<PAGE> PAGE 1
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<PAGE> PAGE 2
011 C010001 NEW YORK
011 C020001 NY
011 C030001 10019
012 A000001 PFPC, INC.
012 B000001 84-0000000
012 C010001 WILMINGTON
012 C020001 DE
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<PAGE> PAGE 3
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022 A000008 JOHN NUVEEN & CO
022 C000008 24700
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022 A000009 SMITH BARNEY SHEARSON
022 B000009 13-1912900
022 C000009 10900
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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SIGNATURE JULIAN SLUYTERS
TITLE TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000814400
<NAME> PAINEWEBBER/KIDDER PEABODY
CALIFORNIA TAX EXEMPT MONEY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<INVESTMENTS-AT-COST> 151,265,165
<INVESTMENTS-AT-VALUE> 151,265,165
<RECEIVABLES> 1,095,218
<ASSETS-OTHER> 1,821,930
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,182,313
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 299,896
<TOTAL-LIABILITIES> 299,896
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 153,898,792
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (358,628)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 153,882,417
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,571,004
<OTHER-INCOME> 0
<EXPENSES-NET> 1,151,065
<NET-INVESTMENT-INCOME> 4,419,939
<REALIZED-GAINS-CURRENT> (27,632)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,392,307
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,419,939
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 641,776,055
<NUMBER-OF-SHARES-REDEEMED> 675,247,310
<SHARES-REINVESTED> 4,147,327
<NET-CHANGE-IN-ASSETS> (29,323,928)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 787,433
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,151,065
<AVERAGE-NET-ASSETS> 157,851,299
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.03)
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<AVG-DEBT-PER-SHARE> 0
For the year ended July 31, 1995 Exhibit 77C
File Number 811-5168
A special meeting of shareholders of PaineWebber/Kidder, Peabody California Tax
Exempt Money Fund ("Fund") was held on April 13, 1995. At the meeting the
following agreements were approved for the Fund:
The votes were as follows:
1) An interim investment advisory agreement between the Fund and Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins") containing substantially
the same terms, conditions and fees as the previous investment advisory
agreement with Kidder Peabody Asset Management, Inc. ("KPAM").
The votes were as follows:
Shares Shares Shares
Voted For Voted Against Withhold Authority
- ---------- ------------- ------------------
77,081,043 599,102 1,530,404
2) A new investment advisory and administration agreement with PaineWebber
containing substantially the same fees and substantially similar material terms
and conditions as the previous investment advisory agreement with KPAM to
commence on the termination of the interim agreement.
The votes were as follows:
Shares Shares Shares
Voted For Voted Against Withhold Authority
- ---------- ------------- ------------------
77,890,882 658,381 1,661,287
3) A new sub-advisory and sub-administration agreement between PaineWebber and
Mitchell Hutchins to commence on the termination of the interim agreement for
the Fund.
The votes were as follows:
Shares Shares Shares
Voted For Voted Against Withhold Authority
- ---------- ------------- ------------------
77,420,422 866,938 1,923,191
[LETTERHEAD OF ERNST & YOUNG]
The Board of Trustees and Shareholders
PaineWebber/Kidder, Peabody California Tax Exempt Money Fund
In planning and performing our audit of the financial statements of
PaineWebber/Kidder, Peabody California Tax Exempt Money Fund for the
year ended July 31, 1995, we considered its internal control structure,
including procedures for safeguarding securities, in order to determine
our auditing procedures for the purpose of expressing our opinion on the
financial statements and to comply with the requirements of Form N-SAR,
not to provide assurance on the internal control structure.
The management of PaineWebber/Kidder, Peabody California Tax Exempt Money
Fund is responsible for establishing and maintaining an internal control
structure. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs
of internal control structure policies and procedures. Two of the
objectives of an internal control structure are to provide management with
reasonable, but not absolute, assurance that assets are safeguarded against
loss from unauthorized use or disposition and that transactions are executed
in accordance with management's authorization and recorded properly to permit
preparation of financial statements in conformity with generally accepted
accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce
to a relatively low level the risk that errors or irregularities in amounts
that would be material in relation to the financial statements being audited
may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions. However, we noted no
matters involving the internal control structure, including procedures for
safeguarding securities, that we consider to be material weaknesses as defined
above as of July 31, 1995.
This report is intended solely for the information and use of management and
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
September 21, 1995
July 27, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
At a meeting held on July 20, 1995, the Boards of Trustees/Directors of the
Funds, listed on the attached schedule, approved the engagement of Ernst &
Young LLP as their independent auditors for the fiscal years ending, as
noted on the attached listing, to replace the firm of Deloitte & Touche LLP
effective July 20, 1995.
The reports of Deloitte & Touche LLP on the Funds' financial statements for
the past two fiscal years did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles.
In connection with the audits of the Funds' financial statements for each
of the past two fiscal years ended (see attached listing) and in the
subsequent interim period, there were no disagreements with Deloitte &
Touche LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope and procedures which, if not
resolved to the satisfaction of Deloitte & Touche LLP would have caused
Deloitte & Touche LLP to make reference to the matter in their reports.
The Funds have requested Deloitte & Touche LLP to furnish a letter
addressed to the Commission stating whether it agrees with the above
statements. A copy of that letter, dated
July 26, 1995 is attached hereto.
Sincerely,
/s/ Paul Schubert
Paul Schubert
Vice President and Assistant Treasurer
PS:wlq
<PAGE>
Mitchell Hutchins
PAINEWEBBER/KIDDER, PEABODY
MITCHELL HUTCHINS/KIDDER, PEABODY
FUND LISTING
PaineWebber/Kidder, Peabody California Tax-Exempt Money Fund - fiscal year
ending July 31, 1995.
PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc. - fiscal year ending
July 31, 1995.
Mitchell Hutchins/Kidder, Peabody Equity Income Fund Inc. - fiscal year
ending January 31, 1996.
Mitchell Hutchins/Kidder, Peabody Government Income Fund, Inc. - fiscal year
ending January 31, 1996.
PaineWebber/Kidder, Peabody Government Money Fund, Inc. - fiscal year
ending March 31, 1996.
PaineWebber/Kidder, Peabody Premium Account Fund - fiscal year ending March
31, 1996.
PaineWebber/Kidder, Peabody Tax Exempt Money Fund, Inc. - fiscal year ending
September 30, 1995.
Institutional Series Trust
with respect to
Institutional Adjustable Rate Government Portfolio - fiscal year ending
November 30, 1995.
Mitchell Hutchins/Kidder, Peabody Investment Trust
with respect to
Mitchell Hutchins/Kidder, Peabody Adjustable Rate Government Fund - fiscal
year ending August 31, 1995.*
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund - fiscal year ending
August 31, 1995.
Mitchell Hutchins/Kidder, Peabody Global Equity Fund - fiscal year ending
August 31, 1995.*
Mitchell Hutchins/Kidder, Peabody Intermediate Fixed Income Fund - fiscal
year ending August 31, 1995.*
* Deloitte & Touche LLP also audited and issued reports on the past two
semi-annual periods ended February 28, 1995.
<PAGE>
Mitchell Hutchins
PAINEWEBBER/KIDDER, PEABODY
MITCHELL HUTCHINS/KIDDER, PEABODY
FUND LISTING
Page 2 of 2
Mitchell Hutchins/Kidder, Peabody Investment Trust II
with respect to
Mitchell Hutchins/Kidder, Peabody Emerging Markets Equity Fund - fiscal
year ending June 30, 1996.
Mitchell Hutchins/Kidder, Peabody Municipal Bond Fund - fiscal year ending
June 30, 1996.
Mitchell Hutchins/Kidder, Peabody Investment Trust III
with respect to
Mitchell Hutchins/Kidder, Peabody Small Cap Equity Fund - fiscal year ending
July 31, 1995.
Liquid Institutional Reserves
with respect to
Government Securities Fund - fiscal year ending April 30, 1996.
Money Market Fund - fiscal year ending April 30, 1996.
Treasury Securities Fund - fiscal year ending April 30, 1996.
PaineWebber/Kidder, Peabody
Municipal Money Market Series
with respect to
Connecticut Series - fiscal year ending October 31, 1995.
New Jersey Series - fiscal year ending October 31, 1995
New York Series - fiscal year ending October 31, 1995
(Collectively referred to as "The Funds")
<PAGE>
[MITCHELL HUTCHINS LETTERHEAD]
July 27, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We have read and agree with the comments contained in the attached letter dated
July 25, 1995.
Yours truly,
/s/ Deloitte & Touche LLP
PAGE>
[DELOITTE & TOUCHE LLP LETTERHEAD]
July 26, 1995
Mr. Paul Schubert
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
Dear Mr. Schubert:
This is to confirm that the client-auditor relationship between
PaineWebber/Kidder, Peabody Investment Funds and the Mitchell Hutchins/Kidder,
Peabody Investment Funds and Deloitte & Touche LLP has ceased.
Yours truly,
/s/ Deloitte & Touche LLP
cc: Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
