<PAGE>
LIQUID INSTITUTIONAL RESERVES ANNUAL REPORT
June 15, 2000
Dear Shareholder,
We are pleased to present you with the annual report for Liquid Institutional
Reserves (the "Funds") for the fiscal year ended April 30, 2000.
MARKET REVIEW
[GRAPHIC]
The Funds' fiscal year was a difficult time for the fixed income market. Rapid
economic growth caused the Federal Reserve (the "Fed") to increase short-term
interest rates. Yields on fixed income securities rose as interest rates rose,
causing losses in almost every sector of the bond market. Diversion of
investment funds into technology stocks hurt the bond markets, as did supply
surges brought on by Y2K worries. Finally, the market was disrupted by the U.S.
Treasury's announcement of a $30 billion buyback of long-term debt for calendar
year 2000.
Short-term yields (as measured by the 90-day U.S. Treasury bill) rose from 4.53%
to 5.82% during the fiscal year and created more difficult conditions for money
market funds. But because of their emphasis on safety, money market funds fared
better than the broad bond market.
PERFORMANCE AND PORTFOLIO REVIEW
Current Seven-Day Average Yield(1) 4/30/00 10/31/99 4/30/99
--------------------------------------------------------------------------------
Money Market Fund:
Institutional Shares 5.92% 5.21% 4.74%
Financial Intermediary Shares 5.67 4.96 4.49
Government Securities Fund 5.74 5.03 4.56
Treasury Securities Fund 5.30 4.45 4.23
--------------------------------------------------------------------------------
Effective Seven-Day Average Yield(1) 4/30/00 10/31/99 4/30/99
--------------------------------------------------------------------------------
Money Market Fund:
Institutional Shares 6.10% 5.35% 4.85%
Financial Intermediary Shares 5.83 5.08 4.59
Government Securities Fund 5.90 5.16 4.66
Treasury Securities Fund 5.44 4.54 4.32
--------------------------------------------------------------------------------
LIQUID INSTITUTIONAL RESERVES
Investment Goal (all three funds):
High current income to the extent consistent with capital preservation and
liquidity
Portfolio Manager:
Susan P.Ryan
Mitchell Hutchins Asset Management Inc.
Commencement:
Institutional Shares--June 3, 1991 (Money Market Fund and Government Securities
Fund) December 6, 1991 (Treasury Securities Fund)
MMF Financial Intermediary Shares original issuance March 17, 1994, ceased April
30, 1995; reissued January 14, 1998
Dividend Payments:
Monthly
(1) Yields will fluctuate.
1
<PAGE>
ANNUAL REPORT LIQUID INSTITUTIONAL RESERVES
Weighted Average Maturity 4/30/00 10/31/99 4/30/99
--------------------------------------------------------------------------------
Money Market Fund 45 days 52 days 54 days
Government Securities Fund 32 days 20 days 42 days
Treasury Securities Fund 45 days 42 days 74 days
--------------------------------------------------------------------------------
Net Assets 4/30/00 10/31/99 4/30/99
--------------------------------------------------------------------------------
Money Market Fund $1.901 billion $1.716 billion $2.048 billion
Government Securities Fund $121.9 million $134.8 million $138.8 million
Treasury Securities Fund $118.5 million $120.2 million $179.2 million
--------------------------------------------------------------------------------
HIGHLIGHTS
We expected interest rates to rise during the Funds' fiscal year, and
therefore kept the Funds' weighted-average maturities at or below their peer
group averages. As 2000 approached we increased weightings in U.S. government
and agency obligations to emphasize liquidity and principal stability in the
event of any Y2K problems. The new century dawned without major problems, and
with the Y2K issue behind us we began to restructure the Funds to balance their
goals of principal stability and current income. Throughout the fiscal year, we
maintained the Funds' focus on first-tier credit-quality instruments.
OUTLOOK
We expect an active Fed and rising rates across the yield curve in the
first half of 2000. We look for moderating economic growth in the second half of
the year, and believe interest rates will stabilize in response to current
growth and the absence of real inflationary pressure. As always, we intend to
maintain the Funds emphasis on liquidity, high credit quality and portfolio
diversity.
2
<PAGE>
LIQUID INSTITUTIONAL RESERVES ANNUAL REPORT
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support
and welcome any comments or questions you may have. For a Quarterly Review on a
fund in the PaineWebber Family of Funds,/2/please contact your Financial
Advisor.
Sincerely,
<TABLE>
<S> <C>
/s/ MARGO ALEXANDER /s/ BRIAN M. STORMS
MARGO ALEXANDER BRIAN M. STORMS
Chairman and Chief Executive Officer President and Chief Operating Officer
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset Management Inc.
/s/ DENNIS L. McCAULEY /s/ SUSAN P. RYAN
DENNIS L. McCAULEY
Managing Director and Chief Investment Office--Fixed Income Senior Vice President
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset Management Inc.
Portfolio Manager, Liquid Institutional
Reserves
</TABLE>
This letter is intended to assist shareholders in understanding how the Funds
performed during the fiscal year ended April 30, 2000, and reflects our views at
the time of its writing. Of course, these views may change in response to
changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
(2) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
3
<PAGE>
Liquid Institutional Reserves -- Money Market Fund
Statement of Net Assets April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- --------------- --------------
<C> <S> <C> <C> <C>
U.S. Government and Agency
Obligations -- 7.89%
$ 15,000 Federal Home Loan Bank.. 05/01/00 6.090*% $ 14,996,115
10,000 Federal National
Mortgage Association... 05/01/00 6.120* 9,998,634
125,000 Student Loan Marketing
Association............ 05/02/00 6.132 to 6.643* 124,982,151
--------------
Total U.S. Government and Agency
Obligations (cost -- $149,976,900). 149,976,900
--------------
Domestic Bank Notes -- 1.05%
10,000 KeyBank N.A............. 06/26/00 5.650 9,998,971
10,000 LaSalle Bank N.A........ 02/05/01 6.700 9,996,362
--------------
Total Domestic Bank Notes (cost --
$19,995,333)...................... 19,995,333
--------------
Yankee Deposit Note -- 0.79%
15,000 Westpac Banking
Corporation (cost --
$14,994,632).......... 01/31/01 6.560 14,994,632
--------------
Yankee Certificates of Deposit --
9.63%
15,000 Bank of Nova Scotia..... 02/20/01 6.750 14,994,255
10,000 Bank of Nova Scotia..... 05/01/00 6.043* 9,995,121
23,000 Bank of Scotland........ 02/28/01 6.770 22,992,757
25,000 Canadian Imperial Bank
of Commerce............ 05/08/00 6.060 25,000,000
15,000 Commerzbank AG ......... 04/27/01 to 04/30/01 6.810 to 6.880 14,999,055
10,000 National Westminster
Bank PLC............... 02/01/01 6.620 9,997,128
15,000 Royal Bank of Canada.... 05/04/00 6.140* 14,999,938
15,000 Societe Generale........ 04/10/01 6.800 14,995,308
15,000 Societe Generale........ 05/19/00 6.075* 14,997,137
25,000 Svenska Handelsbanken... 05/22/00 to 03/07/01 5.280 to 6.620 24,983,750
15,000 Westpac Banking
Corporation............ 01/18/01 6.545 14,994,885
--------------
Total Certificates of Deposit
(cost -- $182,949,334)............. 182,949,334
--------------
Time Deposit -- 2.10%
40,000 Societe Generale
(cost -- $40,000,000) . 05/01/00 6.063 40,000,000
--------------
Commercial Paper@ -- 66.29%
Asset Backed-Banking -- 11.04%
43,076 Atlantis One Funding.... 05/10/00 to 05/19/00 5.910 to 6.060 42,965,420
167,155 Centric Capital
Corporation............ 05/01/00 to 06/07/00 6.030 to 6.070 166,868,546
--------------
209,833,966
--------------
Asset Backed-Credit Cards -- 1.57%
30,000 Riverwoods Funding
Corporation............ 05/16/00 6.040 29,924,500
--------------
</TABLE>
4
<PAGE>
Liquid Institutional Reserves -- Money Market Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
Commercial Paper@ -- (continued)
Asset Backed-Miscellaneous --
15.03%
$11,127 Delaware Funding
Corporation............ 05/25/00 5.950% $ 11,082,863
60,283 Enterprise Funding
Corporation............ 05/03/00 6.040 60,262,772
9,490 Falcon Asset
Securitization
Corporation............ 05/02/00 6.050 9,488,405
10,000 Parthenon Receivables
Funding LLC............ 05/15/00 6.070 9,976,394
65,000 Quincy Capital
Corporation............ 05/01/00 to 05/08/00 6.030 to 6.050 64,953,100
65,000 Triple-A One Funding
Corporation............ 05/05/00 to 05/22/00 6.040 to 6.060 64,896,618
30,000 Variable Funding Capital
Corporation............ 05/10/00 to 05/23/00 6.040 to 6.050 29,943,764
35,000 Variable Funding Capital
Corporation............ 05/08/00 to 05/15/00 6.100 to 6.126* 35,000,000
--------------
285,603,916
--------------
Auto & Truck -- 3.68%
20,000 BMW US Capital
Incorporated........... 05/17/00 6.020 19,946,489
50,000 Ford Motor Credit
Corporation............ 05/04/00 6.010 49,974,958
--------------
69,921,447
--------------
Banking-Domestic -- 13.91%
30,000 Abbey National North
America................ 05/25/00 6.040 29,879,200
25,000 BCI Funding Corporation. 05/15/00 6.030 24,941,375
25,000 Cariplo Finance
Incorporated........... 05/11/00 6.020 24,958,195
25,000 Den Danske Corporation.. 05/10/00 6.020 24,962,375
45,000 Dexia CLF Finance
Company................ 05/08/00 to 06/05/00 5.940 to 6.100 44,852,514
50,000 Fortis Funding LLC ..... 05/02/00 6.020 49,991,639
65,000 Santander Finance
(Delaware) Inc......... 05/04/00 to 05/15/00 5.900 to 6.020 64,886,090
--------------
264,471,388
--------------
Banking-Foreign -- 1.05%
20,000 Nationwide Building
Society ............... 05/17/00 6.020 19,946,489
--------------
Broker-Dealer -- 8.15%
50,000 Bear Stearns Companies,
Incorporated........... 05/08/00 to 05/11/00 5.940 to 6.020 49,931,905
25,000 Goldman Sachs Group,
L.P. .................. 05/11/00 6.060 24,957,917
80,000 Morgan Stanley, Dean
Witter & Company....... 07/12/00 to 11/03/00 6.213* 80,000,000
--------------
154,889,822
--------------
Consumer Products -- 0.42%
8,070 Kimberly Clark
Corporation............ 05/15/00 6.030 8,051,076
--------------
Drugs, Health Care -- 0.94%
18,000 Glaxo Wellcome PLC...... 05/16/00 5.900 17,955,750
--------------
Electronics -- 0.79%
15,000 Emerson Electric
Company................ 05/04/00 6.030 14,992,463
--------------
Finance-Conduit -- 1.57%
10,000 MetLife Funding
Incorporated........... 07/06/00 6.120 9,887,800
20,000 UBS Finance (Delaware)
LLC.................... 05/01/00 6.040 20,000,000
--------------
29,887,800
--------------
</TABLE>
5
<PAGE>
Liquid Institutional Reserves -- Money Market Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
Commercial Paper@ -- (concluded)
Finance-Subsidiary -- 1.58%
$30,000 Deutsche Bank Financial
Inc. .................. 05/11/00 6.040% $ 29,949,667
--------------
Insurance -- 3.68%
30,000 AEGON Funding........... 05/08/00 6.010 29,964,942
40,000 Prudential Funding
Corporation............ 05/02/00 to 05/19/00 6.010 to 6.030 39,950,601
--------------
69,915,543
--------------
Insurance-Property/Casualty --
0.53%
10,000 A.I. Credit Corporation. 05/01/00 6.030 10,000,000
--------------
Metals & Mining -- 1.82%
34,700 Rio Tinto America
Incorporated........... 05/08/00 to 05/18/00 6.000 to 6.020 34,634,878
--------------
Printing & Publishing -- 0.53%
10,000 Gannett Company......... 05/05/00 6.080 9,993,244
--------------
Total Commercial Paper (cost --
$1,259,971,949)................... 1,259,971,949
--------------
Short-Term Corporate Obligations -- 7.37%
Asset Backed-Finance -- 2.63%
35,000 Beta Finance
Incorporated........... 01/19/01 to 02/18/01 5.620 to 6.200 35,000,000
15,000 Beta Finance
Incorporated........... 05/01/00 6.200* 15,000,000
--------------
50,000,000
--------------
Auto & Truck -- 0.79%
5,000 Ford Motor Credit
Corporation............ 08/15/00 6.850 5,015,186
10,000 General Motors
Acceptance Corporation. 05/01/00 6.180* 10,000,117
--------------
15,015,303
--------------
Banking-Domestic -- 0.79%
15,000 Morgan (J.P.) & Company
Incorporated........... 05/16/00 6.120* 15,000,000
--------------
Banking-Foreign -- 0.79%
15,000 Bank of Scotland
Treasury Services PLC.. 05/08/00 6.113* 15,000,000
--------------
Broker-Dealer -- 1.32%
10,000 Merrill Lynch & Company,
Incorporated........... 02/07/01 6.740 9,999,267
15,000 Merrill Lynch & Company,
Incorporated........... 05/08/00 6.093* 14,998,744
--------------
24,998,011
--------------
Computers -- 0.26%
5,000 International Business
Machines Corporation... 07/10/00 5.755 5,000,096
--------------
Finance-Diversified -- 0.79%
15,000 Associates Corporation
of North America....... 06/29/00 6.112* 14,998,565
--------------
Total Short-Term Corporate
Obligations (cost --
$140,011,975).................... 140,011,975
--------------
</TABLE>
6
<PAGE>
Liquid Institutional Reserves -- Money Market Fund
<TABLE>
<CAPTION>
Number of
Shares
(000) Value
--------- --------------
<C> <S> <C>
Money Market Funds -- 4.97%
81,896 AIM Liquid Assets Money Market Portfolio............ $ 81,896,107
12,623 AIM Prime Money Market Portfolio.................... 12,622,824
--------------
Total Money Market Funds (cost -- $94,518,931)................. 94,518,931
--------------
Total Investments (cost -- $1,902,419,054 which approximates
cost for federal income tax purposes) -- 100.09%.............. 1,902,419,054
Liabilities in excess of other assets -- (0.09)%.............. (1,671,319)
--------------
Net Assets (applicable to 1,836,113,304 and 64,633,823 of
Institutional Shares and Financial Intermediary Shares,
respectively, each equivalent to $1.00 per share) -- 100.00%.. $1,900,747,735
==============
</TABLE>
---------
@ Interest rates shown reflect the discount rates at time of purchase.
* Variable Rate Securities-Maturity date reflects earlier of reset date or
maturity date. The interest rates shown are current rates as of April 30,
2000 and reset periodically.
Weighted Average Maturity -- 45 days
See accompanying notes to financial statements
7
<PAGE>
Liquid Institutional Reserves -- Government Securities Fund
Statement of Net Assets April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
U.S. Government and Agency Obligations -- 100.37%
$ 6,964 Federal Farm Credit
Bank................... 05/01/00 to 05/18/00 5.880@% $ 6,957,753
1,500 Federal Home Loan Bank . 05/17/00 5.135 1,500,000
8,221 Federal Home Loan Bank.. 05/19/00 5.880@ 8,196,830
10,000 Federal Home Loan
Mortgage Corporation... 06/06/00 5.960@ 9,940,400
14,000 Federal National
Mortgage Association... 05/04/00 to 05/16/00 5.870@ 13,973,585
5,000 Federal National
Mortgage Association... 02/22/01 to 02/23/01 6.445 to 6.570 4,996,905
35,000 Student Loan Marketing
Association............ 05/11/00 to 06/21/00 5.850 to 5.950@ 34,841,063
2,000 Student Loan Marketing
Association............ 05/02/00 6.282* 1,999,506
40,000 Tennessee Valley
Authority.............. 05/03/00 to 05/18/00 5.840 to 5.940@ 39,943,025
------------
Total Investments (cost --
$122,349,067 which approximates
cost for
federal income tax purposes) --
100.37%.......................... 122,349,067
Liabilities in excess of other
assets -- (0.37)%................ (451,613)
------------
Net Assets (applicable to
121,888,414 Institutional Shares,
equivalent to $1.00 per share) --
100.00%.......................... $121,897,454
============
</TABLE>
---------
@ Interest rates shown are the discount rates at time of purchase.
* Variable Rate Securities-Maturity date reflects earlier of reset date or
maturity date. The interest rates shown are current rates as of April 30,
2000 and reset periodically.
Weighted Average Maturity -- 32 days
See accompanying notes to financial statements
8
<PAGE>
Liquid Institutional Reserves -- Treasury Securities Fund
Statement of Net Assets April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
U.S. Treasury Obligations -- 76.16%
$66,815 U.S. Treasury Bills..... 05/04/00 to 02/01/01 5.350 to 5.840@% $ 66,270,742
24,000 U.S. Treasury Notes..... 06/30/00 to 07/31/00 5.375 to 6.125 24,001,258
------------
Total U.S. Treasury Obligations
(cost -- $90,272,000).............. 90,272,000
------------
<CAPTION>
Number of
Shares
(000)
---------
<C> <S> <C> <C> <C>
Money Market Funds -- 2.24%
2,649 AIM Tax Advantage Money
Market Portfolio
(cost -- $2,649,313)... 2,649,313
------------
Total Investments (cost --
$92,921,313 which approximates
cost for federal income tax
purposes) -- 78.40%............... 92,921,313
Other assets in excess of
liabilities -- 21.60%*............. 25,603,850
------------
Net Assets (applicable to
118,521,375 Institutional Shares,
equivalent to $1.00 per share) --
100.00%.......................... $118,525,163
============
</TABLE>
---------
@ Interest rates shown reflect the discount rates at time of purchase.
* Includes a receivable of a $25,000,000 U.S. Treasury Note maturing on April
30, 2000, yielding 5.625%.
Weighted Average Maturity -- 45 days*
See accompanying notes to financial statements
9
<PAGE>
Liquid Institutional Reserves
Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended
April 30, 2000
------------------------------------
Government Treasury
Money Market Securities Securities
Fund Fund Fund
------------ ---------- ----------
<S> <C> <C> <C>
Investment income:
Interest................................. $100,143,113 $7,932,493 $6,570,823
------------ ---------- ----------
Expenses:
Investment advisory and administration... 4,515,497 367,653 335,066
Transfer agency and related services
fees.................................... 361,236 32,179 29,108
Custody and accounting................... 180,620 16,567 13,402
State and federal registration fees...... 137,102 18,824 27,025
Legal and audit.......................... 92,101 19,906 27,673
Shareholder servicing fees -- Financial
Intermediary shares..................... 66,100 -- --
Reports and notices to shareholders...... 48,768 15,607 18,424
Insurance expense........................ 44,444 1,649 2,781
Trustees' fees........................... 10,500 10,500 10,500
Other expenses........................... 28,332 1,515 2,496
------------ ---------- ----------
5,484,700 484,400 466,475
Less: Fee waivers and expense
reimbursements from adviser............. (376,748) (59,053) (78,314)
------------ ---------- ----------
Net expenses............................. 5,107,952 425,347 388,161
------------ ---------- ----------
Net investment income.................... 95,035,161 7,507,146 6,182,662
Net realized gains (losses) from
investment transactions................. 1,283 9,952 (121)
------------ ---------- ----------
Net increase in net assets resulting from
operations.............................. $ 95,036,444 $7,517,098 $6,182,541
============ ========== ==========
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
Liquid Institutional Reserves -- Money Market Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Years Ended
April 30,
------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
From operations:
Net investment income.......................... $ 95,035,161 $ 94,951,866
Net realized gains from investment
transactions.................................. 1,283 44,391
-------------- --------------
Net increase in net assets resulting from
operations.................................... 95,036,444 94,996,257
-------------- --------------
Dividends to shareholders from:
Net investment income -- Institutional shares.. (93,698,675) (94,471,543)
Net investment income -- Financial Intermediary
shares........................................ (1,336,486) (480,323)
-------------- --------------
Total dividends to shareholders................ (95,035,161) (94,951,866)
-------------- --------------
Net increase (decrease) in net assets from
beneficial interest transactions.............. (147,634,006) 440,244,875
-------------- --------------
Net increase (decrease) in net assets.......... (147,632,723) 440,289,266
Net Assets:
Beginning of year.............................. 2,048,380,458 1,608,091,192
-------------- --------------
End of year.................................... $1,900,747,735 $2,048,380,458
============== ==============
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
Liquid Institutional Reserves -- Government Securities Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Years Ended
April 30,
--------------------------
2000 1999
------------ ------------
<S> <C> <C>
From operations:
Net investment income.............................. $ 7,507,146 $ 5,600,628
Net realized gains from investment transactions.... 9,952 10,565
------------ ------------
Net increase in net assets resulting from
operations........................................ 7,517,098 5,611,193
------------ ------------
Dividends and distributions to shareholders from:
Net investment income -- Institutional shares...... (7,507,146) (5,600,628)
Net realized gain from investment transactions --
Institutional shares ............................ (10,565) --
------------ ------------
Total dividends and distributions to shareholders.. (7,517,711) (5,600,628)
------------ ------------
Net increase (decrease) in net assets from
beneficial interest transactions.................. (16,884,706) 38,632,650
------------ ------------
Net increase (decrease) in net assets.............. (16,885,319) 38,643,215
Net Assets:
Beginning of year.................................. 138,782,773 100,139,558
------------ ------------
End of year........................................ $121,897,454 $138,782,773
============ ============
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
Liquid Institutional Reserves -- Treasury Securities Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Years Ended
April 30,
--------------------------
2000 1999
------------ ------------
<S> <C> <C>
From operations:
Net investment income.............................. $ 6,182,662 $ 8,375,074
Net realized gains (losses) from investment
transactions...................................... (121) 166,129
------------ ------------
Net increase in net assets resulting from
operations........................................ 6,182,541 8,541,203
------------ ------------
Dividends and distributions to shareholders from:
Net investment income -- Institutional shares...... (6,182,662) (8,375,074)
Net realized gain from investment transactions --
Institutional shares............................. (166,129) --
------------ ------------
Total dividends and distributions to shareholders.. (6,348,791) (8,375,074)
------------ ------------
Net decrease in net assets from beneficial interest
transactions...................................... (60,535,731) (646,662)
------------ ------------
Net decrease in net assets......................... (60,701,981) (480,533)
Net Assets:
Beginning of year.................................. 179,227,144 179,707,677
------------ ------------
End of year........................................ $118,525,163 $179,227,144
============ ============
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
Notes to Financial Statements
Organization and Significant Accounting Policies
Liquid Institutional Reserves (the "Trust") is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The Trust currently
offers three no-load series: the Money Market Fund, the Government Securities
Fund and the Treasury Securities Fund (collectively, the "Funds").
The Funds offer two classes of shares, Institutional shares and Financial In-
termediary shares. Each class represents interests in the same assets of a
Fund, and both classes have equal voting privileges, except that beneficial
owners of Financial Intermediary shares receive certain services directly from
financial intermediaries, bear certain service fees and to the extent that mat-
ters pertaining to the Shareholder Services Plan or to the Financial Intermedi-
ary shares are submitted to shareholders for approval, only the holders of Fi-
nancial Intermediary shares shall be entitled to vote thereon. For the year
ended April 30, 2000 the Government Securities Fund and the Treasury Securities
Fund had no Financial Intermediary shares outstanding.
The preparation of financial statements in accordance with accounting princi-
ples generally accepted in the United States requires Fund management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
Following is a summary of significant accounting policies:
Valuation and Accounting for Investments and Investment Income--Investments
are valued at amortized cost which approximates market value. Investment
transactions are recorded on the trade date. Realized gains and losses from
investment transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Premiums are amortized and
discounts are accreted as adjustments to interest income and the identified
cost of investments.
Repurchase Agreements--The Money Market Fund's custodian takes possession of
the collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event that a counterparty defaults on its obligation to repurchase, the Money
Market Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings. The Money Mar-
ket Fund occasionally participates in joint repurchase agreement transactions
with other funds managed by Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), sub-adviser and sub-administrator of the Fund, a wholly owned asset
management subsidiary of PaineWebber Incorporated ("PaineWebber"), the adviser
and administrator of the Funds.
Dividends and Distributions--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from accounting principles generally accepted in the United States. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are re-
classified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification.
Concentration of Risk
The ability of the issuers of the debt securities held by the Funds to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
14
<PAGE>
Notes to Financial Statements
Investment Adviser and Administrator
The Trust has an Investment Advisory and Administration Contract ("Advisory
Contract") with PaineWebber under which PaineWebber serves as investment
adviser and administrator of the Funds. In accordance with the Advisory
Contract, PaineWebber receives compensation from the Funds, computed daily and
paid monthly, at an annual rate of 0.25% of each Fund's average daily net
assets. At April 30, 2000, the Money Market Fund, the Government Securities
Fund and the Treasury Securities Fund owed PaineWebber $357,392, $13,709 and
$13,930, respectively, in investment advisory and administration fees.
Mitchell Hutchins serves as sub-adviser and sub-administrator of the Trust
pursuant to a Sub-Advisory and Sub-Administration Contract ("Sub-Advisory Con-
tract") between PaineWebber and Mitchell Hutchins. In accordance with the Sub-
Advisory Contract, PaineWebber (not the Funds) pays Mitchell Hutchins a fee,
computed daily and paid monthly, at an annual rate of 50% of the fee paid by
each Fund to PaineWebber under the Advisory Contract, net of waivers and/or re-
imbursements.
For the period May 1, 1999 to May 31, 1999, PaineWebber and Mitchell Hutchins
voluntarily waived 0.05% of these advisory fees and reimbursed a portion of ex-
penses to maintain each Fund's total annual operating expenses at a level not
exceeding 0.30% and 0.55% of the Funds' average daily net assets for Institu-
tional shares and Financial Intermediary shares, respectively. Effective June
1, 1999, PaineWebber and Mitchell Hutchins discontinued the advisory fee waiv-
ers for the Funds and agreed to reimburse a portion of expenses to maintain the
Funds total annual operating expenses at a level not exceeding 0.28%, 0.29% and
0.29% of the Money Market Fund, the Government Securities Fund and the Treasury
Securities Funds' average daily net assets for Institutional shares, respec-
tively, and 0.53% of the Money Market Fund's average daily net assets for Fi-
nancial Intermediary shares. For the year ended April 30, 2000, PaineWebber and
Mitchell Hutchins waived or reimbursed $376,748, $59,053 and $78,314 in invest-
ment advisory and administration fees and other expenses from the Money Market
Fund, the Government Securities Fund and the Treasury Securities Fund, respec-
tively.
Federal Tax Status
Each Fund intends to distribute all of its taxable income and to comply with
the other requirements of the Internal Revenue Code applicable to regulated in-
vestment companies. Accordingly, no provision for federal income taxes is re-
quired. In addition, by distributing during each calendar year substantially
all of their net investment income, capital gains and certain other amounts, if
any, the Funds intend not to be subject to a federal excise tax.
Shareholder Service Plan and Agreement
Under a Shareholder Service Plan and Agreement with respect to its Financial
Intermediary shares, each Fund pays PaineWebber monthly fees at the annual rate
of 0.25% of the average daily net assets of the Financial Intermediary shares
held by financial intermediaries on behalf of their customers. Under Service
Agreements with those financial intermediaries, PaineWebber pays the entire fee
to the financial intermediaries for certain support services that they provide
to the beneficial owners of the Financial Intermediary shares. At April 30,
2000, the Money Market Fund owed PaineWebber $6,435 in shareholder service
fees.
15
<PAGE>
Notes to Financial Statements
Money Market Fund Bond
Effective September 30, 1999, the Money Market Fund obtained an insurance bond
that provides limited coverage for certain loss events involving certain money
market instruments held by the Fund. These loss events include non-payment of
principal or interest or a bankruptcy or insolvency of the issuer or credit en-
hancement provider (if any). The insurance bond provides for coverage up to
$200 million for a number of funds with a deductible of 10 basis points (0.10%)
of the total assets of the Fund for First Tier Securities and 50 basis points
(0.50%) of the total assets of the Fund for Second Tier Securities, in each
case determined as of the close of business on the first business day prior to
the loss event. In the event of a loss covered under the bond, the Fund would
expect to retain the security in its portfolio, rather than having to sell it
at its current market value, until the date of payment of the loss, which is
generally no later than the maturity of the security. While the policy is in-
tended to provide some protection against credit risk and to help the Fund
maintain a constant price per share of $1.00, there is no guarantee that the
insurance will do so. For the period September 30, 1999 to April 30, 2000, the
Money Market Fund did not use this insurance bond.
Other Liabilities
At April 30, 2000, the Funds had the following liabilities outstanding:
<TABLE>
<CAPTION>
Dividends
Payable
----------
<S> <C>
Money Market Fund................................................. $8,693,756
Government Securities Fund........................................ 593,594
Treasury Securities Fund.......................................... 548,203
</TABLE>
16
<PAGE>
Notes to Financial Statements
Shares of Beneficial Interest
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest, at $1.00 per share,
were as follows:
<TABLE>
<CAPTION>
Financial
Institutional Shares Intermediary Shares*
-------------------------------- -------------------------
For the Years Ended
For the Years Ended April 30, April 30,
-------------------------------- -------------------------
2000 1999 2000 1999
--------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
Money Market Fund:
Shares sold............. 12,555,684,920 12,503,291,139 125,615,287 44,909,334
Shares repurchased...... (12,844,886,813) (12,145,857,186) (72,982,693) (49,210,334)
Dividends reinvested.... 88,935,293 87,111,922 -- --
--------------- --------------- ------------ -----------
Net increase (decrease)
in shares outstanding.. (200,266,600) 444,545,875 52,632,594 (4,301,000)
=============== =============== ============ ===========
Government Securities
Fund:
Shares sold............. 348,454,081 281,772,626
Shares repurchased...... (372,396,988) (248,308,554)
Dividends reinvested.... 7,058,201 5,168,578
--------------- ---------------
Net increase (decrease)
in shares outstanding.. (16,884,706) 38,632,650
=============== ===============
Treasury Securities
Fund:
Shares sold............. 221,556,579 476,238,175
Shares repurchased...... (288,382,268) (485,058,321)
Dividends reinvested.... 6,289,958 8,173,484
--------------- ---------------
Net decrease in shares
outstanding............ (60,535,731) (646,662)
=============== ===============
</TABLE>
-------
* For the years ended April 30, 2000 and April 30, 1999, there were no
transactions in Financial Intermediary shares for the Government Securities
Fund and Treasury Securities Fund.
17
<PAGE>
Liquid Institutional Reserves -- Money Market Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
Financial Intermediary
Institutional Shares Shares**
-------------------------------------------------------- -----------------------------
For the
Period
For the Years January 14,
For the Years Ended April 30, Ended 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>
---------
+ Issuance of shares.
* Annualized
** For the period May 1, 1997 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.
18
<PAGE>
Liquid Institutional Reserves -- Government Securities Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
year is presented below:
<TABLE>
<CAPTION>
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.
19
<PAGE>
Liquid Institutional Reserves -- Treasury Securities Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
year is presented below:
<TABLE>
<CAPTION>
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>
---------
(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
Report of Independent Auditors
The Board of Trustees and Shareholders of Liquid Institutional Reserves
We have audited the accompanying statement of net assets of Liquid Institu-
tional Reserves (comprising, respectively, the Money Market Fund, Government
Securities Fund and Treasury Securities Fund) as of April 30, 2000, and the re-
lated statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended, and the fi-
nancial highlights for each of the periods indicated. These financial state-
ments and financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included con-
firmation of securities owned at April 30, 2000, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits pro-
vide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting Liquid Institutional Reserves at
April 30, 2000, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated, in conformity
with accounting principles generally accepted in the United States.
New York, New York
June 7, 2000
21
<PAGE>
Liquid Institutional Reserves
Tax Information (unaudited)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end (April 30,
2000) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all dividends
paid by the Money Market Fund, the Government Securities Fund and the Treasury
Securities Fund during the fiscal year were derived from net investment income.
These amounts are taxable as ordinary income, none of which qualifies for the
dividend received deduction available to corporate shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need to be
reported as taxable income. Some retirement trusts (e.g., corporate, Keogh and
403(b)(7) plans) may need this information for their annual information report-
ing.
Because each Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 2000. The second notification, which
will reflect the amounts to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 2001. Shareholders are advised to consult their own tax ad-
visers with respect to the tax consequences of their investment in each respec-
tive Fund.
22
<PAGE>
TRUSTEES
E. Garrett Bewkes, Jr. Meyer Feldberg
Chairman George W. Gowen
Frederic V. Malek
Margo N. Alexander Carl W. Schafer
Richard Q. Armstrong Brian M. Storms
Richard R. Burt
Mary C. Farrell
OFFICERS
Margo N. Alexander Paul H. Schubert
President Vice President and Treasurer
Dianne E. O'Donnell Dennis L. McCauley
Vice President and Secretary Vice President
Susan P. Ryan
Vice President
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
SUBADVISER AND SUBADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019
This report is not to be used in connection with the offering of shares of the
Funds unless accompanied or preceded by an effective prospectus.
A prospectus containing more complete information for any of the Funds listed on
the back cover can be obtained from a PaineWebber Financial Advisor or
correspondent firm. Read the prospectus carefully before investing.
<PAGE>
PaineWebber offers a family of 27 funds which encompass a diversified range of
investment goals.
BOND FUNDS
. High Income Fund
. Investment Grade Income Fund
. Low Duration U.S. Government Income Fund
. Strategic Income Fund
. U.S. Government Income Fund
TAX-FREE BOND FUNDS
. California Tax Free Income Fund
. Municipal High Income Fund
. National Tax-Free Income Fund
. New York Tax-Free Income Fund
STOCK FUNDS
. Enhanced S&P 500 Fund
. Enhanced Nasdaq 100 Fund
. Financial Services Growth Fund
. Growth Fund
. Growth and Income Fund
. Mid Cap Fund
. Small Cap Fund
. S&P 500 Index Fund
. Strategy Fund
. Tax-Managed Equity Fund
. Utility Income Fund
ASSET ALLOCATION FUNDS
. Balanced Fund
. Tactical Allocation Fund
GLOBAL FUNDS
. Asia Pacific Growth Fund
. Emerging Markets Equity Fund
. Global Equity Fund
. Global Income Fund
PAINEWEBBER MONEY MARKET FUND
ANNUAL REPORT
LIQUID
INSTITUTIONAL
RESERVES
APRIL 30, 2000
PaineWebber
(C)2000 PaineWebber Incorporated
All Rights Reserved
Member SIPC
