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LIR Liquid Assets Fund
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PROSPECTUS
DECEMBER 22, 1999
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This prospectus offers shares of a money market fund only to eligible benefit
plans that participate in certain PaineWebber or Correspondent Services
Corporation investment programs and that have arrangements with Mitchell
Hutchins or an affiliate to serve as investment manager for the client or
investment program.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
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LIR Liquid Assets Fund
Contents
THE FUND
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What every investor 3 LIR Liquid Assets Fund
should know about 5 More About Risks and
the fund Investment
Strategies
YOUR INVESTMENT
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Information for 6 Managing Your Fund Account
managing your fund -- Buying Shares
account -- Selling Shares
-- Pricing and Valuation
ADDITIONAL INFORMATION
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Additional important 8 Management
information about the fund 9 Dividends and Taxes
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Where to learn more Back Cover
about the fund
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The fund is not a complete or
balanced investment program.
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LIR Liquid Assets Fund
LIR Liquid Assets Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
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FUND OBJECTIVE
To provide as high a level of current interest income as is consistent with
maintaining liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality money
market instruments of governmental and private issuers.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests in foreign money market instruments only if they are
denominated in U.S. dollars.
Mitchell Hutchins Asset Management Inc., the fund's investment adviser, selects
money market instruments for the fund based on its assessment of relative values
and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is the risk that issuers
may fail, or become less able, to make payments when due. The fund also is
subject to interest rate risk. When short-term interest rates rise, the value of
the fund's investments generally will fall, and its yield will tend to lag
behind prevailing rates. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers.
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:
Credit Risk
Interest Rate Risk
Foreign Securities Risk
PERFORMANCE
The fund is newly organized. As a result, the fund has no operating history or
performance information to include in a bar chart or table reflecting average
annual returns.
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LIR Liquid Assets Fund
EXPENSES AND FEE TABLES
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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)
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Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
offering price)........................................... None
Redemption Fees............................................. None
Exchange Fees............................................... None
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ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets)
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Management Fees*............................................ 0.03%
Distribution and/or Service (12b-1) Fees.................... None
Other Expenses**............................................ 0.18%
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Total Annual Fund Operating Expenses........................ 0.21%
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* The fund reimburses Mitchell Hutchins for its direct costs and expenses
incurred in managing the fund's portfolio, which are included in 'Management
Fees' above. The fund also reimburses Mitchell Hutchins for its direct costs
and expenses in administering the fund. Mitchell Hutchins' direct costs for
management and administration services exclude any costs attributable to
overhead or any profit charge. These fees are estimated amounts. Mitchell
Hutchins periodically will review fund expenses in an effort to confirm that
only direct costs and expenses are paid to Mitchell Hutchins by the fund. See
'Additional Information -- Management.'
** Other expenses are based on estimated amounts for the current fiscal year.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
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1 YEAR 3 YEARS
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$22 $68
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LIR Liquid Assets Fund
MORE ABOUT RISKS
AND INVESTMENT STRATEGIES
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PRINCIPAL RISKS
The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further detail about some of the risks
described below, are discussed in the fund's Statement of Additional Information
('SAI'). Information on how you can obtain the SAI is on the back cover of this
prospectus.
Credit Risk. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even the highest quality money market
instruments are subject to some credit risk.
Interest Rate Risk. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of the fund's investments will fall. Also, the fund's
yield will tend to lag behind changes in prevailing short-term interest rates.
This means that the fund's income will tend to rise more slowly than increases
in short-term interest rates. Similarly, when short-term interest rates are
falling, the fund's income will tend to fall more slowly.
Foreign Securities Risk. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
Year 2000 Risk. The fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.
Similarly, the issuers whose money market instruments are bought by the fund and
the trading systems used by the fund could be adversely affected by this issue.
The ability of an issuer or trading system to respond successfully to the issue
requires both technological sophistication and diligence, and there can be no
assurance that any steps taken will be sufficient to avoid an adverse impact on
the fund.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the fund is subject to maturity, quality and
diversification requirements designed to help it maintain a stable price of
$1.00 per share. The fund's investment strategies are designed to comply with
these requirements.
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LIR Liquid Assets Fund
YOUR INVESTMENT
MANAGING YOUR FUND ACCOUNT
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BUYING SHARES
The fund offers its shares only to eligible benefit plans, including individual
retirement accounts, through brokerage accounts established as eligible benefit
plan sweep accounts at PaineWebber Incorporated, Mitchell Hutchins or certain
other financial services firms. The types of eligible benefit plans that are
permitted to buy fund shares are described below. You can open an eligible
benefit plan sweep account by contacting your Financial Advisor.
Fund shares are available only to eligible benefit plans that participate in
certain investment programs offered by PaineWebber or an affiliate and managed
by Mitchell Hutchins or an affiliate. The eligible investment programs include:
PaineWebber ACCESS'sm';
PaineWebber Managed Account Consulting (MAC) Wrap;
PaineWebber Portfolio Management Program (PMP);
PaineWebber SELECTIONS'sm'; and
CSChoice'sm'.
The fund may be made available to other programs in the future.
Eligible benefit plans that participate in these programs may purchase fund
shares only if Mitchell Hutchins or an affiliate serves as investment manager
(i.e., PaineWebber, Mitchell Hutchins or an affiliate exercises investment
discretion with respect to account assets).
BUYING SHARES AUTOMATICALLY
The fund is designed to automatically invest free credit cash balances (that is,
immediately available funds) held in your account in shares of the fund for the
investment programs listed above. If you are eligible to buy fund shares, the
fund will be offered as the money market sweep fund for the automatic investment
of free credit cash balances. You should contact your Financial Advisor to
determine if another money market fund is available for your account. (Neither
your Financial Advisor, Mitchell Hutchins, nor any affiliate may recommend a
specific money market fund for automatic investment of such account balances.)
All free cash credit balances of $1.00 or more in your brokerage account are
automatically invested in the fund on a daily basis for settlement the next
business day. These amounts include proceeds of securities sold in your account.
All remaining free cash credit balances under $1.00 are invested in fund shares
monthly. There is no sales charge or commission paid for the automatic purchase
of shares.
Your purchase of fund shares will be priced at the next determination of net
asset value on any business day after federal funds become available to the
fund. Federal funds are funds deposited by a commercial bank in an account at a
Federal Reserve Bank that can be transferred to a similar account of another
bank in one day and thus can be made immediately available to the fund. A
business day is any day that the Boston offices of the fund's custodian and the
New York City offices of Mitchell Hutchins are open for business.
The fund and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of fund shares.
The fund pays no sales commission, sales load or distribution fees to the
principal underwriter and its affiliates, or any other person, in connection
with the sale of fund shares. Neither Mitchell Hutchins nor any affiliate
exercises any discretion with respect to the timing or frequency of the
automatic investment of free cash balances.
Please consult your Financial Advisor for more information about this automatic
purchase feature.
BENEFIT PLANS ELIGIBLE TO BUY FUND SHARES
Eligible benefit plans that may buy fund shares include
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LIR Liquid Assets Fund
individual retirement accounts (e.g., traditional, rollover and 'SIMPLE' IRAs)
simplified employee pension plans
cash or deferred arrangements (i.e., 401(k) plans, including SIMPLE 401(k)
plans)
profit sharing plans
money purchase plans
defined benefit plans
target benefit plans
church plans
government plans
self-employed plans (i.e., 'KEOGHs')
Other benefit plans may be eligible to buy fund shares. Contact your Financial
Advisor for more information regarding these benefit plans.
Although the amount that you may contribute to an eligible benefit plan in any
one year is subject to certain limitations, you may invest assets already held
in an eligible benefit plan in the fund without regard to these limitations.
SELLING SHARES
Your fund shares will be sold automatically to settle any outstanding securities
purchases or debits to your brokerage account.
If the proceeds from selling your fund shares remain in the eligible benefit
plan sweep account, certain adverse tax consequences that may otherwise be
applicable to eligible benefit plan distributions will not occur.
ADDITIONAL INFORMATION
Investment programs buying or holding shares for their client accounts may
charge clients for cash management and other services provided in connection
with their accounts.
You should consider the terms of your investment program before purchasing
shares.
PRICING AND VALUATION
The price of fund shares is based on net asset value. The net asset value per
share is the total value of the fund divided by the total number of shares
outstanding. In determining net asset value, the fund values its securities at
their amortized cost. This method uses a constant amortization to maturity of
the difference between the cost of the instrument to the fund and the amount due
at maturity. The fund's net asset value per share is expected to be $1.00 per
share, although this value is not guaranteed. Your price for buying or selling
your shares will be the net asset value that is next calculated after the fund
accepts your order.
The fund calculates its net asset value per share twice each business day at
noon, Eastern time, and the close of regular trading on the New York Stock
Exchange (generally, 4:00 p.m., Eastern time), on days that the New York Stock
Exchange is open, except Columbus Day and Veterans Day.
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LIR Liquid Assets Fund
ADDITIONAL INFORMATION
MANAGEMENT
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INVESTMENT ADVISER
Mitchell Hutchins is the investment adviser and administrator of the fund, and
its principal underwriter. Mitchell Hutchins is located at 51 West 52nd Street,
New York, New York 10019-6114. Mitchell Hutchins is a wholly owned asset
management subsidiary of PaineWebber Incorporated, which is wholly owned by
Paine Webber Group Inc., a publicly owned financial services holding company. On
November 30, 1999, Mitchell Hutchins managed approximately $61 billion in client
assets with Mitchell Hutchins or PaineWebber as the adviser or sub-adviser of 33
investment companies with 76 separate portfolios and aggregate assets of
approximately $50.5 billion.
ADVISORY FEES
The fund pays advisory and administration fees to Mitchell Hutchins that are
limited to reimbursements for direct costs, excluding any profit or overhead,
for the expenses Mitchell Hutchins incurs pursuant to an agreement with the
fund. Mitchell Hutchins has advised the fund that it expects advisory and
administration fees to approximate an annual rate of 0.03% of the average daily
net assets of the fund for its initial fiscal year. These fees are estimated
amounts. Mitchell Hutchins periodically will review fund expenses in an effort
to confirm that only direct costs and expenses are paid to Mitchell Hutchins by
the fund.
Under the agreement with the fund, Mitchell Hutchins manages the investment
operations of the fund and also administers the fund's business affairs.
Mitchell Hutchins is reimbursed by the fund for its direct advisory and
administrative costs and expenses, excluding any profit or overhead, incurred in
providing services to the fund. Mitchell Hutchins' costs include the following:
(i) paying the salaries and expenses of the fund's officers and other personnel
engaged in administering the fund's business; (ii) monitoring financial and
shareholder accounting services provided by the fund's custodian and transfer
agent, respectively; (iii) responding to shareholder inquiries and disseminating
information to shareholders; (iv) monitoring compliance with the fund's
registration statement and other operating documents, with federal and state
securities laws and rules thereunder and with the Internal Revenue Code;
(v) preparing semi-annual and annual reports to shareholders; (vi) preparing
filings required by the SEC; (vii) assisting in the preparation of federal,
state and local tax returns; (viii) assisting with the payment of notice filing
fees under state securities laws; (ix) organizing annual and special meetings of
the fund's shareholders; and (x) paying any other costs and expenses Mitchell
Hutchins incurs in managing the portfolio of the fund. The fund will incur other
expenses in its operations. See 'Investment Advisory and Distribution
Arrangements' in the SAI.
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LIR Liquid Assets Fund
DIVIDENDS AND TAXES
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DIVIDENDS
The fund declares dividends daily and pays them monthly. The fund distributes
any net short-term capital gain annually, but may make more frequent
distributions if necessary to maintain its share price at $1.00 per share.
Your dividends will be reinvested in additional shares of the fund, unless you
elect to receive them in cash. Contact your Financial Advisor or your financial
services firm if you prefer to receive dividends in cash.
TAXES
Eligible benefit plan participants ordinarily do not pay taxes on dividends they
receive on fund shares until they withdraw the proceeds from the plan.
Generally, withdrawals from an eligible benefit plan will be taxable as ordinary
income. Withdrawals will be subject to an additional tax equal to 10% of the
amount distributed unless the withdrawals are used to pay certain higher
education expenses and certain acquisition costs of first time home buyers or
are made after the participant:
reaches age 59 1/2;
becomes permanently disabled; or
reaches at least age 55 and is separated from service of the employer who
sponsored the plan.
The failure of an eligible benefit plan to distribute sufficient income after a
participant reaches age 70 1/2 may be subject to an excise tax. Moreover,
certain contributions to a benefit plan in excess of the amounts permitted by
law may be subject to an excise tax.
The fund notifies its shareholders following the end of each calendar year of
the amount of all dividends paid that year.
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If you want more information about the fund, the following document is available
free upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about the fund by contacting your Financial
Advisor. You may obtain free copies of the SAI by contacting the fund directly
at 1-800-647-1568.
You may review and copy information about the fund, including the SAI, at the
Public Reference Room of the Securities and Exchange Commission. You may obtain
information about the operations of the SEC's Public Reference Room by calling
the SEC at 1-202-942-8090. You can get text-only copies of information about the
fund:
For a fee, by electronic request at [email protected] or by writing to or
calling the SEC's Public Reference Room, Washington, D.C. 20549-0102; or
Free, from the EDGAR Database on the SEC's Internet website at:
http://www.sec.gov.
Mitchell Hutchins LIR Money Series
- -- LIR Liquid Assets Fund
Investment Company Act File No. 811-08767
LIR
LIQUID ASSETS FUND
Prospectus
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December 22, 1999
'c' 1999 PaineWebber Incorporated. All rights reserved.
STATEMENT OF DIFFERENCES
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The copyright symbol shall be expressed as............. 'c'
The service mark symbol shall be expressed as.......... 'sm'
