<PAGE>
<PAGE>
As filed with the Securities and Exchange Commission on August 30, 1996
1933 Act Registration No. 33-39029
1940 Act Registration No. 811-06281
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-lA
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No._____ [ ]
Post-Effective Amendment No. 9 [ X ]
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 10
---
(Check appropriate box or boxes.)
LIQUID INSTITUTIONAL RESERVES
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, ESQ.
SUSAN M. CASEY, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Telephone (202) 778-9000
It is proposed that this filing will become effective:
_____ Immediately upon filing pursuant to Rule 485(b)
x On September 1, 1996 pursuant to Rule 485(b)
- -----
_____ 60 days after filing pursuant to Rule 485(a)(i)
_____ On _____________ pursuant to Rule 485(a)(i)
_____ 75 days after filing pursuant to Rule 485(a)(ii)
_____ On _____________ pursuant to Rule 485(a)(ii)
Registrant has filed a declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The notice required by such rule for the Registrant's
fiscal year ended April 30, 1996 was filed on June 27, 1996.
<PAGE>
<PAGE>
LIQUID INSTITUTIONAL RESERVES
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheets
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
<PAGE>
LIQUID INSTITUTIONAL RESERVES
Form N-lA Cross Reference Sheet
<TABLE>
<CAPTION>
Part A Item No.
and Caption Prospectus Caption
--------------- ------------------
<C> <S> <C>
1. Cover Page ................................ Cover Page
2. Synopsis ................................ Expense Table
3. Condensed Financial Information ........... Financial Highlights; Performance
Information
4. General Description of Registrant ......... Investment Objectives and Policies;
Highlights; Description of Shares
5. Management of the Fund .................... Expense Table; Investment Objectives and
Policies;
Management; Purchases; Redemptions
6. Capital Stock and Other Securities ........ Purchases; Redemptions; Dividends,
Distributions and Taxes; Description of
Shares
7. Purchase of Securities Being Offered ...... Purchases; Redemptions; Management;
Financial Intermediaries
8. Redemption or Repurchase .................. Purchases; Redemptions; Financial
Intermediaries
9. Pending Legal Proceedings ................. Not Applicable
Part B Item No. Statement of Additional
and Caption Information Caption
---------------- -------------------
10. Cover Page ................................ Cover Page
11. Table of Contents ......................... Table of Contents
12. General Information and History ........... Not Applicable
13. Investment Objectives and Policies ........ Investment Objective and Policies
14. Management of the Fund .................... Trustees and Officers
15. Control Persons and Principal Holders of Trustees and Officers; Beneficial Ownership
Securities ................................ of Greater Than 5% of Fund Shares
16. Investment Advisory and Other Services .... Investment Advisory, Administration and
Distribution Arrangements
17. Brokerage Allocation ...................... Portfolio Transactions
18. Capital Stock and Other Securities ........ Additional Information Regarding Redemptions
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<C> <S> <C>
19. Purchase, Redemption and Pricing of Additional Information Regarding
Securities Being Offered .................. Redemptions; Valuation of Shares
20. Tax Status ................................ Taxes
21. Underwriters .............................. Investment Advisory, Administration and
Distribution Arrangements; Trustees and
Officers
22. Calculation of Performance Data ........... Calculation of Yield
23. Financial Statements ...................... Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
<PAGE>
LIQUID INSTITUTIONAL RESERVES
MONEY MARKET FUND
GOVERNMENT SECURITIES FUND
TREASURY SECURITIES FUND
1285 AVENUES OF THE AMERICAS NEW YORK, NEW YORK 10019
Professionally managed money market funds seeking:
High Current Income
High Liquidity
Preservation of Capital
Money Market Fund, Government Securities Fund and Treasury Securities Fund (the
'Funds') are series of Liquid Institutional Reserves, a Massachusetts business
trust ('Trust'). Each Fund offers two separate classes of
shares -- 'Institutional' shares and 'Financial Intermediary' shares.
Institutional shares are available for purchase by institutional investors.
Financial Intermediary shares are available for purchase by banks and other
financial intermediaries for the benefit of their customers.
This Prospectus concisely sets forth information that a prospective investor
should know about the Funds before investing. Please retain this Prospectus for
future reference. A Statement of Additional Information dated September 1, 1996
(which is incorporated by reference herein) has been filed with the Securities
and Exchange Commission ('SEC'). The Statement of Additional Information can be
obtained without charge, and further inquiries can be made, by contacting the
Funds, your PaineWebber investment executive or PaineWebber's correspondent
firms, or by calling toll free 1-800-762-1000.
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. WHILE EACH FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
ANY SUCH COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTUS DATED SEPTEMBER 1, 1996
<PAGE>
<PAGE>
HIGHLIGHTS
See elsewhere in the Prospectus for more information on the topics
discussed in these highlights.
<TABLE>
<S> <C>
The Funds: Professionally managed money market funds (each a 'Fund'). The Funds are designed
primarily for institutions as an economical and convenient means for the investment
of short-term funds that they hold for their own account or hold or manage for
others. The Funds are offered primarily to participants in the PaineWebber Resource
Management Account ('RMA')'r' program. The Funds also are offered to participants in
the PaineWebber Business Services Account ('BSA')'r' program.
Each Fund offers investors the choice of investing in two separate classes of
shares.
Institutional shares are available for purchase by institutional investors.
Financial Intermediary shares are available for purchase by banks and other
financial intermediaries for the benefit of their customers. Financial Intermediary
shares bear all fees payable by the Funds to financial intermediaries for certain
services they provide to the beneficial owners of those shares. See 'Purchases,'
'Redemptions,' 'Financial Intermediaries' and 'Valuation of Shares.'
Investment Objectives and Money Market Fund -- A diversified money market fund seeking high current income to
Policies: the extent consistent with the preservation of capital and the maintenance of
liquidity through investments in a diversified portfolio of high quality,
short-term, U.S. dollar-denominated money market instruments; invests in high
quality money market instruments.
Government Securities Fund -- A diversified money market fund seeking high current
income consistent with the preservation of capital and maintenance of liquidity
through investments in a diversified portfolio of high quality, short-term, U.S.
dollar-denominated money market instruments; invests in short-term U.S. government
securities, the interest income from which is generally exempt from state income
taxation.
Treasury Securities Fund -- A diversified money market fund seeking high current
income consistent with preservation of capital and maintenance of liquidity through
investments in a diversified portfolio of high quality, short-term, U.S.
dollar-denominated money market instruments; invests exclusively in securities
issued by the U.S. Treasury, which are supported by the full faith and credit of the
United States.
Total Net Assets at Money Market Fund -- $502.7 million.
July 31, 1996: Government Securities Fund -- $51.1 million.
Treasury Securities Fund -- $18.1 million.
Distributor and Investment PaineWebber Incorporated ('PaineWebber'). See 'Management.'
Adviser:
Sub-Adviser: Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'). See 'Management'
Purchases: Shares are available exclusively through PaineWebber and its correspondent firms.
See 'Purchases.'
Redemptions: Shares may be redeemed through PaineWebber or its correspondent firms. See
'Redemptions.'
Dividends: Declared daily and paid monthly. See 'Dividends and Taxes.'
Reinvestment: All dividends are automatically paid in Fund shares.
Minimum Initial Purchase: $1,000,000 for Money Market Fund and Government Securities Fund and $250,000 for
Treasury Securities Fund; no minimum for subsequent purchases.
Public Offering Price: Net asset value, which each Fund seeks to maintain at $1.00 per share.
</TABLE>
2
<PAGE>
<PAGE>
WHO SHOULD INVEST. Each Fund has its own suitability considerations and
risk factors, as summarized below and described in detail under 'Investment
Objectives and Policies.' The Funds are designed primarily for institutions as
an economical and convenient means for the investment of short-term funds that
they hold for their own account or hold or manage for others. These institutions
include corporations, banks, trust companies, investment bankers and brokers,
insurance companies, investment counsellors, pension funds, employee benefit
plans, law firms, trusts, estates and educational, religious and charitable
organizations. See 'Purchases' and 'Management.'
Shares of the Funds are offered primarily to clients of PaineWebber and its
correspondent firms who are participants in the RMA and BSA programs. Shares of
the Funds may be offered to PaineWebber clients with other types of accounts
under certain limited circumstances.
RISK FACTORS. There can be no assurance that any Fund will achieve its
investment objective. In periods of declining interest rates, a Fund's yield
will tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, a Fund's yield generally will be somewhat lower. Money
Market Fund may invest in U.S. dollar-denominated securities of foreign issuers,
which may present a greater degree of risk than investments in securities of
domestic issuers. See 'Investment Objective and Policies' for more information
about these and other risk factors.
3
<PAGE>
<PAGE>
EXPENSES OF INVESTING IN THE FUNDS. The following tables are intended to
assist investors in understanding the expenses associated with investing in each
Fund.
SHAREHOLDER TRANSACTION EXPENSES
FOR ALL FUNDS
<TABLE>
<CAPTION>
Sales charge on purchases of shares........................................................ None
<S> <C>
Sales charge on reinvested dividends....................................................... None
Redemption fee or deferred sales charge.................................................... None
</TABLE>
ANNUAL FUND OPERATING EXPENSES*
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
GOVERNMENT
SECURITIES FUND MONEY MARKET FUND
-------------------------------------- --------------------------------------
FINANCIAL FINANCIAL
INSTITUTIONAL INTERMEDIARY INSTITUTIONAL INTERMEDIARY
SHARES SHARES** SHARES SHARES**
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Management Fees (after
fee waivers).......... 0.20% 0.20% 0.20% 0.20%
Shareholder Servicing
Fees.................. 0.00% 0.25% 0.00% 0.25%
Other Expenses (after
reimbursements)....... 0.10% 0.10% 0.10% 0.10%
------- ------- ------- -------
Total Operating Expenses
(after fee waivers and
reimbursements)**..... 0.30% 0.55% 0.30% 0.55%
------- ------- ------- -------
------- ------- ------- -------
<CAPTION>
TREASURY SECURITIES FUND
----------------------------------
FINANCIAL
INSTITUTIONAL INTERMEDIARY
SHARES SHARES**
-------------- -----------------
<S> <C> <C>
Management Fees (after
fee waivers).......... 0.20% 0.20%
Shareholder Servicing
Fees.................. 0.00% 0.25%
Other Expenses (after
reimbursements)....... 0.10% 0.10%
------- -------
Total Operating Expenses
(after fee waivers and
reimbursements)**..... 0.30% 0.55%
------- -------
------- -------
</TABLE>
EXAMPLE OF EFFECT OF FUND EXPENSES*
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in each Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Government Securities Fund
Institutional shares.................................................. $3 $10 $17 $ 38
Financial Intermediary shares......................................... $6 $18 $31 $ 69
Money Market Fund
Institutional shares.................................................. $3 $10 $17 $ 38
Financial Intermediary shares......................................... $6 $18 $31 $ 69
Treasury Securities Fund
Institutional shares.................................................. $3 $10 $17 $ 38
Financial Intermediary shares......................................... $6 $18 $31 $ 69
</TABLE>
This Example assumes that all dividends are reinvested and that the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in the years shown. The above tables and the assumption in the Example of a 5%
annual return are required by regulations of the SEC applicable to all mutual
funds; the assumed 5% annual return is not a prediction of, and does not
represent, any Fund's projected or actual performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND EACH FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses of each Fund will depend upon, among other things, the level
of average net assets and the extent to which each Fund incurs variable
expenses, such as transfer agency costs.
(footnotes continue on following page)
4
<PAGE>
<PAGE>
(footnotes from previous page)
* Information in the expense table and the example has been restated to
reflect an agreement by PaineWebber and Mitchell Hutchins to waive 0.05% of the
management fees and to reduce or otherwise limit the expenses of each Fund, on
an annualized basis, to 0.30% and 0.55% of each Fund's average daily net assets
for Institutional shares and Financial Intermediary shares, respectively. In the
absence of this agreement, Money Market Fund's, Government Securities Fund's and
Treasury Securities Fund's total operating expenses would have been 0.37%, 0.56%
and 0.94% of their average net assets, respectively, for Institutional shares
and would have been 0.62%, 0.81% and 1.19% (estimated) of their average net
assets, respectively, for Financial Intermediary shares. Without this agreement,
under the assumptions set forth in the example above, the expenses on a $1,000
investment in Money Market Fund, Government Securities Fund and Treasury
Securities Fund at the end of one, three, five and ten years would have been $4,
$12, $21 and $47; $6, $18, $31 and $70; and $10, $30, $52 and $115,
respectively, for Institutional shares and would have been $6, $20, $35 and $77;
$8, $26, $45 and $100; and $12, $38, $65 and $144 (estimated), respectively, for
Financial Intermediary shares. PaineWebber and Mitchell Hutchins do not
anticipate that they will waive fees or reimburse expenses in the current fiscal
year, except to the extent necessary to comply with the fee waiver and total
expense limitation agreement described.
** At the date of this Prospectus, no Financial Intermediary shares are
outstanding.
The Funds are offered primarily to participants in the PaineWebber RMA and
BSA programs. PaineWebber currently charges an annual $85 account charge for the
RMA program including the Gold MasterCard without the Bank One Line of Credit.
The fee for clients who choose the Line of Credit for their Gold MasterCard is
$125. The annual account charge for the BSA program, including the MasterCard
BusinessCard, is $125 ($165 with a MasterCard Line of Credit). The account
charges for these programs are not included in the table because they are waived
for RMA and BSA participants that purchase shares of the Funds.
5
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below provide selected per share data and ratios for one share
of each class of shares of each Fund for each of the periods shown. No Financial
Intermediary Shares were outstanding during the fiscal year ended April 30,
1996. This information is supplemented by the financial statements and
accompanying notes appearing in each Fund's Annual Report to Shareholders for
the fiscal year ended April 30, 1996, which are incorporated by reference into
the Statement of Additional Information and which may be obtained without charge
by calling 1-800-647-1568. The financial statements and notes, as well as the
information in the tables appearing below insofar as it relates to the fiscal
year ended April 30, 1996, have been audited by Ernst & Young LLP, independent
auditors, whose unqualified report thereon is incorporated by reference into the
Funds' Statement of Additional Information. The financial information for the
prior years was audited by another independent accounting firm, whose reports
thereon also were unqualified.
<TABLE>
<CAPTION>
MONEY MARKET FUND
---------------------------------------------------------------------------------------------------
FINANCIAL
INSTITUTIONAL SHARES INTERMEDIARY
------------------------------------------------------ SHARES**
FOR THE PERIOD ------------------------------------------
FOR THE YEARS ENDED JUNE 3, FOR THE PERIOD
APRIL 30, 1991`D' FOR THE YEAR ENDED MARCH 17, 1994`D'
------------------------------------- TO APRIL 30, TO
1996 1995`D'`D' 1994 1993 APRIL 30, 1992 1995`D'`D' 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 (1)............ -- 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
(2).................... 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
Expenses to average net
assets after
waivers/reimbursement
from adviser........... 0.31% 0.35% 0.33% 0.34% 0.30%* 0.60% 0.58%*
Expenses to average net
assets before
waivers/reimbursement
from adviser........... 0.37% 0.37% 0.33% 0.36% 0.41%* 0.62% 0.58%*
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%*
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>
- ------------
`D' Commencement of issuance of shares
`D'`D' 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 from December 24, 1994
to April 30, 1995 there were no outstanding Financial Intermediary shares of
Money Market Fund. For the year ended April 30, 1996 and for the period from
March 22, 1995 to April 30, 1995 there were no outstanding Financial
Intermediary Shares of Government Securities Fund.
(1) Kidder Peabody Asset Management, Inc., the Funds' predecessor investment
adviser and administrator, purchased certain of Money Market Fund's and
Government Securities Fund's variable rate securities on July 6, 1994 at
prices equal to the securities' amortized cost plus accrued and unpaid
interest.
(2) 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 other distributions at net asset value on the payable dates,
and a sale at net asset value on the last date of each period reported.
Total investment returns for periods of less than one year have not been
annualized.
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
----------------------------------------------------------------------
FINANCIAL
INTERMEDIARY
INSTITUTIONAL SHARES SHARES**
------------------------------------------------------ --------------
FOR THE PERIOD FOR THE PERIOD
FOR THE YEARS ENDED JUNE 3, JULY 12,
APRIL 30, 1991`D' 1994`D'
-------------------------------------- TO TO
1996 1995`D'`D' 1994 1993 APRIL 30, 1992 APRIL 30, 1995
------- ------- ------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
0.053 0.048 0.029 0.031 0.044 0.032
0.001 (0.008) -- -- -- --
------- ------- ------- ------- ------- -------
0.054 0.040 0.029 0.031 0.044 --
------- ------- ------- ------- ------- -------
(0.054) (0.047) (0.029) (0.031) (0.044) (0.032)
------- ------- ------- ------- ------- -------
-- 0.007 -- -- -- --
------- ------- ------- ------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
5.50% 4.61% 2.97% 3.13% 4.46% 3.31%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
$43,770 $54,903 $84,209 $102,611 $144,853 --
0.32% 0.35% 0.35% 0.34% 0.30%* 0.60%*
0.56% 0.47% 0.37% 0.36% 0.41%* 0.72%*
5.52% 4.75% 2.95% 3.11% 4.63%* 4.58%*
5.28% 4.63% 2.93% 3.09% 4.52%* 4.46%*
<CAPTION>
TREASURY SECURITIES FUND
-----------------------------------------------------------------
INSTITUTIONAL SHARES
---------------------------------------
FOR THE YEARS ENDED FOR THE PERIOD
APRIL 30, DECEMBER 6, 1991`D'
--------------------------------------- TO
1996 1995`D'`D' 1994 1993 APRIL 30, 1992
---------- ------- ------- ------- ------------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ------- ------- ------- -------
0.048 0.049 0.028 0.029 0.016
0.003 (0.002) -- -- --
---------- ------- ------- ------- -------
0.051 0.047 0.028 0.029 0.016
---------- ------- ------- ------- -------
(0.051) (0.047) (0.028) (0.029) (0.016)
---------- ------- ------- ------- -------
--
-- -- -- --
---------- ------- ------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ------- ------- ------- -------
---------- ------- ------- ------- -------
5.23% 4.75% 2.87% 2.89% 1.62%
---------- ------- ------- ------- -------
---------- ------- ------- ------- -------
$19,624 $23,762 $38,602 $8,064 $15,003
0.32% 0.22% 0.18% 0.33% 0.06%*
0.94% 0.84% 0.76% 1.10% 2.05%*
5.71% 5.51% 3.66% 3.65% 5.88%*
5.09% 4.89% 3.08% 2.88% 3.89%*
</TABLE>
7
<PAGE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Fund is to earn high current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity through investments in a diversified portfolio of high quality,
short-term, U.S. dollar-denominated money market instruments. Each Fund seeks to
meet this objective by following different investment policies.
Each Fund maintains a dollar-weighted average portfolio maturity of 90 days
or less. All securities in which each Fund invests have remaining maturities of
397 days or less on the date of purchase. In managing each Fund's portfolio,
Mitchell Hutchins may employ a number of professional money management
techniques, including varying the composition and the average weighted maturity
of each Fund's portfolio based upon its assessment of the relative values of
various money market instruments and future interest rate patterns, in order to
respond to changing economic and money market conditions and to shifts in fiscal
and monetary policy. Mitchell Hutchins may also seek to improve a Fund's yield
by purchasing or selling securities to take advantage of yield disparities among
similar or dissimilar money market instruments that regularly occur in the money
market.
There can be no assurance that the Funds will achieve their investment
objectives. In periods of declining interest rates, the Funds' yields will tend
to be somewhat higher than prevailing market rates, and in periods of rising
interest rates the opposite will be true. Also, when interest rates are falling,
net cash inflows from the continuous sale of a Fund's shares are likely to be
invested in portfolio instruments producing lower yields than the balance of
that Fund's portfolio, thereby reducing its yield. In periods of rising interest
rates, the opposite can be true.
MONEY MARKET FUND
Money Market Fund invests in high quality, short-term, U.S.
dollar-denominated money market instruments. These instruments include U.S.
government securities, obligations of U.S. banks, commercial paper and other
short-term corporate obligations, corporate bonds and notes, variable and
floating rate securities and loan participation interests or repurchase
agreements involving any of the foregoing securities. Participation interests
are pro rata interests in securities held by others.
The U.S. government securities in which the Money Market Fund may invest
include direct obligations of the U.S. Treasury (such as Treasury bills, notes
and bonds) and obligations issued or guaranteed by U.S. government agencies and
instrumentalities, including securities that are supported by the full faith and
credit of the U.S. government (such as Government National Mortgage Association
certificates ('GNMAs')), securities supported primarily or solely by the
creditworthiness of the issuer (such as securities of the Resolution Funding
Corporation and the Tennessee Valley Authority) and securities that are
supported primarily or solely by specific pools of assets and the
creditworthiness of a U.S. government-related issuer (such as mortgage-backed
securities issued by the Federal National Mortgage Association).
Money Market Fund may invest in obligations (including certificates of
deposit, bankers' acceptances and similar obligations) of U.S. banks, including
foreign branches of domestic banks, domestic branches of foreign banks and
foreign branches of foreign banks, having total assets in excess of $1.5 billion
at the time of purchase. The Fund may invest in non-negotiable time deposits of
U.S. banks, savings associations and similar depository institutions having
total assets in excess of $1.5 billion at the time of purchase only if the time
deposits have maturities of seven days or less. Money Market Fund also may
invest in interest-bearing savings deposits in U.S. banks and savings
associations having total assets of $1.5 billion or less, provided that the
principal amounts at each such bank are fully insured by the Federal Deposit
Insurance Corporation and the aggregate amount of such deposits (plus interest
accrued) does not exceed 5% of the Fund's assets.
The commercial paper and other short-term corporate obligations purchased
by Money Market Fund consist only of obligations that Mitchell Hutchins
determines, pursuant to procedures adopted by the Trust's board of trustees,
present minimal credit risks and are either (1) rated in the highest short-term
rating category by at least two nationally recognized statistical rating
organizations ('NRSROs'), (2) rated in the highest short-term rating category by
a single NRSRO if only that NRSRO has assigned the obligations a short-term
rating or (3) unrated, but determined by Mitchell Hutchins to be of comparable
quality
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('First Tier Securities'). The Fund generally may invest no more than 5% of its
total assets in the securities of a single issuer (other than securities issued
by the U.S. government, its agencies or instrumentalities).
GOVERNMENT SECURITIES FUND
Government Securities Fund invests in U.S. government securities, the
interest income from which is generally exempt from state income taxation. The
Fund intends to emphasize investments in securities eligible for this exemption
in the maximum number of states. Securities generally eligible for this
exemption include those issued by the U.S. Treasury and those issued by certain
agencies, authorities or instrumentalities of the U.S. government, including the
Federal Home Loan Bank, Federal Farm Credit Banks Funding Corp. and the Student
Loan Marketing Association. The Fund intends to invest all of its assets in
securities with these characteristics. Under extraordinary circumstances,
however, such as when securities with those characteristics are unavailable, the
Fund may temporarily hold cash or invest in other U.S. government securities,
such as those issued by the Government National Mortgage Association, the
Federal Home Loan Mortgage Corporation and the Small Business Administration.
The Fund may acquire any of the above securities on a forward commitment or
when-issued basis. The Fund will not enter into repurchase agreements.
Each investor should consult its own tax advisor to determine whether
distributions from Government Securities Fund derived from interest on its
Portfolio Securities are exempt from state income taxation in the investor's own
state.
TREASURY SECURITIES FUND
Treasury Securities Fund invests exclusively in securities issued by the
U.S. Treasury, which are supported by the full faith and credit of the United
States. The Fund may acquire any of these securities on a forward commitment or
when-issued basis. The Fund will not enter into repurchase agreements.
OTHER INVESTMENT POLICIES AND RISK FACTORS
U.S. GOVERNMENT SECURITIES -- CUSTODIAL RECEIPTS. Money Market Fund may
acquire custodial receipts that evidence ownership of future interest payments,
principal payments or both that have been 'stripped' from certain U.S. Treasury
notes or bonds. These custodial receipts are known by various names, including
'Treasury Investment Growth Receipts' ('TIGRs') and 'Certificates of Accrual on
Treasury Securities' ('CATS'). Each Funds may also invest in separately traded
principal and interest components of securities issued or guaranteed by the U.S.
Treasury. The principal and interest components of selected securities are
traded independently under the Separate Trading of Registered Interest and
Principal of Securities ('STRIPS') program. Under the STRIPS program, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury. The staff of the SEC currently takes the position
that interests in 'stripped' U.S. government securities that are not part of the
STRIPS program are not U.S. government securities.
VARIABLE AMOUNT MASTER DEMAND NOTES. Securities purchased by Money Market
Fund may include variable amount master demand notes, which are unsecured
redeemable obligations that permit investment of varying amounts at fluctuating
interest rates under a direct agreement between the Fund and the issuer. The
principal amount of these notes may be increased from time to time by the
parties (subject to specified maximums) or decreased by the Fund or the issuer.
These notes are payable on demand and are typically unrated.
REPURCHASE AGREEMENTS. Money Market Fund may enter into repurchase
agreements with U.S. banks and dealers with respect to any security in which
that Fund is authorized to invest. The Fund may enter into repurchase agreements
with such institutions with respect to U.S. government securities, commercial
paper, bank certificates of deposit and bankers' acceptances. Repurchase
agreements are transactions in which the Fund purchases securities from a bank
or recognized securities dealer and simultaneously commits to resell the
securities to that bank or dealer at an agreed-upon date or upon demand and at a
price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities. Although repurchase agreements carry
certain risks not associated with direct investments in securities, including
possible decline in the market value of the underlying securities and delays and
costs to the Fund if the other party to the repurchase agreement becomes
insolvent, the Fund intends to enter into repurchase agreements only with
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banks and dealers in transactions believed by Mitchell Hutchins to present
minimal credit risks in accordance with guidelines established by the Trust's
board of trustees.
FOREIGN SECURITIES. Money Market Fund may invest in U.S. dollar-denominated
securities of foreign issuers, including debt securities of foreign corporations
and foreign governments and obligations of foreign banks, domestic branches of
foreign banks, foreign branches of domestic banks and foreign branches of
foreign banks. Such investments may involve risks that are different from
investments in U.S. issuers. These risks may include future unfavorable
political and economic developments, possible withholding taxes, seizure of
foreign deposits, currency controls, interest limitations or other governmental
restrictions that might affect the payment of principal or interest on the
securities held by the Fund. Additionally, there may be less publicly available
information about foreign issuers as these issuers may not be subject to the
same regulatory requirements as domestic issuers.
LENDING OF PORTFOLIO SECURITIES. Each Fund is authorized to lend up to
33 1/3% of the total value of its portfolio securities to broker-dealers or
institutional investors that Mitchell Hutchins deems qualified. Lending
securities enables a Fund to earn additional income, but could result in a loss
or delay in recovering securities.
BORROWING. Each Fund may borrow money from banks for temporary purposes in
an aggregate amount not exceeding 33 1/3% of the value of the Fund's total
assets. A Fund may not purchase securities while borrowings exceed 5% of the
value of the Fund's assets.
OTHER INVESTMENT POLICIES. Each Fund may purchase securities on a
'when-issued' or forward commitment basis, that is, for delivery beyond the
normal settlement date at a stated price and yield. A Fund generally would not
pay for such securities or start earning interest on them until they are
received. However, when a Fund purchases securities on a when-issued basis, it
immediately assumes the risks of ownership, including the risk of price
fluctuation. Failure by the issuer to deliver a security purchased on a
when-issued basis may result in a loss or missed opportunity to make an
alternative investment.
No Fund will invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days.
A Fund's investment objective may not be changed without the approval of
its shareholders. Certain other investment limitations, as described in the
Statement of Additional Information, also may not be changed without shareholder
approval. All other investment policies may be changed by the Trust's board of
trustees without shareholder approval.
PURCHASES
Each Fund offers investors the choice of investing in two separate classes
of shares -- Institutional shares and Financial Intermediary shares.
Institutional shares in each Fund are available for purchase by institutional
investors, and, at the discretion of PaineWebber, may be purchased by
individuals or other entities. Financial Intermediary shares in each Fund are
available for purchase by banks and other financial intermediaries for the
benefit of their customers and bear all fees payable by the Fund to financial
intermediaries for certain services they provide to the beneficial owners of
these shares.
The minimum initial investment is $1,000,000 in Money Market Fund or
Government Securities Fund (or in a combination of both) and $250,000 in
Treasury Securities Fund, which minimums may be waived at the discretion of
PaineWebber. Financial intermediaries purchasing shares for the accounts of
their customers may set a higher minimum for their customers. There is no
minimum subsequent investment.
The Funds and PaineWebber reserve the right to reject any purchase order
and to suspend the offering of Fund shares for a period of time.
An order to purchase shares of a Fund will be executed on the Business Day
on which federal funds become available to the Fund, at the Fund's
next-determined net asset value per share. A 'Business Day' is any day on which
the Boston offices of the Fund's custodian, State Street Bank and Trust Company
('Custodian'), and the New York City offices of PaineWebber and PaineWebber's
bank are all open for business. 'Federal funds' are funds deposited by a
commercial bank in an account at a Federal Reserve Bank that can be transferred
to a similar account of another bank in one day and thus may be made immediately
available to a Fund through its custodian.
If an order is received before 12:00 noon, Eastern time, and federal funds
are received by PaineWebber prior to 4:00 p.m., Eastern time, the order will be
executed on that day and the shareholder will receive the dividend declared on
that day. If an order is received after 12:00 noon, Eastern time, the order will
be executed at 12:00 noon, Eastern time, the following Business Day if payment
in federal funds has been received.
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THE RMA AND BSA PROGRAMS. Shares of each Fund are available primarily
through the RMA and BSA programs. RMA and BSA participants are asked to select
one of the Funds as their designated portfolio ('Primary Sweep Money Fund').
Investors will have all free credit cash balances (including proceeds from
securities sold) in the account invested in the Primary Sweep Money Fund.
Balances of $1 or more are invested daily after the initial minimum purchase is
made.
Investors who choose one Fund as their Primary Sweep Money Fund may also
purchase shares of another Fund by contacting their PaineWebber Investment
Executives or correspondent firms. Minimum purchase and maintenance
requirements, however, may apply to purchases of shares of a Fund other than the
investor's Primary Sweep Money Fund.
Certain features available to RMA and BSA participants are summarized in
the Appendices to the Statement of Additional Information. The RMA program is
more fully described in the brochure, 'Facts about Your Resource Management
Account (RMA)'r' and the BSA program is more fully described in the brochure,
'Facts about Your Business Services Account (BSA)'r'.' The availability of Fund
shares to customers of PaineWebber's correspondent firms varies depending on the
arrangements between PaineWebber and such firms.
RMA and BSA participants may change their Primary Sweep Money Fund at any
time by notifying their PaineWebber Investment Executives or correspondent
firms. However, RMA and BSA participants may not have more than one Primary
Sweep Money Fund at a time.
On any Business Day, a Fund will accept purchase orders and credit shares
to investors' accounts as follows.
PURCHASES IN GENERAL. To the extent that amounts transferred by check,
electronic funds transfer credit or wire or from funds held at PaineWebber into
an investor's brokerage account create a free credit cash balance, that cash
balance will be automatically invested in the investor's Primary Sweep Money
Fund, as described above under 'The RMA and BSA Programs,' when federal funds
are available for the investment. Fund shares will not be purchased until all
Debits and Charges in a shareholder's RMA or BSA brokerage account are
satisfied. See 'Redemptions -- Automatic Redemptions.' RMA or BSA participants
wishing to invest amounts transferred in one of the other Funds should so
instruct their PaineWebber Investment Executives or correspondent firms. All
other shareholders should consult their PaineWebber Investment Executives or
correspondent firms for information on how to purchase Fund shares.
PURCHASES WITH FUNDS HELD AT PAINEWEBBER. Investors may invest in Fund
shares with funds held in their brokerage account, including funds from the sale
of securities, as described above under 'Purchases in General.' Federal funds
normally are available for cash balances arising from the sale of securities
held in a brokerage account on the Business Day following settlement, but in
some cases can take longer.
PURCHASES BY CHECK OR ELECTRONIC FUNDS TRANSFER CREDIT. RMA and BSA
participants may purchase Fund shares by depositing into their account checks
drawn on a U.S. bank. The RMA or BSA participant's brokerage account number
should be included on the check.
As noted above, shares of the participant's Primary Sweep Money Fund will
be purchased when federal funds are available. Federal funds are deemed
available to a Fund two Business Days after deposit of a personal check and/or
an Electronic Funds Transfer credit initiated by PaineWebber and one Business
Day after deposit of a cashier's or certified check. PaineWebber may benefit
from the temporary use of the proceeds of personal checks and Electronic Funds
Transfer credits to the extent those funds are converted to federal funds in
fewer than two Business Days.
PURCHASES BY WIRE. RMA and BSA participants may purchase shares of their
Primary Sweep Money Fund or another Fund by instructing their banks to transfer
federal funds by wire to their RMA or BSA account. Wire transfers should be
directed to: The Bank of New York, ABA 021000018, PaineWebber Inc., A/C
890-0114-088, OBI = FBO [Account Name]/[Brokerage Account Number]. The wire must
include the investor's name and RMA or BSA brokerage account number. RMA or BSA
participants wishing to transfer federal funds into their accounts should
contact their PaineWebber Investment Executives or correspondent firms to
determine the appropriate wire instructions.
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PaineWebber and/or an investor's bank may impose a service charge for wire
transfers.
REDEMPTIONS
Shareholders may redeem any number of shares from their Fund accounts by
wire, by telephone or by mail. Shares will be redeemed at the net asset value
per share next determined after receipt by the Funds' transfer agent ('Transfer
Agent') of instructions from PaineWebber to redeem. PaineWebber delivers such
instructions to the Transfer Agent prior to the determination of net asset value
at 12:00 noon, Eastern time, on any Business Day.
The price at which a redemption request is executed is the net asset value
per share next determined after proper redemption instructions are received.
Payment for redemption orders that are received before 12:00 noon, Eastern time,
normally is made on the same Business Day. Payment for redemption orders that
are received at or after 12:00 noon, Eastern time, will be made on the next
Business Day following the redemption.
AUTOMATIC REDEMPTIONS. Under the RMA and BSA programs, PaineWebber will
redeem Fund shares automatically to satisfy outstanding 'Debits' and 'Charges.'
'Debits' are amounts due PaineWebber on settlement date for securities purchases
and other debits in the investor's RMA or BSA brokerage account, including
margin loans, any federal funds wires arranged by PaineWebber and fees for such
wires and PaineWebber checks and fees for such checks. 'Charges' are RMA or BSA
checks, MasterCard purchases, cash advances. Bill Payment Service checks and
Automated Clearing House transfers including Electronic Funds Transfer Debits.
Shares are redeemed to cover Debits on the day the Debit is generated. Shares
are redeemed to cover RMA or BSA checks and MasterCard cash advances on the day
they are paid. Shares are redeemed to cover MasterCard purchases at the end of
the MasterCard monthly billing period. Shares are also redeemed to cover
interest due on and credit extended and outstanding under the Bank One Line of
Credit at the end of the MasterCard monthly billing cycle. Securities purchases
are automatically paid for on settlement date. Fund shares will not be purchased
until all Debits and Charges in a shareholder's RMA or BSA brokerage account are
satisfied.
ADDITIONAL INFORMATION ON REDEMPTIONS. Shareholders with questions about
redemption requirements should consult their PaineWebber Investment Executives
or correspondent firms. Shareholders who redeem all their shares will receive
cash credits to their RMA or BSA brokerage accounts for dividends earned on
those shares to (but not including) the day of redemption. The redemption price
may be more or less than the purchase price, depending on the market value of
the Fund's portfolio; however, each Fund anticipates that its net asset value
per share will normally be $1.00 per share. See 'Valuation of Shares.'
PaineWebber has the right to terminate an RMA or BSA brokerage account for
any reason. In such event, all Fund shares held in the shareholder's RMA or BSA
brokerage account will be redeemed and the proceeds sent to the shareholder
within three Business Days.
ADDITIONAL INFORMATION ON FINANCIAL INTERMEDIARY SHARES. Each Fund's shares
are sold and redeemed without charge by the Fund. Financial intermediaries
purchasing or holding Financial Intermediary shares for their customer accounts
may charge customers for cash management and other services provided in
connection with their accounts, including, for instance, account maintenance
fees, compensating balance requirements or fees based on account transactions,
assets or income. The dividends payable to beneficial owners of Financial
Intermediary shares will be reduced by the amount of fees paid by a Fund to
financial intermediaries through which those shares are purchased and held. See
'Financial Intermediaries.' A customer should consider the terms of his or her
account with a financial
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intermediary before purchasing shares. A financial intermediary purchasing or
redeeming shares on behalf of its customers is responsible for transmitting
orders to PaineWebber in accordance with its customer agreements.
VALUATION OF SHARES
Each Fund uses its best efforts to maintain its net asset value at $1.00
per share. Each Fund's net asset value per share is determined by dividing the
value of its investment and other assets minus its liabilities by the number of
Fund shares outstanding. Each Fund's net asset value is determined once each
Business Day at 12:00 noon, Eastern time.
Each Fund values its portfolio securities using the amortized cost method
of valuation, under which market value is approximated by amortizing the
difference between the acquisition cost and value at maturity of an instrument
on a straight-line basis over its remaining life. All cash, receivables and
current payables are carried at their face value. Other assets are valued at
fair value as determined in good faith by or under the direction of the board of
trustees.
DIVIDENDS AND TAXES
DIVIDENDS. Each Business Day, each Fund declares as dividends all of its
net investment income. Shares begin earning dividends on the day of purchase;
dividends are accrued to shareholder accounts daily and are automatically paid
in additional Fund shares monthly. Shares do not earn dividends on the day of
redemption.
Each Fund distributes its net short-term capital gain, if any, annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The Funds
do not expect to realize net long-term capital gain and thus do not anticipate
payment of any long-term capital gain distributions.
FEDERAL TAX. Each Fund intends to continue to qualify for treatment as a
regulated investment company under the Internal Revenue Code so that it will be
relieved of federal income tax on that part of its investment company taxable
income (consisting generally of taxable net investment income and net short-term
capital gain, if any) that is distributed to its shareholders.
Dividends paid by the Funds generally are taxable to their shareholders as
ordinary income, notwithstanding that such dividends are paid in additional Fund
shares. Shareholders not subject to tax on their income, however, generally are
not required to pay tax on amounts distributed to them. The Funds' dividends and
distributions will not qualify for the dividends-received deduction for
corporations.
Some states permit shareholders to treat their portions of a Fund's
dividends that are attributable to interest on U.S. Treasury securities and
certain U.S. government securities as income that is exempt from state and local
income taxes, if the Fund meets certain asset and diversification requirements.
Dividends attributable to earnings on repurchase agreements and securities loans
are, as a general rule, subject to state and local taxation.
Each Fund notifies its shareholders following the end of each calendar year
of the tax status of all distributions paid (or deemed paid) during that year.
The notice sent by each Fund specifies the portions of their dividends that are
attributable to U.S. Treasury securities and specific types of U.S. government
securities.
Each Fund is required to withhold 31% of all taxable dividends payable to
any individuals and certain other noncorporate shareholders who (1) do not
provide the Fund with a correct taxpayer identification number or (2) otherwise
are subject to backup withholding.
ADDITIONAL INFORMATION. The foregoing is only a summary of some of the
important federal, state and local income tax considerations generally affecting
the Funds and their shareholders; see the Statement of Additional Information
for a further discussion. There may be other federal, state and local tax
considerations applicable to a particular investor. Prospective shareholders are
urged to consult their tax advisers.
MANAGEMENT
The Trust's board of trustees, as part of its overall management
responsibility, oversees various organizations responsible for the Funds' day-
to-day management. PaineWebber, the Funds' investment adviser and administrator,
provides a continuous investment program for each Fund and supervises all
aspects of its operations. As sub-adviser to the Funds, Mitchell Hutchins makes
and implements investment decisions and,
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as sub-administrator, is responsible for the day-to-day administration of the
Funds.
PaineWebber receives a monthly fee for these services. For the fiscal year
ended April 30, 1996, the effective advisory and administration fees paid to
PaineWebber by each Fund were equal to 0.25% of the Fund's average daily net
assets. PaineWebber has undertaken to waive 0.05% of its fees and to maintain
each Fund's total annual operating expenses at a level not exceeding 0.30% and
0.55% of the Fund's average daily net assets annually for Institutional shares
and Financial Intermediary shares, respectively. After PaineWebber's waiver of a
portion of the fees with respect to each Fund's Institutional shares, for the
fiscal year ended April 30, 1996, Money Market Fund's, Government Securities
Fund's and Treasury Securities Fund's total expenses represented 0.31%, 0.32%
and 0.32%, respectively, of their average net assets. No Financial Intermediary
shares of the Funds were outstanding during that period. PaineWebber (not the
Funds) pays Mitchell Hutchins a fee for its sub-advisory and sub-administration
services, at an annual rate of 50% of the fee received by PaineWebber from each
Fund for advisory and administrative services.
PaineWebber and Mitchell Hutchins are located at 1285 Avenue of the
Americas, New York, New York 10019. Mitchell Hutchins is a wholly owned
subsidiary of PaineWebber, which is in turn wholly owned by Paine Webber Group
Inc., a publicly owned financial services holding company. At July 31, 1996,
PaineWebber or Mitchell Hutchins was investment adviser or sub-adviser to 31
registered investment companies with 65 separate portfolios and aggregate assets
in excess of $30 billion.
Mitchell Hutchins personnel may engage in securities transactions for their
own accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
PaineWebber is the distributor of each Fund's shares.
FINANCIAL INTERMEDIARIES
Financial intermediaries, such as banks and savings and loan associations,
may purchase Financial Intermediary shares for the accounts of their customers.
The Trust will enter into a service agreement with each financial intermediary
that purchases Financial Intermediary shares requiring it to provide support
services to its customers who are the beneficial owners of Financial
Intermediary shares in consideration of the Trust's payment of 0.25%, on an
annualized basis, of the average daily net asset value of the Financial
Intermediary shares held by the financial intermediary for the benefit of its
customers. These services, which are described in greater detail in the
Statement of Additional Information under 'Management of the Trust -- Financial
Intermediaries,' include: aggregating and processing purchase and redemption
requests from customers and placing net purchase and redemption orders with
PaineWebber; providing customers with a service that invests the assets of their
accounts in Financial Intermediary shares; processing dividend payments on
behalf of customers; providing information periodically to customers showing
their positions in Financial Intermediary shares; arranging for bank wires;
responding to customer inquiries relating to the services performed by the
financial intermediary; providing sub-accounting with respect to Financial
Intermediary shares beneficially owned by customers or the information necessary
for sub-accounting; forwarding shareholder communications from a Fund to
customers, if required by law; and such other similar services as the Trust may
reasonably request from time to time to the extent the financial intermediary is
permitted to do so under federal and state statutes, rules and regulations.
Under the terms of the service agreements, financial intermediaries are required
to provide to their customers a schedule of any additional fees that they may
charge customers in connection with their investments in Financial Intermediary
shares. Financial Intermediary shares are available for purchase only by
financial intermediaries that have entered into service agreements with the
Trust in connection with their investment. Financial intermediaries providing
services to beneficial owners of Financial Intermediary shares in certain states
may be required to be registered as dealers under the laws of those states.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of banks serving as financial intermediaries in
connection with the provision of support services to their customers, the Trust
might be required to alter or discontinue its arrangements with financial
intermediaries and change its method of operations with respect to Financial
Intermediary shares. It is not anticipated, however, that
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any change in the Trust's method of operations would affect its net asset values
per share or result in a financial loss to any shareholder.
PERFORMANCE INFORMATION
From time to time each Fund may advertise its 'yield' and 'effective
yield.' Both yield figures are based on historical earnings and are not intended
to indicate future performance. The 'yield' of a Fund is the income on an
investment in that Fund over a specified seven-day period. This income is then
'annualized' (that is, assumed to be earned each week over a 52-week period) and
shown as a percentage of the investment. The 'effective yield' is calculated
similarly, but when annualized the income earned is assumed to be reinvested.
The 'effective yield' will be higher than the 'yield' because of the compounding
effect of this assumed reinvestment.
Current yield and effective yield are calculated separately for
Institutional shares and Financial Intermediary shares. Since holders of
Financial Intermediary shares bear all service fees for the services rendered by
financial intermediaries, the net yield on Financial Intermediary shares can be
expected at any given time to be approximately .25% lower than the net yield on
Institutional shares. Any additional fees directly assessed by financial
intermediaries will have the effect of further reducing the net yield realized
by a beneficial owner of Financial Intermediary shares.
Each Fund may also advertise other performance data, which may consist of
the annual or cumulative return (including realized net short-term capital gain,
if any) earned on a hypothetical investment in the Fund since it began
operations or for shorter periods. This return data may or may not assume
reinvestment of dividends (compounding).
GENERAL INFORMATION
The Trust is registered as an open-end management investment company and
was organized as a business trust under the laws of the Commonwealth of
Massachusetts by Declaration of Trust dated February 14, 1991. The Trust's board
of trustees has authority to issue an unlimited number of shares of beneficial
interest of separate series, par value $0.001 per share. The trustees have
authorized the issuance of Institutional shares and Financial Intermediary
shares of each of the three Funds.
Each share of a Fund has equal voting, dividend and liquidation rights,
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.
The Trust does not hold annual shareholder meetings. There normally will be
no meetings of shareholders to elect trustees unless fewer than a majority of
the trustees holding office have been elected by shareholders.
Shareholders of record of no less than two-thirds of the outstanding shares
of the Trust may remove a trustee by vote cast in person or by proxy at a
meeting called for that purpose. The trustees are required to call a meeting of
shareholders of the Trust for the purposes of voting upon the question of
removal of any trustee when requested in writing to do so by the shareholders of
record of not less than 10% of the Trust's outstanding shares.
The shares of each Fund will be voted separately except when an aggregate
vote of all series is required by the Investment Company Act of 1940. Financial
intermediaries holding shares for their own accounts must undertake to vote the
shares in the same proportions as the vote of shares held for their customers.
CERTIFICATES. To avoid additional operating expenses and for investor
convenience, stock certificates are not issued. Ownership of shares of each Fund
is recorded on a stock register by the Transfer Agent, and shareholders have the
same rights of ownership with respect to such shares as if certificates had been
issued.
REPORTS. Shareholders receive audited annual and unaudited semi-annual
financial statements of the Funds. All purchases and redemptions of Fund shares
are confirmed to shareholders at least quarterly.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One
Heritage Drive, North Quincy, Massachusetts 02171, is custodian of the Trust's
assets. PFPC Inc., a subsidiary of PNC Bank, National Association, whose
principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809,
is the Trust's transfer and dividend disbursing agent.
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Table of Contents
Highlights........................... 2
Financial Highlights................. 6
Investment Objective and Policies.... 8
Purchases............................ 10
Redemptions.......................... 12
Valuation of Shares.................. 13
Dividends and Taxes.................. 13
Management........................... 13
Financial Information................ 14
Performance Information.............. 15
General Information.................. 15
No person has been authorized to give any information or to
make any representations not contained in this Prospectus in
connection with the offering made by this Prospectus and, if
given or made, such information or representations must not
be relied upon as having been authorized by the Fund or its
distributor. This Prospectus does not constitute an offering by
the Fund or by the distributor in any jurisdiction in which
offering may not lawfully be made.[qp]
PaineWebber
1996 PaineWebber Incorporated
PaineWebber
Prospectus
Liquid
Institutional
Reserves
Money Market
Fund
Government
Securities
Fund
Treasury
Securities
Fund
SEPTEMBER 1, 1996
<PAGE>
<PAGE>
LIQUID INSTITUTIONAL RESERVES
MONEY MARKET FUND
GOVERNMENT SECURITIES FUND
TREASURY SECURITIES FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
Liquid Institutional Reserves (the 'Trust') is a no-load, open-end
investment company offering shares in three separate, diversified, money market
funds (the 'Funds'). Each Fund seeks high current income to the extent
consistent with the preservation of capital and the maintenance of liquidity
through investments in high quality, short-term, U.S. dollar-denominated money
market instruments. The investment adviser, administrator and distributor of
each Fund is PaineWebber Incorporated ('PaineWebber'); the sub-adviser and
sub-administrator of each Fund is Mitchell Hutchins Asset Management Inc.
('Mitchell Hutchins'), a wholly owned subsidiary of PaineWebber. This Statement
of Additional Information is not a prospectus and should be read only in
conjunction with the Funds' current Prospectus, dated September 1, 1996. A copy
of the Prospectus may be obtained by contacting any PaineWebber Investment
Executive or correspondent firm or by calling 1-800-762-1000. This Statement of
Additional Information is dated September 1, 1996.
INVESTMENT POLICIES AND RESTRICTIONS
The following supplements the information contained in the Prospectus
concerning the Funds' investment policies and limitations.
YIELDS AND RATINGS OF MONEY MARKET INVESTMENTS. The yields on the money
market instruments in which the Funds invest (such as U.S. government
securities, commercial paper and bank obligations) are dependent on a variety of
factors, including general money market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer, the size of
the offering, the maturity of the obligation and the ratings of the issue. The
ratings of nationally recognized statistical rating organizations ('NRSROs')
represent their opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices. Subsequent to its purchase by a Fund, an issue may
cease to be rated or its rating may be reduced. In the event that a security in
a Fund's portfolio ceases to be a 'First Tier Security,' as defined in the
Prospectus, or Mitchell Hutchins becomes aware that a security has received a
rating below the second highest rating by any NRSRO, Mitchell Hutchins or the
Trust's board of trustees, will consider whether the Fund should continue to
hold the obligation. A First Tier Security rated in the highest short-term
rating category by a single NRSRO at the time of purchase that subsequently
receives a rating below the highest rating category from a different NRSRO will
continue to be considered a First Tier Security.
REPURCHASE AGREEMENTS. As stated in the Prospectus, Money Market Fund may
enter into repurchase agreements with respect to any security in which that Fund
is authorized to invest. The Market Fund may enter into repurchase agreements
with U.S. banks and dealers with respect to any obligation issued or guaranteed
by the U.S. government, its agencies or instrumentalities and also with respect
to commercial paper, bank certificates of deposit and bankers' acceptances. The
Fund maintains custody of the underlying securities prior to their repurchase;
thus, the obligation of the bank or securities dealer to pay the repurchase
price on the date agreed to or upon demand is, in effect, secured by such
securities. If the value of these securities is less than the repurchase price,
plus any agreed-upon additional amount, the other party to the agreement must
provide additional collateral so that at all times the collateral is at least
equal to the repurchase price plus any agreed-upon additional amount. The
difference between the total amount to be received upon repurchase of the
securities and the price
<PAGE>
<PAGE>
that was paid by the Fund upon acquisition is accrued as interest and included
in the Fund's net investment income.
Repurchase agreements carry certain risks not associated with direct
investments in securities. Money Market Fund intends to enter into repurchase
agreements only with banks and dealers in transactions believed by Mitchell
Hutchins to present minimal credit risks in accordance with guidelines
established by the Trust's board of trustees. Mitchell Hutchins will review and
monitor the creditworthiness of those institutions under the board's general
supervision.
ILLIQUID SECURITIES. No Fund will invest more than 10% of its net assets in
illiquid securities. The term 'illiquid securities' for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities and includes, among other things, repurchase agreements maturing in
more than seven days, and restricted securities other than those Mitchell
Hutchins has determined to be liquid pursuant to guidelines established by the
Trust's board of trustees.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933 ('1933 Act'), including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a 'safe harbor' from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
have developed as a result of Rule 144A, providing both readily ascertainable
values for restricted securities and the ability to liquidate an investment in
order to satisfy share redemption orders. Such markets include automated systems
for the trading, clearance and settlement of unregistered securities, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc. An insufficient number of qualified institutional buyers interested in
purchasing certain restricted securities held by Money Market Fund, however,
could affect adversely the marketability of such portfolio securities, and the
Fund might be unable to dispose of such securities promptly or at favorable
prices.
The board has delegated the function of making day-to-day determinations of
liquidity to Mitchell Hutchins, pursuant to guidelines approved by the board.
Mitchell Hutchins takes into account a number of factors in reaching liquidity
decisions, including (1) the frequency of trades for the security, (2) the
number of dealers that make quotes for the security, (3) the number of dealers
that have undertaken to make a market in the security, (4) the number of other
potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities held by the Funds and reports periodically on such
decisions to the board.
FLOATING RATE AND VARIABLE RATE DEMAND INSTRUMENTS. As noted in the
Prospectus, Money Market Fund may invest in floating rate and variable rate
securities with demand features. A demand feature gives the Fund the right to
sell the securities back to a specified party, usually a remarketing agent, on a
specified date, at a price equal to their amortized cost value plus accrued
interest. A demand feature is often backed by a letter of credit, liquidity
support arrangements or guarantee from a bank or other financial institution,
which permits the remarketing agent to draw on the letter of credit or other
arrangements on demand, after specified notice, for all or any part of the
exercise price of the demand feature. Generally, a Fund intends to exercise
demand features (1) upon a default under the terms of the underlying security,
(2) to maintain the Fund's portfolio in accordance with its investment objective
and policies or applicable legal or regulatory requirements or (3) as needed to
provide liquidity to the Fund in order to meet redemption requests. The ability
of a bank or other financial institution to fulfill its obligations under a
letter of credit or guarantee or other liquidity arrangements might be affected
by possible financial difficulties of its borrowers, adverse interest rate or
economic conditions, regulatory limitations or other factors. The interest rate
on floating rate or variable rate securities ordinarily is readjusted on the
basis of the prime rate of the bank that originated the financing or some other
index
2
<PAGE>
<PAGE>
or published rate, such as the 90-day U.S. Treasury bill rate, or resets to
reflect market rates of interest. Generally, these interest rate adjustments
cause the market value of floating rate and variable rate securities to
fluctuate less than the market value of fixed rate obligations.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As stated in the Prospectus,
each Fund may purchase securities on a 'when-issued' or 'delayed delivery'
basis. A security purchased on a when-issued or delayed delivery basis is
recorded as an asset on the commitment date and is subject to changes in market
value, generally based upon changes in the level of interest rates. Thus,
fluctuation in the value of the security from the time of the commitment date
will affect the Fund's net asset value. When a Fund commits to purchase
securities on a when-issued or delayed delivery basis, its custodian segregates
assets to cover the amount of the commitment. See 'Investment Policies and
Restrictions -- Segregated Accounts.'
LENDING OF PORTFOLIO SECURITIES. As indicated in the Prospectus, each Fund
is authorized to lend up to 33 1/3% of its portfolio securities to
broker-dealers or institutional investors that Mitchell Hutchins deems
qualified, but only when the borrower maintains acceptable collateral with the
Funds' custodian, marked to market daily, in an amount at least equal to the
market value of the securities loaned, plus accrued interest and dividends.
Acceptable collateral is limited to cash, U.S. government securities and
irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. In determining whether to lend securities to a particular
broker-dealer of institutional investor, Mitchell Hutchins will consider, and
during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. The Funds will
retain authority to terminate any loan at any time. The Funds may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. The Funds will
receive reasonable interest on the loan or a flat fee from the borrower and
amounts equivalent to any dividends, interest or other distributions on the
securities loaned. The Funds will regain record ownership of loaned securities
to exercise beneficial rights, such as voting and subscription rights and rights
to dividends, interest or other distributions, when exercising such rights is
considered to be in the Funds' interest.
SEGREGATED ACCOUNTS. When a Fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis, the Fund will
maintain with an approved custodian in a segregated account cash or liquid
securities, marked to market daily, in an amount at least equal to the Fund's
obligation or commitment under such transactions.
INVESTMENT LIMITATIONS. The following fundamental investment limitations
cannot be changed with respect to a Fund without the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or
more of the shares present at a shareholders' meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy. If a
percentage restriction is adhered to at the time of an investment or
transaction, a later increase or decrease in percentage resulting from changing
values of portfolio securities or amount of total assets will not be considered
a violation of any of the following limitations.
Each Fund will not:
(1) purchase securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in securities of
that issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to
25% of the Fund's total assets may be invested without regard to
this limitation, and except that this limitation does not apply to
securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities or to securities issued by other
investment companies.
The following interpretation applies to, but is not a part of,
this fundamental restriction: Mortgage- and asset-backed
securities will not be considered to have been issued by the same
issuer by reason of the securities having the same sponsor, and
mortgage- and asset-backed securities issued by a finance or other
special purpose subsidiary that are not guaranteed by the parent
company will be considered to be issued by a separate issuer from
the parent company.
3
<PAGE>
<PAGE>
(2) purchase any security if, as a result of that purchase, 25% or
more of the Fund's total assets would be invested in securities of
issuers having their principal business activities in the same
industry, except that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities or to municipal securities or to certificates of
deposit and bankers' acceptances of domestic branches of U.S.
banks.
The following interpretation applies to, but is not a part of,
this fundamental restriction: With respect to this limitation,
domestic and foreign banking will be considered to be different
industries.
(3) issue senior securities or borrow money, except as permitted under
the Investment Company Act of 1940 ('1940 Act') and then not in
excess of 33 1/3% of the Fund's total assets (including the amount
of the senior securities issued but reduced by any liabilities not
constituting senior securities) at the time of the issuance or
borrowing, except that the Fund may borrow up to an additional 5%
of its total assets (not including the amount borrowed) for
temporary or emergency purposes.
(4) make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt
securities or instruments, or participations or other interests
therein and investments in government obligations, commercial
paper, certificates of deposit, bankers' acceptances or similar
instruments will not be considered the making of a loan.
(5) engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with
its disposition of portfolio securities.
(6) purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments
in mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject
to this limitation, and except that the Fund may exercise rights
under agreements relating to such securities, including the right
to enforce security interests and to hold real estate acquired by
reason of such enforcement until that real estate can be
liquidated in an orderly manner.
(7) purchase or sell physical commodities unless acquired as a result
of owning securities or other instruments, but the Fund many
purchase, sell or enter into financial options and futures,
forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following investment
restrictions are not fundamental and may be changed by the Trust's board without
shareholder approval.
Each Fund will not:
(1) mortgage, pledge or hypothecate any assets except in connection
with permitted borrowings or the issuance of senior securities.
(2) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that
the Fund may make deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative
instruments.
(3) engage in short sales of securities or maintain a short position,
except that the Fund may (a) sell short 'against the box' and (b)
maintain short positions in connection with its use of financial
options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative
instruments.
(4) invest in oil, gas or mineral exploration or development programs
or leases, except that investments in securities of issuers that
invest in such programs or leases and investments in asset-backed
securities supported by receivables generated from such programs
or leases are not subject to this prohibition.
(5) invest in companies for the purpose of exercising control or
management.
(6) invest in warrants, valued at the lower of cost or market, in
excess of 5% of the value of its net assets, which amount may
include warrants that are not listed on the New York Stock
Exchange Inc. ('NYSE') or the American Stock Exchange, Inc.,
provided that such unlisted warrants, valued at the lower of cost
or market, do not exceed 2% of the Fund's net assets.
4
<PAGE>
<PAGE>
TRUSTEES AND OFFICERS; PRINCIPAL SHAREHOLDERS
The trustees and executive officers of the Trust, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ----------------------------------- --------------------- -----------------------------------------------------
<S> <C> <C>
Margo N. Alexander**; 49 Trustee and President Mrs. Alexander is president, chief executive officer
and a director of Mitchell Hutchins (since January
1995), and an executive vice president and a
director of PaineWebber. Mrs. Alexander is
president and a director or trustee of 30
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Richard Q. Armstrong; 61 Trustee Mr. Armstrong is chairman and principal of RQA
78 West Brother Drive Enterprises (management consulting firm) (since
Greenwich, CT 06830 April 1991 and principal occupation since March
1995). Mr. Armstrong is also director of Hi Lo
Automotive, Inc. He was chairman of the board,
chief executive officer and co-owner of Adirondack
Beverages (producer and distributor of soft drinks
and sparkling/still waters) (October 1993-March
1995). Mr. Armstrong was a partner of The New
England Consulting Group (management consulting
firm) (December 1992-September 1993). He was
managing director of LVMH U.S. Corporation (U.S.
subsidiary of the French luxury goods conglomerate,
Luis Vuitton Moet Hennessey Corporation)
(1987-1991) and chairman of its wine and spirits
subsidiary, Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a director or trustee
of 29 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment
advisor.
E. Garrett Bewkes, Jr.**; 69 Trustee and Chairman Mr. Bewkes is a director of Paine Webber Group Inc.
of the Board of ('PW Group') (holding company of PaineWebber and
Trustees Mitchell Hutchins). Prior to December 1995, he was
a consultant to PW Group. Prior to 1988, he was
chairman of the board, president and chief
executive officer of American Bakeries Company. Mr.
Bewkes is also a director of Interstate Bakeries
Corporation and NaPro BioTherapeutics, Inc. Mr.
Bewkes is a director or trustee of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ----------------------------------- --------------------- -----------------------------------------------------
<S> <C> <C>
Richard R. Burt; 49 Trustee Mr. Burt is chairman of International Equity Partners
1101 Connecticut Avenue, N.W. (international investments and consulting firm)
Washington, D.C. 20036 (since March 1994) and a partner of McKinsey &
Company (management consulting firm) (since 1991).
He is also a director of American Publishing
Company. He was the chief negotiator in the
Strategic Arms Reduction Talks with the former
Soviet Union (1989-1991) and the U.S. Ambassador to
the Federal Republic of Germany (1985-1989). Mr.
Burt is a director or trustee of 29 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Mary C. Farrell**; 46 Trustee Ms. Farrell is a managing director, senior investment
strategist and member of the Investment Policy
Committee of PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a member of the
Financial Women's Association and Women's Economic
Roundtable and is employed as a regular panelist on
Wall $treet Week with Louis Rukeyser. She also
serves on the Board of Overseers of New York
University's Stern School of Business. Ms. Farrell
is a director or trustee of 29 investment companies
for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Meyer Feldberg; 54 Trustee Dean Feldberg is Dean and Professor of Management of
Columbia University the Graduate School of Business, Columbia
101 Uris Hall University. Prior to 1989, he was president of the
New York, New York 10027 Illinois Institute of Technology. Dean Feldberg is
also a director of AMSCO International Inc.
(medical instruments and supplies), Federated
Department Stores Inc. and New World Communications
Group Incorporated. Dean Feldberg is a director or
trustee of 29 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
George W. Gowen; 66 Trustee Mr. Gowen is a partner in the law firm of Dunnington,
666 Third Avenue Bartholow & Miller. Prior to May 1994, he was a
New York, New York 10017 partner in the law firm of Fryer, Ross & Gowen. Mr.
Gowen is also a director of Columbia Real Estate
Investments, Inc. Mr. Gowen is a director or
trustee of 29 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ----------------------------------- --------------------- -----------------------------------------------------
<S> <C> <C>
Frederic V. Malek; 59 Trustee Mr. Malek is chairman of Thayer Capital Partners
901 15th Street, N.W. (investment bank) and a co- chairman and director
Suite 300 of CB Commercial Group Inc. (real estate). From
Washington, D.C. 20005 January 1992 to November 1992, he was campaign
manager of Bush-Quayle '92. From 1990 to 1992, he
was vice chairman and, from 1989 to 1990, he was
president of Northwest Airlines Inc., NWA Inc.
(holding company of Northwest Airlines Inc.) and
Wings Holdings Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline catering
and contract feeding), where he most recently was
an executive vice president and president of
Marriott Hotels and Resorts. Mr. Malek is also a
director of American Management Systems, Inc.
(management consulting and computer-related
services), Automatic Data Processing, Inc., Avis,
Inc. (passenger car rental), FPL Group, Inc.
(electric services), National Education Corporation
and Northwest Airlines Inc. Mr. Malek is a director
or trustee of 29 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Carl W. Schafer; 60 Trustee Mr. Schafer is president of the Atlantic Foundation
P.O. Box 1164 (charitable foundation supporting mainly
Princeton, NJ 08542 oceanographic exploration and research). He also is
a director of Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Evans Systems, Inc.
(a motor fuels, convenience store and diversified
company), Hidden Lake Gold Mines Ltd., Electronic
Clearing House, Inc. (financial transactions
processing), Wainoco Oil Corporation and
Nutraceutix, Inc. (biotechnology company). Prior to
January 1993, he was chairman of the Investment
Advisory Committee of the Howard Hughes Medical
Institute. Mr. Schafer is a director or trustee of
29 investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
</TABLE>
7
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ----------------------------------- --------------------- -----------------------------------------------------
<S> <C> <C>
John R. Torell III; 57 Trustee Mr. Torell is chairman of Torell Management Inc.
767 Fifth Avenue (financial advisory firm), chairman of Telesphere
Suite 4605 Corporation (electronic provider of financial
New York, NY 10153 information) and a partner of Zilkha & Company
(merchant banking and private investment company).
He is the former chairman and chief executive
officer of Fortune Bancorp (1990-1991 and
1990-1994, respectively), the former chairman,
president and chief executive officer of CalFed,
Inc. (savings association) (1988 to 1989) and
former president of Manufacturers Hanover Corp.
(bank) (prior to 1988). Mr. Torell is a director of
American Home Products Corp., New Colt Inc.
(armament manufacturer) and Volt Information
Services Inc. Mr. Torell is a director or trustee
of 29 investment companies for which Mitchell
Hutchins or PaineWebber services as investment
adviser.
Teresa M. Boyle; 37 Vice President Ms. Boyle is a first vice president and
manager -- advisory administration of Mitchell
Hutchins. Prior to November 1993, she was
compliance manager of Hyperion Capital Management,
Inc., an investment advisory firm. Prior to April
1993, Ms. Boyle was a vice president and
manager -- legal administration of Mitchell
Hutchins. Ms. Boyle is a vice president of 30
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
C. William Maher; 35 Vice President and Mr. Maher is a first vice president and a senior
Assistant Treasurer manager of the mutual fund finance division of
Mitchell Hutchins. Mr. Maher is a vice president
and assistant treasurer of 30 investment companies
for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Dennis McCauley; 49 Vice President Mr. McCauley is a managing director and chief
investment officer -- fixed income of Mitchell
Hutchins. Prior to December, 1994, he was director
of fixed income investments of IBM Corporation. Mr.
McCauley is a vice president of 19 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Susan P. Messina; 36 Vice President Ms. Messina is a senior vice president of Mitchell
Hutchins. Ms. Messina has been with Mitchell
Hutchins since 1982. Ms. Messina is a vice
president of five investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
8
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE TRUST OTHER DIRECTORSHIPS
- ----------------------------------- --------------------- -----------------------------------------------------
<S> <C> <C>
Ann E. Moran; 39 Vice President and Ms. Moran is a vice president of Mitchell Hutchins.
Assistant Treasurer Ms. Moran is a vice president and assistant
treasurer of 30 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Dianne E. O'Donnell; 44 Vice President and Ms. O'Donnell is a senior vice president and deputy
Secretary general counsel of Mitchell Hutchins. Ms. O'Donnell
is a vice president and secretary of 29 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Victoria E. Schonfeld; 45 Vice President Ms. Schonfeld is a managing director and general
counsel of Mitchell Hutchins. Prior to May 1994,
she was a partner in the law firm of Arnold &
Porter. Ms. Schonfeld is a vice president of 30
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Paul H. Schubert; 33 Vice President and Mr. Schubert is a first vice president and a senior
Assistant Treasurer manager of the mutual fund finance division of
Mitchell Hutchins. From August 1992 to August 1994,
he was a vice president of BlackRock Financial
Management, Inc. Prior to August 1992, he was an
audit manager with Ernst & Young LLP. Mr. Schubert
is a vice president and assistant treasurer of 30
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Julian F. Sluyters; 36 Vice President and Mr. Sluyters is a senior vice president and the
Treasurer director of the mutual fund finance division of
Mitchell Hutchins. Prior to 1991, he was an audit
senior manager with Ernst & Young LLP. Mr. Sluyters
is also a vice president and treasurer of 30
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Keith A. Weller; 36 Vice President and Mr. Weller is a first vice president and associate
Assistant Secretary general counsel of Mitchell Hutchins. Prior to May
1995, he was an attorney in private practice. Mr.
Weller is a vice president and assistant secretary
of 29 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment
adviser.
</TABLE>
- ------------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are 'interested persons' of the
Trust as defined in the 1940 Act by virtue of their positions with PW Group,
PaineWebber and/or Mitchell Hutchins.
The Trust pays trustees who are not 'interested persons' of the Trust
$1,000 annually for each Fund and $150 for each board meeting and each meeting
of a board committee (other than committee
9
<PAGE>
<PAGE>
meetings held on the same day as a board meeting). Messrs. Feldberg and Torell
serve as chairmen of the audit and contract review committees of individual
funds within the PaineWebber fund complex and receive additional annual
compensation, aggregating $15,000, from the relevant funds. Trustees of the
Trust who are 'interested persons' receive no compensation from the Fund. All
trustees are reimbursed for any expenses incurred in attending meetings.
Trustees and officers of the Trust own in the aggregate less than 1% of the
shares of each Fund. Since PaineWebber and Mitchell Hutchins perform
substantially all of the services necessary for the operation of the Trust, the
Trust requires no employees. The table below includes certain information
relating to the compensation of the Trust's current trustees who held office
with the Trust or other PaineWebber funds for the last fiscal and calendar
years.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM THE
TRUST
AND THE
AGGREGATE COMPENSATION FUND
NAME OF PERSONS, POSITION FROM THE TRUST COMPLEX`D'
- ----------------------------------------------------------------- --------------------------- -------------
<S> <C> <C>
Richard Q. Armstrong, Trustee**.................................. -- $ $ 9,000
Richard R. Burt, Trustee**....................................... -- $ 7,750
Meyer Feldberg, Trustee**........................................ -- $ 106,375
George W. Gowen, Trustee**....................................... -- $ 99,750
Frederic V. Malek, Trustee**..................................... -- $ 99,750
Carl W. Schafer, Trustee......................................... 2,000 $ 118,175
John R. Torell III, Trustee**.................................... -- $ 28,125
</TABLE>
- ------------
Only independent trustees are compensated by the Trust and identified above; who
are 'interested persons,' as defined in the 1940 Act, do not receive
compensation.
* Represents fees paid to each trustee during the fiscal year ended April 30,
1996.
** Elected as trustee at a shareholder meeting on April 15, 1996.
`D' Represents total compensation paid to each trustee during the calendar year
ended December 31, 1995; no fund within the fund complex has a bonus,
pension, profit sharing or retirement plan.
10
<PAGE>
<PAGE>
BENEFICIAL OWNERSHIP OF GREATER THAN 5% OF FUND SHARES
To the knowledge of the Trust, the following persons owned of record 5% or
more of Government Securities Fund's Institutional shares:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE
OF INSTITUTIONAL SHARES BENEFICIALLY
NAME AND ADDRESS* OWNED AS OF AUGUST 1, 1996
- --------------------------------------------------- ------------------------------------------------------------
<S> <C>
Medmax Ventures LLC 13.14%
Florida Preferred Risk Self Insurers Fund 11.30
To the knowledge of the Trust, the following persons owned of record 5% or
more of Money Market Fund's Institutional shares:
<CAPTION>
NUMBER AND PERCENTAGE
OF INSTITUTIONAL SHARES BENEFICIALLY
NAME AND ADDRESS* OWNED AS OF AUGUST 1, 1996
- --------------------------------------------------- ------------------------------------------------------------
<S> <C>
Pyramid Venture Inc. 13.46%
To the knowledge of the Trust, the following persons owned of record 5% or
more of Treasury Securities Fund's Institutional shares:
<CAPTION>
NUMBER AND PERCENTAGE
OF INSTITUTIONAL SHARES BENEFICIALLY
NAME AND ADDRESS* OWNED AS OF AUGUST 1, 1996
- --------------------------------------------------- ------------------------------------------------------------
<S> <C>
Randy Lee
White Bear Lincoln Mercury 20.09%
Macrochem Corp. 27.63%
Robert S. Thompson and Elizabeth Thompson,
Trustees FBO Robert S. and Elizabeth
Thompson Trust 6.53%
Norlyn K. Vande Brake 6.35%
The Trust is not aware as to whether or to what extent shares owned of record also are owned beneficially.
</TABLE>
- ------------
* Each shareholder listed above may be contacted c/o Mitchell Hutchins Asset
Managment Inc., 1285 Avenue of the Americas, New York, NY 10019.
11
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<PAGE>
INVESTMENT ADVISORY, ADMINISTRATION AND
DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. PaineWebber acts as
the Trust's investment adviser and administrator pursuant to a contract dated
April 13, 1995 ('PaineWebber Contract'). Under the PaineWebber Contract, the
Trust pays PaineWebber an annual fee, computed daily and paid monthly, at an
annual rate of 0.25% of each Fund's average daily net assets.
For the fiscal years ended April 30, 1996, April 30, 1995 and April 30,
1994, Government Securities Fund incurred fees of $124,281, $166,715 and
$283,281, respectively, to Kidder Peabody Asset Management, Inc. ('KPAM'), the
Fund's predecessor investment adviser and administrator. During these periods,
PaineWebber or KPAM voluntarily waived a portion of their fees in the amounts of
$16,752, $0 and $0, respectively, and voluntarily paid other Fund expenses in
the amounts of $105,334, $81,678 and $21,554, respectively. For the fiscal years
ended April 30, 1996, April 30, 1995 and April 30, 1994, Money Market Fund
incurred fees of $669,836, $595,984 and $800,430, respectively, to PaineWebber
or KPAM. During these periods, PaineWebber or KPAM voluntarily waived a portion
of their fees in the amounts of $102,772, $0 and $0, respectively, and
voluntarily paid other Fund expenses in the amounts of $59,795, $45,499 and
$3,470, respectively. For the fiscal years ended April 30, 1996, April 30, 1995
and April 30, 1994, Treasury Securities Fund incurred fees of $62,167, $57,716
and $47,804 to PaineWebber or KPAM. During these periods, PaineWebber or KPAM
voluntarily waived their fees in the amounts of $7,410, $6,926 and $40,467,
respectively, and voluntarily paid other Fund expenses in the amounts of
$129,447, $138,518 and $68,730, respectively. As of the date of this Statement
of Additional Information, PaineWebber is voluntarily waiving .05% of its fee
with respect to each Fund.
Under a contract with PaineWebber dated April 15, 1996 ('Mitchell Hutchins
Contract') with respect to the Trust, Mitchell Hutchins serves as the Trust's
sub-adviser and sub-administrator. Under the Mitchell Hutchins Contract,
PaineWebber (not the Trust) pays Mitchell Hutchins a fee, computed daily and
paid monthly, at an annual rate of 50% of the fee paid by each Fund to
PaineWebber under the PaineWebber Contract.
For the fiscal year ended April 30, 1996, PaineWebber paid (or accrued) to
Mitchell Hutchins the following fees of $220,065, $39,863 and $17,551, with
respect to Money Market Fund, Government Securities Fund and Treasury Securities
Fund, respectively.
Under the terms of the PaineWebber Contract, the Trust bears all expenses
incurred in its operation that are not specifically assumed by PaineWebber.
General expenses of the Trust not readily identifiable as belonging to a
specific Fund are allocated among series by or under the direction of the
Trust's board in such manner as the board deems fair and equitable. Expenses
borne by the Trust include the following (or each Fund's share of the
following): (1) the cost (including brokerage commissions and other transaction
costs, if any) of securities purchased or sold by the Funds and any losses
incurred in connection therewith, (2) fees payable to and expenses incurred on
behalf of the Funds by PaineWebber, (3) organizational expenses, (4) filing fees
and expenses relating to the registration and qualification of the shares of the
Funds under federal and state securities laws and maintaining such registrations
and qualifications, (5) fees and salaries payable to the trustees and officers
who are not interested persons of the Trust or PaineWebber, (6) all expenses
incurred in connection with the trustees' services, including travel expenses,
(7) taxes (including any income or franchise taxes) and governmental fees, (8)
costs of any liability, uncollectable items of deposit and other insurance or
fidelity bonds, (9) any costs, expenses or losses arising out of a liability of
or claim for damages or other relief asserted against the Trust or a Fund for
violation of any law, (10) legal, accounting and auditing expenses, including
legal fees of special counsel for those trustees who are not interested persons
of the Trust, (11) charges of custodians, transfer agents and other agents, (12)
expenses of setting in type and printing prospectuses and supplements thereto,
reports and statements to shareholders and proxy material for existing
shareholders, (13) costs of mailing prospectuses and supplements thereto,
statements of additional information and supplements thereto, reports and proxy
materials to existing shareholders, (14) any extraordinary expenses (including
fees and disbursements of counsel, costs of actions, suits or proceedings to
which the Trust is a party and the expenses the Trust may incur as a result of
its legal obligation to provide indemnification to its officers, trustees,
agents and
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<PAGE>
shareholders) incurred by a Fund, (15) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations, (16) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the board and any committees thereof, (17) the cost
of investment company literature and other publications provided to the trustees
and officers, and (18) costs of mailing, stationery and communications
equipment.
As required by state regulation, PaineWebber will reimburse a Fund if and
to the extent that the aggregate operating expenses of the Fund exceed
applicable limits for the fiscal year. Currently, the most restrictive such
limit applicable to each Fund is 2.5% of the first $30 million of the Fund's
average daily net assets, 2.0% of the next $70 million of its average daily net
assets and 1.5% of its average daily net assets in excess of $100 million.
Certain expenses, such as brokerage commissions, distribution fees, taxes,
interest and extraordinary items, are excluded from this limitation. No
reimbursement pursuant to such limitation was required for the 1996 fiscal year
for any of the Funds.
Under the PaineWebber and Mitchell Hutchins Contracts (collectively,
'Contracts'), PaineWebber or Mitchell Hutchins will not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with the performance of the Contracts, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of PaineWebber or
Mitchell Hutchins in the performance of its duties or from reckless disregard of
its duties and obligations thereunder.
The Contracts are terminable with respect to each Fund at any time without
penalty by vote of the Trust's board of trustees or by vote of the holders of a
majority of the outstanding voting securities of that Fund on 60 days' written
notice to PaineWebber or Mitchell Hutchins, as the case may be. The PaineWebber
Contract is also terminable without penalty by PaineWebber on 60 days' written
notice to the Trust, and the Mitchell Hutchins Contract is terminable without
penalty by PaineWebber or Mitchell Hutchins on 60 days' written notice to the
other party. The Contracts terminate automatically upon their assignment, and
the Mitchell Hutchins Contract also terminates automatically upon the assignment
of the PaineWebber Contract.
The following table shows the approximate net assets as of July 31, 1996,
sorted by category of investment objective, of the investment companies as to
which Mitchell Hutchins serves as adviser or sub-adviser. An investment company
may fall into more than one of the categories below.
<TABLE>
<CAPTION>
INVESTMENT CATEGORY
- --------------------------------------------------------------------------------- NET ASSETS
----------
($ MIL)
<S> <C>
Domestic (excluding Money Market)................................................ $ 5,413.8
Global........................................................................... 2,766.8
Equity/Balanced.................................................................. 2,927.3
Fixed Income (excluding Money Market)............................................ 5,253.3
Taxable Fixed Income........................................................ 3,620.8
Tax-Free Fixed Income....................................................... 1,632.5
Money Market Funds............................................................... 21,914.2
</TABLE>
Mitchell Hutchins personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders of the PaineWebber mutual funds and other Mitchell Hutchins'
advisory accounts by all Mitchell Hutchins' directors, officers and employees,
establishes procedures for personal investing and restricts certain
transactions. For example, employee accounts generally must be maintained at
PaineWebber, personal trades in most securities require pre-clearance and
short-term trading and participation in initial public offerings generally are
prohibited. In addition, the code of ethics puts restrictions on the timing of
personal investing in relation to trades by PaineWebber Funds and other Mitchell
Hutchins advisory clients.
DISTRIBUTION ARRANGEMENTS. PaineWebber acts as distributor of shares of the
Trust under a distribution contract with the Trust dated January 30, 1995, which
requires PaineWebber to use its best efforts, consistent with its other
business, to sell shares of the Trust. Shares of the Trust are offered
continuously.
13
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<PAGE>
PORTFOLIO TRANSACTIONS
The Mitchell Hutchins Contract authorizes Mitchell Hutchins (with the
approval of the Trust's board) to select brokers and dealers to execute
purchases and sales of the Funds' portfolio securities. The Contract directs
Mitchell Hutchins to use its best efforts to obtain the best available price and
most favorable execution with respect to all transactions for the Funds. To the
extent that the execution and price offered by more than one dealer are
comparable, Mitchell Hutchins may, in its discretion, effect transactions in
portfolio securities with dealers who provide the Funds with research, analysis,
advice and similar services. Although Mitchell Hutchins may receive certain
research or execution services in connection with these transactions, Mitchell
Hutchins will not purchase securities at a higher price or sell securities at a
lower price than would otherwise be paid had no services been provided by the
executing dealer. Moreover, Mitchell Hutchins will not enter into any explicit
soft dollar arrangements relating to principal transactions and will not receive
in principal transactions the types of services which could be purchased for
hard dollars. Research services furnished by the dealers with which a Fund
effects securities transactions may be used by Mitchell Hutchins in advising
other funds or accounts it advises and, conversely, research services
furnished to Mitchell Hutchins in connection with other funds or accounts it
Mitchell Hutchins advises may be used in advising the Fund. Information and
research received from dealers will be in addition to, and not in lieu of, the
services required to be performed by Mitchell Hutchins under the Mitchell
Hutchins Contract. During its past three fiscal years, none of the Funds has
paid any brokerage commissions, nor has any Fund allocated any transactions to
dealers for research, analysis, advice and similar services.
Mitchell Hutchins may engage in agency transactions in over-the-counter
equity and debt securities in return for research and execution services. These
transactions are entered into only in compliance with procedures ensuring that
the transaction (including commissions) is at least as favorable as it would
have been if effected directly with a market-maker that did not provide research
or execution services. These procedures include a requirement that Mitchell
Hutchins obtain multiple quotes from dealers before executing the transactions
on an agency basis.
The Funds purchase portfolio securities from dealers and underwriters as
well as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a 'spread,' which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.
Investment decisions for each Fund and for other investment accounts
managed by Mitchell Hutchins are made independently of each other in light of
differing considerations for the various accounts. However, the same investment
decision may occasionally be made for a Fund and one or more of such accounts.
In such cases, simultaneous transactions are inevitable. Purchases or sales are
then averaged as to price and allocated between the Fund and such other
account(s) as to amount according to a formula deemed equitable to the Fund and
such account(s). While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as the Fund is concerned,
or upon its ability to complete its entire order, in other cases it is believed
that coordination and the ability to participate in volume transactions will be
beneficial to the Fund.
As of April 30, 1996, Money Market Fund owned commercial paper and
short-term obligations issued by the following issuers that are regular
broker-dealers for the Fund: Bear Stearns Companies Incorporated -- $2,000,000;
BT Securities Corporation -- $7,925,660; Goldman Sachs Group LP -- $12,950,237;
Merrill Lynch & Company, Incorporated -- $2,925,750; Morgan Stanley Group
Incorporated -- $14,983,069; and Nomura Holding America Incorporated --
$15,000,000.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
Each Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the NYSE is closed or trading on the NYSE is
restricted as determined by the SEC, (2) when an emergency exists, as defined by
the Securities and Exchange Commission ("SEC"), which makes it not
14
<PAGE>
<PAGE>
reasonably practicable for a Fund to dispose of securities owned by it or to
determine fairly the market value of its assets or (3) as the SEC may otherwise
permit. The redemption price may be more or less than the shareholder's
cost, depending on the market value of the Fund's portfolio at the time,
although each Fund seeks to maintain a constant net asset value of $1.00 per
share.
If conditions exist that make cash payments undesirable, each Fund reserves
the right to honor any request for redemption by making payment in whole or in
part in securities chosen by the Fund and valued in the same way as they would
be valued for purposes of computing the Fund's net asset value. If payment is
made in securities, a shareholder may incur brokerage expenses in converting
these securities into cash. The Trust is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net asset value of a Fund during
any 90-day period for one shareholder.
VALUATION OF SHARES
Each Fund's net asset value per share is determined by State Street Bank
and Trust Company ('State Street') as of 12:00 noon, eastern time, on each
Business Day. As defined in the Prospectus, 'Business Day' means any day on
which State Street's Boston offices, PaineWebber's New York City offices and the
New York City offices of PaineWebber's bank, The Bank of New York, are all open
for business. One or more of these institutions will be closed on the observance
of the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Patriot's Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Each Fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ('Rule') under the 1940 Act. To use
amortized cost to value its portfolio securities, a Fund must adhere to certain
conditions under that Rule relating to the Fund's investments, some of which are
discussed in the Prospectus. Amortized cost is an approximation of market value
of an instrument, whereby the difference between its acquisition cost and value
at maturity is amortized on a straight-line basis over the remaining life of the
instrument. The effect of changes in the market value of a security as a result
of fluctuating interest rates is not taken into account, and thus the amortized
cost method of valuation may result in the value of a security being higher or
lower than its actual market value. In the event that a large number of
redemptions take place at a time when interest rates have increased, a Fund
might have to sell portfolio securities prior to maturity and at a price that
might not be desirable.
The Trust's board of trustees has established procedures ('Procedures') for
the purpose of maintaining a constant net asset value of $1.00 per share, which
include a review of the extent of any deviation of net asset value per share,
based on available market quotations, from the $1.00 amortized cost per share.
Should that deviation exceed 1/2 of 1% for any Fund, the board of trustees will
promptly consider whether any action should be initiated to eliminate or reduce
material dilution or other unfair results to shareholders. Such action may
include redeeming shares in kind, selling portfolio securities prior to
maturity, reducing or withholding dividends and utilizing a net asset value per
share as determined by using available market quotations. Each Fund will
maintain a dollar-weighted average portfolio maturity of 90 days or less and
will not purchase any instrument with a remaining maturity of more than 397
days, will limit portfolio investments, including repurchase agreements, to
those U.S. dollar-denominated instruments that are of high quality under the
Rule and that Mitchell Hutchins, acting pursuant to the Procedures, determines
present minimal credit risks, and will comply with certain reporting and
recordkeeping procedures. There is no assurance that constant net asset value
per share will be maintained. In the event amortized cost ceases to represent
fair value per share, the board will take appropriate action.
In determining the approximate market value of portfolio investments, each
Fund may employ outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used.
15
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<PAGE>
TAXES
In order to continue to qualify for treatment as a regulated investment
company under the Internal Revenue Code, each Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of taxable net investment income and net
short-term capital gain, if any). With respect to each Fund, these requirements
include the following: (1) the Fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of securities and certain other
income; (2) the Fund must derive less than 30% of its gross income each taxable
year from the sale or other disposition of securities held for less than three
months; (3) at the close of each quarter of the Fund's taxable year, at least
50% of the value of its total assets must be represented by cash and cash items,
U.S. government securities and other securities, with these other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets; and (4) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities) of any one
issuer.
CALCULATION OF YIELD
Each Fund computes its yield and effective yield quotations using
standardized methods required by the SEC. The Fund from time to time advertises
(1) its current yield based on a recently ended seven-day period, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7), with the resulting yield figure
carried to at least the nearest hundredth of one percent, and (2) its effective
yield based on the same seven-day period by compounding the base period return
by adding 1, raising the sum to a power equal to (365/7), and subtracting 1 from
the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7] - 1
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of each Fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.
The following yields are for the seven-day period ended July 31, 1996:
<TABLE>
<CAPTION>
EFFECTIVE
FUND YIELD YIELD
- ---------------------------------------------------------------------------- ----- ---------
<S> <C> <C>
Money Market Fund........................................................... 5.20 % 5.33%
Government Securities Fund.................................................. 5.07 % 5.20%
Treasury Securities Fund.................................................... 5.02 % 5.14%
</TABLE>
OTHER INFORMATION. The Funds' performance data quoted in advertising and
other promotional materials ('Performance Advertisements') represent past
performance and are not intended to predict or indicate future results. The
return on an investment in each Fund will fluctuate. In Performance
Advertisements, the Funds may compare their taxable or tax-free yield with data
published by Lipper Analytical Services, Inc. for money funds ('Lipper'), CDA
Investment Technologies, Inc. ('CDA'), IBC/Donoghue's Money Market Fund Report
('Donoghue'), Wiesenberger Investment Companies Service ('Wiesenberger') or
Investment Company Data Inc. ('ICD'), or with the performance of recognized
stock and other indexes, including (but not limited to) the Standard & Poor's
500 Composite Stock Price Index, the Dow Jones Industrial Average, the Morgan
Stanley Capital International World Index, the Lehman Brothers Treasury Bond
Index, the Lehman Brothers Government/Corporate Bond Index, the Salomon Brothers
Government Bond Index and changes in the Consumer Price Index as published by
the U.S. Department of Commerce. The Funds also may refer in such materials to
mutual
16
<PAGE>
<PAGE>
fund performance rankings and other data, such as comparative asset, expense and
fee levels, published by Lipper, CDA, Donoghue, Wiesenberger or ICD. Performance
Advertisements also may refer to discussions of the Funds and comparative mutual
fund data and ratings reported in independent periodicals, including (but not
limited to) THE WALL STREET JOURNAL, MONEY MAGAZINE, FORBES, BUSINESS WEEK,
FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE
WASHINGTON POST and THE KIPLINGER LETTERS. Comparisons in Performance
Advertisements may be in graphic form.
Each Fund may also compare its performance with the performances of bank
certificates of deposit ('CDs') as measured by the CDA Certificate of Deposit
Index and the Bank Rate Monitor National Index and the average of yields of CDs
of major banks published by Banxquotes'r' Money Markets. In comparing a Fund's
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Advertisements and other promotional materials for the Funds or
for the RMA and BSA programs may compare features of the RMA and BSA programs to
those offered by bank checking accounts and other bank accounts. Bank accounts
are insured in whole or in part by an agency of the U.S. government and may
offer a fixed rate of return. Fund shares are not insured or guaranteed by the
U.S. government and returns thereon will fluctuate. While each Fund seeks to
maintain a stable net asset value of $1.00 per share, there can be no assurance
that it will be able to do so.
Each Fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. 'Compounding' refers to the fact
that, if dividends on a Fund investment are reinvested by being paid in
additional Fund shares, any future income of the Fund would increase the value,
not only of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of a Fund investment would
increase more quickly than if dividends had been paid in cash.
OTHER INFORMATION
The Trust is an entity of the type commonly known as a 'Massachusetts
business trust.' Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each note, bond, contract, instrument, certificate or undertaking made or issued
by the trustees or by any officers or officer by or on behalf of the Trust, a
Fund, the trustees or any of them in connection with the Trust. The Declaration
of Trust provides for indemnification from a Fund's property for all losses and
expenses of any shareholder held personally liable for the obligations of the
Fund. Thus, the risk of a shareholder's incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations, a possibility which PaineWebber believes is
remote and not material. Upon payment of any liability incurred by a
shareholder, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Fund. The trustees intend to
conduct the operations of each Fund in such a way as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Fund.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036, serves as counsel to the Funds.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for the Funds.
FINANCIAL INTERMEDIARIES
The Trust will enter into an agreement with each financial intermediary
that purchases Financial Intermediary shares requiring it to provide support
services to its customers who beneficially own Financial Intermediary shares in
consideration of the Trust's payment of .25% (on an annualized basis)
17
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<PAGE>
of the average daily net asset value of the Financial Intermediary shares held
by the financial intermediary for the benefit of its customers. These services
include: (i) aggregating and processing purchase and redemption requests from
customers and placing net purchase and redemption orders with PaineWebber; (ii)
providing customers with a service that invests the assets of their accounts in
Financial Intermediary shares; (iii) processing dividend payments from the Trust
on behalf of customers; (iv) providing information periodically to customers
showing their positions in Financial Intermediary shares; (v) arranging for bank
wires; (vi) responding to customer inquiries relating to the services performed
by the financial intermediary; (vii) providing sub-accounting with respect to
Financial Intermediary shares beneficially owned by customers or the information
necessary for sub-accounting; (viii) forwarding shareholder communications from
the Trust (such as proxies, shareholder reports and dividend, distribution and
tax notices) to customers, if required by law; and (ix) other similar services
if requested by the Trust. For the fiscal period from March 17, 1994 (the date
on which Financial Intermediary shares were first outstanding) through April 30,
1994 and for the fiscal year ended April 30, 1995, the Trust paid to financial
intermediaries $1,694 and $12,028, respectively, with respect to Financial
Intermediary shares of Money Market Fund. For the fiscal period from July 12,
1994 (the date on which Financial Intermediary shares were first outstanding)
through April 30, 1995, the Trust paid to financial intermediaries $3,715 with
respect to the Financial Intermediary shares of the Government Securities Fund.
No Financial Intermediary shares were outstanding during the fiscal year ended
April 30, 1996. The Trust has not yet made payments to financial intermediaries
with respect to Financial Intermediary shares of Treasury Securities Fund.
The Trust's agreements with financial intermediaries are governed by an
Amended and Restated Shareholder Services Plan (the 'Plan') adopted by the board
in connection with the offering of Financial Intermediary shares. Pursuant to
the Plan, the board reviews, at least quarterly, a written report of the amounts
expended under the Trust's agreements with financial intermediaries and the
purposes for which the expenditures were made. In addition, the Trust's
arrangements with financial intermediaries must be approved annually by a
majority of the trustees, including a majority of the trustees who are not
'interested persons' of the Trust as defined in the 1940 Act and have no direct
or indirect financial interest in these arrangements (the 'Independent
Trustees').
The board may approve the Trust's arrangements with financial
intermediaries if, based on information provided by the Trust's service
contractors, there is a reasonable likelihood that the arrangements will benefit
the Trust and its shareholders by affording the Trust greater flexibility in
connection with the servicing of the accounts of the beneficial owners of its
shares in an efficient manner. Any material amendment to the Funds' arrangements
with financial intermediaries must be approved by a majority of the board,
including a majority of the Independent Trustees. So long as the Trust's
arrangements with Financial Intermediaries are in effect, the selection and
nomination of the members of the board who are not 'interested persons' of the
Trust, as defined in the 1940 Act, will be committed to the discretion of those
non-interested trustees.
Conflict of interest restrictions may apply to a financial intermediary's
receipt of compensation paid by a Fund in connection with the investment of
fiduciary funds in Financial Intermediary shares. Financial intermediaries,
including banks regulated by the Comptroller of the Currency and investment
advisers subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult their legal advisers before
investing fiduciary funds in Financial Intermediary shares. See also 'Financial
Intermediaries' in the Prospectus.
FINANCIAL STATEMENTS
The Funds' Annual Report to Shareholders for the fiscal year ended April
30, 1996 is a separate document supplied with this Statement of Additional
Information and the financial statements, accompanying notes and reports of
independent auditors appearing therein are incorporated herein by this
reference.
18
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APPENDIX A
SERVICES AVAILABLE THROUGH THE RMA PROGRAM TO RMA ACCOUNTHOLDERS
Shares of the Funds are available to investors who are Participants in the
Resource Management Account'r' ('RMA') program offered by PaineWebber and its
correspondent firms. The following is a summary of some of the services
available to RMA Participants. For more complete information, investors should
refer to their RMA account agreement and the brochure entitled 'Facts About Your
Resource Management Account.'
THE PAINEWEBBER RMA PREMIER STATEMENT. RMA Participants receive a monthly
Premier account statement, which provides consolidated information to assist
with portfolio management decisions and personal financial planning. The Premier
account statement summarizes securities transactions, charges, cash advances and
checks (if applicable) and provides cost basis information and calculations of
unrealized and realized gains and losses on most investments. A menu of
customized statement options is available to assist in managing the accounts.
PRELIMINARY AND YEAR-END SUMMARY STATEMENT. RMA Participants receive
preliminary (nine month) summary information and year-end summary account
statements that provide a comprehensive overview of tax-related activity in the
account during the year to help investors with tax planning.
CHOICE OF MONEY MARKET FUNDS AND AUTOMATIC SWEEP OF UNINVESTED CASH. As
described more fully in the Prospectus under the heading 'Purchases -- The RMA
and BSA Programs,' RMA Participants select a money market fund as a primary fund
into which uninvested cash is automatically swept on a daily basis once the
minimum initial purchase is made. By automatically investing cash balances into
a money market fund, this sweep feature minimizes the extent to which an
investor's assets remain idle while held in the account pending investment.
CHECK WRITING. RMA Participants have ready access to the assets held in
their RMA account through the check writing feature. There are no minimum check
amounts or per check charges. The RMA checks also include an expense coding
system that enables the investor to track types of expenses for tax and
financial planning.
DIRECT DEPOSIT. Regular payments from an employer, pension, social security
or other sources may be eligible for electronic deposit into RMA Participants'
accounts.
ELECTRONIC FUNDS TRANSFER/BILL PAYMENT SERVICE. RMA Participants can
electronically transfer money between their RMA and other financial
institutions, transfer funds to and from other PaineWebber accounts and pay
bills. Unlimited transfers from other financial accounts and ten free transfers
to financial accounts are permitted monthly, with a nominal charge per
transaction thereafter. A Bill Payment Service is available for an additional
charge.
GOLD MASTERCARD'r'. RMA Participants are provided with a Gold MasterCard
that makes account assets easily accessible. The Gold MasterCard is accepted by
businesses, stores and services both in the U.S. and abroad, and can be used to
obtain cash advances at thousands of automated teller machines in the U.S. For
an additional annual fee, investors can also obtain a line of credit from Bank
One that can be accessed through their Gold MasterCard. Through MasterCard's
enhanced MasterAssist'r' and MasterPurchase'r' programs, investors can obtain
other benefits, including rental car insurance, emergency medical and travel
assistance, legal services and purchase protection.
EXTENDED ACCOUNT PROTECTION. Assets of RMA Participants that are held in an
RMA Account by PaineWebber or one of its correspondent firms are protected for
up to $49.5 million through private insurance in the event of the liquidation or
failure of the firm. This protection is in addition to the $500,000 in
protection provided to account holders by the Securities Investor Protection
Corporation ('SIPC'). Neither the SIPC protection nor the additional account
protection insurance applies to shares of the Funds because such shares are
registered directly in the name of the shareholder, and not in the name of
PaineWebber or one of its correspondent firms.
THE PAINEWEBBER PROTECTOR. The PaineWebber Protector is a popular
convalescent care insurance program. Participants can elect to own $50,000 to
$200,000 of convalescent care benefits. This feature is not available to
PaineWebber's correspondent firms.
A-1
<PAGE>
<PAGE>
RMA RESOURCE ACCUMULATION PLANSM. The RMA Resource Accumulation Plan is an
automatic mutual fund investment program that provides RMA participants the
ability to purchase shares of mutual funds on a regular, periodic basis. The
minimum purchase in the program is $100 per investment; however, initial minimum
purchase requirements of the designated mutual fund(s) must be met before an
investor can participate in this program. The participant must receive a
prospectus, which contains more complete information (including charges and
expenses), for each fund before the application form to participate in the
Resource Accumulation Plan is submitted.
RMA AUTHORIZATION LIMIT. RMA Participants' Authorization Limit is the
combined amount of any uninvested cash balances in the account, money fund
balances and, if applicable, the Securities Credit Line (margin). The
Authorization Limit is reduced each time a debit is generated in the securities
account, a security is purchased, an RMA check is paid, cash advances are
obtained from MasterCard or when an electronic transfer/payment is made. The
Authorization Limit is increased when funds are deposited into their securities
account.
FINANCIAL SERVICES CENTER AND RESOURCELINE'r'. RMA Participants have day
and night access to information concerning their RMA account. This service is
available by calling (800) RMA-1000. RMA representatives are available at the
Financial Services Center from 8:30 a.m. to 8:00 p.m. (ET) to answer inquiries
from Participants regarding their accounts, and ResourceLine, an automated voice
response system, provides 24 hour account information.
SECURITIES CREDIT LINE. RMA Participants may choose to have a Securities
Credit Line (margin) as part of their RMA account.
A-2
<PAGE>
<PAGE>
APPENDIX B
SERVICES AVAILABLE THROUGH THE BSA PROGRAM FOR BSA ACCOUNTHOLDERS
Shares of the Funds are available to investors who are Participants in the
Business Services Account'r' ('BSA') program. The following is a summary of some
of the services that are available to BSA Participants. For more complete
information, investors should refer to their BSA Account Agreement and the
brochure entitled 'Facts About Your Business Services Account (BSA).'
PREMIER BUSINESS SERVICES ACCOUNT STATEMENT -- BSA Participants receive the
monthly Premier Business Services Account statement, which provides consolidated
information to assist with portfolio management decisions and business finances.
The Premier Business Services Account statement summarizes securities
transactions, charges, cash advances and checks in chronological order with
running cash and money fund balances. When applicable, the expiration and
beneficiary of outstanding letters of credit are printed. The 'Portfolio
Management' feature provides cost basis information where available as well as
calculated gains and losses on most investments. A menu of customized statement
options is now available to make the monthly reporting more comprehensive.
PRELIMINARY AND YEAR-END SUMMARY STATEMENT -- BSA Participants receive
preliminary (nine month) summary information and year-end summary account
statements that provide a comprehensive overview of tax-related activity in the
account during the year to help investors plan.
CHOICE OF MONEY MARKET FUNDS AND AUTOMATIC SWEEP OF UNINVESTED CASH -- As
described more fully in the Prospectus under the heading 'Purchases--The RMA and
BSA Programs,' BSA Participants select a money market fund as a primary fund
into which uninvested cash is automatically swept on a daily basis. By
automatically investing cash balances into a money market fund, this sweep
feature minimizes the extent to which an investor's assets remain idle while
held in the account pending investment.
CHECK WRITING -- BSA Participants have ready access to the assets held in
their BSA account through the check writing feature. There are no minimum check
amounts. BSA Participants may clear up to 100 checks each month without
incurring per check charges. Participants can order from a number of business
check styles to suit their check writing needs. The BSA checks also include an
expense code system that enables the investors to track business expense types
for tax and financial planning.
MASTERCARD BUSINESSCARD'r' -- BSA Participants can elect to receive a
MasterCard BusinessCard for easy access to account assets. The MasterCard
BusinessCard is accepted by businesses, stores and services worldwide, and can
be used to obtain cash at thousands of automated teller machines in the U.S.
Through MasterCard's enhanced MasterAssist'r' and MasterPurchase'r' programs,
investors can obtain other benefits including full value primary rental car
insurance, emergency medical and travel assistance, legal services and purchase
protection.
SECURITIES CREDIT LINE -- BSA Participants may choose to have a Securities
Credit Line (margin) as part of their BSA account.
EXTENDED ACCOUNT PROTECTION -- Assets of BSA Participants that are held in
a BSA Account by PaineWebber or one of its correspondent firms are protected for
up to $49.5 million through private insurance in the event of the liquidation or
failure of the firm. This protection is in addition to the $500,000 in
protection provided to accountholders by the Securities Investor Protection
Corporation ('SIPC'). Neither the SIPC protection nor the additional account
protection insurance applies to shares of the Funds because such shares are
registered directly in the name of the shareholder, and not in the name of
PaineWebber or one of its correspondent firms.
BSA AUTHORIZATION LIMIT -- BSA Participants' Authorization Limit is the
combined amount of any uninvested cash balances in the account, money fund
balances and, if applicable, the Securities Credit Line (margin). The
Authorization Limit is reduced each time a debit is generated in the securities
account, a security is purchased, a BSA check is paid, cash advances are
obtained from MasterCard or when an electronic transfer/payment is made. The
Authorization Limit is increased when funds are deposited into their securities
account.
FINANCIAL SERVICES CENTER AND RESOURCELINE'r' -- BSA Participants can call
the Financial Services Center at (800) BSA-0140 from 8:30 a.m. to 8:00 p.m.
(EST) and speak to a PaineWebber representative
B-1
<PAGE>
<PAGE>
to resolve any inquiries about their accounts. The automated ResourceLine
provides basic account information through a touch-tone phone and is available
night and day by calling (800) BSA-0140.
ELECTRONIC FUNDS TRANSFER/PAYMENT SERVICE -- BSA Participants have the
option to initiate transfers of funds to and from their accounts, pay bills and
process their payroll through an electronic fund transfer service. Unlimited
transfers to the BSA from other financial institutions and 20 free
transfers/payments out of the BSA are permitted monthly with nominal fees
thereafter. Participants can set up payees to receive regular or variable
payments simply by calling an 800 number.
DIRECT DEPOSIT -- Regular payments from customers, receivables and other
sources may be eligible for electronic deposit into BSA Participants' accounts.
This feature permits the investor's money to be invested sooner and eliminates
excess paperwork.
LETTERS OF CREDIT -- BSA Participants can have Standby Letters of Credit
issued on their behalf through PaineWebber at competitive rates and backed by
securities in their account.
B-2
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<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this Statement of
Additional Information in connection with the offering made by the Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Funds or their distributor. The Prospectus
and this Statement of Additional Information do not constitute an offering by
the Funds or by the distributor in any jurisdiction in which such offering may
not lawfully be made.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Restrictions........... 1
Trustees and Officers; Principal
Shareholders................................. 5
Investment Advisory, Administration and
Distribution Arrangements.................... 12
Portfolio Transactions......................... 14
Additional Information Regarding Redemptions... 14
Valuation of Shares............................ 15
Taxes.......................................... 16
Calculation of Yield........................... 16
Other Information.............................. 17
Financial Statements........................... 18
Appendix A..................................... A-1
Appendix B..................................... B-1
</TABLE>
LIQUID INSTITUTIONAL RESERVES
MONEY MARKET FUND
GOVERNMENT SECURITIES FUND
TREASURY SECURITIES FUND
----------------------------------------------------------
Statement of Additional Information
September 1, 1996
----------------------------------------------------------
'c'1996 PaineWebber Incorporated
<PAGE>
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Money Market Fund
Included in Part A of the Registration Statement:
Financial Highlights for one Institutional share of the Fund for each of
the four years in the period ended April 30, 1996 and for the period
June 3, 1991 (commencement of offering) to April 30, 1992.
Financial Highlights for one Financial Intermediary share of the Fund
for the year ended April 30, 1995 and for the period March 17, 1994
(commencement of offering) to April 30, 1994.
Included in Part B of the Registration Statement through incorporation by
reference from the Annual Report to Shareholders, previously filed with the
Securities and Exchange Commission through EDGAR on July 2, 1996, Accession
No. 0000950112-96-2273:
Portfolio of Investments at April 30, 1996.
Statement of Assets and Liabilities at April 30, 1996.
Statement of Operations for the year ended April 30, 1996.
Statement of Changes in Net Assets for each of the two years in the
period ended April 30, 1996.
Notes to Financial Statements.
Financial Highlights for one Institutional share of the Fund for each of
the four years in the period ended April 30, 1996 and for the period
June 3, 1991 (commencement of offering) through April 30, 1992.
Financial Highlights for one Financial Intermediary share of the Fund
for the year ended April 30, 1995 and for the period March 17, 1994
(commencement of offering) through April 30, 1994.
Report of Ernst & Young LLP, Independent Auditors, dated June 7, 1996.
Government Securities Fund
Included in Part A of the Registration Statement:
C-1
<PAGE>
<PAGE>
Financial Highlights for one Institutional share of the Fund for each of
the four years in the period ended April 30, 1996 and for the period
June 3, 1991 (commencement of offering) to April 30, 1992.
Financial Highlights for one Financial Intermediary share of the Fund
for the period July 12, 1994 (commencement of offering) to April 30,
1995.
Included in Part B of the Registration Statement through incorporation by
reference from the Annual Report to Shareholders, previously filed with the
Securities and Exchange Commission through EDGAR on July 2, 1996, Accession
No. 0000950112-96-2273:
Portfolio of Investments at April 30, 1996.
Statement of Assets and Liabilities at April 30, 1996.
Statement of Operations for the year ended April 30, 1996.
Statement of Changes in Net Assets for each of the two years in the
period ended April 30, 1996.
Notes to Financial Statements.
Financial Highlights for one Institutional share of the Fund for each of
the four years in the period ended April 30, 1996 and for the period
June 3, 1991 (commencement of offering) through April 30, 1992.
Financial Highlights for one Financial Intermediary share of the Fund
for the period July 12, 1994 (commencement of offering) through April
30, 1995.
Report of Ernst & Young LLP, Independent Auditors, dated June 7, 1996.
Treasury Securities Fund
Included in Part A of the Registration Statement:
Financial Highlights for one Institutional share of the Fund for each of
the four years in the period ended April 30, 1996 and for the period
December 6, 1991 (commencement of offering) to April 30, 1992.
Included in Part B of the Registration Statement through incorporation by
reference from the Annual Report to Shareholders, previously filed with the
Securities and Exchange Commission through EDGAR on July 2, 1996, Accession
No. 0000950112-96-2273:
C-2
<PAGE>
<PAGE>
Portfolio of Investments at April 30, 1996.
Statement of Assets and Liabilities at April 30, 1996.
Statement of Operations for the year ended April 30, 1996.
Statement of Changes in Net Assets for each of the two years ended April
30, 1996.
Notes to Financial Statements.
Financial Highlights for one Institutional share of the Fund for each of
the four years in the period ended April 30, 1996 and for the period
December 6, 1991 (commencement of offering) through April 30, 1992.
Report of Ernst & Young LLP, Independent Auditors, dated June 7, 1996.
(b) Exhibits:
Exh. No. Description of Exhibit
- -------- ----------------------
1 (a) Amended and Restated Declaration of Trust(1)
(b) Amendment effective April 18, 1996 to Declaration of Trust (filed
herewith)
2 Amended and Restated By-Laws of the Trust(1)
3 Voting Trust Agreement - none
4 Instruments defining the rights of holders of Registrant's shares of
beneficial interest(2)
5 (a) Investment Advisory and Administration Contract
between Registrant and PaineWebber(6)
(b) Investment Sub-advisory and Sub-administration Agreement between
PaineWebber and Mitchell Hutchins (filed herewith)
6 Distribution Contract between Registrant and PaineWebber(3)
7 Bonus, profit or pension plans - none
8 Custodian Contract(6)
9 (a) Transfer Agency Services and Shareholder Services Agreement(3)
(b) Shareholder Service Plan (filed herewith)
(c) Shareholder Service Agreement (filed herewith)
10 Other Opinions, appraisals, rulings and consents: An opinion and
consent of counsel as to the legality of Registrant's shares was
filed prior to the effective date of Registrant's initial Registration
Statement
11 Consent of Independent Auditors (filed herewith)
12 Financial statements omitted from Part B - none
13 Letter of Investment Intent(4)
14 Prototype Retirement Plan - none
15 Plan Pursuant to Rule 12b-1 - none
16 Schedule for computation of performance quotations provided in the
Registration Statement in response to Item 22(5)
17 and
27 Financial Data Schedule (filed herewith)
18 Plan pursuant to Rule 18f-3 - none
C-3
<PAGE>
<PAGE>
- -------------------------------
(1) Incorporated by reference to Pre-effective
Amendment No. 1 to the registration statement
(SEC File No. 33-39029), filed April 26, 1991.
(2) Incorporated herein by reference from Articles II,
IV, V, VI, VII and VIII of the Registrant's Amended
and Restated Declaration of Trust and Article II of
the Registrant's Amended and Restated By-Laws.
(3) Incorporated by reference to Post-Effective
Amendment No. 6 to the registration statement (SEC
File No. 33-39029), filed August 25, 1995,
Accession No. 000095-0117-95-000312.
(4) Incorporated herein by reference from Pre-Effective
Amendment No. 2 to the registration statement (SEC
File No. 33-39029), filed May 23, 1991.
(5) Incorporated herein by reference from
Post-Effective Amendment No. 2 to
registration statement (SEC File No. 33-39029),
filed August 28, 1992.
(6) Incorporated herein by reference from
Post-Effective Amendment No. 8 to
registration statement (SEC File No. 33-39029)
filed July 3, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
C-4
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<PAGE>
Item 26. Number of Holders of Securities
Number of Record
Shareholders as of
Title of Class June 5, 1996
- -------------- ------------
Shares of Beneficial Interest,
par value $0.001 per share
Government Securities Fund
Institutional Shares
Financial Intermediary Shares
Institutional Shares 95
Financial Intermediary Shares 0
Money Market Fund
Institutional Shares 548
Financial Intermediary Shares 0
Treasury Securities Fund
Institutional Shares 48
Financial Intermediary Shares 0
Item 27. Indemnification
Section 4.2 of Article IV of the Registrant's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Trust shall be
liable to the Trust, its shareholders, or to any shareholder, Trustee, officer,
employee, or agent thereof for any action or failure to act (including without
limitation the failure to compel in any way any former or acting Trustee to
redress any breach of trust) except for his or her own bad faith, willful
misfeasance, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
Section 4.3(a) of Article IV of the Registrant's Declaration of Trust
provides that the Registrant, or the appropriate series of the Registrant, will
indemnify its Trustees and officers to the fullest extent permitted by law
against all liability and against all expenses reasonably incurred or paid by
such Trustees and officers in connection with any claim, action, suit or
proceeding in which such Trustee or officer becomes involved as a party or
otherwise by virtue of his or her being or having been a Trustee or officer and
against amounts paid or incurred by him or her in the settlement thereof.
Additionally, Section 4.3(b) of Article IV provides that no such person shall be
indemnified (i) where such person is liable to the Trust, a series thereof or
the shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his or her
office, (ii) where such person has been finally adjudicated not to have acted in
good faith in the
C-5
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<PAGE>
reasonable belief that his or her action was in the best interest of the Trust,
or a series thereof, or (iii) in the event of a settlement or other disposition
not involving a final adjudication as provided in (ii) above resulting in a
payment by a Trustee or officer, unless there has been a determination by the
court of other body approving the settlement or other disposition or based upon
a review of readily available facts by vote of a majority of the non-interested
Trustees or written opinion of independent legal counsel, that such Trustee or
officer did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
Section 4.3(b) of Article IV further provides that the rights of indemnification
may be insured against by policies maintained by the Trust. Section 4.4 of
Article IV provides that no Trustee shall be obligated to give any bond or other
security for the performance of any of his or her duties hereunder.
Section 4.6 of Article IV provides that each Trustee, officer or
employee of the Trust or a series thereof shall, in the performance of his or
her duties, be fully and completely justified and protected with regard to any
act or any failure to act resulting from reliance in good faith upon the books
of account or other records of the Trust or a series thereof, upon an opinion of
counsel, or upon reports made to the Trust or a series thereof by any of its
officers or employees or by the Investment Adviser, the Administrator, the
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
Section 9 of the Investment Advisory and Administration Contract with
PaineWebber, Incorporated ("PaineWebber") provides that PaineWebber shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
any series of the Registrant in connection with the matters to which the
Contract relates, except for a loss resulting from the willful misfeasance, bad
faith, or gross negligence of PaineWebber in the performance of its duties or
from its reckless disregard of its obligations and duties under the Contract.
Section 13 of the Contract provides that the Trustees shall not be liable for
any obligations of the Trust or any series under the Contract and that
PaineWebber shall look only to the assets and property of the Registrant in
settlement of such right or claim and not to the assets and property of the
Trustees.
Section 7 of the Sub-Investment Advisory and Sub-Administration
Agreement between PaineWebber and Mitchell Hutchins Asset Management, Inc.
("Mitchell Hutchins") provides that PaineWebber shall be indemnified and held
harmless by the Registrant against all liabilities, except those arising out of
willful misfeasance, bad faith, or reckless disregard of its obligations and
duties under the Agreement.
Section 9 of the Distribution Contract provides that the Trust will
indemnify PaineWebber and its officers, directors and controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by PaineWebber to the Trust for use in the Registration Statement; and
provided that this indemnity agreement shall not protect any such persons
against liabilities arising by reason of their bad faith, gross negligence or
willful misfeasance; and shall not inure to the benefit of any such persons
unless a court of competent jurisdiction or controlling precedent determines
that such result is not against public policy as expressed in the Securities Act
of 1933. Section 9 of each Distribution Contract also provides that PaineWebber
agrees to indemnify, defend and hold the Trust, its officers
C-6
<PAGE>
<PAGE>
and Trustees free and harmless of any claims arising out of any alleged untrue
statement or any alleged omission of material fact contained in information
furnished by PaineWebber for use in the Registration Statement or arising out of
an agreement between PaineWebber and any retail dealer, or arising out of
supplementary literature or advertising used by PaineWebber in connection with
the Contract.
Section 10 of the Distribution Contract contains provisions similar to
Section 13 of the Investment Advisory and Administration Contract.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to Trustees, officers and controlling
persons of the Trust, pursuant to the foregoing provisions or otherwise, the
Trust has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a Trustee, officer or controlling person of the Trust in
connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Trust by such
Trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
I. PaineWebber, a Delaware corporation, is a registered investment
adviser and is wholly owned by Paine Webber Group, Inc. PaineWebber is primarily
engaged in the financial services business. Information as to the officers and
directors of PaineWebber is included in its Form ADV as filed with the
Securities and Exchange Commission (registration number 801-7163) and is
incorporated herein by reference.
II. Mitchell Hutchins, a Delaware corporation, is a registered
investment adviser and is a wholly owned subsidiary of PaineWebber which is, in
turn, a wholly owned subsidiary of PaineWebber Group Inc. Mitchell Hutchins is
primarily engaged in the investment advisory business. Information as to the
officers and directors of Mitchell Hutchins is included in its Form ADV, as
filed with the Securities and Exchange Commission (registration number
801-13219) and is incorporated herein by reference.
Item 29. Principal Underwriters
(a) PaineWebber serves as principal underwriter and/or investment
adviser for the following other investment companies:
PAINEWEBBER RMA MONEY FUND, INC.
PAINEWEBBER RMA TAX-FREE FUND, INC.
PAINEWEBBER MUNICIPAL MONEY MARKET SERIES
PAINEWEBBER MANAGED MUNICIPAL TRUST
C-7
<PAGE>
<PAGE>
(b) PaineWebber is the Registrant's principal underwriter. The directors
and officers of PaineWebber, their principal business addresses, and their
positions and offices with PaineWebber are identified in its Form ADV filed
March 31, 1995, with the Securities and Exchange Commission (registration number
801-7163) and such information is hereby incorporated herein by reference. The
information set forth below is furnished for those directors and officers of
PaineWebber who also serve as directors or officers of the Trust.
<TABLE>
<CAPTION>
Positions and Offices With
Name and Principal Positions and Offices Underwriter or Exclusive
Business Address With Registrant Dealer
- ---------------- --------------------- --------------------------
<S> <C> <C>
Margo N. Alexander Trustee and Executive Vice President and
1285 Avenue of the Americas President (Chief Director
New York, NY 10019 Executive Officer)
Mary C. Farrell Trustee Managing Director, Senior
1285 Avenue of the Americas Investment Strategist and
New York, NY 10019 member of the Investment
Policy Committee
</TABLE>
(c) None.
Item 30. Location of Accounts and Records
The books and other documents required by paragraphs (b)(4), (c) and (d)
of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Registrant's Portfolio Manager, Mitchell Hutchins Asset
Management Inc., 1285 Avenue of the Americas, New York, New York 10019. All
other accounts, books and documents required by Rule 31a-1 are maintained in the
physical possession of Registrant's transfer agent and custodian.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
C-8
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that it meets
all the requirements for effectiveness of this Post- Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State of
New York, on the 28th day of August, 1996.
LIQUID INSTITUTIONAL RESERVES
By: /s/ Dianne E. O'Donnell
---------------------------------
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander President and Trustee August 28, 1996
- ---------------------------- (Chief Executive
Margo N. Alexander * Officer)
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman August 28, 1996
- ---------------------------- of the Board of
E. Garrett Bewkes, Jr. * Trustees
/s/ Richard Q. Armstrong Trustee August 28, 1996
- ----------------------------
Richard Q. Armstrong *
/s/ Richard R. Burt Trustee August 28, 1996
- ----------------------------
Richard R. Burt *
/s/ Mary C. Farrell Trustee August 28, 1996
- ----------------------------
Mary C. Farrell *
/s/ Meyer Feldberg Trustee August 28, 1996
- ----------------------------
Meyer Feldberg *
/s/ George W. Gowen Trustee August 28, 1996
- ----------------------------
George W. Gowen *
/s/ Frederic V. Malek Trustee August 28, 1996
- ----------------------------
Frederic V. Malek *
/s/ Carl W. Schafer Trustee August 28, 1996
- ----------------------------
Carl W. Schafer *
/s/ John R. Torell III Trustee August 28, 1996
- ----------------------------
John R. Torell III *
/s/ Julian F. Sluyters Vice President and August 28, 1996
- ---------------------------- Treasurer (Chief
Julian F. Sluyters Financial and
Accounting Officer)
</TABLE>
<PAGE>
<PAGE>
SIGNATURES (CONTINUED)
* Signature affixed by Elinor W. Gammon pursuant to power of
attorney dated May 21, 1996 and incorporated by reference from
Post-Effective Amendment No. 30 to the registration statement of
PaineWebber Managed Municipal Trust, SEC File No. 2-89016, filed
June 27, 1996.
<PAGE>
<PAGE>
LIQUID INSTITUTIONAL RESERVES
EXHIBIT INDEX
Exh. No. Description of Exhibit
1 (a) Amended and Restated Declaration of Trust(1)
(b) Amendment effective April 18, 1996 to Declaration of Trust (filed
herewith)
2 Amended and Restated By-Laws of the Trust(1)
3 Voting Trust Agreement - none
4 Instruments defining the rights of holders of Registrant's shares of
beneficial interest(2)
5 (a) Investment Advisory and Administration Contract
between Registrant and PaineWebber(6)
(b) Investment Sub-advisory and Sub-administration Agreement between
PaineWebber and Mitchell Hutchins (filed herewith)
6 Distribution Contract between Registrant and PaineWebber(3)
7 Bonus, profit or pension plans - none
8 Custodian Contract(6)
9 (a) Transfer Agency Services and Shareholder Services Agreement(3)
(b) Shareholder Service Plan (filed herewith)
(c) Shareholder Service Agreement (filed herewith)
10 Other Opinions, appraisals, rulings and consents: An opinion and consent
of counsel as to the legality of Registrant's shares was filed prior to
the effective date of Registrant's initial Registration Statement
11 Consent of Independent Auditors (filed herewith)
12 Financial statements omitted from Part B - none
13 Letter of Investment Intent(4)
14 Prototype Retirement Plan - none
15 Plan Pursuant to Rule 12b-1 - none
16 Schedule for computation of performance quotations provided in the
Registration Statement in response to Item 22(5)
17 and
27 Financial Data Schedule (filed herewith)
18 Plan pursuant to Rule 18f-3 (filed herewith)
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(1) Incorporated by reference to Pre-effective
Amendment No. 1 to the registration statement (SEC
File No. 33-39029), filed April 26, 1991.
(2) Incorporated herein by reference from Articles II,
IV, V, VI, VII and VIII of the Registrant's Amended
and Restated Declaration of Trust and Article II of
the Registrant's Amended and Restated By-Laws.
(3) Incorporated by reference to Post-Effective
Amendment No. 6 to the registration statement (SEC
File No. 33-39029), filed August 25, 1995,
Accession No. 000095-0117-95-000312.
(4) Incorporated herein by reference from Pre-Effective
Amendment No. 2 to the registration statement (SEC
File No. 33-39029), filed May 23, 1991.
(5) Incorporated herein by reference from
Post-Effective Amendment No. 2 to registration
statement (SEC File No. 33-39029), filed
August 28, 1992.
(6) Incorporated herein by reference from
Post-Effective Amendment No. 8 to
registration statement (SEC File No. 33-39029)
filed July 3, 1996.
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EXHIBIT 1(b)
LIQUID INSTITUTIONAL RESERVES
CERTIFICATE OF VICE PRESIDENT AND SECRETARY
I, Dianne E. O'Donnell, Vice President and Secretary of Liquid
Institutional Reserves ("Trust"), hereby certify that the board of trustees of
the Trust, by vote at a meeting held April 18, 1996, adopted the following
resolutions, which became effective on that date:
RESOLVED, that Section 8.2(b) of Article VIII of the Trust's
Declaration of Trust be, and it hereby is, amended to read, in its
entirety, as follows:
Section 8.2(b). After termination of the Trust or any Series or
Class thereof and distribution to the Shareholders as herein
provided, a majority of the Trustees (or an officer of the Trust
pursuant to a vote of a majority of the Trustees) shall execute
and lodge among the records of the Trust and file with the Office
of the Secretary of the Commonwealth of Massachusetts an
instrument in writing setting forth the fact of such termination,
and the Trustees shall thereupon be discharged from all further
liabilities and duties with respect to the Trust or the
terminated Series or Class thereof, and the rights and interests
of all Shareholders of the Trust or the terminated Series or
Class shall thereupon cease.
RESOLVED, that Section 8.3(c) of ARTICLE VIII of the Trust's
Declaration of Trust be, and it hereby is, amended to read, in its
entirety, as follows:
Section 8.3(c). Subject to the foregoing, any amendment shall be
effective as provided in the instrument containing the terms of
such amendment or, if there is no provision therein with respect
to effectiveness, upon the execution of such instrument and of a
certificate (which may be a part of such instrument) executed by
a Trustee or officer to the effect that such amendment has been
duly adopted. Copies of the amendment to this Declaration shall
be filed as specified in Section 1 of ARTICLE X. A restated
Declaration, integrating into a single instrument all of the
provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the
Trustees and shall be effective upon filing as specified in
Section 1 of ARTICLE X.
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RESOLVED, that Section 10.1 of ARTICLE X of the Trust's
Declaration of Trust be, and it hereby is, amended to read, in its
entirety, as follows:
Section 10.1. A copy of this Declaration and of each amendment
hereto shall be filed by the Trustees with the Secretary of the
Commonwealth of Massachusetts and the Boston City Clerk, as well
as any other governmental office where such filing may from time
to time be required. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether
or not any such amendments to this Declaration have been made and
as to any matters in connection with the Trust hereunder, and
with the same effect as if it were the original, may rely on a
copy certified by an officer or Trustee of the Trust to be a copy
of this Declaration or of any such amendments.
Dated: May 20, 1996 By:/s/ Dianne E. O'Donnell
-----------------------
Dianne E. O'Donnell
Vice President and Secretary
Liquid Institutional Reserves
New York, New York (ss)
Subscribed and sworn to before me this 20th day of May, 1996.
Ilene Shore
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Notary Public
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SUB-ADVISORY AND SUB-ADMINISTRATION AGREEMENT
Contract made as of April 15, 1996, between PAINEWEBBER INCORPORATED
("PaineWebber"), a Delaware corporation registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended ("1934 Act") and as an investment
adviser under the Investment Advisers Act of 1940, as amended ("Advisers Act"),
and MITCHELL HUTCHINS ASSET MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware
corporation registered as a broker-dealer under the 1934 Act and as an
investment adviser under the Advisers Act.
WHEREAS PaineWebber has entered into an Investment Advisory and
Administration Contract dated April 13, 1995 ("Advisory Contract") with Liquid
Institutional Reserves ("Fund"), an open-end investment company registered under
the Investment Company Act of 1940, as amended ("1940 Act"), which offers for
public sale distinct series of shares of beneficial interest ("Series"), each
corresponding to a distinct portfolio; and
WHEREAS under the Advisory Contract PaineWebber has agreed to provide
certain investment advisory and administrative services to the Series as now
exist and as hereafter may be established; and
WHEREAS the Advisory Contract authorizes PaineWebber to delegate certain
of its duties as investment adviser and administrator under the Advisory
Contract to a sub-adviser or sub-administrator; and
WHEREAS PaineWebber wishes to retain Mitchell Hutchins as sub-adviser
and sub-administrator to provide certain investment advisory and administrative
services to PaineWebber and each Series of the Fund as listed in Schedule A to
this agreement, as such schedule may be revised from time to time, and Mitchell
Hutchins is willing to render such services as described herein upon the terms
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. PaineWebber hereby appoints Mitchell Hutchins as its
sub-adviser and sub-administrator with respect to each Series and Mitchell
Hutchins accepts such appointment and agrees that it will furnish the services
set forth in Paragraph 2.
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2. Services and Duties of Mitchell Hutchins.
(a) Subject to the supervision of the Board of Trustees ("Board") and
PaineWebber, Mitchell Hutchins will provide a continuous investment program for
each Series, including investment research and management with respect to all
securities, investments and cash equivalents held in the portfolio of each
Series. Mitchell Hutchins will determine from time to time what investments will
be purchased, retained or sold by each Series. Mitchell Hutchins will be
responsible for placing purchase and sale orders for investments and for other
related transactions. Mitchell Hutchins will provide services under this
agreement in accordance with the Series' investment objective, policies and
restrictions as stated in the Series' Prospectuses.
(b) Mitchell Hutchins agrees that, in placing orders with brokers, it
will attempt to obtain the best net result in terms of price and execution;
provided that, on behalf of any Series, Mitchell Hutchins may, in its
discretion, effect securities transactions with brokers and dealers who provide
the Series with research, analysis, advice and similar services, and Mitchell
Hutchins may pay to those brokers and dealers, in return for brokerage and
research services and analysis, a higher commission than may be charged by other
brokers and dealers, subject to Mitchell Hutchins' determining in good faith
that such commission is reasonable in terms either of the particular transaction
or of the overall responsibility of Mitchell Hutchins and its affiliates to such
Series and its other clients and that the total commissions paid by such Series
will be reasonable in relation to the benefits to such Series over the long
term. In no instance will portfolio securities be purchased from or sold to
PaineWebber, Mitchell Hutchins or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder, or any applicable exemptive orders. Whenever Mitchell Hutchins
simultaneously places orders to purchase or sell the same security on behalf of
a Series and one or more other accounts advised by Mitchell Hutchins, such
orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable to each account. The Fund recognizes that in
some cases this procedure may adversely affect the results obtained for a
Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series and will
furnish the Board with such periodic and special reports as PaineWebber or the
Board reasonably may request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Mitchell Hutchins hereby agrees that all records which it
maintains for the Fund are the property of the Fund, agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940
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Act any records which it maintains for the Fund and which are required to be
maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender
promptly to the Fund any records which it maintains for the Fund upon request by
the Fund.
(d) Mitchell Hutchins will oversee the computation of the net asset
value and net income of each Series as described in the currently effective
registration statement of the Fund under the Securities Act of 1933, as amended,
and 1940 Act and any supplements thereto ("Registration Statement") or as more
frequently requested by the Board.
(e) Mitchell Hutchins will assist in administering the affairs of the
Fund and each Series, subject to the supervision of the Board and PaineWebber,
and further subject to the following understandings:
(i) Mitchell Hutchins will supervise all aspects of the operation
of the Fund and each Series except as hereinafter set forth; provided, however,
that nothing herein contained shall be deemed to relieve or deprive the Board of
its responsibility for and control of the conduct of affairs of the Fund and
each Series.
(ii) Mitchell Hutchins will provide the Fund and each Series with
such administrative and clerical personnel (including officers of the Fund) as
are reasonably deemed necessary or advisable by the Board and PaineWebber and
Mitchell Hutchins will pay the salaries of all such personnel.
(iii) Mitchell Hutchins will provide the Fund and each Series
with such administrative and clerical services as are reasonably deemed
necessary or advisable by the Board and PaineWebber, including the maintenance
of certain of the books and records of the Fund and each Series.
(iv) Mitchell Hutchins will arrange, but not pay for, the
periodic preparation, updating, filing and dissemination (as applicable) of the
Fund's Registration Statement, proxy material, tax returns and reports to
shareholders of each Series, the Securities and Exchange Commission and other
appropriate federal or state regulatory authorities.
(v) Mitchell Hutchins will provide the Fund and each Series with,
or obtain for them, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
3. Duties Retained by PaineWebber. PaineWebber will continue to provide
to the Board and each Series the services described in subparagraph 3(e) of the
Advisory Contract.
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4. Further Duties. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Fund's Declaration
of Trust, By-Laws and Registration Statement of the Fund and with the written
instructions and directions of the Board and PaineWebber, and will comply with
the requirements of the 1940 Act, the Investment Advisers Act of 1940 ("Advisers
Act"), the rules thereunder, and all other applicable federal and state laws and
regulations.
5. Services Not Exclusive. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive, and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a trustee, officer or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
6. Expenses. During the term of this Contract, Mitchell Hutchins
will pay all expenses incurred by it in connection with its services under this
Contract.
7. Compensation. For the services provided and the expenses assumed by
Mitchell Hutchins pursuant to this Contract with respect to each Series,
PaineWebber will pay to Mitchell Hutchins a fee equal to 50% of the fee received
by PaineWebber from the Fund pursuant to the Advisory Contract with respect to
such Series, such compensation to be paid monthly.
8. Limitation of Liability. Mitchell Hutchins and its delegates will not
be liable for any error of judgment or mistake of law or for any loss suffered
by PaineWebber or the Fund or the shareholders of any Series in connection with
the performance of this Contract, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Contract. Any person, even though also an officer, director, employee, or agent
of Mitchell Hutchins, who may be or become an officer, trustee, employee or
agent of the Fund shall be deemed, when rendering services to any Series of the
Fund or acting with respect to any business of such Series or the Fund, to be
rendering such services to or acting solely for the Series or the Fund and not
as an officer, director, employee, or agent or one under the control or
direction of Mitchell Hutchins even though paid by it.
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9. Duration and Termination.
(a) This Contract will become effective upon the date first above
written, provided that, with respect to any Series, this Contract shall not take
effect unless it has first been approved (i) by a vote of a majority of those
trustees of the Fund who are not parties to this Contract or interested persons
of any such party, cast in person at a meeting called for the purpose of voting
on such approval, and (ii) by vote of a majority of that Series' outstanding
voting securities.
(b) Unless sooner terminated as provided herein, this Contract will
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Contract will continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of those trustees of the Fund who are
not parties to this Contract or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or, with respect to any given Series, by vote of a majority of the
outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Contract may be terminated by any party hereto at any time, without the payment
of any penalty, on sixty days' written notice to the other party; this Contract
also may be terminated at any time, without the payment of any penalty, by vote
of the Board or by a vote of a majority of the outstanding voting securities of
such Series on sixty days' written notice to Mitchell Hutchins and PaineWebber.
Termination of this Contract with respect to any given Series shall in no way
affect the continued validity of this Contract or the performance thereunder
with respect to any other Series. This Contract will terminate automatically in
the event of its assignment or upon termination of the Advisory Contract.
10. Amendment of this Agreement. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract as to any
given Series shall be effective until approved by vote of a majority of such
Series' outstanding voting securities.
11. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Delaware without giving effect to the conflicts of laws
principles thereof and the 1940 Act provided, however, that Section 12 will be
construed in accordance with the laws of the Commonwealth of Massachusetts. To
the extent that the applicable laws of the State of Delaware or the
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Commonwealth of Massachusetts conflict with the applicable provisions of the
1940 Act, the latter shall control.
12. Limitation of Liability of the Trustees and Shareholders of the
Trust. No Trustee, shareholder, officer, employee or agent of any Series shall
be liable for any obligations of any Series or the Fund under this Contract, and
Mitchell Hutchins agrees that, in asserting any rights or claims under this
Contract, it shall look only to the assets and property of the Fund in
settlement of such right or claim, and not to such Trustee, shareholder,
officer, employee or agent. The Fund represents that a copy of its Declaration
of Trust is on file with the Secretary of the Commonwealth of Massachusetts and
the Boston City Clerk.
13. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act, subject to such exemption as may be granted by the SEC by any
rule, regulation or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Agreement is affected by a
rule, regulation or order of the SEC, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
PAINEWEBBER INCORPORATED
Attest:
_________________________________ By: ______________________________
Title: ___________________________
MITCHELL HUTCHINS ASSET
Attest: MANAGEMENT INC.
__________________________________ By: ______________________________
Title: ___________________________
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SCHEDULE A
1. Liquid Institutional Reserves - Money Market Fund
2. Liquid Institutional Reserves - Government Securities Fund
3. Liquid Institutional Reserves - Treasury Securities Fund
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AMENDED AND RESTATED
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan (the "Plan") is adopted by Liquid
Institutional Reserves, a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust") pursuant to a Declaration of Trust
dated June 3, 1991, as amended from time to time (the "Trust Agreement"), with
respect to the Trust's Financial Intermediary Shares, a class of shares issued
by the Trust's Treasury Securities Fund, Government Securities Fund and Money
Market Fund and such other series of the Trust as may be designated by the Board
of Trustees (collectively, the "Funds"), subject to the following terms and
conditions:
Section 1. Service Agreement.
The Trust in respect of each Fund will enter into a shareholder service
agreement ("Service Agreement") with each financial intermediary that purchases
Financial Intermediary Shares. Each Service Agreement shall require the
financial intermediary to provide support services to its customers
("Customers") who are the beneficial owners of Financial Intermediary Shares as
set forth within each Service Agreement and shall provide an express notice of
limitation of Trustee and shareholder liability as set forth in the Trust
Agreement.
Section 2. Compensation.
Each Fund will pay participating financial intermediaries an annual fee
(the "Service Payment") for their services in connection with the Service
Agreement. The Service Payment will be calculated daily and paid monthly by the
Trust at the annual rate of .25% of the average daily net asset value of the
Financial Intermediary Shares held by the financial intermediary for its
Customers. All expenses incurred by a Fund in respect of Service Agreements and
Service Payments shall be borne entirely by the holders of Financial
Intermediary Shares.
Section 3. Approval by Board of Trustee.
The Plan and any of the related Service Agreements will not take effect
until approved by a majority vote of both (i) the full Board of Trustees of the
Trust, and (ii) those Trustees who are not "interested persons" of the Trust (as
defined in the Investment Company Act of 1940, as amended) and who have no
direct or indirect financial interest in the operation of this Plan, or in any
Service Agreements related to the Plan (the "Disinterested Trustees"), pursuant
to a vote cast in person at a meeting called for the purpose of voting on the
Plan and the related Service Agreements.
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Section 4. Continuance of the Plan.
The Plan will continue in effect from year to year so long as such
continuance is specifically approved annually by the Board of Trustees in
accordance with the procedure specified in Section 3 above.
Section 5. Termination.
The Plan may be terminated at any time, without penalty, by vote of a
majority of the Disinterested Trustees. The Plan will automatically terminate in
the event of its assignment.
Section 6. Amendment.
The Plan may be amended from time to time by the Board of Trustees,
provided, however, that all material amendments of the Plan must be approved in
accordance with the procedures specified in Section 3 above.
Section 7. Selection and Nomination of Trustees.
While the Plan is in effect, the selection and nomination of Disinterested
Trustees of the Trust will be committed to the discretion of the Disinterested
Trustees then in office.
Section 8. Shareholder Voting.
To the extent that matters pertaining to the Plan and Service Agreements
are submitted to shareholders for approval, only the holders of Financial
Intermediary Shares shall be entitled to vote thereon.
Section 9. Written Reports and Preservation of Materials.
(A) While the Plan is in effect, each participating financial intermediary
and any person authorized to direct the disposition of monies paid or payable by
the Trust with respect to the Funds pursuant to the Plan or any related
agreement shall provide to the Trust's Board of Trustees, and the Board of
Trustees shall review, at least quarterly, a written report of the amounts so
expended by the financial intermediary or such person described above and the
purposes for which such expenditures were made.
(B) The Trust shall preserve copies of the Plan, the related Service
Agreements, any other agreement relating to the Plan and any report made
pursuant to Section 9(A) above for a period of not
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less than six years from the date of the Plan, each Service Agreement, the
agreement or report, the first two years in an easily accessible place.
Section 10. Dates.
The Plan has been amended and restated and will become effective as of
August 25, 1993.
LIQUID INSTITUTIONAL RESERVES
By:
_________________________
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SHAREHOLDER SERVICE AGREEMENT
Gentlemen:
This will confirm the terms of our agreement (the "Service Agreement") by
and between Liquid Institutional Reserves (the "Trust"), a business trust
organized under the laws of the Commonwealth of Massachusetts pursuant to a
Declaration of Trust dated June 3, 1991, as amended from time to time (the
"Trust Agreement"), and the other signatory hereto, as financial intermediary
("Financial Intermediary"), implementing the terms and provisions of the amended
and restated shareholder services plan dated as of August 25, 1993 (the "Plan")
adopted by the Trust with respect to the issuance and sale of financial
intermediary shares of each of the Trust's Funds (the "Financial Intermediary
Shares").
Section 1. Compensation and Services to be performed.
(a) The Trust will pay the Financial Intermediary an annual fee (the
"Service Payment") for its services in connection with the servicing of the
Financial Intermediary Shares. The Service Payment will be calculated daily and
paid monthly by the Trust at the annual rate of .25% of the average daily net
asset value of the Financial Intermediary Shares held by the Financial
Intermediary for its customers ("Customers"). The Trust may increase or decrease
the annual rate in its sole discretion. For purposes of calculating the fee
payable to the Financial Intermediary, the average daily net asset value of the
Financial Intermediary Shares will be calculated in accordance with the
procedure set forth in the Trust's current Prospectus and Statement of
Additional Information.
(b) The support services to be furnished by the Financial Intermediary
include the following: (i) aggregating and processing purchase and redemption
requests from Customers and placing net purchase and redemption orders with the
Trust's distributor; (ii) providing Customers with a service that invests the
assets of their accounts in Financial Intermediary Shares; (iii) processing
dividend payments on behalf of Customers; (iv) providing information
periodically to Customers showing their positions in Financial Intermediary
Shares; (v) arranging for bank wires; (vi) responding to Customer inquiries
relating to the services performed by the Financial Intermediary; (vii)
providing sub-accounting with respect to Shares beneficially owned by customers
or the information to the Trust necessary for sub-accounting; (viii) forwarding
shareholder communications from a Fund (for example, proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Customers, if required by law; and (ix) such other similar
services as the Trust may reasonably request from
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time to time to the extent the Financial Intermediary is permitted to do so
under Federal and state statutes, rules and regulations.
(c) In connection with this Service Agreement, the Financial Intermediary
shall be deemed to be an independent contractor, and shall have no authority to
act as agent for the Trust in any matter. Neither the Financial Intermediary nor
any of its directors, officers, partners, employees or agents are authorized to
make or furnish any representations concerning the Trust or the Financial
Intermediary Shares, except for those representations set forth in the Trust's
current Prospectus and Statement of Additional Information, or as set forth in
such supplemental literature as may be authorized by the Trust in writing.
Section 2. Approval by Trustees.
The Service Agreement will not take effect until the form hereof is
approved by a majority vote of both (i) the full Board of Trustees of the Trust,
and (ii) those Trustees who are not "interested persons" of the Trust (as
defined in the Investment Company Act of 1940) and who have no direct or
indirect financial interest in the operation of the Service Agreement (the
"Disinterested Trustees"), pursuant to a vote cast in person at a meeting called
for the purpose of voting on the form of Service Agreement.
Section 3. Continuance of the Plan.
The Service Agreement will continue in effect from year to year so long as
such continuance is specifically approved annually by the Board of Trustees in
accordance with the procedure specified in Section 2 above.
Section 4. Termination.
The Service Agreement may be terminated at any time, without penalty, by
vote of a majority of the Disinterested Trustees or by the Financial
Intermediary.
Section 5. Amendment and Assignment.
The Service Agreement may be amended from time to time by agreement of the
Financial Intermediary and the Board of Trustees, provided, however, that all
material amendments of the Service Agreement must be approved in accordance with
the procedures specified in Section 2 above. The Service Agreement is
non-assignable.
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Section 6. Representations of Financial Intermediary.
The Financial Intermediary represents to the Trust as follows:
(A) Any compensation payable to the Financial Intermediary in connection
with the investment of its Customers' assets in the Fund, including the
compensation payable hereunder and any additional fees the Financial
Intermediary may directly assess in connection with a Fund investment, (a) will
be disclosed by the Financial Intermediary to its Customers, (b) will be
authorized by the Financial Intermediary's Customers and (c) will not result in
an excessive fee to the Financial Intermediary;
(B) In the event an issue pertaining to the Plan is submitted for
shareholder approval, the Financial Intermediary will vote any Financial
Intermediary Shares held for its own account in the same proportion as the vote
of those Financial Intermediary Shares held for its Customers' accounts.
Section 7. Written Reports and Preservation of Materials.
(A) While the Service Agreement is in effect, the Financial Intermediary
and any person authorized to direct the disposition of monies paid or payable by
the Trust with respect to the Funds pursuant to the Plan, the Service Agreement
or any related agreement, shall provide to the Trust's Board of Trustees, and
the Board of Trustees shall review, at least quarterly, a written report of the
amounts so expended by the Financial Intermediary or such person described
above, and the purposes for which such expenditures were made. The Financial
Intermediary will provide the Trust with such information as the Trust may
reasonably request and will cooperate with and assist the Trust in the
preparation of reports to be furnished to the Board of Trustees concerning the
Service Agreement and any fees or compensation paid or payable by the Trust
pursuant hereto, in addition to any other reports or filings that may be
required by law.
(B) The Trust shall preserve copies of the Service Agreements, any other
agreement relating to the Plan and any report made pursuant to Section 7(A)
above, for a period of not
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less than six years from the date of the Plan, each Service Agreement, the
agreement or report, the first two years in a easily accessible place.
Section 8. Indemnification.
By signing the Service Agreement, the Financial Intermediary agrees to
release, indemnify and hold harmless the Trust from and against any and all
liabilities or losses resulting from any action or inaction by the Financial
Intermediary, its directors, officers, partners, employees or agents regarding
the Financial Intermediary's responsibilities under the Service Agreement, or
regarding the purchase, redemption, transfer or registration of Financial
Intermediary Shares by or on behalf of the Financial Intermediary's Customers.
Section 9. Limitation of Liability.
The Financial Intermediary is hereby expressly put on notice of the
limitation of Trustee and shareholder liability as set forth in the Trust
Agreement on file with the Secretary of the Commonwealth of Massachusetts and
with the Boston City Clerk, and the Financial Intermediary agrees that
obligations assumed by the Trust pursuant to this Agreement shall be limited in
all cases to the Trust and its assets. The Financial Intermediary agrees that
any creditor of any of the Trust's Funds may look only to the assets of that
Fund to satisfy such creditor's debt. The Financial Intermediary agrees that the
Financial Intermediary shall not seek satisfaction of any such obligation from
the Shareholders of the Trust, or from the Trustees of the Trust.
Section 10. Governing Law.
The Service Agreement shall be construed in accordance with the laws of the
State of New York, without giving effect to the conflict of law provisions
thereof.
Section 11. Effective Data.
This Service Agreement will become effective on the date set forth below,
provided that the Service Agreement has been approved in accordance with the
procedure set forth in Section 2 hereof.
* * * *
If the terms and conditions set forth above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing it
below and returning
-4-
<PAGE>
<PAGE>
the enclosed copy of this Agreement to the Trust.
LIQUID INSTITUTIONAL RESERVES
By:__________________________
ACCEPTED AND AGREED:
By:__________________________________
Name:________________________________
Title:_______________________________
Company:_____________________________
Address______________________________
Date:________________________________
-5-
<PAGE>
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference of our report dated June 7,
1996, in this Registration Statement (Form N-1A 33-39029) of Liquid
Institutional Reserves.
ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
August 27, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000872475
<NAME> LIQUID INSTITUTIONAL RESERVES
<SERIES>
<NUMBER> 03
<NAME> TREASURY SECURITIES FUND
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
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<INVESTMENTS-AT-VALUE> 9,643
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<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36
<TOTAL-LIABILITIES> 36
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<PAID-IN-CAPITAL-COMMON> 19,655
<SHARES-COMMON-STOCK> 19,655
<SHARES-COMMON-PRIOR> 23,761
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (31)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 19,624
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,184
<OTHER-INCOME> 0
<EXPENSES-NET> (69)
<NET-INVESTMENT-INCOME> 1,115
<REALIZED-GAINS-CURRENT> 36
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,151
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,183
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 376,474
<NUMBER-OF-SHARES-REDEEMED> (381,685)
<SHARES-REINVESTED> 1,105
<NET-CHANGE-IN-ASSETS> (4,138)
<ACCUMULATED-NII-PRIOR> 68
<ACCUMULATED-GAINS-PRIOR> (67)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (206)
<AVERAGE-NET-ASSETS> 21,903
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> (0.51)
<PER-SHARE-DISTRIBUTIONS> 0
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<AVG-DEBT-PER-SHARE> 0
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000872475
<NAME> LIQUID INSTITUTIONAL RESERVES
<SERIES>
<NUMBER> 01
<NAME> MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 421,467
<INVESTMENTS-AT-VALUE> 421,467
<RECEIVABLES> 1,139
<ASSETS-OTHER> 85
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 422,691
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 813
<TOTAL-LIABILITIES> 813
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 421,885
<SHARES-COMMON-STOCK> 421,885
<SHARES-COMMON-PRIOR> 220,844
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 421,878
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,338
<OTHER-INCOME> 0
<EXPENSES-NET> (835)
<NET-INVESTMENT-INCOME> 14,503
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 14,503
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,510
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,503,837
<NUMBER-OF-SHARES-REDEEMED> (3,316,244)
<SHARES-REINVESTED> 13,448
<NET-CHANGE-IN-ASSETS> 201,034
<ACCUMULATED-NII-PRIOR> 7
<ACCUMULATED-GAINS-PRIOR> (7)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 670
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (998)
<AVERAGE-NET-ASSETS> 267,934
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000872475
<NAME> LIQUID INSTITUTIONAL RESERVES
<SERIES>
<NUMBER> 02
<NAME> GOVERNMENT SECURITIES FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 30,179
<INVESTMENTS-AT-VALUE> 30,179
<RECEIVABLES> 16,645
<ASSETS-OTHER> 29
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 46,853
<PAYABLE-FOR-SECURITIES> 3,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 83
<TOTAL-LIABILITIES> 3,083
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43,768
<SHARES-COMMON-STOCK> 43,768
<SHARES-COMMON-PRIOR> 54,903
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 43,770
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,784
<OTHER-INCOME> 0
<EXPENSES-NET> (158)
<NET-INVESTMENT-INCOME> 2,626
<REALIZED-GAINS-CURRENT> 51
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,676
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 370,956
<NUMBER-OF-SHARES-REDEEMED> (384,646)
<SHARES-REINVESTED> 2,556
<NET-CHANGE-IN-ASSETS> (11,133)
<ACCUMULATED-NII-PRIOR> 50
<ACCUMULATED-GAINS-PRIOR> (50)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (280)
<AVERAGE-NET-ASSETS> 49,697
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
