|
|
|
|
| LIQUID INSTITUTIONAL
| RESERVES
|
|
|
|
| MONEY MARKET FUND
| GOVERNMENT SECURITIES FUND
| TREASURY SECURITIES FUND
ANNUAL REPORT
APRIL 30, 1996
<PAGE>
- --------------------------------------------------------------------------------
June 14, 1996
Dear Shareholder,
We are pleased to present you with the Annual Report for Liquid Institutional
Reserves for the year ended April 30, 1996. Moderate economic growth, low
inflation and strong corporate earnings growth helped to propel the stock market
to record-breaking levels during 1995. The bond market also rallied during 1995,
providing investors with their third-best year since the 1920s.
By the end of 1995, most investors were convinced that the Federal Reserve Board
had achieved a "soft landing" for the economy, which led to a general consensus
that the Fed would act again to cut short-term interest rates. Sentiment changed
quickly in early March, however, in response to government reports showing
higher-than-expected economic growth: there was a sharp drop in bond prices
which caused volatility in the stock market. Meanwhile, the Federal Reserve's
Open Market Committee decided to keep monetary policy unchanged at the March 26,
and May 21, 1996 meetings. The Fed's decision to hold rates steady suggests that
officials do not foresee a recession or accelerating inflation.
Moving forward, our view is that the economy will continue to expand, but
slowly. We forecast that inflation will remain in check, creating a stable
environment for current interest rates. A recession within the next year is
unlikely, given the absence of many of the usual pre-recession indicators. The
economic backdrop for the rest of the year should be similar to 1995's. However,
we project that corporate earnings growth will moderate, which will probably
constrain stock prices.
ANNUALIZED YIELDS AS OF 4/30/96
CURRENT EFFECTIVE
7-DAY 7-DAY
AVERAGE YIELD AVERAGE YIELD
------------- -------------
Money Market Fund................. 5.08% 5.20%
Government Securities Fund........ 4.98 5.11
Treasury Securities Fund.......... 4.75 4.87
PORTFOLIO REVIEW
During the year ended April 30, 1996, the Federal Reserve Board signaled its
assessment of low inflationary pressure by bringing the Federal Funds rate down
to 5.25% via three rate cuts in July and December 1995, and January 1996. As
short-term rates began to decline during the second half of 1995, the Funds'
maturities were slightly longer than average, which was beneficial to
performance. During the first quarter of 1996, short-term interest rates began
to increase in the six-month to one-year sector, steepening the short-end of the
yield curve. However, the discounted 30-day commercial paper rate decreased to
approximately 5.30% on April 30, 1996. In anticipation of the rising interest
rate environment, the Funds' weighted average maturities were decreased. A
shorter weighted average maturity enabled the Funds to have more cash available
to invest as rates trended upward.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
On April 30, 1996, the approximate net assets of the Money Market Fund, the
Government Securities Fund and the Treasury Securities Fund were $422 million,
$44 million and $20 million, respectively. On April 30, 1996, the weighted
average maturity was 51 days for the Money Market Fund; 36 days for the
Government Securities Fund; and 60 days for the Treasury Securities Fund.
Going forward, the Funds expect to maintain neutral weighted average maturities
as short-term rates find stability. The Fed appears to have engineered a soft
landing for the economy. However, if inflation becomes problematic, further
increases in short-term interest rates could be possible during the second half
of 1996. Investment decisions in the Funds will continue to 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,
<TABLE>
<S> <C>
/s/ MARGO ALEXANDER /s/ DENNIS L. MCCAULEY
MARGO ALEXANDER DENNIS L. MCCAULEY
President, Managing Director and Chief Investment
Mitchell Hutchins Asset Management Inc. Officer--Fixed Income,
Mitchell Hutchins Asset Management Inc.
</TABLE>
/s/ SUSAN P. MESSINA
SUSAN P. MESSINA
Senior Vice President,
Mitchell Hutchins Asset Management Inc.
- --------------------------------------------------------------------------------
3
<PAGE>
Liquid Institutional Reserves--Money Market Fund
- --------------------------------------------------------------------------------
Portfolio of Investments
April 30, 1996
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- --------------- ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--2.84%
$ 2,000 Federal Home Loan Mortgage
Corporation.......................... 08/15/96 5.645% $ 1,998,639
3,000 Federal National Mortgage
Association.......................... 02/14/97 4.780 2,996,802
7,000 Student Loan Marketing
Association*......................... 05/07/96 5.280 7,000,000
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(cost--$11,995,441).................. 11,995,441
------------
DOMESTIC BANK NOTES--11.56%
2,000 Abbey National PLC................... 05/15/96 6.450 2,000,252
3,000 Bank of Hawaii....................... 01/03/97 5.500 3,000,000
5,000 Bank of New York Company ............ 05/28/96 5.600 5,000,000
11,000 FCC National Bank.................... 10/02/96 to 04/17/97 5.640 to 5.700 11,009,629
5,000 FCC National Bank*................... 05/01/96 5.300 4,997,842
5,000 LaSalle National Bank, N.A........... 07/02/96 5.350 5,000,000
3,000 Morgan Guaranty Trust Company........ 01/15/97 5.250 3,001,900
8,000 PNC Bank, N.A.*...................... 05/07/96 5.305 7,996,532
6,750 Wachovia Bank & Trust Company*....... 05/06/96 5.313 6,744,891
------------
48,751,046
TOTAL DOMESTIC BANK NOTES (cost--$48,751,046)....
------------
CERTIFICATES OF DEPOSIT--10.67%
Yankee--10.67%
10,000 Bank of Tokyo-Mitsubishi Limited .... 05/13/96 5.500 10,000,215
5,000 Bayersche Vereinsbank AG............. 04/25/97 5.800 5,000,000
3,000 Dresdner Bank AG..................... 02/26/97 5.010 2,997,819
5,000 Industrial Bank of Japan Limited .... 05/20/96 5.430 5,000,098
5,000 Sanwa Bank Limited .................. 05/28/96 5.420 5,000,075
2,000 Societe Generale, N.A.
Incorporated......................... 04/01/97 5.650 2,000,673
10,000 Sumitomo Bank Limited ............... 05/01/96 to 05/13/96 5.510 to 5.530 10,000,017
5,000 Westpac Banking Corporation.......... 03/19/97 5.610 4,999,328
------------
44,998,225
TOTAL CERTIFICATES OF DEPOSIT
(cost--$44,998,225)..............................
------------
COMMERCIAL [email protected]%
Agriculture--2.21%
9,350 Cargill Incorporated................. 05/02/96 to 05/23/96 5.300 to 5.320 9,333,162
------------
Asset-Backed--8.27%
10,000 Asset Securitization Cooperative
Corporation.......................... 06/10/96 5.280 9,941,333
15,000 Delaware Funding Corporation......... 05/03/96 to 05/20/96 5.280 to 5.350 14,983,095
10,000 Eiger Capital Corporation............ 05/07/96 to 05/09/96 5.320 9,989,656
------------
34,914,084
------------
Auto-Truck--2.37%
10,000 Toyota Motor Credit Corporation...... 05/08/96 5.310 9,989,675
------------
Banking--6.53%
7,850 ABN-AMRO N.A. Finance Incorporated... 08/26/96 to 08/27/96 4.950 7,723,184
7,000 BCI Funding Corporation.............. 05/17/96 5.330 6,983,418
5,000 BEX America Finance Incorporated..... 08/16/96 4.875 4,927,552
5,000 Credito Italiano Delaware,
Incorporated......................... 07/17/96 5.320 4,943,105
3,000 Societe Generale N.A. Incorporated... 07/09/96 4.920 2,971,710
------------
27,548,969
------------
</TABLE>
4
<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>
Broker-Dealer--12.75%
$ 8,000 BT Securities Corporation............ 07/03/96 5.310% $ 7,925,660
13,000 Goldman Sachs Group L.P.............. 05/14/96 to 05/31/96 5.280 to 5.320 12,950,237
3,000 Merrill Lynch & Company,
Incorporated......................... 10/28/96 4.950 2,925,750
15,000 Morgan Stanley Group Incorporated.... 05/01/96 to 05/24/96 5.300 to 5.375 14,983,069
15,000 Nomura Holding America
Incorporated......................... 05/01/96 5.350 15,000,000
------------
53,784,716
------------
Conglomerate--0.94%
4,000 BTR Dunlop Finance Incorporated...... 06/24/96 5.290 3,968,260
------------
Consumer Products--2.36%
10,000 Procter & Gamble Company............. 06/14/96 4.990 9,939,011
------------
Drugs and Health Care--3.52%
12,000 Lilly (Eli) & Company................ 05/06/96 to 08/22/96 4.830 to 5.250 11,910,121
3,000 Warner Lambert Company............... 09/16/96 4.840 2,944,340
------------
14,854,461
------------
Electronics--4.74%
5,000 Motorola Incorporated................ 05/13/96 5.300 4,991,167
15,000 Vermont American Corporation......... 05/01/96 5.310 to 5.370 15,000,000
------------
19,991,167
------------
Energy--3.56%
15,000 Koch Industries, Incorporated........ 05/01/96 5.350 15,000,000
------------
Finance-Conduit--5.92%
10,000 Commerzbank U.S. Finance ............ 05/02/96 to 05/17/96 5.300 to 5.320 9,987,483
15,000 UBS Finance (DE) Incorporated........ 05/07/96 5.320 14,986,700
------------
24,974,183
------------
Finance-Consumer--1.18%
5,000 American General Finance
Corporation.......................... 05/14/96 5.300 4,990,431
------------
Finance-Diversified--2.37%
10,000 Associates Corporation of North
America ............................. 05/09/96 5.320 9,988,178
------------
Finance-Subsidiary--1.18%
5,000 National Australia Funding (Delaware)
Incorporated......................... 05/16/96 5.320 4,988,917
------------
Food, Beverage and Tobacco--2.37%
10,000 Nestle Capital Corporation........... 05/06/96 5.300 9,992,639
------------
General Trade--1.18%
5,000 Mitsubishi International
Corporation.......................... 06/17/96 5.330 4,965,207
------------
Insurance-Property/Casualty--1.18%
5,000 A.I.G. Funding Incorporated.......... 05/08/96 5.320 4,994,828
------------
Metals and Mining--2.13%
5,000 RTZ America, Incorporated............ 05/22/96 5.300 4,984,542
4,000 U.S. Borax Incorporated.............. 05/14/96 5.060 3,992,691
------------
8,977,233
------------
Miscellaneous--1.64%
7,000 Beta Finance Incorporated............ 06/12/96 to 07/29/96 5.060 to 5.230 6,928,453
------------
280,123,574
TOTAL COMMERCIAL PAPER (cost--$280,123,574)......
------------
</TABLE>
5
<PAGE>
Liquid Institutional Reserves--Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- --------------- ------------
<C> <S> <C> <C> <C>
SHORT-TERM CORPORATE OBLIGATIONS--4.03%
Auto & Truck--0.24%
$ 1,000 PACCAR Financial Corporation......... 04/01/97 5.060% $ 995,460
------------
Broker-Dealer--0.47%
2,000 Bear Stearns Companies
Incorporated......................... 01/24/97 5.160 2,000,000
------------
Business Services--1.66%
7,000 PHH Corporation*..................... 05/01/96 5.330 6,998,983
------------
Drugs, Healthcare--0.72%
3,000 Pfizer Incorporated.................. 10/01/96 7.125 3,017,073
------------
Finance-Consumer--0.95%
4,000 American General Finance
Corporation.......................... 04/01/97 5.800 4,007,368
------------
17,018,884
TOTAL SHORT-TERM CORPORATE OBLIGATIONS
(cost--$17,018,884)..............................
------------
REPURCHASE AGREEMENT--4.40%
18,580 Repurchase Agreement dated 04/30/96,
with Citicorp Securities Markets,
Inc., collateralized by $18,730,000
U.S. Treasury Notes, 5.375%, due
11/30/97; proceeds: $18,582,735
(cost-- $18,580,000)................ 05/01/96 5.300 18,580,000
------------
421,467,170
TOTAL INVESTMENTS (cost--$421,467,170, which
approximates cost for federal income tax
purposes)--99.90%................................
411,328
Other assets in excess of liabilities--0.10%.....
------------
$421,878,498
NET ASSETS --100.00%.............................
------------
------------
</TABLE>
- ------------
* Variable rate security--maturity date reflects earlier of reset date or
maturity date. The interest rates shown are the current rates as of April 30,
1996 and reset periodically.
@ Interest rates shown are discount rates at date of purchase.
Weighted average maturity--51 days
See accompanying notes to financial statements
6
<PAGE>
Liquid Institutional Reserves--Government Securities Fund
- --------------------------------------------------------------------------------
Portfolio of Investments
April 30, 1996
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- --------------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--68.95%
$ 500 U.S. Treasury Notes................. 02/28/97 6.875% $ 507,274
10,000 Federal Farm Credit Bank............ 05/22/96 to 12/02/96 5.125 to 5.400 @ 9,993,857
13,000 Federal Home Loan Bank.............. 05/07/96 to 10/21/96 5.000 to 6.015 @ 12,946,594
750 Federal National Mortgage
Association......................... 01/23/97 5.070 749,658
3,000 Student Loan Marketing
Association*........................ 06/13/96 5.370 2,999,878
3,000 Tennessee Valley Authority.......... 06/04/96 to 06/19/96 5.160@ 2,982,155
-----------
30,179,416
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(cost--$30,179,416)...........................
-----------
30,179,416
TOTAL INVESTMENTS (cost--$30,179,416, which
approximates cost for federal income tax
purposes)--68.95%...............................
13,590,154
Other assets in excess of
liabilities--31.05%**...........................
-----------
$43,769,570
NET ASSETS--100.00%.............................
-----------
-----------
</TABLE>
- ------------
@ Interest rates shown are discount rates at date of purchase.
* Variable rate security--maturity date reflects earlier of reset date or
maturity date. The interest rate shown is the current rate as of April 30,
1996 and resets periodically.
** Includes a receivable of $16,360,803 from the sale of $15,754,000 U.S.
Treasury Notes, 7.500%, due December 31, 1996; sold on April 30, 1996,
settling on May 01, 1996, yielding 5.222%
Weighted average maturity--36 days
See accompanying notes to financial statements
7
<PAGE>
Liquid Institutional Reserves--Treasury Securities Fund
- --------------------------------------------------------------------------------
Portfolio of Investments
April 30, 1996
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--49.14%
$ 8,500 U.S. Treasury Bills................... 05/02/96 to 11/14/96 4.670 to 5.410%@ $ 8,382,498
1,250 U.S. Treasury Notes................... 08/15/96 to 02/28/97 4.375 to 6.875 1,260,144
-----------
9,642,642
TOTAL U.S. GOVERNMENT SECURITIES
(cost--$9,642,642)................................
-----------
9,642,642
TOTAL INVESTMENTS (cost--$9,642,642, which
approximates cost for federal income tax
purposes)--49.14%.................................
9,981,435
Other assets in excess of liabilities--50.86%*....
-----------
$19,624,077
NET ASSETS --100.00%..............................
-----------
-----------
</TABLE>
- ------------
@ Interest rates shown are discount rates at date of purchase.
* Includes a receivable of $9,817,105 from the sale of $9,453,000 U.S. Treasury
Notes, 7.500%, due December 31, 1996; sold on April 30, 1996, settling on May
01, 1996, yielding 5.222%
Weighted average maturity--60 days
See accompanying notes to financial statements
8
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
April 30, 1996
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Money Government Treasury
Market Securities Securities
Fund Fund Fund
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost--$421,467,170,
$30,179,416, and $9,642,642, respectively)............ $421,467,170 $30,179,416 $ 9,642,642
Cash.................................................... 648 223 894
Interest receivable..................................... 1,126,750 162,473 8,169
Due from investment adviser............................. 12,415 120,476 150,496
Receivable for investments sold......................... -- 16,360,803 9,817,105
Deferred organizational expenses and other assets....... 84,419 29,065 40,764
------------ ----------- -----------
Total assets............................................ 422,691,402 46,852,456 19,660,070
------------ ----------- -----------
LIABILITIES
Dividends payable....................................... 760,955 76,550 33,348
Payable for investments purchased....................... -- 3,000,000 --
Accrued expenses and other liablilties.................. 51,949 6,336 2,645
------------ ----------- -----------
Total liabilities....................................... 812,904 3,082,886 35,993
------------ ----------- -----------
NET ASSETS
Beneficial interest shares of $0.001 par value
outstanding (unlimited amount authorized)............. 421,885,615 43,768,263 19,655,358
Accumulated net realized gains (losses) from
investments.............................................. (7,117) 1,307 (31,281)
------------ ----------- -----------
NET ASSETS............................................... $421,878,498 $43,769,570 $19,624,077
------------ ----------- -----------
------------ ----------- -----------
OUTSTANDING SHARES OF BENEFICIAL INTEREST ($0.001 PAR
VALUE);
Institutional Shares.................................... 421,885,615 43,768,263 19,655,358
------------ ----------- -----------
------------ ----------- -----------
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, 1996
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Money Government Treasury
Market Securities Securities
Fund Fund Fund
----------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................................... $15,338,337 $2,783,802 $1,184,514
----------- ---------- ----------
EXPENSES:
Investment advisory and administration..................... 669,836 124,281 62,167
State and federal registration fees........................ 156,178 59,810 45,050
Custody and accounting..................................... 68,814 37,392 32,598
Reports and notices to shareholders........................ 41,853 14,849 10,790
Legal and audit............................................ 25,281 19,609 19,433
Transfer agency and service fees........................... 11,315 7,399 6,744
Trustees' fees............................................. 6,167 6,167 6,167
Amortization of organization expenses...................... 55 775 17,573
Other expenses............................................. 18,772 9,338 5,673
----------- ---------- ----------
998,271 279,620 206,195
Less: Fee waivers and expense reimbursements from
adviser..................................................... (162,567) (122,086) (136,857)
----------- ---------- ----------
Net expenses............................................... 835,704 157,534 69,338
----------- ---------- ----------
NET INVESTMENT INCOME....................................... 14,502,633 2,626,268 1,115,176
NET REALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS.... (110) 50,911 35,745
----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $14,502,523 $2,677,179 $1,150,921
----------- ---------- ----------
----------- ---------- ----------
</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 Years Ended
April 30,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................. $ 14,502,633 $ 11,133,571
Net realized losses from investment transactions.................. (110) (1,704,028)
------------ ------------
Net increase in net assets resulting from operations.............. 14,502,523 9,429,543
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional shares....................... (14,509,640) (10,925,683)
Net investment income--Financial Intermediary shares.............. -- (200,881)
------------ ------------
(14,509,640) (11,126,564)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST
TRANSACTIONS....................................................... 201,041,615 (42,437,158)
------------ ------------
Contribution to capital from predecessor adviser................... -- 1,697,021
------------ ------------
Net increase (decrease) in net assets.............................. 201,034,498 (42,437,158)
NET ASSETS:
Beginning of year................................................. 220,844,000 263,281,158
------------ ------------
End of year (including undistributed net investment income of
$7,007 at April 30, 1995).......................................... $421,878,498 $220,844,000
------------ ------------
------------ ------------
</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 YEARS ENDED
APRIL 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................... $ 2,626,268 $ 3,127,645
Net realized gains (losses) from investment transactions............ 50,911 (423,554)
----------- -----------
Net increase in net assets resulting from operations................ 2,677,179 2,704,091
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional shares......................... (2,675,931) (3,007,449)
Net investment income--Financial Intermediary shares................ -- (70,533)
----------- -----------
(2,675,931) (3,077,982)
----------- -----------
NET DECREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS..... (11,134,345) (29,306,186)
----------- -----------
Contribution to capital from predecessor adviser..................... -- 373,950
----------- -----------
Net decrease in net assets........................................... (11,133,097) (29,306,127)
NET ASSETS:
Beginning of year................................................... 54,902,667 84,208,794
----------- -----------
End of year (including undistributed net investment income of
$49,663 at April 30, 1995)........................................... $43,769,570 $54,902,667
-----------
----------- -----------
-----------
</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 Years Ended
April 30,
---------------------------
1996 1995
----------- ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................... $ 1,115,176 $ 1,140,445
Net realized gains (losses) from investment transactions............ 35,745 (67,026)
----------- ------------
Net increase in net assets resulting from operations................ 1,150,921 1,073,419
----------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional shares......................... (1,183,400) (1,072,221)
----------- ------------
NET DECREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS..... (4,105,788) (14,840,847)
----------- ------------
Net decrease in net assets.......................................... (4,138,267) (14,839,649)
NET ASSETS:
Beginning of year................................................... 23,762,344 38,601,993
----------- ------------
End of year (including undistributed net investment income of
$68,224 at April 30, 1995)........................................... $19,624,077 $ 23,762,344
-----------
----------- ------------
------------
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Liquid Institutional Reserves (the "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: the Money Market Fund, the Government Securities
Fund and the Treasury Securities Fund (collectively, the "Funds"). Organization
costs have been deferred and are being amortized on a straight-line method over
a period not to exceed 60 months from the date the Funds' commenced operations.
The Funds offer two classes of shares, Institutional and Financial Intermediary.
Each class represents interest in the same assets of the Fund and both classes
have equal voting privileges. At April 30, 1996 there were no Financial
Intermediary shares outstanding.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. Following is a summary of
significant accounting policies:
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 identified cost of investments.
Repurchase Agreements--The Funds' 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 Funds have 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. The Funds occasionally participate in joint repurchase
agreement transactions with other funds managed by Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a wholly owned subsidiary of PaineWebber
Incorporated ("PaineWebber") and sub-adviser and sub-administrator of the Funds.
Dividends and Distributions--The Funds declare dividends on a daily basis from
net investment income. 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 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. Net
capital gains, if any, will be distributed annually, but the Funds may make more
frequent distributions of such gains, if necessary, to maintain their net asset
value per share at $1.00 or to avoid income or excise taxes.
14
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONCENTRATION OF RISK
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.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust has an Investment Advisory and Administration Contract ("Advisory
Contract") with PaineWebber under which PaineWebber serves as investment adviser
and administrator of the Funds. In accordance with the Advisory Contract,
PaineWebber receives compensation from the Funds, computed daily and paid
monthly, at an annual rate of .25% of each Fund's average daily net assets.
Mitchell Hutchins serves as sub-adviser and sub-administrator of the Trust
pursuant to a Sub-Advisory and Sub-Administration Contract ("Sub-Advisory
Contract") between PaineWebber and Mitchell Hutchins. In accordance with the
Sub-Advisory Contract, PaineWebber (not the Funds) pays Mitchell Hutchins a fee,
computed daily and paid monthly, at an annual rate of 50% of the fee paid by the
Fund to PaineWebber under the Advisory Contract.
In compliance with applicable state securities laws, PaineWebber will reimburse
each Fund if the operating expenses in any fiscal year, exclusive of taxes,
interest, brokerage fees, distribution fees and extraordinary expenses, exceed
applicable limitations in any fiscal year. 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, 1996, no reimbursements were required
pursuant to the above limitation.
Effective September 1, 1995, PaineWebber has voluntarily undertaken to waive
.05% of these advisory fees and maintain each Fund's total annual operating
expenses at a level not exceeding .30% and .55% of the Fund's average daily net
assts for Institutional Shares and Financial Intermediary Shares, respectively.
Prior to September 1, 1995, total annual operating expenses were maintained at a
level of .35% and .60%.
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 their net investment income, capital gains and certain other amounts, if
any, the Funds intend not to be subject to a federal excise tax.
At April 30, 1996, the Money Market Fund and the Treasury Securities Fund had
net capital loss carryforwards of $7,030 and $29,965, respectively. These loss
carryforwards are available as a reduction, to the extent provided in the
regulations, of future net realized captial gains, and will expire by April 30,
2004 for each Fund. To the extent these losses are used to offset future capital
gains, it is probable that the gains so offset will not be distributed.
15
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 YEAR ENDED
1996 1995 APRIL 30, 1995
------------------
<S> <C> <C> <C>
MONEY MARKET FUND:
Shares sold....................................... 3,503,837,331 3,703,043,244 16,999,900
Shares repurchased................................ (3,316,243,676) (3,746,358,860) (26,000,050)
Dividends reinvested.............................. 13,447,960 9,878,608 --
-------------- -------------- ----------
Net increase (decrease) in shares outstanding..... 201,041,615 (33,437,008) (9,000,150)
-------------- -------------- ----------
-------------- -------------- ----------
<CAPTION>
FOR THE PERIOD
JULY 12, 1994+ TO
APRIL 30, 1995
------------------
<S> <C> <C> <C>
GOVERNMENT SECURITIES FUND:
Shares sold....................................... 370,955,813 424,163,698 5,522,683
Shares repurchased................................ (384,645,929) (456,271,881) (5,592,261)
Dividends reinvested.............................. 2,555,771 2,801,997 69,578
-------------- -------------- ----------
Net decrease in shares outstanding................ (11,134,345) (29,306,186) --
-------------- -------------- ----------
-------------- -------------- ----------
TREASURY SECURITIES FUND:
Shares sold....................................... 376,474,093 261,729,869 --
Shares repurchased................................ (381,685,003) (277,579,314) --
Dividends reinvested.............................. 1,105,122 1,008,598 --
-------------- -------------- ----------
Net decrease in shares outstanding................ (4,105,788) (14,840,847) --
-------------- -------------- ----------
-------------- -------------- ----------
</TABLE>
- ------------
+ Commencement of issuance of shares
* For the year ended April 30, 1996, there were no transactions in Financial
Intermediary shares
CAPITAL CONTRIBUTION AND AFFILIATED TRANSACTIONS
Kidder Peabody Asset Management, Inc. ("KPAM"), the Funds' 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 and
Government Securities Fund recorded capital contributions from KPAM in the
amounts of $1,697,021 and $373,950.
16
<PAGE>
Liquid Institutional Reserves-Money Market Fund
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE><CAPTION>
Institutional Shares Financial Intermediary Shares**
---------------------------------------------------------- ----------------------------------
For the Period For the Period
For the Years Ended April 30, June 3, 1991+ For the March 17, 1994+
----------------------------------------- to Year Ended to
1996 1995++ 1994 1993 April 30, 1992 April 30, 1995++ April 30, 1994
-------- -------- -------- -------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- ------- ------ ------
Net investment income...... 0.055 0.048 0.030 0.031 0.044 0.027 0.004
Net realized losses from
investment transactions... -- (0.008) -- -- -- -- --
-------- -------- -------- -------- ------- ------ ------
Net increase from
investment operations..... 0.055 0.040 0.030 0.031 0.044 0.027 0.004
-------- -------- -------- -------- ------- ------ ------
Dividends from net
investment income......... (0.055) (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 $ 1.00
-------- -------- -------- -------- ------- ------ ------
-------- -------- -------- -------- ------- ------ ------
Total investment return
(1)........................ 5.61% 4.91% 3.03% 3.16% 4.52% 3.10% 0.37%
-------- -------- -------- -------- ------- ------ ------
-------- -------- -------- -------- ------- ------ ------
Ratios/Supplemental Data:
Net assets, end of period
(000's).................... $421,878 $220,844 $254,281 $385,618 $ 335,868 -- $ 9,000
Ratio of expenses to
average net assets after
waivers/
reimbursements from
adviser.................... 0.31% 0.35% 0.33% 0.34% 0.30%* 0.60%* 0.58%*
Ratio of expenses to
average net assets
before waivers/
reimbursements from
adviser.................... 0.37% 0.37% 0.33% 0.36% 0.41%* 0.62%* 0.58%*
Ratio of net investment
income to average net
assets after
waivers/reimbursements
from adviser............ 5.47% 4.68% 2.96% 3.13% 4.76%* 4.17%* 2.93%*
Ratio of net investment
income to average net
assets before
waivers/reimbursements
from adviser............ 5.41% 4.66% 2.96% 3.11% 4.65%* 4.15%* 2.93%*
</TABLE>
- ------------
+ Commencement of issuance of shares
++ Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
* Annualized
** For the year ended April 30, 1996 and for the period December 24, 1994 to
April 30, 1995 there were no outstanding Financial Intermediary shares.
(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 and capital gains distributions 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 of less than one year have
not been annualized.
17
<PAGE>
Liquid Institutional Reserves-Government Securities Fund
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE><CAPTION>
Financial
Intermediary
Institutional Shares Shares**
-------------------------------------------------------- ----------------
For the Period For the Period
For the Years Ended April 30, June 3, 1991+ July 12, 1994+
-------------------------------------- to to
1996 1995++ 1994 1993 April 30, 1992 April 30, 1995++
------- ------- ------- -------- --------------- ----------------
<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...................... 0.053 0.048 0.029 0.031 0.044 0.032
Net realized gains (losses) from investment
transactions.............................. 0.001 (0.008) -- -- -- --
------- ------- ------- -------- ------ -----
Net increase from investment operations.... 0.054 0.040 0.029 0.031 0.044
------- ------- ------- -------- ------ -----
Dividends from net investment income....... (0.054) (0.047) (0.029) (0.031) (0.044) (0.032)
------- ------- ------- -------- ------ -----
Contribution to capital from predecessor
adviser................................... -- 0.007 -- -- -- --
------- ------- ------- -------- ------ -----
Net asset value, end of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------- ------ -----
------- ------- ------- -------- ------ -----
Total investment return (1)................ 5.50% 4.61% 2.97% 3.13% 4.46% 3.31%
------- ------- ------- -------- ------ -----
------- ------- ------- -------- ------ -----
Ratios/Supplemental Data:
Net assets, end of period (000's)......... $43,770 $54,903 $84,209 $102,611 $ 144,853 --
Ratio of expenses to average net assets
after waivers/
reimbursements from adviser............. 0.32% 0.35% 0.35% 0.34% 0.30%* 0.60%*
Ratio of expenses to average net assets
before waivers/
reimbursements from adviser............. 0.56% 0.47% 0.37% 0.36% 0.41%* 0.72%*
Ratio of net investment income to average
net assets after waivers/reimbursements
from adviser............................... 5.52% 4.75% 2.95% 3.11% 4.63%* 4.58%*
Ratio of net investment income to average
net assets before waivers/reimbursements
from adviser............................... 5.28% 4.63% 2.93% 3.09% 4.52%* 4.46%*
</TABLE>
- ------------
+ Commencement of issuance of shares
++ Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
* Annualized
** For the year ended April 30, 1996 and for the period March 22, 1995 to April
30, 1995 there were no outstanding Financial Intermediary shares.
(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 and capital gains distributions 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 of less than one year have
not been annualized.
18
<PAGE>
Liquid Institutional Reserves-Treasury Securities Fund
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE><CAPTION>
Institutional Shares
------------------------------------------------------------
For the Period
For the Years Ended April 30, December 6, 1991+
--------------------------------------- to
1996 1995++ 1994 1993 April 30, 1992
------- ------- ------- ------ -----------------
<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......................... 0.048 0.049 0.028 0.029 0.016
Net realized gains (losses) from investment
transactions.................................. 0.003 (0.002) -- -- --
------- ------- ------- ------ ------
Net increase from investment operations....... 0.051 0.047 0.028 0.029 0.016
------- ------- ------- ------ ------
Dividends from net investment income.......... (0.051) (0.047) (0.028) (0.029) (0.016)
------- ------- ------- ------ ------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------ ------
------- ------- ------- ------ ------
Total investment return (1)................... 5.23% 4.75% 2.87% 2.89% 1.62%
------- ------- ------- ------ ------
------- ------- ------- ------ ------
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $19,624 $23,762 $38,602 $8,064 $15,003
Ratio of expenses to average net assets after
waivers/
reimbursements from adviser................ 0.32% 0.22% 0.18% 0.33% 0.06%*
Ratio of expenses to average net assets
before waivers/
reimbursements from adviser................ 0.94% 0.84% 0.76% 1.10% 2.05%*
Ratio of net investment income to average net
assets after waivers/reimbursements from
adviser....................................... 5.71% 5.51% 3.66% 3.65% 5.88%*
Ratio of net investment income to average net
assets before waivers/reimbursements from
adviser....................................... 5.09% 4.89% 3.08% 2.88% 3.89%*
</TABLE>
- ------------
+ Commencement of issuance of shares
++ Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
* Annualized
(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 and capital gains distributions 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 of less than one year have
not been annualized.
19
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Liquid Institutional Reserves
We have audited the accompanying statement of assets and liabilities of Liquid
Institutional Reserves (comprising, respectively, the Money Market Fund,
Government Securities Fund and Treasury Securities Fund), including the
portfolios of investments as of April 30, 1996, and the related statements of
operations and 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
audit. The statement of changes in net assets for the year ended April 30, 1995
and the financial highlights for each of the years in the period from June 3,
1991 (commencement of operations) to April 30, 1995, were audited by other
auditors whose report dated June 9, 1995, expressed an unqualified opinion on
such statement and financial highlights.
We conducted our audit 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, 1996 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above and audited by us present fairly, in all material respects, the financial
position of each of the respective portfolios constituting Liquid Institutional
Reserves at April 30, 1996, the results of their operations, changes in their
net assets, and the financial highlights for the year then ended, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
New York, New York
June 7, 1996
20
<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,
1996) 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 1996. 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 1997. Shareholders are advised to
consult their own tax advisers with respect to the tax consequences of their
investment in each respective Fund.
21
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
A special meeting of shareholders of the Trust was held on April 15, 1996, the
proposals and votes were as follows;
1. To elect ten members of its Board of Trustees:
<TABLE><CAPTION>
FUNDS VOTED
TOGETHER
--------------------------
SHARES
SHARES VOTED WITHHOLD
FOR AUTHORITY
------------ ----------
<S> <C> <C>
Margo N. Alexander................................................ 242,121,623 20,127,467
Richard Q. Armstrong.............................................. 242,121,623 20,127,467
E. Garrett Bewkes, Jr............................................. 242,121,623 20,127,467
Richard Burt...................................................... 242,121,623 20,127,467
Mary C. Farrell................................................... 242,121,623 20,127,467
Meyer Feldberg.................................................... 242,121,623 20,127,467
George W. Gowen................................................... 242,121,623 20,127,467
Frederic V. Malek................................................. 242,121,623 20,127,467
Carl W. Schafer................................................... 242,121,623 20,127,467
John R. Torell III................................................ 242,121,623 20,127,467
</TABLE>
Broker non-votes and absentions are included within "Shares Withhold Authoritys"
totals.
2. Ratification of the selection of Ernst & Young LLP as the independent
auditors for its current fiscal year:
<TABLE><CAPTION>
SHARES
VOTED SHARES VOTED SHARES
FOR AGAINST ABSTAIN
----------- ------------ ----------
<S> <C> <C> <C>
Government Securities Fund............................ 35,067,459 0 10,640,730
Money Market Fund..................................... 193,343,464 0 6,478,828
Treasury Securities Fund.............................. 13,710,700 0 3,007,909
</TABLE>
22
<PAGE>
Liquid Institutional Reserves
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In addition, the following proposals were approved for the Funds:
3. Approval of the proposed changes to each Fund's fundamental investment
restrictions and policies:
<TABLE>
<S> <C>
A. Modification of fundamental restriction on portfolio diversification for diversified
funds;
B. Modification of fundamental restriction on concentration;
C. Modification of fundamental restriction on senior securities and borrowing;
D. Modification of fundamental restriction on making loans;
E. Modification of fundamental restriction on underwriting securities;
F. Modification of fundamental restriction on real estate investments;
G. Modification of fundamental restriction on investing in commodities;
H. Elimination of fundamental restriction on pledging portfolio securities;
I. Elimination of fundamental restriction on margin transactions;
J. Elimination of fundamental restriction on short sales;
K. Elimination of fundamental restriction on investments in oil, gas and mineral leases and
programs;
L. Elimination of fundamental restriction on investing for the purpose of control; and
M. Elimination of fundamental restriction on investing in warrants.
For each of the above listed proposals the votes were as follows:
<CAPTION>
SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAIN
----------- ------------ ----------
<S> <C> <C> <C>
Government Securities Fund............................ 35,067,459 0 10,640,730
Money Market Fund..................................... 189,225,343 3,708,840 6,888,109
Treasury Securities Fund.............................. 13,708,076 2,624 3,007,909
4. Approval of a New Sub-Advisory Agreement:
Funds voted together.................................. 235,785,474 271,574 26,192,042
</TABLE>
23
<PAGE>
---------------------------------------
TRUSTEES
E. Garrett Bewkes, Jr., Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
John R. Torell III
---------------------------------------
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
---------------------------------------
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.
[LOGO] Recycled Paper
(C)1996 PaineWebber Incorporated
