As filed with the Securities and Exchange Commission on July 30, 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 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 2 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 3
MITCHELL HUTCHINS LIR MONEY SERIES
(Formerly, Mitchell Hutchins Institutional Series)
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, ESQ.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, ESQ.
BENJAMIN J. HASKIN, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: 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
<PAGE>
LIR PREMIER MONEY MARKET FUND
LIR PREMIER TAX-FREE MONEY MARKET FUND
-------------------------------
PROSPECTUS
[________ , 1999]
-------------------------------
This prospectus offers Correspondent Class Shares of these money market funds.
Correspondent Class Shares are offered through firms that have arrangements with
Correspondent Services Corporation ("CSC") and certain other financial services
firms for the benefit of their clients.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the funds' shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
<PAGE>
CONTENTS
THE FUNDS
---------------------------------------
What every investor 3 Premier Money Market Fund
should know about 7 Premier Tax-Free Money Market Fund
the funds 11 More About Risks and Investment Strategies
YOUR INVESTMENT
---------------------------------------
Information for 12 Managing Your Fund Account
managing your fund 12 Buying Shares
account 13 Selling Shares
14 Exchanging Shares
14 Pricing and Valuation
ADDITIONAL INFORMATION
---------------------------------------
Additional important 15 Management
information about 16 Dividends and Taxes
the funds
---------------------------------------
Where to learn more Back Cover
about the funds
-------------------------------
The funds are not a complete or
balanced investment program.
-------------------------------
2
<PAGE>
PREMIER MONEY MARKET FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
FUND OBJECTIVE
High level of current income consistent with the preservation of capital and the
maintenance of liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund. It seeks to maintain a stable price of $1.00
per share. To do this, 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 may invest in any of these money market instruments. It invests in
foreign money market instruments only if they are denominated in U.S. dollars.
Mitchell Hutchins Asset Management Inc. serves as the fund's investment adviser.
Mitchell Hutchins 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 completely
risk-free. The fund is subject to credit risk, which is that issuers may fail,
or become less able, to make payments when due. The fund also is subject to
interest rate risks. 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
3
<PAGE>
PERFORMANCE
RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about the Premier Money
Market Fund's performance and thus give some indication of the risks of an
investment in the fund.
The bar chart shows how the fund's performance has varied from year to year.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
PREMIER MONEY MARKET FUND -- TOTAL RETURN
The chart below contains the following plot points:
1992 3.11%
1993 2.48%
1994 3.45%
1995 5.24%
1996 4.72%
1997 4.77%
1998 4.75%
Calendar year total return as of December 31, 1998 - 4.75%
Best quarter during years shown: 3rd quarter, 1991 - 1.31%
Worst quarter during years shown: 2nd quarter, 1993 - 0.59%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
One Year 4.75%
Five Years 4.59%
Life of Fund 4.16%
(5/20/91)
4
<PAGE>
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
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
Retail Shares
-------------
Management Fees 0.20%
Distribution and/or Service
(12b-1) Fees 0.60%
Other Expenses(1) 0.21%
----
Total Annual Fund Operating Expenses 1.01%
Expense Reimbursements(2) 0.11%
====
Net Expenses(2) 0.90%
(1) Other expenses are based on estimated amounts for the current fiscal year.
(2) The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those unreimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
5
<PAGE>
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 sell 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 5 YEARS 10 YEARS
$92 $287 $498 $1103
6
<PAGE>
PREMIER TAX-FREE MONEY MARKET FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
FUND OBJECTIVE
High level of current income exempt from federal income tax consistent with the
preservation of capital and the maintenance of liquidity.
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,
municipal money market instruments.
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 money market instruments that are exempt from federal income
tax. The fund may invest up to 20% of its total assets in securities that are
subject to the federal alternative minimum tax.
Mitchell Hutchins Asset Management Inc. serves as the fund's investment adviser.
Mitchell Hutchins 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 completely
risk-free. The fund is subject to credit risk, which is that issuers may fail,
or become less able, to make payments when due. The fund also is subject to
interest rate risks. 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
7
<PAGE>
PERFORMANCE
RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about the Premier Tax-Free
Money Market Fund's performance and thus give some indication of the risks of an
investment in the fund.
The bar chart shows how the fund's performance has varied from year to year.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
PREMIER TAX-FREE MONEY MARKET FUND -- TOTAL RETURN
The chart below contains the following plot points:
1997 2.90%
1998 2.83%
Calendar year total return as of June 30, 1999 - December 31, 1999 - 2.83%
Best quarter during years shown: 2nd quarter, 1998 - 0.75%
Worst quarter during years shown: 4th quarter, 1998 - 0.66%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
One Year 2.83%
Life of Fund 2.86%
(10/7/96)
8
<PAGE>
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
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
RETAIL SHARES
Management Fees 0.20%
Distribution and/or Service (12b-1) Fees 0.43%
Other Expenses(1) 0.39%
----
Total Annual Fund Operating Expenses 1.02%
Expense Reimbursements(2) 0.34%
====
Net Expenses(2) 0.68%
(1) Other expenses are based on estimated amounts for the current fiscal year.
(2) The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the "Net Expenses" rate shown above. The fund has agreed to repay
Mitchell Hutchins for those unreimbursed expenses if it can do so over the
following three years without causing the fund's expenses in any of those three
years to exceed the "Net Expenses" rate.
9
<PAGE>
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 sell 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 5 YEARS 10 YEARS
$69 $291 $530 $1217
10
<PAGE>
MORE ABOUT RISKS AND INVESTMENT STRATEGIES
PRINCIPAL RISKS
The main risks of investing in the funds are described below. Not all of these
risks apply to each fund. The main risks that apply to a particular fund are
identified under the "Investment Objective, Strategies and Risks" heading for
that fund.
Other risks of investing in a fund, along with further detail about some of the
risks described below, are discussed in the funds' 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 interest rates rise and to rise when interest rates fall.
Interest rate risk is the risk that interest rates will rise, so that the value
of a fund's investments will fall. In addition, changes in a fund's yield will
tend to lag behind changes in prevailing short-term interest rates. This means
that when interest rates are rising, a fund's income will tend to increase more
slowly than money market interest rates. Similarly, when interest rates are
falling, a fund's income generally will tend to fall more slowly. The value of a
fund's municipal money market instruments could fall due to adverse political or
regulatory developments concerning tax exemptions for municipal securities.
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 funds could be adversely affected by problems relating to
the inability of computer systems used by Mitchell Hutchins and the funds' other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the funds, 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 funds
and the trading systems used by the funds could be adversely affected by this
issue. The ability of an issuer or trading system to respond successfully to
this 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 funds.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the funds are subject to maturity, quality and
diversification requirements designed to help them maintain a stable price of
$1.00 per share In addition, Mitchell Hutchins may use a number of professional
money management techniques to respond to changing economic and money market
conditions and to shifts in fiscal and monetary policy. These techniques include
varying the composition and the weighted average maturity of a fund's portfolio
based upon its assessment of the relative values of various money market
instruments and future interest rate patterns. Mitchell Hutchins also may buy or
sell money market instruments to take advantage of yield differences.
When market conditions warrant, Premier Tax-Free Money Market Fund may
temporarily invest all or a portion of its net assets in cash or taxable money
market instruments.
11
<PAGE>
YOUR INVESTMENT
MANAGING YOUR FUND ACCOUNT
BUYING SHARES
The funds offer their shares only to clients of certain securities dealers
(correspondent firms) that have securities clearing arrangements with
Correspondent Services Corporation (CSC) or certain other financial services
firms. These clients include qualified retirement plans and individual
retirement accounts. You must buy shares through your Investment Representative
at your correspondent firm or financial services firm.
You may buy shares of the funds at the net asset value per share on the same
business day after receipt and acceptance of the purchase order by the transfer
agent, subject to timely receipt of federal funds for the purchase as provided
below. You can place a purchase order through your Investment Representative who
must then send the order to the transfer agent prior to noon, Eastern time.
Federal funds must be available to the fund by 4:00 p.m., Eastern time.
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 a fund. A business
day is any day that the Boston offices of the funds' custodian, the New York
City offices of Mitchell Hutchins and the transfer agent and your correspondent
firm's offices(s) are open for business.
Each fund's shares are sold at net asset value. However, under a Rule 12b-1 plan
adopted by the funds, Correspondent Class Shares pay annual fees of 0.60% of
average net assets for the Premier Money Market Fund and 0.43% of average net
assets for the Premier Tax-Free Money Market Fund. The funds pay this fee for
services and expenses relating to the sale and distribution of the funds' shares
and/or for providing shareholder services. Because these fees are paid from the
funds' assets on an ongoing basis, over time they will increase the cost of your
investment and may cost you more than paying other types of sales charges.
The funds and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of fund shares. The availability of fund shares to
customers of correspondent firms or the funds' distributor may vary depending on
the arrangements between CSC and those firms.
BUYING SHARES AUTOMATICALLY
Your correspondent firm or other financial services firm may have arrangements
with CSC to permit you to invest automatically in a fund. Under these
arrangements, all free cash credit balances (that is, immediately available
funds) of $1.00 or more in your brokerage account (with a $1,000 minimum
investment to open the account) are automatically invested in the fund on a
daily basis. These purchases are made daily for settlement the next business
day. All remaining free cash credit balances under $1.00 are invested in fund
shares monthly. Please consult your Investment Representative for more
information about the availability of this automatic purchase feature.
MINIMUM INVESTMENTS:
To open an account ....................................$1,000
To open an Individual Retirement
Account (IRA)..........................................[$25]
To add to an account ..................................None
The funds will waive the minimum to add to an account for automatic purchases
made with free cash credit balances in your linked brokerage account, as
described above.
The funds may change their minimum investment requirements at any time.
Correspondent firms or other participating financial services firms may set a
higher or lower minimum for their customers, provided that the aggregate amounts
purchased meet the above minimums. Your Investment Representative at your
correspondent firm is responsible for transmitting orders in a timely manner and
may have an earlier cut-off time for purchase and sale requests. Speak with your
Investment Representative for more information.
12
<PAGE>
SELLING SHARES
You may sell your fund shares by contacting your Investment Representative, by
check or through the funds' systematic withdrawal plan. Your fund shares will
also be sold automatically to settle any outstanding securities purchases or
debits to your brokerage account, unless you instruct your Investment
Representative otherwise.
You may place a sales order through your Investment Representative who must then
provide the order to the transfer agent up until noon, Eastern time, on any
business day.
You may request sales proceeds at any time by following the instructions related
to your account at your correspondent firm. Your correspondent firm is
responsible for transmitting the sales order to the transfer agent and crediting
your account on a timely basis. The funds will not accept requests to sell
shares by wire or telephone from you or your financial institution. Your
Investment Representative may charge a fee for transmitting the sales order.
Please contact your Investment Representative if you have questions about sales
order requirements.
SELLING BY CHECK
You may sell your fund shares by using a check drawn on your fund account. You
may obtain a supply of checks from the transfer agent. [Insert instructions.]
When the transfer agent receives the check for payment, the transfer agent will
arrange for the sale of a sufficient amount of fund shares to cover the amount
of the check. You will continue to receive dividends until the transfer agent
receives the check.
You will not receive canceled checks, but you may request photocopies of
canceled checks. If you have insufficient funds in your account or if you write
a check, the payee will receive a returned check. You should not attempt to sell
all the shares in your account by writing a check because the amount of the fund
shares is likely to change each day as you earn dividends. You may not close
your account by check.
The transfer agent may impose charges for specially imprinted checks, business
checks, stop payment orders, copies of canceled checks and checks returned for
insufficient funds. You will pay these charges through automatic sales of an
appropriate number of your fund shares. The transfer agent may modify or
terminate the checkwriting service at any time or impose service fees for
checkwriting.
You may obtain the necessary forms for the checkwriting service from your
Investment Representative. This service generally is not available to persons
who own fund shares through any sub-account or tax-deferred retirement plan
account.
SELLING SHARES AUTOMATICALLY
CSC and the funds' distributor have instituted an automatic sales procedure
applicable to fund shareholders. CSC or the funds' distributor may use this
procedure if you have outstanding amounts due as a result of securities
purchases or other transactions. CSC or the funds' distributor may review your
securities account each business day prior to noon, Eastern time and
automatically sell a sufficient number of fund shares to satisfy any outstanding
amounts due from your account. This procedure will occur on the business day
prior to the day you are obligated to make a payment. Your correspondent firm or
financial services firm will receive these sales proceeds on the day following
the sales date.
SYSTEMATIC WITHDRAWAL PLAN
You may receive automatic payments from your account on a monthly, quarterly or
semi-annual basis if you have a [$1,000] balance in your fund account. The
minimum withdrawal is [$50.] Ordinarily, sales proceeds will be on deposit in
your designated account at an Automatic Clearing House member bank two business
days after the withdrawal. You may request that payment by check to yourself or
a third party. You, your correspondent firm, the transfer agent, or a fund may
request that your participation in the systematic withdrawal plan end at any
time.
If you are a retirement plan participant, you may be eligible for participation
in the systematic withdrawal plan. You may use these services only if
o you are eligible for distributions from your retirement plan,
o your retirement plan permits participants to direct the investment of their
retirement plan balances and
o you are at least 59 1/2 years old
Please contact your Investment Representative, for more information on the
systematic withdrawal plan.
13
<PAGE>
ADDITIONAL INFORMATION
It costs the funds money to maintain shareholder accounts. Therefore, the funds
reserve the right to repurchase all shares in any account that has a net asset
value of less than $500. If a fund elects to do this with your account, you will
be notified that you can increase the amount invested to $500 or more within 60
days. This notice may appear on your account statement.
If you want to sell shares that you purchased recently, a fund may delay payment
until it verifies that it has received good payment. If you purchased shares by
check, this can take up to 15 days.
Each fund's shares are bought and sold without charge to the shareholder.
Correspondent firms or other financial services firms 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 account with your correspondent firm or
other financial services firm before purchasing shares. A correspondent firm
buying or selling shares on your behalf is responsible for transmitting orders
to the transfer agent in accordance with its shareholder agreements and the
procedures noted above.
EXCHANGING SHARES
You may exchange Correspondent Class Shares of one fund for Correspondent Class
Shares of the other fund based on the next determined net asset value per share.
You may place an exchange order up until noon, Eastern time, for each fund.
Exchange orders received after these times are executed on the next business
day. If you exchange all your fund shares, the dividends accrued on those shares
for the month to date also will be invested in the shares of the other fund into
which the exchange is made.
You may place an exchange order through your Investment Representative, who must
then send the order on a timely basis to the transfer agent as noted above.
Exchange transactions must meet the minimum initial investment of the new fund.
There is no minimum for subsequent exchanges between fund accounts once they
have been activated except as noted above.
The funds may modify or terminate the exchange privilege at any time.
PRICING AND VALUATION
The price of fund shares is based on net asset value. The net asset value per
share for a fund is the total value of the fund divided by the total number
shares outstanding. In determining net asset value, each 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. Each fund's net asset value per share is expected to
be $1.00 per share, although this value is not guaranteed.
The net asset value per share for each fund is determined once each business day
at noon, Eastern time, on days that the New York Stock Exchange is open, except
Columbus Day and Veterans Day. Your price for buying or selling or exchanging
your shares will be the net asset value that is next calculated after the fund
accepts your order.
14
<PAGE>
MANAGEMENT
INVESTMENT ADVISER
Mitchell Hutchins Asset Management Inc. is the investment adviser and
administrator of the funds. Mitchell Hutchins is located at 1285 Avenue of the
Americas, New York, New York, 10019 and is a wholly owned asset management
subsidiary of PaineWebber Incorporated, which is wholly owned by Paine Webber
Group Inc., a publicly owned financial services holding company. On July 31,
1999, PaineWebber or Mitchell Hutchins was the adviser or sub-adviser of [__]
investment companies with [__] separate portfolios and aggregate assets of
approximately [$__._] billion.
ADVISORY FEES
Each fund will pay advisory and administration fees to Mitchell Hutchins at the
annual rate of 0.20% of its average daily net assets.
15
<PAGE>
DIVIDENDS AND TAXES
DIVIDENDS
Each fund declares dividends daily and pays them monthly. Each 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.
Shares earn dividends on the day they are purchased but do not earn dividends on
the day they are sold.
You will receive dividends in additional shares of the same class. You must
contact your Investment Representative if you prefer to receive dividends by
check.
TAXES
Premier Tax-Free Money Market Fund seeks to pay dividends that are exempt from
federal income tax. Premier Money Market Fund expects that its dividends will be
taxed primarily as ordinary income.
Each fund will tell you annually how you should treat its dividends for tax
purposes.
A portion of each fund's dividends may be subject to federal and state income
taxes. Each fund also may pay dividends that are subject to the federal
alternative minimum tax.
Any taxable dividends you receive from a fund will be taxable to you regardless
of whether you receive them in additional fund shares or in cash.
16
<PAGE>
If you want more information about the funds, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semi-annual reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the funds and is incorporated
by reference into this prospectus.
You may discuss your questions about the funds by contacting your Investment
Representative. You may obtain free copies of annual and semi-annual reports and
the SAI by contacting the funds directly at 1-800-[ ].
You may review and copy information about the funds, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You can get text-only copies of reports and other information about
the funds:
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 Premier Money Market Fund
-- LIR Premier Tax-Free Money Market Fund
Investment Company Act File No. 811-08767
<PAGE>
LIR PREMIER MONEY MARKET FUND
LIR PREMIER TAX-FREE MONEY MARKET FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
Premier Money Market Fund and Premier Tax-Free Money Market 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 three separate, diversified, money market funds.
Premier Money Market Fund seeks a high level of current income consistent with
the preservation of capital and the maintenance of liquidity through investments
in a diversified portfolio of high quality, short-term, U.S. dollar-denominated
money market instruments. Premier Tax-Free Money Market Fund seeks a high level
of current income exempt from federal income tax consistent with the
preservation of capital and the maintenance of liquidity through investments in
a diversified portfolio of high quality, short-term money market instruments
that are exempt from federal income tax.
Each fund offers Correspondent Class Shares through certain correspondent
firms and certain other financial services firms for the benefit of their
customers.
The funds' investment adviser, administrator and distributor is Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset
management subsidiary of PaineWebber Incorporated.
Portions of the funds' Annual Report to Shareholders are incorporated by
reference into this Statement of Additional Information. The Annual Report
accompanies this Statement of Additional Information. You may obtain an
additional copy of the funds' Annual Report by calling toll-free [ ].
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the funds' current Prospectus, dated [_______ __,
1999]. A copy of the Prospectus may be obtained by calling your [Investment
Representative] at your correspondent firm or by calling toll-free [ ].
This Statement of Additional Information is dated [________ __, 1999].
TABLE OF CONTENTS
PAGE
The Funds and Their Investment Policies......... 2
The Funds' Investments, Related Risks and
Limitations.....................................
Organization of the Trust; Trustees and Officers
and Principal Holders of Securities..........
Investment Advisory and Distribution Arrangements
Portfolio Transactions..........................
Additional Purchase and Redemption Information;
Service Organizations........................
Valuation of Shares.............................
Performance Information.........................
Taxes...........................................
Other Information...............................
Financial Statements............................
<PAGE>
THE FUNDS AND THEIR INVESTMENT POLICIES
No fund's investment objective may be changed without shareholder
approval. Except where noted, the other investment policies of each 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.
PREMIER MONEY MARKET FUND'S investment objective is high current income to
the extent consistent with preservation of capital and the maintenance of
liquidity. The fund invests in a diversified portfolio of high quality,
short-term U.S. dollar-denominated money market instruments. The fund invests in
high quality money market instruments that have, or are deemed to have,
remaining maturities of 13 months or less. These instruments include (1)
commercial paper and other short-term obligations of corporations, partnerships,
trusts and other entities, (2) U.S. government securities, (3) certificates of
deposit and other bank obligations, (4) funding agreements and other insurance
company obligations and (5) repurchase agreements regarding any of the
foregoing. The fund may invest in foreign money market instruments, but only if
they are denominated in U.S. dollars. The fund's investments may include
variable and floating rate securities. The fund maintains a dollar-weighted
average portfolio maturity of 90 days or less.
The fund may invest in obligations (including certificates of deposit,
bankers' acceptances and similar obligations) of U.S. and foreign banks having
total assets at the time of purchase in excess of $1.5 billion. The fund may
invest in non-negotiable time deposits of U.S. banks, savings associations and
similar depository institutions only if the institution has total assets at the
time of purchase in excess of $1.5 billion and the time deposits have a maturity
of seven days or less.
The fund 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.
The 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). The fund
may purchase only U.S. dollar-denominated obligations of foreign issuers.
The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
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. The fund
may borrow up to 10% of the value of its total assets for temporary purposes,
including through entering into reverse repurchase agreements. The fund may
invest up to 10% of its total assets in the securities of other money market
funds.
PREMIER TAX-FREE MONEY MARKET FUND'S investment objective is to provide a
high level of current income exempt from federal income tax consistent with the
preservation of capital and maintenance of liquidity. The fund invests
substantially all of its assets in high quality, short-term money market
instruments having or deemed to have remaining maturities of 13 months or less
issued by states, municipalities, public authorities and other issuers, the
interest from which is exempt from federal income tax ("Municipal Securities").
These instruments include (1) municipal commercial paper, (2) municipal bonds
and notes and (3) variable and floating rate municipal securities. The fund
maintains a dollar-weighted average portfolio maturity of 90 days or less.
2
<PAGE>
Municipal bonds include industrial development bonds ("IDBs"), private
activity bonds ("PABs"), moral obligation bonds, municipal lease obligations and
certificates of participation therein and put bonds. The interest on most PABs
is an item of tax preference for purposes of the federal alternative minimum tax
("AMT"). Under normal market conditions, the fund intends to invest in Municipal
Securities that pay interest that is not an item of tax preference for purposes
of the AMT ("AMT exempt interest"), but may invest up to 20% of its total assets
in such securities if in Mitchell Hutchins' judgment, market conditions warrant.
In addition, when Mitchell Hutchins believes that there is an insufficient
supply of Municipal Securities or during other unusual market conditions, the
fund may temporarily hold cash and may invest all or any portion of its net
assets in taxable money market instruments, including repurchase agreements. To
the extent that the fund holds cash, such cash would not earn income and would
reduce the fund's yield.
The fund may invest more than 25% of its total assets in municipal
obligations which are related in such a way that an economic, business or
political development or change affecting one such security also would affect
the other securities; for example, securities the interest upon which is paid
from revenues of similar types of projects such as mass transit or water and
sewer works, or securities whose issuers are located in the same state. As a
result of such investments, the fund's yield may be more affected by factors
pertaining to the economy of the relevant governmental issuer and other factors
specifically affecting the ability of issuers of such securities to meet their
obligations.
The fund may purchase only those Municipal Securities that Mitchell
Hutchins determines, pursuant to procedures adopted by the board, present
minimal credit risks and are "First Tier Securities" as defined above.
The 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). The fund
may purchase only U.S. dollar-denominated obligations of foreign issuers.
The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
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. The fund
may borrow up to 10% of its total assets for temporary purposes, including
through entering into reverse repurchase agreements.
THE FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS
The following supplements the information contained in the Prospectus and
above concerning the funds' investments, related risks and limitations. Except
as otherwise indicated in the Prospectus 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 the funds invest
(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 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 the funds, an issue may cease to be rated or
its rating may be reduced. If a security in the funds' portfolios 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 funds' board, will consider
whether the funds 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.
3
<PAGE>
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The funds may purchase
commercial paper, which includes short-term obligations issued by corporations,
partnerships, trusts or other entities to finance short-term credit needs. The
funds also may purchase non-convertible debt obligations with no more than 397
days remaining to maturity at the time of purchase. Descriptions of certain
types of short-term obligations are provided below.
U.S. GOVERNMENT SECURITIES 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.
ASSET-BACKED SECURITIES. The funds may invest in securities that are
comprised of financial assets. Such assets may include motor vehicle installment
sales contracts, 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. The funds
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, the funds 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. The funds' 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 funds 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, the funds 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
regulatory requirements or (3) as needed to provide liquidity to the funds 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. The funds 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
4
<PAGE>
direct agreement between the funds 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 the funds or the issuer. These notes are payable on
demand and may or may not be rated.
INVESTING IN FOREIGN SECURITIES. Premier Money Market 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, and there may be less available
information about the service providers (including depositories, banks and
brokerage firms that the fund may use for custody of its assets or to effect
transactions).
CREDIT AND LIQUIDITY ENHANCEMENTS. The funds may invest in securities that
have credit or liquidity enhancements or the funds may purchase these types of
enhancements in the secondary market. Such enhancements may be structured as
demand features that permit the funds 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 the funds to use them when the funds wishes to do so. Changes in the credit
quality of these could cause losses to the funds and affect their share price.
ILLIQUID SECURITIES. The term "illiquid securities" for purposes of the
Prospectus 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 the funds have 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 the
funds invest in illiquid securities, they may not be able to liquidate such
investments readily and may have to sell other investments if necessary to raise
cash to meet their 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, the funds
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 funds may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the funds 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
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
the funds, however, could affect adversely the marketability of such portfolio
securities, and the funds might be unable to dispose of such securities promptly
or at favorable prices.
5
<PAGE>
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, or are expected to make quotes, for the
security, (3) the number of dealers that have undertaken to make a market in the
security, (4) the number of other potential purchasers (5) 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 (6) the
existence of demand features or similar liquidity enhancements. Mitchell
Hutchins monitors the liquidity of restricted securities in the funds'
portfolios and reports periodically on such decisions to the board.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
funds purchase securities or other obligations from a bank or securities dealer
(or its affiliate) and simultaneously commit 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 funds maintain custody of the underlying
obligations prior to their repurchase, either through their regular custodian or
through a special "tri-party" custodian or sub-custodian that maintains separate
accounts for both the funds and their 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 funds 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 funds may suffer delays, costs and possible losses in connection with the
disposition of collateral. The funds intend to enter into repurchase agreements
only in transactions with counterparties believed by Mitchell Hutchins to
present minimum credit risks in accordance with guidelines established by the
board.
REVERSE REPURCHASE AGREEMENTS. Each fund may enter into reverse repurchase
agreements with banks, brokers or dealers. In these transactions, a fund sells a
portfolio security to another party in return for cash and agrees to repurchase
the security generally at a particular price and time. A fund will use the cash
to make investments which either mature or have a demand feature to resell to
the issuer at a date simultaneous with or prior to the time a fund must
repurchase the security. Reverse repurchase agreements may be preferable to a
regular sale and later repurchase of the securities because it avoids certain
market risks and transaction costs. Such transactions, however, may increase the
risk of potential fluctuations in the market value of a fund's assets. In
addition, interest costs on the cash received may exceed the return on the
securities purchased. The Trust's board has considered the risks to each fund
and its shareholders which may result from the entry into reverse repurchase
agreements and have determined that the entry into such agreements is consistent
with a fund's investment objective and management policies. A fund will maintain
in a segregated custodial account permissible liquid assets equal to the
aggregate amount of its reverse repurchase obligations, plus accrued interest,
in certain cases, in accordance with releases promulgated by the SEC.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The funds 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 funds later than
the normal settlement date for such securities at a stated price and yield. The
funds generally would not pay for such securities or start earning interest on
them until they are received. However, when the funds undertake a when-issued or
delayed delivery obligation, they immediately assume the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by the funds on a when-issued or delayed delivery basis may
result in the funds' incurring a loss or missing an opportunity to make an
alternative investment.
6
<PAGE>
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 funds' net asset value. When the funds commit to purchase
securities on a when-issued or delayed delivery basis, their custodian
segregates assets to cover the amount of the commitment. See "The Funds'
Investments, Related Risks and Limitations--Segregated Accounts." The funds 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 funds.
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, the funds would continue to pay their own management fees and
expenses with respect to all its investments, including shares of other money
market funds. The funds 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 funds' 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.
Pursuant to procedures adopted by the board governing the funds'
securities lending program, PaineWebber has been retained to serve as lending
agent for the funds. 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 funds' securities
lending program.
SEGREGATED ACCOUNTS. When the funds enter 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.
INVESTMENT LIMITATIONS OF THE FUNDS
FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations
cannot be changed for the funds without the affirmative vote of the lesser of
(a) more than 50% of the outstanding shares of the funds or (b) 67% or more of
the shares of the funds present at a shareholders' meeting if more than 50% of
7
<PAGE>
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, funding
agreements 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.
(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.
8
<PAGE>
(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.
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 and
except that the fund will not purchase securities of registered open-end
investment companies or registered unit investment trusts in reliance on
Sections 12(d)(1)(F) or 12(d)(1)(G) of the Investment Company Act.
(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.
* * *
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.
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 three operating 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 and
officers, 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:
9
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE POSITION WITH TRUST DIRECTORSHIPS
---------------------- ------------------- -------------
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
One Old Church Road (management consulting firm)
Unit #6 (since April 1991 and principal
Greenwich, CT 06830 occupation since March 1995).
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.
E. Garrett Bewkes, Director and Mr. Bewkes is a director of
Jr.**; 73 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. Mr. Bewkes is a
director of Interstate Bakeries
Corporation. 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.
10
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE POSITION WITH TRUST DIRECTORSHIPS
---------------------- ------------------- -------------
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.,
Powerhouse Technologies Inc. and
Weirton Steel Corp. 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 31
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
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., Federated
Department Stores, Inc. and
Revlon, Inc. 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.
11
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE POSITION WITH TRUST DIRECTORSHIPS
---------------------- ------------------- -------------
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., NWA Inc. (holding
company of Northwest Airlines
Inc.) and Wings Holdings Inc.
(holding company of NWA Inc.).
Prior to 1989, he was employed by
the Marriott Corporation (hotels,
restaurants, airline catering and
contract feeding), where he most
recently was an executive vice
president and president of
Marriott Hotels and Resorts. Mr.
Malek is also a director of
American Management Systems, Inc.
(management consulting and
computer related services),
Automatic Data Processing, Inc.,
CB Commercial Group, Inc. (real
estate services), Choice Hotels
International (hotel and hotel
franchising), FPL Group, Inc.
(electric services), 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.
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.
12
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE POSITION WITH TRUST DIRECTORSHIPS
---------------------- ------------------- -------------
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.
Anthony G. Balestrieri; Vice President Mr. Balestrieri is a senior
36 vice president and a portfolio
manager in the short-term
strategies group of Mitchell
Hutchins. Mr. Balestrieri is a
vice president of one investment
company 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; 42 Vice President Mr. Gerry is a senior vice
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 company for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
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.
13
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE POSITION WITH TRUST DIRECTORSHIPS
---------------------- ------------------- -------------
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; 33 Vice President Mr. Markowitz is a first vice
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; 32 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.
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.
14
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE POSITION WITH TRUST DIRECTORSHIPS
---------------------- ------------------- -------------
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 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; 48 Vice President Ms. Schonfeld is a managing
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.
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; 40 Vice President Ms. Vermann is a vice president
and a portfolio manager of
Mitchell Hutchins. Ms. Vermann is
a vice president of three
investment company for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
15
<PAGE>
BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE POSITION WITH TRUST DIRECTORSHIPS
---------------------- ------------------- -------------
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. -------------
* Unless otherwise indicated, the
business address of each listed
person 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 annually and up to $150 for each board meeting and each 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 any class of each fund. Because Correspondent Services
Corporation and Mitchell Hutchins perform 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 funds or with
other PaineWebber funds during the fiscal year ended December 31, 1998.
COMPENSATION TABLE+
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM THE TRUST AND
NAME OF PERSON, POSITION FROM THE TRUST* THE TRUST 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
- --------------------
16
<PAGE>
+ Only independent board members are compensated by the Trust and identified
above; board members who are "interested persons," as defined by the
Investment Company Act, do not receive compensation.
* Represents fees paid to each board member for the fiscal year ended December
31, 1998.
** 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 [__________], 1999, the funds' records showed [no] shareholders as
owning 5% or more of any class of the funds' shares.
INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. Mitchell Hutchins
acts as the Trust's investment adviser and administrator pursuant to a contract
("Advisory and Administration Contract"). Under the Advisory and Administration
Contract, each fund pays Mitchell Hutchins an annual fee, computed daily and
paid monthly, at the rate of 0.20% of average daily net assets.
Services provided by Mitchell Hutchins under the Advisory and
Administration Contract, as discussed below, 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.
During each of the periods indicated, Mitchell Hutchins was paid the fees
indicated below under the predecessor agreements to the Advisory and
Administration Contract:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31
----------------------------------------------
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Premier Money Market Fund... $1,328,616 $1,088,088 $950,074
Premier Tax-Free Money Market $ 113,647 $ 79,470 $ 9,950
Fund........................
</TABLE>
Under a contract with BISYS Fund Services Ohio, Inc. ("BISYS") ("BISYS
Administration Contract"), BISYS served as the administrator prior to
[__________,] 1999. Under the BISYS Administration Contract, each fund paid
BISYS a fee, computed daily and paid monthly, at an annual rate of .10% of the
value of each fund's average daily net assets. For the fiscal years ended
December 31, 1998, 1997 and 1996, Premier Money Market Fund and Premier Tax-Free
Money Market Fund paid BISYS fees in the amount of $1,328,616, $1,088,088 and
$950,074; and $66,199, $26,487 and $0, respectively.
Pursuant to the terms of a Special Management Services Agreement among the
funds, Mitchell Hutchins and BISYS, each fund had agreed to pay Mitchell
Hutchins and BISYS each a monthly fee at the annual rate of 0.05% of each fund's
average daily net asset value. [BISYS has undertaken not to require further
payment under the Special Management Services Agreement.] The fees payable to
Mitchell Hutchins by Premier Money Market Fund under the Special Management
Services Agreement for the fiscal years ended December 31, 1998, 1997 and 1996,
amounted to $664,308, $554,044 and $461,556, respectively; however, pursuant to
an undertaking, Mitchell Hutchins waived its fee in its entirety for each such
fiscal year. The fees payable to Mitchell Hutchins by Premier Tax-Free Money
Market Fund under the Special Management Services Agreement for the fiscal years
ended December 31, 1998, 1997 and 1996, amounted to $56,824, $46,747 and $9,950,
respectively, which amounts were waived in their entirety pursuant to an
undertaking.
17
<PAGE>
Under the Advisory and Administration Contract, 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 Contract, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of Mitchell Hutchins in the performance of
its duties or from reckless disregard of its duties and obligations thereunder.
The Advisory and Administration Contract terminates automatically upon
assignment and is terminable at any time without penalty by the board or by vote
of the holders of a majority of the funds'outstanding voting securities on 60
days' written notice to Mitchell Hutchins, or by Mitchell Hutchins on 60 days'
written notice to the funds.
Under the terms of the Advisory and Administration Contract, each fund
bears all expenses incurred in its operation that are not specifically assumed
by Mitchell Hutchins. General expenses of the Trust not readily identifiable as
belonging to a specific fund or to the Trust's other series are allocated among
series by or under the direction of the board of directors in such manner as the
board deems fair and equitable. Expenses borne by the Trust include the
following (or each fund's share of 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) fees
and salaries payable to the directors 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 directors 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 directors and officers; and (18) costs of mailing,
stationery and communications equipment.
SECURITIES LENDING. During the fiscal year ended December 31, 1998, the
funds [did not] pay fees to PaineWebber for its services as lending agent
because the funds did not engage in any securities lending activities.
NET ASSETS. The following table shows the approximate net assets as of
[_________], 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.
18
<PAGE>
NET ASSETS
INVESTMENT CATEGORY ($MIL)
Domestic (excluding Money Market)...........
Global......................................
Equity/Balanced.............................
Fixed Income (excluding Money Market).......
Taxable Fixed Income........................
Tax-Free Fixed Income.......................
Money Market Funds..........................
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 mutual funds and other
Mitchell Hutchins advisory accounts by all Mitchell Hutchins' directors,
officers and employees, establishes procedures for personal investing and
restricts certain transactions. For example, employee accounts generally must be
maintained at PaineWebber, personal trades in most securities require
pre-clearance and short-term trading and participation in initial public
offerings generally are prohibited. In addition, the code of ethics puts
restrictions on the timing of personal investing in relation to trades by
PaineWebber 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.
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.
The Advisory and Administration Contract authorizes Mitchell Hutchins
(with the approval of the board) to select brokers and dealers to execute
purchases and sales of the funds' portfolio securities. It directs Mitchell
Hutchins to use its best efforts to obtain the best available price and most
favorable execution with respect to all transactions for the funds. To the
extent that the execution and price offered by more than one dealer are
comparable, Mitchell Hutchins may, in its discretion, effect transactions in
portfolio securities with dealers who provide the funds or Mitchell Hutchins
with research, analysis, advice and similar services. Although Mitchell Hutchins
may receive certain research or execution services in connection with these
transactions, Mitchell Hutchins will not purchase securities at a higher price
or sell securities at a lower price than would otherwise be paid had no services
been provided by the executing dealer. Agency transactions in over-the-counter
securities are entered into only in compliance with procedures ensuring that the
transaction (including commissions) is at least as favorable as it would have
been if effected directly with a market-maker that did not provide research or
execution services. These procedures include a requirement that Mitchell
Hutchins obtain multiple quotes from dealers before executing the transaction on
an agency basis. Moreover, Mitchell Hutchins will not enter into any explicit
soft dollar arrangements relating to principal transactions and will not receive
in principal transactions the types of services that could be purchased for hard
dollars. Research services furnished by the dealers with which the funds effect
19
<PAGE>
securities transactions may be used by Mitchell Hutchins in advising other funds
or accounts and, conversely, research services furnished to Mitchell Hutchins in
connection with other funds or accounts that Mitchell Hutchins advises may be
used in advising the funds. Information and research received from dealers will
be in addition to, and not in lieu of, the services required to be performed by
Mitchell Hutchins under the Advisory and Administration Contract.
[To date, the funds have paid no brokerage commissions. Therefore, the
funds have not allocated any brokerage transactions for research, analysis
advice and similar services.]
Investment decisions for the funds and for other investment accounts
managed by Mitchell Hutchins are made independently of each other in light of
differing considerations for the various accounts. However, the same investment
decision may occasionally be made for the funds and one or more of such
accounts. In such cases, simultaneous transactions are inevitable. Purchases or
sales are then averaged as to price and allocated between the funds and such
other account(s) as to amount according to a formula deemed equitable to the
funds and such account(s). While in some cases this practice could have a
detrimental effect upon the price or value of the security as far as the funds
are concerned, or upon its ability to complete its entire order, in other cases
it is believed that coordination and the ability to participate in volume
transactions will be beneficial to the funds.
As of [June 30, 1999], the funds owned securities issued by the following
companies which are regular broker-dealers for the funds: [ ].
ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION; SERVICE ORGANIZATIONS
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION. Each fund may suspend
redemption privileges or postpone the date of payment during any period (1) when
the New York Stock Exchange is closed or trading on the New York Stock Exchange
is restricted as determined by the SEC, (2) when an emergency exists, as defined
by the SEC, that makes it not reasonably practicable for the funds 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 each 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 Investment Representative 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 insitition 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." 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, [to be determined] as of 12:00 noon, Eastern time, on each Business
Day. As defined in the Prospectus, "Business Day" means any day on which the
[___________] offices of the funds' custodian and the funds' transfer agent,
BISYS ("Transfer Agent") and the New York City offices of Mitchell Hutchins and
Mitchell Hutchins' bank are all open for business. One or more of
20
<PAGE>
these institutions will be closed on the observance of the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day and Christmas Day.
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, the funds 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, the funds 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
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
of a specified class
T = average annual total return of shares of that class
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
21
<PAGE>
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.
The funds also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The funds calculate Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in fund shares
and assuming the reinvestment of all dividends distributions. The rate of return
is determined by subtracting the initial value of the investment from the ending
value and by dividing the remainder by the initial value.
The following tables show performance information for the funds' shares
outstanding for the periods indicated. All returns for periods of more than one
year are expressed as an average annual return.
PREMIER MONEY MARKET FUND
RETAIL SHARES INSTITUTIONAL SHARES
Year ended December 31, 1998:
Standardized Return..........
Non-Standardized Return......
Five Years ended December 31, 1998:
Standardized
Return.................
Non-Standardized Return......
Ten Years ended December 31, 1998:
Standardized Return..........
Non-Standardized Return.....
Inception* to December 31, 1998:
Standardized Return..........
Non-Standardized Return......
- --------------
* The inception date for the fund is March 6, 1990.
PREMIER TAX-FREE MONEY MARKET FUND
RETAIL SHARES INSTITUTIONAL SHARES
Year ended December 31, 1998:
Standardized Return..........
Non-Standardized Return......
Five Years ended December 31, 1998:
Standardized
Return.............................
Non-Standardized Return......
Ten Years ended December 31, 1998:
Standardized Return..........
Non-Standardized Return.....
Inception* to December 31, 1998:
Standardized Return..........
Non-Standardized Return......
- --------------
* The inception date for the fund is October 7, 1996.
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
22
<PAGE>
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:
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.
Premier Money Market Fund and Premier Tax-Free Money Market Fund's yields
and effective yields for the seven-day period ended December 31, 1998 were
[________] and [___________]; and [___________] and [___________], respectively.
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.
23
<PAGE>
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.
TAXES
BACKUP WITHHOLDING. The funds are required to withhold 31% of all
dividends and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the funds, the investor's
Investment Representative or his or her financial institution with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends payable to those shareholders who otherwise are subject to backup
withholding.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to qualify
for treatment as a RIC under the Internal Revenue Code, the funds must
distribute to their shareholders for each taxable year at least 90% of their
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 funds must
derive at least 90% of their 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 funds' taxable year, at least 50% of the value of their
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 funds' total assets; and (3) at the close of each quarter of the fund's
taxable year, not more than 25% of the value of the funds' total assets may be
invested in securities (other than U.S. government securities or the securities
of other RICs) of any one issuer. If the funds failed to qualify for treatment
as a RIC for any taxable year, (a) they would be taxed as an ordinary trust on
the full amount of their taxable income for that year without being able to
deduct the distributions they makes to their shareholders and (b) the
shareholders would treat all those distributions as dividends (that is, ordinary
income) to the extent of the funds' earnings and profits. In addition, the funds
could be required to recognize unrealized gains, pay substantial taxes and
interest, and make substantial distributions before requalifying for RIC
treatment.
OTHER INFORMATION
PRIOR NAMES. Prior to [_________], 1999, the funds were series of [_______
____________]. Premier Money Market Fund was known as [_______________________
_________________________________] and Premier Tax-Free Money Market Fund was
known as [___________________________________________________________].
Prior to July 28, 1999, the name of the Trust was "Mitchell Hutchins
Institutional Series."
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 Trust does not hold annual meetings. There normally will be no
meetings of shareholders to elect directors unless fewer than a majority of the
directors holding office have been elected by shareholders. The directors are
required to call a meeting of shareholders when requested in writing to do so by
the shareholders of record holding at least 10% of the Trust's outstanding
shares.
24
<PAGE>
CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. The Fund's
custodian, located at [___________________________________], serves as custodian
and recordkeeping agent for the funds. BISYS, located at 3435 Stelzer Road,
Columbus, OH 43219, serves as the funds' transfer and dividend disbursing agent.
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.
FINANCIAL STATEMENTS
The funds' Annual Report to Shareholders for its last fiscal year ended December
31, 1998 is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing therein are incorporated herein by this
reference.
25
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION
CONTAINED OR REFERRED TO IN THE
PROSPECTUS AND THIS STATEMENT OF
ADDITIONAL INFORMATION. THE FUNDS AND
THEIR DISTRIBUTOR HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT. THE PROSPECTUS AND
THIS 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 LIR Premier Money
LAWFULLY SELL THOSE SHARES. Market Fund
LIR Premier Tax-Free
Money Market Fund
-----------
------------------------------------------
Statement of Additional Information
[_______ ___], 1999
------------------------------------------
(C)1999 Mitchell Hutchins Asset Management Inc.
26
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(1) (a) Trust Instrument 1/
(b) Amendment to Trust Instrument effective July 28, 1999 (to be
filed)
(2) By-Laws 1/
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 2/
(4) (a) Investment Advisory and Administration Contract for Mitchell
Hutchins LIR Select Money Fund (to be filed)
(b) Investment Advisory and Administration Contract for LIR Premier
Money Market Fund and LIR Premier Tax-Free Money Market Fund (to
be filed)
(5) (a) Distribution Contract for Mitchell Hutchins LIR Select Money Fund
(to be filed)
(b) Distribution Contract for LIR Premier Money Market Fund and LIR
Premier Tax-Free Money Market Fund (to be filed)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (to be filed)
(8) (a) Transfer Agency Agreement (to be filed)
(b) Shareholder Service Plan (to be filed)
(c) Shareholder Service Agreement (to be filed)
(9) Opinion and consent of counsel (to be filed)
(10) Other opinions, appraisals, rulings and consents: Auditors' consent (to
be filed)
(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 (to be filed)
(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 Articles IV, VI and X of Registrant's Trust
Instrument and from Articles VI and IX of Registrant's By-Laws.
<PAGE>
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
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
C-2
<PAGE>
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) Mitchell Hutchins serves as principal underwriter and/or investment
adviser for the following investment companies:
ALL AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
GLOBAL SMALL CAP FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICPAL INCOME FUND INC.
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 FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST INC.
b) PaineWebber is the Registrant's principal underwriter. The directors
and officers of PaineWebber, their principal business addresses, and their
positions and offices with PaineWebber are identified in its Form ADV, as filed
with the Securities and Exchange Commission (registration number 801-7163) and
such information is hereby incorporated herein by reference. The information set
forth below is furnished for those directors and officers of PaineWebber who
also serve as trustees or officers of the Trust. Unless otherwise indicated, the
principal business address of each person named is 1285 Avenue of the Americas,
New York, NY 10019.
C-3
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices
Name With Registrant Positions and Offices With Underwriter
- ---- --------------- --------------------------------------
<S> <C> <C>
Margo N. Alexander Trustee and President Executive Vice President and Director of
PaineWebber
Mary C. Farrell Trustee Managing Director, Senior Investment
Strategist and member of the Investment
Policy Committee
Brian M. Storms Trustee President and Chief Operating Officer of
Mitchell Hutchins
</TABLE>
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.
Item 29. Management Services
-------------------
Not applicable.
Item 30. Undertakings
------------
None.
<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 30th day of July, 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 July 30, 1999
- --------------------------- (Chief Executive Officer)
Margo N. Alexander *
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman July 30, 1999
- --------------------------- of the Board of Trustees
E. Garrett Bewkes, Jr. *
/s/ Richard Q. Armstrong Trustee July 30, 1999
- ---------------------------
Richard Q. Armstrong *
/s/ Richard R. Burt Trustee July 30, 1999
- ---------------------------
Richard R. Burt *
/s/ Mary C. Farrell Trustee July 30, 1999
- ---------------------------
Mary C. Farrell *
/s/ Meyer Feldberg Trustee July 30, 1999
- ---------------------------
Meyer Feldberg *
/s/ George W. Gowen Trustee July 30, 1999
- ---------------------------
George W. Gowen *
/s/ Frederic V. Malek Trustee July 30, 1999
- ---------------------------
Frederic V. Malek *
/s/ Carl W. Schafer Trustee July 30, 1999
- ---------------------------
Carl W. Schafer *
/s/ Brian M. Storms Trustee July 30, 1999
- ---------------------------
Brian M. Storms **
/s/ Paul H. Schubert Vice President and Treasurer July 30, 1999
- --------------------------- (Chief Financial and Accounting
Paul H. Schubert 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 July 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 (to be
filed)
(2) By-Laws 1/
(3) Instruments defining the rights of holders of Registrant's shares
of beneficial interest 2/
(4) (a) Investment Advisory and Administration Contract for Mitchell
Hutchins LIR Select Money Fund (to be filed)
(b) Investment Advisory and Administration Contract for LIR
Premier Money Market Fund and LIR Premier Tax-Free Money
Market Fund (to be filed)
(5) (a) Distribution Contract for Mitchell Hutchins LIR Select Money
Fund (to be filed)
(b) Distribution Contract for LIR Premier Money Market Fund and
LIR Premier Tax-Free Money Market Fund (to be filed)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (to be filed)
(8) (a) Transfer Agency Agreement (to be filed)
(b) Shareholder Service Plan (to be filed)
(c) Shareholder Service Agreement (to be filed)
(9) Opinion and consent of counsel (to be filed)
(10) Other opinions, appraisals, rulings and consents: Auditors' consent (to
be filed)
(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 (to be filed)
(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 Articles IV, VI and X of Registrant's Trust
Instrument and from Articles VI and IX of Registrant's By-Laws.
