LIQUID INSTITUTIONAL
RESERVES
MONEY MARKET FUND
GOVERNMENT SECURITIES FUND
TREASURY SECURITIES FUND
ANNUAL REPORT
APRIL 30, 1995
<PAGE>
June 15, 1995
Dear Shareholder,
During the year ended April 30, 1995, the United States economy exhibited steady
growth. In a series of monetary tightenings that began early in 1994, the
Federal Reserve Board raised the benchmark Federal Funds rate, the rate banks
charge each other for overnight borrowing, six times in 1994 for a total
increase of 2.5%. These increases were implemented to moderate economic
expansion and forestall inflation, and were followed by another 0.5% increase on
February 1, 1995, bringing the Federal Funds rate to 6.0%.
Productivity gains in the workplace and the increased competitiveness of United
States corporations in the global marketplace contributed to the low inflation
and steady growth that characterized the economy during the year ended April 30,
1995. Unemployment continued to decline, personal income exhibited an upward
trend and measures of consumer confidence continued to register positive
readings. However, side effects of higher interest rates, including a decline in
single family housing starts, crept into economic data during the latter half of
1994. As we move through the second quarter of 1995, the economy remains
healthy--although it is not yet clear what the full impact of higher interest
rates will be on either economic or corporate profit growth.
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. Mitchell Hutchins, a wholly owned investment
management subsidiary of PaineWebber, provides investment advisory and portfolio
management services to individuals, pension and endowment funds, trusts and
institutions. As of April 30, 1995, Mitchell Hutchins was adviser or sub-adviser
to 42 investment companies with 77 separate portfolios and aggregate assets of
approximately $27 billion.
Dennis L. McCauley and Susan P. Messina are jointly responsible for the
day-to-day management of the Funds. Mr. McCauley is a Managing Director and
Chief Investment Officer--Fixed Income of Mitchell Hutchins responsible for
overseeing all active fixed income investments, including domestic and global
taxable and tax exempt mutual funds. Mrs. Messina is a senior vice president of
Mitchell Hutchins responsible for overseeing taxable fixed income money market
funds.
ANNUALIZED YIELDS AS OF 4/30/95
<TABLE>
<CAPTION>
CURRENT EFFECTIVE
7-DAY 7-DAY
AVERAGE YIELD AVERAGE YIELD
------------- -------------
<S> <C> <C>
Money Market Fund 5.77% 5.93%
Government Securities Fund 5.74 5.90
Treasury Securities Fund 5.67 5.83
</TABLE>
2
<PAGE>
PORTFOLIO REVIEW
On April 30, 1995, the approximate net assets of the Money Market Fund, the
Government Securities Fund and the Treasury Securities Fund were $221 million,
$55 million, and $24 million, respectively. During the year ended April 30,
1995, the Federal Reserve's credit tightening policy caused interest rates on
money market instruments to increase. For example, the discounted 30-day
commercial paper rate rose to approximately 5.95% on April 30, 1995, from
approximately 3.80% on April 30, 1994. The Federal Funds rate for short-term
borrowing was approximately 3.50% on April 30, 1994, and 6.0% on April 28, 1995.
During the year ended April 30, 1995, the Funds' performance was enhanced by the
Federal Funds rate increases. Rising interest rates translated into higher
yields for the portfolios. On April 30, 1995, the weighted average maturity was
41 days for the Money Market Fund; 31 days for the Government Securities Fund;
and 32 days for the Treasury Securities Fund. A shorter weighted average
maturity benefits the Funds by enabling them to have more cash available to
invest as rates trend upward. Going forward, the Funds will maintain a neutral
weighted average maturity as short-term rates find stability during uncertain
economic times. Investment decisions in the portfolios will be dominated by
credit quality and liquidity. Although we are interested in maintaining higher
yields, we will not do so by sacrificing the Funds' 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/ Frank P.L. Minard /s/ Dennis L. McCauley
FRANK P.L. MINARD DENNIS L. MCCAULEY
Chairman, Managing Director and Chief Investment
Mitchell Hutchins Asset Officer--Fixed Income,
Management Inc. Mitchell Hutchins Asset Management Inc.
/s/ Susan P. Messina
SUSAN P. MESSINA
Senior Vice President,
Taxable Money Funds
Mitchell Hutchins Asset Management Inc.
3
<PAGE>
Liquid Institutional Reserves--Money Market Fund
- --------------------------------------------------------------------------------
Portfolio of Investments
April 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--16.40%
$ 25,000 Federal Home Loan Mortgage Corp. .......... 05/01/95 5.850% $ 25,000,000
1,500 Federal National Mortgage Association...... 07/10/95 5.860 1,482,908
10,000 United States Treasury Bills............... 10/12/95 5.685 9,741,017
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
36,223,925
(cost--$36,223,925)...................................
--------------
COMMERCIAL PAPER--81.84%
Agriculture--3.62%
8,000 Cargill Inc. .............................. 05/01/95 5.900 8,000,000
--------------
Asset-Backed--4.06%
4,000 Asset Securitization Cooperative Corp. .... 05/31/95 5.970 3,980,100
5,000 Delaware Funding Corp. .................... 05/22/95 6.050 4,982,354
--------------
8,962,454
--------------
Auto/Truck--6.28%
5,089 Daimler-Benz North America Corp. .......... 05/08/95 6.000 5,083,063
4,000 Ford Motor Credit Corp. ................... 05/22/95 5.970 3,986,070
5,000 Toyota Motor Credit Corp. ................. 12/08/95 6.190 4,810,001
--------------
13,879,134
--------------
Banking--6.77%
5,000 B.B.V Finance (Delaware), Inc. ............ 05/08/95 6.000 4,994,167
5,000 Cregem North America Inc. ................. 05/24/95 6.030 4,980,737
5,000 MPS U.S. Commercial Paper Corp. ........... 05/18/95 6.000 4,985,833
--------------
14,960,737
--------------
Broker/Dealer--5.87%
5,000 Goldman Sachs Group LP..................... 05/11/95 6.020 4,991,639
3,000 Merrill Lynch & Co. Inc. .................. 05/23/95 5.980 2,989,037
5,000 Morgan Stanley Group, Inc. ................ 05/30/95 5.970 4,975,954
--------------
12,956,630
--------------
Business Services--1.58%
3,500 PHH Corp. ................................. 05/30/95 5.970 3,483,168
--------------
Chemicals--1.35%
3,000 Dupont E.I. De Nemours & Co. .............. 05/30/95 5.950 2,985,621
--------------
Conglomerate--2.26%
5,000 BTR Dunlop Finance Inc. ................... 05/17/95 5.960 4,986,756
--------------
Drugs and Healthcare--2.26%
5,000 Pfizer Inc. ............................... 05/15/95 5.960 4,988,411
--------------
Electronics--2.24%
5,000 Hewlett-Packard Co. ....................... 06/29/95 5.960 4,951,161
--------------
</TABLE>
4
<PAGE>
Liquid Institutional Reserves--Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------- --------------
COMMERCIAL PAPER--(continued)
<C> <S> <C> <C> <C>
Energy--4.98%
$ 3,000 Exxon Imperial US Inc. .................... 05/26/95 5.970% $ 2,987,562
8,000 Koch Industries............................ 05/01/95 5.920 8,000,000
--------------
10,987,562
--------------
Finance-Conduit--5.43%
4,000 SBNSW (Delaware), Inc. .................... 05/26/95 5.960 3,983,444
8,000 U.B.S. Finance (Delaware), Inc. ........... 05/01/95 5.930 8,000,000
--------------
11,983,444
--------------
Finance-Diversified--4.52%
5,000 Associates Corp. of North America.......... 05/12/95 5.980 4,990,864
5,000 Sanwa Business Credit Corp. ............... 05/10/95 6.000 4,992,500
--------------
9,983,364
--------------
Finance-Independent--2.26%
5,000 National Rural Utilities Cooperative
Finance Corp. ]............................ 05/16/95 5.970 4,987,563
--------------
Finance-Subsidiary--2.26%
5,000 Pitney Bowes Credit Corp. ................. 05/02/95 5.980 4,999,169
--------------
Food and Beverage--10.33%
5,000 Anheuser Busch Inc. ....................... 06/06/95 6.000 4,970,000
3,000 Campbell Soup Co........................... 01/12/96 6.090 2,870,080
2,000 Heinz (H.J.) Co. .......................... 05/04/95 5.970 1,999,005
8,000 Nestle Capital Corp. ...................... 05/01/95 5.920 8,000,000
5,000 Philip Morris Companies, Inc. ............. 06/09/95 6.000 4,967,500
--------------
22,806,585
--------------
General Trade--2.25%
5,000 Mitsubishi International Corp. ............ 06/06/95 6.180 4,969,100
--------------
Insurance--4.51%
5,000 A.I.G. Funding Inc. ....................... 05/05/95 5.930 4,996,706
5,000 Metlife Funding Inc. ...................... 06/19/95 5.970 4,959,371
--------------
9,956,077
--------------
Metals and Mining--2.25%
5,000 RTZ America, Inc. ......................... 06/08/95 6.100 4,967,806
--------------
Printing/Publishing--2.25%
5,000 Reed Elsevier.............................. 06/06/95 6.080 4,969,600
--------------
Retail--Department Stores--2.26%
5,000 Wal Mart Stores Inc. ...................... 05/11/95 5.960 4,991,722
--------------
</TABLE>
5
<PAGE>
Liquid Institutional Reserves--Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------- --------------
COMMERCIAL PAPER--(concluded)
<C> <S> <C> <C> <C>
Telecommunications--2.25%
$ 5,000 American Telephone & Telegraph Co. ........ 06/02/95 6.070% $ 4,973,022
--------------
180,729,086
TOTAL COMMERCIAL PAPER (cost--$180,729,086)............
--------------
REPURCHASE AGREEMENT--1.86%
4,121 Repurchase Agreement dated 04/28/95, with
Citicorp Securities Markets, Inc.,
collateralized by $4,340,000 U.S. Treasury
Bills, due 10/26/95; proceeds: $4,123,026
(cost--$4,121,000)......................... 05/01/95 5.900 4,121,000
--------------
221,074,011
TOTAL INVESTMENTS (cost $221,074,011, which
approximates cost for federal income tax
purposes)--100.10%....................................
(230,011)
Liabilities in excess of other assets--(0.10)%.........
--------------
$ 220,844,000
NET ASSETS--100.00%....................................
--------------
--------------
</TABLE>
Weighted Average Maturity--41 days
See accompanying notes to financial statements.
6
<PAGE>
Liquid Institutional Reserves--Government Securities Fund
- --------------------------------------------------------------------------------
Portfolio of Investments
April 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--74.21%
$ 5,000 Federal Farm Credit Bank........... 07/07/95 5.850% $ 4,945,563
8,000 Federal Home Loan Bank............. 05/09/95 to 06/07/95 5.950 to 5.990 7,965,251
15,000 Federal Home Loan Mortgage
Corp. ............................. 05/02/95 to 07/20/95 5.890 to 6.070 14,921,295
13,000 Federal National Mortgage
Association........................ 05/03/95 to 10/20/95 5.890 to 6.100 12,912,188
--------------
40,744,297
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(cost--$40,744,297)............................
--------------
40,744,297
TOTAL INVESTMENTS (cost $40,744,297, which
approximates cost for federal income tax
purposes)--74.21%..............................
14,158,370
Other assets in excess of
liabilities--25.79%............................
--------------
$ 54,902,667
NET ASSETS--100.00%............................
--------------
--------------
</TABLE>
Weighted Average Maturity--31 days
See accompanying notes to financial statements.
7
<PAGE>
Liquid Institutional Reserves--Treasury Securities Fund
- --------------------------------------------------------------------------------
Portfolio of Investments
April 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--18.46%
$ 4,500 United States Treasury Bills....... 07/13/95-03/07/96 5.58 to 6.09% $ 4,385,912
--------------
4,385,912
TOTAL INVESTMENTS (cost $4,385,912, which
approximates cost for federal income tax
purposes)--18.46%..............................
19,376,432
Other assets in excess of
liabilities--81.54%............................
--------------
$ 23,762,344
NET ASSETS--100.00%............................
--------------
--------------
</TABLE>
Weighted Average Maturity--32 days
See accompanying notes to financial statements.
8
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
April 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY GOVERNMENT TREASURY
MARKET SECURITIES SECURITIES
FUND FUND FUND
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost
$221,074,011, $40,744,297 and $4,385,912,
respectively)............................... $221,074,011 $40,744,297 $ 4,385,912
Cash.......................................... 1,019 679 --
Receivable for investments sold............... -- 14,193,470 19,516,809
Interest receivable........................... 2,026 -- --
Due from investment adviser................... 20,712 22,178 21,019
Deferred organizational expenses and other
assets...................................... 174,971 79,772 81,175
------------ ----------- -----------
Total assets.................................. 221,272,739 55,040,396 24,004,915
------------ ----------- -----------
LIABILITIES
Dividends payable............................. 338,967 92,698 38,116
Payable to affiliates......................... 35,005 10,972 1,445
Payable to custodian.......................... -- -- 179,823
Accrued expenses and other liabilities........ 54,767 34,059 23,187
------------ ----------- -----------
Total liabilities............................. 428,739 137,729 242,571
------------ ----------- -----------
NET ASSETS
Beneficial interest--$0.001 par value
(unlimited amount authorized)............... 220,844,000 54,902,608 23,761,146
Accumulated undistributed net investment
income...................................... 7,007 49,663 68,224
Accumulated net realized losses from
investments................................. (7,007) (49,604) (67,026)
------------ ----------- -----------
NET ASSETS...................................... $220,844,000 $54,902,667 $23,762,344
------------ ----------- -----------
------------ ----------- -----------
OUTSTANDING SHARES OF BENEFICIAL INTEREST
($0.001 PAR VALUE)
Institutional Shares.......................... 220,844,000 54,902,608 23,761,146
Financial Intermediary Shares................. -- -- --
------------ ----------- -----------
Total Outstanding Shares...................... 220,844,000 54,902,608 23,761,146
------------ ----------- -----------
------------ ----------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
VALUE PER SHARE................................. $1.00 $1.00 $1.00
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended April 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY GOVERNMENT TREASURY
MARKET SECURITIES SECURITIES
FUND FUND FUND
----------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest.......................................... $11,980,096 $3,364,768 $1,190,952
----------- ---------- ----------
EXPENSES:
Investment advisory and administration............ 595,984 166,715 57,716
Federal and state registration fees............... 135,420 38,461 49,069
Custody and accounting............................ 42,159 36,751 36,410
Legal and audit................................... 24,360 19,452 13,755
Amortization of organization expense.............. 23,572 23,809 17,416
Transfer agency fees.............................. 22,979 13,250 7,639
Reports and notices to shareholders............... 13,650 5,900 6,851
Services fees--Financial Intermediary Shares...... 12,028 3,715 --
Trustees' fees and expenses....................... 4,031 4,031 4,031
Other expenses.................................... 17,841 6,717 3,064
----------- ---------- ----------
Total expenses.................................... 892,024 318,801 195,951
Less: Fee waivers and expense reimbursements from
adviser......................................... (45,499) (81,678) (145,444)
----------- ---------- ----------
Net expenses...................................... 846,525 237,123 50,507
----------- ---------- ----------
NET INVESTMENT INCOME............................... 11,133,571 3,127,645 1,140,445
NET REALIZED LOSSES FROM INVESTMENT TRANSACTIONS.... (1,704,028) (423,554) (67,026)
----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $ 9,429,543 $2,704,091 $1,073,419
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Liquid Institutional Reserves--Money Market Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1995 1994
------------ ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income...................................... $ 11,133,571 $ 9,583,380
Net realized losses from investment transactions........... (1,704,028) --
------------ ------------
Net increase in net assets resulting from operations....... 9,429,543 9,583,380
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional Shares................ (10,925,683) (9,427,332)
Net investment income--Financial Intermediary Shares....... (200,881) (156,048)
------------ ------------
(11,126,564) (9,583,380)
------------ ------------
NET DECREASE IN NET ASSETS DERIVED FROM BENEFICIAL INTEREST
TRANSACTIONS................................................. (42,437,158) (122,336,447)
------------ ------------
Contribution to capital from predecessor adviser............. 1,697,021 --
------------ ------------
Net decrease in net assets................................. (42,437,158) (122,336,447)
NET ASSETS:
Beginning of period........................................ 263,281,158 385,617,605
------------ ------------
End of period (including undistributed net investment
income of $7,007 at April 30, 1995)...................... $220,844,000 $263,281,158
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
Liquid Institutional Reserves--Government Securities Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
APRIL 30, 1995 APRIL 30, 1994
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income...................................... $ 3,127,645 $ 3,322,339
Net realized losses from investment transactions........... (423,554) --
-------------- --------------
Net increase in net assets resulting from operations....... 2,704,091 3,322,339
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional Shares................ (3,007,449) (3,322,339)
Net investment income--Financial Intermediary Shares....... (70,533) --
-------------- --------------
(3,077,982) (3,322,339)
-------------- --------------
NET DECREASE IN NET ASSETS DERIVED FROM BENEFICIAL INTEREST
TRANSACTIONS................................................. (29,306,186) (18,401,729)
-------------- --------------
Contribution to capital from predecessor adviser............. 373,950 --
-------------- --------------
Net decrease in net assets................................. (29,306,127) (18,401,729)
NET ASSETS:
Beginning of period........................................ 84,208,794 102,610,523
-------------- --------------
End of period (including undistributed net investment
income of $49,663 at April 30, 1995)..................... $ 54,902,667 $ 84,208,794
--------------
-------------- --------------
--------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
Liquid Institutional Reserves--Treasury Securities Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
APRIL 30, 1995 APRIL 30, 1994
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................ $ 1,140,445 $ 580,650
Net realized losses from investment transactions............. (67,026) --
-------------- --------------
Net increase in net assets resulting from operations......... 1,073,419 580,650
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional Shares.................. (1,072,221) (580,650)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS DERIVED FROM BENEFICIAL
INTEREST TRANSACTIONS.......................................... (14,840,847) 30,538,254
-------------- --------------
Net increase (decrease) in net assets........................ (14,839,649) 30,538,254
NET ASSETS:
Beginning of period.......................................... 38,601,993 8,063,739
-------------- --------------
End of period (including undistributed net investment income
of $68,224 at April 30, 1995).............................. $ 23,762,344 $ 38,601,993
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Liquid Institutional Reserves ("Trust") is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The Trust currently
offers three no-load series of shares: the Money Market Fund, the Government
Securities Fund and the Treasury Securities Fund (collectively, the "Funds").
Each Fund offers investors the choice of investing in two separate classes
of shares representing equal pro rata interests in its investment
portfolio--"Institutional" shares and "Financial Intermediary" shares. Financial
Intermediary shares are identical to Institutional shares in all respects except
that beneficial owners of Financial Intermediary shares receive certain services
directly from financial intermediaries, bear certain service fees and enjoy
certain exclusive voting rights on matters relating to these services and fees.
Valuation and Accounting for Investments--Investments are valued at
amortized cost which approximates market value. Investment transactions are
accounted for 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 identified cost of investments.
The ability of the issuers of the debt securities held by the Funds to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
Repurchase Agreements--The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
Federal Tax Status--Each Fund intends to distribute all of its taxable
income and to comply with the other requirements of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provision for
federal income taxes is required. In addition, by distributing during each
calendar year substantially all of its net investment income, capital gains and
certain other amounts, if any, each Fund intends not to be subject to a federal
excise tax.
Dividends and distributions--Each Fund declares dividends on a daily basis
from net investment income. The amount of dividends and distributions are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized
14
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
capital gains for tax purposes, they are reported as distributions of
paid-in-capital. Net capital gains, if any, will be distributed annually, but
each Fund 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.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's investment adviser and administrator receives compensation from
the Trust accrued daily and paid monthly at an annual rate of 0.25% of each
Funds' 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 Trust and
Mitchell Hutchins Asset Management Inc. (Mitchell Hutchins") as the Trust's sub-
adviser and sub-administrator. Each Fund pays the same fee for investment
advisory and administration services to PaineWebber as previously paid to Kidder
Peabody Asset Management, Inc. ("KPAM"), as described in the Trust's prospectus.
PaineWebber (not the Funds) pays Mitchell Hutchins a fee 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 April 30,
1995, the Money Market Fund, the Government Securities Fund and the Treasury
Securities Fund owed fees to PaineWebber in the amount of $35,005, $10,972 and
$1,445 respectively, for investment advisory and administration fees.
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
and Paine Webber Group Inc. That period commenced January 30, 1995 and ended
April 13, 1995.
In compliance with applicable state securities laws, PaineWebber will
reimburse each Fund 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 applicable to each Fund
is 2.5% of 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 April
30, 1995, no reimbursements were required pursuant to the above limitation.
Mitchell Hutchins has undertaken to maintain each Fund's total annual operating
expenses at a level not exceeding .35% and .60% of the Fund's average daily net
assets annually for Institutional shares and Financial Intermediary shares,
respectively. Mitchell Hutchins voluntarily reimbursed each series of the Fund
for a portion of its expenses and waived a portion of its investment adviser
fee.
FEDERAL INCOME TAX STATUS
At April 30, 1995, the Money Market Fund, the Government Securities Fund and
the Treasury Securities Fund had net capital loss carryforwards of $7,007,
$49,604 and $67,026, respectively. These loss carryforwards are available as a
reduction, to the extent provided in the regulations, of future net
15
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
realized capital gains, and will expire April 30, 2003 for the three Funds. To
the extent these losses are used to offset future capital gains, it is probable
that the gains so offset will not be distributed.
For the year ended April 30, 1995, the reclassification arising from
permanent book/tax differences resulted in increases (decreases) to the
components of net assets as follows:
<TABLE>
<CAPTION>
ACCUMULATED
NET
REALIZED BENEFICIAL
LOSSES INTEREST
----------- ----------
<S> <C> <C>
Liquid Institutional Reserves--Money Market Fund.................... 1,697,021 (1,697,021)
Liquid Institutional Reserves--Government Securities Fund........... 373,950 (373,950)
</TABLE>
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>
Institutional Shares Financial Intermediary Shares
------------------------------- ---------------------------------------------
For the Years Ended April 30, For the Years Ended April 30,
------------------------------- ---------------------------------------------
1995 1994 1995 1994
-------------- -------------- ------------------------ -------------------
<S> <C> <C> <C> <C>
Money Market Fund:
Shares sold................. 3,703,043,244 4,402,851,570 16,999,900 12,000,150
Shares repurchased.......... (3,746,358,860) (4,543,080,835) (26,000,050) (3,000,000)
Dividends reinvested in
additional Fund shares.... 9,878,608 8,892,668 -- --
-------------- -------------- ------------ -------------------
Net increase (decrease) in
shares outstanding........ (33,437,008) (131,336,597) (9,000,150) 9,000,150
-------------- -------------- ------------ -------------------
-------------- -------------- ------------ -------------------
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended For the Period
------------------------------- July 12, 1994+ to
1995 1994 April 30, 1995
-------------- -------------- ------------------------
<S> <C> <C> <C>
Government Securities Fund:
Shares sold................. 424,163,698 984,225,519 5,522,683
Shares repurchased.......... (456,271,881) (1,005,656,059) (5,592,261)
Dividends reinvested in
additional Fund shares.... 2,801,997 3,028,811 69,578
-------------- -------------- ------------
Net decrease in shares
outstanding............... (29,306,186) (18,401,729) --
-------------- -------------- ------------
-------------- -------------- ------------
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended April 30,
-------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Treasury Securities Fund:
Shares sold................. 261,729,869 265,285,134
Shares repurchased.......... (277,579,314) (235,282,499)
Dividends reinvested in
additional Fund shares.... 1,008,598 535,619
-------------- --------------
Net increase (decrease) in
shares outstanding........ (14,840,847) 30,538,254
-------------- --------------
-------------- --------------
</TABLE>
- ------------
+ Commencement of operations
16
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Notes to Financial Statements--(concluded)
- --------------------------------------------------------------------------------
CAPITAL CONTRIBUTION AND AFFILIATED TRANSACTIONS
KPAM, the predecessor investment adviser and administrator, purchased
certain of the Money Market Fund's and Government Securities Fund's variable
rate securities on July 6, 1994 for an aggregate purchase price of $34,248,854
and $9,056,094 respectively. The purchases were made at prices equal to the
securities' amortized cost plus accrued and unpaid interest. Since the purchases
by KPAM were made at prices above the securities' then current fair values, the
Money Market Fund's and Government Securities Fund's recorded capital
contributions from KPAM in the amounts of $1,697,021 and $373,950. The per share
amounts as of July 6, 1994 are represented in the table below:
<TABLE>
<CAPTION>
Money Market Fund Government Securities Fund
----------------- --------------------------
<S> <C> <C>
Institutional Shares................................ $0.0061 $ 0.0047
Financial Intermediary Shares....................... $0.0062 --
</TABLE>
17
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
Money Market Fund
-----------------------------------------------------------------------------------------
Financial
Intermediary
Institutional Shares Shares
-------------------------------------------------- -----------------------------------
For the Period For the Period
For the Years Ended April 30, June 3, 1991+ March 17, 1994+
-------------------------------- to For the Year Ended to
1995 1994 1993 April 30, 1992 April 30, 1995 April 30, 1994
-------- -------- -------- -------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- ------- ------- -------
Net investment income........ 0.048 0.030 0.031 0.044 0.027 0.004
Net realized losses from
investment transactions.... (0.008) -- -- -- -- --
Dividends from net investment
income..................... (0.048) (0.030) (0.031) (0.044) (0.027) (0.004)
-------- -------- -------- ------- ------- -------
Contribution to capital from
predecessor adviser........ 0.008 -- -- -- -- --
-------- -------- -------- ------- ------- -------
Net asset value:
End of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- ------- ------- -------
-------- -------- -------- ------- ------- -------
Total investment return(1).... 4.91% 3.03% 3.16% 4.52% 3.10% 0.37%
-------- -------- -------- ------- ------- -------
-------- -------- -------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period
(000's).................... $220,844 $254,281 $385,618 $335,868 -- $ 9,000
Ratio of expenses to average
net assets after
waivers/reimbursement from
adviser.................... 0.35% 0.33% 0.34% 0.30%* 0.60%* 0.58%*
Ratio of expenses to average
net assets before
waivers/reimbursement from
adviser.................... 0.37% 0.33% 0.36% 0.41%* 0.62%* 0.58%*
Ratio of net investment
income to average net
assets..................... 4.66% 2.96% 3.11% 4.65%* 4.15%* 2.93%*
</TABLE>
- -------------------
+ Commencement of operations
* Annualized
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gain
distributions at net asset value of $1.00 per share, and a sale at net asset
value on the last date of each period reported. Total return information for
periods less than one year have not been annualized.
18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Securities Fund
- -------------------------------------------------------------------- Treasury Securities Fund
Financial ------------------------------------------------------
Intermediary
Institutional Shares Shares Institutional Shares
- -------------------------------------------------- -------------- ------------------------------------------------------
For the Period For the Period For the Period
For the Years Ended April 30, June 3, 1991+ July 12, 1994+ For the Years Ended April 30, December 6, 1991+
- -------------------------------- to to -------------------------------- to
1995 1994 1993 April 30, 1992 April 30, 1995 1995 1994 1993 April 30, 1992
- -------- -------- -------- -------------- -------------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------- -------- -------- ------- ------- -------- -------- -------- -------
0.048 0.029 0.031 0.044 0.032 0.049 0.028 0.029 0.016
(0.008) -- -- -- -- (0.002) -- -- --
(0.047) (0.029) (0.031) (0.044) (0.032) (0.047) (0.028) (0.029) (0.016)
- -------- -------- -------- ------- ------- -------- -------- -------- -------
0.007 -- -- -- -- -- -- -- --
- -------- -------- -------- ------- ------- -------- -------- -------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------- -------- -------- ------- ------- -------- -------- -------- -------
- -------- -------- -------- ------- ------- -------- -------- -------- -------
4.61% 2.97% 3.13% 4.46% 3.31% 4.75% 2.87% 2.89% 1.62%
- -------- -------- -------- ------- ------- -------- -------- -------- -------
- -------- -------- -------- ------- ------- -------- -------- -------- -------
$ 54,903 $ 84,209 $102,611 $144,853 -- $ 23,762 $ 38,602 $ 8,064 $ 15,003
0.35% 0.35% 0.34% 0.30%* 0.60%* 0.22% 0.18% 0.33% 0.06%*
%
0.47 0.37% 0.36% 0.41%* 0.72%* 0.84% 0.76% 1.10% 2.05%*
%
4.63 2.93% 3.09% 4.52%* 4.46%* 4.89% 3.08% 2.88% 3.89%*
</TABLE>
19
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
A special meeting of shareholders of Liquid Institutional Reserves ("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
---------------------------------------------
SHARES VOTED FOR SHARES WITHHOLD AUTHORITY
---------------- -------------------------
<S> <C> <C>
David J. Beaubien...................................... 141,018,439 10,535,884
William W. Hewitt, Jr.................................. 141,018,439 10,535,884
Thomas R. Jordan....................................... 141,018,439 10,535,884
Frank P.L. Minard...................................... 141,018,439 10,535,884
Carl W. Schafer........................................ 141,018,439 10,535,884
</TABLE>
<TABLE>
<CAPTION>
ALL SERIES VOTING AS A SINGLE SERIES
--------------------------------------------------
SHARES SHARES VOTED SHARES WITHHOLD
VOTED FOR AGAINST AUTHORITY
----------- ------------- ------------------
<S> <C> <C> <C>
Ratification of the selection of Deloitte &
Touche LLP..................................... 135,297,297 59,674 16,197,353
</TABLE>
In addition the following agreements were approved for each of the Fund
(Money Market Fund, Government Securities Fund and Treasury Securities Fund):
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").
The votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES VOTING AS A SINGLE CLASS
-------------------------------------------------
SHARES SHARES VOTED SHARES WITHHOLD
VOTED FOR AGAINST AUTHORITY
---------- ------------- ------------------
<S> <C> <C> <C>
Money Market Fund................................. 90,331,376 1,349,375 9,936,068
Government Securities Fund........................ 28,004,483 0 6,261,285
Treasury Securities Fund.......................... 15,671,736 0 0
</TABLE>
20
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Shareholder Information--(concluded)
- --------------------------------------------------------------------------------
2) A new investment advisory and administration agreement between each
Series 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.
The votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES VOTING AS A SINGLE CLASS
-------------------------------------------------
SHARES SHARES VOTED SHARES WITHHOLD
VOTED FOR AGAINST AUTHORITY
---------- ------------- ------------------
<S> <C> <C> <C>
Money Market Fund................................. 90,256,207 1,359,775 10,000,837
Government Securities Fund........................ 28,004,483 0 6,261,285
Treasury Securities Fund.......................... 15,671,736 0 0
</TABLE>
3) A new sub-advisory and sub-administration agreement between PaineWebber
and Mitchell Hutchins to commence on the termination of the interim agreement
for each Series.
The votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES VOTING AS A SINGLE CLASS
-------------------------------------------------
SHARES SHARES VOTED SHARES WITHHOLD
VOTED FOR AGAINST AUTHORITY
---------- ------------- ------------------
<S> <C> <C> <C>
Money Market Fund................................. 89,951,238 1,351,852 10,313,730
Government Securities Fund........................ 28,004,483 0 6,261,285
Treasury Securities Fund.......................... 15,671,736 0 0
</TABLE>
Broker non-votes and abstentions are included within the "Shares Withhold
Authority" totals.
21
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders,
Liquid Instititutional Reserves
(Consisting of the Money Market Fund, the Government
Securities Fund and the Treasury Securities Fund):
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Money Market Fund, the Government
Securities Fund and the Treasury Securities Fund of Liquid Institutional
Reserves as of April 30, 1995, and the related statements of operations for the
year then ended and of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the periods
presented. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 securities owned at April
30, 1995 by correspondence with the custodian. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Money Market
Fund, the Government Securities Fund and the Treasury Securities Fund of Liquid
Institutional Reserves at April 30, 1995, the results of their operations, the
changes in their net assets and the financial highlights for the periods
presented in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
June 9, 1995
22
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
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 (April 30,
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 by the Money Market Fund, the Government Securities Fund and the Treasury
Securities Fund during the fiscal year were derived from net investment income.
These amounts are taxable as ordinary income, none of which qualifies for the
dividend received deduction available to corporate shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information
reporting.
Because 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 the amounts to be used by calendar year
taxpayers on their federal income tax returns, will be made in conjunction with
Form 1099 DIV and will be mailed in January 1996. Shareholders are advised to
consult their own tax advisers with respect to the tax consequences of their
investment in each respective Fund.
23
<PAGE>
---------------------------------------
TRUSTEES
David J. Beaubien
William W. Hewitt, Jr.
Thomas R. Jordan
Frank P.L. Minard
Carl W. Schafer
---------------------------------------
OFFICERS
Frank P. L. Minard,
President
Victoria E. Schonfeld,
Vice President
Dianne E. O'Donnell,
Vice President and Secretary
Julian F. Sluyters,
Vice President and Treasurer
---------------------------------------
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
---------------------------------------
SUB-INVESTMENT 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
