<PAGE>
LIQUID INSTITUTIONAL RESERVES SEMIANNUAL REPORT
December 15, 1997
Dear Shareowner,
We are pleased to present you with the semiannual report for Liquid
Institutional Reserves (LIR) for the six months ended October 31, 1997. Among
the new services available to you is a dedicated service center to answer any
questions you may have on your account. You may call 1-888-LIR-FUND from 9:00
a.m to 5:00 p.m. (Eastern Time) Monday-Friday. In addition, the LIR Money
Market Fund's investment and redemption deadline has been moved to 2:30 p.m.
(Eastern Time), and we have introduced an electronic trading capability for
easier access to accounts and information.
GENERAL MARKET OVERVIEW
- -------------------------------------------------------------------------------
[LOGO]
Stronger than expected economic growth and rising employment prompted the
Federal Reserve to raise interest rates in March, and volatile and difficult
financial markets ensued. Then, on April 28, 1997, the report of the
Employment Cost Index--considered the most comprehensive wage-inflation
indicator, and critical to Fed policy--indicated a very positive inflation
picture. This information, plus optimism over an agreed upon framework by
President Clinton and the Republicans to balance the budget by 2002, turned
market sentiment extremely bullish.
July, August and September were also positive months for the financial
markets, as the prevailing theme that above-trend economic growth could occur
without generating higher inflation gained strength. At the end of the
period, on October 27, 1997, events occurring in Asian markets sparked a
554-point drop in the U.S. stock market, with ensuing volatility in the bond
markets. Although, as of this writing, the markets have recovered somewhat,
market volatility persists amid continuing concerns over events overseas. By
December 11, 1997, investors' flight to the haven of U.S. bonds caused the
yield on the bellwether 30-year Treasury bond to dip below 6% for the first
time since January 1996.
PORTFOLIO REVIEW
- -------------------------------------------------------------------------------
[LOGO]
PERFORMANCE--The Funds' annualized yields are listed on the table on the
next page. You will note that these numbers are roughly in line with the
Funds' yields six months ago, and slightly higher than last year's figures.
The IBC Money Fund Report Average-TM-First Tier Institutions, as
measured by IBC, Inc., had a 5.30% 7-day current yield, for the period ended
October 31, 1997.
1
<PAGE>
SEMIANNUAL REPORT
ANNUALIZED YIELDS
<TABLE>
<CAPTION>
Current 7-Day Average Yield Effective 7-Day Average Yield Weighted
--------------------------- ----------------------------- Average
As of As of As of As of As of As of Maturity
10/31/97 4/30/97 10/31/96 10/31/97 4/30/97 10/31/96
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund 5.37% 5.35% 5.21% 5.52% 5.49% 5.35% 50 DAYS
Government Securities Fund 5.18% 5.19% 5.05% 5.31% 5.33% 5.17% 44 DAYS
Treasury Securities Fund 5.11% 5.06% 4.76% 5.24% 5.18% 4.87% 63 DAYS
</TABLE>
PORTFOLIO HIGHLIGHTS--As of October 31, 1997, net assets of the Money Market
Fund, the Government Securities Fund and the Treasury Securities Fund were
approximately $1.6 billion, $74.7 million and $78.4 million, respectively.
On October 31, 1997, the Money Market Fund's weighted average maturity
was 50 days, while the weighted average maturities for the Government
Securities Fund and the Treasury Securities Fund were 44 days and 63 days,
respectively. This was done in response to economic data indicating low
inflation with slight economic growth. Additionally, we took advantage of
periods of volatility by purchasing securities at higher yields when rates
rose.
OUTLOOK
- -------------------------------------------------------------------------------
[LOGO]
Near term, we intend to keep the Fund's average weighted maturities
around their present levels. Going forward, every significant economic number
released will be closely scrutinized. Inflation is always a concern since it
is a trigger for the Fed to move on interest rates; as such, the inflationary
environment will be carefully monitored. Investment decisions for the Funds
will continue to be driven by credit worthiness, quality and liquidity.
Although we are interested in maintaining higher yields, we will not do so by
sacrificing the Funds' emphasis on security, quality and liquidity.
2
<PAGE>
LIQUID INSTITUTIONAL RESERVES SEMIANNUAL REPORT
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued
support and welcome any comments or questions you may have.
Sincerely,
/s/ Margo N. Alexander /s/ Dennis L. McCauley /s/ Susan P. Ryan
MARGO N. ALEXANDER DENNIS L. MCCAULEY SUSAN P. RYAN
President, Managing Director and Chief Senior Vice President,
Mitchell Hutchins Investment Officer-- Mitchell Hutchins
Asset Management Inc. Fixed Income, Mitchell Hutchins Asset Management Inc.
Asset Management Inc.
This letter is intended to assist shareowners in understanding how the Funds
performed during the semiannual period ended October 31, 1997 and reflects
our views at the time we are writing this report. Of course, these views may
change in response to changing circumstances. We encourage you to consult
your investment executive regarding your personal investment program.
3
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--2.71%
$ 18,000 Federal Home Loan Bank.............................. 12/17/97 to 08/26/98 5.625 to 5.950% $ 18,000,000
14,000 Student Loan Marketing Association.................. 01/08/98 to 01/23/98 5.750 14,000,000
10,000 Student Loan Marketing Association*................. 11/04/97 5.310 10,000,000
--------------
Total U.S. Government Agency Obligations (cost--$42,000,000)......... 42,000,000
--------------
DOMESTIC BANK NOTES--9.67%
35,000 Bank of America National Trust and
Savings Association............................... 11/21/97 to 10/22/98 5.520 to 6.150 34,993,966
10,000 Bank One Wisconsin*................................. 11/04/97 5.580 9,992,382
15,000 Comerica Bank, N.A., Detroit*....................... 11/04/97 5.640 14,994,326
3,000 FCC National Bank................................... 03/25/98 6.000 2,998,870
10,000 FCC National Bank*.................................. 11/03/97 5.610 9,996,407
20,000 Greenwood Trust Company............................. 11/10/97 5.530 20,000,000
20,000 Harris Trust and Savings Bank....................... 11/10/97 5.530 19,999,996
20,000 NationsBank Corporation............................. 11/20/97 5.520 20,000,000
10,000 PNC Bank N.A.*...................................... 11/03/97 5.600 9,993,963
7,000 Wachovia Bank of North Carolina..................... 10/08/98 5.810 6,997,816
--------------
Total Domestic Bank Notes (cost--$149,967,726)....................... 149,967,726
--------------
BANKERS [email protected]%
20,000 Bank of Tokyo--Mitsubishi, Limited.................. 11/25/97 to 12/08/97 5.520 to 5.540 19,896,192
7,000 Republic National Bank of New York.................. 12/19/97 5.500 6,948,667
8,250 Sanwa Bank Limited.................................. 12/11/97 5.520 8,199,400
40,866 SunTrust Banks Incorporated......................... 11/05/97 to 01/16/98 5.480 to 5.540 40,633,376
--------------
Total Bankers Acceptances (cost--$75,677,635)........................ 75,677,635
--------------
CERTIFICATES OF DEPOSIT--18.90%
DOMESTIC--0.64%
5,000 Bankers Trust Company............................... 08/28/98 5.970 4,998,822
5,000 Bankers Trust New York Corporation.................. 05/26/98 6.190 4,999,462
--------------
9,998,284
--------------
YANKEE--16.00%
6,000 ABN AMRO Bank N.V................................... 12/04/97 5.500 5,998,975
30,000 Bank of Tokyo--Mitsubishi, Limited.................. 12/19/97 to 01/26/98 5.660 to 5.780 29,999,997
4,000 Barclays Bank PLC................................... 06/25/98 5.940 3,998,518
25,000 Canadian Imperial Bank of Commerce.................. 11/04/97 to 02/27/98 5.540 to 5.760 24,998,538
12,000 Credit Agricole Indosuez............................ 09/30/98 to 10/26/98 5.830 to 5.900 11,997,381
20,000 Credit Suisse First Boston*......................... 11/04/97 5.620 20,000,000
20,000 Deutsche Bank AG.................................... 01/16/98 to 02/12/98 5.640 to 5.670 20,000,088
7,000 National Westminster Bank PLC....................... 07/30/98 5.790 6,999,502
3,000 Rabobank Nederland.................................. 03/20/98 5.980 2,999,782
10,000 Royal Bank of Canada................................ 04/16/98 to 10/01/98 5.800 to 6.300 10,007,478
29,000 Sanwa Bank Limited.................................. 01/08/98 to 01/27/98 5.660 to 5.760 29,000,270
52,000 Societe Generale.................................... 11/06/97 to 10/05/98 5.580 to 6.200 51,995,194
15,000 Societe Generale*................................... 11/03/97 5.620 14,992,864
5,000 Swiss Bank Corporation.............................. 07/17/98 5.850 4,997,970
10,000 Westpac Banking Corporation......................... 03/23/98 5.970 10,004,402
--------------
247,990,959
--------------
EURO--2.26%
20,000 Creditanstalt-Bankverein............................ 01/07/98 5.660 20,002,138
10,000 Sanwa Bank Limited.................................. 01/16/98 5.720 10,000,208
5,000 Westdeutshe Landesbank Girozentrale................. 08/03/98 5.820 5,000,361
--------------
35,002,707
--------------
Total Certificates of Deposit (cost--$292,991,950)................... 292,991,950
--------------
</TABLE>
4
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- --------------
<C> <S> <C> <C> <C>
COMMERCIAL [email protected]%
AGRICULTURE--1.61%
$ 25,000 Cargill Incorporated................................ 11/12/97 5.540% $ 24,957,681
--------------
ASSET-BACKED--11.28%
59,337 Delaware Funding Corporation........................ 11/17/97 to 11/24/97 5.520 to 5.550 59,166,114
21,699 Eiger Capital Corporation........................... 11/04/97 to 11/18/97 5.500 to 5.520 21,675,952
10,000 Enterprise Funding Corporation...................... 12/01/97 5.550 9,953,750
40,000 New Center Asset Trust.............................. 11/03/97 5.790 39,987,134
15,000 Riverwoods Funding Corporation...................... 11/05/97 5.500 14,990,833
29,215 Triple-A One Funding Corporation.................... 11/03/97 to 11/25/97 5.540 to 5.600 29,124,481
--------------
174,898,264
--------------
AUTO & TRUCK--1.29%
5,000 PACCAR Financial Corporation........................ 11/18/97 5.600 4,986,778
15,000 Toyota Motor Credit Corporation..................... 11/10/97 5.490 14,979,412
--------------
19,966,190
--------------
BANKING--13.04%
5,000 Abbey National North America........................ 02/25/98 5.540 4,910,745
25,000 B.B.V. Finance (Delaware) Incorporated.............. 11/05/97 5.500 24,984,722
13,000 Bayerische Vereinsbank AG........................... 11/03/97 5.520 12,996,013
5,000 BEX America Finance Incorporated.................... 11/12/97 5.520 4,991,567
55,000 Cregem North America Incorporated................... 11/14/97 to 12/10/97 5.500 to 5.520 54,820,327
28,000 KFW International Finance Incorporated.............. 11/14/97 5.500 27,944,389
35,000 Morgan (J.P.) & Company Incorporated................ 11/20/97 to 12/23/97 5.510 to 5.520 34,809,179
27,000 Nordbanken North America Incorporated............... 11/04/97 to 02/17/98 5.520 to 5.530 26,874,670
10,000 San Paolo U.S. Financial Company.................... 01/05/98 5.580 9,899,250
--------------
202,230,862
--------------
BROKER - DEALER--1.16%
15,000 Goldman Sachs Group L.P............................. 11/25/97 5.530 14,944,700
3,000 Merrill Lynch & Company Incorporated................ 11/17/97 5.530 2,992,627
--------------
17,937,327
--------------
CHEMICALS--1.60%
1,000 DuPont (E.I.) de Nemours & Company.................. 12/03/97 5.500 995,111
24,000 Henkel Corporation.................................. 11/06/97 to 01/16/98 5.500 to 5.590 23,885,061
--------------
24,880,172
--------------
DRUGS & HEALTHCARE--4.15%
19,500 Abbott Laboratories................................. 11/20/97 5.510 19,443,293
45,000 Bayer Corporation................................... 11/04/97 to 12/09/97 5.500 44,872,430
--------------
64,315,723
--------------
ENERGY--1.61%
25,000 Exxon Asset Management Company...................... 11/03/97 5.530 24,992,319
--------------
FINANCE-CONDUIT--2.47%
18,490 MetLife Funding Incorporated........................ 11/07/97 to 12/03/97 5.500 to 5.540 18,417,162
20,000 UBS Finance (Delaware) Incorporated................. 11/21/97 5.540 19,938,445
--------------
38,355,607
--------------
FINANCE-DIVERSIFIED--1.29%
20,000 Barclays US Funding Corporation..................... 11/06/97 5.550 19,984,583
--------------
FINANCE-INDEPENDENT--0.28%
4,300 National Rural Utilities Cooperative Finance
Corporation....................................... 11/03/97 to 11/06/97 5.500 to 5.530 4,297,761
--------------
</TABLE>
5
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- --------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER@--(CONCLUDED)
FINANCE-SUBSIDIARY--4.54%
$ 45,000 Deutsche Bank Financial Incorporated................ 11/06/97 to 01/07/98 5.500 to 5.510% $ 44,793,675
20,000 Dresdner U.S. Finance Incorporated.................. 11/04/97 5.520 19,990,800
5,600 Pitney Bowes Credit Corporation..................... 11/03/97 5.520 5,598,283
--------------
70,382,758
--------------
GENERAL TRADE--3.09%
48,047 Mitsubishi International Corporation................ 11/03/97 to 11/21/97 5.510 to 5.530 47,978,648
--------------
INSURANCE--0.32%
5,000 USAA Capital Corporation............................ 11/17/97 5.500 4,987,778
--------------
MANUFACTURING--DIVERSIFIED--0.48%
7,500 BTR Dunlop Finance Incorporated..................... 11/04/97 to 11/18/97 5.500 to 5,540 7,485,773
--------------
METALS & MINING--0.64%
10,000 Rio Tinto America Incorporated...................... 01/07/98 5.500 9,897,639
--------------
MISCELLANEOUS--1.09%
17,200 Beta Finance Incorporated........................... 11/03/97 to 04/23/98 5.500 to 5.600 16,905,628
--------------
OIL EQUIPMENT & SERVICES--0.39%
6,000 Colonial Pipeline Company........................... 11/24/97 5.520 5,978,840
--------------
TELECOMMUNICATIONS--4.79%
15,000 BellSouth Capital Funding Corporation............... 11/04/97 5.500 14,993,125
6,000 BellSouth Telecommunications Incorporated........... 11/04/97 5.520 5,997,240
53,300 SBC Communications Incorporated..................... 11/05/97 to 01/22/98 5.500 to 5.520 53,182,819
--------------
74,173,184
--------------
Total Commercial Paper (cost--$854,606,737).......................... 854,606,737
--------------
SHORT-TERM CORPORATE OBLIGATIONS--7.01%
AUTO & TRUCK--0.21%
3,210 Ford Motor Credit Company*.......................... 11/03/97 5.899 3,210,038
--------------
BANKING--0.64%
1,675 Chase Manhattan Corporation......................... 01/15/98 6.625 1,677,655
8,000 National Australia Bank Limited..................... 10/15/98 9.700 8,278,689
--------------
9,956,344
--------------
BROKER-DEALER--3.39%
23,000 Bear Stearns Companies Incorporated*................ 11/04/97 to 11/20/97 5.500 to 5.636 23,000,000
2,500 Goldman Sachs Group L.P............................. 04/15/98 6.100 2,500,290
17,000 Merrill Lynch & Company Incorporated................ 03/16/98 to 10/09/98 5.655 to 9.000 17,045,722
5,000 Merrill Lynch & Company Incorporated*............... 11/03/97 5.680 4,999,724
5,000 Morgan Stanley Group Incorporated*.................. 11/14/97 5.692 5,000,000
--------------
52,545,736
--------------
FINANCE-DIVERSIFIED--0.82%
12,600 Associates Corporation of North America............. 01/15/98 to 05/15/98 6.625 to 8.125 12,663,488
--------------
</TABLE>
6
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM CORPORATE OBLIGATIONS--(CONCLUDED)
FINANCE-INDEPENDENT--0.32%
$ 5,000 National Rural Utilities Cooperative Finance
Corporation....................................... 07/10/98 5.980% $ 5,000,000
--------------
MISCELLANEOUS--1.29%
20,000 Beta Finance Incorporated........................... 12/10/97 to 08/17/98 5.550 to 5.920 20,000,000
--------------
RETAIL-MERCHANDISE--0.34%
5,325 Wal-Mart Stores Incorporated........................ 03/01/98 5.500 5,319,586
--------------
Total Short-Term Corporate Obligations (cost--$108,695,192).......... 108,695,192
--------------
REPURCHASE AGREEMENT--1.58%
24,420 Repurchase agreement dated 10/31/97 with Citicorp
Securities, Incorporated, collateralized by
24,200,000 U.S. Treasury Notes, 5.625 to 6.250%,
due 11/30/00 to 8/31/02, proceeds: $24,431,498
(cost--$24,420,000)............................... 11/03/97 5.650 24,420,000
--------------
Total Investments (cost--$1,548,359,240 which approximates cost for
federal income tax purposes)--99.87%............................... 1,548,359,240
Other assets in excess of liabilities--0.13%......................... 1,953,254
--------------
Net Assets--100%..................................................... $1,550,312,494
--------------
--------------
</TABLE>
- -----------------
@ Interest rates shown are the discount rates at date of purchase.
* Variable rate security--maturity date reflects earlier of reset date or
maturity date. The interest rates shown are the current rates as of October
31, 1997 and reset periodically.
Weighted Average Maturity--50 days
See accompanying notes to financial statements.
7
<PAGE>
LIQUID INSTITUTIONAL RESERVES--GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--98.88%
$ 1,000 U.S. Treasury Notes........... 04/30/98 5.875% $ 998,975
8,500 Federal Farm Credit Bank@..... 11/03/97 to 02/27/98 5.360 to 5.400 8,460,493
4,500 Federal Farm Credit Bank*..... 02/02/98 to 11/04/98 5.650 to 5.810 4,502,417
20,100 Federal Home Loan Bank@....... 11/03/97 to 12/22/97 5.210 to 5.500 20,076,238
4,400 Federal Home Loan Bank........ 12/02/97 to 10/20/98 5.420 to 5.835 4,401,473
3,000 Federal Home Loan Mortgage
Corporation@................ 11/03/97 5.650 2,999,058
1,000 Federal National Mortgage
Association*................ 06/18/98 5.520 999,628
2,000 Federal National Mortgage
Association................. 03/12/98 to 06/23/98 5.540 to 5.710 2,000,615
10,000 Student Loan Marketing
Association@................ 11/03/97 5.630 9,996,872
5,000 Student Loan Marketing
Association*................ 02/19/98 5.310 5,000,000
1,450 Student Loan Marketing
Association................. 12/24/97 to 03/20/98 5.630 to 5.850 1,450,000
13,000 Tennessee Valley Authority@... 11/12/97 to 12/18/97 5.350 to 5.400 12,951,913
-------------
Total U.S. Govenment and Agency Obligations
(cost--$73,837,682).......................... 73,837,682
-------------
Total Investments (cost--$73,837,682, which
approximates cost for federal income tax
purposes) 98.88%............................. 73,837,682
Other assets in excess of
liabilities--1.12%............................ 838,169
-------------
Net Assets--100.00%........................... $ 74,675,851
-------------
-------------
</TABLE>
- -----------------
@ Interest rates shown are the discount rates at date of purchase.
* Variable rate securities--maturity date reflects earlier of reset date or
maturity date. The interest rates shown are the current rates as of October
31, 1997 and reset periodically.
Weighted Average Maturity--44 days
See accompanying notes to financial statements
8
<PAGE>
LIQUID INSTITUTIONAL RESERVES--TREASURY SECURITIES FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--55.41%
$ 9,500 U.S. Treasury Bills@.......... 01/02/98 to 04/02/98 5.090 to 5.640% $ 9,380,317
34,000 U.S. Treasury Notes........... 11/30/97 to 10/15/98 5.375 to 7.125 34,043,151
-------------
Total U.S. Government Securities
(cost--$43,423,468).......................... 43,423,468
-------------
Total Investments (cost--$43,423,468, which
approximates cost for federal income tax
purposes)--55.41%.............................. 43,423,468
Other assets in excess of
liabilities--44.59%*.......................... 34,937,704
-------------
Net Assets--100.00%............................ $ 78,361,172
-------------
-------------
</TABLE>
- -----------------
@ Interest rates shown are the discount rates at date of purchase.
* Includes a receivable of $39,667,786 from the sale of a $39,526,000 U.S.
Treasury Note sold on October 31, 1997, settling on November 3, 1997,
yielding 5.567%.
Weighted Average Maturity--63 days
See accompanying notes to financial statements
9
<PAGE>
LIQUID INSTITUTIONAL RESERVES
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1997(UNAUDITED)
<TABLE>
<CAPTION>
MONEY GOVERNMENT TREASURY
MARKET SECURITIES SECURITIES
FUND FUND FUND
-------------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost--$1,548,359,240, $73,837,682 and
$43,423,468 respectively)............. $1,548,359,240 $73,837,682 $43,423,468
Interest receivable..................... 8,848,841 231,837 627,376
Receivable for investments sold......... -- 5,585,966 39,667,786
Receivable from investment adviser...... -- 6,982 1,751
Other assets............................ 88,395 106,284 73,785
-------------- ----------- -----------
Total assets............................ 1,557,296,476 79,768,751 83,794,166
-------------- ----------- -----------
LIABILITIES
Dividends payable....................... 6,567,427 333,430 309,474
Payable for investments purchased....... -- 4,502,417 4,942,556
Payable to affiliates................... 250,619 -- --
Due to custodian........................ 142,941 -- --
Accrued expenses and other
liablilties........................... 22,995 257,053 180,964
-------------- ----------- -----------
Total liabilities....................... 6,983,982 5,092,900 5,432,994
-------------- ----------- -----------
NET ASSETS
Beneficial interest shares of $0.001 par
value outstanding (unlimited amount
authorized)........................... 1,550,298,652 74,689,841 78,375,252
Accumulated net realized gains (losses)
from investments...................... 13,842 (13,990) (14,080)
-------------- ----------- -----------
Net assets.............................. $1,550,312,494 $74,675,851 $78,361,172
-------------- ----------- -----------
-------------- ----------- -----------
Outstanding shares of beneficial
interest ($0.001 par value):
Institutional Shares.................... 1,550,298,652 74,689,841 78,375,252
-------------- ----------- -----------
-------------- ----------- -----------
Net asset value, offering price and $1.00 $1.00 $1.00
redemption value per share............ -------------- ----------- -----------
-------------- ----------- -----------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
LIQUID INSTITUTIONAL RESERVES
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
OCTOBER 31, 1997
(UNAUDITED)
------------------------------------
MONEY GOVERNMENT TREASURY
MARKET SECURITIES SECURITIES
FUND FUND FUND
----------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................ $35,865,961 $2,315,588 $1,986,801
----------- ----------- ----------
EXPENSES:
Investment advisory and
administration........................ 1,589,862 105,395 92,976
Transfer agency and service............. 144,468 19,826 13,047
State and federal registration fees..... 94,233 53,240 46,980
Legal and audit......................... 70,508 33,106 27,133
Custody and accounting.................. 64,136 4,191 3,668
Reports and notices to shareholders..... 61,307 17,432 16,933
Directors/Trustees' fees................ 5,250 5,250 5,250
Other expenses.......................... 90,635 78,453 26,807
----------- ----------- ----------
2,120,399 316,893 232,794
Less: Fee waivers and expense
reimbursements from adviser........... (317,973) (190,322) (121,222)
----------- ----------- ----------
Net expenses............................ 1,802,426 126,571 111,572
----------- ----------- ----------
Net investment income................... 34,063,535 2,189,017 1,875,229
NET REALIZED GAINS FROM INVESTMENT
TRANSACTIONS.......................... 11,145 275 8,139
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $34,074,680 $2,189,292 $1,883,368
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED FOR THE YEAR
OCTOBER 31, 1997 ENDED
(UNAUDITED) APRIL 30, 1997
----------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income......................................................................... $ 34,063,535 $ 46,003,708
Net realized gains from investment transactions............................................... 11,145 9,814
----------------- --------------
Net increase in net assets resulting from operations.......................................... 34,074,680 46,013,522
----------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional Shares................................................... (34,063,535) (46,003,708)
----------------- --------------
NET INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.............................. 303,502,265 824,910,772
----------------- --------------
Net increase in net assets.................................................................... 303,513,410 824,920,586
NET ASSETS:
Beginning of period........................................................................... 1,246,799,084 421,878,498
----------------- --------------
End of period................................................................................. $ 1,550,312,494 $1,246,799,084
----------------- --------------
----------------- --------------
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
LIQUID INSTITUTIONAL RESERVES--GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997 APRIL 30,
(UNAUDITED) 1997
----------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................................................... $ 2,189,017 $ 4,135,255
Net realized gains (losses) from investment transactions........................................ 275 (10,497)
----------------- -------------
Net increase in net assets resulting from operations............................................ 2,189,292 4,124,758
----------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional Shares..................................................... (2,189,017) (4,140,330)
----------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS..................... (32,167,338) 63,088,916
----------------- -------------
Net increase (decrease) in net assets........................................................... (32,167,063) 63,073,344
NET ASSETS:
Beginning of period............................................................................. 106,842,914 43,769,570
----------------- -------------
End of period................................................................................... $ 74,675,851 $106,842,914
----------------- -------------
----------------- -------------
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
LIQUID INSTITUTIONAL RESERVES--TREASURY SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997 APRIL 30,
(UNAUDITED) 1997
----------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................................................... $ 1,875,229 $ 1,986,551
Net realized gains from investment transactions................................................. 8,139 9,062
----------------- -------------
Net increase in net assets resulting from operations............................................ 1,883,368 1,995,613
----------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional Shares..................................................... (1,875,229) (1,986,551)
----------------- -------------
NET INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS................................ 12,460,309 46,259,585
----------------- -------------
Net increase in net assets...................................................................... 12,468,448 46,268,647
NET ASSETS:
Beginning of period............................................................................. 65,892,724 19,624,077
----------------- -------------
End of period................................................................................... $ 78,361,172 $65,892,724
----------------- -------------
----------------- -------------
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Liquid Institutional Reserves (the "Trust") is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The Trust currently
offers three no-load series: the Money Market Fund, the Government Securities
Fund and the Treasury Securities Fund (collectively, the "Funds").
The Funds offer two classes of shares, Institutional shares and Financial
Intermediary shares. Each class represents interests in the same assets of a
Fund, and both classes have equal voting privileges, except that beneficial
owners of Financial Intermediary shares receive certain services directly from
financial intermediaries, bear certain service fees and enjoy exclusive voting
rights on matters relating to these services and fees. For the six months ended
October 31, 1997, there were no Financial Intermediary shares outstanding.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. Following is a summary of
significant accounting policies:
VALUATION AND ACCOUNTING FOR INVESTMENTS AND INVESTMENT INCOME--Investments
are valued at amortized cost which approximates market value. Investment
transactions are recorded on the trade date. Realized gains and losses from
investment transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Premiums are amortized and
discounts are accreted as adjustments to interest income and the identified cost
of investments.
REPURCHASE AGREEMENTS--The Funds' custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In the event that a
counterparty defaults on its obligation to repurchase, the Funds have the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Funds occasionally
participate in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
asset management subsidiary of PaineWebber Incorporated ("PaineWebber") and
sub-adviser and sub-administrator of the Funds.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Funds to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust has an Investment Advisory and Administration Contract ("Advisory
Contract") with PaineWebber under which PaineWebber serves as investment adviser
and administrator of the Funds. In accordance with the Advisory Contract,
PaineWebber receives compensation from the Funds, computed daily and paid
monthly, at an annual rate of 0.25% of each Fund's average daily net assets.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
Mitchell Hutchins serves as sub-adviser and sub-administrator of the Trust
pursuant to a Sub-Advisory and Sub-Administration Contract ("Sub-Advisory
Contract") between PaineWebber and Mitchell Hutchins. In accordance with the
Sub-Advisory Contract, PaineWebber (not the Funds) pays Mitchell Hutchins a fee,
computed daily and paid monthly, at an annual rate of 50% of the fee paid by
each Fund to PaineWebber under the Advisory Contract.
For the six months ended October 31, 1997, PaineWebber and Mitchell Hutchins
have voluntarily undertaken to waive 0.05% of these advisory fees and reimburse
a portion of expenses to maintain each Fund's total annual operating expenses at
a level not exceeding 0.30% and 0.55% of the Funds' average daily net assets for
Institutional shares and Financial Intermediary shares, respectively.
FEDERAL TAX STATUS
Each Fund intends to distribute all of its taxable income and to comply with
the other requirements of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provision for federal income taxes is
required. In addition, by distributing during each calendar year substantially
all of their net investment income, capital gains and certain other amounts, if
any, the Funds intend not to be subject to a federal excise tax.
At April 30, 1997, the Treasury Securities Fund had a net capital loss
carryforward of $8,501. The loss carryforward is available as a reduction, to
the extent provided in the regulations, of future net realized capital gains,
and will expire by April 30, 2004. To the extent these losses are used to offset
future capital gains, it is probable that the gains so offset will not be
distributed.
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest, at $1.00 per share,
were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
-------------------------------------
FOR THE SIX MONTHS FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997 APRIL 30, 1997
------------------ ---------------
<S> <C> <C>
MONEY MARKET FUND:
Shares sold............................................ 4,154,243,260 8,398,406,989
Shares repurchased..................................... (3,879,160,432) (7,616,174,223)
Dividends reinvested................................... 28,419,437 42,678,006
------------------ ---------------
Net increase in shares outstanding..................... 303,502,265 824,910,772
------------------ ---------------
------------------ ---------------
GOVERNMENT SECURITIES FUND:
Shares sold............................................ 162,596,069 670,826,717
Shares repurchased..................................... (196,708,015) (611,609,161)
Dividends reinvested................................... 1,944,608 3,871,360
------------------ ---------------
Net increase (decrease) in shares outstanding.......... (32,167,338) 63,088,916
------------------ ---------------
------------------ ---------------
TREASURY SECURITIES FUND:
Shares sold............................................ 184,390,752 439,537,681
Shares repurchased..................................... (173,561,761) (395,078,231)
Dividends reinvested................................... 1,631,318 1,800,135
------------------ ---------------
Net increase in shares outstanding..................... 12,460,309 46,259,585
------------------ ---------------
------------------ ---------------
</TABLE>
For the period ended October 31, 1997 and for the year ended April 30, 1997,
there were no transactions in Financial Intermediary Shares.
16
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
-------------------------------------------------------------------- FINANCIAL INTERMEDIARY
FOR THE SHARES**
SIX MONTHS ---------------------------
ENDED FOR THE FOR THE PERIOD
OCTOBER 31, FOR THE YEARS ENDED APRIL 30, YEAR ENDED MARCH 17,
1997 ------------------------------------------------------ APRIL 30, 1994+ TO APRIL
(UNAUDITED) 1997 1996 1995++ 1994 1993 1995++ 30, 1994
----------- ---------- -------- -------- -------- -------- ---------- --------------
<S> <C> <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 $ 1.00
----------- ---------- -------- -------- -------- -------- ---------- ------
Net investment income........... 0.027 0.052 0.055 0.048 0.030 0.031 0.027 0.004
Net realized losses from
investment transactions........ -- -- -- (0.008) -- -- -- --
----------- ---------- -------- -------- -------- -------- ---------- ------
Net increase from investment
operations..................... 0.027 0.052 0.055 0.040 0.030 0.031 0.027 0.004
----------- ---------- -------- -------- -------- -------- ---------- ------
Dividends from net investment
income......................... (0.027) (0.052) (0.055) (0.048) (0.030) (0.031) (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 $ 1.00
----------- ---------- -------- -------- -------- -------- ---------- ------
----------- ---------- -------- -------- -------- -------- ---------- ------
Total investment return (2)..... 2.73% 5.33% 5.61% 4.91% 3.03% 3.16% 3.10% 0.37%
----------- ---------- -------- -------- -------- -------- ---------- ------
----------- ---------- -------- -------- -------- -------- ---------- ------
Ratios/Supplemental Data:
Net assets, end of period
(000's)........................ $1,550,312 $1,246,799 $421,878 $220,844 $254,281 $385,618 -- $ 9,000
Expenses to average net assets
net of waivers/reimbursements
from adviser................... 0.28%* 0.25% 0.31% 0.35% 0.33% 0.34% 0.60%* 0.58%*
Expenses to average net assets
before waivers/reimbursements
from adviser................... 0.33%* 0.30% 0.37% 0.37% 0.33% 0.36% 0.62%* 0.58%*
Net investment income to average
net assets net of
waivers/reimbursements from
adviser........................ 5.36%* 5.24% 5.47% 4.68% 2.96% 3.13% 4.17%* 2.93%*
Net investment income to average
net assets before
waivers/reimbursements from
adviser........................ 5.31%* 5.19% 5.41% 4.66% 2.96% 3.11% 4.15%* 2.93%*
</TABLE>
- -------------
+ Commencement of issuance of shares.
++ Sub-advisory functions for the Fund were transferred from Kidder Peabody
Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
* Annualized
** For the six months ended October 31, 1997, the years ended April 30, 1996 and
1997 and for the period December 24, 1994 to April 30, 1995 there were no
outstanding Financial Intermediary Shares.
(1) Kidder Peabody Asset Management, Inc., the Fund's predecessor investment
adviser and administrator, purchased certain of the Fund's variable rate
securities on July 6, 1994 at prices equal to the securities' amortized cost
plus accrued and unpaid interest. Since the purchases were made at prices
above the securities' current fair value, the Fund recorded a contribution to
capital.
(2) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment return
for periods of less than one year has not been annualized.
17
<PAGE>
LIQUID INSTITUTIONAL RESERVES--GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
--------------------------------------------------------------- FINANCIAL
FOR THE INTERMEDIARY
SIX MONTHS SHARES**
ENDED ------------------
OCTOBER 31, FOR THE YEARS ENDED APRIL 30, FOR THE PERIOD
1997 ------------------------------------------------- JULY 12, 1994+ TO
(UNAUDITED) 1997 1996 1995++ 1994 1993 APRIL 30, 1995++
----------- -------- ------- ------- ------- -------- ------------------
<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................... 0.026 0.051 0.053 0.048 0.029 0.031 0.032
Net realized gains (losses) from
investment transactions................ -- -- 0.001 (0.008) -- -- --
----------- -------- ------- ------- ------- -------- ------
Net increase from investment
operations............................. 0.026 0.051 0.054 0.040 0.029 0.031 0.032
----------- -------- ------- ------- ------- -------- ------
Dividends from net investment income.... (0.026) (0.051) (0.054) (0.047) (0.029) (0.031) (0.032)
----------- -------- ------- ------- ------- -------- ------
Contribution to capital from predecessor
advisor (1)............................ -- -- -- 0.007 -- -- --
----------- -------- ------- ------- ------- -------- ------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- -------- ------- ------- ------- -------- ------
----------- -------- ------- ------- ------- -------- ------
Total investment return (2)............. 2.65% 5.20% 5.50% 4.61% 2.97% 3.13% 3.31%
----------- -------- ------- ------- ------- -------- ------
----------- -------- ------- ------- ------- -------- ------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $74,676 $106,843 $43,770 $54,903 $84,209 $102,611 --
Expenses to average net assets net of
waivers/reimbursements from adviser.... 0.30%* 0.30% 0.32% 0.35% 0.35% 0.34% 0.60%*
Expenses to average net assets before
waivers/reimbursements from adviser.... 0.75%* 0.53% 0.56% 0.47% 0.37% 0.36% 0.72%*
Net investment income to average net
assets net of waivers/reimbursements
from adviser........................... 5.19%* 5.09% 5.52% 4.75% 2.95% 3.11% 4.58%*
Net investment income to average net
assets before waivers/reimbursements
from adviser........................... 4.74%* 4.86% 5.28% 4.63% 2.93% 3.09% 4.46%*
</TABLE>
- -----------------
+ Commencement of issuance of shares.
++ Sub-advisory functions for the Fund were transferred from Kidder Peabody
Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
* Annualized
** For the six months ended October 31, 1997, the year ended April 30, 1997 and
for the period March 22, 1995 to April 30, 1996 there were no outstanding
Financial Intermediary Shares.
(1) Kidder Peabody Asset Management, Inc., the Fund's predecessor investment
adviser and administrator, purchased certain of the Fund's variable rate
securities on July 6, 1994 at prices equal to the securities' amortized cost
plus accrued and unpaid interest. Since the purchases were made at prices
above the securities' current fair value, the Fund recorded a contribution to
capital.
(2) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment return
for periods of less than one year has not been annualized.
18
<PAGE>
LIQUID INSTITUTIONAL RESERVES -- TREASURY SECURITIES FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
-------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEARS ENDED
OCTOBER 31, APRIL 30,
1997 ---------------------------------------------------------
(UNAUDITED) 1997 1996 1995++ 1994 1993
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- --------- --------- ---------
Net investment income............................. 0.025 0.049 0.048 0.049 0.028 0.029
Net realized gains (losses) from investment
transactions..................................... -- -- 0.003 (0.002) -- --
------------- --------- --------- --------- --------- ---------
Net increase from investment operations........... 0.025 0.049 0.051 0.047 0.028 0.029
------------- --------- --------- --------- --------- ---------
Dividends from net investment income.............. (0.025) (0.049) (0.051) (0.047) (0.028) (0.029)
------------- --------- --------- --------- --------- ---------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
Total investment return (1)....................... 2.57% 5.02% 5.23% 4.75% 2.87% 2.89%
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $78,361 $ 65,893 $ 19,624 $ 23,762 $ 38,602 $ 8,064
Expenses to average net assets net of
waivers/reimbursements from adviser.............. 0.30%* 0.30% 0.32% 0.22% 0.18% 0.33%
Expenses to average net assets before
waivers/reimbursements from adviser.............. 0.63%* 0.72% 0.94% 0.84% 0.76% 1.10%
Net investment income to average net assets net of
waivers/reimbursements from adviser.............. 5.04%* 4.97% 5.71% 5.51% 3.66% 3.65%
Net investment income to average net assets before
waivers/reimbursements from adviser.............. 4.72%* 4.56% 5.09% 4.89% 3.08% 2.88%
</TABLE>
- -----------------
++ Sub-advisory functions for the Fund were transferred from Kidder Peabody
Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment return
for periods of less than one year has not been annualized.
19
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES
E. Garrett Bewkes, Jr. Mary C. Farrell
CHAIRMAN
Meyer Feldberg
Margo N. Alexander
George W. Gowen
Richard Q. Armstrong
Frederic V. Malek
Richard R. Burt
Carl W. Schafer
OFFICERS
Margo N. Alexander Paul H. Schubert
PRESIDENT VICE PRESIDENT AND TREASURER
Victoria E. Schonfeld Dennis L. McCauley
VICE PRESIDENT VICE PRESIDENT
Dianne E. O'Donnell Susan P. Ryan
VICE PRESIDENT AND SECRETARY VICE PRESIDENT
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
SUBADVISER AND SUBADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED
ON THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER INVESTMENT EXECUTIVE OR
CORRESPONDENT FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
THE FINANCIAL INFORMATION HEREIN IS TAKEN FROM THE RECORDS OF THE FUNDS
WITHOUT EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION
THEREON.
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF
THE FUNDS UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
PaineWebber offers a family of 22 funds which encompass a diversified range
of investment goals.
BOND FUNDS
- - High Income Fund
- - Investment Grade Income Fund
- - Low Duration U.S. Government Income Fund
- - Strategic Income Fund
- - U.S. Government Income Fund
TAX-FREE BOND FUNDS
- - California Tax-Free Income Fund
- - Municipal High Income Fund
- - National Tax-Free Income Fund
- - New York Tax-Free Income Fund
STOCK FUNDS
- - Capital Appreciation Fund
- - Financial Services Growth Fund
- - Growth Fund
- - Growth and Income Fund
- - Small Cap Fund
- - Utility Income Fund
ASSET ALLOCATION FUNDS
- - Balanced Fund
- - Tactical Allocation Fund
GLOBAL FUNDS
- - Asia Pacific Growth Fund
- - Emerging Markets Equity Fund
- - Global Equity Fund
- - Global Income Fund
PAINEWEBBER MONEY MARKET FUND
[LOGO]
OCTOBER 31, 1997
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
LIQUID
INSTITUTIONAL
RESERVES
