<PAGE>
LIQUID INSTITUTIONAL RESERVES SEMIANNUAL REPORT
December 15, 1998
Dear Shareholder,
We are pleased to present you with the semiannual report for Liquid
Institutional Reserves (the "Funds") for the six-month period ended October 31,
1998.
LIQUID INSTITUTIONAL RESERVES
FUND PROFILE
GOAL (ALL THREE FUNDS):
High current income to the extent consistent with capital preservation and
liquidity
[GRAPHIC]
PORTFOLIO MANAGER:
Susan P. Ryan,
Mitchell Hutchins Asset
Management Inc.
[GRAPHIC]
TOTAL NET ASSETS AS OF OCTOBER 31, 1998:
Money Market Fund
$1.832 billion
Government Securities Fund
$108.5 million
Treasury Securities Fund
$181.4 million
[GRAPHIC]
DIVIDEND PAYMENTS:
Monthly
GENERAL MARKET OVERVIEW
- --------------------------------------------------------------------------------
[GRAPHIC]
U.S. bond market yields fell over the period, reflecting investor demand
for high-quality securities and diminishing concern over inflation. The bond
market traded in tandem with the dollar and the yield curve flattened as
long-term rates fell more than short-term rates.
Stock market volatility increased during the summer. In response, investors
shifted some of their assets into Treasury bonds, causing yields to fall and
prices to rise. Other sectors of the fixed income market did not rise to the
same extent, due to doubts about corporate earnings and uncertainty in the
global economy, especially regarding Japan and Russia.
PERFORMANCE
- --------------------------------------------------------------------------------
[GRAPHIC]
The table below compares the Funds' annualized yields at October 31, 1998,
to their yields six months and one year ago:
<TABLE>
<CAPTION>
ANNUALIZED YIELDS
CURRENT 7-DAY AVERAGE YIELD EFFECTIVE 7-DAY AVERAGE YIELD Weighted
Average
As of As of As of As of As of As of Maturity
10/31/98 4/30/98 10/31/97 10/31/98 4/30/98 10/31/97 10/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund:
Institutional Shares 5.03% 5.36% 5.37% 5.15% 5.50% 5.52% 51 days
Financial Intermediary Shares* 4.77% 5.11% -- 4.89% 5.23% --
Government Securities Fund 4.81% 5.24% 5.18% 4.92% 5.38% 5.31% 50 days
Treasury Securities Fund 4.18% 5.02% 5.11% 4.26% 5.15% 5.24% 49 days
</TABLE>
* The commencement of issuance for financial intermediary shares was January 14,
1998.
<PAGE>
SEMIANNUAL REPORT
OUTLOOK
- --------------------------------------------------------------------------------
[GRAPHIC]
As 1998 draws to a close, the volatility in the financial markets appears to be
subsiding. Global economic conditions seem more positive -- especially
encouraging is the Japanese government's increasing willingness to tackle that
country's problems. Interest rates in the United States reflect both the
underlying economy and a flight to quality.
After three cuts in short-term interest rates this fall, we do not believe
the Federal Reserve will lower rates again this year. We still look for rates to
trend lower over the long term, and therefore anticipate maintaining the Funds'
weighted average maturities slightly above those of their peer groups.
Our ultimate objective in managing your investments is to help you successfully
meet your financial goals. We thank you for your continued support and welcome
any comments or questions you may have.
For a quarterly FUND PROFILE on one of the non-money market mutual funds in the
PaineWebber Family of Funds(1), please contact your investment executive.
Sincerely,
/s/ Margo Alexander /s/ Dennis L. McCauley /s/ Susan P. Ryan
MARGO ALEXANDER DENNIS L. MCCAULEY SUSAN P. RYAN
President, Managing Director and Chief Senior Vice President,
Mitchell Hutchins Investment Officer-- Mitchell Hutchins
Asset Management Inc. Fixed Income, Mitchell Hutchins Asset Management Inc.
Asset Management Inc.
This letter is intended to assist shareholders in understanding how the Funds
performed during the six-month period ended October 31, 1998, and reflects our
views at the time of writing this report. Of course, these views may change in
response to changing circumstances. We encourage you to consult your investment
executive regarding your personal investment program.
(1) Mutual Funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
2
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--24.31%
$ 20,600 Federal Farm Credit Bank............................ 11/06/98 to 11/09/98 5.100% $ 20,581,158
25,000 Federal Farm Credit Bank*........................... 11/27/98 to 01/04/99 4.870 to 5.293 25,000,000
25,000 Federal Home Loan Bank*............................. 11/02/98 to 11/04/98 4.605 to 5.240 24,997,318
78,158 Federal Home Loan Bank.............................. 11/04/98 to 09/29/99 5.050 to 5.210 77,930,617
223,103 Federal Home Loan Mortgage Corporation.............. 11/02/98 to 03/26/99 4.900 to 5.420 222,951,665
15,000 Federal National Mortgage Association*.............. 11/03/98 4.580 14,794,650
22,000 Federal National Mortgage Association............... 02/01/99 to 10/19/99 4.800 to 5.250 21,988,385
7,000 Student Loan Marketing Association.................. 10/29/99 4.900 7,000,000
30,000 Student Loan Marketing Association*................. 11/02/98 to 11/04/98 4.650 to 5.050 29,999,085
--------------
Total U.S. Government Agency Obligations (cost--$445,242,878)........ 445,242,878
--------------
BANKERS ACCEPTANCE--YANKEE--0.82%
15,000 Toronto-Dominion Bank (cost--$14,997,800)........... 11/02/98 5.280 14,997,800
--------------
DOMESTIC BANK NOTES--3.39%
10,000 FCC National Bank*.................................. 11/02/98 5.060 to 5.700 9,998,492
7,000 FCC National Bank................................... 01/07/99 5.700 6,999,631
7,000 Huntington National Bank............................ 05/03/99 6.460 7,025,669
30,000 KeyBank N.A.*....................................... 11/02/98 5.050 to 5.090 29,988,604
8,000 LaSalle National Bank............................... 03/24/99 5.300 8,000,000
--------------
Total Domestic Bank Notes (cost--$62,012,396)........................ 62,012,396
--------------
CERTIFICATES OF DEPOSIT--11.26%
DOMESTIC--1.36%
25,000 First Tennessee Bank, N.A. Memphis.................. 11/10/98 5.300 25,000,000
--------------
YANKEE--9.90%
7,000 Bayerische Landesbank Girozentrale.................. 07/23/99 5.650 6,995,632
15,000 Canadian Imperial Bank of Commerce.................. 04/01/99 5.740 14,996,643
17,000 Credit Agricole Indosuez............................ 02/18/99 to 05/19/99 5.650 to 5.750 16,998,409
10,000 Den Danske Bank A/S................................. 05/10/99 5.780 9,998,007
15,000 Deutsche Bank AG.................................... 03/01/99 to 04/09/99 5.630 to 5.650 14,994,430
13,000 Rabobank Nederland.................................. 04/28/99 to 07/30/99 5.640 to 5.740 13,022,936
5,000 Royal Bank of Canada*............................... 11/02/98 5.055 4,997,573
31,750 Societe Generale.................................... 02/10/99 to 06/18/99 5.580 to 5.700 31,743,732
16,000 Societe Generale*................................... 11/02/98 5.090 to 5.254 15,996,841
14,000 Svenska Handelsbanken............................... 04/30/99 to 05/07/99 5.790 to 5.820 13,999,994
32,500 Swiss Bank Corporation.............................. 11/20/98 to 01/07/99 5.690 to 5.880 32,495,512
5,000 Westpac Banking Corporation......................... 05/18/99 5.750 4,998,442
--------------
181,238,151
--------------
Total Certificates of Deposit (cost--$206,238,151)................... 206,238,151
--------------
</TABLE>
3
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- --------------
<C> <S> <C> <C> <C>
COMMERCIAL [email protected]%
ASSET-BACKED--BANKING--3.78%
$ 69,928 Atlantis One Funding Corporation.................... 11/06/98 to 02/12/99 5.220 to 5.520% $ 69,287,457
--------------
ASSET-BACKED--FINANCE--2.97%
50,000 Beta Finance Incorporated........................... 11/16/98 to 7/15/99 5.250 to 5.870 49,510,786
5,000 CC (USA), Incorporated.............................. 02/24/99 5.100 4,918,542
--------------
54,429,328
--------------
ASSET-BACKED--MISCELLANEOUS--7.70%
5,294 Enterprise Funding Corporation...................... 02/23/99 5.260 5,205,820
9,585 Falcon Asset Securitization Corporation............. 11/20/98 to 11/25/98 5.210 to 5.240 9,554,240
20,000 Preferred Receivables Funding Corporation........... 11/10/98 to 01/04/99 5.280 to 5.290 19,892,756
54,518 Quincy Capital Corporation.......................... 11/09/98 to 11/18/98 5.200 to 5.240 54,430,582
7,911 Receivables Capital Corporation..................... 11/05/98 to 11/24/98 5.240 to 5.250 7,897,840
44,152 Triple-A One Funding Corporation.................... 11/04/98 to 11/20/98 5.240 to 5.360 44,090,140
--------------
141,071,378
--------------
AUTO & TRUCK--7.97%
35,000 Daimler-Benz North America Corporation.............. 12/11/98 to 01/22/99 5.070 to 5.270 34,681,200
50,000 Ford Motor Credit Company........................... 11/13/98 to 01/08/99 5.060 to 5.090 49,808,400
50,000 General Motors Acceptance Corporation............... 11/03/98 to 11/12/98 5.090 to 5.120 49,960,367
11,564 PACCAR Financial Corporation........................ 11/02/98 5.050 11,562,378
--------------
146,012,345
--------------
BANKING--3.95%
10,000 BBL North America Incorporated...................... 11/20/98 5.500 9,970,972
15,000 BCI Funding Corporation............................. 11/02/98 5.250 14,997,813
3,000 Generale Bank Incorporated.......................... 12/23/98 5.150 2,977,683
15,000 Morgan J.P. & Company, Incorporated................. 03/22/99 5.200 14,694,500
10,000 Nordbanken North America Incorporated............... 02/12/99 5.470 9,843,497
10,000 PNC Bank N.A........................................ 12/11/98 5.180 9,942,444
10,000 Unifunding Incorporated............................. 12/03/98 5.490 9,951,200
--------------
72,378,109
--------------
BROKER-DEALER--0.53%
10,000 Merrill Lynch & Company Incorporated................ 4/30/99 5.470 9,726,500
--------------
BUSINESS SERVICES--4.47%
52,100 Block Financial Corporation......................... 11/16/98 to 12/01/98 5.250 to 5.430 51,887,752
10,000 First Data Corporation.............................. 11/23/98 5.070 9,969,017
20,000 Xerox Capital....................................... 11/24/98 5.070 19,935,217
--------------
81,791,986
--------------
CHEMICALS--4.80%
66,064 DuPont (E. I.) de Nemours & Company................. 11/05/98 5.070 to 5.080 66,026,727
22,000 Henkel Corporation.................................. 11/05/98 to 12/14/98 5.130 to 5.370 21,895,329
--------------
87,922,056
--------------
CONSUMER PRODUCTS--0.96%
6,014 Clorox Company...................................... 11/18/98 5.070 5,999,601
11,750 Rubbermaid Incorporated............................. 12/10/98 5.510 to 5.520 11,679,811
--------------
17,679,412
--------------
</TABLE>
4
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- --------------
<C> <S> <C> <C> <C>
</TABLE>
COMMERCIAL PAPER@ (CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
ELECTRONICS--0.27%
$ 5,000 Motorola Incorporated............................... 12/08/98 5.020% $ 4,974,203
--------------
ENERGY--2.73%
50,000 Koch Industries Incorporated........................ 11/02/98 5.710 49,992,069
--------------
FINANCE-CONDUIT--0.46%
8,500 Svenska Handelsbanken............................... 11/12/98 5.490 8,485,741
--------------
FOOD, BEVERAGE & TOBACCO--1.64%
30,000 Diageo Capital PLC.................................. 11/04/98 5.500 29,986,250
--------------
INSURANCE--1.91%
25,000 American General Corporation........................ 11/17/98 5.070 24,943,667
10,000 Prudential Funding Corporation...................... 11/03/98 5.130 9,997,150
--------------
34,940,817
--------------
MACHINERY--0.87%
16,000 Caterpillar Financial Services Corporation.......... 11/17/98 5.060 15,964,018
--------------
MANUFACTURING-DIVERSIFIED--1.36%
25,000 BTR Dunlop Finance Incorporated..................... 11/18/98 to 11/23/98 5.080 24,929,444
--------------
METALS & MINING--2.29%
30,000 Rio Tinto America Incorporated...................... 11/04/98 5.100 29,987,250
12,000 U.S. Borax Incorporated............................. 12/15/98 5.360 11,921,387
--------------
41,908,637
--------------
RETAIL-MERCHANDISE--1.09%
20,000 Penny (J.C) Funding Corporation..................... 11/30/98 5.090 19,917,994
--------------
TELECOMMUNICATIONS--1.09%
20,065 Ameritech Capital Funding Corporation............... 11/16/98 5.060 20,022,696
--------------
UTILITY-GAS--0.55%
10,000 Consolidated Natural Gas Company.................... 11/02/98 5.070 9,998,592
--------------
Total Commercial Paper (cost--$941,419,032).......................... 941,419,032
--------------
SHORT-TERM CORPORATE OBLIGATIONS--7.94%
ASSET-BACKED--FINANCE--0.55%
10,000 Beta Finance Incorporated*.......................... 11/03/98 4.850 10,000,000
--------------
BANKING--1.47%
12,000 Banc One Corporation*............................... 11/02/98 5.284 11,994,593
15,000 Nationsbank Corporation*............................ 01/04/99 5.303 15,000,132
--------------
26,994,725
--------------
BROKER-DEALER--3.81%
5,000 Bear Stearns Companies*............................. 11/12/98 5.376 5,000,000
15,000 Credit Suisse First Boston*......................... 11/03/98 4.750 15,000,000
11,700 Goldman Sachs Group L.P............................. 09/15/99 6.875 11,818,080
27,000 Merrill Lynch & Company Incorporated*............... 11/02/98 to 11/05/98 5.020 to 5.325 27,000,000
5,920 Merrill Lynch & Company Incorporated................ 07/19/99 6.200 5,938,337
</TABLE>
5
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- --------------
<C> <S> <C> <C> <C>
</TABLE>
SHORT-TERM CORPORATE OBLIGATIONS (CONCLUDED)
BROKER-DEALER (CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
$ 5,000 Morgan Stanley Dean Witter & Company*............... 11/03/98 4.640% $ 4,998,553
--------------
69,754,970
--------------
FINANCE-DIVERSIFIED--1.02%
18,500 Associates Corporation of North America............. 8/15/99 6.375 18,594,869
--------------
FINANCE-INDEPENDENT--1,09%
20,000 National Rural Utilities Cooperative Finance
Corporation*...................................... 11/25/98 5.608 20,000,000
--------------
Total Short-Term Corporate Obligations (cost--$145,344,564).......... 145,344,564
--------------
REPURCHASE AGREEMENT--1.36%
24,893 Repurchase agreement dated 10/30/98 with CitiGroup
Securities Incorporated, collateralized by
$22,750,000 U.S. Treasury Notes, 6.125% due
08/15/07 (value-- $25,394,688); proceeds
$24,903,953 (cost--$24,893,000) 11/2/98 5.28 24,893,000
--------------
Total Investments (cost--$1,840,147,821 which approximates cost for
federal income tax purposes)--100.47%.............................. 1,840,147,821
(8,587,688)
--------------
Liabilities in excess of other assets--(0.47)%.......................
$1,831,560,133
--------------
--------------
Net Assets--100.00%..................................................
</TABLE>
- -----------------
@ Interest rates shown are the discount rates at date of purchase.
* Variable rate securities--maturity date reflects earlier of reset date or
maturity date. The interest rates shown are current rates as of October 31,
1998 and reset periodically.
Weighted Average Maturity - 51 days
See accompanying notes to financial statements.
6
<PAGE>
LIQUID INSTITUTIONAL RESERVES--GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--82.11%
$ 1,000 Federal Farm Credit Bank............................ 04/01/99 5.500% $ 999,384
26,000 Federal Farm Credit Bank@........................... 11/09/98 to 12/14/98 4.750 to 5.280 25,908,809
7,600 Federal Farm Credit Bank*........................... 06/17/99 to 10/01/99 5.205 to 5.293 7,597,528
7,500 Federal Home Loan Bank.............................. 11/04/98 to 05/05/99 4.800 to 5.810 7,498,942
26,000 Federal Home Loan Bank@............................. 12/16/98 to 01/20/99 4.740 to 5.040 25,770,481
4,000 Federal National Mortgage Association............... 02/02/99 to 08/13/99 5.380 to 5.490 3,998,613
10,401 Federal National Mortgage Association@.............. 11/24/98 to 03/26/99 4.560 to 5.410 10,299,430
500 Federal Home Loan Bank*............................. 3/26/99 4.376 499,911
1,000 Student Loan Marketing Association.................. 01/25/99 7.723 1,004,708
5,500 Student Loan Marketing Association*................. 11/25/98 to 3/18/99 4.421 5,500,000
--------------
Total U.S. Government Agency Obligations (cost--$89,077,806)......... 89,077,806
--------------
Total Investments (cost--$89,077,806 which approximates cost for
federal income tax purposes)--82.11%............................... 89,077,806
Other assets in excess of liabilities--17.89%**...................... 19,411,490
--------------
Net Assets--100.00%.................................................. $ 108,489,296
--------------
--------------
</TABLE>
- -----------------
@ Interest rates shown are the discount rates at date of purchase.
* Variable Rate Securities--Maturity date reflects earlier of reset date or
maturity date. The interest rates shown are current rates as of October 31,
1998 and reset periodically.
** Includes receivable of $19,899,382 from the sale of $20,305,000 U.S. Treasury
Bills, due April 22, 1999; sold on October 30, 1998, settling on November 2,
1998, yielding 4.22%.
Weighted Average Maturity--50 days
See accompanying notes to financial statements
7
<PAGE>
LIQUID INSTITUTIONAL RESERVES--TREASURY SECURITIES FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS--60.86%
$ 110,136 U.S. Treasury Notes
(cost--$110,369,608)........ 11/30/98 to 07/15/99 5.000 to 6.500% $ 110,369,608
-------------
Total Investments (cost--$110,369,608 which
approximates cost for federal income tax
purposes)--60.86%............................ 110,369,608
Other assets in excess of
liabilities--39.14%*........................... 70,981,748
-------------
Net Assets--100.00%............................ $ 181,351,356
-------------
-------------
</TABLE>
- -----------------
* Includes receivables of $67,619,678 from the sale of $68,998,000 U.S.
Treasury Bills, due April 22, 1999; sold on October 30, 1998, settling on
November 2, 1998, yielding 4.22%. And also includes $2,000,000 from the
maturity of $2,000,000 U.S. Treasury Notes, 4.75%, due October 31, 1998,
settling on November 2, 1998.
Weighted Average Maturity--49 days
See accompanying notes to financial statements
8
<PAGE>
LIQUID INSTITUTIONAL RESERVES
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1998(UNAUDITED)
<TABLE>
<CAPTION>
MONEY GOVERNMENT TREASURY
MARKET SECURITIES SECURITIES
FUND FUND FUND
-------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost--$1,840,147,821, $89,077,806 and
$110,369,608 respectively)............ $1,840,147,821 $ 89,077,806 $ 110,369,608
Interest receivable..................... 9,229,074 249,719 2,106,330
Receivable for investments sold......... -- 19,899,382 69,619,678
Other assets............................ 123,187 51,310 29,143
-------------- ------------- -------------
Total assets............................ 1,849,500,082 109,278,217 182,124,759
-------------- ------------- -------------
LIABILITIES
Payable for investments purchased....... 10,000,000 -- --
Dividends payable....................... 7,390,873 590,944 648,696
Payable to affiliates................... 292,627 17,382 27,223
Accrued expenses and other
liabilities........................... 256,449 180,595 97,484
-------------- ------------- -------------
Total liabilities....................... 17,939,949 788,921 773,403
-------------- ------------- -------------
NET ASSETS
Beneficial interest shares of $0.001 par
value outstanding (unlimited amount
authorized)........................... 1,831,600,002 108,476,066 181,217,813
Accumulated net realized gains (losses)
from investments...................... (39,869) 13,230 133,543
-------------- ------------- -------------
Net assets.............................. $1,831,560,133 $ 108,489,296 $ 181,351,356
-------------- ------------- -------------
-------------- ------------- -------------
INSTITUTIONAL SHARES:
Net assets.............................. $1,825,054,920 $ 108,489,296 $ 181,351,356
-------------- ------------- -------------
Outstanding shares of beneficial
interest ($0.001 par value)........... 1,825,094,821 108,476,066 181,217,813
-------------- ------------- -------------
Net asset value, offering price and
redemption value per share............ $ 1.00 $ 1.00 $ 1.00
-------------- ------------- -------------
-------------- ------------- -------------
FINANCIAL INTERMEDIARY SHARES:
Net assets.............................. $ 6,505,213 -- --
-------------- ------------- -------------
Outstanding shares of beneficial
interest ($0.001 par value)........... 6,505,181 -- --
-------------- ------------- -------------
Net asset value, offering price and
redemption value per share............ $ 1.00 -- --
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
LIQUID INSTITUTIONAL RESERVES
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
OCTOBER 31, 1998
(UNAUDITED)
------------------------------------
MONEY GOVERNMENT TREASURY
MARKET SECURITIES SECURITIES
FUND FUND FUND
----------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................ $46,838,290 $3,014,278 $4,596,097
----------- ----------- ----------
EXPENSES:
Investment advisory and
administration........................ 2,082,108 139,233 226,154
Transfer agency and service............. 212,928 11,238 23,248
State and federal registration fees..... 139,406 8,983 15,823
Custody and accounting.................. 84,493 5,570 9,046
Legal and audit......................... 74,117 7,580 15,408
Reports and notices to shareholders..... 41,955 4,986 4,908
Shareholder servicing fees--Financial
Intermediary shares................... 11,039 -- --
Trustees' fees.......................... 5,250 5,250 5,250
Other expenses.......................... 53,110 3,290 6,061
----------- ----------- ----------
2,704,406 186,130 305,898
Less: Fee waivers and expense
reimbursements from adviser........... (419,601) (27,293) (44,536)
----------- ----------- ----------
Net expenses............................ 2,284,805 158,837 261,362
----------- ----------- ----------
Net investment income................... 44,553,485 2,855,441 4,334,735
NET REALIZED GAINS FROM INVESTMENT
TRANSACTIONS.......................... 5,197 14,142 129,634
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $44,558,682 $2,869,583 $4,464,369
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
OCTOBER 31, FOR THE YEAR
1998 ENDED
(UNAUDITED) APRIL 30, 1998
--------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................................................... $ 44,553,485 $ 76,947,344
Net realized gains (losses) from investment transactions........................................ 5,197 (45,066)
--------------- --------------
Net increase in net assets resulting from operations............................................ 44,558,682 76,902,278
--------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Institutional shares..................................................... (44,329,207) (76,222,313)
Net investment income--Financial Intermediary shares............................................ (224,278) (225,031)
Net realized gain from investment transactions--Institutional shares............................ -- (2,697)
--------------- --------------
Total dividends and distributions to shareholders............................................... (44,553,485) (76,950,041)
--------------- --------------
NET INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS................................ 223,463,744 361,339,871
--------------- --------------
Net increase in net assets...................................................................... 223,468,941 361,292,108
NET ASSETS:
Beginning of period............................................................................. 1,608,091,192 1,246,799,084
--------------- --------------
End of period................................................................................... $1,831,560,133 $1,608,091,192
--------------- --------------
--------------- --------------
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
LIQUID INSTITUTIONAL RESERVES--GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
OCTOBER 31, FOR THE YEAR
1998 ENDED
(UNAUDITED) APRIL 30, 1998
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income....................................... $ 2,855,441 $ 4,498,429
Net realized gains from investment transactions............. 14,142 13,353
-------------- --------------
Net increase in net assets resulting from operations........ 2,869,583 4,511,782
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional shares................. (2,855,441) (4,498,429)
-------------- --------------
NET INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST
TRANSACTIONS.............................................. 8,335,596 6,716,709
-------------- --------------
Net increase in net assets.................................. 8,349,738 6,703,356
NET ASSETS:
Beginning of period......................................... 100,139,558 106,842,914
-------------- --------------
End of period............................................... $108,489,296 $100,139,558
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
LIQUID INSTITUTIONAL RESERVES--TREASURY SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
OCTOBER 31, FOR THE YEAR
1998 ENDED
(UNAUDITED) APRIL 30, 1998
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................ $ 4,334,735 $ 5,284,871
Net realized gains from investment transactions.................. 129,634 26,128
-------------- --------------
Net increase in net assets resulting from operations............. 4,464,369 5,310,999
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional shares...................... (4,334,735) (5,284,871)
-------------- --------------
NET INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST
TRANSACTIONS................................................... 1,514,045 113,788,825
-------------- --------------
Net increase in net assets....................................... 1,643,679 113,814,953
NET ASSETS:
Beginning of period.............................................. 179,707,677 65,892,724
-------------- --------------
End of period.................................................... $181,351,356 $179,707,677
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Liquid Institutional Reserves (the "Trust") is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The Trust currently
offers three no-load series: the Money Market Fund, the Government Securities
Fund and the Treasury Securities Fund (collectively, the "Funds").
The Funds offer two classes of shares, Institutional shares and Financial
Intermediary shares. Each class represents interests in the same assets of a
Fund, and both classes have equal voting privileges, except that beneficial
owners of Financial Intermediary shares receive certain services directly from
financial intermediaries, bear certain service fees and to the extent that
matters pertaining to the Shareholder Services Plan or to the Financial
Intermediary shares are submitted to shareholders for approval, only the holders
of Financial Intermediary shares shall be entitled to vote thereon. For the six
months ended October 31, 1998 the Government Securities Fund and the Treasury
Securities Fund had no Finanical Intermediary shares outstanding.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. Following is a summary of
significant accounting policies:
VALUATION AND ACCOUNTING FOR INVESTMENTS AND INVESTMENT INCOME--Investments
are valued at amortized cost which approximates market value. Investment
transactions are recorded on the trade date. Realized gains and losses from
investment transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Premiums are amortized and
discounts are accreted as adjustments to interest income and the identified cost
of investments.
REPURCHASE AGREEMENTS--The Money Market Fund's custodian takes possession of
the collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event that a counterparty defaults on its obligation to repurchase, the Money
Market Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings. The Money
Market Fund occasionally participates in joint repurchase agreement transactions
with other funds managed by Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), sub-adviser and sub-administrator of the Fund, a wholly owned asset
management subsidiary of PaineWebber Incorporated ("PaineWebber"), the adviser
and administrator of the funds.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Funds to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust has an Investment Advisory and Administration Contract ("Advisory
Contract") with PaineWebber under which PaineWebber serves as investment adviser
and administrator of the Funds. In accordance with the Advisory Contract,
PaineWebber receives compensation from the Funds, computed daily and paid
monthly, at an annual rate of 0.25% of each Fund's average daily net assets.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Mitchell Hutchins serves as sub-adviser and sub-administrator of the Trust
pursuant to a Sub-Advisory and Sub-Administration Contract ("Sub-Advisory
Contract") between PaineWebber and Mitchell Hutchins. In accordance with the
Sub-Advisory Contract, PaineWebber (not the Funds) pays Mitchell Hutchins a fee,
computed daily and paid monthly, at an annual rate of 50% of the fee paid by
each Fund to PaineWebber under the Advisory Contract, net of waivers and/or
reimbursements.
For the six months ended October 31, 1998, PaineWebber and Mitchell Hutchins
have voluntarily undertaken to waive 0.05% of these advisory fees and reimburse
a portion of expenses to maintain each Fund's total annual operating expenses at
a level not exceeding 0.30% and 0.55% of the Funds' average daily net assets for
Institutional shares and Financial Intermediary shares, respectively.
FEDERAL TAX STATUS
Each Fund intends to distribute all of its taxable income and to comply with
the other requirements of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provision for federal income taxes is
required. In addition, by distributing during each calendar year substantially
all of their net investment income, capital gains and certain other amounts, if
any, the Funds intend not to be subject to a federal excise tax.
At April 30, 1998, the Money Market Fund had a net capital loss carryforward
of $45,066. The loss carryforward is available as a reduction, to the extent
provided in the regulations, of future net realized capital gains, and will
expire by April 30, 2006. To the extent these losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed.
SHAREHOLDER SERVICE PLAN AND AGREEMENT
Under a Shareholder Service Plan and Agreement with respect to its Financial
Intermediary shares, each Fund pays PaineWebber monthly fees at the annual rate
of 0.25% of the average daily net assets of the Financial Intermediary shares
held by financial intermediaries on behalf of their customers. Under Service
Agreements with those financial intermediaries, PaineWebber pays an identical
fee to the financial intermediaries for certain support services that they
provide to the beneficial owners of the Financial Intermediary shares.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest, at $1.00 per share,
were as follows:
<TABLE>
<CAPTION>
FINANCIAL INTERMEDIARY SHARES**
INSTITUTIONAL SHARES
------------------------------------- -------------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, 1998 APRIL 30, 1998 OCTOBER 31, 1998 APRIL 30, 1998*
------------------ --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
MONEY MARKET FUND:
Shares sold............................. 4,442,530,477 8,202,616,006 13,627,390 20,004,794
Shares repurchased...................... (4,251,099,073) (7,924,527,512) (23,424,438) (3,702,565)
Dividends reinvested.................... 41,829,388 66,949,148 -- --
------------------ --------------- ------------------ ---------------
Net increase (decrease) in shares
outstanding........................... 233,260,792 345,037,642 (9,797,048) 16,302,229
------------------ --------------- ------------------ ---------------
------------------ --------------- ------------------ ---------------
GOVERNMENT SECURITIES FUND:
Shares sold............................. 169,387,828 317,328,523
Shares repurchased...................... (163,470,376) (328,113,692)
Dividends reinvested.................... 2,418,144 4,068,460
------------------ ---------------
Net increase (decrease) in shares
outstanding........................... 8,335,596 (6,716,709)
------------------ ---------------
------------------ ---------------
TREASURY SECURITIES FUND:
Shares sold............................. 354,814,812 435,482,281
Shares repurchased...................... (357,522,468) (326,140,762)
Dividends reinvested.................... 4,221,701 4,447,306
------------------ ---------------
Net increase in shares outstanding...... 1,514,045 113,788,825
------------------ ---------------
------------------ ---------------
</TABLE>
- ---------------
* Issuance of shares was January 14, 1998.
** For the six months ended October 31, 1998 and for the year ended April 30,
1998, there were no transactions in Financial Intermediary Shares for the
Government Securities Fund and Treasury Securities Fund.
16
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
FINANCIAL INTERMEDIARY
SHARES**
INSTITUTIONAL SHARES ----------------------
---------------------------------------------------------------------- FOR THE
FOR THE SIX FOR THE PERIOD
MONTHS SIX MONTHS JANUARY
ENDED ENDED 14, 1998+
OCTOBER 31, FOR THE YEARS ENDED APRIL 30, OCTOBER TO
1998 --------------------------------------------------------- 31, 1998 APRIL 30,
(UNAUDITED) 1998 1997 1996 1995++ 1994 (UNAUDITED) 1998
----------- ----------- ---------- -------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00
----------- ----------- ---------- -------- -------- -------- ---------- ---------
Net investment income........... 0.027 0.054 0.052 0.055 0.048 0.030 0.026 0.015
Net realized losses from
investment transactions........ -- -- -- -- (0.008) -- -- --
----------- ----------- ---------- -------- -------- -------- ---------- ---------
Net increase from investment
operations..................... 0.027 0.054 0.052 0.055 0.040 0.030 0.026 0.015
----------- ----------- ---------- -------- -------- -------- ---------- ---------
Dividends from net investment
income......................... (0.027) (0.054) (0.052) (0.055) (0.048) (0.030) (0.026) (0.015)
----------- ----------- ---------- -------- -------- -------- ---------- ---------
Contribution to capital from
predecessor adviser (1)........ -- -- -- -- 0.008 -- -- --
----------- ----------- ---------- -------- -------- -------- ---------- ---------
Net asset value, end of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ---------- -------- -------- -------- ---------- ---------
----------- ----------- ---------- -------- -------- -------- ---------- ---------
Total investment return (2)..... 2.72% 5.52% 5.33% 5.61% 4.91% 3.03% 2.59% 1.51%
----------- ----------- ---------- -------- -------- -------- ---------- ---------
----------- ----------- ---------- -------- -------- -------- ---------- ---------
Ratios/Supplemental Data:
Net assets, end of period
(000's)........................ $ 1,825,055 $ 1,591,789 $1,246,799 $421,878 $220,844 $254,281 $ 6,505 $16,302
Expenses to average net assets
net of waivers/ reimbursements
from adviser................... 0.27%* 0.29% 0.25% 0.31% 0.35% 0.33% 0.52%* 0.54%*
Expenses to average net assets
before waivers/ reimbursements
from adviser................... 0.32%* 0.34% 0.30% 0.37% 0.37% 0.33% 0.57%* 0.59%*
Net investment income to average
net assets net of
waivers/reimbursements from
adviser........................ 5.32%* 5.38% 5.24% 5.47% 4.68% 2.96% 5.08%* 5.13%*
Net investment income to average
net assets before
waivers/reimbursements from
adviser........................ 5.27%* 5.33% 5.19% 5.41% 4.66% 2.96% 5.03%* 5.07%*
<CAPTION>
FOR THE PERIOD
FOR THE MARCH 17,
YEAR ENDED 1994+
APRIL 30, TO
1995++ APRIL 30, 1994
---------- --------------
<S> <C> <C>
Net asset value, beginning of
period......................... $1.00 $1.00
---------- ------
Net investment income........... 0.027 0.004
Net realized losses from
investment transactions........ -- --
---------- ------
Net increase from investment
operations..................... 0.027 0.004
---------- ------
Dividends from net investment
income......................... (0.027) (0.004)
---------- ------
Contribution to capital from
predecessor adviser (1)........ -- --
---------- ------
Net asset value, end of period.. $ 1.00 $ 1.00
---------- ------
---------- ------
Total investment return (2)..... 3.10% 0.37%
---------- ------
---------- ------
Ratios/Supplemental Data:
Net assets, end of period
(000's)........................ -- $ 9,000
Expenses to average net assets
net of waivers/ reimbursements
from adviser................... 0.60%* 0.58%*
Expenses to average net assets
before waivers/ reimbursements
from adviser................... 0.62%* 0.58%*
Net investment income to average
net assets net of
waivers/reimbursements from
adviser........................ 4.17%* 2.93%*
Net investment income to average
net assets before
waivers/reimbursements from
adviser........................ 4.15%* 2.93%*
</TABLE>
- -------------
+ Issuance of shares.
++ Sub-advisory functions for the Fund were transferred from Kidder Peabody
Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
* Annualized
** For the period May 1, 1997 to January 13, 1998, for the years ended April 30,
1996 and 1997 and for the period December 24, 1994 to April 30, 1995 there
were no outstanding Financial Intermediary Shares.
(1) Kidder Peabody Asset Management, Inc., the Fund's predecessor investment
adviser and administrator, purchased certain of the Fund's variable rate
securities on July 6, 1994 at prices equal to the securities' amortized cost
plus accrued and unpaid interest. Since the purchases were made at prices
above the securities' current fair value, the Fund recorded a contribution to
capital.
(2) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment return
for periods of less than one year has not been annualized.
17
<PAGE>
LIQUID INSTITUTIONAL RESERVES--GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
FINANCIAL
INTERMEDIARY
INSTITUTIONAL SHARES SHARES**
--------------------------------------------------------------- ----------
FOR THE SIX FOR THE
MONTHS PERIOD
ENDED JULY 12,
OCTOBER 31, FOR THE YEARS ENDED APRIL 30, 1994+ TO
1998 ------------------------------------------------- APRIL 30,
(UNAUDITED) 1998 1997 1996 1995++ 1994 1995++
----------- -------- -------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- -------- -------- ------- ------- ------- ----------
Net investment income................... 0.026 0.052 0.051 0.053 0.048 0.029 0.032
Net realized gains (losses) from
investment transactions................ -- -- -- 0.001 (0.008) -- --
----------- -------- -------- ------- ------- ------- ----------
Net increase from investment
operations............................. 0.026 0.052 0.051 0.054 0.040 0.029 0.032
----------- -------- -------- ------- ------- ------- ----------
Dividends from net investment income.... (0.026) (0.052) (0.051) (0.054) (0.047) (0.029) (0.032)
----------- -------- -------- ------- ------- ------- ----------
Contribution to capital from predecessor
advisor (1)............................ -- -- -- -- 0.007 -- --
----------- -------- -------- ------- ------- ------- ----------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- -------- -------- ------- ------- ------- ----------
----------- -------- -------- ------- ------- ------- ----------
Total investment return (2)............. 2.63% 5.32% 5.20% 5.50% 4.61% 2.97% 3.31%
----------- -------- -------- ------- ------- ------- ----------
----------- -------- -------- ------- ------- ------- ----------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $108,489 $100,140 $106,843 $43,770 $54,903 $84,209 --
Expenses to average net assets net of
waivers/reimbursements from adviser.... 0.28%* 0.30% 0.30% 0.32% 0.35% 0.35% 0.60%*
Expenses to average net assets before
waivers/reimbursements from adviser.... 0.33%* 0.59% 0.53% 0.56% 0.47% 0.37% 0.72%*
Net investment income to average net
assets net of waivers/reimbursements
from adviser........................... 5.13%* 5.21% 5.09% 5.52% 4.75% 2.95% 4.58%*
Net investment income to average net
assets before waivers/reimbursements
from adviser........................... 5.08%* 4.91% 4.86% 5.28% 4.63% 2.93% 4.46%*
</TABLE>
- -----------------
+ Commencement of issuance of shares.
++ Sub-advisory functions for the Fund were transferred from Kidder Peabody
Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
* Annualized
** For the six months ended October 31, 1998, the years ended April 30, 1998 and
1997 and for the period March 22, 1995 to April 30, 1996 there were no
outstanding Financial Intermediary Shares.
(1) Kidder Peabody Asset Management, Inc., the Fund's predecessor investment
adviser and administrator, purchased certain of the Fund's variable rate
securities on July 6, 1994 at prices equal to the securities' amortized cost
plus accrued and unpaid interest. Since the purchases were made at prices
above the securities' current fair value, the Fund recorded a contribution to
capital.
(2) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment return
for periods of less than one year has not been annualized.
18
<PAGE>
LIQUID INSTITUTIONAL RESERVES -- TREASURY SECURITIES FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED
OCTOBER 31, FOR THE YEARS ENDED APRIL 30,
1998 -------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995++ 1994
--------------- ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------- ------------- --------- --------- --------- ---------
Net investment income............................. 0.024 0.051 0.049 0.048 0.049 0.028
Net realized gains (losses) from investment
transactions..................................... -- -- -- 0.003 (0.002) --
--------------- ------------- --------- --------- --------- ---------
Net increase from investment operations........... 0.024 0.051 0.049 0.051 0.047 0.028
--------------- ------------- --------- --------- --------- ---------
Dividends from net investment income.............. (0.024) (0.051) (0.049) (0.051) (0.047) (0.028)
--------------- ------------- --------- --------- --------- ---------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------- ------------- --------- --------- --------- ---------
--------------- ------------- --------- --------- --------- ---------
Total investment return (1)....................... 2.44% 5.23% 5.02% 5.23% 4.75% 2.87%
--------------- ------------- --------- --------- --------- ---------
--------------- ------------- --------- --------- --------- ---------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $ 181,351 $ 179,708 $ 65,893 $ 19,624 $ 23,762 $ 38,602
Expenses to average net assets net of
waivers/reimbursements from adviser.............. 0.29%* 0.30% 0.30% 0.32% 0.22% 0.18%
Expenses to average net assets before
waivers/reimbursements from adviser.............. 0.34%* 0.47% 0.72% 0.94% 0.84% 0.76%
Net investment income to average net assets net of
waivers/reimbursements from adviser.............. 4.79%* 5.09% 4.97% 5.71% 5.51% 3.66%
Net investment income to average net assets before
waivers/reimbursements from adviser.............. 4.74%* 4.92% 4.56% 5.09% 4.89% 3.08%
</TABLE>
- -----------------
++ Sub-advisory functions for the Fund were transferred from Kidder Peabody
Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment return
for periods of less than one year has not been annualized.
19
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES
E. Garrett Bewkes, Jr.
CHAIRMAN
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
OFFICERS
Margo N. Alexander
PRESIDENT
Victoria E. Schonfeld
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
Dennis L. McCauley
VICE PRESIDENT
Susan P. Ryan
VICE PRESIDENT
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
SUBADVISER AND SUBADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF THE
FUNDS UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
THE FINANCIAL INFORMATION HEREIN IS TAKEN FROM THE RECORDS OF THE FUNDS WITHOUT
EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION THEREON.
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED ON
THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER INVESTMENT EXECUTIVE OR
CORRESPONDENT FIRM.
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
<PAGE>
PaineWebber offers a family of 27 funds which
encompass a diversified range of investment goals.
BOND FUNDS
- - High Income Fund
- - Investment Grade Income Fund
- - Low Duration U.S. Government Income Fund
- - Strategic Income Fund
- - U.S. Government Income Fund
TAX-FREE BOND FUNDS
- - California Tax-Free Income Fund
- - Municipal High Income Fund
- - National Tax-Free Income Fund
- - New York Tax-Free Income Fund
STOCK FUNDS
- - Financial Services Growth Fund
- - Growth Fund
- - Growth and Income Fund
- - Mid Cap Fund
- - Small Cap Fund
- - S&P 500 Index Fund
- - Tax-Managed Equity Fund
- - Utility Income Fund
ASSET ALLOCATION FUNDS
- - Balanced Fund
- - Tactical Allocation Fund
GLOBAL FUNDS
- - Asia Pacific Growth Fund
- - Emerging Markets Equity Fund
- - Global Equity Fund
- - Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
- - Aggressive Portfolio
- - Moderate Portfolio
- - Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
[LOGO]
- -C-1998 PaineWebber Incorporated
Member SIPC
- --------------------------------------------------------------------------------
LIQUID INSTITUTIONAL RESERVES
SEMIANNUAL REPORT
OCTOBER 31, 1998
