<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND ANNUAL REPORT
June 15, 1999
Dear Shareholder,
We are pleased to present you with the annual report for the Mitchell
Hutchins LIR Select Money Fund (the "Fund") for the fiscal period from
commencement of operations on August 10, 1998 through April 30, 1999.
MITCHELL HUCTHINS LIR
SELECT MONEY FUND
FUND PROFILE
GOAL:
Maximum current income consistent with liquidity and capital preservation
PORTFOLIO MANAGER:
Anthony Balestrieri, Mitchell Hutchins Asset Management Inc.
TOTAL NET ASSETS:
$1.323 billion as of April 30, 1999
DIVIDEND PAYMENTS:
Monthly
MARKET REVIEW
Money market mutual fund assets increased during the Fund's fiscal period as
investors emphasized safety of principal in response to market volatility
during the latter part of 1998. The Federal Reserve cut the Federal Funds
rate by 0.25% in September, October and November of 1998, lowering the rate
from 5.50% to 4.75%. At the same time, European central banks were cutting
rates in preparation for the January 1, 1999 debut of the euro currency.
Lower interest rates helped to calm the global financial markets, which had
become unsettled after Russia's default in August. Money market yields were
lower across the short-term yield curve. Because inflation remained low,
however, money market yields stayed relatively strong on an
inflation-adjusted basis and versus overseas short-term rates.
PERFORMANCE
The Fund commenced operations on August 10, 1998. As of the end of the fiscal
period on April 30, 1999, the Fund's net assets stood at $1.323 billion. The
Fund's seven-day yield was 4.86% for Institutional shares as of April 30,
1999.
At the Fund's inception we adopted a cautious outlook on the markets
given the rising uncertainty, and during the period kept the Fund's weighted
average maturity slightly below its peer group. The Fund's weighted-average
maturity was 36 days as of April 30, 1999. While seeking to maximize current
income, we emphasized credit quality, liquidity and appropriate
diversification.
OUTLOOK
We expect the U.S. economy's rate of growth to slow in 1999 from the rate of
the fourth quarter of 1998, with inflation remaining low and no recession on
the immediate horizon. The Federal Reserve is likely to maintain a steady
monetary policy. We believe the fixed income markets will remain volatile in
1999. We expect to keep the Fund's weighted average maturity slightly below
its peer group.
1
<PAGE>
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued
support and welcome any comments or questions you may have. For a QUARTERLY
REVIEW on a fund in the PaineWebber Family of Funds,(1) please contact your
Financial Advisor.
Sincerely,
/s/ MARGO ALEXANDER
MARGO ALEXANDER
Chairman and Chief Executive Officer
Mitchell Hutchins Asset Management Inc.
/s/ BRIAN M. STORMS
BRIAN M. STORMS
President and Chief Operating Officer
Mitchell Hutchins Asset Management Inc.
/s/ DENNIS L. MCCAULEY
DENNIS L. MCCAULEY
Managing Director and Chief
Investment Officer--Fixed Income
Mitchell Hutchins Asset Management Inc.
/s/ ANTHONY BALESTRIERI
ANTHONY BALESTRIERI
Senior Vice President
Mitchell Hutchins Asset Management Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal period ended April 30, 1999, and reflects our
views at the time of its writing. Of course, these views may change in
response to changing circumstances. We encourage you to consult your
Financial Advisor regarding your personal investment program.
(1) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
2
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
STATEMENT OF NET ASSETS APRIL 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- --------------- --------------
<C> <S> <C> <C> <C>
BANK NOTE--1.89%
BANKING--1.89%
Harris Trust & Savings Bank
$ 25,000 (cost--$24,994,536)........... 02/01/00 5.000% $ 24,994,536
--------------
CERTIFICATES OF DEPOSIT--2.04%
DOMESTIC--1.44%
19,000 First Tennessee Bank, N.A..... 05/10/99 4.850 18,999,849
--------------
YANKEE--0.60%
Canadian Imperial Bank of
8,000 Commerce...................... 02/07/00 5.010 7,997,616
--------------
Total Certificates of Deposit
(cost--$26,997,465).................... 26,997,465
--------------
COMMERCIAL [email protected]%
ASSET-BACKED--BANKING--5.64%
Atlantis One Funding
42,820 Corporation................... 05/03/99 to 08/25/99 4.820 to 5.000 42,612,558
Wood Street Funding
32,000 Corporation................... 05/12/99 to 05/28/99 4.830 31,941,101
--------------
74,553,659
--------------
ASSET-BACKED--FINANCE--4.63%
18,000 Beta Finance Incorporated..... 07/16/99 4.820 17,816,840
44,177 CC (USA) Incorporated......... 07/12/99 to 11/17/99 4.820 to 4.840 43,429,252
--------------
61,246,092
--------------
ASSET-BACKED--MISCELLANEOUS--9.40%
Enterprise Funding
10,529 Corporation................... 05/06/99 to 05/11/99 4.810 to 4.830 10,518,584
Falcon Asset Securitization
10,000 Corporation................... 05/27/99 4.800 9,965,333
Preferred Receivables Funding
42,875 Corporation................... 05/03/99 to 05/10/99 4.820 42,849,419
Triple-A One Funding
28,161 Corporation................... 05/13/99 4.810 28,115,849
Variable Funding Capital
33,000 Corporation................... 05/12/99 to 05/17/99 4.820 to 4.840 32,941,247
--------------
124,390,432
--------------
AUTO & TRUCK--4.91%
15,000 BMW US Capital Incorporated... 05/13/99 4.780 14,976,100
Ford Motor Credit
50,000 Corporation................... 05/06/99 to 05/07/99 4.800 to 4.820 49,962,611
--------------
64,938,711
--------------
BANKING--1.50%
Nordbanken North America
20,000 Incorporated.................. 07/16/99 4.830 19,796,067
--------------
CHEMICALS--0.15%
2,000 Henkel Corporation............ 06/16/99 4.810 1,987,708
--------------
CONSUMER PRODUCTS--4.50%
9,600 Fortune Brands Incorporated... 05/03/99 4.780 9,597,451
50,000 Gillette Company (The)........ 05/03/99 5.050 49,985,972
--------------
59,583,423
--------------
DRUGS & MEDICINE--2.65%
Zeneca Wilmington
35,175 Incorporated.................. 05/21/99 4.790 to 4.800 35,081,229
--------------
</TABLE>
3
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- --------------- --------------
<C> <S> <C> <C> <C>
</TABLE>
COMMERCIAL PAPER@--(CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
ENERGY--0.81%
$ 10,735 Koch Industries............... 05/03/99 5.000% $ 10,732,018
--------------
FINANCE--CONDUIT--2.33%
Metlife Funding
30,805 Incorporated.................. 05/12/99 to 05/13/99 4.810 30,757,613
--------------
FINANCE--CONSUMER--1.51%
Household Finance
20,000 Corporation................... 05/05/99 4.780 19,989,378
--------------
FINANCE--RETAIL--1.51%
American Express Credit
20,000 Corporation................... 05/04/99 4.850 19,991,917
--------------
FOOD, BEVERAGE & TOBACCO--6.51%
Allied Domecq North America
25,000 Corporation................... 05/11/99 to 05/26/99 4.800 to 4.810 24,949,438
14,000 Diageo Capital PLC............ 05/06/99 4.810 13,990,647
14,000 Heinz (H.J.) Company.......... 05/11/99 4.780 13,981,411
33,137 McDonald's Corporation........ 05/03/99 5.150 33,127,519
--------------
86,049,015
--------------
INSURANCE--1.25%
16,600 Transamerica Corporation...... 05/03/99 to 05/07/99 4.800 to 5.000 16,589,853
--------------
MACHINERY--2.89%
Caterpillar Financial Services
38,245 Corporation................... 05/04/99 5.150 38,228,587
--------------
MANUFACTURING - DIVERSIFIED--6.34%
BTR Dunlop Finance
39,000 Incorporated.................. 05/17/99 to 06/14/99 4.810 38,844,209
45,000 Siemens Capital Corporation... 05/03/99 5.100 44,987,250
--------------
83,831,459
--------------
METALS & MINING--1.83%
Rio Tinto America
24,300 Incorporated.................. 05/14/99 4.800 24,257,880
--------------
PAPER & FOREST PRODUCTS--1.13%
15,000 Weyerhaeuser Company.......... 05/12/99 to 05/19/99 4.780 to 4.800 14,973,383
--------------
PRINTING--PUBLISHING--1.92%
25,370 Reed Elsevier Incorporated.... 05/03/99 5.000 25,362,953
--------------
UTILITY-ELECTRIC--0.72%
9,600 Southern Company.............. 05/19/99 4.810 9,576,912
--------------
Total Commercial Paper
(cost--$821,918,289)................... 821,918,289
--------------
DOMESTIC MASTER NOTES--15.50%
BROKER-DEALER--15.50%
Bear Stearns Companies
55,000 Incorporated.................. 05/03/99 5.138* 55,000,000
45,000 Goldman Sachs Group L.P....... 05/03/99 4.926* 45,000,000
Morgan Stanley, Dean Witter &
55,000 Company....................... 05/03/99 5.038* 55,000,000
50,000 NationsBanks N.A.............. 05/03/99 5.138* 50,000,000
--------------
Total Domestic Master Notes
(cost--$205,000,000)................... 205,000,000
--------------
</TABLE>
4
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- --------------- --------------
<C> <S> <C> <C> <C>
FUNDING AGREEMENTS--10.20%
INSURANCE--10.20%
First Allmerica Financial Life
$ 25,000 Insurance Company+............ 07/29/99 5.170%* $ 25,000,000
Hartford Life Insurance
15,000 Company....................... 05/07/99 4.933* 15,000,000
Hartford Life Insurance
15,000 Company+...................... 07/29/99 5.100* 15,000,000
Jackson National Life
25,000 Insurance Company+............ 07/29/99 5.100* 25,000,000
Pacific Life Insurance
30,000 Company+...................... 09/15/99 5.140* 30,000,000
12,500 Travelers Insurance Company... 05/07/99 4.939* 12,500,000
Travelers Insurance
12,500 Company+...................... 07/29/99 5.060* 12,500,000
--------------
Total Funding Agreements
(cost--$135,000,000)................... 135,000,000
--------------
SHORT-TERM CORPORATE OBLIGATIONS--2.65%
ASSET-BACKED--FINANCE--1.89%
25,000 Beta Finance Incorporated++... 01/19/00 to 03/01/00 5.130 to 5.200 25,000,000
--------------
FINANCE--DIVERSIFIED--0.76%
Associates Corporation of
10,000 North America++............... 02/15/00 6.200 10,076,210
--------------
Total Short-Term Corporate Obligations
(cost--$35,076,210).................... 35,076,210
--------------
TIME DEPOSITS--4.54%
20,000 Societe Generale.............. 05/03/99 5.125 20,000,000
Westdeutsche Landesbank
40,000 Girozentrale.................. 05/03/99 4.938 40,000,000
--------------
Total Time Deposits
(cost--$60,000,000).................... 60,000,000
--------------
<CAPTION>
NUMBER
OF
SHARES
- ---------
<C> <S> <C> <C> <C>
MONEY MARKET FUNDS--1.21%
6,469,615 AIM Liquid Money Market Fund......................................... 6,469,615
9,497,536 Provident Temp Money Market Fund..................................... 9,497,536
--------------
Total Money Market Funds (cost--$15,967,151).................................... 15,967,151
--------------
Total Investments (cost--$1,324,953,651 which approximates cost for federal
income
tax purposes)--100.16%........................................................ 1,324,953,651
Liabilities in excess of other assets--(0.16)%.................................. (2,146,736)
--------------
Net Assets (applicable to 1,322,806,956 Institutional shares outstanding at
$1.00 per
share)--100.00%............................................................... $1,322,806,915
--------------
--------------
</TABLE>
- ---------------
* Variable rate securities--maturity date reflects earlier of reset date,
maturity date or put date. The interest rates shown are the current rates
as of April 30, 1999 and reset periodically.
@ Interest rates shown are the discount rates at date of purchase.
+ Illiquid securities representing 8.13% of net assets.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional buyers.
Weighted Average Maturity--36 Days
See accompanying notes to financial statements
5
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 10,
1998+
TO
APRIL 30, 1999
--------------
<S> <C>
INVESTMENT INCOME:
Interest......................................................... $ 32,032,776
--------------
EXPENSES:
Management fee................................................... 1,115,803
Shareholder Servicing Fees--Financial Intermediary Shares........ 373
Trustees' fees................................................... 7,244
--------------
1,123,420
Less: Fee waivers from adviser................................... (668,641)
--------------
Net expenses..................................................... 454,779
--------------
Net investment income............................................ 31,577,997
NET REALIZED LOSSES FROM INVESTMENT TRANSACTIONS................. (41)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 31,577,956
--------------
--------------
</TABLE>
- ---------------
+ Commencement of operations.
See accompanying notes to financial statements
6
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 10,
1998+
TO
APRIL 30, 1999
---------------
<S> <C>
FROM OPERATIONS:
Net investment income............................................ $ 31,577,997
Net realized losses from investment transactions................. (41)
---------------
Net increase in net assets resulting from operations............. 31,577,956
---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional Shares...................... (31,570,819)
Net investment income--Financial Intermediary Shares............. (7,178)
---------------
Total dividends to shareholders.................................. (31,577,997)
---------------
NET INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST
TRANSACTIONS................................................... 1,322,706,956
---------------
Net increase in net assets....................................... 1,322,706,915
NET ASSETS:
Beginning of period.............................................. 100,000
---------------
End of period.................................................... $1,322,806,915
---------------
---------------
</TABLE>
- ---------------
+ Commencement of operations.
See accompanying notes to financial statements
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins LIR Select Money Fund (the "Fund") is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, as a diversified series of Mitchell Hutchins Institutional Series
("Trust"), an open-end management investment company organized as a Delaware
business trust on April 29, 1998. Prior to commencement of operations, August
10, 1998, the Fund had no activity other than the sale of 100,000 Institutional
shares on July 22, 1998 to Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), the investment adviser and an asset management subsidiary of
PaineWebber Incorporated ("PaineWebber"), for $100,000.
The Fund currently offers two classes of shares, Institutional shares and
Financial Intermediary shares. Each class represents interests in the same
assets of the Fund, and both classes have equal voting privileges, except that
beneficial owners of Financial Intermediary shares receive certain services
directly from financial intermediaries, bear certain service fees and, to the
extent that matters pertaining to the Shareholder Services Plan or to the
Financial Intermediary shares are submitted to shareholders for approval, only
the holders of Financial Intermediary shares are entitled to vote thereon. The
Fund had Financial Intermediary shares outstanding from December 29, 1998 to
February 9, 1999. However, at April 30, 1999, there were no Financial
Intermediary shares outstanding.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. Following is a summary of
significant accounting policies:
VALUATION AND ACCOUNTING FOR INVESTMENTS AND INVESTMENT INCOME--Investments
are valued at amortized cost which approximates market value. Investment
transactions are recorded on the trade date. Realized gains and losses from
investment transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Premiums are amortized and
discounts are accreted as adjustments to interest income and the identified cost
of investments.
REPURCHASE AGREEMENTS--The Fund's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In the event that a
counterparty defaults on its obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Fund to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust has an Investment Advisory and Administration Contract ("Advisory
Contract") under which Mitchell Hutchins serves as investment adviser and
administrator of the Fund. In accordance with the Advisory Contract, Mitchell
Hutchins receives compensation from the Fund, computed daily and paid monthly,
at an annual rate of 0.18% of the Fund's average daily net assets. At April 30,
1999, the Fund owed Mitchell Hutchins $93,604 in management fees.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Under the Advisory Contract, Mitchell Hutchins has agreed to pay all Fund
expenses other than the management fees, the fees payable pursuant to the
Shareholder Service Plan adopted by the Trust with respect to the Fund's
Financial Intermediary shares, fees and expenses (including counsel fees) of
those trustees who are not "interested persons" of the Trust (as defined in the
Investment Company Act of 1940, as amended) ("Independent Trustees"), interest,
taxes and the cost (including brokerage commissions and other transaction costs,
if any) of securities purchased or sold by the Fund and any losses incurred in
connection therewith and extraordinary expenses (such as costs of litigation to
which the Trust or Fund is a party and of indemnifying officers and trustees of
the Trust.) Although Mitchell Hutchins is not obligated to pay the fees and
expenses of the Independent Trustees, it is contractually obligated to reduce
its management fee in an amount equal to those fees and expenses. Mitchell
Hutchins had agreed to waive 15 basis points (0.15%) of its 18 basis points
(0.18%) management fee from August 10, 1998 through October 18, 1998. From
October 19, 1998 through January 18, 1999, Mitchell Hutchins had agreed to waive
12 basis points (0.12%) of its 18 basis points (0.18%). From January 19, 1999
through April 30, 1999, Mitchell Hutchins had also agreed to waive 9 basis
points (0.09%) of its 18 basis points (0.18%). At April 30, 1999, management
fees were 9 basis points (0.09%). Effective May 1, 1999, Mitchell Hutchins has
agreed to waive 6 basis points (0.06%) of its 18 basis points (0.18%) management
fee through August 31, 1999. For the period August 10, 1998 (commencement of
operations) to April 30, 1999, Mitchell Hutchins voluntarily waived $668,641 of
its management fees.
OTHER LIABILITIES
At April 30, 1999 dividends payable was $4,711,286.
FEDERAL TAX STATUS
The Fund intends to distribute all of its taxable income and to comply with
the other requirements of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provision for federal income taxes is
required. In addition, by distributing during each calendar year substantially
all of its net investment income, capital gains and certain other amounts, if
any, the Fund intends not to be subject to federal excise tax.
SHAREHOLDER SERVICE PLAN AND AGREEMENT
Under a Shareholder Service Plan and Agreement with respect to its Financial
Intermediary shares, the Fund pays PaineWebber monthly fees at the annual rate
of 0.25% of the average daily net assets of the Financial Intermediary shares
held by financial intermediaries on behalf of their customers. Under Service
Agreements with those financial intermediaries, PaineWebber pays an identical
fee to the financial intermediaries for certain support services that they
provide to the beneficial owners of the Financial Intermediary shares.
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest, at $1.00 per share,
were as follows:
<TABLE>
<CAPTION>
FINANCIAL
INSTITUTIONAL INTERMEDIARY
SHARES SHARES
------------------ ------------------
FOR THE PERIOD FOR THE PERIOD
AUGUST 10, 1998* DECEMBER 29, 1998*
TO TO
APRIL 30, 1999 FEBRUARY 9, 1999
------------------ ------------------
<S> <C> <C>
Shares sold............................. 11,625,182,358 3,252,333
Shares repurchased...................... (10,320,925,101) (3,252,333)
Dividends reinvested in additional Fund
shares................................ 18,449,699 0
------------------ ----------
Net increase in shares outstanding...... 1,322,706,956 0
------------------ ----------
------------------ ----------
</TABLE>
- ---------------
* Commencement of issuance of shares.
9
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
FINANCIAL
INTERMEDIARY
INSTITUTIONAL SHARES
SHARES ---------------
--------------- FOR THE PERIOD
FOR THE PERIOD DECEMBER 29,
AUGUST 10, 1998+
1998+ TO
TO FEBRUARY 9,
APRIL 30, 1999 1999(2)
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 1.00 $ 1.00
--------------- ---------------
Net investment income............................. 0.037 0.006
Dividends from net investment income.............. (0.037) (0.006)
--------------- ---------------
Net asset value, end of period.................... $ 1.00 $ 1.00
--------------- ---------------
--------------- ---------------
Total investment return (1)....................... 3.81% 0.57%
--------------- ---------------
--------------- ---------------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $1,322,807 --
Expenses to average net assets net of
waivers from adviser............................. 0.07%* 0.32%*
Expenses to average net assets before
waivers from adviser............................. 0.18%* 0.43%*
Net investment income to average net assets net of
waivers from adviser............................. 5.06%* 4.81%*
Net investment income to average net assets before
waivers from adviser............................. 4.95%* 4.70%*
</TABLE>
- -----------------
+ Issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of the period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of the period reported. Total investment return
for periods of less than one year has not been annualized.
(2) At February 9, 1999, there were no longer any Financial Intermediary shares
outstanding. Any further subscriptions of such shares would be at a $1.00 per
share.
10
<PAGE>
MITCHELL HUTCHINS INSTITUTIONAL SERIES
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of
Mitchell Hutchins LIR Select Money Fund
We have audited the accompanying statement of net assets of Mitchell Hutchins
LIR Select Money Fund as of April 30, 1999, and the related statement of
operations, the statement of changes in net assets and the financial highlights
for the period from August 10, 1998 (commencement of operations) to April 30,
1999. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned at April 30, 1999, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above and audited by us present fairly, in all material respects, the financial
position of Mitchell Hutchins LIR Select Money Fund at April 30, 1999, the
results of its operations, the changes in its net assets and the financial
highlights for the period from August 10, 1998 (commencement of operations) to
April 30, 1999, in conformity with generally accepted accounting principles.
[ERNST & YOUNG SIGNATURE]
New York, New York
June 23, 1999
11
<PAGE>
MITCHELL HUTCHINS LIR SELECT MONEY FUND
TAX INFORMATION (UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal period, August 10,
1998 (commencement of operations) to April 30, 1999, as to the federal tax
status of distributions received by shareholders during such fiscal period.
Accordingly, we are advising you that all dividends paid by the Fund during the
fiscal period were derived from net investment income. These amounts are taxable
as ordinary income, none of which qualifies for the dividend received deduction
available to corporate shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need to be
reported as taxable income. Some retirement trusts (e.g., corporate, Keogh and
403(b)(7) plans) may need this information for their annual information
reporting.
Because the Fund's fiscal period is not the calendar year, another
notification will be sent in respect of calendar year 1999. The second
notification, which will reflect the amounts to be used by calendar year
taxpayers on their federal income tax returns, will be made in conjunction with
Form 1099 DIV and will be mailed in January 2000. Shareholders are advised to
consult their own tax advisers with respect to the tax consequences of their
investment in the Fund.
12
<PAGE>
TRUSTEES
E. Garrett Bewkes, Jr.
CHAIRMAN
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
Brian M. Storms
OFFICERS
Margo N. Alexander
PRESIDENT
Victoria E. Schonfeld
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
Dennis L. McCauley
VICE PRESIDENT
Anthony G. Balestrieri
VICE PRESIDENT
INVESTMENT ADVISER AND ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF
THE FUND UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED
ON THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER INVESTMENT EXECUTIVE OR
CORRESPONDENT FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
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PaineWebber offers a family of 27 funds which encompass a diversified range
of investment goals.
BOND FUNDS
- - High Income Fund
- - Investment Grade Income Fund
- - Low Duration U.S. Government Income Fund
- - Strategic Income Fund
- - U.S. Government Income Fund
TAX-FREE BOND FUNDS
- - California Tax-Free Income Fund
- - Municipal High Income Fund
- - National Tax-Free Income Fund
- - New York Tax-Free Income Fund
STOCK FUNDS
- - Financial Services Growth Fund
- - Growth Fund
- - Growth and Income Fund
- - Mid Cap Fund
- - Small Cap Fund
- - S&P 500 Index Fund
- - Tax-Managed Equity Fund
- - Utility Income Fund
ASSET ALLOCATION FUNDS
- - Balanced Fund
- - Tactical Allocation Fund
GLOBAL FUNDS
- - Asia Pacific Growth Fund
- - Emerging Markets Equity Fund
- - Global Equity Fund
- - Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
- - Aggressive Portfolio
- - Moderate Portfolio
- - Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
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- -C-1999 PaineWebber Incorporated
Member SIPC
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ANNUAL REPORT
LIR SELECT
MONEY FUND
APRIL 30, 1999
