<PAGE>
LIQUID INSTITUTIONAL RESERVES
ANNUAL REPORT
June 15, 1999
Dear Shareholder,
We are pleased to present you with the annual report for Liquid Institutional
Reserves (the "Funds") for the fiscal year ended April 30, 1999.
- ---------------------------------------------------------------------------
LIQUID INSTITUTIONAL RESERVES
MARKET REVIEW
[ICON]
Money market mutual fund assets increased during the Funds' fiscal year
as investors emphasized safety of principal in response to market volatility
during the latter part of 1998. The Federal Reserve cut the Federal Funds
rate by 0.25% in September, October and November of 1998, lowering the rate
from 5.50% to 4.75%. At the same time, European central banks were cutting
rates in preparation for the January 1, 1999, debut of the euro currency.
Lower interest rates helped to calm the global financial markets, which had
become unsettled after Russia's default in August. Money market yields were
lower across the short-term yield curve. Because inflation remained low,
however, money market yields stayed relatively strong on an
inflation-adjusted basis and versus overseas short-term rates.
PERFORMANCE
<TABLE>
<CAPTION>
ANNUALIZED YIELDS Weighted
Current 7-Day Average Yield Effective 7-Day Average Yield Average
As of As of As of As of As of As of Maturity
4/30/99 10/31/98 4/30/98 4/30/99 10/31/98 4/30/98 4/30/99
<S> <C> <C> <C> <C>
Money Market Fund:
Institutional Shares 4.74% 5.03% 5.36% 4.85% 5.15% 5.50% 54 days
Financial Intermediary Shares 4.49% 4.77% 5.11% 4.59% 4.89% 5.23% 54 days
Government Securities Fund 4.56% 4.81% 5.24% 4.66% 4.92% 5.38% 42 days
Treasury Securities Fund 4.23% 4.18% 5.02% 4.32% 4.26% 5.15% 74 days
</TABLE>
LIQUID INSTITUTIONAL RESERVES
FUND PROFILE
[ARROW]GOAL (ALL THREE FUNDS):
High current income to the extent consistent
with capital preservation and liquidity
[ARROW]PORTFOLIO MANAGER:
Susan P. Ryan,
Mitchell Hutchins Asset
Management Inc.
[ARROW]TOTAL NET ASSETS AS OF APRIL 30, 1999:
Money Market Fund
$2.048 billion
Government Securities Fund
$138.8 million
Treasury Securities Fund
$179.2 million
[ARROW]DIVIDEND PAYMENTS:
Monthly
1
<PAGE>
OUTLOOK
We expect the U.S. economy's rate of growth to slow in 1999 from the rate of
the fourth quarter of 1998, with inflation remaining low and no recession on
the immediate horizon. The Federal Reserve is likely to maintain a steady
monetary policy. We believe the fixed income markets will remain volatile in
1999. We expect to keep the Funds' weighted average maturities slightly above
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 REVIEW on a fund in the PaineWebber Family of Funds,(1)
please contact your Financial Advisor.
Sincerely,
/s/ MARGO ALEXANDER
MARGO ALEXANDER
Chairman and Chief Executive Officer,
Mitchell Hutchins
Asset Management Inc.
/s/ BRIAN M. STORMS
BRIAN M. STORMS
President and Chief Operating Officer,
Mitchell Hutchins
Asset Management Inc.
/s/ DENNIS L. MCCAULEY
DENNIS L. MCCAULEY
Managing Director and Chief
Investment Officer--
Fixed Income, Mitchell Hutchins
Asset Management Inc.
/s/ SUSAN P. RYAN
SUSAN P. RYAN
Senior Vice President,
Mitchell Hutchins
Asset Management Inc.
This letter is intended to assist shareholders in understanding how the Funds
performed during the fiscal year ended April 30, 1999, and reflects our views
at the time of its writing. Of course, these views may change in response to
changing circumstances. We encourage you to consult your Financial Advisor
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
STATEMENT OF NET ASSETS APRIL 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ----------------- -------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--9.86%
$ 25,000 Federal Farm Credit Bank...... 05/27/99 to 07/01/99 5.157 to 5.248*% $ 25,000,000
10,000 Federal Home Loan Bank........ 02/03/00 5.010 10,000,000
35,000 Federal Home Loan Bank........ 05/03/99 to 05/04/99 4.910 to 5.115* 34,990,183
Federal National Mortgage
15,000 Association................... 05/04/99 4.867* 14,996,200
Student Loan Marketing
117,000 Association................... 05/03/99 to 05/11/99 4.660 to 5.207* 117,000,948
-------------------
Total U.S. Government Agency Obligations
(cost--$201,987,331)................... 201,987,331
-------------------
DOMESTIC BANK NOTES--8.15%
8,000 FCC National Bank............. 02/16/00 5.058 7,998,309
8,000 First National Bank Chicago... 03/15/00 5.180 7,995,962
25,000 First National Bank Chicago... 07/13/99 4.880* 24,985,944
First Tennessee Bank, N.A.
34,000 Memphis....................... 01/14/00 to 04/12/00 5.100 to 5.210 34,000,000
First Tennessee Bank, N.A.
55,000 Memphis....................... 05/04/99 4.937 to 5.017* 55,000,000
7,000 Huntington National Bank...... 05/03/99 6.460 7,000,280
15,000 KeyBank N. A.................. 05/03/99 4.860* 14,998,922
15,000 Nationsbank N. A.............. 01/06/00 5.000 14,998,018
-------------------
Total Domestic Bank Notes
(cost--$166,977,435)................... 166,977,435
-------------------
DEPOSIT NOTE-YANKEE--0.54%
Canadian Imperial Bank of
Commerce
11,014 (cost--$11,129,862)........... 01/24/00 6.475 11,129,862
-------------------
CERTIFICATES OF DEPOSIT--17.78%
DOMESTIC--3.15%
American Express Centurion
56,500 Bank.......................... 05/07/99 to 05/12/99 4.840 to 4.850 56,500,000
8,100 Chase Manhattan Bank.......... 05/11/99 5.730 8,101,446
-------------------
64,601,446
-------------------
EURO-DOLLAR--0.49%
10,000 Bank of Scotland.............. 05/11/99 4.900 10,000,028
-------------------
YANKEE--14.14%
10,000 ABN AMRO Bank N.V............. 05/19/99 5.050 10,000,627
10,000 Bank of Scotland.............. 05/20/99 5.000 10,000,468
20,000 Barclays Bank PLC............. 05/03/99 4.890* 19,989,541
Bayerische Landesbank
7,000 Girozentrale.................. 07/23/99 5.650 6,998,627
Canadian Imperial Bank of
21,000 Commerce...................... 02/07/00 to 04/12/00 5.010 to 5.120 20,992,895
5,000 Credit Agricole Indosuez...... 05/19/99 5.750 4,999,856
10,000 Den Danske Bank A/S........... 05/10/99 5.780 9,999,906
National Westminster Bank
35,000 PLC........................... 01/07/00 to 04/03/00 4.980 to 5.200 34,995,262
17,000 Rabobank Nederland............ 07/30/99 to 01/07/00 4.990 to 5.640 17,004,031
4,000 Royal Bank of Canada.......... 03/31/00 5.265 3,998,764
60,000 Royal Bank of Canada.......... 05/03/99 4.870 to 4.895* 59,976,753
5,000 Societe Generale.............. 06/18/99 5.680 4,999,811
6,000 Societe Generale.............. 05/01/99 4.849* 5,999,604
36,700 Svenska Handelsbanken......... 05/07/99 to 04/10/00 5.100 to 5.790 36,688,954
18,000 Toronto Dominion Bank......... 03/02/00 to 04/17/00 5.060 to 5.270 17,993,120
20,000 Toronto Dominion Bank......... 07/12/99 4.885* 19,989,778
</TABLE>
3
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ----------------- -------------------
<C> <S> <C> <C> <C>
</TABLE>
CERTIFICATES OF DEPOSIT--(CONCLUDED)
YANKEE--(CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
$ 5,000 Westpac Banking Corporation... 05/18/99 5.750% $ 4,999,866
-------------------
289,627,863
-------------------
Total Certificates of Deposit
(cost--$364,229,337)................... 364,229,337
-------------------
COMMERCIAL [email protected]%
ASSET-BACKED--BANKING--3.24%
Atlantis One Funding
49,544 Corporation................... 05/05/99 to 07/30/99 4.820 to 4.850 49,335,618
Wood Street Funding
17,127 Corporation................... 05/06/99 to 07/13/99 4.840 17,069,776
-------------------
66,405,394
-------------------
ASSET-BACKED--FINANCE--0.48%
10,000 CC (USA) Incorporated......... 07/12/99 4.830 9,903,400
-------------------
ASSET-BACKED--MISCELLANEOUS--13.45%
Enterprise Funding
33,388 Corporation................... 07/02/99 to 07/09/99 4.820 to 4.830 33,091,647
Falcon Asset Securitization
31,915 Corporation................... 05/18/99 to 05/25/99 4.830 to 4.900 31,828,467
Preferred Receivables Funding
42,730 Corporation................... 05/04/99 to 05/13/99 4.820 to 4.860 42,690,494
68,902 Quincy Capital Corporation.... 05/05/99 to 05/20/99 4.830 to 4.850 68,784,461
Receivables Capital
11,877 Corporation................... 05/13/99 4.850 11,857,799
Triple-A One Funding
67,291 Corporation................... 05/04/99 to 05/13/99 4.830 to 4.840 67,236,466
Variable Funding Capital
20,000 Corporation................... 05/06/99 4.830 19,986,583
-------------------
275,475,917
-------------------
AUTO & TRUCK--5.07%
Daimler-Chrysler N. A. Holding
40,000 Corporation................... 05/19/99 to 05/21/99 4.790 to 4.800 39,900,083
14,000 Ford Motor Credit Company..... 05/06/99 4.800 13,990,667
General Motors Acceptance
50,000 Corporation................... 05/03/99 4.960 49,986,222
-------------------
103,876,972
-------------------
BANKING--7.53%
10,000 ABN AMRO N.V.................. 06/29/99 4.830 9,920,842
Banque Et Caisse D Epargne de
15,000 L 'Etat....................... 07/07/99 4.830 14,865,163
CBA Delaware Finance
60,000 Incorporated.................. 05/12/99 to 05/19/99 4.800 59,874,666
Cregem North America
20,000 Incorporated.................. 05/11/99 4.820 19,973,222
Nordbanken North America
40,000 Incorporated.................. 07/16/99 to 07/22/99 4.810 to 4.820 39,577,367
10,000 Unifunding Incorporated....... 05/05/99 4.820 9,994,644
-------------------
154,205,904
-------------------
BROKER-DEALER--4.38%
70,000 Goldman Sachs Group L.P....... 05/12/99 to 05/26/99 4.800 to 4.830 69,822,392
Morgan Stanley, Dean Witter &
20,000 Company....................... 06/15/99 4.840 19,879,000
-------------------
89,701,392
-------------------
DRUGS--HEALTHCARE--1.21%
25,000 Zeneca Wilmington Inc......... 06/21/99 4.800 24,830,000
-------------------
</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--0.20%
Vermont American
$ 4,066 Corporation................... 05/06/99 4.800% $ 4,063,289
-------------------
ENERGY--1.46%
Koch Industries
30,000 Incorporated.................. 05/03/99 4.910 29,991,817
-------------------
FINANCE--CONDUIT--0.48%
10,000 ANZ (Delaware) Incorporated... 07/26/99 4.800 9,885,333
-------------------
FINANCE--SUBSIDIARY--0.49%
10,000 Deutsche Bank................. 05/10/99 4.840 9,987,900
-------------------
FOOD, BEVERAGE & TOBACCO--2.62%
Allied Domecq North America
43,742 Corporation................... 05/13/99 to 05/27/99 4.800 to 4.810 43,619,737
10,000 Diageo Capital PLC ........... 05/12/99 4.830 9,985,242
-------------------
53,604,979
-------------------
INSURANCE--1.46%
Prudential Funding
30,000 Corporation................... 05/04/99 4.840 29,987,900
-------------------
INSURANCE-PROPERTY/CASUALTY--0.47%
John Hancock Capital
9,565 Corporation................... 05/10/99 4.820 9,553,474
-------------------
MANUFACTURING-DIVERSIFIED--4.39%
BTR Dunlop Finance
40,000 Incorporated.................. 05/24/99 to 05/25/99 4.800 39,875,334
United Technologies
50,155 Corporation................... 05/03/99 to 05/05/99 4.800 50,138,704
-------------------
90,014,038
-------------------
METALS & MINING--1.65%
Rio Tinto America
19,000 Incorporated.................. 06/10/99 to 07/08/99 4.820 to 4.825 18,841,869
15,000 U.S. Borax Incorporated....... 05/17/99 4.820 14,967,867
-------------------
33,809,736
-------------------
PRINTING--PUBLISHING--2.44%
50,000 Reed Elsevier................. 05/12/99 4.810 49,926,514
-------------------
OIL EQUIPMENT & SERVICES--0.90%
18,400 Colonial Pipeline Company..... 05/25/99 4.830 18,340,752
-------------------
TELECOMMUNICATIONS--1.22%
25,000 AT&T Capital Corporation...... 06/04/99 4.790 24,886,903
-------------------
UTILITY-ELECTRIC--3.44%
70,680 Southern Company.............. 05/07/99 to 06/01/99 4.800 to 4.870 70,505,718
-------------------
Total Commercial Paper
(cost--$1,158,957,332)................. 1,158,957,332
-------------------
SHORT-TERM CORPORATE OBLIGATIONS--5.45%
ASSET-BACKED--MISCELLANOUS--0.25%
5,000 Beta Finance, Incorporated.... 07/15/99 5.700 5,000,000
-------------------
</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)
<TABLE>
<C> <S> <C> <C> <C>
BANKING--1.32%
$ 15,000 Nations Corporation........... 07/02/99 4.990*% $ 15,000,033
12,000 Banc One Corporation.......... 05/03/99 4.879* 11,997,523
-------------------
26,997,556
-------------------
BROKER-DEALER--1.85%
Bear Stearns Companies
5,000 Incorporated.................. 05/11/99 4.901* 5,000,000
11,700 Goldman Sachs Group L P....... 09/15/99 6.875 11,750,871
Merrill Lynch & Company,
11,160 Incorporated.................. 06/25/99 to 07/19/99 6.200 to 6.280 11,175,453
Merrill Lynch & Company,
10,000 Incorporated.................. 05/03/99 4.850* 10,000,000
-------------------
37,926,324
-------------------
FINANCE-DIVERSIFIED--1.05%
Associates Corporation of
21,500 North America................. 08/15/99 to 03/28/00 6.375 to 7.470 21,595,971
-------------------
FINANCE-INDEPENDENT--0.98%
National Rural Utilities
Cooperative Finance
20,000 Corporation................... 05/25/99 4.920* 20,000,000
-------------------
Total Short-Term Corporate Obligations
(cost--$111,519,851)................... 111,519,851
-------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
(000)
- ---------
<C> <S> <C> <C> <C>
MONEY MARKET FUNDS--2.34%
38,226 Janus Investment Fund......... 38,225,753
9,621 AIM Liquid Assets Portfolio... 9,621,262
-------------------
Total Money Market Funds
(cost--$47,847,015).................... 47,847,015
-------------------
Total Investments (cost--$2,062,648,163
which approximates cost for federal
income tax purposes)--100.70%.......... 2,062,648,163
Liabilities in excess of other
assets--(0.70)%........................ (14,267,705)
-------------------
Net Assets (applicable to 2,036,379,904
and 12,001,229 of Institutional Shares
and Financial Intermediary Shares,
respectively, each equivalent to $1.00
per share)--100.00%.................... $ 2,048,380,458
-------------------
-------------------
</TABLE>
- ---------------
@ Interest rates shown reflect the discount rates at time of purchase.
* Variable Rate Securities--Maturity date reflects earlier of reset date or
maturity date. The interest rates shown are current rates as of April 30,
1999 and reset periodically.
Weighted Average Maturity--54 days
See accompanying notes to financial statements
6
<PAGE>
LIQUID INSTITUTIONAL RESERVES--GOVERNMENT SECURITIES FUND
STATEMENT OF NET ASSETS APRIL 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ----------------- ---------------------- ----------------------- -------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--101.36%
$ 9,600 Federal Farm Credit Bank...... 05/03/99 to 07/03/99 4.726 to 5.248*% $ 9,598,776
20,500 Federal Farm Credit Bank...... 05/05/99 to 12/13/99 4.550 to 4.720@ 20,348,088
2,500 Federal Home Loan Bank........ 05/05/99 to 05/17/00 5.135 to 5.705 2,500,003
9,000 Federal Home Loan Bank........ 05/05/99 4.887 to 4.967* 8,997,537
30,000 Federal Home Loan Bank........ 05/07/99 to 06/23/99 4.680 to 4.700@ 29,924,118
Federal Home Loan Mortgage
4,000 Corporation................... 05/04/99 4.957* 3,999,237
Federal Home Loan Mortgage
12,000 Corporation................... 05/25/99 to 08/06/99 4.700 to 4.760@ 11,914,467
Federal National Mortgage
3,500 Association................... 08/03/99 to 03/10/00 5.180 to 5.490 3,498,711
Federal National Mortgage
24,018 Association................... 05/10/99 to 04/03/00 4.650 to 4.800@ 23,887,766
Student Loan Marketing
6,000 Association................... 05/25/99 4.810* 5,998,077
Student Loan Marketing
9,017 Association................... 05/03/99 4.800@ 9,014,595
11,000 Tennessee Valley Authority.... 05/03/99 to 05/06/99 4.630 to 4.680@ 10,994,814
-------------------
Total Investments (cost--$140,676,189 which
approximates cost for federal income tax
purposes)--101.36%.............................. 140,676,189
Liabilities in excess of other assets--(1.36)%.... (1,893,416)
-------------------
Net Assets (applicable to 138,773,120
Institutional Shares, equivalent to $1.00 per
share)--100.00% ................................ $ 138,782,773
-------------------
-------------------
</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 April 30,
1999 and reset periodically.
Weighted Average Maturity--42 days
See accompanying notes to financial statements
7
<PAGE>
LIQUID INSTITUTIONAL RESERVES--TREASURY SECURITIES FUND
STATEMENT OF NET ASSETS APRIL 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ---------------- ------------
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS--99.98%
$ 115,420 U.S. Treasury Bills........... 05/06/99 to 07/22/99 4.200 to 4.400@% $114,791,830
64,136 U.S. Treasury Notes........... 06/30/99 to 04/15/00 5.500 to 6.750 64,397,419
------------
Total Investments (cost--$179,189,249
which approximates cost for federal
income tax purposes)--99.98%........... 179,189,249
Other assets in excess of
liabilities--0.02%..................... 37,895
------------
Net Assets (applicable to 179,057,106
Institutional Shares, equivalent to
$1.00 per share)--100.00% ............. $179,227,144
------------
------------
</TABLE>
- ---------------
@ Interest rates shown reflect the discount rates at time of purchase.
Weighted Average Maturity--74 days
See accompanying notes to financial statements
8
<PAGE>
LIQUID INSTITUTIONAL RESERVES
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
APRIL 30, 1999
------------------------------------
MONEY GOVERNMENT TREASURY
MARKET SECURITIES SECURITIES
FUND FUND FUND
----------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................ $99,928,785 $5,920,977 $8,897,378
----------- ----------- ----------
EXPENSES:
Investment advisory and
administration........................ 4,684,985 285,771 458,169
Transfer agency and related services
fees.................................. 452,374 21,618 44,282
State and federal registration fees..... 270,909 21,362 33,919
Custody and accounting.................. 239,621 11,429 18,327
Legal and audit......................... 88,172 14,405 22,096
Reports and notices to shareholders..... 77,998 10,746 19,362
Shareholder servicing fees--Financial
Intermediary shares................... 24,898 -- --
Trustees' fees.......................... 10,500 10,500 10,500
Other expenses.......................... 65,378 1,110 6,592
----------- ----------- ----------
5,914,835 376,941 613,247
Less: Fee waivers and expense
reimbursements from adviser........... (937,916) (56,592) (90,943)
----------- ----------- ----------
Net expenses............................ 4,976,919 320,349 522,304
----------- ----------- ----------
Net investment income................... 94,951,866 5,600,628 8,375,074
NET REALIZED GAINS FROM INVESTMENT
TRANSACTIONS.......................... 44,391 10,565 166,129
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $94,996,257 $5,611,193 $8,541,203
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
LIQUID INSTITUTIONAL RESERVES--MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
APRIL 30,
------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................... $ 94,951,866 $ 76,947,344
Net realized gains (losses) from
investment transactions............... 44,391 (45,066)
-------------- --------------
Net increase in net assets resulting
from operations....................... 94,996,257 76,902,278
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income--Institutional
shares................................ (94,471,543) (76,722,313)
Net investment income--Financial
Intermediary shares................... (480,323) (225,031)
Net realized gain from investment
transactions--Institutional shares.... -- (2,697)
-------------- --------------
Total dividends and distributions to
shareholders.......................... (94,951,866) (76,950,041)
-------------- --------------
NET INCREASE IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS...... 440,244,875 361,339,871
-------------- --------------
Net increase in net assets.............. 440,289,266 361,292,108
NET ASSETS:
Beginning of year....................... 1,608,091,192 1,246,799,084
-------------- --------------
End of year............................. $2,048,380,458 $1,608,091,192
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
LIQUID INSTITUTIONAL RESERVES--GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
APRIL 30,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................... $ 5,600,628 $ 4,498,429
Net realized gains from investment
transactions.......................... 10,565 13,353
-------------- --------------
Net increase in net assets resulting
from operations....................... 5,611,193 4,511,782
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional
shares................................ (5,600,628) (4,498,429)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM BENEFICIAL INTEREST
TRANSACTIONS.......................... 38,632,650 (6,716,709)
-------------- --------------
Net increase (decrease) in net assets... 38,643,215 (6,703,356)
NET ASSETS:
Beginning of year....................... 100,139,558 106,842,914
-------------- --------------
End of year............................. $ 138,782,773 $ 100,139,558
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
LIQUID INSTITUTIONAL RESERVES--TREASURY SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
APRIL 30,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................ $ 8,375,074 $ 5,284,871
Net realized gains from investment transactions.................. 166,129 26,128
-------------- --------------
Net increase in net assets resulting from operations............. 8,541,203 5,310,999
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Institutional shares...................... (8,375,074) (5,284,871)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST
TRANSACTIONS................................................... (646,662) 113,788,825
-------------- --------------
Net increase (decrease) in net assets............................ (480,533) 113,814,953
NET ASSETS:
Beginning of year................................................ 179,707,677 65,892,724
-------------- --------------
End of year...................................................... $ 179,227,144 $ 179,707,677
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 year
ended April 30, 1999 the Government Securities Fund and the Treasury Securities
Fund had no Financial Intermediary shares outstanding.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. Following is a summary of
significant accounting policies:
VALUATION AND ACCOUNTING FOR INVESTMENTS AND INVESTMENT INCOME--Investments
are valued at amortized cost which approximates market value. Investment
transactions are recorded on the trade date. Realized gains and losses from
investment transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Premiums are amortized and
discounts are accreted as adjustments to interest income and the identified cost
of investments.
REPURCHASE AGREEMENTS--The 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.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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. At
April 30, 1999, the Money Market Fund, the Government Securities Fund and the
Treasury Securities Fund owed PaineWebber $367,966, $11,653 and $26,401,
respectively, in investment advisory and administration fees.
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 year ended April 30, 1999, PaineWebber and Mitchell Hutchins
voluntarily waived 0.05% of these advisory fees and reimbursed 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. For the
year ended April 30, 1999, PaineWebber and Mitchell Hutchins voluntarily waived
or reimbursed $937,916, $56,592 and $90,943 in investment advisory and
administration fees and other expenses from the Money Market Fund, the
Government Securities Fund and the Treasury Securities Fund, respectively.
Effective June 1, 1999, PaineWebber and Mitchell Hutchins discontinued the
advisory fee waivers for the Funds and agreed to reimburse a portion of expenses
to maintain the Fund's total annual operating expenses at a level not exceeding
0.28%, 0.29% and 0.29% of the Money Market Fund, the Government Securities Fund
and the Treasury Securities Funds' average daily net assets for Institutional
Shares, respectively, and 0.53% of the Money Market Fund's average daily net
assets for Financial Intermediary shares.
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, 1999, the Money Market Fund had a net capital loss carryforward
of $675. 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 the entire fee
to the financial intermediaries for certain support services that they provide
to the beneficial owners of the Financial Intermediary shares. At April 30,
1999, the Money Market Fund owed PaineWebber $2,334 in shareholder service fees.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
OTHER LIABILITIES
At April 30, 1999, the Funds had the following liabilities outstanding:
<TABLE>
<CAPTION>
PAYABLE FOR
DIVIDENDS INVESTMENTS
PAYABLE PURCHASED
----------- -----------
<S> <C> <C>
Money Market Fund................... $8,564,578 $14,992,500
Government Securities Fund.......... 469,941 1,500,000
Treasury Securities Fund............ 667,553 --
</TABLE>
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest, at $1.00 per share,
were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES FINANCIAL INTERMEDIARY SHARES**
------------------------------------- -------------------------------------
FOR THE YEARS ENDED APRIL 30, FOR THE YEARS ENDED APRIL 30,
------------------------------------- -------------------------------------
1999 1998 1999 1998*
------------------ --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
MONEY MARKET FUND:
Shares sold............................. 12,503,291,139 8,202,616,006 44,909,334 20,004,794
Shares repurchased...................... (12,145,857,186) (7,924,527,512) (49,210,334) (3,702,565)
Dividends reinvested.................... 87,111,922 66,949,148 -- --
------------------ --------------- ------------------ ---------------
Net increase (decrease) in shares
outstanding........................... 444,545,875 345,037,642 (4,301,000) 16,302,229
------------------ --------------- ------------------ ---------------
------------------ --------------- ------------------ ---------------
GOVERNMENT SECURITIES FUND:
Shares sold............................. 281,772,626 317,328,523
Shares repurchased...................... (248,308,554) (328,113,692)
Dividends reinvested.................... 5,168,578 4,068,460
------------------ ---------------
Net increase (decrease) in shares
outstanding........................... 38,632,650 (6,716,709)
------------------ ---------------
------------------ ---------------
TREASURY SECURITIES FUND:
Shares sold............................. 476,238,175 435,482,281
Shares repurchased...................... (485,058,321) (326,140,762)
Dividends reinvested.................... 8,173,484 4,447,306
------------------ ---------------
Net increase (decrease) in shares
outstanding........................... (646,662) 113,788,825
------------------ ---------------
------------------ ---------------
</TABLE>
- ---------------
* Issuance of shares was January 14, 1998.
** For the years ended April 30, 1999 and April 30, 1998, there were no
transactions in Financial Intermediary Shares for the Government Securities
Fund and Treasury Securities Fund.
15
<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**
-----------------------------------
FOR THE
INSTITUTIONAL SHARES PERIOD
----------------------------------------------------------- JANUARY
FOR THE 14, 1998+ FOR THE
FOR THE YEARS ENDED APRIL 30, YEAR ENDED TO YEAR ENDED
----------------------------------------------------------- APRIL 30, APRIL 30, APRIL 30,
1999 1998 1997 1996 1995++ 1999 1998 1995++
----------- ----------- ---------- -------- -------- ---------- --------- ----------
<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............. 0.051 0.054 0.052 0.055 0.048 0.048 0.015 0.027
Net realized losses
from investment
transactions....... -- -- -- -- (0.008) -- -- --
----------- ----------- ---------- -------- -------- ---------- --------- ----------
Net increase from
investment
operations......... 0.051 0.054 0.052 0.055 0.040 0.048 0.015 0.027
----------- ----------- ---------- -------- -------- ---------- --------- ----------
Dividends from net
investment
income............. (0.051) (0.054) (0.052) (0.055) (0.048) (0.048) (0.015) (0.027)
----------- ----------- ---------- -------- -------- ---------- --------- ----------
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)......... 5.22% 5.52% 5.33% 5.61% 4.91% 4.96% 1.51% 3.10%
----------- ----------- ---------- -------- -------- ---------- --------- ----------
----------- ----------- ---------- -------- -------- ---------- --------- ----------
Ratios/Supplemental
Data:
Net assets, end of
period (000's)..... $ 2,036,379 $ 1,591,789 $1,246,799 $421,878 $220,844 $12,002 $16,302 --
Expenses to average
net assets net of
waivers/reimbursements
from adviser....... 0.26% 0.29% 0.25% 0.31% 0.35% 0.51% 0.54%* 0.60%
Expenses to average
net assets before
waivers/reimbursements
from adviser....... 0.31% 0.34% 0.30% 0.37% 0.37% 0.56% 0.59%* 0.62%
Net investment
income to average
net assets net of
waivers/
reimbursements from
adviser............ 5.07% 5.38% 5.24% 5.47% 4.68% 4.82% 5.13%* 4.17%
Net investment
income to average
net assets before
waivers/
reimbursements from
adviser............ 5.02% 5.33% 5.19% 5.41% 4.66% 4.77% 5.07%* 4.15%
<CAPTION>
FOR THE PERIOD
MARCH 17,
1994+
TO
APRIL 30, 1994
--------------
<S> <C>
Net asset value,
beginning of
period............. $1.00
------
Net investment
income............. 0.004
Net realized losses
from investment
transactions....... --
------
Net increase from
investment
operations......... 0.004
------
Dividends from net
investment
income............. (0.004)
------
Contribution to
capital from
predecessor adviser
(1)................ --
------
Net asset value, end
of period.......... $ 1.00
------
------
Total investment
return (2)......... 0.37%
------
------
Ratios/Supplemental
Data:
Net assets, end of
period (000's)..... $ 9,000
Expenses to average
net assets net of
waivers/reimburseme
from adviser....... 0.58%*
Expenses to average
net assets before
waivers/reimburseme
from adviser....... 0.58%*
Net investment
income to average
net assets net of
waivers/
reimbursements from
adviser............ 2.93%*
Net investment
income to average
net assets before
waivers/
reimbursements from
adviser............ 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. Any further subscriptions
of such shares would be at $1.00 per share.
(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.
16
<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
SHARES**
-------------
INSTITUTIONAL SHARES FOR THE
----------------------------------------------------- PERIOD
JULY 12,
FOR THE YEARS ENDED APRIL 30, 1994+ TO
----------------------------------------------------- APRIL 30,
1999 1998 1997 1996 1995++ 1995++
----------- -------- -------- ------- ------- -------------
<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................... 0.049 0.052 0.051 0.053 0.048 0.032
Net realized gains (losses) from
investment transactions................ -- -- -- 0.001 (0.008) --
----------- -------- -------- ------- ------- ------
Net increase from investment
operations............................. 0.049 0.052 0.051 0.054 0.040 0.032
----------- -------- -------- ------- ------- ------
Dividends from net investment income.... (0.049) (0.052) (0.051) (0.054) (0.047) (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
----------- -------- -------- ------- ------- ------
----------- -------- -------- ------- ------- ------
Total investment return (2)............. 5.04% 5.32% 5.20% 5.50% 4.61% 3.31%
----------- -------- -------- ------- ------- ------
----------- -------- -------- ------- ------- ------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $ 138,783 $100,140 $106,843 $43,770 $54,903 --
Expenses to average net assets net of
waivers/reimbursements from adviser.... 0.28% 0.30% 0.30% 0.32% 0.35% 0.60%*
Expenses to average net assets before
waivers/reimbursements from adviser.... 0.33% 0.59% 0.53% 0.56% 0.47% 0.72%*
Net investment income to average net
assets net of waivers/ reimbursements
from adviser........................... 4.90% 5.21% 5.09% 5.52% 4.75% 4.58%*
Net investment income to average net
assets before waivers/ reimbursements
from adviser........................... 4.85% 4.91% 4.86% 5.28% 4.63% 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 years ended April 30, 1999, 1998 and 1997 and for the period March
22, 1995 to April 30, 1996 there were no outstanding Financial Intermediary
Shares. Any further subscriptions of such shares would be at $1.00 per share.
(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 -- 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 YEARS ENDED APRIL 30,
------------------------------------------------------------
1999 1998 1997 1996 1995++
--------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- ------------- --------- --------- ---------
Net investment income............................. 0.046 0.051 0.049 0.048 0.049
Net realized gains (losses) from investment
transactions..................................... -- -- -- 0.003 (0.002)
--------- ------------- --------- --------- ---------
Net increase from investment operations........... 0.046 0.051 0.049 0.051 0.047
--------- ------------- --------- --------- ---------
Dividends from net investment income.............. (0.046) (0.051) (0.049) (0.051) (0.047)
--------- ------------- --------- --------- ---------
Net asset value, end of year...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- ------------- --------- --------- ---------
--------- ------------- --------- --------- ---------
Total investment return (1)....................... 4.68% 5.23% 5.02% 5.23% 4.75%
--------- ------------- --------- --------- ---------
--------- ------------- --------- --------- ---------
Ratios/Supplemental Data:
Net assets, end of year (000's)................... $ 179,227 $ 179,708 $ 65,893 $ 19,624 $ 23,762
Expenses to average net assets net of
waivers/reimbursements from adviser.............. 0.28% 0.30% 0.30% 0.32% 0.22%
Expenses to average net assets before
waivers/reimbursements from adviser.............. 0.33% 0.47% 0.72% 0.94% 0.84%
Net investment income to average net assets net of
waivers/reimbursements from adviser.............. 4.57% 5.09% 4.97% 5.71% 5.51%
Net investment income to average net assets before
waivers/reimbursements from adviser.............. 4.52% 4.92% 4.56% 5.09% 4.89%
</TABLE>
- -----------------
++ Sub-advisory functions for the Fund were transferred from Kidder Peabody
Asset Management, Inc. to Mitchell Hutchins on January 30, 1995.
(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.
18
<PAGE>
LIQUID INSTITUTIONAL RESERVES
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of
Liquid Institutional Reserves
We have audited the accompanying statement of net assets of Liquid
Institutional Reserves (comprising, respectively, the Money Market Fund,
Government Securities Fund and Treasury Securities Fund) as of April 30, 1999,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the four years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the period ended April 30, 1995 were audited by other auditors
whose report dated June 9, 1995, expressed an unqualified opinion on such
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned at April 30, 1999, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above and audited by us present fairly, in all material respects, the financial
position of each of the respective portfolios constituting Liquid Institutional
Reserves at April 30, 1999, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the four years in the
period then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
June 18, 1999
19
<PAGE>
LIQUID INSTITUTIONAL RESERVES
TAX INFORMATION(UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end (April 30,
1999) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all dividends
paid by the Money Market Fund, the Government Securities Fund and the Treasury
Securities Fund during the fiscal year were derived from net investment income.
These amounts are taxable as ordinary income, none of which qualifies for the
dividend received deduction available to corporate shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and Koeghs) need to be
reported as taxable income. Some retirement trusts (e.g., corporate, Keogh and
403(b)(7) plans) may need this information for their annual information
reporting.
Because each Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 1999. The second notification, which
will reflect the amounts to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 2000. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in each
respective Fund.
20
<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
Brian M. Storms
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.
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-1999 PaineWebber Incorporated
Member SIPC
- -------------------------------
LIQUID
INSTITUTIONAL
RESERVES
APRIL 30, 1999
ANNUAL REPORT
