<PAGE>
Supplement to the
LIQUID INSTITUTIONAL RESERVES
Money Market Fund, Government Securities Fund and Treasury Securities Fund
Prospectus dated September 1, 1998
June 1, 1999
Dear Investor,
PaineWebber Incorporated and Mitchell Hutchins Asset Management Inc. have
agreed to reimburse expenses during the current fiscal year so that the
information contained in the prospectus is revised as indicated below under "Fee
Waivers." Also, the investment policies of Government Securities Fund and
Treasury Securities Fund have been amended to permit limited investment in
shares of similar money market funds, as explained below under "Investment in
Other Money Market Funds."
FEE WAIVERS:
1. The table of estimated annual fund operating expenses on page 5 and related
footnotes on page 6 is replaced with the following:
Annual Fund Operating Expenses*
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Government Securities Fund
and
Money Market Fund Treasury Securities Fund
----------------- ------------------------
Financial Financial
Institutional Intermediary Institutional Intermediary
Shares Shares Shares Shares **
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees ................................. 0.25% 0.25% 0.25% 0.25%
Other Expenses:
Shareholder Servicing Fees...................... 0.00% 0.25% 0.00% 0.25%
Miscellaneous Expenses (after reimbursements) 0.03% 0.03% 0.04% 0.04%
Total Other Expenses (after reimbursements)...... 0.03% 0.28% 0.04% 0.29%
---- ---- ---- ----
Total Operating Expenses (after reimbursements).. 0.28% 0.53% 0.29% 0.54%
==== ==== ==== ====
</TABLE>
_______________________
* Information in the expense table and the example (below) reflect an
agreement by PaineWebber and Mitchell Hutchins to reduce or otherwise limit the
expenses of each Fund, on an annualized basis, to the amounts indicated next to
the caption "Total Operating Expenses (after reimbursements)." In the absence of
this agreement, Money Market Fund's, Government Securities Fund's and Treasury
Securities Fund's total operating expenses, stated as a percentage of average
net assets, would have been 0.34%, 0.59% and 0.47%, respectively, for
Institutional shares and 0.59%, 0.84% and 0.72%, respectively, for Financial
Intermediary shares. Without this agreement, under the assumptions set forth in
the example, 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 $3, $11, $19 and $43; $6, $19, $33 and $74;
and $15, $15, $26 and $59, respectively, for Institutional shares and would have
been $6, $19, $33 and $74; $9, $27, $47 and $104; and $7, $23, $40 and $89,
respectively, for Financial Intermediary shares. PaineWebber and Mitchell
Hutchins do not anticipate that they will reimburse expenses in the current
fiscal year, except to the extent necessary to comply with the total expense
limitation agreement described above.
** No Financial Intermediary shares were outstanding during the last fiscal year
of Government Securities Fund and Treasury Securities Fund. "Miscellaneous
Expenses" for the Financial Intermediary shares of these two Funds have been
estimated.
(Continued on other side)
<PAGE>
2. The amounts under "Example of Effect of Fund Expenses" on page 5 are
revised as follows:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund:
Institutional shares $3 $ 9 $16 $36
Financial Intermediary shares $5 $17 $30 $66
Government Securities Fund and Treasury Securities Fund:
Institutional shares $3 $ 9 $16 $37
Financial Intermediary shares $5 $17 $30 $68
</TABLE>
3. The first complete sentence on page 17 of the prospectus is revised to
read: "PaineWebber and Mitchell Hutchins have undertaken to maintain each
Fund's total annual operating expenses during its current fiscal year at a
level not exceeding the percentages indicated under "Annual Fund Operating
Expenses" in the table at the front of this prospectus."
INVESTMENT IN OTHER MONEY MARKET FUNDS:
The description of Treasury Securities Fund's investment policies on pages 3 and
11 is revised to read as follows: "Treasury Securities Fund invests
substantially all of its assets in securities issued by the U.S. Treasury, which
are supported by the full faith and credit of the United States. The interest
income on these securities is generally exempt from state and local income
taxation. The Fund will not enter into repurchase agreements." The description
of Government Securities Fund's investment policies on page 3, and the first
sentence under the caption "Government Securities Fund" on page 10, is revised
to read: "Government Securities Fund invests substantially all of its assets in
short-term U.S. government securities, the interest income from which is
generally exempt from state and local income taxation."
The last sentence in the first paragraph on page 13 under the caption "Other
Investment Policies" is revised to read: "Each Fund may invest up to 10% of its
total assets in the securities of other money market funds; Government
Securities Fund and Treasury Securities Fund limit their investments in other
funds to those having similar investment policies in order to maximize the
potential beneficial treatment under state and local income taxation
accorded investment in federal government securities."
