As filed with the Securities and Exchange Commission on July 2, 1999
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. 12 [X]
--
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 13
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.
BENJAMIN J. HASKIN, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Telephone (202) 778-9000
Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
[ ] On pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[X] On September 1, 1999 pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On pursuant to Rule 485(a)(2)
Title of Securities Being Registered: Shares of Beneficial Interest.
<PAGE>
LIQUID INSTITUTIONAL RESERVES
MONEY MARKET FUND
GOVERNMENT SECURITIES FUND
TREASURY SECURITIES FUND
-------------------------------
PROSPECTUS
SEPTEMBER 1, 1999
-------------------------------
This prospectus offers two classes of shares for each money market fund.
Institutional shares are offered primarily to institutional investors and
Financial Intermediary shares are offered to banks and other financial
intermediaries for the benefit of their customers.
----------------------------------------------------------------
Not FDIC insured. May lose value. No bank guarantee.
----------------------------------------------------------------
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
<PAGE>
Liquid Institutional Reserves Money Market Fund Government Securities Fund
Treasury Securities Fund
CONTENTS
THE FUNDS
------------------------------------------------------------------
What every investor 3 Money Market Fund
should know about 6 Government Securities Fund
the funds 9 Treasury Securities Fund
12 More About Risks and Investment Strategies
YOUR INVESTMENT
------------------------------------------------------------------
Information for 13 Managing Your Fund Account
managing your fund 13 Buying Shares
account 14 Selling Shares
14 Exchanging Shares
15 Pricing and Valuation
ADDITIONAL INFORMATION
------------------------------------------------------------------
Additional important 16 Management
information about 17 Dividends and Taxes
the funds 18 Financial Highlights
------------------------------------------------------------------
Where to learn more Back Cover
about the funds
----------------------------------------
The funds are not complete or
balanced investment programs.
----------------------------------------
2
<PAGE>
Liquid Institutional Reserves Money Market Fund
- ---------------------------------------------------------------------
MONEY MARKET FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------
FUND OBJECTIVE
High current income to the extent consistent with 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.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality money
market instruments of governmental and private issuers.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rate or other
special features that give them the financial characteristics of short-term
debt.
The fund may invest in any of these money market instruments. It invests in
foreign money market instruments only if they are denominated in U.S. dollars.
PaineWebber Incorporated, the fund's investment adviser, has appointed Mitchell
Hutchins Asset Management Inc. to serve as the fund's sub-adviser. Mitchell
Hutchins selects money market instruments for the fund based on its assessment
of relative values and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is that issuers may fail,
or become less able, to make payments when due. The fund also is subject to
interest rate risk. When short-term interest rates rise, the value of the fund's
investments generally will fall, and its yield will tend to lag behind
prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
o Credit Risk
o Interest Rate Risk
o Foreign Securities Risk
INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).
3
<PAGE>
Liquid Institutional Reserves Money Market Fund
- ---------------------------------------------------------------------
PERFORMANCE
- -----------
RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart shows Institutional shares because they have the longer performance
history.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
MONEY MARKET FUND -TOTAL RETURN ON INSTITUTIONAL SHARES
[BAR CHART TO BE INSERTED]
Calendar year total return as of June 30, 1999 ............- %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
CLASS INSTITUTIONAL SHARES*
(INCEPTION DATE) (6/3/91)
ONE YEAR
FIVE YEARS
LIFE OF CLASS
* Because no Financial Intermediary shares were outstanding for a full calendar
year, average annual total return for Financial Intermediary shares is not
included in the table.
4
<PAGE>
Liquid Institutional Reserves Money Market Fund
- ---------------------------------------------------------------------
EXPENSES AND FEE TABLES
- -----------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering None
price)...............................................
Maximum Contingent Deferred Sales Charge (Load)
(as a % of offering None
price)...............................................
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
FINANCIAL INTERMEDIARY
INSTITUTIONAL SHARES SHARES
-------------------- ------
Management 0.25% 0.25%
Fees.................................
Distribution and/or Service (12b-1) 0.00% 0.00%
Fees.................................
Other Expenses
Shareholder Servicing 0.00% 0.25%
Fee..................................
Miscallaneous 0.06% 0.06%
Expenses*.......................
0.06% 0.06%
---- -----
Total Annual Fund Operating Expenses 0.31% 0.56%
==== -----
Expense Reimbursement* 0.03% 0.03%
---- -----
Net Expenses* 0.28% 0.53%
==== =====
* The fund and PaineWebber have entered into an expense reimbursement agreement.
PaineWebber has agreed to reimburse the fund to the extent that the fund's
expenses through the end of the current fiscal year otherwise would exceed the
"Net Expenses" rates for each class as shown above. The fund has agreed to repay
PaineWebber for those reimbursed expenses if it can do so over the following
three years without causing the fund's expenses in any of those years to exceed
those "Net Expenses" rates.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same, except for the one year period when
the fund's expenses are lower due to its reimbursement agreement with
PaineWebber. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
INSTITUTIONAL SHARES $29 $90 $157 $356
FINANCIAL INTERMEDIARY SHARES 54 71 296 665
5
<PAGE>
Liquid Institutional Reserves Government Securities Fund
- ------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------
FUND OBJECTIVE
High current income to the extent consistent with 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.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality, U.S.
government money market instruments that pay income that is exempt from state
and local income tax in the maximum number of states.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rate or other
special features that give them the financial characteristics of short-term
debt.
PaineWebber Incorporated, the fund's investment adviser, has appointed Mitchell
Hutchins Asset Management Inc. to serve as the fund's sub-adviser. Mitchell
Hutchins selects money market instruments for the fund based on its assessment
of relative values and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is that issuers may fail,
or become less able, to make payments when due. The fund also is subject to
interest rate risk. When short-term interest rates rise, the value of the fund's
investments generally will fall, and its yield will tend to lag behind
prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
o Credit Risk
o Interest Rate Risk
INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).
6
<PAGE>
Liquid Institutional Reserves Government Securities Fund
- --------------------------------------------------------------------------
PERFORMANCE
- -----------
RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart shows Institutional shares because they have the longer performance
history.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
GOVERNMENT SECURITIES FUND - TOTAL RETURN ON INSTITUTIONAL SHARES
[BAR CHART TO BE INSERTED]
Calendar year total return as of June 30, 1999 - %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
CLASS INSTITUTIONAL SHARES*
(INCEPTION DATE) (6/3/91)
ONE YEAR
FIVE YEARS
LIFE OF CLASS
* Because no Financial Intermediary shares were outstanding for a full calendar
year, average annual total return for Financial Intermediary shares is not
included in the table.
7
<PAGE>
Liquid Institutional Reserves Government Securities Fund
- --------------------------------------------------------------------------
EXPENSES AND FEE TABLES
- -----------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering None
price)...............................................
Maximum Contingent Deferred Sales Charge (Load)
(as a % of offering None
price)...............................................
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
FINANCIAL INTERMEDIARY
INSTITUTIONAL SHARES SHARES
-------------------- ------
Management 0.25% 0.25%
Fees.................................
Distribution and/or Service (12b-1) 0.00% 0.00%
Fees.................................
Other Expenses
Shareholder Servicing 0.00% 0.25%
Fee..................................
Miscallaneous 0.08% 0.06%
Expenses*.......................
0.08% 0.08%
---- -----
Total Annual Fund Operating Expenses 0.33% 0.58%
==== -----
Expense Reimbursement* 0.04% 0.04%
---- -----
Net Expenses* 0.29% 0.54%
==== =====
* The fund and PaineWebber have entered into an expense reimbursement agreement.
PaineWebber has agreed to reimburse the fund to the extent that the fund's
expenses through the end of the current fiscal year otherwise would exceed the
"Net Expenses" rates for each class as shown above. The fund has agreed to repay
PaineWebber for those reimbursed expenses if it can do so over the following
three years without causing the fund's expenses in any of those years to exceed
those "Net Expenses" rates.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same, except for the one year period when
the fund's expenses are lower due to its reimbursement agreement with
PaineWebber. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
INSTITUTIONAL SHARES $31 $93 $163 $368
FINANCIAL INTERMEDIARY SHARES 55 173 302 677
8
<PAGE>
Liquid Institutional Reserves Treasury Securities Fund
- ----------------------------------------------------------------------------
TREASURY SECURITIES FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------
FUND OBJECTIVE
High current income to the extent consistent with 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 investments.
PRINCIPAL INVESTMENT STRATEGIES
The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in U.S. Treasury money market instruments that are
supported by the full faith and credit of the United States. These investments
pay income that is generally exempt from state and local income tax.
Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rate or other
special features that give them the financial characteristics of short-term
debt.
PaineWebber Incorporated, the fund's investment adviser, has appointed Mitchell
Hutchins Asset Management Inc. to serve as the fund's sub-adviser. Mitchell
Hutchins selects money market instruments for the fund based on its assessment
of relative values and changes in market and economic conditions.
PRINCIPAL RISKS
An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is that issuers may fail,
or become less able, to make payments when due. The fund also is subject to
interest rate risk. When short-term interest rates rise, the value of the fund's
investments generally will fall, and its yield will tend to lag behind
prevailing rates.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
o Credit Risk
o Interest Rate Risk
INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).
9
<PAGE>
Liquid Institutional Reserves Treasury Securities Fund
- ----------------------------------------------------------------------------
PERFORMANCE
- -----------
RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
bar chart shows Institutional shares because they have the longer performance
history.
The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TREASURY SECURITIES FUND - TOTAL RETURN ON INSTITUTIONAL SHARES
[BAR CHART TO BE INSERTED]
Calendar year total return as of June 30, 1999 - %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %
AVERAGE ANNUAL TOTAL RETURNS*
as of December 31, 1998
CLASS INSTITUTIONAL SHARES
(INCEPTION DATE) (2/14/91)
ONE YEAR
FIVE YEARS
LIFE OF CLASS
* No Financial Intermediary shares were outstanding prior to December 31, 1998.
10
<PAGE>
Liquid Institutional Reserves Treasury Securities Fund
- ----------------------------------------------------------------------------
EXPENSES AND FEE TABLES
- -----------------------
FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering None
price)...............................................
Maximum Contingent Deferred Sales Charge (Load)
(as a % of offering None
price)...............................................
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
FINANCIAL INTERMEDIARY
INSTITUTIONAL SHARES SHARES
-------------------- ------
Management 0.25% 0.25%
Fees.................................
Distribution and/or Service (12b-1) 0.00% 0.00%
Fees.................................
Other Expenses
Shareholder Servicing 0.00% 0.25%
Fee..................................
Miscallaneous 0.08% 0.06%
Expenses*.......................
0.08% 0.08%
---- -----
Total Annual Fund Operating Expenses 0.33% 0.58%
==== -----
Expense Reimbursement* 0.04% 0.04%
---- -----
Net Expenses* 0.29% 0.54%
==== =====
* The fund and PaineWebber have entered into an expense reimbursement agreement.
PaineWebber has agreed to reimburse the fund to the extent that the fund's
expenses through the end of the current fiscal year otherwise would exceed the
"Net Expenses" rates for each class as shown above. The fund has agreed to repay
PaineWebber for those reimbursed expenses if it can do so over the following
three years without causing the fund's expenses in any of those years to exceed
those "Net Expenses" rates.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same, except for the one year period when
the fund's expenses are lower due to its reimbursement agreement with
PaineWebber. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
11
<PAGE>
Liquid Institutional Reserves Treasury Securities Fund
- ----------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
INSTITUTIONAL SHARES $30 $93 $163 $368
FINANCIAL INTERMEDIARY SHARES 55 173 302 677
12
<PAGE>
Liquid Institutional Reserves Money Market Fund Government Securities Fund
Treasury Securities Fund
- -----------------------------------------------------------------------------
MORE ABOUT RISKS AND INVESTMENT STRATEGIES
- ------------------------------------------
PRINCIPAL RISKS
The main risks of investing in one or more of the funds are described below. Not
all these risks apply to each fund. You can find a list of the main risks that
apply to a particular fund by looking under the "Investment Objective,
Strategies and Risks" heading for that fund.
Other risks of investing in a fund, along with further detail about some of the
risks described below, are discussed in the funds' Statement of Additional
Information ("SAI"). Information on how you can obtain the SAI is on the back
cover of this prospectus.
CREDIT RISK. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even the highest quality money market
instruments are subject to some credit risk.
INTEREST RATE RISK. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of a fund's investments will fall. Also, a fund's yield
will tend to lag behind changes in prevailing short-term interest rates. This
means that a fund's income will tend to rise more slowly than increases in
short-term interest rates. Similarly, when short-term interest rates are
falling, a fund's income will tend to fall more slowly. The value of a fund's
municipal money market instruments also could fall due to adverse political or
regulatory developments concerning tax exemptions for municipal securities.
FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
YEAR 2000 RISK. The funds could be adversely affected by problems relating to
the inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the funds, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.
Similarly, the issuers whose money market instruments are bought by the funds
and the trading systems used by the funds could be adversely affected by this
issue. The ability of an issuer or trading system to respond successfully to the
issue requires both technological sophistication and diligence, and there can be
no assurance that any steps taken will be sufficient to avoid an adverse impact
on the funds.
ADDITIONAL INVESTMENT STRATEGIES
Like all money market funds, the funds are subject to maturity, quality and
diversification requirements designed to help them maintain a stable price of
$1.00 per share. In addition, Mitchell Hutchins may employ a number of
professional money management techniques to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. For each
fund, these techniques include varying the composition and the weighted average
maturity of the portfolio based upon Mitchell Hutchins' assessment of the
relative values of various money market instruments and future interest rate
patterns. Mitchell Hutchins also may 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
markets.
Each fund may invest to a limited extent in shares of similar money market funds
that, for Government Securities Fund and Treasury Securities Fund, have the same
tax characteristics.
13
<PAGE>
Liquid Institutional Reserves Money Market Fund Government Securities Fund
Treasury Securities Fund
- -----------------------------------------------------------------------------
YOUR INVESTMENT
MANAGING YOUR FUND ACCOUNT
- --------------------------
BUYING SHARES
- -------------
THE FUNDS ACCEPT THE SETTLEMENT OF PURCHASE ORDERS ONLY IN AVAILABLE FEDERAL
FUNDS. 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.
Each fund offers two separate classes of shares -- Institutional shares and
Financial Intermediary shares -- as an economical and convenient means for
institutions to invest short-term funds that they hold for their own account or
hold or manage for others.
o You may purchase Institutional shares if you are an institutional investor.
PaineWebber Incorporated, the distributor of the fund's shares may, in its
discretion, make Institutional shares available to individuals or other
entities.
o You may purchase Financial Intermediary shares only if you are a bank or
other financial intermediary buying the shares for the benefit of your
customers. Financial Intermediary shares bear special fees at the annual
rate of 0.25% of average net assets for services that these financial
intermediaries provide to the beneficial owners of the Financial
Intermediary shares.
Unless you specify otherwise, all shares purchased will be Institutional shares.
You may buy fund shares by calling the funds' transfer agent, First Data
Investor Services Group, Inc., at 1-888-LIR-FUND and speaking to a
representative. You may also buy fund shares by contacting your Financial
Advisor at PaineWebber or its correspondent firms, who are then responsible for
sending the order to the transfer agent. The availability of fund shares to
customers of PaineWebber's correspondent firms may vary depending on the
arrangements between PaineWebber and those firms.
You buy shares at the net asset value next determined after receipt and
acceptance of your purchase order by the transfer agent, subject to a fund
receiving payment the same day.
Your purchase order will be effective only if you wire payment in federal funds
on the same business day that you place your order, and your wire must actually
be credited to the fund's bank account by a Federal Reserve Bank that day.
Otherwise, the order will be rejected. A business day is any day that the funds'
custodian, the funds' transfer agent and PaineWebber are open for business. Each
fund effects orders to purchase its shares each business day at the net asset
value determined as of
o 2:30 p.m. (Eastern time) for Money Market Fund.
o noon (Eastern time) for Government Securities Fund and Treasury Securities
Fund
The funds and PaineWebber reserve the right to reject a purchase order or
suspend the offering of fund shares. PaineWebber may return without notice money
wired to a fund where the investor fails to place a corresponding share purchase
order.
WIRE INSTRUCTIONS
Instruct your bank to transfer federal funds by wire to:
Mitchell Hutchins Institutional Funds
c/o The Bank of New York
CR DDA A/C #8900337516
FFC PW A/C # ______________
[INSERT PAINEWEBBER ACCOUNT NAME AND ACCOUNT NUMBER]
ABA #021000018
14
<PAGE>
Liquid Institutional Reserves Money Market Fund Government Securities Fund
Treasury Securities Fund
- -----------------------------------------------------------------------------
PaineWebber or your bank may impose a service charge for wire transfers.
MINIMUM INVESTMENTS:
Money Market Fund and Government Securities Fund (or a combination of both):
To open an account.............$1,000,000
To add to an account............None
Treasury Securities Fund:
14A
<PAGE>
To open an account.............$250,000
To add to an account............None
PaineWebber may waive these minimums. A fund may change its minimum investment
requirements at any time.
Financial intermediaries may establish different minimums for their customers
who purchase Financial Intermediary shares through them, provided that the
aggregate amounts purchased meet the above minimums. You may obtain additional
information about these minimums from your financial intermediary.
REMOTE TRADE ENTRY
The funds may offer an electronic trade order entry (RTE) capability to eligible
institutional investors who meet certain conditions. For more information on
this option, contact your Financial Advisor or the transfer agent at
1-888-LIR-FUND.
SELLING SHARES
- --------------
You may sell your shares by calling the transfer agent at 1-888-LIR Fund and
speaking with a representative. You also may sell your shares by contacting your
Financial Advisor or correspondent firm (if you previously designated them to
give instructions to the transfer agent on your behalf). They are then
responsible for sending the order to the transfer agent. The funds accept sell
orders each business day up until
o 2:30 p.m., Eastern time, for Money Market Fund
o noon, Eastern time, for Government Securities Fund and Treasury Securities
Fund.
Your sales proceeds will be paid in federal funds wired to one or more accounts
you have designated, normally on the business day the sale order is accepted. If
you sell all the shares you own, dividends accrued for the month to date will be
paid in federal funds and wired at the same time to the bank account(s) that you
designate.
Your bank account may not receive the proceeds in a timely manner if a Federal
Reserve Bank is experiencing delay in transfer of funds. Neither the funds,
PaineWebber nor the transfer agent is responsible for the performance of your
bank or any of its intermediaries.
The transfer agent will process your orders to sell shares only if you have on
file with it a properly completed account application, with a signature
guaranteed or other authentication acceptable to the transfer agent. The account
application requires you to designate the bank account(s) or PaineWebber account
for wiring sales proceeds. You must submit any change in the designated
account(s) for sale proceeds in a form acceptable to the transfer agent. The
transfer agent will not place the sales order if the information you provide
does not correspond to the information on your application.
If you have additional questions on selling shares, you should contact your
Financial Advisor or call the transfer agent at 1-888-LIR-FUND.
EXCHANGING SHARES
- -----------------
You may exchange shares of a fund for shares of the same class of another fund
or Mitchell Hutchins LIR Select Money Fund. LIR Select Money Fund has a
$10,000,000 minimum for initial purchases, including through exchanges, and a
$100,000 minimum for subsequent purchases. All exchanges are based on the next
determined net asset value per share.
Exchange orders are accepted up until noon, Eastern time (2:30 p.m., Eastern
time, for exchanges from Money Market Fund into Mitchell Hutchins LIR Select
Money Fund). Exchange orders received after these times will not be effected and
you will have to place an exchange order before these times on the following
business day if you still wish to effect an exchange. If you exchange all your
fund shares, the dividends accrued on those shares for the month to date also
will be invested in the shares of the other fund into which the exchange is
made.
You can place an exchange order by calling the transfer agent at 1-888-LIR-FUND
and speaking with a representative. You also can place an exchange order through
a PaineWebber Financial Advisor or correspondent firm, whoa re then responsible
for sending the order to the transfer agent.
Exchange transactions must meet the minimum initial investment of the new fund.
There in no minimum for subsequent exchanges between fund accounts once they
have been activated except as noted above.
15
<PAGE>
Liquid Institutional Reserves Money Market Fund Government Securities Fund
Treasury Securities Fund
- -----------------------------------------------------------------------------
A fund may modify or terminate the exchange privilege at any time.
ADDITIONAL INFORMATION ABOUT YOUR ACCOUNT
- -----------------------------------------
FINANCIAL INTERMEDIARY SHARES. Financial intermediaries purchasing or holding
shares for their customer accounts may charge those customers for cash
management and other services provided in connection with their accounts. These
15A
<PAGE>
Liquid Institutional Reserves Money Market Fund Government Securities Fund
Treasury Securities Fund
- -----------------------------------------------------------------------------
charges may include account maintenance fees, compensating balance requirements
or fees based on account transactions, assets or income. The dividends payable
to the financial intermediaries' customers, who are the beneficial owners of the
shares, will be lower than those on Institutional shares by the amount of the
fees paid by the fund for shareholder services. A customer should consider the
terms of his account with a financial intermediary before purchasing shares.
A financial intermediary buying or selling shares for its customers is
responsible for transmitting orders to the transfer agent in accordance with its
customer agreements and the procedures noted above.
INSTITUTIONAL SHARES. PaineWebber or Mitchell Hutchins (not the fund) may pay
shareholder servicing fees to financial institutions that make Institutional
shares available to their customers. The amount of these fees will be negotiated
between PaineWebber and the financial institution.
PRICING AND VALUATION
- ---------------------
The price of fund shares is based on net asset value and is determined
separately for each class of shares. The net asset value is the total value of a
fund divided by the total number of shares outstanding. In determining net asset
value, each fund values its securities at their amortized cost. This method uses
a constant amortization to maturity of the difference between the cost of the
instrument to the fund and the amount due at maturity. Each fund's net asset
value per share is expected to be $1.00 per share, although this value is not
guaranteed.
The net asset value per share for Money Market Fund is determined twice each
Business Day at
o noon (Eastern time) and
o 2:30 p.m. (Eastern time)
The net asset value per share for Government Securities Fund and Treasury
Securities Fund is determined once each Business Day at
o noon (Eastern time)
Your price for buying or selling shares will be the net asset value that is next
calculated after a fund accepts your order.
16
<PAGE>
Liquid Institutional Reserves Money Market Fund Government Securities Fund
Treasury Securities Fund
- -----------------------------------------------------------------------------
MANAGEMENT
- ----------
INVESTMENT ADVISER AND SUB-ADVISER
PaineWebber is the investment adviser, administrator of the funds and
distributor of the funds' shares. Mitchell Hutchins Asset Management Inc. is
each fund's sub-adviser and sub-administrator. PaineWebber and Mitchell Hutchins
are located at 1285 Avenue of the Americas, New York, New York, 10019. Mitchell
Hutchins is a wholly owned asset management subsidiary of PaineWebber, which is
wholly owned by Paine Webber Group Inc., a publicly owned financial services
holding company. On July 31, 1999, PaineWebber or Mitchell Hutchins was the
adviser or sub-adviser of __ investment companies with __ separate portfolios
and aggregate assets of approximately $__._ billion.
ADVISORY FEES
The funds paid advisory and administration fees to PaineWebber for the most
recent fiscal year ended April 30, 1999 at the following annual rates based on
average net assets.
Money Market Fund 0.20%
Government Securities Fund 0.20%
Treasury Securities Fund 0.20%
These fees reflect a waiver by PaineWebber of 0.05% of the 0.25% contract rate
for each fund's advisory and administrative fees. That fee waiver is no longer
in effect.
OTHER INFORMATION. Money Market Fund will maintain a rating from one or more
rating agencies that provide ratings on money market funds. There can be no
assurance that the fund will maintain any particular rating or maintain it with
a particular rating agency.
17
<PAGE>
Liquid Institutional Reserves Money Market Fund Government Securities Fund
Treasury Securities Fund
- -----------------------------------------------------------------------------
DIVIDENDS AND TAXES
- -------------------
DIVIDENDS
Each fund declares dividends daily and pays them monthly. Dividends are paid on
the last business day of a month or upon the sale of all the fund shares in a
shareholder's account.
Each fund distributes any net short-term capital gain annually and anticipates
that any short-term capital gain distribution would be declared during the month
of December in a given year. A fund may make more frequent distributions if
necessary to maintain its share price at $1.00.
Shares earn dividends on the day they are purchased but do not earn dividends on
the day they are sold.
Dividends on Financial Intermediary shares of a fund will be lower than
dividends on its Institutional shares because of the higher expenses borne by
Financial Intermediary shares.
You will receive dividends in additional shares of the same class unless you
elect to have the dividends transmitted by federal funds wire to either a
designated bank account or PaineWebber account. You must notify the transfer
agent in writing in a form acceptable to the transfer agent at least two
business days prior to the end of the month if you wish to change this election
for a particular monthly dividend.
TAXES
The dividends that you receive from a fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. Shareholders not subject to tax on their income will not be required to
pay tax on amounts distributed to them. The funds' dividends will not qualify
for the dividends-received deduction for corporations.
Some states and localities do not tax dividends that are attributable to
interest on U.S. Treasury securities and certain other government securities.
The funds expect that their dividends will be taxed primarily as ordinary
income. The fund will tell you how you should treat its dividends for tax
purposes.
18
<PAGE>
Liquid Institutional Reserves Treasury Securities Fund
- --------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------
The following financial highlights tables are intended to help you understand
the funds' financial performance for the past 5 years. Certain information
reflects financial results for a single fund share. In the tables, "total
investment return" represents the rate that an investor would have earned on an
investment in the fund (assuming reinvestment of all dividends). Financial
Intermediary shares were not outstanding during the fiscal year ended April 30,
1999 for Government Securities Fund or Treasury Securities Fund and were
outstanding for only limited periods of time prior to that fiscal year for Money
Market Fund and Government Securities Fund.
The information in the financial highlights has been audited by Ernst & Young,
LLP, independent auditors, whose reports, along with the funds' financial
statements, are included in the funds' annual report to shareholders. The annual
report may be obtained without charge by calling 1-888-LIR-FUND. The financial
information for periods prior to 1996 was audited by another independent
accounting firm, whose reports thereon were unqualified.
Financial Highlights to be inserted for
Money Market Fund
Government Securities Fund
Treasury Securities Fund
19
<PAGE>
[BACK COVER]
Ticker Symbols for Institutional Shares Money Market Fund: LIRXX
Government Securities Fund: LIGXX
Treasury Securities Fund: LISXX
If you want more information about the funds, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semi-annual reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about a fund by contacting your PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting the funds directly at 1-800-LIR-FUND.
You may review and copy information about the funds, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You can get text-only copies of reports and other information about
the funds:
o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov
Liquid Institutional Reserves
- -- Money Market Fund
- -- Government Securities Fund
- -- Treasury Securities Fund
Investment Company Act File No. 811-06281
(COPYRIGHT) 1999 PaineWebber Incorporated
<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
Money Market Fund, Government Securities Fund and Treasury Securities Fund
are professionally managed money market funds organized as diversified series of
Liquid Institutional Reserves ("Trust").
The funds' investment adviser, administrator and distributor is
PaineWebber Incorporated ("PaineWebber"); their sub-adviser is Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset management
subsidiary of PaineWebber. Mitchell Hutchins also serves as the funds'
sub-administrator.
Portions of the funds' Annual Report to Shareholders are incorporated by
reference into this Statement of Additional Information ("SAI"). The Annual
Report accompanies this SAI. You may obtain an additional copy of the funds'
Annual Report by calling toll-free 1-888-LIR-FUND.
This SAI is not a prospectus and should be read only in conjunction with
the fund's current Prospectus, dated September 1, 1999. A copy of the Prospectus
may be obtained by calling any PaineWebber Financial Advisor or correspondent
firm or by calling toll-free 1-888-LIR-FUND. This SAI is dated September 1,
1999.
TABLE OF CONTENTS
PAGE
The Funds and Their Investment Policies......... 2
The Funds' Investments, Related Risks and 3
Limitations.....................................
Organization of the Trust; Trustees and Officers
and Principal Holders of Securities.......... 9
Investment Advisory, Administration
and Distribution Arrangements.................. 16
Portfolio Transactions.......................... 19
Additional Information Regarding Redemptions.... 20
Valuation of Shares............................. 20
Performance Information......................... 21
Taxes........................................... 24
Other Information............................... 25
Financial Statements............................ 25
<PAGE>
THE FUNDS AND THEIR INVESTMENT POLICIES
No fund's investment objective may be changed without shareholder
approval. Except where noted, the other investment policies of each fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that a fund will achieve its investment objective. Each
fund is a money market fund that invests in high quality money market
instruments that have, or are deemed to have, remaining maturities of 13 months
or less and maintains a dollar-weighted average portfolio maturity of 90 days or
less. Money market instruments are short-term debt-obligations and similar
securities. They also include longer term bonds that have variable interest rate
or other special features that give them the financial characteristics of
short-term debt. Each fund may purchase only those obligations that Mitchell
Hutchins determines, pursuant to procedures adopted by the board, present
minimal credit risks and are "First Tier Securities" as defined in Rule 2a-7
under the Investment Company Act of 1940, as amended ("Investment Company Act").
MONEY MARKET FUND'S investment objective is high current income to the
extent consistent with 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. The fund's investments include (1)
U.S. and foreign government securities, (2) obligations of U.S. and foreign
banks, (3) commercial paper and other short-term obligations of U.S. and foreign
corporations, partnerships, trusts and similar entities, (4) repurchase
agreements regarding any of the foregoing and (5) investment company securities.
The fund may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks only if the institution has total assets at the time of purchase in excess
of $1.5 billion. The fund may invest in non-negotiable time deposits of U.S.
banks, savings associations and similar depository institutions only if the
institution has total assets at the time of purchase in excess of $1.5 billion
and the time deposits have a maturity of seven days or less.
The fund generally may invest no more than 5% of its total assets in the
securities of a single issuer (other than U.S. government securities). The fund
may purchase only U.S. dollar-denominated obligations of foreign issuers.
The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33-1/3% of its total assets. The fund
may borrow up to 33 1/3% of the value of its total assets[, including reverse
repurchase agreements,] for temporary purposes The fund may invest in the
securities of other money market funds.
GOVERNMENT SECURITIES FUND'S investment objective is high current income
to the extent consistent with 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. The fund invests in
U.S. government securities with interest income that is generally exempt from
state and local income taxation and 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 Banks,
Federal Farm Credit Banks Funding Corp. and SLM Holding Corp. (formerly known as
the Student Loan Marketing Association). The fund will not enter into repurchase
agreements.
Under extraordinary circumstances, however, such as when securities with
interest income that is generally exempt from state and local income taxation
are unavailable at prices deemed reasonable by Mitchell Hutchins, the fund may
temporarily hold cash or invest in other U.S. government securities, such as
securities issued by Ginnie Mae, also known as the Government National Mortgage
Association, and Freddie Mac, also known as the Federal Home Loan Mortgage
Corporation, and the Small Business Administration.
2
<PAGE>
The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33-1/3% of its total assets. The fund
may borrow up to 33 1/3% of the value of its total assets for temporary
purposes. The fund may invest in investment company securities .
TREASURY SECURITIES FUND'S investment objective is high current income to
the extent consistent with 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. The 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 interest income on these
securities is generally exempt from state and local income tax.
The fund will not enter into repurchase agreements.
The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33-1/3% of its total assets. The fund
may borrow up to 33 1/3% of the value of its total assets for temporary
purposes. The fund may invest in investment company securities .
THE FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS
The following supplements the information contained in the Prospectus and
above concerning each fund's investments, related risks and limitations. Except
as otherwise indicated in the Prospectus or the SAI, the funds have established
no policy limitations on its ability to use the investments or techniques
discussed in these documents. New forms of money market instruments continue to
be developed. The funds may invest in these instruments to the extent consistent
with their investment objectives.
YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER
SECURITIES. The yields on the money market instruments in which the funds invest
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 assigned by nationally
recognized statistical rating organizations ("rating agencies") 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. If a security in a fund's portfolio ceases to be a
First Tier Security or Mitchell Hutchins becomes aware that a security has
received a rating below the second highest rating by any rating agency, Mitchell
Hutchins and, in certain cases, a fund's board, will consider whether a fund
should continue to hold the obligation. A First Tier Security is either (1)
rated in the highest short-term rating category by at least two rating agencies,
(2) rated in the highest short-term rating category by a single rating agency if
only that rating agency has assigned the obligation a short-term rating, (3)
issued by an issuer that has received such a short-term rating with respect to a
security that is comparable in priority and security, (4) subject to a guarantee
rated in the highest short-term rating category or issued by a guarantor that
has received the highest short-term rating for a comparable debt obligation or
(5) unrated, but determined by Mitchell Hutchins to be of comparable quality. A
First Tier Security rated in the highest short-term category at the time of
purchase that subsequently receives a rating below the highest rating category
from a different rating agency may continue to be considered a First Tier
Security.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. Treasury
(such as Treasury bills, notes or bonds) and obligations issued or guaranteed as
to principal and interest (but not as to market value) by the U.S. government,
its agencies or its instrumentalities. U.S. government securities include
mortgage-backed securities issued or guaranteed by government agencies or
government-sponsored enterprises. Other U.S. government securities may be backed
by the full faith and credit of the U.S. government or supported primarily or
solely by the creditworthiness of the government-related issuer or, in the case
of mortgage-backed securities, by pools of assets.
3
<PAGE>
U.S. government securities also include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury,
which are traded independently under the Separate Trading of Registered Interest
and Principal of Securities ("STRIPS") program. Under the STRIPS programs, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury.
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. Money Market Fund may
purchase commercial paper, which includes short-term obligations issued by
corporations, partnerships, trusts or other entities to finance short-term
credit needs. The fund also may purchase non-convertible debt obligations
subject to maturity constraints imposed by Rule 2a-7 under the Investment
Company Act.
ASSET-BACKED SECURITIES. [Money Market Fund] may invest in securities that
are comprised of financial assets. Such assets may include a motor vehicle and
other types of installment sales contracts, home equity loans, leases of various
types of real and personal property and receivables from revolving credit
(credit card) agreements or other types of financial assets. Such assets are
securitized through the use of trusts or special purpose corporations or other
entities. Payments or distributions of principal and interest may be guaranteed
up to a certain amount and for a certain time period by a letter of credit or
pool insurance policy issued by a financial institution unaffiliated with the
issuer, or other credit enhancements may be present. See "The Funds'
Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements."
VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. Money Market
Fund and Government Securities Fund may purchase variable and floating rate
securities with remaining maturities in excess of 13 months issued by U.S.
government agencies or instrumentalities or guaranteed by the U.S. government.
In addition, the funds may purchase variable and floating rate securities of
other issuers with remaining maturities in excess of 13 months if the securities
are subject to a demand feature exercisable within 13 months or less. The yields
on these securities are adjusted in relation to changes in specific rates, such
as the prime rate, and different securities may have different adjustment rates.
The funds' investments in these securities must comply with conditions
established by the Securities and Exchange Commission ("SEC") under which they
may be considered to have remaining maturities of 13 months or less. Certain of
these obligations carry a demand feature that gives the funds the right to
tender them back to a specified party, usually the issuer or a remarketing
agent, prior to maturity. See "The Funds' Investments, Related Risks and
Limitations -- Credit and Liquidity Enhancements."
Generally, each fund may exercise demand features (1) upon a default under
the terms of the underlying security, (2) to maintain its 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, guarantee or
other liquidity arrangement 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 or published rate, such
as the 90-day U.S. Treasury bill rate, or is otherwise reset 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 securities.
VARIABLE AMOUNT MASTER DEMAND NOTES. Money Market Fund may invest in
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 an 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 may or may not be rated.
INVESTING IN FOREIGN SECURITIES. Money Market Fund's investments in U.S.
dollar-denominated securities of foreign issuers 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 fund's investments. Additionally, there may be less publicly available
information about foreign issuers because they may not be subject to the same
regulatory requirements as domestic issuers.
4
<PAGE>
CREDIT AND LIQUIDITY ENHANCEMENTS. [Money Market Fund] may invest in
securities that have credit or liquidity enhancements or the fund may purchase
these types of enhancements in the secondary market. Such enhancements may be
structured as demand features that permit the fund to sell the instrument at
designated times and prices. These credit and liquidity enhancements may be
backed by letters of credit or other instruments provided by banks or other
financial institutions whose credit standing affects the credit quality of the
underlying obligation. Changes in the credit quality of these could cause losses
to the fund and affect its share price. The credit and liquidity enhancements
may have conditions that limit the ability of the fund to use them when the fund
wished to do so.
ILLIQUID SECURITIES. The term "illiquid securities" for purposes of the
Prospectus and SAI means securities that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount at. to which a
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 are liquid pursuant to guidelines
established by the funds' board. To the extent the funds invest in illiquid
securities, they may not be able readily to liquidate such investments and may
have to sell other investments if necessary to raise cash to meet its
obligations.
Restricted securities are not registered under the Securities Act of 1933,
as amended ("Securities Act") and may be sold only in privately negotiated or
other exempted transactions or after a registration statement under the
Securities Act has become effective. Where registration is required, a fund may
be obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time a fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, a fund
might obtain a less favorable price than prevailed when it decided to sell.
However, not all restricted securities are illiquid. A large institutional
market has developed for many U.S. and foreign securities that are not
registered under the Securities Act. 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.
Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a 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, which may include (1) the frequency of trades for the security, (2)
the number of dealers that make quotes, or are expected to make quotes, for the
security, (3) the nature of the security and how trading is effected (e.g., the
time needed to sell the security, how bids are solicited and the mechanics of
transfer) and (4) the existence of demand features or similar liquidity
enhancements. Mitchell Hutchins monitors the liquidity of restricted securities
in each fund's portfolio and reports periodically on such decisions to the
board.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which
Money Market Fund purchases securities or other obligations from a bank or
securities dealer (or its affiliate) and simultaneously commits to resell them
to the counterparty 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 obligations. Securities or other obligations subject to repurchase
agreements may have maturities in excess of 13 months. The fund maintains
custody of the underlying obligations prior to their repurchase, either through
its regular custodian or through a special "tri-party" custodian or
5
<PAGE>
sub-custodian that maintains separate accounts for both the fund and its
counterparty. Thus, the obligation of the counterparty to pay the repurchase
price on the date agreed to or upon demand is, in effect, secured by such
obligations. Repurchase agreements carry certain risks not associated with
direct investments in securities, including a possible decline in the market
value of the underlying obligations. If their value becomes less than the
repurchase price, plus any agreed-upon additional amount, the counterparty 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
obligations and the price that was paid by the fund upon acquisition is accrued
as interest and included in its net investment income. Repurchase agreements
involving obligations other than U.S. government securities (such as commercial
paper and corporate bonds) may be subject to special risks and may not have the
benefit of certain protections in the event of the counterparty's insolvency. If
the seller or guarantor becomes insolvent, the fund may suffer delays, costs and
possible losses in connection with the disposition of collateral. The fund
intends to enter into repurchase agreements only with counterparties in
transactions believed by Mitchell Hutchins to present minimum credit risks.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the
sale of securities held by Money Market Fund subject to its agreement to
repurchase the securities at an agreed-upon date or upon demand and at a price
reflecting a market rate of interest. Reverse repurchase agreements are subject
to the fund's limitation on borrowings and may be entered into only with banks
and securities dealers. While a reverse repurchase agreement is outstanding, the
fund will maintain, in a segregated account with its custodian, cash or liquid
securities, marked to market daily, in an amount at least equal to its
obligations under the reverse repurchase agreement. See "The Funds' Investments
and Related Risks-- Segregated Accounts."
Reverse repurchase agreements involve the risk that the buyer of the
securities sold by the fund might be unable to deliver them when the fund seeks
to repurchase. If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, such buyer or trustee or receiver may
receive an extension of time to determine whether to enforce the fund's
obligation to repurchase the securities, and the fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The funds may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery, I.E., for issuance or delivery to or by the funds later than
the normal settlement date for such securities 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 undertakes a when-issued or
delayed delivery obligation, it immediately assumes the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by a funds on a when-issued or delayed delivery basis may
result in the fund's incurring a loss or missing an opportunity to make an
alternative investment.
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 a 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 "The Funds' Investments, Related Risks
and Limitations--Segregated Accounts." A fund may sell the right to acquire the
security prior to delivery if Mitchell Hutchins deems it advantageous to do so,
which may result in a gain or loss to the fund.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each fund may invest in
securities of other money market funds, subject to Investment Company Act
limitations, which at present restrict these investments in the aggregate to no
more than 10% of the fund's total assets. The shares of other money market funds
are subject to the management fees and other expenses of those funds. At the
same time, a fund would continue to pay its own management fees and expenses
with respect to all its investments, including shares of other money market
funds. A fund may invest in the securities of other money market funds when
Mitchell Hutchins believes that (1) the amounts to be invested are too small or
are available too late in the day to be effectively invested in other money
market instruments, (2) shares of other money market funds otherwise would
provide a better return than direct investment in other money market instruments
or (3) such investments would enhance the fund's liquidity.
6
<PAGE>
LENDING OF PORTFOLIO SECURITIES. Each fund is authorized to lend 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 these securities. The
borrower of a fund's portfolios securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, 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. A fund may reinvest any cash collateral in money market
investments or other short-term liquid investments. In determining whether to
lend securities to a particular broker-dealer or 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. Each fund will retain authority to terminate any of its loans at any
time. A fund may pay reasonable fees in connection with a loan and may pay the
borrower or placing broker a negotiated portion of the interest earned on the
reinvestment of cash held as collateral. A fund will receive amounts equivalent
to any interest, dividends or other distributions on the securities loaned. Each
fund will regain record ownership of loaned securities to exercise beneficial
rights, such as voting and subscription rights, when regaining such rights is
considered to be in its interest.
Pursuant to procedures adopted by the board governing each fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for the funds. The board also has authorized the payment of fees
(including fees calculated as a percentage of invested cash collateral) to
PaineWebber for these services. The board periodically reviews all portfolio
securities loan transactions for which PaineWebber acted as lending agent.
PaineWebber also has been approved as a borrower under each funds' securities
lending program.
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 or reverse
repurchase agreements, it 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 its obligation or commitment under such transactions.
INVESTMENT LIMITATIONS OF THE FUNDS
FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations
cannot be changed for a fund without the affirmative vote of the lesser of (a)
more than 50% of the outstanding shares of the fund or (b) 67% or more of the
shares of the fund 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, later changes in percentage resulting from a change in 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.
(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.
7
<PAGE>
The following interpretations apply to, but are not a part of, this
fundamental restriction: (a) domestic and foreign banking will be considered to
be different industries; and (b) asset-backed securities will be grouped in
industries based upon their underlying assets and not treated as constituting a
single, separate industry.
(3) issue senior securities or borrow money, except as permitted under
the Investment Company 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.
The following interpretation applies to, but is not a part of, this
fundamental restriction: Money Market Fund's investments in master notes and
similar instruments will not be considered to be 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 may 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 LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without shareholder
approval.
Each fund will not:
(1) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the fund may
make margin 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.
(2) 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.
(3) purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding.
(4) purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act and except that this limitation
does not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of reorganization, consolidation, or merger.
8
<PAGE>
ORGANIZATION OF THE TRUST; TRUSTEES AND OFFICERS AND
PRINCIPAL HOLDERS OF SECURITIES
The Trust was formed on February 4, 1991 as a business trust under the
laws of the Commonwealth of Massachusetts and has three operating series. The
Trust has authority to issue an unlimited number of shares of beneficial
interest, par value $.001 per share, of each existing or future series. The
Trust is governed by a board of trustees, which oversees the funds' operations.
The board also is authorized to establish additional series. The trustees and
executive officers of the Trust, their ages, business addresses and principal
occupations during the past five years are:
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH TRUST OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------
Margo N. Alexander**; 52 Trustee and Mrs. Alexander is chairman
President (since March 1999), chief
executive officer and a director
of Mitchell Hutchins (since
January 1995), and an executive
vice president and a director of
PaineWebber (since March 1984).
Mrs. Alexander is president and a
director or trustee of 32
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
Richard Q. Armstrong; 64 Trustee Mr. Armstrong is chairman and
R.Q.A. Enterprises principal of R.Q.A. Enterprises
One Old Church Road (management consulting firm)
Unit #6 (since April 1991 and principal
Greenwich, CT 06830 occupation since March 1995).
Mr. Armstrong 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). He 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, Louis 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 31
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
9
<PAGE>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH TRUST OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------
E. Garrett Bewkes, Trustee and Mr. Bewkes is a director of
Jr.**; 72 Chairman of the Paine Webber Group Inc. ("PW
Board of Trustees Group") (holding company of
PaineWebber and 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 a
director of Interstate Bakeries
Corporation. Mr. Bewkes is a
director or trustee of 35
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Richard R. Burt; 52 Trustee Mr. Burt is chairman of IEP
1275 Pennsylvania Ave, Advisors, Inc. (international
N.W. investments and consulting
Washington, DC 20004 firm) (since March 1994) and a
partner of McKinsey & Company
(management consulting firm)
(since 1991). He is also a
director of
Archer-Daniels-Midland Co.
(agricultural commodities),
Hollinger International Co.
(publishing), Homestake Mining
Corp., Powerhouse Technologies
Inc. and Wierton Steel Corp. 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 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Mary C. Farrell**; 49 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 appears
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 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
10
<PAGE>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH TRUST OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------
Meyer Feldberg; 57 Trustee Mr. Feldberg is Dean and
Columbia University Professor of Management of the
101 Uris Hall Graduate School of Business,
New York, NY 10027 Columbia University. Prior to
1989, he was president of the
Illinois Institute of Technology.
Dean Feldberg is also a director
of Primedia, Inc., Federated
Department Stores, Inc. and
Revlon, Inc. Dean Feldberg is a
director or trustee of 34
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
George W. Gowen; 69 Trustee Mr. Gowen is a partner in the
666 Third Avenue law firm of Dunnington,
New York, NY 10017 Bartholow & Miller. Prior to
May 1994, he was a partner in the
law firm of Fryer, Ross & Gowen.
Mr. Gowen is a director or
trustee of 34 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Frederic V. Malek; 62 Trustee Mr. Malek is chairman of Thayer
1455 Pennsylvania Ave, Capital Partners (merchant
N.W. bank). From January 1992 to
Suite 350 November 1992, he was campaign
Washington, DC 20004 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., CB Commercial Group, Inc.
(real estate services), Choice
Hotels International (hotel and
hotel franchising), FPL Group,
Inc. (electric services), Manor
Care, Inc. (health care) and
Northwest Airlines Inc. Mr.
Malek is a director or trustee
of 31 investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.
11
<PAGE>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH TRUST OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------
Carl W. Schafer; 63 Trustee Mr. Schafer is president of the
66 Witherspoon Street, Atlantic Foundation (charitable
#1100 foundation supporting mainly
Princeton, NJ 08542 oceanographic exploration and
research). He is a director of
Base Ten Systems, Inc.
(software), Roadway Express,
Inc. (trucking), The Guardian
Group of Mutual Funds, the
Harding, Loevner Funds, Evans
Systems, Inc. (motor fuels,
convenience store and
diversified company),
Electronic Clearing House, Inc.
(financial transactions
processing), Frontier 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 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Brian M. Storms;** 44 Trustee Mr. Storms is president and
chief operating officer of
Mitchell Hutchins (since March
1999). Prior to March 1999, he
was president of Prudential
Investments (1996-1999). Prior
to joining Prudential, he was a
managing director at Fidelity
Investments. Mr. Storms is a
director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
John J. Lee; 30 Vice President and Mr. Lee is a vice president and
Assistant Treasurer a manager of the mutual fund
finance department of Mitchell
Hutchins. Prior to September
1997, he was an audit manager in
the financial services practice
of Ernst & Young LLP. Mr. Lee is
a vice president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as an
investment adviser.
Kevin J. Mahoney; 33 Vice President and Mr. Mahoney is a first vice
Assistant Treasurer president and a senior manager
of the mutual fund finance
department of Mitchell
Hutchins. From August 1996
through March 1999, he was the
manager of the mutual fund
internal control group of
Salomon Smith Barney. Prior to
August 1996, he was an
associate and assistant
treasurer of BlackRock
Financial Management L.P. Mr.
Mahoney is a vice president and
assistant treasurer of 32
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
12
<PAGE>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH TRUST OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------
Dennis McCauley; 52 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 22
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Ann E. Moran; 42 Vice President and Ms. Moran is a vice president
Assistant Treasurer and a manager of the mutual
fund finance department of
Mitchell Hutchins. Ms. Moran is
a vice president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Dianne E. O'Donnell; 47 Vice President and Ms. O'Donnell is a senior vice
Secretary president and deputy general
counsel of Mitchell Hutchins.
Ms. O'Donnell is a vice
president and secretary of 31
investment companies and a vice
president and assistant
secretary of one investment
company for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Emil Polito; 38 Vice President Mr. Polito is a senior vice
president and director of
operations and control for
Mitchell Hutchins. Mr. Polito
is a vice president of 32
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Susan Ryan; 39 Vice President Ms. Ryan is a senior vice
president and portfolio manager
of Mitchell Hutchins and has
been with Mitchell Hutchins
since 1982. Ms. Ryan is a vice
president of five investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser
Victoria E. Schonfeld; 48 Vice President Ms. Schonfeld is a managing
director and general counsel of
Mitchell Hutchins (since May
1994) and a senior vice
president of PaineWebber (since
July 1995). Ms. Schonfeld is a
vice president of 31 investment
companies and a vice president
and secretary of one investment
company for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
13
<PAGE>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH TRUST OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------
Paul H. Schubert; 36 Vice President and Mr. Schubert is a senior vice
Treasurer president and director of the
mutual fund finance department
of Mitchell Hutchins. Mr.
Schubert is a vice president
and treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Barney A. Taglialatela; Vice President and Mr. Taglialatela is a vice
38 Assistant Treasurer president and a manager of the
mutual fund finance department
of Mitchell Hutchins. Prior to
February 1995, he was a manager
of the mutual fund finance
division of Kidder Peabody
Asset Management, Inc. Mr.
Taglialatela is a vice
president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.
Keith A. Weller; 38 Vice President and Mr. Weller is a first vice
Assistant Secretary president and associate 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 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
- -------------
* 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, Ms. Farrell and Mr. Storms are "interested
persons" of the fund as defined in the Investment Company Act by virtue of
their positions with Mitchell Hutchins, PaineWebber, and/or PW Group.
The Trust pays each board member who is not an "interested person" of the
Trust $1,000 annually and up to $150 for each board meeting and each meeting of
a board committee. Each chairman of the audit and contract review committees of
individual funds within the PaineWebber fund complex receives additional
compensation, aggregating $15,000 annually, from the relevant funds. All board
members are reimbursed for any expenses incurred in attending meetings. Board
members and officers of the Trust own in the aggregate less than 1% of the
outstanding shares of any class of each fund. Because PaineWebber and Mitchell
Hutchins perform substantially all the services necessary for the operation of
the Trust, the Trust requires no employees. No officer, director or employee of
Mitchell Hutchins or PaineWebber presently receives any compensation from the
Trust for acting as a board member or officer.
14
<PAGE>
The table below includes certain information relating to the compensation
of the Trust's current trustees who held office with the funds or with other
PaineWebber funds during the fiscal year ended April 30, 1999.
COMPENSATION TABLE+
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM THE TRUST AND
NAME OF PERSON, POSITION FROM THE TRUST* THE FUND COMPLEX**
------------------------ --------------- ------------------
Richard Q. Armstrong,
Trustee $ 101,372
Richard R. Burt,
Trustee 101,372
Meyer Feldberg,
Trustee 116,222
George W Gowen,
Trustee 108,272
Frederic V. Malek,
Trustee 101372
Carl W. Schafer,
Trustee 101,372
- --------------------
+ Only independent board members are compensated by the Trust and identified
above; board members who are "interested persons," as defined by the
Investment Company Act, do not receive compensation.
* Represents fees paid to each board member for the fiscal year ended April 30,
1999.
** Represents total compensation paid during the calendar year ended December
31, 1998, to each board member by 31 investment companies (33 in the case of
Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or one
of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.
PRINCIPAL HOLDERS OF SECURITIES
As of July 31, 1999, the Trust's records showed [the following
shareholders as owning 5% or more of a class of the funds' shares.
[to be added]
15
<PAGE>
INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY ARRANGEMENTS. PaineWebber acts as the Trust's
investment adviser and administrator pursuant to a contract dated April 13, 1995
("Advisory Contract"). Under the Advisory Contract, each fund pays PaineWebber
an annual fee, computed daily and paid monthly, at an annual rate of 0.25% of
its average daily net assets.
During each of the periods indicated, PaineWebber earned or accrued fees
under the Advisory Contract in the amounts set forth below. During these
periods, PaineWebber voluntarily waived a portion of its fees and/or voluntarily
paid other fund expenses.
FISCAL YEAR ENDED APRIL 30
------------------------------------------
1999 1998 1997
------------ ------------- ------------
Money Market Fund...... $3,572,192 $2,196,654
Fee Amount Waived 716,790 439,015
Expenses Reimbursed 2,739 0
Government Securities Fund 215,911 203,152
Fee Amount Waived 43,177 40,607
Expenses Reimbursed 210,691 144,536
Treasury Securities Fund 259,380 99,845
Fee Amount Waived 51,876 19,956
Expenses Reimbursed 128,386 147,250
Under a contract with PaineWebber dated April 15, 1996 ("Mitchell Hutchins
Contract"), 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 fees paid by each fund to PaineWebber under the
PaineWebber Contract, net of waivers and/or reimbursements.
During each of the periods indicated, PaineWebber paid (or accrued) to
Mitchell Hutchins the fees indicated below under either the Mitchell Hutchins
Contract or a predecessor agreement:
FISCAL YEAR ENDED APRIL 30
------------------------------------------
1999 1998 1997
------------- ------------ -----------
Money Market Fund...... $1,503,380 $887,358
Government Securities Fund 0 8,099
Treasury Securities Fund 39,694 0
Under the terms of the Advisory Contract, each fund 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 or to the Trust's other series are allocated among series by or
under the direction of the board of directors 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 fund
and any losses incurred in connection therewith; (2) fees payable to and
expenses incurred on behalf of the fund by PaineWebber; (3) organizational
expenses; (4) filing fees and expenses relating to the registration and
qualification of fund shares under federal and state securities laws and
maintaining such registrations and qualifications; (5) fees and salaries payable
to the directors and officers who are not interested persons of the fund or
PaineWebber; (6) all expenses incurred in connection with the trustees'
16
<PAGE>
services, including travel expenses; (7) taxes (including any income or
franchise taxes) and governmental fees; (8) costs of any liability,
uncollectible 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 directors 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 statements of additional information and
supplements thereto, reports and statements to shareholders and proxy material
for existing shareholders; costs of mailing such materials to 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 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 directors
and officers; and (18) costs of mailing, stationery and communications
equipment.
The Advisory and Mitchell Hutchins Contracts (collectively, "Contracts")
noted above provide that PaineWebber or Mitchell Hutchins, as the case may be,
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the funds in connection with the performance of the contract, 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 by vote of the funds' board or by the holders
of a majority of the outstanding voting securities of the funds at any time
without penalty, on 60 days' written notice to PaineWebber or Mitchell Hutchins,
as the case may be. The Advisory 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 automatically
terminates upon the assignment of the Advisory Contract.
During the fiscal year ended April 30, 1999, the funds [did not] pay fees
to PaineWebber for its services as lending agent because the funds did not
engage in any securities lending activities.
NET ASSETS. The following table shows the approximate net assets as of
July 31, 1999, 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.
NET ASSETS
INVESTMENT CATEGORY ($MIL)
Domestic (excluding Money Market)................
Global...........................................
Equity/Balanced..................................
Fixed Income (excluding Money Market)............
Taxable Fixed Income.......................
Tax-Free Fixed Income......................
Money Market Funds...............................
PERSONAL TRADING POLICIES. 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 PaineWebber 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
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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 the distributor of each
fund's shares under a distribution contract with the Trust ("Distribution
Contract"), which requires PaineWebber to use its best efforts, consistent with
its other business, to sell shares of the funds. Shares of the funds are offered
continuously.
FINANCIAL INTERMEDIARIES. Financial intermediaries, such as banks and
savings associations, may purchase Financial Intermediary shares for the
accounts of their customers. The Trust has adopted a shareholder services plan
("Plan") with respect to Financial Intermediary shares. PaineWebber implements
the Plan on behalf of the Trust by entering 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.
Under the Plan, each fund pays PaineWebber an annual fee at the annual
rate of 0.25% of the average daily net assets value of the Financial
Intermediary shares held by financial intermediaries on behalf of their
customers. Under each service agreement, PaineWebber pays an identical fee to
the financial intermediary for providing the support services to its customers
specified in the service agreement. These services may 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. During the fiscal year ended April 30, 1999, the Trust
made payments through PaineWebber to financial intermediaries with respect to
Financial Intermediary shares in the amount of $__________ for Money Market
Fund, $ for Government Securities Fund and $
for Treasury Securities Fund.
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
PaineWebber 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.
The Plan requires that PaineWebber provide to the board at least annually
a written report of the amounts expended by PaineWebber under service agreements
with financial intermediaries and the purposes for which such expenditures were
made. Each service agreement requires the financial intermediary to cooperate
with PaineWebber in providing information to the board with respect to amounts
expended and services provided under the service agreement. The Plan may be
terminated at any time, without penalty, by vote of the trustees of the Trust
who are not "interested persons" of the Trust as defined in the Investment
Company Act and who have no direct or indirect financial interest in the
operation of the Plan ("Disinterested Trustees"). Any amendment to the Plan must
be approved by the board and any material amendment must be approved by the
Disinterested Trustees.
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
and PaineWebber might be required to alter or discontinue their arrangements
with financial intermediaries and change their method of operations with respect
to Financial Intermediary shares. It is not anticipated, however, that any
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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.
Conflict of interest restrictions may apply to a financial institution's
receipt of compensation from a fund through PaineWebber under a service
agreement resulting from fiduciary funds being invested in Financial
Intermediary shares. Before investing fiduciary funds in Financial Intermediary
shares, financial intermediaries, including investment advisers and other money
managers under the jurisdiction of the SEC, the Department of Labor or state
securities commissions and banks regulated by the Comptroller of the Currency
should consult their legal advisors.
PORTFOLIO TRANSACTIONS
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.
The Sub-Advisory Contract authorizes Mitchell Hutchins (with the approval
of the board) to select brokers and dealers to execute purchases and sales of
each fund's portfolio securities. It 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 or Mitchell Hutchins with research, analysis, advice and
similar services. Although Mitchell Hutchins may receive certain research or
execution services in connection with these transactions, Mitchell Hutchins on
behalf of the funds 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 that could
be purchased for hard dollars. Research services furnished by the dealers with
which each 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 that Mitchell Hutchins advises may be used in advising the funds.
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
Sub-Advisory Contract.
During the last three fiscal years, the funds paid no brokerage
commissions.
Mitchell Hutchins may engage in agency transactions in over-the-counter
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.
Investment decisions for the funds 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 the funds 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 funds and such
other account(s) as to amount according to a formula deemed equitable to the
funds 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 funds
are 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 funds.
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As of _________, 1999, the following fund(s) owned securities issued by
the following companies which are regular broker-dealers for the respective
fund:
[to be added]
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
Each fund may suspend redemption privileges or postpone the date of
payment during any period (1) when the New York Stock Exchange ("NYSE") is
closed or trading on the NYSE is restricted as determined by the SEC, (2) when
an emergency exists, as defined by the SEC, that makes it not reasonably
practicable for the fund to dispose of securities owned by it or fairly to
determine the 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 each fund's portfolio at the time; although the funds
attempt 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, the 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 a shareholder.
VALUATION OF SHARES
Money Market Fund's net asset value per share is determined by State
Street Bank and Trust Company ("State Street") as of noon and 2:30 p.m., Eastern
time, on each Business Day. Government Securities Fund's and Treasury Securities
Fund's net asset values per share are determined by State Street as of noon,
Eastern time, on each Business Day. As defined in the Prospectus, "Business Day"
means any day on which the Massachusetts offices of State Street and the fund's
transfer agent, First Data Services Group, Inc. ("Transfer Agent") and the New
York City offices of PaineWebber and PaineWebber's bank 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, 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 Investment Company
Act. To use amortized cost to value its portfolio securities, the funds must
adhere to certain conditions under the Rule relating to its investments, some of
which are discussed in this SAI. 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. If a large number of redemptions
take place at a time when interest rates have increased, the funds might have to
sell portfolio securities prior to maturity and at a price that might not be
desirable.
The board has established 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. If that deviation exceeds
1/2 of 1% for each fund, the board 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
20
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having, or deemed to have, 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. If amortized cost ceases to represent fair value per share, the
board will take appropriate action.
In determining the approximate market value of portfolio investments, the
funds 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. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board.
PERFORMANCE INFORMATION
The funds' performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represent past performance and are not
intended to indicate future performance. The investment return will fluctuate.
TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in each fund's Performance Advertisements are
calculated according to the following formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares
of a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of that period.
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. All dividends are assumed to have been reinvested at net asset value.
The funds also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The funds calculate Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in fund shares
and assuming the reinvestment of all dividends distributions. The rate of return
is determined by subtracting the initial value of the investment from the ending
value and by dividing the remainder by the initial value.
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The following tables show performance information for the funds' shares
outstanding for the periods indicated. All returns for periods of more than one
year are expressed as an average annual return.
MONEY MARKET FUND
FINANCIAL INTERMEDIARY
SHARES INSTITUTIONAL SHARES
Year ended April 30, 1999:
Standardized Return.........
Non-Standardized Return.....
Five Years ended April 30, 1999:
Standardized Return.........
Non-Standardized Return.....
Inception* to April 30, 1999:
Standardized Return.........
Non-Standardized Return.....
- --------------
* The inception date for the fund is February 14, 1991.
GOVERNMENT SECURITIES FUND
FINANCIAL INTERMEDIARY
SHARES INSTITUTIONAL SHARES
Year ended April 30, 1999:
Standardized Return.........
Non-Standardized Return.....
Five Years ended April 30, 1999:
Standardized Return.........
Non-Standardized Return.....
Inception* to April 30, 1999:
Standardized Return.........
Non-Standardized Return.....
- --------------
* The inception date for the fund is February 14, 1991.
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TREASURY SECURITIES FUND
FINANCIAL INTERMEDIARY
SHARES INSTITUTIONAL SHARES
Year ended April 30, 1999:
Standardized Return.........
Non-Standardized Return.....
Five Years ended April 30, 1999:
Standardized Return.........
Non-Standardized Return.....
Inception* to April 30, 1999:
Standardized Return.........
Non-Standardized Return.....
- --------------
* The inception date for the fund is February 14, 1991.
CALCULATION OF YIELD. Each fund computes its yield and effective yield
quotations using standardized methods required by the SEC. The funds from time
to time advertise (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
The funds may also advertise other performance data, which may consist of
the annual or cumulative return (including net short-term capital gain, if any)
earned on a hypothetical investment in each fund since it began operations or
for shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).
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.
Money Market Fund, Government Securities Fund and Treasury Securities
Fund's yields and effective yields for the seven-day period ended April 30, 1999
were ________ and ___________; __________ and ___________; and __________ and
___________, respectively.
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 its yield with data published by Lipper
Analytical Services, Inc. for money funds ("Lipper"), CDA Investment
Technologies, Inc. ("CDA"), IBC Financial Data, Inc. ("IBC"), Wiesenberger
Investment Companies Service ("Wiesenberger") or Investment Company Data Inc.
("ICD"), or with the performance of recognized stock and other indexes,
including 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
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Consumer Price Index as published by the U.S. Department of Commerce. The funds
also may refer in such materials to mutual fund performance rankings and other
data, such as comparative asset, expense and fee levels, published by Lipper,
CDA, IBC, 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 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.
The funds may also compare their performance with the performance 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. 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 the funds seek 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.
The funds may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on the funds' investments are reinvested by being paid in
additional fund shares, any future income of the funds would increase the value,
not only of the original funds' investments, but also of the additional fund
shares received through reinvestment. As a result, the value of the funds'
investments would increase more quickly than if dividends had been paid in cash.
The funds may also make available to shareholders a daily accrual factor or "mil
rate" representing dividends accrued to shareholder accounts on a given day or
days. Certain shareholders may find that this information facilitates accounting
or recordkeeping.
TAXES
BACKUP WITHHOLDING. The funds are required to withhold 31% of all
dividends and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the funds or PaineWebber with a
correct taxpayer identification number. Withholding at that rate also is
required from dividends payable to those shareholders who otherwise are subject
to backup withholding.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to qualify
for treatment as a regulated investment company ("RIC") under the Internal
Revenue Code, the fund must distribute to its shareholders for each taxable year
at least 90% of its investment company taxable income (consisting generally of
net investment income and net short-term capital gains, if any) and must meet
several additional requirements. Among these requirements are 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 and gains from
the sale or other disposition of securities and certain other income; (2) 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, securities of other RICs and other securities that are 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 (3) 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 or the securities of other
RICs) of any one issuer. If the fund failed to qualify for treatment as a RIC
for any taxable year, (a) it would be taxed as an ordinary Trust on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (b) the shareholders would treat
all those distributions as dividends (that is, ordinary income) to the extent of
the fund's earnings and profits. In addition, the fund could be required to
recognize unrealized gains, pay substantial taxes and interest, and make
substantial distributions before requalifying for RIC treatment.
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OTHER INFORMATION
MASSACHUSETTS BUSINESS TRUST. 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.
CLASS OF SHARES. A share of each class of a fund represent an interest in
the fund's investment portfolios and has similar rights, privileges and
preferences. 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 and bear the related
service costs.
VOTING RIGHTS. Shareholders of each fund are entitled to one vote for each
full share held and fractional votes for fractional shares held. Voting rights
are not cumulative and, as a result, the holders of more than 50% of all the
shares of the Trust may elect all its board members. The shares of a fund will
be voted together, except that only the shareholders of a particular class may
vote on matters affecting only that class. The shares of each series of the
Trust will be voted separately, except when an aggregate vote of all the
securities is required by law. 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.
The Trust does not hold annual meetings. Shareholders of record holding no
less than two thirds of the outstanding shares of the Trust may remove a board
member by vote cast in person or by proxy at a meeting called for that purpose.
A meeting will be called to vote on the removal of a board member at the written
request of holders of record of at least 10% of the outstanding shares of the
Trust..
CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. State
Street Bank and Trust Company, located at One Heritage Drive, North Quincy,
Massachusetts 02171, serves as custodian and recordkeeping agent for the funds.
First Data Investor Services Group, Inc., whose principal business address is
4400 Computer Drive, Westborough, Massachusetts 01581-5159, is the fund's
transfer and dividend disbursing agent.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the fund.
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 fund.
FINANCIAL STATEMENTS
The funds' Annual Report to Shareholders for their last fiscal year ended April
30, 1999 is a separate document supplied with this SAI, and the financial
statements, accompanying notes and report of independent auditors appearing
therein are incorporated herein by this reference.
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YOU SHOULD RELY ONLY ON THE
INFORMATION CONTAINED OR REFERRED
TO IN THE PROSPECTUS AND THIS
STATEMENT OF ADDITIONAL
INFORMATION. THE FUNDS AND THEIR
DISTRIBUTOR HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THE
PROSPECTUS AND THIS STATEMENT OF Mitchell Hutchins'
ADDITIONAL INFORMATION IS NOT AN Liquid Institutional Reserves
OFFER TO SELL SHARES OF THE FUNDS Money Market Fund
IN ANY JURISDICTION WHERE THE FUNDS Government Securities Fund
OR THEIR DISTRIBUTOR MAY NOT Treasury Securities Fund
LAWFULLY SELL THOSE SHARES.
-----------
---------------------------------------
Statement of Additional Information
September 1, 1999
---------------------------------------
PAINEWEBBER
(C)1999 PaineWebber Incorporated
<PAGE>
PART C. OTHER INFORMATION
Item 23. EXHIBITS
(1) (a) Amended and Restated Declaration of Trust 1/
(b) Amendment effective April 18, 1996 to Declaration of Trust 2/
(2) Amended and Restated By-Laws of the Trust 1/
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 3/
(4) (a) Investment Advisory and Administration Contract between Registrant and
PaineWebber 4/
(b) Investment Sub-advisory and Sub-administration Agreement between
PaineWebber and Mitchell Hutchins 2/
(5) Distribution Contract between Registrant and PaineWebber 5/
(6) Bonus, profit or pension plans - none
(7) Custodian Contract 4/
(8) (a) Transfer Agency Services and Shareholder Services Agreement 6/
(b) Shareholder Service Plan 2/
(c) Shareholder Service Agreement 2/
(9) Opinion and consent of counsel (to be filed)
(10) Other opinions, appraisals, rulings and consents: Auditor's consent
(to be filed)
(11) Financial statements omitted from Part B - none
(12) Letter of Investment Intent (previously filed)
(13) Plan Pursuant to Rule 12b-1 - none
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan pursuant to Rule 18f-3 2/
- -------------------------------
1/ Incorporated by reference from Post-Effective Amendment No. 11 to the
registration statement, SEC File No. 33-39029, filed August 28, 1998.
2/ Incorporated by reference from Post-Effective Amendment No. 9 to the
registration statement, SEC File No. 33-39029, filed August 30, 1996.
3/ Incorporated 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.
4/ Incorporated by reference from Post-Effective Amendment No. 8 to the
registration statement, SEC File No. 33-39029, filed July 3, 1996.
5/ Incorporated by reference to Post-Effective Amendment No. 6 to the
registration statement, SEC File No. 33-39029, filed August 25, 1995.
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<PAGE>
6/ Incorporated by referenced from Post-Effective Amendment No. 10 to the
registration statement, SEC File No. 33-39029, filed July 2, 1997.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 25. 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 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
C-2
<PAGE>
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 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
I. PaineWebber, a Delaware corporation, is a registered investment adviser
and is wholly owned by PaineWebber 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.
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<PAGE>
Item 27. PRINCIPAL UNDERWRITERS
(a) PaineWebber serves as principal underwriter and/or investment adviser for
the following other investment companies:
MITCHELL HUTCHINS INSTITUTIONAL SERIES
PAINEWEBBER RMA MONEY FUND, INC.
PAINEWEBBER RMA TAX-FREE FUND, INC.
PAINEWEBBER MUNICIPAL MONEY MARKET SERIES
PAINEWEBBER MANAGED MUNICIPAL TRUST
(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.
Positions and
Offices With Positions and Offices
Name and Principal Registrant With Underwriter
- ------------------ ---------- ----------------
Margo N. Alexander Trustee and President Executive Vice President
(Chief Executive and a Director
Officer)
Mary C. Farrell Trustee Managing Director,
Senior Investment
Strategist and member of
the Investment Policy
Committee
Brian M. Storms Trustee President and Chief
Operating Officer of
Mitchell Hutchins
(c) None.
Item 28. 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 29. MANAGEMENT SERVICES
Not applicable.
Item 30. UNDERTAKINGS
None.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement 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 30th day of June, 1999.
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:
Signature Title Date
- --------- ----- ----
/s/ Margo N. Alexander President and Trustee June 30, 1999
- ---------------------------- (Chief Executive Officer)
Margo N. Alexander *
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman June 30, 1999
- ---------------------------- of the Board of Trustees
E. Garrett Bewkes, Jr. *
/s/ Richard Q. Armstong Trustee June 30, 1999
- ----------------------------
Richard Q. Armstrong *
/s/ Richard R. Burt Trustee June 30, 1999
- ----------------------------
Richard R. Burt *
/s/ Mary C. Farrell Trustee June 30, 1999
- ----------------------------
Mary C. Farrell *
/s/ Meyer Feldberg Trustee June 30, 1999
- ----------------------------
Meyer Feldberg *
/s/ George W. Gowen Trustee June 30, 1999
- ----------------------------
George W. Gowen *
/s/ Frederic V. Malek Trustee June 30, 1999
- ----------------------------
Frederic V. Malek *
/s/ Carl W. Schafer Trustee June 30, 1999
- ----------------------------
Carl W. Schafer *
/s/ Brian M. Storms Trustee June 30, 1999
- ----------------------------
Brian M. Storms **
/s/ Paul H. Schubert Vice President and June 30, 1999
- ---------------------------- Treasurer (Chief Financial
Paul H. Schubert and Accounting Officer)
<PAGE>
SIGNATURES (CONTINUED)
* Signature affixed by Elinor W. Gammon pursuant to powers 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 2-89016, filed June 27, 1996.
** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
May 14, 1999 and incorporated by reference from Post-Effective Amendment
No. 61 to the registration statement of PaineWebber Managed Investments
Trust, SEC File 2-91362, filed June 1, 1999.
<PAGE>
LIQUID INSTITUTIONAL RESERVES
EXHIBIT INDEX
Exhibit
Number
- ------
(1) (a) Amended and Restated Declaration of Trust 1/
(b) Amendment effective April 18, 1996 to Declaration of Trust 2/
(2) Amended and Restated By-Laws of the Trust 1/
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 3/
(4) (a) Investment Advisory and Administration Contract between Registrant and
PaineWebber 4/
(b) Investment Sub-advisory and Sub-administration Agreement between
PaineWebber and Mitchell Hutchins 2/
(5) Distribution Contract between Registrant and PaineWebber 5/
(6) Bonus, profit or pension plans - none
(7) Custodian Contract 4/
(8) (a) Transfer Agency Services and Shareholder Services Agreement 6/
(b) Shareholder Service Plan 2/
(c) Shareholder Service Agreement 2/
(9) Opinion and consent of counsel (to be filed)
(10) Other opinions, appraisals, rulings and consents: Auditor's consent
(to be filed)
(11) Financial statements omitted from Part B - none
(12) Letter of Investment Intent (previously filed)
(13) Plan Pursuant to Rule 12b-1 - none
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan pursuant to Rule 18f-3 2/
- -------------------------------
1/ Incorporated by reference from Post-Effective Amendment No. 11 to the
registration statement, SEC File No. 33-39029, filed August 28, 1998.
2/ Incorporated by reference from Post-Effective Amendment No. 9 to the
registration statement, SEC File No. 33-39029, filed August 30, 1996.
3/ Incorporated 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.
4/ Incorporated by reference from Post-Effective Amendment No. 8 to the
registration statement, SEC File No. 33-39029, filed July 3, 1996.
<PAGE>
5/ Incorporated by reference to Post-Effective Amendment No. 6 to the
registration statement, SEC File No. 33-39029, filed August 25, 1995.
6/ Incorporated by referenced from Post-Effective Amendment No. 10 to the
registration statement, SEC File No. 33-39029, filed July 2, 1997.
