LIQUID INSTITUTIONAL RESERVES, 485BPOS, 2000-08-29

LIQUID INSTITUTIONAL RESERVES
485BPOS, 2000-08-29

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As filed with the Securities and Exchange Commission on August 29, 2000

1933 Act Registration No. 33-39029
1940 Act Registration No. 811-06281

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-lA

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 15 [ X ]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]

Amendment No. 16 [ X ]

LIQUID INSTITUTIONAL RESERVES
(Exact name of registrant as specified in charter)
51 West 52nd Street
New York, New York 10019-6114
(Address of principal executive offices)

Registrant's telephone number, including area code: (212) 713-2000

DIANNE E. O'DONNELL, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)

Copies to:
ELINOR W. GAMMON, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Telephone (202) 778-9000

Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.

It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
[X] On September 1, 2000 pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] On pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On pursuant to Rule 485(a)(2)

Title of Securities Being Registered: Shares of Beneficial Interest.
<PAGE>

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Liquid Institutional Reserves
Money Market Fund
Government Securities Fund
Treasury Securities Fund

--------------------------
PROSPECTUS
SEPTEMBER 1, 2000
--------------------------

This prospectus offers two classes of shares for each money market fund.
Institutional shares are offered primarily to institutional investors, and
Financial Intermediary shares are offered to banks and other financial
intermediaries for the benefit of their customers.

----------------------------------------------------
Not FDIC insured. May lose value. No bank guarantee.
----------------------------------------------------

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the funds' shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.

=====
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Liquid Institutional Reserves
Money Market Fund Government Securities Fund Treasury Securities Fund

Contents
THE FUNDS
--------------------------------------------------------------------------------

What every investor
should know about
the funds

Money Market Fund
3 Investment Objective, Strategies and Risks
4 Performance
5 Expenses and Fee Tables

Government Securities Fund
6 Investment Objective, Strategies and Risks
7 Performance
8 Expenses and Fee Tables
Treasury Securities Fund
9 Investment Objective, Strategies and Risks
10 Performance
11 Expenses and Fee Tables

12 More About Risks and Investment Strategies

YOUR INVESTMENT
--------------------------------------------------------------------------------

Information for
managing your fund
account

13 Managing Your Fund Account
--Buying Shares
--Selling Shares
--Exchanging Shares
--Pricing and Valuation

ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

Additional important
information about the funds

16 Management

17 Dividends and Taxes

18 Financial Highlights

--------------------------------------------------------------------------------

Where to learn more
about the funds

Back Cover

-----------------------------
The funds are not complete or
balanced investment programs.
-----------------------------

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2
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Liquid Institutional Reserves Money Market Fund

Money Market Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
--------------------------------------------------------------------------------

FUND OBJECTIVE

High current income to the extent consistent with the preservation of capital
and the maintenance of liquidity through investments in a diversified portfolio
of high quality, short-term, U.S. dollar denominated money market instruments.

PRINCIPAL INVESTMENT STRATEGIES

The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality money
market instruments of governmental and private issuers.

Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. The fund invests in foreign money market instruments only if they are
denominated in U.S. dollars.

PaineWebber Incorporated, the fund's investment adviser, has appointed Mitchell
Hutchins Asset Management Inc. to serve as the fund's sub-adviser. Mitchell
Hutchins selects money market instruments for the fund based on its assessment
of relative values and changes in market and economic conditions. Mitchell
Hutchins considers safety of principal and liquidity in selecting securities for
the fund and thus may not buy securities that pay the highest yield.

PRINCIPAL RISKS

An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, you may lose money by investing in the fund. Money market instruments
generally have a low risk of loss, but they are not risk-free. The principal
risks presented by the fund are:

o CREDIT RISK - Issuers of money market instruments may fail to make payments
when due, or they may become less willing or less able to do so.

o INTEREST RATE RISK - The value of the fund's investments generally will fall
when short term interest rates rise and its yield will tend to lag behind
prevailing rates.

o FOREIGN INVESTING RISK - The value of the fund's investments in foreign
securities may fall due to adverse political, social and economic
developments abroad. However, because the fund's foreign investments must be
denominated in U.S. dollars, it generally is not subject to the risk of
changes in currency valuations.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

-------------------------------------=====--------------------------------------
3
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves Money Market Fund

PERFORMANCE
--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund. The bar chart shows how the fund's performance has varied from year to
year. The bar chart shows Institutional shares because they have a longer
performance history than Financial Intermediary shares.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN ON INSTITUTIONAL SHARES (1992 IS THE FUND'S FIRST FULL CALENDAR
YEAR OF OPERATIONS)

CALENDAR YEAR TOTAL RETURN
------------- -------------
1990
1991
1992 3.54%
1993 2.98%
1994 4.02%
1995 5.76%
1996 5.32%
1997 5.47%
1998 5.43%
1999 5.07%

Total return January 1 to June 30, 2000 2.98%

Best quarter during years shown: 2nd quarter, 1995-- 1.44%
Worst quarter during years shown: 2nd quarter, 1993-- 0.72%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

INSTITUTIONAL SHARES FINANCIAL INTERMEDIARY SHARES
(INCEPTION DATE) (6/3/91) (1/14/98)*
-------------- ------ --------
One Year .............. 5.07% 4.81%
Five Years ............ 5.41% N/A
Life of Class ......... 4.75% 4.99%

----------

* Average annual total returns for Financial Intermediary shares are for the
period January 14, 1998 through December 31, 1999. Such shares had previously
been outstanding only for short periods of time. For further information see
"Financial Highlights."

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4
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Liquid Institutional Reserves Money Market Fund

EXPENSES AND FEE TABLES
--------------------------------------------------------------------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price) ............................................. None
Maximum Deferred Sales Charge (Load) (as a % of offering price) .......... None

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

FINANCIAL
INSTITUTIONAL INTERMEDIARY
SHARES SHARES
--------------- ----------------
Management Fees .......................... 0.25% 0.25%
Distribution and/or Service (12b-1) Fees.. 0.00% 0.00%
----
Other Expenses
Shareholder Servicing Fee .............. 0.00% 0.25%
Miscellaneous Expenses* ................ 0.05% 0.05%
----- -----
0.05% 0.30%
------- -------
Total Annual Fund Operating Expenses ..... 0.30% 0.55%
======= =======
Expense Reimbursement* ................... 0.02% 0.02%
------- -------
Net Expenses* ............................ 0.28% 0.53%
======= =======
----------
* The fund and PaineWebber have entered into a written expense reimbursement
agreement. PaineWebber is contractually obligated to reimburse fund expenses
through August 31, 2001 to the extent that the fund's expenses otherwise
would exceed the "Net Expenses" rates for each class as shown above. The fund
has agreed to repay PaineWebber for those reimbursed expenses if it can do so
over the following three years without causing the fund's expenses in any of
those years to exceed those "Net Expenses" rates.

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

This example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same except for the one year period when
the fund's expenses are lower due to its reimbursement agreement with
PaineWebber. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Institutional Shares ................ $29 $ 94 $167 $379
Financial Intermediary Shares ....... 54 174 305 687

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5
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----------------------------------===========-----------------------------------
Liquid Institutional Reserves Government Securities Fund

Government Securities Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
--------------------------------------------------------------------------------

FUND OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality, U.S.
government money market instruments and in related repurchase agreements.

Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rates or other
special features that give them the financial characteristics of short-term
debt. U.S. government money market instruments pay income that is generally
exempt from state and local income tax.

The fund may invest a significant percentage of its assets in repurchase
agreements. Income from repurchase agreements may not be exempt from state and
local income taxation. Repurchase agreements often offer a higher yield than
investments directly in government securities. In deciding whether an investment
in a repurchase agreement is more attractive than a direct investment in
government securities, the fund considers the possible loss of this tax
advantage.

PRINCIPAL RISKS

o CREDIT RISK - Issuers of money market instruments may fail to make payments
when due, or they may become less willing or less able to do so.

o INTEREST RATE RISK - The value of the fund's investments generally will fall
when short-term interest rates rise and its yield will tend to lag behind
prevailing rates.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

-------------------------------------=====--------------------------------------
6
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves Government Securities Fund

PERFORMANCE
--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund. The bar chart shows how the fund's performance has varied from year to
year. The bar chart shows Institutional shares because they were the only class
outstanding for all periods shown.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN ON INSTITUTIONAL SHARES (1992 IS THE FUND'S FIRST FULL CALENDAR
YEAR OF OPERATIONS)

CALENDAR YEAR TOTAL RETURN
------------- -------------
1990
1991
1992 3.53%
1993 2.94%
1994 3.93%
1995 5.57%
1996 5.17%
1997 5.30%
1998 5.24%
1999 4.91%

Total return January 1 to June 30, 2000 2.87%

Best quarter during years shown: 2nd quarter, 1995-- 1.39%
Worst quarter during years shown: 2nd quarter and 4th quarter, 1993-- 0.72%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

INSTITUTIONAL SHARES
(INCEPTION DATE) (6/3/91)
-------------- ------
One Year ...................... 4.91%
Five Years .................... 5.24%
Life of Class ................. 4.57%

----------

* Because no Financial Intermediary shares were outstanding for a full calendar
year, average annual total return for Financial Intermediary shares is not
included in the table. Performance for Financial Intermediary shares would be
lower because of the 0.25% shareholder servicing fee paid by those shares.

-------------------------------------=====--------------------------------------
7
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves Government Securities Fund

EXPENSES AND FEE TABLES
--------------------------------------------------------------------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

FINANCIAL
INSTITUTIONAL INTERMEDIARY
SHARES SHARES
----------------- ------------------
Management Fees .......................... 0.25% 0.25%
Distribution and/or Service (12b-1) Fees.. 0.00% 0.00%
Other Expenses
Shareholder Servicing Fee .............. 0.00% 0.25%
Miscellaneous Expenses* ................ 0.08% 0.08%
----- ----
0.08% 0.33%
------- -------
Total Annual Fund Operating Expenses ..... 0.33% 0.58%
======= =======
Expense Reimbursement* ................... 0.04% 0.04%
------- -------
Net Expenses* ............................ 0.29% 0.54%
======= =======

----------

* The fund and PaineWebber have entered into a written expense reimbursement
agreement. PaineWebber is contractually obligated to reimburse fund expenses
through August 31, 2001 to the extent that the fund's expenses otherwise
would exceed the "Net Expenses" rates for each class as shown above. The fund
has agreed to repay PaineWebber for those reimbursed expenses if it can do so
over the following three years without causing the fund's expenses in any of
those years to exceed those "Net Expenses" rates.

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Institutional Shares .............. $30 $102 $181 $414
Financial Intermediary Shares ..... 55 182 320 722

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8
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves Treasury Securities Fund

Treasury Securities Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
--------------------------------------------------------------------------------

FUND OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in U.S. Treasury money market instruments that are
supported by the full faith and credit of the United States. These investments
pay income that is generally exempt from state and local income tax.

PRINCIPAL RISKS

o CREDIT RISK - Issuers of money market instruments may fail to make payments
when due, or they may become less willing or less able to do so.

o INTEREST RATE RISK - The value of the fund's investments generally will fall
when short-term interest rates rise and its yield will tend to lag behind
prevailing rates.

More information about risks of an investment in the fund is provided below in
"More About Risks and Investment Strategies."

-------------------------------------=====--------------------------------------
9
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves Treasury Securities Fund

PERFORMANCE
--------------------------------------------------------------------------------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund. The bar chart shows how the fund's performance has varied from year to
year. The bar chart shows Institutional shares because they were the only class
outstanding for all the periods shown.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN ON INSTITUTIONAL SHARES (1992 IS THE FUND'S FIRST FULL CALENDAR
YEAR OF OPERATIONS)

CALENDAR YEAR TOTAL RETURN
------------- -------------
1990
1991
1992 3.34%
1993 2.72%
1994 3.93%
1995 5.47%
1996 4.97%
1997 5.16%
1998 4.94%
1999 4.47%

Total return January 1 to June 30, 2000 2.63%

Best quarter during years shown: 2nd quarter, 1995 -- 1.38%
Worst quarter during years shown: 1st quarter, 1993 -- 0.65%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

INSTITUTIONAL SHARES*
(INCEPTION DATE) (12/6/91)
-------------- ------
One Year ...................... 4.47%
Five Years .................... 5.00%
Life of Class ................. 4.37%

----------

* No Financial Intermediary shares were outstanding prior to December 31, 1999.
Performance for Financial Intermediary shares would be lower because of the
0.25% shareholder servicing fee paid by those shares.
-------------------------------------=====--------------------------------------
10
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves Treasury Securities Fund

EXPENSES AND FEE TABLES
--------------------------------------------------------------------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

FINANCIAL
INSTITUTIONAL INTERMEDIARY
SHARES SHARES
--------------- ----------------
Management Fees ............................ 0.25% 0.25%
Distribution and/or Service (12b-1) Fees ... 0.00% 0.00%
Other Expenses
Shareholder Servicing Fee ................ 0.00% 0.25%
Miscellaneous Expenses* .................. 0.10% 0.10%
---- ----
0.10% 0.35%
---- ----
Total Annual Fund Operating Expenses ....... 0.35% 0.60%
==== ====
Expense Reimbursement* ..................... 0.06% 0.06%
---- ----
Net Expenses* .............................. 0.29% 0.54%
==== ====

----------

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Institutional Shares ............... $30 $106 $190 $437
Financial Intermediary Shares ...... 55 186 329 744

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11
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Liquid Institutional Reserves
Money Market Fund Government Securities Fund Treasury Securities Fund

MORE ABOUT RISKS
AND INVESTMENT STRATEGIES
--------------------------------------------------------------------------------

PRINCIPAL RISKS

The main risks of investing in the funds are described below. Not all of these
risks apply to each fund. You can find a list of the main risks that apply to a
particular fund under the "Investment Objective, Strategies and Risks" heading
for that fund.

Other risks of investing in a fund, along with further detail about some of the
risks described below, are discussed in the funds' Statement of Additional
Information ("SAI"). Information on how you can obtain the SAI is on the back
cover of this prospectus.

CREDIT RISK. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even the highest quality money market
instruments are subject to some credit risk.

INTEREST RATE RISK. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of a fund's investments will fall. Also, a fund's yield
will tend to lag behind changes in prevailing short-term interest rates. This
means that a fund's income will tend to rise more slowly than increases in
short-term interest rates. Similarly, when short-term interest rates are
falling, a fund's income generally will tend to fall more slowly.

FOREIGN INVESTING RISK. Foreign investing involves risks relating to political,
social and economic developments abroad to a greater extent than investing in
the securities of U.S. issuers. In addition, there are differences between U.S.
and foreign regulatory requirements and market practices.

ADDITIONAL INVESTMENT STRATEGIES

Like all money market funds, the funds are subject to maturity, quality and
diversification requirements designed to help them maintain a stable price of
$1.00 per share. In addition, Mitchell Hutchins may use a number of professional
money management techniques to respond to changing economic and money market
conditions and to shifts in fiscal and monetary policy. These techniques include
varying a fund's composition and weighted average maturity based upon its
assessment of the relative values of various money market instruments and future
interest rate patterns. Mitchell Hutchins also may buy or sell money market
instruments to take advantage of yield differences.

Each fund may invest to a limited extent in shares of similar money market funds
that, for Government Securities Fund and Treasury Securities Fund, have like tax
characteristics.

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12
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Liquid Institutional Reserves
Money Market Fund Government Securities Fund Treasury Securities Fund

MANAGING YOUR FUND ACCOUNT
--------------------------------------------------------------------------------

BUYING SHARES

The funds accept the settlement of purchase orders only in available federal
funds. Federal funds are funds deposited by a commercial bank in an account at a
Federal Reserve Bank that can be transferred to a similar account of another
bank in one day and thus may be made immediately available to a fund through its
custodian.

Each fund offers two separate classes of shares - Institutional shares and
Financial Intermediary shares - as an economical and convenient means for
institutions to invest short-term funds that they hold for their own account or
hold or manage for others.

o You may purchase Institutional shares if you are an institutional investor.
PaineWebber Incorporated, the distributor of the fund's shares may, in its
discretion, make Institutional shares available to individuals or other
entities.

o You may purchase Financial Intermediary shares only if you are a bank or
other financial intermediary buying the shares for the benefit of your
customers. Financial Intermediary shares bear special fees (paid by the fund)
at the annual rate of 0.25% of average net assets attributable to financial
intermediary shares for services that these financial intermediaries provide
to the beneficial owners of the Financial Intermediary shares.

Unless you specify otherwise, the funds will treat all purchase orders as orders
for Institutional shares.

You may buy fund shares by calling the funds' transfer agent, PFPC Inc., at
1-888-LIR-FUND and speaking to a representative. You may also buy fund shares by
contacting your Financial Advisor at PaineWebber or its correspondent firms, who
are then responsible for sending the order to the transfer agent. The
availability of fund shares to customers of PaineWebber's correspondent firms
may vary depending on the arrangements between PaineWebber and those firms.

You buy shares at the net asset value next determined after receipt and
acceptance of your purchase order by the transfer agent, subject to a fund
receiving payment the same day. Your purchase order will be effective only if
you wire payment in federal funds on the same business day that you place your
order, and your wire must actually be credited to the funds' bank account by a
Federal Reserve Bank that day. Otherwise, the order will be rejected. A business
day is any day that the funds' custodian, the funds' transfer agent and
PaineWebber are open for business.

Orders to buy shares of Money Market Fund and Government Securities Fund
received before noon (Eastern time), will normally be executed as of noon
(Eastern time). Orders received after noon (Eastern time) but before 2:30 p.m.
(Eastern time), will normally be executed as of 2:30 p.m. (Eastern time). Orders
received after 2:30 p.m. (Eastern time) and before 4:30 p.m. (Eastern time),
will normally be executed as of 4:30 p.m. (Eastern time).

Orders to buy shares of Treasury Securities Fund received before noon (Eastern
time), will normally be executed as of noon (Eastern time). Orders received
after noon (Eastern time) but before 2:30 p.m. (Eastern time), will normally be
executed as of 2:30 p.m. (Eastern time).

Each fund reserves the right to advance the time by which orders to buy or sell
its shares must be received by the transfer agent. A fund may do this when the
primary government securities dealers are either closed for business or close
early, or trading in money market instruments is limited due to national
holidays. For example, a fund may advance the time by which orders to buy or
sell its shares must be received by the transfer agent on any day that the New
York Stock Exchange ("NYSE") closes early because trading has been halted for
the day or The Bond Market Association ("BMA") (formerly known as the Public
Securities Association or "PSA") recommends that the securities markets close
early. Frequently, markets close on the afternoon of a business day prior to a
national holiday. Of course, if a fund's usual deadline for receipt by the
transfer agent of orders to buy or sell its shares is earlier than the time at
which markets close, the fund expects to follow its normal schedule. Investors
may call toll-free 1-888-LIR-Fund to inquire whether a fund intends to close
early on a given day.

The funds and PaineWebber reserve the right to reject a purchase order or
suspend the offering of fund shares. PaineWebber may return without notice money
wired to a fund where the investor fails to place a corresponding share purchase
order.

-------------------------------------=====--------------------------------------
13
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----------------------------------===========-----------------------------------
Liquid Institutional Reserves
Money Market Fund Government Securities Fund Treasury Securities Fund

WIRE INSTRUCTIONS

Instruct your bank to transfer federal funds by wire to:

Mitchell Hutchins Institutional Funds
c/o State Street Bank and Trust Company
CR DDA A/C #4738-489-6
FFC PW A/C # ______________________________
[INSERT PAINEWEBBER ACCOUNT NAME AND ACCOUNT NUMBER]
LIR ___________________________________ Fund
[INSERT MONEY MARKET, GOVERNMENT OR TREASURY]
ABA #011000028

PaineWebber or your bank may impose a service charge for wire transfers.

MINIMUM INVESTMENTS:

Money Market Fund and Government Securities Fund (or a combination of both):

To open an account ............. $1,000,000
To add to an account ........... None

Treasury Securities Fund:
To open an account ............. $250,000
To add to an account ........... None

PaineWebber may waive these minimums. A fund may change its minimum investment
requirements at any time. Investments must be denominated in U.S. dollars.

Financial intermediaries may establish different minimums for their customers
who purchase Financial Intermediary shares through them, provided that the
aggregate amounts purchased meet the above minimums. You may obtain additional
information about these minimums from your financial intermediary.

REMOTE TRADE ENTRY

The funds may offer an electronic trade order entry (RTE) capability to eligible
institutional investors who meet certain conditions. For more information on
this option, contact your Financial Advisor or the transfer agent at
1-888-LIR-FUND.

SELLING SHARES

You may sell your shares by calling the transfer agent at
1-888-LIR-FUND and speaking with a representative. You also may sell your shares
by contacting your Financial Advisor or correspondent firm (if you previously
designated them to give instructions to the transfer agent on your behalf); they
are then responsible for sending the order to the transfer agent.

Orders to sell shares of Money Market Fund and Government Securities Fund
received before noon (Eastern time), will normally be executed as of noon
(Eastern time). Orders received after noon (Eastern time) but before 2:30 p.m.
(Eastern time), will normally be executed as of 2:30 p.m. (Eastern time). Orders
received after 2:30 p.m. (Eastern time) and before 4:30 p.m. (Eastern time),
will normally be executed as of 4:30 p.m. (Eastern time).

Orders to sell shares of Treasury Securities Fund received before noon (Eastern
time), will normally be executed as of noon (Eastern time). Orders received
after noon (Eastern time) but before 2:30 p.m. (Eastern time), will normally be
executed as of 2:30 p.m. (Eastern time).

As noted above under "Buying Shares," the funds may advance the time for the
transfer agent's receipt of orders to sell shares (e.g., days on which
securities markets close early prior to a national holiday).

Your sales proceeds will be paid in federal funds wired to one or more accounts
you have designated, normally on the business day the sale order is accepted. If
you sell all the shares you own, dividends accrued for the month to date will be
paid in federal funds and wired at the same time to the bank account(s) that you
designate.

Your bank account may not receive the proceeds in a timely manner if a Federal
Reserve Bank is experiencing delay in transfer of funds. Neither the funds,
PaineWebber nor the transfer agent is responsible for the performance of your
bank or any of its intermediaries.

The transfer agent will process your orders to sell shares only if you have on
file with it a properly completed account application, with a signature
guaranteed or other authentication acceptable to the transfer agent. The account
application requires you to designate the bank account(s) or PaineWebber account
for wiring sales proceeds. You must submit any change in the designated
account(s) for sale proceeds in a form acceptable to the transfer agent. The
transfer agent will not place the sales order if the information you provide
does not correspond to the information on your application.

If you have additional questions on selling shares, you should contact your
Financial Advisor or call the transfer agent at 1-888-LIR-FUND.

EXCHANGING SHARES

You may exchange shares of a fund for shares of the same class of another fund
or Mitchell Hutchins LIR Select Money Fund. Mitchell Hutchins LIR Select Money
Fund has a $10,000,000 minimum for initial purchases and a

-------------------------------------=====--------------------------------------
14
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves
Money Market Fund Government Securities Fund Treasury Securities Fund

$100,000 minimum for subsequent purchases. These minimums apply to initial and
subsequent purchases made through an exchange of shares. All exchanges are based
on the next determined net asset value per share.

Exchange orders are accepted up until 2:30 p.m. (Eastern time). Exchange orders
received after that time will not be effected, and you will have to place an
exchange order before that time on the following business day if you still wish
to effect an exchange. If you exchange all your fund shares, the dividends
accrued on those shares for the month to date also will be invested in the
shares of the other fund into which the exchange is made.

You can place an exchange order by calling the transfer agent at 1-888-LIR-FUND
and speaking with a representative. You also can place an exchange order through
a PaineWebber Financial Advisor or correspondent firm (if you previously
designated them to give instructions to the transfer agent on your behalf), who
is then responsible for sending the order to the transfer agent. You may
exchange Financial Intermediary shares only if you are a bank or other financial
intermediary exchanging the shares for the benefit of your customers.

Shareholders making their initial purchase of another fund through an exchange
should allow more time and must provide the transfer agent with a properly
completed account application for the new fund. These exchange orders should be
received by the transfer agent at least one half hour before the previously
mentioned deadline to allow the transfer agent sufficient time to establish an
account in the new fund in the investor's name. Otherwise the transfer agent may
not be able to effect the exchange.

Exchange transactions must meet the minimum initial investment of the new fund.
There is no minimum for subsequent exchanges between fund accounts once they
have been activated except as noted above.

A fund may modify or terminate the exchange privilege at any time.

ADDITIONAL INFORMATION ABOUT YOUR ACCOUNT

FINANCIAL INTERMEDIARY SHARES. Financial intermediaries purchasing or holding
shares for their customer accounts may charge those customers for cash
management and other services provided in connection with their accounts. These
charges may include account maintenance fees, compensating balance requirements
or fees based on account transactions, assets or income. The dividends payable
to the financial intermediaries' customers, who are the beneficial owners of the
shares, will be lower than those on Institutional shares by the amount of the
fees paid by the fund for shareholder services. A customer should consider the
terms of his account with a financial intermediary before purchasing shares.

A financial intermediary buying or selling shares for its customers is
responsible for transmitting orders to the transfer agent in accordance with its
customer agreements and the procedures noted above.

INSTITUTIONAL SHARES. PaineWebber or Mitchell Hutchins (not the fund) may pay
shareholder servicing fees to financial institutions that make Institutional
shares available to their customers. The amount of these fees will be negotiated
between PaineWebber or Mitchell Hutchins and the financial institution.

PRICING AND VALUATION

The price of fund shares is based on net asset value and is determined
separately for each class of shares. The net asset value is the total value of a
fund divided by the total number of shares outstanding. In determining net asset
value, each fund values its securities at their amortized cost. This method uses
a constant amortization to maturity of the difference between the cost of the
instrument to the fund and the amount due at maturity. Each fund's net asset
value per share is expected to be $1.00 per share, although this value is not
guaranteed.

The net asset value per share for both Money Market Fund and Government
Securities Fund is normally determined three times each Business Day at

o 12:00 p.m. (Eastern time);
o 2:30 p.m. (Eastern time); and
o 4:30 p.m. (Eastern time).

The net asset value per share for Treasury Securities Fund is normally
determined twice each Business Day at

o 12:00 p.m. (Eastern time) and
o 2:30 p.m. (Eastern time).

Your price for buying or selling shares will be the net asset value that is next
calculated after a fund accepts your order.

On any day that a fund determines to advance the time by which orders to buy or
sell its shares must be received by the transfer agent as described above under
"Buying Shares," the time for determination of the fund's net asset value per
share will be as of the same time the fund has determined to cease accepting
orders to buy or sell its shares. The fund will not price its shares again on
that business day even if it normally prices its shares more than once each
business day.

-------------------------------------=====--------------------------------------
15
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves
Money Market Fund Government Securities Fund Treasury Securities Fund

MANAGEMENT
--------------------------------------------------------------------------------

INVESTMENT ADVISER AND SUB-ADVISER

PaineWebber is the investment adviser and administrator of the funds and
distributor of their shares. Mitchell Hutchins Asset Management Inc. is each
fund's sub-adviser and sub-administrator. PaineWebber is located at 1285 Avenue
of the Americas, New York, New York, 10019-6028 and Mitchell Hutchins is located
at 51 West 52nd Street, New York, New York, 10019-6114. Mitchell Hutchins is a
wholly owned asset management subsidiary of PaineWebber, which is wholly owned
by Paine Webber Group Inc. ("PW Group"), a publicly owned financial services
holding company. On July 31, 2000, PaineWebber or Mitchell Hutchins was the
adviser or sub-adviser of 31 investment companies with 75 separate portfolios
and aggregate assets of approximately $53.3 billion.

On July 12, 2000, PW Group and UBS AG ("UBS") announced that they had entered
into an agreement and plan of merger under which PW Group will merge into a
wholly owned subsidiary of UBS. If all required approvals are obtained and the
required conditions are satisfied, PW Group and UBS expect to complete the
transaction in the fourth quarter of 2000. UBS, with headquarters in Zurich,
Switzerland, is an internationally diversified organization with operations in
many areas of the financial services industry.

ADVISORY FEES

The funds paid advisory and administration fees to PaineWebber for the most
recent fiscal year ended April 30, 2000 at the following annual rates based on
average net assets:

Money Market Fund ................... 0.25%
Government Securities Fund .......... 0.25%
Treasury Securities Fund ............ 0.25%

OTHER INFORMATION. Money Market Fund and Government Securities Fund will
maintain a rating from one or more rating agencies that provide ratings on money
market funds. There can be no assurance that either fund will maintain any
particular rating or maintain it with a particular rating agency.

-------------------------------------=====--------------------------------------
16
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves
Money Market Fund Government Securities Fund Treasury Securities Fund

DIVIDENDS AND TAXES
--------------------------------------------------------------------------------

DIVIDENDS

Each fund declares dividends daily and pays them monthly. Dividends are paid on
the last business day of a month or upon the sale of all the fund shares in a
shareholder's account.

Each fund distributes any net short-term capital gain annually and anticipates
that any short-term capital gain distribution would be declared during the month
of December in a given year. A fund may make more frequent distributions if
necessary to maintain its share price at $1.00.

Shares earn dividends on the day they are purchased but do not earn dividends on
the day they are sold.

Dividends on Financial Intermediary shares of a fund will be lower than
dividends on its Institutional shares because of the higher expenses borne by
Financial Intermediary shares.

You will receive dividends in additional shares of the same class unless you
elect to have the dividends transmitted by federal funds wire to either a
designated bank account or PaineWebber account. You must notify the transfer
agent in writing in a form acceptable to the transfer agent at least two
business days prior to the end of the month if you wish to change this election
for a particular monthly dividend.

TAXES

The dividends that you receive from a fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. Shareholders not subject to tax on their income will not be required to
pay tax on amounts distributed to them. The funds' dividends will not qualify
for the dividends-received deduction for corporations.

Some states and localities do not tax dividends that are attributable to
interest on U.S. Treasury securities and certain other government securities
under certain circumstances.

The funds expect that their dividends will be taxed as ordinary income. Each
fund will tell you annually how you should treat its dividends for tax purposes.
You should not recognize any capital gain on the sale of your shares in a fund
so long as the fund maintains a share price of $1.00.

-------------------------------------=====--------------------------------------
17
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves
Money Market Fund Government Securities Fund Treasury Securities Fund

FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

The following financial highlights tables are intended to help you understand
the funds' financial performance for the past 5 years. Certain information
reflects financial results for a single fund share. In the tables, "total
investment return" represents the rate that an investor would have earned on an
investment in the fund (assuming reinvestment of all dividends). Financial
Intermediary shares were not outstanding during the fiscal year ended April 30,
2000 for Government Securities Fund or Treasury Securities Fund and were
outstanding for only limited periods of time prior to that fiscal year for Money
Market Fund and Government Securities Fund.

The information in the financial highlights has been audited by Ernst & Young
LLP, independent auditors, whose reports, along with the funds' financial
statements, are included in the funds' annual report to shareholders. The annual
report may be obtained without charge by calling 1-888-LIR-FUND.

-------------------------------------=====--------------------------------------
18
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves Money Market Fund

FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MONEY MARKET FUND
------------------------------------------------------------------------------------------
FINANCIAL
INSTITUTIONAL SHARES INTERMEDIARY SHARES**
------------------------------------------------------------ ---------------------------
FOR THE
FOR THE PERIOD
YEARS ENDED JANUARY 14,
FOR THE YEARS ENDED APRIL 30, APRIL 30, 1998+ TO
------------------------------------------------------------ ----------------- APRIL 30,
2000 1999 1998 1997 1996 2000 1999 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 ............... 0.053 0.051 0.054 0.052 0.055 0.050 0.048 0.015
---------- ---------- ---------- ---------- -------- ------- ------- -------
Dividends from net
investment income ................. (0.053) (0.051) (0.054) (0.052) (0.055) (0.050) (0.048) (0.015)
---------- ---------- ---------- ---------- -------- ------- ------- -------
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(1) .......... 5.40% 5.22% 5.52% 5.33% 5.61% 5.14% 4.96% 1.51%
========== ========== ========== ========== ======== ======= ======= =======

Ratios/Supplemental Data:
Net assets, end of period (000's) ... $1,836,114 $2,036,379 $1,591,789 $1,246,799 $421,878 $64,634 $12,002 $16,302
Expenses to average net assets
net of waivers/reimbursements
from adviser ...................... 0.28% 0.26% 0.29% 0.25% 0.31% 0.53% 0.51% 0.54%*
Expenses to average net assets
before waivers/reimbursements
from adviser ...................... 0.30% 0.31% 0.34% 0.30% 0.37% 0.55% 0.56% 0.59%*
Net investment income to average
net assets net of waivers/
reimbursements from adviser ....... 5.26% 5.07% 5.38% 5.24% 5.47% 5.05% 4.82% 5.13%*
Net investment income to average
net assets before waivers/
reimbursements from adviser ....... 5.24% 5.02% 5.33% 5.19% 5.41% 5.03% 4.77% 5.07%*
</TABLE>

----------

+ Reissuance of shares.

* Annualized.

** For the period May 1, 1995 to January 13, 1998 there were no outstanding
Financial Intermediary Shares.

(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>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves Government Securities Fund

FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
------------------------------------------------------------
INSTITUTIONAL SHARES
------------------------------------------------------------
FOR THE YEARS ENDED APRIL 30,
------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<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 ............................................. 0.051 0.049 0.052 0.051 0.053
Net realized gains from investment transactions ................... -- -- -- -- 0.001
-------- -------- -------- -------- --------
Net increase from investment operations ........................... 0.051 0.049 0.052 0.051 0.054
-------- -------- -------- -------- --------
Dividends from net investment income .............................. (0.051) (0.049) (0.052) (0.051) (0.054)
-------- -------- -------- -------- --------
Net asset value, end of year ...................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total investment return(1) ........................................ 5.22% 5.04% 5.32% 5.20% 5.50%
======== ======== ======== ======== ========

Ratios/Supplemental Data:
Net assets, end of year (000's) ................................... $121,897 $138,783 $100,140 $106,843 $ 43,770
Expenses to average net assets net of waivers/reimbursements
from adviser .................................................... 0.29% 0.28% 0.30% 0.30% 0.32%
Expenses to average net assets before waivers/reimbursements
from adviser .................................................... 0.33% 0.33% 0.59% 0.53% 0.56%
Net investment income to average net assets net of
waivers/reimbursements from adviser ............................. 5.10% 4.90% 5.21% 5.09% 5.52%
Net investment income to average net assets before
waivers/reimbursements from adviser ............................. 5.06% 4.85% 4.91% 4.86% 5.28%
</TABLE>

----------

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year 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 year reported.

-------------------------------------=====--------------------------------------
20
<PAGE>

----------------------------------===========-----------------------------------
Liquid Institutional Reserves Treasury Securities Fund

FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
TREASURY SECURITIES FUND
------------------------------------------------------------
INSTITUTIONAL SHARES
------------------------------------------------------------
FOR THE YEARS ENDED APRIL 30,
------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<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 ............................................. 0.049 0.046 0.051 0.049 0.048
Net realized gains from investment transactions ................... -- -- -- -- 0.003
-------- -------- -------- -------- --------
Net increase from investment operations ........................... 0.049 0.046 0.051 0.049 0.051
-------- -------- -------- -------- --------
Dividends from net investment income .............................. (0.047) (0.046) (0.051) (0.049) (0.051)
Distributions from net realized gains from investment
transactions .................................................... (0.002) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to shareholders ................. (0.049) (0.046) (0.051) (0.049) (0.051)
-------- -------- -------- -------- --------
Net asset value, end of year ...................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total investment return(1) ........................................ 4.97% 4.68% 5.23% 5.02% 5.23%
======== ======== ======== ======== ========

Ratios/Supplemental Data:
Net assets, end of year (000's) ................................... $118,525 $179,227 $179,708 $ 65,893 $ 19,624
Expenses to average net assets net of
waivers/reimbursements from adviser ............................. 0.29% 0.28% 0.30% 0.30% 0.32%
Expenses to average net assets before
waivers/reimbursements from adviser ............................. 0.35% 0.33% 0.47% 0.72% 0.94%
Net investment income to average net assets net of
waivers/reimbursements from adviser ............................. 4.61% 4.57% 5.09% 4.97% 5.71%
Net investment income to average net assets before
waivers/reimbursements from adviser ............................. 4.55% 4.52% 4.92% 4.56% 5.09%
</TABLE>

----------

-------------------------------------=====--------------------------------------
21
<PAGE>

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<PAGE>

(This page has been left blank intentionally.)

<PAGE>

TICKER SYMBOL: Institutional Shares--
Money Market Fund LIRXX
Government Securities Fund LIGXX
Treasury Securities Fund LISXX

If you want more information about the funds, the following documents are
available free upon request:

ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the funds' investments is available in the funds'
annual and semi-annual reports to shareholders.

STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.

You may discuss your questions about a fund by contacting your PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting the funds directly at 1-888-LIR-FUND.

You may review and copy information about the funds, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You may obtain information about the operations of the SEC's Public
Reference Room by calling the SEC at 1-202-942-8900. You can get text-only
copies of information about the fund:

o For a fee, by electronic request at [email protected] or by writing the
SEC's Public Reference Room, Washington, D.C. 20549-0102; or

o Free, from the EDGAR Database on the SEC's Internet website at:
http://www.sec.gov

Liquid Institutional Reserves
-- Money Market Fund
-- Government Securities Fund
-- Treasury Securities Fund
Investment Company Act File No. 811-06281

LIQUID INSTITUTIONAL RESERVES

Prospectus

MONEY MARKET FUND

GOVERNMENT SECURITIES FUND

TREASURY SECURITIES FUND

September 1, 2000

<PAGE>

LIQUID INSTITUTIONAL RESERVES
MONEY MARKET FUND
GOVERNMENT SECURITIES FUND
TREASURY SECURITIES FUND

51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114

STATEMENT OF ADDITIONAL INFORMATION

Money Market Fund, Government Securities Fund and Treasury Securities Fund
are professionally managed money market funds organized as diversified series of
Liquid Institutional Reserves ("Trust").

The funds' investment adviser, administrator and distributor is PaineWebber
Incorporated ("PaineWebber"); their sub-adviser is Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a wholly owned asset management
subsidiary of PaineWebber. Mitchell Hutchins also serves as the funds'
sub-administrator.

Portions of the funds' Annual Report to Shareholders are incorporated by
reference into this Statement of Additional Information ("SAI"). The Annual
Report accompanies this SAI. You may obtain an additional copy of the funds'
Annual Report without charge by calling toll-free 1-888-LIR-FUND.

This SAI is not a prospectus and should be read only in conjunction with
the fund's current Prospectus, dated September 1, 2000. A copy of the
Prospectus may be obtained by calling any PaineWebber Financial Advisor or
correspondent firm or by calling toll-free 1-888-LIR-FUND. Customers of banks
and other financial intermediaries that purchase the funds' Financial
Intermediary shares may obtain the Prospectus from their financial
intermediaries. This SAI is dated September 1, 2000.

TABLE OF CONTENTS
PAGE
The Funds and Their Investment Policies ................................... 2
The Funds' Investments, Related Risks and Limitations ..................... 3
Organization of the Trust; Trustees and Officers;
Principal Holders and Management Ownership of Securities ............... 9
Investment Advisory, Administration
and Distribution Arrangements ............................................. 16
Portfolio Transactions .................................................... 19
Additional Information Regarding Redemptions .............................. 20
Valuation of Shares ....................................................... 20
Performance Information ................................................... 21
Taxes ..................................................................... 23
Other Information ......................................................... 24
Financial Statements ...................................................... 25

<PAGE>

THE FUNDS AND THEIR INVESTMENT POLICIES

Each fund's investment objective may not be changed without shareholder
approval. Except where noted, the other investment policies of each fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that a fund will achieve its investment objective.

Each fund is a money market fund that invests in high quality money market
instruments that have, or are deemed to have, remaining maturities of 13 months
or less. Money market instruments are short-term debt-obligations and similar
securities. They also include longer term bonds that have variable interest
rates or other special features that give them the financial characteristics of
short-term debt. Each fund may purchase only those obligations that Mitchell
Hutchins determines, pursuant to procedures adopted by the board, present
minimal credit risks and are "First Tier Securities" as defined in Rule 2a-7
under the Investment Company Act of 1940, as amended ("Investment Company Act").
Each fund maintains a dollar-weighted average portfolio maturity of 90 days or
less.

MONEY MARKET FUND'S investment objective is to earn high current income to
the extent consistent with the preservation of capital and the maintenance of
liquidity through investments in a diversified portfolio of high quality,
short-term, U.S. dollar denominated money market instruments. The fund's
investments include (1) U.S. and foreign government securities, (2) obligations
of U.S. and foreign banks, (3) commercial paper and other short-term obligations
of U.S. and foreign corporations, partnerships, trusts and similar entities, (4)
repurchase agreements and (5) investment company securities.

The fund may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks only if the institution has total assets at the time of purchase in excess
of $1.5 billion. The fund's investments in non-negotiable time deposits of these
institutions will be considered illiquid if they have maturities greater than
seven calendar days.

The fund generally may invest no more than 5% of its total assets in the
securities of a single issuer (other than U.S. government securities), except
that the fund may invest up to 25% of its total assets in First Tier Securities
of a single issuer for a period of up to three business days. The fund may
purchase only U.S. dollar denominated obligations of foreign issuers.

The fund may invest up to 10% of its net assets in illiquid securities. The
fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33 1/3% of its total assets. The fund
may borrow from banks or through reverse repurchase agreements for temporary
purposes, but not in excess of 33 1/3% of its total assets. The fund may invest
in the securities of other investment companies.

GOVERNMENT SECURITIES FUND'S investment objective is to earn high current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity through investments in a diversified portfolio of high
quality, short-term, U.S. dollar denominated money market instruments. The fund
invests substantially all its assets in U.S. government securities and in
repurchase agreements secured by such securities. These investments also may
include securities of other investment companies that invest only in these
instruments. Income from repurchase agreements may not be exempt from state and
local income taxation. Under extraordinary circumstances, however, the fund may
temporarily hold cash.

Each investor should consult its own tax adviser to determine whether
distributions from the fund derived from interest on its portfolio investments
are exempt from state income taxation in the investor's own state.

2
<PAGE>

TREASURY SECURITIES FUND'S investment objective is to earn high current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity through investments in a diversified portfolio of high
quality, short-term, U.S. dollar denominated money market instruments. The fund
invests substantially all its assets in securities issued by the U.S. Treasury,
which are supported by the full faith and credit of the United States. The
interest income on these securities is generally exempt from state and local
income tax. The fund will not enter into repurchase agreements.

THE FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS

The following supplements the information contained in the Prospectus and
above concerning each fund's investments, related risks and limitations. Except
as otherwise indicated in the Prospectus or the SAI, the funds have established
no policy limitations on their ability to use the investments or techniques
discussed in these documents. New forms of money market instruments continue to
be developed. The funds may invest in these instruments to the extent consistent
with their investment objectives.

YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER
SECURITIES. The yields on the money market instruments in which the funds invest
are dependent on a variety of factors, including general money market
conditions, conditions in the particular market for the obligation, the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue. The ratings assigned by nationally
recognized statistical rating organizations ("rating agencies") represent their
opinions as to the quality of the obligations they undertake to rate. Ratings,
however, are general and are not absolute standards of quality. Consequently,
obligations with the same rating, maturity and interest rate may have different
market prices.

Subsequent to its purchase by a fund, an issue may cease to be rated or its
rating may be reduced. If a security in a fund's portfolio ceases to be a First
Tier Security or Mitchell Hutchins becomes aware that a security has received a
rating below the second highest rating by any rating agency, Mitchell Hutchins
and, in certain cases, the fund's board, will consider whether the fund should
continue to hold the obligation. First Tier Securities include U.S. government
securities and securities of other registered investment companies that are
money market funds. Other First Tier Securities are either (1) rated in the
highest short-term rating category by at least two rating agencies, (2) rated in
the highest short-term rating category by a single rating agency if only that
rating agency has assigned the obligation a short-term rating, (3) issued by an
issuer that has received such a short-term rating with respect to a security
that is comparable in priority and security, (4) subject to a guarantee rated in
the highest short-term rating category or issued by a guarantor that has
received the highest short-term rating for a comparable debt obligation or (5)
unrated, but determined by Mitchell Hutchins to be of comparable quality. A
First Tier Security rated in the highest short-term category at the time of
purchase that subsequently receives a rating below the highest rating category
from a different rating agency may continue to be considered a First Tier
Security.

U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. Treasury
(such as Treasury bills, notes or bonds) and obligations issued or guaranteed as
to principal and interest (but not as to market value) by the U.S. government,
its agencies or its instrumentalities. These U.S. government securities may
include mortgage-backed securities issued or guaranteed by government agencies
or government-sponsored enterprises. Other U.S. government securities may be
backed by the full faith and credit of the U.S. government or supported
primarily or solely by the creditworthiness of the government-related issuer or,
in the case of mortgage-backed securities, by pools of assets.

U.S. government securities also include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury,
which are traded independently under the Separate Trading of Registered

3
<PAGE>

Interest and Principal of Securities ("STRIPS") program. Under the STRIPS
programs, the principal and interest components are individually numbered and
separately issued by the U.S. Treasury.

COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. Money Market Fund may
purchase commercial paper, which includes short-term obligations issued by
corporations, partnerships, trusts or other entities to finance short-term
credit needs. The fund also may purchase other types of non-convertible debt
obligations subject to maturity constraints imposed by the Securities and
Exchange Commission ("SEC"). Descriptions of certain types of short-term
obligations are provided below.

ASSET-BACKED SECURITIES. Money Market Fund and Government Securities Fund
may invest in securities that are comprised of financial assets that have been
securitized through the use of trusts or special purpose corporations or other
entities. Such assets may include motor vehicle and other installment sales
contracts, home equity loans, leases of various types of real and personal
property and receivables from revolving credit (credit card) agreements or other
types of financial assets. Payments or distributions of principal and interest
may be guaranteed up to a certain amount and for a certain time period by a
letter of credit or pool insurance policy issued by a financial institution
unaffiliated with the issuer, or other credit enhancements may be present. See
"The Funds' Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements."

VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. Money Market
Fund and Government Securities Fund may purchase variable and floating rate
securities with remaining maturities in excess of 13 months issued by U.S.
government agencies or instrumentalities or guaranteed by the U.S. government.
In addition, Money Market Fund may purchase variable and floating rate
securities of other issuers. The yields on these securities are adjusted in
relation to changes in specific rates, such as the prime rate, and different
securities may have different adjustment rates. Certain of these obligations
carry a demand feature that gives a fund the right to tender them back to a
specified party, usually the issuer or a remarketing agent, prior to maturity. A
fund's investments in variable and floating rate securities must comply with
conditions established by the SEC under which they may be considered to have
remaining maturities of 13 months or less. Money Market Fund will purchase
variable and floating rate securities of non-U.S. government issuers that have
remaining maturities of more than 13 months only if the securities are subject
to a demand feature exercisable within 13 months or less. See "The Funds'
Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements."

Generally, a fund may exercise demand features (1) upon a default under the
terms of the underlying security, (2) to maintain its portfolio in accordance
with its investment objective and policies or applicable legal or regulatory
requirements or (3) as needed to provide liquidity to the fund in order to meet
redemption requests. The ability of a bank or other financial institution to
fulfill its obligations under a letter of credit, guarantee or other liquidity
arrangement might be affected by possible financial difficulties of its
borrowers, adverse interest rate or economic conditions, regulatory limitations
or other factors. The interest rate on floating rate or variable rate securities
ordinarily is readjusted on the basis of the prime rate of the bank that
originated the financing or some other index or published rate, such as the
90-day U.S. Treasury bill rate, or is otherwise reset to reflect market rates of
interest. Generally, these interest rate adjustments cause the market value of
floating rate and variable rate securities to fluctuate less than the market
value of fixed rate securities.

VARIABLE AMOUNT MASTER DEMAND NOTES. Money Market Fund may invest in
variable amount master demand notes, which are unsecured redeemable obligations
that permit investment of varying amounts at fluctuating interest rates under a
direct agreement between the fund and an issuer. The principal amount of these
notes may be increased from time to time by the parties (subject to specified
maximums) or decreased by the fund or the issuer. These notes are payable on
demand (subject to any applicable advance notice provisions) and may or may not
be rated.

INVESTING IN FOREIGN SECURITIES. Money Market Fund's investments in U.S.
dollar denominated securities of foreign issuers may involve risks that are
different from investments in U.S. issuers. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect the payment of principal or interest
on the fund's investments. Additionally, there may be less publicly available
information about foreign issuers because they may not be subject to the same
regulatory requirements as domestic issuers.

4
<PAGE>

CREDIT AND LIQUIDITY ENHANCEMENTS. Money Market Fund may invest in
securities that have credit or liquidity enhancements or may purchase these
types of enhancements in the secondary market. Such enhancements may be
structured as demand features that permit the fund to sell the instrument at
designated times and prices. These credit and liquidity enhancements may be
backed by letters of credit or other instruments provided by banks or other
financial institutions whose credit standing affects the credit quality of the
underlying obligation. Changes in the credit quality of these financial
institutions could cause losses to the fund and affect its share price. The
credit and liquidity enhancements may have conditions that limit the ability of
the fund to use them when the fund wishes to do so.

ILLIQUID SECURITIES. The term "illiquid securities" means securities that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which a fund has valued the securities and includes,
among other things, repurchase agreements maturing in more than seven days and
restricted securities other than those Mitchell Hutchins has determined are
liquid pursuant to guidelines established by the board. A fund may not be able
to readily liquidate its investments in illiquid securities and may have to sell
other investments if necessary to raise cash to meet its obligations. The lack
of a liquid secondary market for illiquid securities may make it more difficult
for a fund to assign a value to those securities for purposes of valuing its
portfolio and calculating its net asset value.

Restricted securities are not registered under the Securities Act of 1933,
as amended ("Securities Act") and may be sold only in privately negotiated or
other exempted transactions or after a registration statement under the
Securities Act has become effective. Where registration is required, a fund may
be obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, a fund
might obtain a less favorable price than prevailed when it decided to sell.

Not all restricted securities are illiquid. A large institutional market
has developed for many U.S. and foreign securities that are not registered under
the Securities Act. Institutional investors generally will not seek to sell
these instruments to the general public, but instead will often depend either on
an efficient institutional market in which such unregistered securities can be
readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.

Institutional markets for restricted securities also have developed as a
result of Rule 144A , which establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a fund, however, could affect adversely the marketability of such portfolio
securities, and the fund might be unable to dispose of them promptly or at
favorable prices.

The board has delegated the function of making day-to-day determinations of
liquidity to Mitchell Hutchins pursuant to guidelines approved by the board.
Mitchell Hutchins takes into account a number of factors in reaching liquidity
decisions, which may include (1) the frequency of trades for the security, (2)
the number of dealers that make quotes for the security, (3) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how bids are solicited and the mechanics of transfer) and (4) the
existence of demand features or similar liquidity enhancements. Mitchell
Hutchins monitors the liquidity of restricted securities in each fund's
portfolio and reports periodically on such decisions to the board.

Mitchell Hutchins also monitors each fund's overall holdings of illiquid
securities. If a fund's holdings of illiquid securities exceed its limitation on
investments in illiquid securities for any reason (such as a particular security
becoming illiquid, changes in the relative market values of portfolio securities
or shareholder redemptions), Mitchell Hutchins will consider what action would
be in the best interests of the fund and its shareholders. Such

5
<PAGE>

action may include engaging in an orderly disposition of securities to reduce
the fund's holdings of illiquid securities. However, a fund is not required to
dispose of illiquid securities under these circumstances.

REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
fund purchases securities or other obligations from a bank or securities dealer
(or its affiliate) and simultaneously commits to resell them to the counterparty
at an agreed-upon date or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased obligations.
Securities or other obligations subject to repurchase agreements may have
maturities in excess of 13 months. The fund maintains custody of the underlying
obligations prior to their repurchase, either through its regular custodian or
through a special "tri-party" custodian or sub-custodian that maintains separate
accounts for both the fund and its counterparty. Thus, the obligation of the
counterparty to pay the repurchase price on the date agreed to or upon demand
is, in effect, secured by such obligations.

Repurchase agreements carry certain risks not associated with direct
investments in securities, including a possible decline in the market value of
the underlying obligations. If their value becomes less than the repurchase
price, plus any agreed-upon additional amount, the counterparty must provide
additional collateral so that at all times the collateral is at least equal to
the repurchase price plus any agreed-upon additional amount. The difference
between the total amount to be received upon repurchase of the obligations and
the price that was paid by the fund upon acquisition is accrued as interest and
included in its net investment income. Repurchase agreements involving
obligations other than U.S. government securities (such as commercial paper and
corporate bonds) may be subject to special risks and may not have the benefit of
certain protections in the event of the counterparty's insolvency. If the seller
or guarantor becomes insolvent, the fund may suffer delays, costs and possible
losses in connection with the disposition of collateral. The fund intends to
enter into repurchase agreements only in transactions with counterparties
believed by Mitchell Hutchins to present minimum credit risks.

REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the
sale of securities held by a fund subject to its agreement to repurchase the
securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to the fund's
limitation on borrowings and may be entered into only with banks or securities
dealers or their affiliates. While a reverse repurchase agreement is
outstanding, a fund will maintain, in a segregated account with its custodian,
cash or liquid securities, marked to market daily, in an amount at least equal
to its obligations under the reverse repurchase agreement. See "The Funds'
Investments, Related Risks and Limitations -- Segregated Accounts."

Reverse repurchase agreements involve the risk that the buyer of the
securities sold by a fund might be unable to deliver them when the fund seeks to
repurchase. If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, the buyer or trustee or receiver may
receive an extension of time to determine whether to enforce a fund's obligation
to repurchase the securities, and the fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. A fund may purchase securities
on a "when-issued" basis or may purchase or sell securities for delayed
delivery, I.E., for issuance or delivery to or by the fund later than the normal
settlement date at a stated price and yield. A fund generally would not pay for
such securities or start earning interest on them until they are received.
However, when a fund undertakes a when-issued or delayed delivery obligation, it
immediately assumes the risks of ownership, including the risks of price
fluctuation. Failure of the issuer to deliver a security purchased by a fund on
a when-issued or delayed delivery basis may result in the fund's incurring a
loss or missing an opportunity to make an alternative investment.

A security purchased on a when-issued or delayed delivery basis is recorded
as an asset on the commitment date and is subject to changes in market value,
generally based upon changes in the level of interest rates. Thus, fluctuation
in the value of the security from the time of the commitment date will affect a
fund's net asset value. When a fund commits to purchase securities on a
when-issued or delayed delivery basis, its custodian segregates assets to cover
the amount of the commitment. See "The Funds' Investments, Related Risks and
Limitations -- Segregated Accounts." A fund's when-issued and delayed delivery
purchase commitments could cause its net asset value per share to be more
volatile.

6
<PAGE>

INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each fund may invest in
securities of other money market funds, subject to limitations under the
Investment Company Act. Among other things, these limitations currently restrict
a fund's aggregate investments in other investment companies to no more than 10%
of its total assets. A fund's investments in certain private investment vehicles
are not subject to this restriction. The shares of other money market funds are
subject to the management fees and other expenses of those funds. At the same
time, a fund would continue to pay its own management fees and expenses with
respect to all its investments, including shares of other money market funds. A
fund may invest in the securities of other money market funds when Mitchell
Hutchins believes that (1) the amounts to be invested are too small or are
available too late in the day to be effectively invested in other money market
instruments, (2) shares of other money market funds otherwise would provide a
better return than direct investment in other money market instruments or (3)
such investments would enhance the fund's liquidity.

LENDING OF PORTFOLIO SECURITIES. Each fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables a fund to earn additional
income, but could result in a loss or delay in recovering these securities. The
borrower of a fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, at least equal
to the market value of the securities loaned, plus accrued interest and
dividends. Acceptable collateral is limited to cash, U.S. government securities
and irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. Each fund may reinvest any cash collateral in money market
investments or other short-term liquid investments, including other investment
companies. A fund also may reinvest cash collateral in private investment
vehicles similar to money market funds, including one managed by Mitchell
Hutchins. In determining whether to lend securities to a particular
broker-dealer or institutional investor, Mitchell Hutchins will consider, and
during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. Each fund will
retain authority to terminate any of its loans at any time. Each fund may pay
reasonable fees in connection with a loan and may pay the borrower or placing
broker a negotiated portion of the interest earned on the reinvestment of cash
held as collateral. Each fund will receive amounts equivalent to any interest,
dividends or other distributions on the securities loaned. Each fund will regain
record ownership of loaned securities to exercise beneficial rights, such as
voting and subscription rights, when regaining such rights is considered to be
in the fund's interest.

Pursuant to procedures adopted by the board governing each fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for each fund. The board also has authorized the payment of fees
(including fees calculated as a percentage of invested cash collateral) to
PaineWebber for these services. The board periodically reviews all portfolio
securities loan transactions for which PaineWebber acted as lending agent.
PaineWebber also has been approved as a borrower under the funds' securities
lending program.

SEGREGATED ACCOUNTS. When a fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis and reverse
repurchase agreements, it will maintain with an approved custodian in a
segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to its obligation or commitment under such transactions.

INVESTMENT LIMITATIONS OF THE FUNDS

FUNDAMENTAL LIMITATIONS. The following investment limitations cannot be
changed with respect to a fund without the affirmative vote of the lesser of (a)
more than 50% of the outstanding shares of the fund or (b) 67% or more of the
shares present at a shareholders' meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy. If a percentage
restriction is adhered to at the time of an investment or transaction, a later
increase or decrease in percentage resulting from changing values of portfolio
securities or amount of total assets will not be considered a violation of any
of the following limitations. With regard to the borrowings limitation in
fundamental limitation (3), the fund will comply with the applicable
restrictions of Section 18 of the Investment Company Act.

7
<PAGE>

Each fund will not:

(1) purchase securities of any one issuer if, as a result, more than 5% of
the fund's total assets would be invested in securities of that issuer or the
fund would own or hold more than 10% of the outstanding voting securities of
that issuer, except that up to 25% of the fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its agencies
and instrumentalities or to securities issued by other investment companies.

The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.

(2) purchase any security if, as a result of that purchase, 25% or more of
the fund's total assets would be invested in securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities or to municipal securities or to certificates of
deposit and bankers' acceptances of domestic branches of U.S. banks.

The following interpretations apply to, but are not a part of, this
fundamental restriction: (a) domestic and foreign banking will be considered to
be different industries; and (b) asset-backed securities will be grouped in
industries based upon their underlying assets and not treated as constituting a
single, separate industry.

(3) issue senior securities or borrow money, except as permitted under the
Investment Company Act and then not in excess of 33 1/3% of the fund's total
assets (including the amount of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the time of the issuance or
borrowing, except that the fund may borrow up to an additional 5% of its total
assets (not including the amount borrowed) for temporary or emergency purposes.

(4) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances or
similar instruments will not be considered the making of a loan.

The following interpretation applies to, but is not a part of, this
fundamental restriction: Money Market Fund's investments in master notes and
similar instruments will not be considered to be the making of a loan.

(5) engage in the business of underwriting securities of other issuers,
except to the extent that the fund might be considered an underwriter under the
federal securities laws in connection with its disposition of portfolio
securities.

(6) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by interests
in real estate are not subject to this limitation, and except that the fund may
exercise rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an orderly
manner.

(7) purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but the fund may purchase, sell or enter
into financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.

NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without shareholder
approval. If a percentage restriction is adhered to at the time

8
<PAGE>

of an investment or transaction, a later increase or decrease in percentage
resulting from changing values of portfolio securities or amount of total assets
will not be considered a violation of any of the following limitations.

Each fund will not:

(1) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the fund may make margin
deposits in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments.

(2) engage in short sales of securities or maintain a short position,
except that the fund may (a) sell short "against the box" and (b) maintain short
positions in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments.

(3) purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding.

(4) purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act and except that this limitation
does not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of reorganization, consolidation, or merger.

ORGANIZATION OF THE TRUST; TRUSTEES AND OFFICERS ;
PRINCIPAL HOLDERS AND MANAGEMENT OWNERSHIP OF SECURITIES

The Trust was formed on February 14, 1991 as a business trust under the
laws of the Commonwealth of Massachusetts and has three operating series. The
Trust has authority to issue an unlimited number of shares of beneficial
interest, par value $.001 per share, of each existing or future series. The
Trust is governed by a board of trustees, which oversees the funds' operations.
The board also is authorized to establish additional series. The trustees and
executive officers of the Trust, their ages, business addresses and principal
occupations during the past five years are:

POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS; AGE WITH TRUST OTHER DIRECTORSHIPS
--------------------- ---------- -------------------
Margo N. Alexander*+; 53 Trustee and Mrs. Alexander is Chairman (since
President March 1999), chief executive
officer and a director of
Mitchell Hutchins (since January
1995), and an executive vice
president and a director of
PaineWebber (since March 1984).
Mrs. Alexander is president and a
director or trustee of 30
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

9
<PAGE>

POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS; AGE WITH TRUST OTHER DIRECTORSHIPS
--------------------- ---------- -------------------
Richard Q. Armstrong; 65 Trustee Mr. Armstrong is chairman and
R.Q.A. Enterprises principal of R.Q.A. Enterprises
One Old Church Road (management consulting firm)
Unit #6 (since April 1991 and principal
Greenwich, CT 06830 occupation since March 1995). Mr.
Armstrong was chairman of the
board, chief executive officer
and co-owner of Adirondack
Beverages (producer and
distributor of soft drinks and
sparkling/still waters) (October
1993-March 1995). He was a
partner of The New England
Consulting Group (management
consulting firm) (December
1992-September 1993). He was
managing director of LVMH U.S.
Corporation (U.S. subsidiary of
the French luxury goods
conglomerate, Louis Vuitton Moet
Hennessey Corporation)
(1987-1991) and chairman of its
wine and spirits subsidiary,
Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a
director or trustee of 29
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

E. Garrett Bewkes, Jr.**+; 73 Trustee and Mr. Bewkes is a director of Paine
Chairman of Webber Group Inc. ("PW Group")
the Board (holding company of PaineWebber
of Trustees and Mitchell Hutchins). Prior to
1996, he was a consultant to PW
Group. He serves as a consultant
to PaineWebber (since May 1999).
Prior to 1988, he was chairman of
the board, president and chief
executive officer of American
Bakeries Company. Mr. Bewkes is a
director of Interstate Bakeries
Corporation. Mr. Bewkes is a
director or trustee of 40
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

10
<PAGE>

POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS; AGE WITH TRUST OTHER DIRECTORSHIPS
--------------------- ---------- -------------------
Richard R. Burt; 53 Trustee Mr. Burt is chairman of IEP
1275 Pennsylvania Ave, N.W. Advisors, LLP (international
Washington, D.C. 20004 investments and consulting firm)
(since March 1994) and a partner
of McKinsey & Company (management
consulting firm) (since 1991). He
is also a director of
Archer-Daniels-Midland Co.
(agricultural commodities),
Hollinger International Co.
(publishing), Homestake Mining
Corp. (gold mining), six
investment companies in the
Deutsche Bank family of funds,
nine investment companies in the
Flag Investors family of funds;
The Central European Fund, Inc.
and The Germany Fund, Inc., vice
chairman of Anchor Gaming
(provides technology to gaming
and wagering industry) (since
July 1999) and chairman of
Weirton Steel Corp. (makes and
finishes steel products) (since
April 1996). He was the chief
negotiator in the Strategic Arms
Reduction Talks with the former
Soviet Union (1989-1991) and the
U.S. Ambassador to the Federal
Republic of Germany (1985-1989).
Mr. Burt is a director or trustee
of 29 investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.

Mary C. Farrell**+; 50 Trustee Ms. Farrell is a managing
director, senior investment
strategist and member of the
Investment Policy Committee of
PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a
member of the Financial Women's
Association and Women's Economic
Roundtable and appears as a
regular panelist on Wall $treet
Week with Louis Rukeyser. She
also serves on the Board of
Overseers of New York
University's Stern School of
Business. Ms. Farrell is a
director or trustee of 28
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

Meyer Feldberg; 58 Trustee Mr. Feldberg is Dean and
Columbia University Professor of Management of the
101 Uris Hall Graduate School of Business,
New York, NY 10027 Columbia University. Prior to
1989, he was president of the
Illinois Institute of Technology.
Dean Feldberg is also a director
of Primedia, Inc. (publishing),
Federated Department Stores, Inc.
(operator of department stores)
and Revlon, Inc. (cosmetics).
Dean Feldberg is a director or
trustee of 37 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.

11
<PAGE>

POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS; AGE WITH TRUST OTHER DIRECTORSHIPS
--------------------- ---------- -------------------
George W. Gowen; 70 Trustee Mr. Gowen is a partner in the law
666 Third Avenue firm of Dunnington, Bartholow &
New York, NY 10017 Miller. Prior to May 1994, he was
a partner in the law firm of
Fryer, Ross & Gowen. Mr. Gowen is
a director or trustee of 37
investment companies for -- which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

Frederic V. Malek; 63 Trustee Mr. Malek is chairman of Thayer
1455 Pennsylvania Ave, N.W. Capital Partners (merchant bank)
Suite 350 and Chairman of Thayer Hotel
Washington, D.C. 20004 Investors II and Lodging
Opportunities Fund (hotel
investment partnerships). From
January 1992 to November 1992, he
was campaign manager of
Bush-Quayle `92. From 1990 to
1992, he was vice chairman and,
from 1989 to 1990, he was
president of Northwest Airlines
Inc. and NWA Inc. (holding
company of Northwest Airlines
Inc.). Prior to 1989, he was
employed by the Marriott
Corporation (hotels, restaurants,
airline catering and contract
feeding), where he most recently
was an executive vice president
and president of Marriott Hotels
and Resorts. Mr. Malek is also a
director of Aegis Communications,
Inc. (tele-services), American
Management Systems, Inc.
(management consulting and
computer related services),
Automatic Data Processing, Inc.
(computing services), CB Richard
Ellis, Inc. (real estate
services), FPL Group, Inc.
(electric services), Global
Vacation Group (packaged
vacations), HCR/Manor Care, Inc.
(health care), SAGA Systems, Inc.
(software company) and Northwest
Airlines Inc. Mr. Malek is a
director or trustee of 29
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

12
<PAGE>

POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS; AGE WITH TRUST OTHER DIRECTORSHIPS
--------------------- ---------- -------------------
Carl W. Schafer; 64 Trustee Mr. Schafer is president of the
66 Witherspoon Street, #1100 Atlantic Foundation (charitable
Princeton, NJ 08542 foundation supporting mainly
oceanographic exploration and
research). He is a director of
Labor Ready, Inc. (temporary
employment), Roadway Express,
Inc. (trucking), The Guardian
Group of Mutual Funds, the
Harding, Loevner Funds, E.I.I.
Realty Trust (investment
company), Evans Systems, Inc.
(motor fuels, convenience store
and diversified company),
Electronic Clearing House, Inc.
(financial transactions
processing), Frontier Oil
Corporation and Nutraceutix, Inc.
(biotechnology company). Prior to
January 1993, he was chairman of
the Investment Advisory Committee
of the Howard Hughes Medical
Institute. Mr. Schafer is a
director or trustee of 29
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

Brian M. Storms*+; 45 Trustee Mr. Storms is president and chief
operating officer of Mitchell
Hutchins (since March 1999). Mr.
Storms was president of
Prudential Investments
(1996-1999). Prior to joining
Prudential, he was a managing
director at Fidelity Investments.
Mr. Storms is a director or
trustee of 29 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.

Thomas Disbrow***; 34 Vice President Mr. Disbrow is a first vice
and Assistant president and a senior manager of
Treasurer the mutual fund finance
department of Mitchell Hutchins.
Prior to November 1999, he was a
vice president of Zweig/Glaser
Advisers. Mr. Disbrow is a vice
president and assistant treasurer
of 30 investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.

John J. Lee***; 32 Vice President Mr. Lee is a vice president and a
and Assistant manager of the mutual fund
Treasurer finance department of Mitchell
Hutchins. Prior to September
1997, he was an audit manager in
the financial services practice
of Ernst & Young LLP. Mr. Lee is
a vice president and assistant
treasurer of 30 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.

13
<PAGE>

POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS; AGE WITH TRUST OTHER DIRECTORSHIPS
--------------------- ---------- -------------------
Kevin J. Mahoney***; 34 Vice President Mr. Mahoney is a first vice
and Assistant president and a senior manager of
Treasurer the mutual fund finance
department of Mitchell Hutchins.
From August 1996 through March
1999, he was the manager of the
mutual fund internal control
group of Salomon Smith Barney.
Prior to August 1996, he was an
associate and assistant treasurer
of BlackRock Financial Management
L.P. Mr. Mahoney is a vice
president and assistant treasurer
of 30 investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.

Dennis McCauley*; 53 Vice President Mr. McCauley is a managing
director and chief investment
officer--fixed income of Mitchell
Hutchins. Mr. McCauley is a vice
president of 20 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.

Ann E. Moran***; 43 Vice President Ms. Moran is a vice president and
and Assistant a manager of Hutchins. Ms. Moran
Treasurer is a vice president and the
mutual fund finance department of
Mitchell assistant treasurer of
30 investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

Dianne E. O'Donnell**; 48 Vice President Ms. O'Donnell is a senior vice
and Secretary president and deputy general
counsel of Mitchell Hutchins. Ms.
O'Donnell is a vice president and
secretary of 30 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.

Susan P. Ryan*; 40 Vice President Ms. Ryan is a senior vice
president and a portfolio manager
of Mitchell Hutchins. Ms. Ryan is
a vice president of six
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

Paul H. Schubert***; 37 Vice President Mr. Schubert is a senior vice
and Treasurer president and the director of the
mutual fund finance department of
Mitchell Hutchins. Mr. Schubert
is a vice president and treasurer
of 30 investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as investment
adviser.

Barney A. Taglialatela***; 39 Vice President Mr. Taglialatela is a vice
and Assistant president and a manager of the
Treasurer mutual fund finance department of
Mitchell Hutchins. Mr.
Taglialatela is a vice president
and assistant treasurer of 30 --
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

14
<PAGE>

POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS; AGE WITH TRUST OTHER DIRECTORSHIPS
--------------------- ---------- -------------------
Keith A. Weller**; 39 Vice President Mr. Weller is a first vice
and Assistant president and associate general
Secretary counsel of Mitchell Hutchins. Mr.
Weller is a vice president and
assistant secretary of 29
investment companies for which
Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

-------------

* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.

** This person's business address is 1285 Avenue of the Americas, New York,
New York 10019-6028.

*** This person's business address is Newport Center III, 499 Washington Blvd.,
14th Floor, Jersey City, New Jersey 07310-1998.

+ Mrs. Alexander, Mr. Bewkes, Ms. Farrell and Mr. Storms are "interested
persons" of the fund as defined in the - Investment Company Act by virtue
of their positions with Mitchell Hutchins, PaineWebber, and/or PW Group.

The Trust pays trustees who are not "interested persons" of the Trust
$1,000 annually for each series and up to $150 per series for attending each
board meeting and each separate meeting of a board committee. The Trust
presently has three series and thus pays each such trustee $3,000 annually, plus
any additional amounts due for board or committee meetings. Each chairman of the
audit and contract review committees of individual funds within the PaineWebber
fund complex receives additional compensation, aggregating $15,000 annually,
from the relevant funds. All trustees are reimbursed for any expenses incurred
in attending meetings. Because PaineWebber and Mitchell Hutchins perform
substantially all the services necessary for the operation of the Trust, the
Trust requires no employees. No officer, director or employee of Mitchell
Hutchins or PaineWebber presently receives any compensation from the Trust for
acting as a trustee or officer.

The table below includes certain information relating to the compensation
of the current trustees who held office with the Trust during the periods
indicated:

COMPENSATION TABLE+

AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION FROM THE TRUST AND THE FUND
NAME OF PERSON, POSITION THE TRUST* COMPLEX**
------------------------ ---------- ---------
Richard Q. Armstrong, $5,340 $104,650
Trustee
Richard R. Burt, 5,340 102,850
Trustee
Meyer Feldberg, 5,340 143,650
Trustee
George W Gowen, 6,495 138,400
Trustee
Frederic V. Malek, 5,340 104,650
Trustee
Carl W. Schafer, 5,250 104,650
Trustee

15
<PAGE>

----------

+ Only independent board members are compensated by the PaineWebber funds and
identified above; board members who are "interested persons," as defined by
the Investment Company Act, do not receive compensation.

* Represents fees paid to each trustee for the fiscal year ended April 30,
2000.

** Represents total compensation paid during the calendar year ended December
31, 1999, to each board member by 31 investment companies (34 in the case
of Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or
one of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.

PRINCIPAL HOLDERS AND MANAGEMENT OWNERSHIP OF SECURITIES

As of July 31, 2000, trustees and officers owned in the aggregate less than
1% of the outstanding shares of any class of each fund.

As of July 31, 2000, the Trust's records showed the following shareholders
as owning 5% or more of a class of the funds' shares.

PERCENTAGE OF SHARES
BENEFICIALLY OWNED AS OF
NAME AND ADDRESS* JULY 31, 2000
----------------- ------------------------

MONEY MARKET FUND
-----------------
The John P. McGovern Foundation 8.19%
Institutional Shares

McGovern Family Living Trust 7.16%
Institutional Shares

Parbanc Co. 100%
Financial Intermediary
Shares
GOVERNMENT SECURITIES FUND
--------------------------

Kacrochem Corp. 10.46%
Institutional Shares
Town of Hopedale 7.45%
Institutional Shares

Peter O' Halley 5.12%
Institutional Shares
Arkansas State Treasury 5.02%
Institutional Shares

TREASURY SECURITIES FUND
------------------------
James R. Singer 47.54%
Institutional Shares

----------
* Each shareholder listed above may be contacted c/o Mitchell Hutchins Asset
Management Inc., 51 West 52nd Street, New York, NY 10019-6114.

16
<PAGE>

INVESTMENT ADVISORY, ADMINISTRATION AND
DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. PaineWebber acts as
investment adviser and administrator of each fund pursuant to a contract with
the Trust ("Advisory Contract"). Under the Advisory Contract, each fund pays
PaineWebber an annual fee, computed daily and paid monthly, at an annual rate of
0.25% of its average daily net assets.

During each of the periods indicated, the funds paid (or accrued) to
PaineWebber the following fees under the Advisory Contract. During these
periods, PaineWebber voluntarily waived a portion of its fees and/or voluntarily
paid other fund expenses, as set forth below.

FISCAL YEARS ENDED APRIL 30,
------------------------------------
2000 1999 1998
---------- ---------- ----------
Money Market Fund ............. $4,515,497 $4,684,985 $3,572,192
Fee Amount Waived ........... 33,799 936,943 716,790
Expenses Reimbursed ......... 342,949 973 2,739
Government Securities Fund .... 367,653 285,771 215,911
Fee Amount Waived ........... 2,299 56,592 43,177
Expenses Reimbursed ......... 56,754 0 210,691
Treasury Securities Fund ...... 335,066 458,169 259,380
Fee Amount Waived ........... 2,950 90,943 51,876
Expenses Reimbursed ......... 75,364 0 128,386

Under a contract with PaineWebber ("Mitchell Hutchins Contract"), Mitchell
Hutchins serves as sub-adviser and sub-administrator for each fund. Under the
Mitchell Hutchins Contract, PaineWebber (not the Trust) pays Mitchell Hutchins a
fee, computed daily and paid monthly, at an annual rate of 50% of the fees paid
by each fund to PaineWebber under the Advisory Contract, net of waivers and/or
reimbursements.

During each of the periods indicated, PaineWebber paid (or accrued) to
Mitchell Hutchins the fees indicated below under the Mitchell Hutchins Contract:

FISCAL YEARS ENDED APRIL 30,
------------------------------------
2000 1999 1998
---------- ---------- ----------
Money Market Fund ............. $2,069,375 $1,873,688 $1,503,380
Government Securities Fund .... 154,300 114,287 0
Treasury Securities Fund ...... 128,376 183,070 39,694

Under the terms of the Advisory Contract, each fund bears all expenses
incurred in its operation that are not specifically assumed by PaineWebber.
General expenses of the Trust not readily identifiable as belonging to a
specific fund or to the Trust's other series are allocated among series by or
under the direction of the board of trustees in such manner as the board deems
fair and equitable. Expenses borne by the Trust include the following (or each
fund's share of the following): (1) the cost (including brokerage commissions
and other transaction costs, if any) of securities purchased or sold by the fund
and any losses incurred in connection therewith; (2) fees payable to and
expenses incurred on behalf of the fund by PaineWebber; (3) organizational
expenses; (4) filing fees and

17
<PAGE>

expenses relating to the registration and qualification of fund shares under
federal and state securities laws and maintaining such registrations and
qualifications; (5) fees and salaries payable to the trustees and officers who
are not interested persons of the fund or PaineWebber; (6) all expenses incurred
in connection with the trustees' services, including travel expenses; (7) taxes
(including any income or franchise taxes) and governmental fees; (8) costs of
any liability, uncollectible items of deposit and other insurance or fidelity
bonds; (9) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the Trust or a fund for violation
of any law; (10) legal, accounting and auditing expenses, including legal fees
of special counsel for those trustees who are not interested persons of the
Trust; (11) charges of custodians, transfer agents and other agents; (12)
expenses of setting in type and printing prospectuses and statements of
additional information and supplements thereto, reports and statements to
shareholders and proxy material for existing shareholders; (13) costs of mailing
such materials to existing shareholders; (14) any extraordinary expenses
(including fees and disbursements of counsel, costs of actions, suits or
proceedings to which the Trust is a party and the expenses the Trust may incur
as a result of its legal obligation to provide indemnification to its officers,
trustees, agents and shareholders) incurred by a fund; (15) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations; (16) costs of mailing and tabulating proxies
and costs of meetings of shareholders, the board and any committees thereof;
(17) the cost of investment company literature and other publications provided
to the trustees and officers; and (18) costs of mailing, stationery and
communications equipment.

The Advisory and Mitchell Hutchins Contracts (collectively, "Contracts")
noted above provide that PaineWebber or Mitchell Hutchins, as the case may be,
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the funds in connection with the performance of the Contracts,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of PaineWebber or Mitchell Hutchins in the performance of its duties
or from reckless disregard of its duties and obligations thereunder.

The Contracts are terminable by vote of the funds' board or by the holders
of a majority of the outstanding voting securities of the funds at any time
without penalty, on 60 days' written notice to PaineWebber or Mitchell Hutchins,
as the case may be. The Advisory Contract is also terminable without penalty by
PaineWebber on 60 days' written notice to the Trust, and the Mitchell Hutchins
Contract is terminable without penalty by PaineWebber or Mitchell Hutchins on 60
days' written notice to the other party. The Contracts terminate automatically
upon their assignment, and the Mitchell Hutchins Contract also automatically
terminates upon the assignment of the Advisory Contract.

SECURITIES LENDING. During the fiscal years ended April 30, 2000, April 30,
1999 and April 30, 1998, the funds paid (or accrued) no fees to PaineWebber for
its services as securities lending agent because the funds did not engage in any
securities lending activities.

NET ASSETS. The following table shows the approximate net assets as of July
31, 2000, sorted by category of investment objective, of the investment
companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An
investment company may fall into more than one of the categories below.

NET ASSETS
INVESTMENT CATEGORY ($MIL)
------------------- ----------
Domestic (excluding Money Market) ....................... $ 9,156.5
Global .................................................. 4,703.4
Equity/Balanced ......................................... 9,585.7
Fixed Income (excluding Money Market) ................... 4,274.2
Taxable Fixed Income ............................ 2,859.4
Tax-Free Fixed Income ........................... 1,414.8
Money Market Funds ...................................... 39,450.0

DISTRIBUTION ARRANGEMENTS. PaineWebber acts as the distributor of each
fund's shares under a distribution contract with the Trust ("Distribution
Contract"), which requires PaineWebber to use its best efforts,

18
<PAGE>

consistent with its other business, to sell shares of the funds. Shares of the
funds are offered continuously. PaineWebber is located at 1285 Avenue of the
Americas, New York, New York 10019-6028.

FINANCIAL INTERMEDIARIES. Financial intermediaries, such as banks and
savings associations, may purchase Financial Intermediary shares for the
accounts of their customers. The Trust has adopted a shareholder services plan
("Plan") with respect to Financial Intermediary shares. PaineWebber implements
the Plan on behalf of the Trust by entering into a service agreement with each
financial intermediary that purchases Financial Intermediary shares requiring it
to provide support services to its customers who are the beneficial owners of
Financial Intermediary shares.

Under the Plan, each fund pays PaineWebber a monthly fee at the annual rate
of 0.25% of the average daily net asset value of the Financial Intermediary
shares held by financial intermediaries on behalf of their customers. Under each
service agreement, PaineWebber pays an identical fee to the financial
intermediary for providing the support services to its customers specified in
the service agreement. These services may include: (i) aggregating and
processing purchase and redemption requests from customers and placing net
purchase and redemption orders with PaineWebber; (ii) providing customers with a
service that invests the assets of their accounts in Financial Intermediary
shares; (iii) processing dividend payments from the Trust on behalf of
customers; (iv) providing information periodically to customers showing their
positions in Financial Intermediary shares; (v) arranging for bank wires; (vi)
responding to customer inquiries relating to the services performed by the
financial intermediary; (vii) providing sub-accounting with respect to Financial
Intermediary shares beneficially owned by customers or the information necessary
for sub-accounting; (viii) forwarding shareholder communications from the Trust
(such as proxies, shareholder reports and dividend, distribution and tax
notices) to customers, if required by law; and (ix) such other similar services
as a fund may reasonably request from time to time to the extent the financial
intermediary is permitted to do so under federal and state statutes, rules and
regulations. During the fiscal year ended April 30, 2000, the Trust made
payments through PaineWebber to financial intermediaries with respect to
Financial Intermediary shares in the amount of $66,100 for Money Market Fund, $0
for Government Securities Fund and $0 for Treasury Securities Fund.

Under the terms of the service agreements, financial intermediaries are
required to provide to their customers a schedule of any additional fees that
they may charge customers in connection with their investments in Financial
Intermediary shares. Financial Intermediary shares are available for purchase
only by financial intermediaries that have entered into service agreements with
PaineWebber in connection with their investment. Financial intermediaries
providing services to beneficial owners of Financial Intermediary shares in
certain states may be required to be registered as dealers under the laws of
those states.

The Plan requires that PaineWebber provide to the board at least annually a
written report of the amounts expended by PaineWebber under service agreements
with financial intermediaries and the purposes for which such expenditures were
made. Each service agreement requires the financial intermediary to cooperate
with PaineWebber in providing information to the board with respect to amounts
expended and services provided under the service agreement. The Plan may be
terminated at any time, without penalty, by vote of the trustees of the Trust
who are not "interested persons" of the Trust as defined in the Investment
Company Act and who have no direct or indirect financial interest in the
operation of the Plan ("Disinterested Trustees"). Any amendment to the Plan must
be approved by the board and any material amendment must be approved by the
Disinterested Trustees.

Should future legislative, judicial or administrative action prohibit or
restrict the activities of banks serving as financial intermediaries in
connection with the provision of support services to their customers, the Trust
and PaineWebber might be required to alter or discontinue their arrangements
with financial intermediaries and change their method of operations with respect
to Financial Intermediary shares. It is not anticipated, however, that any
change in the Trust's method of operations would affect its net asset values per
share or result in a financial loss to any shareholder.

Conflict of interest restrictions may apply to a financial institution's
receipt of compensation from a fund through PaineWebber under a service
agreement resulting from fiduciary funds being invested in Financial
Intermediary shares. Before investing fiduciary funds in Financial Intermediary
shares, financial intermediaries, including investment advisers and other money
managers under the jurisdiction of the SEC, the Department of

19
<PAGE>

Labor or state securities commissions and banks regulated by the Comptroller of
the Currency should consult their legal advisors.

PORTFOLIO TRANSACTIONS

The funds purchase portfolio securities from dealers and underwriters as
well as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.

For purchases or sales with broker-dealer firms that act as principal,
Mitchell Hutchins seeks best execution. Although Mitchell Hutchins may receive
certain research or execution services in connection with these transactions, it
will not purchase securities at a higher price or sell securities at a lower
price than would otherwise be paid if no weight was attributed to the services
provided by the executing dealer. Mitchell Hutchins may engage in agency
transactions in over-the-counter securities in return for research and execution
services. These transactions are entered into only pursuant to procedures that
are designed to ensure that the transaction (including commissions) is at least
as favorable as it would have been if effected directly with a market-maker that
did not provide research or execution services.

Research services and information received from brokers or dealers are
supplemental to Mitchell Hutchins' own research efforts and, when utilized, are
subject to internal analysis before being incorporated into their investment
processes. Information and research services furnished by brokers or dealers
through which or with which the funds effect securities transactions may be used
by Mitchell Hutchins in advising other funds or accounts and, conversely,
research services furnished to Mitchell Hutchins by brokers or dealers in
connection with other funds or accounts that either of them advises may be used
in advising the funds.

During the fiscal years ended April 30, 2000, April 30, 1999 and April 30,
1998 the funds paid no brokerage commissions. Therefore, the funds have not
allocated any brokerage transactions for research, analysis, advice and similar
services.

Investment decisions for the funds and for other investment accounts
managed by Mitchell Hutchins are made independently of each other in light of
differing considerations for the various accounts. However, the same investment
decision may occasionally be made for the funds and one or more of such
accounts. In such cases, simultaneous transactions are inevitable. Purchases or
sales are then averaged as to price and allocated between the funds and such
other account(s) as to amount in a manner deemed equitable to the funds and such
account(s). While in some cases this practice could have a detrimental effect
upon the price or value of the security as far as the funds are concerned, or
upon its ability to complete its entire order, in other cases it is believed
that coordination and the ability to participate in volume transactions will be
beneficial to the funds.

As of April 30, 2000, Money Market Fund owned securities issued by the
following companies which are regular broker-dealers for the fund:

ISSUER TYPE OF SECURITY VALUE
------ ---------------- -----
Bear Stearns Companies Incorporated commercial paper $49,931,905

Goldman Sachs Group L.P. commercial paper 24,957,917

Merrill Lynch & Company, Incorporated short-term corporate
obligation 24,998,011

Morgan Stanley, Dean Witter & Company commercial paper 80,000,000

20
<PAGE>

ADDITIONAL INFORMATION REGARDING REDEMPTIONS

Each fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange is closed or trading on
the New York Stock Exchange is restricted as determined by the SEC, (2) when an
emergency exists, as defined by the SEC, that makes it not reasonably
practicable for the fund to dispose of securities owned by it or fairly to
determine the value of its assets or (3) as the SEC may otherwise permit. The
redemption price may be more or less than the shareholder's cost, depending on
the market value of each fund's portfolio at the time; although the funds
attempt to maintain a constant net asset value of $1.00 per share.

If conditions exist that make cash payments undesirable, each fund reserves
the right to honor any request for redemption by making payment in whole or in
part in securities chosen by the fund and valued in the same way as they would
be valued for purposes of computing the fund's net asset value. If payment is
made in securities, the shareholder may incur brokerage expenses in converting
these securities into cash. The Trust is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net asset value of a fund during
any 90-day period for a shareholder.

VALUATION OF SHARES

Money Market Fund's and Government Securities Fund's net asset values per
share are determined by State Street Bank and Trust Company ("State Street") as
of 12:00 p.m., Eastern time, 2:30 p.m., Eastern time and 4:30 p.m., Eastern
time, on each Business Day. Treasury Securities Fund's net asset value per share
is determined by State Street as of 12:00 p.m., Eastern time and 2:30 p.m.,
Eastern time, on each Business Day. As defined in the Prospectus, "Business Day"
means any day on which the Massachusetts offices of State Street and the funds'
transfer agent, PFPC Inc. ("PFPC") and the New York City offices of PaineWebber
and PaineWebber's bank are all open for business. One or more of these
institutions will be closed on the observance of the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day
and Christmas Day.

Each fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ("Rule") under the Investment Company
Act. To use amortized cost to value its portfolio securities, the funds must
adhere to certain conditions under the Rule relating to its investments, some of
which are discussed in this SAI. Amortized cost is an approximation of market
value of an instrument, whereby the difference between its acquisition cost and
value at maturity is amortized on a straight-line basis over the remaining life
of the instrument. The effect of changes in the market value of a security as a
result of fluctuating interest rates is not taken into account, and thus the
amortized cost method of valuation may result in the value of a security being
higher or lower than its actual market value. If a large number of redemptions
take place at a time when interest rates have increased, the funds might have to
sell portfolio securities prior to maturity and at a price that might not be
desirable.

The board has established procedures ("Procedures") for the purpose of
maintaining a constant net asset value of $1.00 per share, which include a
review of the extent of any deviation of net asset value per share, based on
available market quotations, from the $1.00 amortized cost per share. If that
deviation exceeds 1/2 of 1% for each fund, the board will promptly consider
whether any action should be initiated to eliminate or reduce material dilution
or other unfair results to shareholders. Such action may include redeeming
shares in kind, selling portfolio securities prior to maturity, reducing or
withholding dividends and utilizing a net asset value per share as determined by
using available market quotations. Each fund will maintain a dollar-weighted
average portfolio maturity of 90 days or less and will not purchase any
instrument having, or deemed to have, a remaining maturity of more than 397
days, will limit portfolio investments, including repurchase agreements, to
those U.S. dollar denominated instruments that are of high quality under the
Rule and that Mitchell Hutchins, acting pursuant to the Procedures, determines
present minimal credit risks, and will comply with certain reporting and
recordkeeping procedures. There is no assurance that constant net asset value
per share will be maintained. If amortized cost ceases to represent fair value
per share, the board will take appropriate action.

In determining the approximate market value of portfolio investments, the
funds may employ outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from

21
<PAGE>

the price that would have been determined had the matrix or formula method not
been used. Other assets, if any, are valued at fair value as determined in good
faith by or under the direction of the board.

PERFORMANCE INFORMATION

The funds' performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represent past performance and are not
intended to indicate future performance. The investment return will fluctuate.

TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in each fund's Performance Advertisements are
calculated according to the following formula:

P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares
of a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of that period.

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. All dividends are assumed to have been reinvested at net asset value.

The funds may also advertise other performance data, which may consist of
the annual or cumulative return (including net short-term capital gain, if any)
earned on a hypothetical investment in each fund since it began operations or
for shorter periods. This return data may or may not assume reinvestment of
dividends (compounding).

The following tables show performance information for the funds' shares
outstanding for the periods indicated. All returns for periods of more than one
year are expressed as an average annual return.

MONEY MARKET FUND

INSTITUTIONAL FINANCIAL
SHARES INTERMEDIARY SHARES
(INCEPTION DATE) (06/03/91) (01/14/98)*

Year ended April 30, 2000:
Standardized Return .............. 5.40% 5.14%
Five Years ended April 30, 2000:
Standardized Return .............. 5.42% N/A
Inception* to April 30, 2000:
Standardized Return .............. 4.79% 5.08%

----------

* Date for most recent issuance of shares. Financial Intermediary shares were
originally issued on March 17, 1994, but subsequently redeemed before being
reissued in 1998.

22
<PAGE>

GOVERNMENT SECURITIES FUND

INSTITUTIONAL
SHARES
(INCEPTION DATE) (06/03/91)
---------------- ----------
Year ended April 30, 2000:
Standardized Return............................ 5.22%
Five Years ended April 30, 2000:
Standardized Return............................ 5.24%
Inception to April 30, 2000:
Standardized Return............................ 4.61%

TREASURY SECURITIES FUND

INSTITUTIONAL
SHARES
(INCEPTION DATE) (12/06/91)
Year ended April 30, 2000:
Standardized Return............................ 4.97%
Five Years ended April 30, 2000:
Standardized Return............................ 4.98%
Inception to April 30, 2000:
Standardized Return............................ 4.40%

CALCULATION OF YIELD. Each fund computes its yield and effective yield
quotations using standardized methods required by the SEC. A fund from time to
time advertises (1) its current yield based on a recently ended seven-day
period, computed by determining the net change, exclusive of capital changes, in
the value of a hypothetical pre-existing account having a balance of one share
at the beginning of the period, subtracting a hypothetical charge reflecting
deductions from that shareholder account, dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return and then multiplying the base period return by (365/7), with the
resulting yield figure carried to at least the nearest hundredth of one percent;
and (2) its effective yield based on the same seven-day period by compounding
the base period return by adding 1, raising the sum to a power equal to (365/7)
and subtracting 1 from the result, according to the following formula:

365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ] - 1

Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of each fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.

The following table shows the yield and effective yield for the outstanding
shares of each fund for the 7-day period ended April 30, 2000:

23
<PAGE>

YIELD EFFECTIVE YIELD
Money Market Fund
Institutional shares ....................... 5.92% 6.10%
Financial Intermediary shares .............. 5.67% 5.83%
Government Securities Fund
Institutional shares ....................... 5.74% 5.90%
Financial Intermediary shares .............. 0% 0%
Treasury Securities Fund
Institutional shares ....................... 5.30% 5.44%
Financial Intermediary shares .............. 0% 0%

OTHER INFORMATION. The funds' performance data quoted in advertising and
other promotional materials ("Performance Advertisements") represent past
performance and are not intended to predict or indicate future results. The
return on an investment in each fund will fluctuate. In Performance
Advertisements, the funds may compare their yields with data published by Lipper
Analytical Services, Inc. for money funds ("Lipper"), CDA Investment
Technologies, Inc. ("CDA"), IBC Financial Data, Inc. ("IBC"), Wiesenberger
Investment Companies Service ("Wiesenberger") or Investment Company Data Inc.
("ICD"), or with the performance of recognized stock and other indexes,
including the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Morgan Stanley Capital International World Index, the
Lehman Brothers Treasury Bond Index, the Lehman Brothers Government/Corporate
Bond Index, the Salomon Smith Barney World Government Bond Index and changes in
the Consumer Price Index as published by the U.S. Department of Commerce. The
funds also may refer in such materials to mutual fund performance rankings and
other data, such as comparative asset, expense and fee levels, published by
Lipper, CDA, IBC, Wiesenberger or ICD. Performance Advertisements also may refer
to discussions of the funds and comparative mutual fund data and ratings
reported in independent periodicals, including THE WALL STREET JOURNAL, MONEY
MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW
YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS.
Comparisons in Performance Advertisements may be in graphic form.

The funds may also compare their performance with the performance of bank
certificates of deposit ("CDs") as measured by the CDA Certificate of Deposit
Index and the Bank Rate Monitor National Index and the average of yields of CDs
of major banks published by Banxquotes(R) Money Markets. In comparing a fund's
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Bank accounts are insured in whole or in part by an agency of
the U.S. government and may offer a fixed rate of return. Fund shares are not
insured or guaranteed by the U.S. government and returns thereon will fluctuate.
While the funds seek to maintain a stable net asset value of $1.00 per share,
there can be no assurance that they will be able to do so.

The funds may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on the funds' investments are reinvested by being paid in
additional fund shares, any future income of the funds would increase the value,
not only of the original funds' investments, but also of the additional fund
shares received through reinvestment. As a result, the value of the funds'
investments would increase more quickly than if dividends had been paid in cash.
The funds may also make available to shareholders a daily accrual factor or "mil
rate" representing dividends accrued to shareholder accounts on a given day or
days. Certain shareholders may find that this information facilitates accounting
or recordkeeping.

TAXES

BACKUP WITHHOLDING. The funds are required to withhold 31% of all dividends
and redemption proceeds payable to individuals and certain other non-corporate
shareholders who do not provide the funds or PaineWebber with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
payable to those shareholders who otherwise are subject to backup withholding.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to qualify for
treatment as a regulated investment company ("RIC") under the Internal Revenue
Code, each fund must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of net
investment

24
<PAGE>

income and net short-term capital gains, if any) and must meet several
additional requirements. With respect to each fund, these requirements include
the following: (1) the fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities and certain other
income; (2) at the close of each quarter of the fund's taxable year, at least
50% of the value of its total assets must be represented by cash and cash items,
U.S. government securities, securities of other RICs and other securities that
are limited, in respect of any one issuer, to an amount that does not exceed 5%
of the value of the fund's total assets; and (3) at the close of each quarter of
the fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer. If a fund failed to qualify for
treatment as a RIC for any taxable year, (1) it would be taxed as an ordinary
Trust on the full amount of its taxable income for that year without being able
to deduct the distributions it makes to its shareholders and (2) the
shareholders would treat all those distributions as dividends (that is, ordinary
income) to the extent of the fund's earnings and profits. In addition, the fund
could be required to recognize unrealized gains, pay substantial taxes and
interest, and make substantial distributions before requalifying for RIC
treatment.

OTHER INFORMATION

MASSACHUSETTS BUSINESS TRUST. The Trust is an entity of the type commonly
known as a "Massachusetts business trust." Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each note, bond, contract, instrument,
certificate or undertaking made or issued by the trustees or by any officers or
officer by or on behalf of the Trust, a fund, the trustees or any of them in
connection with the Trust. The Declaration of Trust provides for indemnification
from a fund's property for all losses and expenses of any shareholder held
personally liable for the obligations of the fund. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which a fund itself would be unable to meet its
obligations, a possibility which PaineWebber believes is remote and not
material. Upon payment of any liability incurred by a shareholder, the
shareholder paying such liability will be entitled to reimbursement from the
general assets of the fund. The trustees intend to conduct the operations of
each fund in such a way as to avoid, as far as possible, ultimate liability of
the shareholders for liabilities of the fund.

CLASS OF SHARES. A share of each class of a fund represents an interest in
the fund's investment portfolio and has similar rights, privileges and
preferences. Each share of a fund has equal voting, dividend and liquidation
rights, except that beneficial owners of Financial Intermediary shares receive
certain services directly from financial intermediaries and bear the related
service costs.

VOTING RIGHTS. Shareholders of each fund are entitled to one vote for each
full share held and fractional votes for fractional shares held. Voting rights
are not cumulative and, as a result, the holders of more than 50% of all the
shares of the Trust may elect all its board members. The shares of a fund will
be voted together, except that only the shareholders of a particular class may
vote on matters affecting only that class. The shares of each series of the
Trust will be voted separately, except when an aggregate vote of all the
securities is required by law. Financial intermediaries holding shares for their
own accounts must undertake to vote the shares in the same proportions as the
vote of shares held for their customers.

The Trust does not hold annual meetings. There normally will be no meetings
of shareholders to elect trustees unless fewer than a majority of the trustees
holding office have been elected by shareholders. Shareholders of record holding
no less than two thirds of the outstanding shares of the Trust may remove a
board member by vote cast in person or by proxy at a meeting called for that
purpose. A meeting will be called to vote on the removal of a board member at
the written request of holders of record of at least 10% of the outstanding
shares of the Trust.

CUSTODIAN; TRANSFER AND DIVIDEND AGENT. State Street Bank and Trust
Company, located at 1776 Heritage Drive, North Quincy, Massachusetts 02171, is
custodian of the funds' assets. PFPC, Inc., a subsidiary of PNC Bank, N.A.,
located at 4400 Computer Drive, Westborough, Massachusetts 01581-5159, serves as
each fund's transfer and dividend disbursing agent.

25
<PAGE>

COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the funds.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.

AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for the funds.

FINANCIAL STATEMENTS

The funds' Annual Report to Shareholders for their last fiscal year ended
April 30, 2000 is a separate document supplied with this SAI, and the financial
statements, accompanying notes and report of independent auditors appearing
therein are incorporated herein by this reference.

26
<PAGE>

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION. THE FUNDS AND THEIR
DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION ARE NOT
AN OFFER TO SELL SHARES OF THE FUNDS IN ANY JURISDICTION WHERE THE FUNDS OR
THEIR DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.

Mitchell Hutchins'
Liquid Institutional Reserves

Money Market Fund
Government Securities Fund
Treasury Securities Fund

------------------------------------------
Statement of Additional Information
September 1, 2000
------------------------------------------

PAINEWEBBER

<PAGE>

PART C. OTHER INFORMATION

Item 23. Exhibits

(1) (a) Amended and Restated Declaration of Trust (1)

(b) Amendment effective April 18, 1996 to Declaration of Trust (2)

(2) Amended and Restated By-Laws of the Trust (1)

(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (3)

(4) (a) Investment Advisory and Administration Contract between Registrant and
PaineWebber (4)

(b) Investment Sub-advisory and Sub-administration Agreement between
PaineWebber and Mitchell Hutchins (2)

(5) Distribution Contract between Registrant and PaineWebber (5)

(6) Bonus, profit or pension plans - none

(7) Custodian Contract (4)

(8) (a) Transfer Agency Services and Shareholder Services Agreement (6)

(b) Shareholder Service Plan (2)

(9) Opinion and consent of counsel (filed herewith)

(10) Other opinions, appraisals, rulings and consents: Auditor's consent (filed
herewith)

(11) Financial statements omitted from Part B - none

(12) Letter of Investment Intent (previously filed)

(13) Plan Pursuant to Rule 12b-1 - none

(14) and

(27) Financial Data Schedule (not applicable)

(15) Plan pursuant to Rule 18f-3 (2)

(16) Code of Ethics for Registrant and Mitchell Hutchins Asset Management Inc.
(7)

PaineWebber Incorporated, Registrant's investment adviser and principal
distributor, is not required to have a code of ethics with respect to the
Registrant because Registrant consists solely of money market funds.
------------------------------

(1) Incorporated by reference from Post-Effective Amendment No. 11 to the
registration statement, SEC File No. 33-39029, filed August 28, 1998.

(2) Incorporated by reference from Post-Effective Amendment No. 9 to the
registration statement, SEC File No. 33-39029, filed August 30, 1996.

(3) Incorporated by reference from Articles II, IV, V, VI, VII and VIII of the
Registrant's Amended and Restated Declaration of Trust and Article II of
the Registrant's Amended and Restated By-Laws.

(4) Incorporated by reference from Post-Effective Amendment No. 8 to the
registration statement, SEC File No. 33-39029, filed July 3, 1996.

C-1
<PAGE>

(5) Incorporated by reference to Post-Effective Amendment No. 6 to the
registration statement, SEC File No. 33-39029, filed August 25, 1995.

(6) Incorporated by referenced from Post-Effective Amendment No. 10 to the
registration statement, SEC File No. 33-39029, filed July 2, 1997.

(7) Incorporated by reference from Post-Effective Amendment No. 29 to the
registration statement of PaineWebber Mutual Fund Trust, SEC File No.
2-98149, filed June 27, 2000.

Item 24. Persons Controlled by or under Common Control with Registrant

None.

Item 25. Indemnification

Section 4.2 of Article IV of the Registrant's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Trust shall be
liable to the Trust, its shareholders, or to any shareholder, Trustee, officer,
employee, or agent thereof for any action or failure to act (including without
limitation the failure to compel in any way any former or acting Trustee to
redress any breach of trust) except for his or her own bad faith, willful
misfeasance, gross negligence or reckless disregard of the duties involved in
the conduct of his office.

Section 4.3(a) of Article IV of the Registrant's Declaration of Trust
provides that the Registrant, or the appropriate series of the Registrant, will
indemnify its Trustees and officers to the fullest extent permitted by law
against all liability and against all expenses reasonably incurred or paid by
such Trustees and officers in connection with any claim, action, suit or
proceeding in which such Trustee or officer becomes involved as a party or
otherwise by virtue of his or her being or having been a Trustee or officer and
against amounts paid or incurred by him or her in the settlement thereof.
Additionally, Section 4.3(b) of Article IV provides that no such person shall be
indemnified (i) where such person is liable to the Trust, a series thereof or
the shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his or her
office, (ii) where such person has been finally adjudicated not to have acted in
good faith in the reasonable belief that his or her action was in the best
interest of the Trust, or a series thereof, or (iii) in the event of a
settlement or other disposition not involving a final adjudication as provided
in (ii) above resulting in a payment by a Trustee or officer, unless there has
been a determination by the court of other body approving the settlement or
other disposition or based upon a review of readily available facts by vote of a
majority of the non-interested Trustees or written opinion of independent legal
counsel, that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. Section 4.3(b) of Article IV further provides that
the rights of indemnification may be insured against by policies maintained by
the Trust. Section 4.4 of Article IV provides that no Trustee shall be obligated
to give any bond or other security for the performance of any of his or her
duties hereunder.

Section 4.6 of Article IV provides that each Trustee, officer or
employee of the Trust or a series thereof shall, in the performance of his or
her duties, be fully and completely justified and protected with regard to any
act or any failure to act resulting from reliance in good faith upon the books
of account or other records of the Trust or a series thereof, upon an opinion of
counsel, or upon reports made to the Trust or a series thereof by any of its
officers or employees or by the Investment Adviser, the Administrator, the
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.

Section 9 of the Investment Advisory and Administration Contract
("Advisory Contract") with PaineWebber Incorporated ("PaineWebber") provides
that PaineWebber shall not be liable for any error of judgment or mistake of law
or for any loss suffered by any series of the Registrant in connection with the
matters to which the Advisory Contract relates, except for a loss resulting from
the willful misfeasance, bad faith, or gross negligence of PaineWebber in the
performance of its duties or from its reckless disregard of its obligations and
duties under the Advisory Contract. Section 13 of the Advisory Contract provides
that the Trustees shall not be liable for any

C-2
<PAGE>

obligations of the Trust or any series under the Advisory Contract and that
PaineWebber shall look only to the assets and property of the Registrant in
settlement of such right or claim and not to the assets and property of the
Trustees.

Section 7 of the Sub-Investment Advisory and Sub-Administration
Agreement between PaineWebber and Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins") provides that PaineWebber shall be indemnified and held
harmless by the Registrant against all liabilities, except those arising out of
willful misfeasance, bad faith, or reckless disregard of its obligations and
duties under the Agreement.

Section 9 of the Distribution Contract provides that the Trust will
indemnify PaineWebber and its officers, directors and controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by PaineWebber to the Trust for use in the Registration Statement; and
provided that this indemnity agreement shall not protect any such persons
against liabilities arising by reason of their bad faith, gross negligence or
willful misfeasance; and shall not inure to the benefit of any such persons
unless a court of competent jurisdiction or controlling precedent determines
that such result is not against public policy as expressed in the Securities Act
of 1933. Section 9 of the Distribution Contract also provides that PaineWebber
agrees to indemnify, defend and hold the Trust, its officers and Trustees free
and harmless of any claims arising out of any alleged untrue statement or any
alleged omission of material fact contained in information furnished by
PaineWebber for use in the Registration Statement or arising out of an agreement
between PaineWebber and any retail dealer, or arising out of supplementary
literature or advertising used by PaineWebber in connection with the
Distribution Contract.

Section 10 of the Distribution Contract contains provisions similar to
Section 13 of the Advisory Contract.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be provided to Trustees, officers and
controlling persons of the Trust, pursuant to the foregoing provisions or
otherwise, the Trust has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Trust of
expenses incurred or paid by a Trustee, officer or controlling person of the
Trust in connection with the successful defense of any action, suit or
proceeding or payment pursuant to any insurance policy) is asserted against the
Trust by such Trustee, officer or controlling person in connection with the
securities being registered, the Trust will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 26. Business and Other Connections of Investment Adviser

I. PaineWebber, a Delaware corporation, is a registered investment
adviser and is wholly owned by Paine Webber Group Inc. PaineWebber is primarily
engaged in the financial services business. Information as to the officers and
directors of PaineWebber is included in its Form ADV as filed with the
Securities and Exchange Commission (registration number 801-7163) and is
incorporated herein by reference.

II. Mitchell Hutchins, a Delaware corporation, is a registered
investment adviser and is a wholly owned subsidiary of PaineWebber which is, in
turn, a wholly owned subsidiary of Paine Webber Group Inc. Mitchell Hutchins is
primarily engaged in the investment advisory business. Information as to the
officers and directors of Mitchell Hutchins is included in its Form ADV, as
filed with the Securities and Exchange Commission (registration number
801-13219) and is incorporated herein by reference.

C-3
<PAGE>

Item 27. Principal Underwriters

(a) PaineWebber serves as principal underwriter and/or investment adviser
for the following other investment companies:

MITCHELL HUTCHINS LIR MONEY SERIES
PAINEWEBBER RMA MONEY FUND, INC.
PAINEWEBBER RMA TAX-FREE FUND, INC.
PAINEWEBBER MUNICIPAL MONEY MARKET SERIES
PAINEWEBBER MANAGED MUNICIPAL TRUST

(b) PaineWebber is the Registrant's principal underwriter. The directors
and officers of PaineWebber, their principal business addresses and their
positions and offices with PaineWebber are identified in its Form ADV filed
March 31, 1995, with the Securities and Exchange Commission (registration number
801-7163) and such information is hereby incorporated herein by reference. The
information set forth below is furnished for those directors and officers of
PaineWebber who also serve as directors or officers of the Registrant.

Positions and Offices With Positions and Offices With
Name and Principal Registrant Underwriter

Margo N. Alexander* Trustee and President Executive Vice President and
(Chief Executive Officer) a Director

Mary C. Farrell** Trustee Managing Director, Senior
Investment Strategist and
member of the Investment
Policy Committee

----------

* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.

** This person's business address is 1285 Avenue of the Americas, New York, New
York 10019.

Item 28. Location of Accounts and Records

The books and other documents required by paragraphs (b)(4), (c) and
(d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Registrant's Sub-Adviser and Sub-Administrator, Mitchell
Hutchins Asset Management Inc. at 1285 Avenue of the Americas, New York, New
York 10019 and 51 West 52nd Street, New York, New York 10019-6114. All other
accounts, books and documents required by Rule 31a-1 are maintained in the
physical possession of Registrant's transfer agent and custodian.

Item 29. Management Services

Not applicable.

Item 30. Undertakings

None.

C-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement under Rule 485(b) of the Securities Act of 1933 and has
duly caused this Post-Effective Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York, on the 29th day of August, 2000.

LIQUID INSTITUTIONAL RESERVES

By: /s/ Dianne E. O'Donnell
------------------------
Dianne E. O'Donnell
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:

Signature Title Date
--------- ----- ----
/s/ Margo N. Alexander President and Trustee August 29, 2000
--------------------------- (Chief Executive Officer)
Margo N. Alexander *

/s/ E. Garrett Bewkes, Jr. Trustee and Chairman August 29, 2000
--------------------------- of the Board of Trustees
E. Garrett Bewkes, Jr. *

/s/ Richard Q. Armstrong Trustee August 29, 2000
---------------------------
Richard Q. Armstrong *

/s/ Richard R. Burt Trustee August 29, 2000
---------------------------
Richard R. Burt *

/s/ Mary C. Farrell Trustee August 29, 2000
---------------------------
Mary C. Farrell *

/s/ Meyer Feldberg Trustee August 29, 2000
---------------------------
Meyer Feldberg *

/s/ George W. Gowen Trustee August 29, 2000
---------------------------
George W. Gowen *

/s/ Frederic V. Malek Trustee August 29, 2000
---------------------------
Frederic V. Malek *

/s/ Carl W. Schafer Trustee August 29, 2000
---------------------------
Carl W. Schafer *

/s/ Brian M. Storms Trustee August 29, 2000
---------------------------
Brian M. Storms **

/s/ Paul H. Schubert Vice President and Treasurer August 29, 2000
--------------------------- (Chief Financial and
Paul H. Schubert Accounting Officer)

<PAGE>

SIGNATURES (CONTINUED)

* Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated
May 21, 1996 and incorporated by reference from Post-Effective Amendment
No. 30 to the registration statement of PaineWebber Managed Municipal
Trust, SEC File 2-89016, filed June 27, 1996.

** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
May 14, 1999 and incorporated by reference from Post-Effective Amendment
No. 61 to the registration statement of PaineWebber Managed Investments
Trust, SEC File 2-91362, filed June 1, 1999.

<PAGE>

LIQUID INSTITUTIONAL RESERVES

EXHIBIT INDEX
-------------

Exhibit
Number
------

(1) (a) Amended and Restated Declaration of Trust (1)

(b) Amendment effective April 18, 1996 to Declaration of Trust (2)

(2) Amended and Restated By-Laws of the Trust (1)

(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest (3)

(4) (a) Investment Advisory and Administration Contract between Registrant and
PaineWebber (4)

(b) Investment Sub-advisory and Sub-administration Agreement between
PaineWebber and Mitchell Hutchins (2)

(5) Distribution Contract between Registrant and PaineWebber (5)

(6) Bonus, profit or pension plans - none

(7) Custodian Contract (4)

(8) (a) Transfer Agency Services and Shareholder Services Agreement (6)

(b) Shareholder Service Plan (2)

(9) Opinion and consent of counsel (filed herewith)

(10) Other opinions, appraisals, rulings and consents: Auditor's consent (filed
herewith)

(11) Financial statements omitted from Part B - none

(12) Letter of Investment Intent (previously filed)

(13) Plan Pursuant to Rule 12b-1 - none

(14) and

(27) Financial Data Schedule (not applicable)

(15) Plan pursuant to Rule 18f-3 (2)

(16) Code of Ethics for Registrant and Mitchell Hutchins Asset Management Inc.
(7) PaineWebber Incorporated, Registrant's investment adviser and principal
distributor, is not required to have a code of ethics with respect to the
Registrant because Registrant consists solely of money market funds.

----------
(1) Incorporated by reference from Post-Effective Amendment No. 11 to the
registration statement, SEC File No. 33-39029, filed August 28, 1998.

(2) Incorporated by reference from Post-Effective Amendment No. 9 to the
registration statement, SEC File No. 33-39029, filed August 30, 1996.

(3) Incorporated by reference from Articles II, IV, V, VI, VII and VIII of the
Registrant's Amended and Restated Declaration of Trust and Article II of
the Registrant's Amended and Restated By-Laws.

<PAGE>

(4) Incorporated by reference from Post-Effective Amendment No. 8 to the
registration statement, SEC File No. 33-39029, filed July 3, 1996.

(5) Incorporated by reference to Post-Effective Amendment No. 6 to the
registration statement, SEC File No. 33-39029, filed August 25, 1995.

(6) Incorporated by referenced from Post-Effective Amendment No. 10 to the
registration statement, SEC File No. 33-39029, filed July 2, 1997.

(7) Incorporated by reference from Post-Effective Amendment No. 29 to the
registration statement of PaineWebber Mutual Fund Trust, SEC File No.
2-98149, filed June 27, 2000.