and officers of PaineWebber or Mitchell Hutchins who also
serve as trustees or officers of the Trust.
<TABLE>
<CAPTION>
Positions and Offices With
Positions and Offices With Underwriter or
NAME REGISTRANT EXCLUSIVE DEALER
---- ------------ -----------------
<S> <C> <C>
Margo N. Alexander* Trustee and President President, Chief Executive
Officer and a Director of
Mitchell Hutchins and an
Executive Vice President and
a Director of PaineWebber
Mary C. Farrell** Trustee Managing Director, Senior
Investment Strategist and
member of the Investment
Policy Committee of
PaineWebber
Brian M. Storms* Trustee President and Chief Operating
Officer of Mitchell Hutchins
Kris L. Dorr* Vice President First Vice President and a
Portfolio Manager in the
Short-Term Strategies Group
of Mitchell Hutchins
Elbridge T. Gerry, Vice President Senior Vice President and a
III* Portfolio Manager of Mitchell
Hutchins
John J. Lee** Vice President and Assistant Vice President and a Manager
Treasurer of the Mutual Fund Finance
Department of Mitchell
Hutchins
Kevin J. Mahoney** Vice President and Assistant First Vice President and a
Treasurer Senior Manager of the Mutual
Fund Finance Department of
Mitchell Hutchins
Michael H. Vice President First Vice President and a
Markowitz* Portfolio Manager in the
Short-Term Strategies Group
of Mitchell Hutchins
Dennis McCauley* Vice President Managing Director and Chief
Investment Officer - Fixed
Income of Mitchell Hutchins
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices
Positions and Offices With With Underwriter or
NAME REGISTRANT EXCLUSIVE DEALER
---- ------------ -----------------
<S> <C> <C> <C>
Kevin P. McIntyre* Vice President Vice President and a
Portfolio Manager of Mitchell
Hutchins
Ann E. Moran** Vice President and Vice President and a Manager
Assistant Treasurer of the Mutual Fund Finance
Department of Mitchell
Hutchins
Dianne E. O'Donnell** Vice President and Secretary Senior Vice President and
Deputy General Counsel of
Mitchell Hutchins
Emil Polito* Vice President Senior Vice President and
Director of Operations and
Control of Mitchell Hutchins
Susan Ryan* Vice President Senior Vice President and a
Portfolio Manager of Mitchell
Hutchins
Victoria E. Vice President Managing Director and General
Schonfeld** Counsel of Mitchell Hutchins
and a Senior Vice President
of PaineWebber
Paul H. Schubert** Vice President and Treasurer Senior Vice President and
Director of the Mutual Fund
Finance Department of
Mitchell Hutchins
Barney A. Vice President and Assistant Vice President and a Manager
Taglialatela** Treasurer of the Mutual Fund Finance
Department of Mitchell
Hutchins
Debbie Vermann* Vice President Vice President and a
Portfolio Manager of Mitchell
Hutchins
Keith A. Weller** Vice President and Assistant First Vice President and
Secretary Associate General Counsel of
Mitchell Hutchins
</TABLE>
_____________
* The business address of this person is 51 West 52nd Street, New York,
York 10019-6114.
** The business address of this person is 1285 Avenue of the
Americas, New York, New York 10019
c) None
Item 28. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
The books and other documents required by paragraphs (b)(4), (c) and
(d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Registrant's investment adviser, Mitchell Hutchins, 1285
Avenue of the Americas, New York, New York 10019. All other accounts, books and
documents required by Rule 31a-1 are maintained in the physical possession of
Registrant's transfer agent and custodian.
C-5
<PAGE>
Item 29. MANAGEMENT SERVICES
-------------------
Not applicable.
Item 30. UNDERTAKINGS
------------
None.
C-6
<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
Post-Effective Amendment to its 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 6th day of October, 1999.
MITCHELL HUTCHINS LIR MONEY SERIES
By: /s/ Dianne E. O'Donnell
-----------------------
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Margo N. Alexander President and Trustee October 6, 1999
- ------------------------------ (Chief Executive Officer)
Margo N. Alexander *
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman October 6, 1999
- ------------------------------ of the Board of Trustees
E. Garrett Bewkes, Jr. *
/s/ Richard Q. Armstrong Trustee October 6, 1999
- ------------------------------
Richard Q. Armstrong *
/s/ Richard R. Burt Trustee October 6, 1999
- ------------------------------
Richard R. Burt *
/s/ Mary C. Farrell Trustee October 6, 1999
- ------------------------------
Mary C. Farrell *
/s/ Meyer Feldberg Trustee October 6, 1999
- ------------------------------
Meyer Feldberg *
/s/ George W. Gowen Trustee October 6, 1999
- ------------------------------
George W. Gowen *
/s/ Frederic V. Malek Trustee October 6, 1999
- ------------------------------
Frederic V. Malek *
/s/ Carl W. Schafer Trustee October 6, 1999
- ------------------------------
Carl W. Schafer *
/s/ Brian M. Storms Trustee October 6, 1999
- ------------------------------
Brian M. Storms **
/s/ Paul H. Schubert Vice President and October 6, 1999
- ------------------------------ Treasurer (Chief Financial
Paul H. Schubert and Accounting Officer)
<PAGE>
SIGNATURES (CONTINUED)
* Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated
May 13, 1998 and incorporated by reference from the Initial Registration
Statement of Mitchell Hutchins Institutional Series, SEC File 333-52965,
filed May 19, 1998.
** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
May 14, 1999 and incorporated by reference from Post-Effective Amendment
No. 61 to the Registration Statement of PaineWebber Managed Investments
Trust, SEC File 2-91362, filed June 1, 1999.
<PAGE>
MITCHELL HUTCHINS LIR MONEY SERIES
EXHIBIT INDEX
-------------
Exhibit
NUMBER
- ------
(1) (a) Trust Instrument (1)/
(b) Amendment to Trust Instrument effective July 28, 1999 (2)/
(2) By-Laws 1/
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (3)/
(4) (a) Investment Advisory and Administration Contract for
Mitchell Hutchins LIR Select Money Fund (2)/
(b) Investment Advisory and Administration Contract for LIR Premier
Money Market Fund and LIR Premier Tax-Free Money Market Fund
(to be filed)
(c) Form of Investment Advisory and Administration Contract for LIR Cash
Reserves Fund (filed herewith)
(d) Form of Investment Advisory and Administration Contract for LIR
Liquid Assets Fund (filed herewith)
(5) (a) Distribution Contract for Mitchell Hutchins LIR Select
Money Fund (2)/
(b) Distribution Contract for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (to be filed)
(c) Distribution Contract for LIR Cash Reserves Fund and LIR Liquid
Assets Fund (to be filed)
(6) Bonus, profit sharing or pension plans - none
(7) (a) Custodian Agreement for LIR Select Money Fund (2)/
(b) Custodian Agreement for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (to be filed)
(c) Custodian Agreement for LIR Cash Reserves Fund and LIR Liquid Assets
Fund (to be filed)
(8) (a) (i) Transfer Agency Agreement for LIR Select Money Fund (2)/
(ii) Transfer Agency Agreement for LIR Premier Money Market Fund
and LIR Premier Tax-Free Money Market Fund (to be filed)
(iii) Transfer Agency Agreement for LIR Cash Reserves Fund and
LIR Liquid Assets Fund (to be filed)
(b) Shareholder Service Plan (2)/
(c) Shareholder Service Agreement(2)/
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Auditors' consent
(not applicable)
(11) Omitted Financial Statements - none
(12) Letter of investment intent (1)/
(13) (a) Plan of Distribution pursuant to Rule 12b-1 (to be filed)
(b) Plan Agreement for LIR Premier Money Market Fund and LIR Premier
Tax-Free Money Market Fund (to be filed)
<PAGE>
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3 (1)/
1/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
registration statement, SEC File No. 333-52965, filed July 29, 1998.
2/ Incorporated by reference from Post-Effective Amendment No. 3 to the
registration statement, SEC File No. 333-52965, filed September 1, 1999.
3/ Incorporated by reference from Articles IV, VI and X of Registrant's Trust
Instrument and from Articles VI and IX of Registrant's By-Laws.
Exhibit No. 4(c)
FORM OF INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of ____________, 1999 between MITCHELL HUTCHINS LIR
MONEY SERIES, a Delaware business trust ("Trust"), and MITCHELL HUTCHINS
ASSET MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation
registered as a broker-dealer under the Securities Exchange Act of 1934, as
amended ("1934 Act"), and as an investment adviser under the Investment
Advisers Act of 1940, as amended.
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end investment management company,
and intends to offer for public sale a distinct series of shares of
beneficial interest, LIR Cash Reserves Fund, corresponding to a distinct
portfolio; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment
adviser and administrator to furnish certain administrative, investment
advisory and portfolio management services to the Trust with respect to LIR
Cash Reserves Fund and any other Series to which this Contract may hereafter
be made applicable (each a "Series"), and Mitchell Hutchins is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints Mitchell Hutchins as
investment adviser and administrator of the Trust with respect to each Series
for the period and on the terms set forth in this Contract. Mitchell
Hutchins accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. DUTIES AS INVESTMENT ADVISER.
(a) Subject to the supervision of the Trust's Board of Trustees
("Board"), Mitchell Hutchins will provide a continuous investment program for
each Series, including investment research and management with respect to all
securities and investments and cash equivalents in each Series. Mitchell
Hutchins will determine from time to time what securities and other
investments will be purchased, retained or sold by each Series.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it
will attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of any Series, Mitchell Hutchins may, in its
discretion, use brokers who provide the Series with research, analysis,
advice and similar services to execute portfolio transactions on behalf of
the Series, and Mitchell Hutchins, pursuant to Board authorization, may pay
to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to Mitchell
Hutchins' determining in good faith that such commission is reasonable in
terms either of the particular transaction or of the overall responsibility
of Mitchell Hutchins to such Series and its other clients and that the total
commissions paid by such Series will be reasonable in relation to the
benefits to the Series over the long term. In no instance will portfolio
securities be purchased from or sold to Mitchell Hutchins, or any affiliated
<PAGE>
person thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder. Whenever Mitchell Hutchins simultaneously
places orders to purchase or sell the same security on behalf of a Series and
one or more other accounts advised by Mitchell Hutchins, such orders will be
allocated as to price and amount among all such accounts in a manner believed
to be equitable to each account. The Trust recognizes that in some cases
this procedure may adversely affect the results obtained for the Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series, and will
furnish the Board with such periodic and special reports as the Board
reasonably may request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Mitchell Hutchins hereby agrees that all records which it
maintains for the Trust are the property of the Trust, agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any records which it
maintains for the Trust and which are required to be maintained by Rule 31a-1
under the 1940 Act and further agrees to surrender promptly to the Trust any
records which it maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset
value and the net income of each Series as described in the currently
effective registration statement of the Trust under the Securities Act of
1933, as amended, and the 1940 Act and any supplements thereto ("Registration
Statement") or as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or
person associated with Mitchell Hutchins which is a member of a national
securities exchange to effect any transaction on such exchange for the
account of any Series, which transaction is permitted by Section 11(a) of the
1934 Act, and the Trust hereby consents to the retention of compensation by
Mitchell Hutchins or any person or entity associated with Mitchell Hutchins.
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the
affairs of the Trust with respect to each Series subject to the supervision
of the Board and the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of
the Trust and each Series, including oversight of transfer agency, custodial
and accounting services, except as hereinafter set forth; provided, however,
that nothing herein contained shall be deemed to relieve or deprive the Board
of its responsibility for and control of the conduct of the affairs of the
Trust and each Series.
(b) Mitchell Hutchins will provide the Trust and each Series with
such corporate, administrative and clerical personnel (including officers of
the Trust) and services as are reasonably deemed necessary or advisable by
the Board, including the maintenance of certain books and records of the
Trust and each Series.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the
Trust's Registration Statement, proxy material, tax returns and required
reports to each Series' shareholders and the Securities and Exchange
Commission and other appropriate federal or state regulatory authorities.
- 2 -
<PAGE>
(d) Mitchell Hutchins will provide the Trust and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies
and similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of
this Contract, Mitchell Hutchins will act in conformity with the Trust
Instrument, By-Laws and Registration Statement of the Trust and with the
instructions and directions of the Board and will comply with the
requirements of the 1940 Act, the rules thereunder, and all other applicable
federal and state laws and regulations.
5. DELEGATION OF MITCHELL HUTCHINS' DUTIES AS INVESTMENT ADVISER AND
ADMINISTRATOR. With respect to any or all Series, Mitchell Hutchins may
enter into one or more contracts ("Sub-Advisory or Sub-Administration
Contract") with a sub-adviser or sub-administrator in which Mitchell Hutchins
delegates to such sub-adviser or sub-administrator any or all its duties
specified in Paragraphs 2 and 3 of this Contract, provided that each
Sub-Advisory or Sub-Administration Contract imposes on the sub-adviser or
sub-administrator bound thereby all applicable duties and conditions to which
Mitchell Hutchins is subject by Paragraphs 2, 3 and 4 of this Contract, and
further provided that each Sub-Advisory or Sub-Administration Contract meets
all requirements of the 1940 Act and rules thereunder.
6. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell
Hutchins hereunder are not to be deemed exclusive and Mitchell Hutchins shall
be free to furnish similar services to others so long as its services under
this Contract are not impaired thereby. Nothing in this Contract shall limit
or restrict the right of any director, officer or employee of Mitchell
Hutchins, who may also be a Trustee, officer or employee of the Trust, to
engage in any other business or to devote his or her time and attention in
part to the management or other aspects of any other business, whether of a
similar nature or a dissimilar nature.
7. EXPENSES.
(a) During the term of this Contract, each Series will bear all
expenses, not specifically assumed by Mitchell Hutchins, incurred in its
operations and the offering of its shares.
(b) Expenses borne by each Series will include but not be limited to
the following (or each Series' proportionate share of the following):
(i) the cost (including brokerage commissions) of securities purchased or
sold by the Series and any losses incurred in connection therewith; (ii) fees
payable to and expenses incurred on behalf of the Series by Mitchell Hutchins
under this Contract; (iii) expenses of organizing the Trust and the Series;
(iv) filing fees and expenses relating to the registration and qualification
of the Series' shares and the Trust under federal and/or state securities
laws and maintaining such registration and qualifications; (v) fees and
salaries payable to the Trust's Trustees and officers who are not interested
persons of the Trust or Mitchell Hutchins; (vi) all expenses incurred in
connection with the Trustees' services, including travel expenses;
(vii) taxes (including any income or franchise taxes) and governmental fees;
(viii) costs of any liability, uncollectible items of deposit and other
- 3 -
<PAGE>
insurance and fidelity bonds; (ix) any costs, expenses or losses arising out
of a liability of or claim for damages or other relief asserted against the
Trust or Series for violation of any law; (x) legal, accounting and auditing
expenses, including legal fees of special counsel for those Trustees of the
Trust who are not interested persons of the Trust; (xi) charges of
custodians, transfer agents and other agents (including any lending agent);
(xii) costs of preparing share certificates; (xiii) expenses of setting in
type and printing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials
for existing shareholders; (xiv) costs of mailing prospectuses and
supplements thereto, statements of additional information and supplements
thereto, reports and proxy materials to existing shareholders; (xv) any
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Trust is a party and the expenses
the Trust may incur as a result of its legal obligation to provide
indemnification to its officers, Trustees, agents and shareholders) incurred
by the Trust or Series; (xvi) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations;
(xvii) the cost of mailing and tabulating proxies and costs of meetings of
shareholders, the Board and any committees thereof; (xviii) the cost of
investment company literature and other publications provided by the Trust to
its Trustees and officers; (xix) costs of mailing, stationery and
communications equipment; (xx) expenses incident to any dividend, withdrawal
or redemption options; (xxi) charges and expenses of any outside pricing
service used to value portfolio securities; and (xxii) interest on borrowings
of the Series.
(c) The Trust or a Series may pay directly any expenses incurred by
it in its normal operations and, if any such payment is consented to by
Mitchell Hutchins and acknowledged as otherwise payable by Mitchell Hutchins
pursuant to this Contract, the Series may reduce the fee payable to Mitchell
Hutchins pursuant to paragraph 8 hereof by such amount. To the extent that
such deductions exceed the fee payable to Mitchell Hutchins on any monthly
payment date, such excess shall be carried forward and deducted in the same
manner from the fee payable on succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those Trustees who are interested persons of the Trust.
(e) The payment or assumption by Mitchell Hutchins of any expenses of
the Trust or a Series that Mitchell Hutchins is not required by this Contract
to pay or assume shall not obligate Mitchell Hutchins to pay or assume the
same or any similar expense of the Trust or a Series on any subsequent
occasion.
8. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to
this Contract, with respect to LIR Cash Reserves Fund, the Trust will pay to
Mitchell Hutchins a fee, computed daily and paid monthly, at an annual rate
of 0.33% of each such Series' average daily net assets.
(b) For the services provided and the expenses assumed pursuant to
this Contract with respect to any Series as to which this Contract hereafter
is made applicable, the Trust will pay to Mitchell Hutchins from the assets
of such Series a fee in an amount to be agreed upon in a written fee
- 4 -
<PAGE>
agreement ("Fee Agreement") executed by the Trust on behalf of such Series
and by Mitchell Hutchins. All such Fee Agreements shall provide that they
are subject to all terms and conditions of this Contract.
(c) The fee shall be computed daily and paid monthly to Mitchell
Hutchins on or before the first business day of the next succeeding calendar
month.
(d) If this Contract becomes effective or terminates before the end
of any month, the fee for the period from the effective day to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
9. LIMITATION OF LIABILITY OF MITCHELL HUTCHINS. Mitchell Hutchins
and its delegates, including any Sub-Adviser or Sub-Administrator to any
Series or the Trust, shall not be liable for any error of judgment or mistake
of law or for any loss suffered by any Series, the Trust or any of its
shareholders, in connection with the matters to which this Contract relates,
except to the extent that such a loss results from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Contract. Any person, even though also an officer, director, employee, or
agent of Mitchell Hutchins, who may be or become an officer, Trustee,
employee or agent of the Trust shall be deemed, when rendering services to
any Series or the Trust or acting with respect to any business of such Series
or the Trust, to be rendering such service to or acting solely for the Series
or the Trust and not as an officer, director, employee, or agent or one under
the control or direction of Mitchell Hutchins even though paid by it.
10. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove
written provided that, with respect to any Series, this Contract shall not
take effect unless it has first been approved (i) by a vote of a majority of
those Trustees of the Trust who are not parties to this Contract or
interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of
that Series' outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if
not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of those Trustees of
the Trust who are not parties to this Contract or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Board or, with respect to any given Series, by
vote of a majority of the outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty,
by vote of the board or by a vote of a majority of the outstanding voting
securities of such Series on sixty days' written notice to Mitchell Hutchins
or by Mitchell Hutchins at any time, without the payment of any penalty, on
sixty days' written notice to the Trust. Termination of this Contract with
respect to any given Series shall in no way affect the continued validity of
this Contract or the performance thereunder with respect to any other
Series. This Contract will automatically terminate in the event of its
assignment.
- 5 -
<PAGE>
11. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE
TRUST. The Trustees of the Trust and the shareholders of any Series shall
not be liable for any obligations of any Series or the Trust under this
Contract, and Mitchell Hutchins agrees that, in asserting any rights or
claims under this Contract, it shall look only to the assets and property of
the Trust in settlement of such right or claim, and not to such Trustees or
shareholders.
12. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought, and no amendment of this Contract
as to any given Series shall be effective until approved by vote of a
majority of such Series' outstanding voting securities.
13. GOVERNING LAW. This Contract shall be construed in accordance
with the laws of the State of Delaware, without giving effect to the
conflicts of laws principles thereof, and in accordance with the 1940 Act.
To the extent that the applicable laws of the State of Delaware conflict with
the applicable provisions of the 1940 Act, the latter shall control.
14. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be
affected thereby. This Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in
this Contract, the terms "majority of the outstanding voting securities",
"affiliated person", "interested person", "assignment", "broker", "investment
adviser", "national securities exchange", "net assets", "prospectus", "sale",
"sell" and "security" shall have the same meaning as such terms have in the
1940 Act and the rules and regulations thereunder, subject to such exemptions
as may be granted by the Securities and Exchange Commission. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Contract is relaxed by a rule, regulation, order or other action of the
Securities and Exchange Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation, order or other action.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers and delivered as of the day and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
By
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Attest: MITCHELL HUTCHINS LIR MONEY SERIES
By
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Exhibit No. 4(d)
FORM OF INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of ____________, 1999 between MITCHELL HUTCHINS LIR
MONEY SERIES, a Delaware business trust ("Trust"), and MITCHELL HUTCHINS
ASSET MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation
registered as a broker-dealer under the Securities Exchange Act of 1934, as
amended ("1934 Act"), and as an investment adviser under the Investment
Advisers Act of 1940, as amended.
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end investment management company,
and intends to offer for public sale a distinct series of shares of
beneficial interest, LIR Liquid Assets Fund, corresponding to a distinct
portfolio; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment
adviser and administrator to furnish certain administrative, investment
advisory and portfolio management services to the Trust with respect to LIR
Liquid Assets Fund and any other Series to which this Contract may hereafter
be made applicable (each a "Series"), and Mitchell Hutchins is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints Mitchell Hutchins as
investment adviser and administrator of the Trust with respect to each Series
for the period and on the terms set forth in this Contract. Mitchell
Hutchins accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. DUTIES AS INVESTMENT ADVISER.
(a) Subject to the supervision of the Trust's Board of Trustees
("Board"), Mitchell Hutchins will provide a continuous investment program for
each Series, including investment research and management with respect to all
securities and investments and cash equivalents in each Series. Mitchell
Hutchins will determine from time to time what securities and other
investments will be purchased, retained or sold by each Series.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it
will attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of any Series, Mitchell Hutchins may, in its
discretion, use brokers who provide the Series with research, analysis,
advice and similar services to execute portfolio transactions on behalf of
the Series, and Mitchell Hutchins, pursuant to Board authorization, may pay
to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to Mitchell
Hutchins' determining in good faith that such commission is reasonable in
terms either of the particular transaction or of the overall responsibility
of Mitchell Hutchins to such Series and its other clients and that the total
commissions paid by such Series will be reasonable in relation to the
benefits to the Series over the long term. In no instance will portfolio
securities be purchased from or sold to Mitchell Hutchins, or any affiliated
<PAGE>
person thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder. Whenever Mitchell Hutchins simultaneously
places orders to purchase or sell the same security on behalf of a Series and
one or more other accounts advised by Mitchell Hutchins, such orders will be
allocated as to price and amount among all such accounts in a manner believed
to be equitable to each account. The Trust recognizes that in some cases
this procedure may adversely affect the results obtained for the Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series, and will
furnish the Board with such periodic and special reports as the Board
reasonably may request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Mitchell Hutchins hereby agrees that all records which it
maintains for the Trust are the property of the Trust, agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any records which it
maintains for the Trust and which are required to be maintained by Rule 31a-1
under the 1940 Act and further agrees to surrender promptly to the Trust any
records which it maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset
value and the net income of each Series as described in the currently
effective registration statement of the Trust under the Securities Act of
1933, as amended, and the 1940 Act and any supplements thereto ("Registration
Statement") or as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or
person associated with Mitchell Hutchins which is a member of a national
securities exchange to effect any transaction on such exchange for the
account of any Series, which transaction is permitted by Section 11(a) of the
1934 Act, and the Trust hereby consents to the retention of compensation by
Mitchell Hutchins or any person or entity associated with Mitchell Hutchins.
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the
affairs of the Trust with respect to each Series subject to the supervision
of the Board and the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of
the Trust and each Series, including oversight of transfer agency, custodial
and accounting services, except as hereinafter set forth; provided, however,
that nothing herein contained shall be deemed to relieve or deprive the Board
of its responsibility for and control of the conduct of the affairs of the
Trust and each Series.
(b) Mitchell Hutchins will provide the Trust and each Series with
such corporate, administrative and clerical personnel (including officers of
the Trust) and services as are reasonably deemed necessary or advisable by
the Board, including the maintenance of certain books and records of the
Trust and each Series.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the
Trust's Registration Statement, proxy material, tax returns and required
reports to each Series' shareholders and the Securities and Exchange
Commission and other appropriate federal or state regulatory authorities.
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<PAGE>
(d) Mitchell Hutchins will provide the Trust and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies
and similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of
this Contract, Mitchell Hutchins will act in conformity with the Trust
Instrument, By-Laws and Registration Statement of the Trust and with the
instructions and directions of the Board and will comply with the
requirements of the 1940 Act, the rules thereunder, and all other applicable
federal and state laws and regulations.
5. DELEGATION OF MITCHELL HUTCHINS' DUTIES AS INVESTMENT ADVISER AND
ADMINISTRATOR. With respect to any or all Series, Mitchell Hutchins may
enter into one or more contracts ("Sub-Advisory or Sub-Administration
Contract") with a sub-adviser or sub-administrator in which Mitchell Hutchins
delegates to such sub-adviser or sub-administrator any or all its duties
specified in Paragraphs 2 and 3 of this Contract, provided that each
Sub-Advisory or Sub-Administration Contract imposes on the sub-adviser or
sub-administrator bound thereby all applicable duties and conditions to which
Mitchell Hutchins is subject by Paragraphs 2, 3 and 4 of this Contract, and
further provided that each Sub-Advisory or Sub-Administration Contract meets
all requirements of the 1940 Act and rules thereunder.
6. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell
Hutchins hereunder are not to be deemed exclusive and Mitchell Hutchins shall
be free to furnish similar services to others so long as its services under
this Contract are not impaired thereby. Nothing in this Contract shall limit
or restrict the right of any director, officer or employee of Mitchell
Hutchins, who may also be a Trustee, officer or employee of the Trust, to
engage in any other business or to devote his or her time and attention in
part to the management or other aspects of any other business, whether of a
similar nature or a dissimilar nature.
7. EXPENSES.
(a) For the services provided and expenses assumed pursuant to this
Contract with respect to the Series, the Trust will pay to Mitchell Hutchins
a fee, computed daily and paid monthly. Where the services are provided
directly by Mitchell Hutchins or an affiliate, the fees will be limited to
reimbursement of Mitchell Hutchins' direct administrative costs and expenses
and will exclude any profit or overhead charges. Where Mitchell Hutchins
arranges for an unaffiliated person to provide services, the Trust will
reimburse Mitchell Hutchins for the cost of the services provided by the
unaffiliated person, but no additional profit or overhead charge will be
included. (Hereinafter, the fees and expenses payable by the Fund under this
Paragraph 7(a) are referred to as "Direct Expenses.")
(b) Subject to Paragraph 7(a), the Direct Expenses borne by each
Series will include but not be limited to the following (or each Series'
proportionate share of the following): (i) expenses of paying the salaries
and expenses of the Trust's officers and other personnel engaged in
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<PAGE>
administering the Trust's business; (ii) expenses of monitoring financial and
shareholder accounting services provided by the Trust's custodian and
transfer agent, respectively; (iii) expenses of responding to shareholder
inquiries and disseminating information to shareholders; (iv) expenses of
monitoring compliance with the Trust's registration statements and other
operating documents, with federal and state securities laws and rules
thereunder and with the Internal Revenue Code of 1986, as amended; (v)
expenses of preparing semi-annual and annual reports to shareholders; (vi)
expenses of preparing filings required by the SEC; (vii) expenses of
preparing federal, state and local tax returns; (viii) expenses of paying
notice filing fees under state securities laws; (ix) expenses of organizing
annual and special meetings of shareholders; (ix) the cost (including
brokerage commissions) of securities purchased or sold by the Series and any
losses incurred in connection therewith; (x) expenses incurred on behalf of
the Series by Mitchell Hutchins under this Contract; (xi) expenses of
organizing the Trust and the Series; (xiii) filing fees and expenses relating
to the registration and qualification of the Series' shares and the Trust
under federal and/or state securities laws and maintaining such registration
and qualifications; (xiv) fees and salaries payable to the Trust's Trustees
and officers who are not interested persons of the Trust or Mitchell
Hutchins; (xv) all expenses incurred in connection with the Trustees'
services, including travel expenses; (xvi) taxes (including any income or
franchise taxes) and governmental fees; (xvii) costs of any liability,
uncollectible items of deposit and other insurance and fidelity bonds;
(xviii) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the Trust or Series for
violation of any law; (xvix) legal, accounting and auditing expenses,
including legal fees of special counsel for those Trustees of the Trust who
are not interested persons of the Trust; (xx) charges of custodians, transfer
agents and other agents (including any lending agent); (xxi) costs of
preparing share certificates; (xxii) expenses of setting in type and printing
prospectuses and supplements thereto, statements of additional information
and supplements thereto, reports and proxy materials for existing
shareholders; (xxiii) costs of mailing prospectuses and supplements thereto,
statements of additional information and supplements thereto, reports and
proxy materials to existing shareholders; (xxiv) any extraordinary expenses
(including fees and disbursements of counsel, costs of actions, suits or
proceedings to which the Trust is a party and the expenses the Trust may
incur as a result of its legal obligation to provide indemnification to its
officers, Trustees, agents and shareholders) incurred by the Trust or Series;
(xxv) fees, voluntary assessments and other expenses incurred in connection
with membership in investment company organizations; (xxvi) the cost of
mailing and tabulating proxies and costs of meetings of shareholders, the
Board and any committees thereof; (xxvii) the cost of investment company
literature and other publications provided by the Trust to its Trustees and
officers; (xxviii) costs of mailing, stationery and communications equipment;
(xxix) expenses incident to any dividend, withdrawal or redemption options;
(xxx) charges and expenses of any outside pricing service used to value
portfolio securities; and (xxxi) interest on borrowings of the Series; and
(xxxii) any other costs and expenses incurred in managing the portfolio of a
Series.
(c) The Trust or a Series may pay directly any Direct Expense
incurred by it in its normal operations and, if any such payment is consented
to by Mitchell Hutchins and acknowledged as otherwise payable by Mitchell
Hutchins pursuant to this Contract, the Series may reduce any amounts
otherwise payable to Mitchell Hutchins pursuant to this Contract. To the
extent that such deductions exceed the amounts payable to Mitchell Hutchins
on any monthly payment date, such excess shall be carried forward and
deducted in the same manner from the fee payable on succeeding monthly
payment dates.
- 4 -
<PAGE>
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those Trustees who are interested persons of the Trust.
(e) The payment or assumption by Mitchell Hutchins of any expenses of
the Trust or a Series that Mitchell Hutchins is not required by this Contract
to pay or assume shall not obligate Mitchell Hutchins to pay or assume the
same or any similar expense of the Trust or a Series on any subsequent
occasion.
8. COMPENSATION.
(a) Mitchell Hutchins shall not receive any compensation other
reimbursement for the Series' Direct Expenses, as provided in paragraph 7.
(b) For the services provided and the expenses assumed pursuant to
this Contract with respect to any Series as to which this Contract hereafter
is made applicable, the Trust will pay to Mitchell Hutchins from the assets
of such Series compensation in an amount to be agreed upon in a written fee
agreement ("Fee Agreement") executed by the Trust on behalf of such Series
and by Mitchell Hutchins. All such Fee Agreements shall provide that they
are subject to all terms and conditions of this Contract.
(c) Any compensation or reimbursement due to Mitchell Hutchins shall
be computed daily and paid monthly to Mitchell Hutchins on or before the
first business day of the next succeeding calendar month.
(d) If this Contract becomes effective or terminates before the end
of any month, Mitchell Hutchins' compensation or reimbursement for the period
from the effective day to the end of the month or from the beginning of such
month to the date of termination, as the case may be, shall be prorated
according to the proportion which such period bears to the full month in
which such effectiveness or termination occurs.
9. LIMITATION OF LIABILITY OF MITCHELL HUTCHINS. Mitchell Hutchins
and its delegates, including any Sub-Adviser or Sub-Administrator to any
Series or the Trust, shall not be liable for any error of judgment or mistake
of law or for any loss suffered by any Series, the Trust or any of its
shareholders, in connection with the matters to which this Contract relates,
except to the extent that such a loss results from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Contract. Any person, even though also an officer, director, employee, or
agent of Mitchell Hutchins, who may be or become an officer, Trustee,
employee or agent of the Trust shall be deemed, when rendering services to
any Series or the Trust or acting with respect to any business of such Series
or the Trust, to be rendering such service to or acting solely for the Series
or the Trust and not as an officer, director, employee, or agent or one under
the control or direction of Mitchell Hutchins even though paid by it.
- 5 -
<PAGE>
10. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove
written provided that, with respect to any Series, this Contract shall not
take effect unless it has first been approved (i) by a vote of a majority of
those Trustees of the Trust who are not parties to this Contract or
interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of
that Series' outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if
not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of those Trustees of
the Trust who are not parties to this Contract or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Board or, with respect to any given Series, by
vote of a majority of the outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty,
by vote of the board or by a vote of a majority of the outstanding voting
securities of such Series on sixty days' written notice to Mitchell Hutchins
or by Mitchell Hutchins at any time, without the payment of any penalty, on
sixty days' written notice to the Trust. Termination of this Contract with
respect to any given Series shall in no way affect the continued validity of
this Contract or the performance thereunder with respect to any other
Series. This Contract will automatically terminate in the event of its
assignment.
11. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE
TRUST. The Trustees of the Trust and the shareholders of any Series shall
not be liable for any obligations of any Series or the Trust under this
Contract, and Mitchell Hutchins agrees that, in asserting any rights or
claims under this Contract, it shall look only to the assets and property of
the Trust in settlement of such right or claim, and not to such Trustees or
shareholders.
12. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought, and no amendment of this Contract
as to any given Series shall be effective until approved by vote of a
majority of such Series' outstanding voting securities.
13. GOVERNING LAW. This Contract shall be construed in accordance
with the laws of the State of Delaware, without giving effect to the
conflicts of laws principles thereof, and in accordance with the 1940 Act.
To the extent that the applicable laws of the State of Delaware conflict with
the applicable provisions of the 1940 Act, the latter shall control.
14. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be
affected thereby. This Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in
- 6 -
<PAGE>
this Contract, the terms "majority of the outstanding voting securities",
"affiliated person", "interested person", "assignment", "broker", "investment
adviser", "national securities exchange", "net assets", "prospectus", "sale",
"sell" and "security" shall have the same meaning as such terms have in the
1940 Act and the rules and regulations thereunder, subject to such exemptions
as may be granted by the Securities and Exchange Commission. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Contract is relaxed by a rule, regulation, order or other action of the
Securities and Exchange Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation, order or other action.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers and delivered as of the day and year first
above written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
By
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Attest: MITCHELL HUTCHINS LIR MONEY SERIES
By
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- 7 -
Exhibit No. 9
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE 202-778-9000
October 27, 1999
Mitchell Hutchins LIR Money Series
51 West 52nd Street
New York, New York 10019-6114
Ladies and Gentlemen:
You have requested our opinion, as counsel to Mitchell Hutchins LIR Money
Series ("Trust"), as to certain matters regarding the issuance of certain Shares
of the Trust. As used in this letter, the term "Shares" means the shares of
beneficial interest of each series of the Trust listed below that may be issued
during the time that Post-Effective Amendment No. 5 to the Trust's Registration
Statement on Form N-1A ("PEA") is effective and has not been superseded by
another post-effective amendment. The series of the Trust are LIR Liquid Assets
Fund and LIR Cash Reserves Fund.
As such counsel, we have examined certified or other copies, believed by
us to be genuine, of the Trust's Trust Instrument and by-laws and such
resolutions and minutes of meetings of the Trust's Board of Trustees as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) of the State of Delaware that in
our experience are normally applicable to the issuance of shares by investment
companies organized as business trusts in that State and to the Securities Act
of 1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by the Trust and that, when sold in accordance
with the terms contemplated by the PEA, including receipt by the Trust of full
payment for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been validly issued, fully paid and non-assessable.
We hereby consent to this opinion accompanying the PEA when it is filed
with the SEC and to the reference to our firm in the statement of additional
information that is being filed as part of the PEA.
Very truly yours,
/s/ Kirkpatrick and Lockhart LLP
KIRKPATRICK & LOCKHART LLP
