PAINEWEBBER/
KIDDER, PEABODY
MUNICIPAL
MONEY MARKET
SERIES
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
December 20, 1995
Dear Shareholder,
During the year ended October 31, 1995, the pace of U.S. economic growth slowed,
as consumer spending declined significantly from 1994 levels, and markets for
new and existing homes were sluggish, despite historically attractive mortgage
rates. This slowdown was in response to the Federal Reserve Board's repeated
increases in the benchmark Federal Funds rate, the rate banks charge each other
for overnight borrowing. With seven short-term interest rate hikes between
February 1994 and February 1995, the Federal Reserve Board raised the Federal
Funds rate to 6.0%, and effectively doubled short-term interest rates in twelve
months.
In addition to concerns over the strength of the recovery, news concerning the
economy centered around debate over whether inflation was still likely to become
a threat and details of efforts in Washington to implement a plan to balance the
budget. While the outcome of the budgetary process remains in question, the
perception that the Federal Reserve is winning its war against inflation is
becoming increasingly widespread. On July 6, 1995, the Federal Reserve cut the
benchmark Federal Funds rate by 0.25%. This decrease, the first in nearly three
years, signals that the Federal Reserve Board believes that inflationary
pressures have eased enough to accommodate an adjustment in monetary policy. On
December 19, 1995, the Federal Reserve, citing low inflation, once again trimmed
the Federal Funds rate by 0.25% to 5.50%. We expect the combination of slower
near-term economic growth, continued low inflation and an eventual federal
budget deficit reduction agreement to trigger further Fed easing of the Federal
Funds rate.
After a 13-month-long correction fueled by the Fed's monetary tightening policy,
interest rates trended lower and the bond market rallied from mid-November 1994
throughout 1995. The U.S. stock market has also rallied strongly during 1995,
pushing the Dow Jones Industrial Average and S&P 500 indices to a string of new
highs. The value of the U.S. dollar declined for much of the period, but began
to show signs of recovery in August.
PORTFOLIO REVIEW
As of October 31, 1995, the current 7-day yields for PaineWebber/Kidder, Peabody
Municipal Money Market Series--Connecticut Series and PaineWebber/Kidder,
Peabody Municipal Money Market Series--New Jersey Series were 2.60% and 2.74%,
respectively. In response to the declining short-term interest rate environment
during the last six months, the Series' weighted average maturities were
extended slightly. On October 31, 1995, the weighted average maturity was 59
days for the Connecticut Series and 59 days for the New Jersey Series.
Going forward, the Series expect to maintain a neutral weighted average maturity
as short-term rates find stability during uncertain economic times. The Federal
Reserve Board appears to have engineered a soft landing--a slowdown in economic
growth without a decline into recession. However, if inflation becomes
problematic, further increases in short-term interest rates could be possible.
Investment decisions in the portfolios will continue to be dominated by credit
quality and liquidity. Although we are
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
interested in maintaining higher yields, we will not do so by sacrificing the
Series' emphasis on security, quality and liquidity.
We value you as a shareholder and as a client, and thank you for your continued
support. We welcome any comments or questions you may have.
Sincerely,
/s/ Gregory W. Serbe /s/ Debbie Vermann
GREGORY W. SERBE DEBBIE VERMANN
Managing Director, Portfolio Manager,
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset
Management Inc.
- --------------------------------------------------------------------------------
3
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series--Connecticut Series
- --------------------------------------------------------------------------------
Statement of Net Assets
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- --------------- -----------
<C> <S> <C> <C> <C>
<CAPTION>
MUNICIPAL BONDS & NOTES--79.37%
<C> <S> <C> <C> <C>
$ 1,000 Connecticut Development Authority
(Connecticut Light and Power Company
Project A)................................. @ 3.900% $ 1,000,000
250 Connecticut Development Authority
(Economic Development Projects Revenue
Bonds)..................................... 11/15/95 4.000 250,019
300 Connecticut Development Authority
(Exeter Project B)........................ @ 3.900 300,000
1,000 Connecticut Development Authority
(Shaw Incorporated)....................... @ 4.000 1,000,000
300 Connecticut Development Authority
(Shelton Inn Limited Partnership)......... @ 4.100 300,000
1,500 Connecticut Development Authority
Health Care Corp.
(Independent Living Project).............. @ 3.800 1,500,000
1,000 Connecticut Development Authority
Pollution Control Revenue
(Western Massachusetts Electric
Company)................................... @ 3.800 1,000,000
400 Connecticut Economic Recovery Notes........ @ 3.900 400,000
500 Connecticut Economic Recovery Notes........ 06/15/96 5.500 504,193
1,200 Connecticut Health and Educational
Facilities Authority
(Bridgeport Hospital)..................... @ 3.800 1,200,000
700 Connecticut Health and Educational
Facilities Authority
(Charlotte Hungerford Hospital)........... @ 4.200 700,000
1,000 Connecticut Special Assessment
(Unemployment Compensation)............... @ 3.950 1,000,000
1,100 Connecticut Special Tax Obligation Revenue
(Second Lien Transportation).............. @ 3.900 1,100,000
500 Darien Bond Anticipation Notes............. 08/14/96 4.000 501,321
500 Fairfield Sewer Assessment Notes........... 06/07/96 3.840 500,114
300 Litchfield Bond Anticipation Notes......... 10/24/96 4.000 300,762
250 Newtown Bank Qualified Notes............... 06/15/96 4.700 250,977
463 North Stonington Bond Anticipation Notes... 06/26/96 to 07/19/96 3.900 to 4.000 463,176
500 Prospect Bond Anticipation Notes........... 07/26/96 3.900 500,527
410 Ridgefield General Obligation Bonds........ 01/15/96 6.600 412,501
</TABLE>
4
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series--Connecticut Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- --------------- -----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS & NOTES--(CONCLUDED)
$ 1,000 South Central Connecticut Regional Water
Authority
Water Systems Revenue Bonds............... 08/01/96 7.125% $ 1,044,013
1,000 Stamford Housing Authority Revenue
(Multi Modal Morgan Street Project)....... @ 3.900 1,000,000
1,800 Puerto Rico Commonwealth
(Government Development Bank)............. @ 3.650 1,800,000
600 Puerto Rico Commonwealth
Highway And Transportation Authority
Revenue.................................... @ 3.450 600,000
-----------
TOTAL MUNICIPAL BONDS & NOTES (cost--$17,627,603)......
17,627,603
-----------
TAX EXEMPT COMMERCIAL PAPER--20.04%
250 Connecticut Health and Educational
Facilities Authority
(Windham Hospital)........................ 11/20/95 3.600 250,000
1,100 Connecticut Health and Educational
Facilities Authority
(Yale University)......................... 12/01/95 to 12/15/95 3.450 to 3.500 1,100,000
500 Connecticut Housing Finance Authority
(Housing Mortgage Finance Program)........ 11/01/95 3.800 500,000
1,800 Connecticut Municipal Electric Energy
Cooperative................................ 11/08/95 to 12/08/95 3.450 to 3.550 1,800,000
800 Puerto Rico Industrial Medical and
Environmental Pollution Control Facilities
Financing Authority Revenue
(Ana Mendez).............................. 12/07/95 3.700 800,000
-----------
TOTAL TAX EXEMPT COMMERCIAL PAPER (cost--$4,450,000)...
4,450,000
-----------
TOTAL INVESTMENTS (cost--$22,077,603 which approximates
cost for
federal income tax purposes)--99.41%................ 22,077,603
Other assets in excess of liabilities--0.59%........... 131,610
-----------
NET ASSETS (applicable to 22,207,035 shares of
beneficial
interest at $1.00 per share)--100.00%............... $22,209,213
-----------
-----------
</TABLE>
- ------------
@ Variable rate demand notes are payable on demand. The interest rate shown is
the current rate as of October 31, 1995.
Weighted average maturity--59 days
See accompanying notes to financial statements
5
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series - New Jersey Series
- --------------------------------------------------------------------------------
Statement of Net Assets
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- -------------- -----------
<C> <S> <C> <C> <C>
<CAPTION>
MUNICIPAL BONDS & NOTES--84.20%
<C> <S> <C> <C> <C>
$ 1,800 New Jersey Economic Development Authority.... @ 4.100% $ 1,800,000
400 New Jersey Economic Development Authority
(400 International Drive Partners).......... @ 3.850 400,000
1,575 New Jersey Economic Development Authority
(Brach/Jersey Avenue Project)............... @ 3.750 1,575,000
300 New Jersey Economic Development Authority
(Church and Dwight Company Project)......... @ 3.750 300,000
1,447 New Jersey Economic Development Authority
(Curtiss Wright Flight)..................... @ 3.650 1,447,000
1,000 New Jersey Economic Development Authority
(Economic Growth)........................... @ 3.850 1,000,000
1,300 New Jersey Economic Development Authority
(Hillcrest Health Service Systems
Project)..................................... @ 3.700 1,300,000
1,300 New Jersey Economic Development Authority
(New Jersey Natural Gas).................... @ 3.450 1,300,000
500 New Jersey Economic Development Authority
(W. Y. Plastic Products Corporation
Project)..................................... @ 4.100 500,000
2,900 New Jersey Economic Development Authority
Pollution Control
(Exxon Project)............................. @ 4.000 2,900,000
1,000 ]New Jersey Economic and Industrial
Development Authority
(Burmah Castrol Incorporated)............... @ 3.750 1,000,000
1,400 New Jersey Economic and Industrial
Development Authority
(Fujinon Incorporated Project).............. @ 3.850 1,400,000
300 New Jersey Economic and Industrial
Development Authority
(Toys "R" Us, Incorporated)................. @ 3.400 300,000
975 New Jersey State Transportation Trust Fund Authority Bonds.. 12/15/95 4.500 976,266
120 Chatham Borough General Improvement Bonds.... 03/01/96 5.400 120,344
409 Cranford Township Bond Anticipation Notes.... 03/22/96 4.250 409,463
400 Cranford Township General Improvement
Bonds........................................ 05/01/96 8.000 407,978
1,050 Fort Lee Tax Anticipation Notes.............. 02/02/96 4.000 1,050,998
750 Galloway Township Bond Anticipation Notes.... 03/14/96 4.100 751,204
500 Maplewood Township Bond Anticipation Notes... 11/17/95 4.000 500,062
550 Mercer County Unlimited Tax General
Obligation Bonds............................. 07/01/96 5.500 556,203
290 Millville Board of Education
(New Jersey School Bond Reserve Act)........ 08/01/96 5.200 292,947
1,000 Monmouth County Bond Anticipation Notes...... 08/29/96 4.375 1,003,369
500 Montvale Tax Anticipation Notes.............. 01/09/96 4.400 500,044
1,100 Newark Healthcare Facility Revenue
(New Community Facility).................... @ 3.900 1,100,000
</TABLE>
6
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series - New Jersey Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- -------------- -----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS & NOTES--(CONCLUDED)
$ 1,134 Ocean County Bond Anticipation Notes......... 06/28/96 4.000% $ 1,136,505
500 Port Authority of New York and New Jersey
Special Obligation Revenue.................. @ 3.900 500,000
1,350 Princeton Township Bond Anticipation Notes... 08/29/96 4.125 1,353,158
1,200 Sayreville Tax Anticipation Notes............ 04/16/96 4.000 1,202,069
500 Scotch Plains Township Bond Anticipation
Notes........................................ 04/04/96 4.250 501,234
1,000 South Orange And Maplewood School District
Temporary Notes............................. 11/30/95 3.970 1,000,091
300 Union County Pollution Control Finance
Authority (Exxon)........................... @ 3.850 300,000
100 Warren Township General Obligation Bonds..... 07/01/96 6.200 101,498
1,500 Puerto Rico Commonwealth Government
Development Bank............................. @ 3.650 1,500,000
-----------
TOTAL MUNICIPAL BONDS & NOTES (cost--$30,485,433)........
30,485,433
-----------
TAX EXEMPT COMMERCIAL PAPER--15.22%
1,000 New Jersey Economic Development Authority
(Chambers Cogeneration Project)............. 11/07/95 3.500 1,000,000
1,200 New Jersey Economic Development Authority
(Keystone Project).......................... 11/01/95 to 11/13/95 3.550 to 3.650 1,200,000
1,000 New Jersey Economic Development Authority
(Public Service Electric and Gas)........... 11/27/95 3.600 1,000,000
2,110 Port Authority of New York and New Jersey.... 11/08/95 to 11/16/95 3.450 to 3.800 2,110,000
200 Puerto Rico Industrial Medical and
Environmental
Pollution Control Facilities Financing Authority
Revenue
(Ana Mendez)................................ 12/07/95 3.700 200,000
-----------
TOTAL TAX EXEMPT COMMERCIAL PAPER (cost--$5,510,000).....
5,510,000
-----------
TOTAL INVESTMENTS (cost--$35,995,433 which approximates
cost for federal income tax purposes)--99.42%......... 35,995,433
Other assets in excess of liabilities--0.58%............. 210,494
-----------
NET ASSETS (applicable to 36,207,705 shares of beneficial
interest at $1.00 per share)--100.00%................. $36,205,927
-----------
-----------
</TABLE>
- ------------
@ Variable rate demand notes are payable on demand. The interest rate shown is
the current rate as of October 31, 1995.
Weighted average maturity--59 days
See accompanying notes to financial statements
7
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series
- --------------------------------------------------------------------------------
Statement of Operations
For The Year Ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONNECTICUT NEW JERSEY
SERIES SERIES
----------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................ $ 877,777 $1,229,243
----------- ----------
EXPENSES:
Investment advisory and administration.............................. 120,651 167,865
Distribution fees................................................... 28,957 40,287
Custody and accounting.............................................. 29,550 31,313
Transfer agency fees................................................ 16,450 19,300
Reports and notices to shareholders................................. 13,500 17,720
Legal and audit..................................................... 12,500 14,296
Amortization of organizational expenses............................. 6,672 6,658
Federal and state registration...................................... 5,000 5,500
Trustees' fees...................................................... 3,700 3,700
Other expenses...................................................... 5,889 6,095
----------- ----------
242,869 312,734
----------- ----------
NET INVESTMENT INCOME............................................... 634,908 916,509
NET REALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS............ 924 (1,778)
----------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $ 635,832 $ 914,731
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series--Connecticut Series
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31,
--------------------------
<S> <C> <C>
1995 1994
----------- -----------
FROM OPERATIONS:
Net investment income............................................. $ 634,908 $ 519,464
Net realized gains (losses) from investment transactions.......... 924 (3,284)
----------- -----------
Net increase in net assets resulting from operations.............. 635,832 516,180
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income............................................. (634,908) (519,464)
----------- -----------
NET DECREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS... (3,563,889) (2,170,701)
----------- -----------
Contribution to capital from predecessor adviser................... 8,906 --
----------- -----------
Net decrease in net assets........................................ (3,554,059) (2,173,985)
NET ASSETS:
Beginning of year................................................. 25,763,272 27,937,257
----------- -----------
End of year....................................................... $22,209,213 $25,763,272
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series--New Jersey Series
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31,
--------------------------
<S> <C> <C>
1995 1994
----------- -----------
FROM OPERATIONS:
Net investment income............................................. $ 916,509 $ 718,975
Net realized losses from investment transactions.................. (1,778) (18,941)
----------- -----------
Net increase in net assets resulting from operations.............. 914,731 700,034
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income............................................. (916,509) (718,975)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST
TRANSACTIONS..................................................... 4,205,178 (4,473,284)
----------- -----------
Contribution to capital from predecessor adviser................... 21,521 --
----------- -----------
Net increase (decrease) in net assets............................. 4,224,921 (4,492,225)
NET ASSETS:
Beginning of year................................................. 31,981,006 36,473,231
----------- -----------
End of year....................................................... $36,205,927 $31,981,006
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber/Kidder, Peabody Municipal Money Market Series (the "Trust") was
organized as a Massachusetts business trust on September 14, 1990, and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended ("1940 Act"), as an open-end, non-diversified
management investment company. The Trust currently offers two no-load series of
shares: the Connecticut Series and the New Jersey Series (collectively the
"Funds"). Organizational costs have been deferred and are being amortized on the
straight line method over a period not to exceed 60 months from the date each
Fund commenced operations.
Effective November 13, 1995, the New York Series, formerly a series of the
Trust, was reorganized into the PaineWebber RMA New York Municipal Money Fund,
which is a series of the PaineWebber Managed Municipal Trust.
Valuation and Accounting for Investments--Investments are valued at amortized
cost which approximates market value. Investment transactions are recorded on
the trade date. Realized gains and losses from investment transactions are
calculated using the identified cost method. Interest income is recorded on an
accrual basis. Premiums are amortized and discounts are accreted as adjustments
to interest income and the identified cost of investments.
Federal Tax Status--Each Fund intends to distribute all of its tax-exempt income
and any taxable income and to comply with the other requirements of the Internal
Revenue Code applicable to regulated investment companies. Accordingly, no
provision for federal income taxes is required. In addition, by distributing
during each calendar year substantially all of its net investment income,
capital gains and certain other amounts, if any, each Fund intends not to be
subject to a federal excise tax. At October 31, 1995, the Connecticut Series and
New Jersey Series had net capital loss carryforwards of $0 and $1,778,
respectively. These loss carryforwards are available as a reduction, to the
extent provided in the regulations, of future net realized capital gains, and
will expire for each Series by October 31, 2002. To the extent that such losses
are used to offset future capital gains it is probable that the gains so offset
will not be distributed.
Dividends and Distributions to Shareholders--Dividends and distributions to
shareholders are recorded on the ex-dividend date. Dividends from net investment
income and distributions from realized gains from investment transactions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal income tax classification; temporary
differences do not need to be reclassified. Net capital gains, if any, will be
distributed at least annually, but the Funds may make more frequent
distributions of such gains, if necessary, to maintain its net asset value per
share at $1.00 or to avoid income or excise taxes.
CONCENTRATION OF RISK
Each Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by each Fund.
11
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's investment adviser and administrator receives compensation from the
Funds for its services. Fees paid by the Funds for investment advisory and
administration services are accrued daily and paid monthly at the annual rate of
0.50% of each Fund's average daily net assets.
At a special meeting of shareholders that took place on April 13, 1995,
shareholders approved the appointment of PaineWebber Incorporated
("PaineWebber") as investment adviser and administrator of the Funds and
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") as the Funds'
sub-adviser and sub-administrator. The Funds pay the same fee for investment
advisory and administration services to PaineWebber as previously paid to Kidder
Peabody Asset Management, Inc. ("KPAM"), the Funds' predecessor adviser, as
described in the Funds' prospectus. PaineWebber (not the Funds) pays Mitchell
Hutchins a fee for sub-advisory and sub-administration services at the annual
rate of 20% of the fee received by PaineWebber from the Funds. PaineWebber and
Mitchell Hutchins continue to manage the Funds in accordance with the Funds'
investment objective, policies and restrictions as stated in the prospectus. At
October 31, 1995, the Funds owed PaineWebber $9,702 and $14,812 in investment
advisory and administration fees for the Connecticut and New Jersey Series,
respectively.
Investment advisory functions for the Funds were previously transferred from
KPAM to Mitchell Hutchins on an interim basis as a result of an asset purchase
transaction by and among Kidder, Peabody Group Inc., its parent, General
Electric Company, and Paine Webber Group Inc. That period commenced on January
30, 1995 and ended April 13, 1995.
In compliance with applicable state securities laws, PaineWebber, the Funds'
investment adviser, will reimburse the Funds, if and to the extent that the
aggregate operating expenses in any fiscal year, exclusive of taxes, interest,
brokerage fees, distribution fees and extraordinary expenses, exceed limitations
imposed by various state regulations. Currently, the most restrictive limitation
is 2.5% on the first $30 million of average daily net assets, 2.0% of the next
$70 million and 1.5% of any excess over $100 million. For the year ended October
31, 1995, no reimbursements were required pursuant to the above limitation.
DISTRIBUTION PLAN
Effective January 30, 1995, PaineWebber serves as the exclusive distributor of
the Funds' shares. For its services, PaineWebber receives from each Fund a
distribution fee accrued daily and paid monthly at the annual rate of 0.12% of
the Funds' average daily net assets. At October 31, 1995, $2,328 and $3,555 were
payable to PaineWebber for these services for the Connecticut Series and New
Jersey Series, respectively.
OTHER LIABILITIES
At October 31, 1995, the amounts payable for investments purchased and dividends
payable were $0 and $20,787, respectively, for the Connecticut Series, and
$103,547 and $34,712, respectively, for the New Jersey Series.
12
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest, at $1.00 per share,
were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31,
--------------------------
<S> <C> <C>
CONNECTICUT SERIES 1995 1994
- -------------------------------------------------------------------- ----------- -----------
Shares sold......................................................... 77,747,232 83,745,065
Shares repurchased.................................................. (81,908,171) (86,418,169)
Dividends reinvested................................................ 597,050 502,403
----------- -----------
Net decrease in shares outstanding.................................. (3,563,889) (2,170,701)
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31,
----------------------------
<S> <C> <C>
NEW JERSEY SERIES 1995 1994
- ------------------------------------------------------------------ ------------ ------------
Shares sold....................................................... 191,790,113 186,667,852
Shares repurchased................................................ (188,445,267) (191,842,500)
Dividends reinvested.............................................. 860,332 701,364
------------ ------------
Net increase (decrease) in shares outstanding..................... 4,205,178 (4,473,284)
------------ ------------
------------ ------------
</TABLE>
CAPITAL CONTRIBUTION
On January 27, 1995, the Funds recorded a capital contribution from KPAM in the
amount of $8,906 or $0.0004 per share and $21,521 or $0.0006 per share for the
Connecticut Series and New Jersey Series, respectively, to compensate the Funds
for realized losses incurred on the sale of certain securities to unrelated
third parties.
13
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series--Connecticut Series
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
FOR THE YEARS FOR THE PERIOD
ENDED OCTOBER 31, NOVEMBER 6, 1990+
---------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Net investment income................... 0.026 0.017 0.015 0.022 0.040
Dividends from net investment income.... (0.026) (0.017) (0.015) (0.022) (0.040)
------- ------- ------- ------- -------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)............. 2.62% 1.74% 1.49% 2.25% 4.04%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental data:
Net assets, end of period (000's)....... $22,209 $25,763 $27,937 $28,063 $40,078
Ratio of expenses to average net
assets**............................... 1.01% 0.90% 0.97% 0.86% 0.36%*
Ratio of net investment income to
average net assets**................... 2.63% 1.71% 1.47% 2.28% 3.96%*
</TABLE>
- ------------
* Annualized
+ Commencement of operations
(1) Total investment return is calculated assuming a $1,000 investment in fund
shares on the first day of each period reported, reinvestment of all
dividends at net asset value on the payable dates, and a sale at net asset
value on the last day of each period reported. Total investment returns for
periods less than one year have not been annualized.
** For the period November 6, 1990 to October 31, 1991, the predecessor adviser
waived and/or reimbursed the Fund for a portion of its operating expenses.
If such fee waivers and/or expense reimbursements had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income to average net assets would have been 0.82% and
3.50%, respectively.
14
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series--New Jersey Series
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
FOR THE YEARS FOR THE PERIOD
ENDED OCTOBER 31, FEBRUARY 1, 1991+
---------------------------------------- TO
1995 1994 1993 1992 OCTOBER 31, 1991
------- ------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Net investment income................... 0.027 0.018 0.016 0.025 0.032
Dividends from net investment income.... (0.027) (0.018) (0.016) (0.025) (0.032)
------- ------- ------- ------- -------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)............. 2.75% 1.76% 1.65% 2.49% 3.19%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental data:
Net assets, end of period (000's)....... $36,206 $31,981 $36,473 $27,625 $ 41,504
Ratio of expenses to average net
assets**............................... 0.93% 0.85% 0.93% 0.86% 0.27%*
Ratio of net investment income to
average net assets**................... 2.73% 1.74% 1.63% 2.51% 4.20%*
</TABLE>
- ------------
* Annualized
+ Commencement of operations
(1) Total investment return is calculated assuming a $1,000 investment in fund
shares on the first day of each period reported, reinvestment of all
dividends at net asset value on the payable dates, and a sale at net asset
value on the last day of each period reported. Total investment returns for
periods less than one year have not been annualized.
** For the period February 1, 1991 to October 31, 1991, the predecessor adviser
waived and/or reimbursed the Fund for a portion of its operating expenses.
If such fee waivers and/or expense reimbursements had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income to average net assets would have been 0.83% and
3.64%, respectively.
15
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
PaineWebber/Kidder, Peabody Municipal Money Market Series
We have audited the accompanying statements of net assets of PaineWebber/Kidder,
Peabody Municipal Money Market Series (comprising, respectively, the Connecticut
Series and the New Jersey Series (the "Funds")) as of October 31, 1995, and the
related statement of operations, the statements of changes in net assets and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The statement of changes in net assets
for the year ended October 31, 1994 and the financial highlights for each of the
periods in the period then ended were audited by other auditors whose report
dated November 30, 1994, expressed an unqualified opinion on that statement and
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned at October
31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the 1995 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective Funds constituting the Paine Webber/Kidder, Peabody
Municipal Money Market Series at October 31, 1995, the results of their
operations for the year then ended, the changes in their net assets, and the
financial highlights for the year then ended, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 11, 1995
16
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series
- --------------------------------------------------------------------------------
Tax Information
- --------------------------------------------------------------------------------
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end (October
31, 1995) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all dividends
paid during the fiscal year by the Connecticut Series and New Jersey Series were
federally exempt interest dividends. The Connecticut Series and New Jersey
Series had 2% and 11%, respectively, of their dividends subject to the federal
alternative minimum tax for individual taxpayers during its fiscal year. Also,
all dividends paid by the Connecticut Series were exempt from Connecticut
personal income tax and all dividends paid by the New Jersey Series were exempt
from New Jersey personal income tax.
Because each Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 1995. The second notification, which
will reflect any amounts to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 1996. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in each
respective Fund.
17
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
A special meeting of shareholders of PaineWebber/Kidder, Peabody Municipal Money
Market Series ("Fund") was held on April 13, 1995. At the meeting David J.
Beaubien, William W. Hewitt, Jr., Thomas R. Jordan, Frank P.L. Minard and Carl
W. Schafer were elected as trustees to serve without limit in time, subject to
resignation, retirement or removal. The selection of Deloitte & Touche LLP as
the Fund's independent accountants was ratified.
The votes were as follows:
<TABLE>
<CAPTION>
ALL SERIES VOTING AS A SINGLE SERIES
---------------------------------------------
<S> <C> <C>
SHARES VOTED FOR SHARES WITHHOLD AUTHORITY
---------------- -------------------------
David J. Beaubien...................................... 65,392,812 4,541,460
William W. Hewitt, Jr.................................. 65,392,812 4,541,460
Thomas R. Jordan....................................... 65,392,812 4,541,460
Frank P.L. Minard*..................................... 65,392,812 4,541,460
Carl W. Schafer........................................ 65,392,812 4,541,460
</TABLE>
*Effective December 1, 1995, Mr. Minard resigned as a Trustee of the Fund.
<TABLE>
<CAPTION>
ALL SERIES VOTING AS A SINGLE SERIES
-------------------------------------------------
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
---------- ------------- ------------------
<S> <C> <C> <C>
Ratification of the selection of Deloitte &
Touche LLP...................................... 64,348,845 3,459,852 2,125,575
</TABLE>
On July 20, 1995, the Board of Trustees appointed Ernst & Young, LLP as the
Fund's independent auditors.
18
<PAGE>
PaineWebber/Kidder, Peabody Municipal Money Market Series
- --------------------------------------------------------------------------------
Shareholder Information--(concluded)
- --------------------------------------------------------------------------------
In addition the following agreements were approved for the Connecticut Series
and the New Jersey Series:
(1) An interim investment advisory agreement between each Series 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").
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
---------- ------------- ------------------
<S> <C> <C> <C>
Connecticut Series................................ 14,204,866 42,408 433,167
New Jersey Series................................. 17,082,309 3,066,227 735,050
</TABLE>
(2) A new investment advisory and administration agreement between the Fund and
PaineWebber Incorporated ("PaineWebber") containing the same fees and
substantively similar material terms and conditions as the previous investment
advisory agreement with KPAM to commence on the termination of the interim
agreement; and
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
---------- ------------- ------------------
<S> <C> <C> <C>
Connecticut Series................................ 14,204,866 42,408 433,167
New Jersey Series................................. 17,101,508 3,053,014 729,065
</TABLE>
(3) A new sub-advisory and sub-administration agreement between PaineWebber and
Mitchell Hutchins to commence on the termination of the interim agreement.
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
---------- ------------- ------------------
<S> <C> <C> <C>
Connecticut Series................................ 14,166,703 32,074 481,664
New Jersey Series................................. 16,928,770 3,203,833 750,984
</TABLE>
Broker non-votes and abstentions are included within the "Shares Withhold
Authority" totals.
19
<PAGE>
---------------------------------------
TRUSTEES
Margo N. Alexander
David J. Beaubien
William W. Hewitt, Jr.
Thomas R. Jordan
Carl W. Schafer
---------------------------------------
OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Julian F. Sluyters
Vice President and Treasurer
Gregory W. Serbe
Vice President
---------------------------------------
INVESTMENT ADVISER,
ADMINISTRATOR AND
DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
---------------------------------------
SUB-ADVISER AND
SUB-ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
---------------------------------------
This report is not to be used in
connection with the offering of shares
of the Funds unless accompanied or
preceded by an effective prospectus.
(C)1995 PaineWebber Incorporated
Recycled Paper
