PAINEWEBBER
CASHFUND, INC.
A MONEY MARKET FUND
DESIGNED TO PROVIDE
INVESTORS WITH CURRENT
INCOME, STABILITY OF PRINCIPAL
AND HIGH LIQUIDITY
ANNUAL REPORT
MARCH 31, 1996
<PAGE>
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May 17, 1996
Dear Shareholder:
We are pleased to present you with the annual report for PaineWebber Cashfund,
Inc. for the year ended March 31, 1996. Moderate economic growth, low inflation
and strong corporate earnings growth helped propel the stock market to
record-breaking levels during 1995. The bond market also rallied during 1995,
providing investors with their third-best year since the 1920s.
By the end of 1995, most investors were convinced that the Federal Reserve Board
had achieved a "soft landing" for the economy, which led to a general consensus
that the Fed would act again to cut short-term interest rates. Sentiment changed
quickly in early March, however, in response to government reports showing
higher-than-expected economic growth: there was a sharp drop in bond prices and
volatility in the stock market. Meanwhile, the Federal Reserve's Open Market
Committee decided to keep monetary policy unchanged at the March 26, 1996
meeting. The Fed's decision not to lower rates in March (and, again in May)
suggests officials do not foresee a recession or accelerating inflation.
Moving forward, our view is that the economy will continue to expand, but
slowly. We forecast that inflation will remain in check, creating an environment
for stable interest rates. A recession within the next year is unlikely, given
the absence of many of the usual pre-recession indicators. The economic backdrop
for the rest of the year should be similar to 1995's. However, we project that
corporate earnings growth will be moderate, which will probably constrain stock
prices.
PORTFOLIO REVIEW
PaineWebber Cashfund's current yield for the seven-day period ended March 31,
1996 was 4.73% and net assets totalled approximately $5.3 billion. During the
year ended March 31, 1996, the Federal Reserve Board signaled its assessment of
low inflationary pressure by bringing the Federal Funds rate down to 5.25% via
three rate cuts in July and December 1995, and January, 1996. As short-term
rates began to decline during the second half of 1995, the Fund's maturity was
slightly longer than average, which was beneficial to Fund performance. However,
during the first quarter of 1996, interest rates began to increase, so the
Fund's weighted average maturity was decreased. (A shorter weighted average
maturity benefits the Fund by enabling it to have more cash available to invest
as rates trend upward.) As of March 31, 1996, the Fund's weighted average
maturity was 52 days.
Going forward, the Fund expects to maintain a neutral weighted average maturity
as short-term rates find stability during uncertain economic times. Investment
decisions in the portfolio will be dominated by credit quality and liquidity.
Although we are interested in maintaining higher yields, we will not do so by
sacrificing the Fund's very strict emphasis on security, quality and liquidity.
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2
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As of March 15, 1996, the Fund continued to be rated AAAm by Standard & Poor's
Ratings Group ("S&P"), the highest rating given to money market funds. The
rating of the Fund reflects S&P's view concerning the creditworthiness of the
Fund's portfolio and its sound investment and management policies. The rating
indicates that there is a superior capacity to maintain principal value and
limit exposure to loss. The rating also reflects S&P's view that the portfolio
credit quality is strong, with all assets rated either 'A-1+' or 'A-1', in
accordance with S&P's rating guidelines.
We value you as a shareholder and as a client, and thank you for your continued
support. We welcome any comments or questions you may have.
Sincerely,
<TABLE>
<CAPTION>
<S> <C>
/s/ Margo Alexander /s/ Dennis L. McCauley
MARGO ALEXANDER DENNIS L. MCCAULEY
President, Managing Director and Chief
Mitchell Hutchins Asset Management Inc. Investment Officer--Fixed Income,
Mitchell Hutchins Asset Management Inc.
/s/ Susan P. Messina /s/ Kris Dorr
SUSAN P. MESSINA KRIS DORR
Senior Vice President, Portfolio Manager,
Taxable Money Funds PaineWebber Cashfund, Inc.
Mitchell Hutchins Asset Management Inc.
</TABLE>
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3
<PAGE>
PaineWebber Cashfund, Inc.
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Statement of Net Assets
March 31, 1996
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<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--6.40%
$ 20,000 U.S. Treasury Bills................ 02/06/97 to 03/06/97 4.650 to 5.140%@ $ 19,114,275
60,000 Federal Farm Credit Bank........... 06/03/96 to 03/03/97 4.950 to 5.875 59,954,942
20,000 Federal Home Loan Bank............. 03/20/97 5.400 19,979,471
53,000 Federal Home Loan Mortgage Corp.... 04/22/96 to 08/15/96 5.300 to 6.210 52,922,035
20,000 Federal National Mortgage
Association*....................... 04/02/96 5.300 20,000,000
85,000 Federal National Mortgage
Association........................ 06/12/96 to 02/14/97 4.780 to 5.680 84,977,426
83,000 Student Loan Marketing
Association*....................... 04/02/96 5.270 to 5.310 82,995,221
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
339,943,370
(cost--$339,943,370)..........................
--------------
DOMESTIC BANK NOTES--5.52%
20,000 Bank of America Illinois........... 04/02/96 5.210 19,999,994
20,000 Bank of Hawaii..................... 01/03/97 5.500 20,020,360
48,000 Bank One, Dayton, N.A.............. 03/25/97 5.560 47,971,816
44,800 First Chicago NBD Corp............. 06/05/96 to 11/01/96 5.500 to 5.650 44,803,874
10,000 LaSalle National Bank, N.A......... 07/02/96 5.350 10,000,000
25,000 Morgan Guaranty Trust Co........... 01/15/97 5.250 25,017,666
15,000 NationsBank of TX, N.A............. 11/08/96 5.550 14,995,070
20,000 NBD Bank, N.A...................... 05/17/96 6.130 20,002,938
15,000 PNC Bank, N.A...................... 05/24/96 6.040 15,010,100
25,000 Seattle-First National Bank........ 10/24/96 5.730 24,990,544
50,000 Wachovia Bank of North Carolina.... 04/02/96 5.240 50,000,011
--------------
292,812,373
TOTAL DOMESTIC BANK NOTES
(cost--$292,812,373)...........................
--------------
COMMERCIAL [email protected]%
Aerospace Defense--0.76%
40,538 Rockwell International Corp........ 04/29/96 to 04/30/96 5.320 to 5.400 40,365,128
--------------
Agriculture--0.38%
20,000 Cargill Inc........................ 04/01/96 5.150 20,000,000
--------------
Asset Backed--8.72%
185,000 Asset Securitization Cooperative
Corp. ............................. 04/02/96 to 05/21/96 5.060 to 5.400 184,421,855
130,481 Delaware Funding Corp.............. 04/15/96 to 05/03/96 5.340 to 5.400 130,022,924
90,000 Eiger Capital Corp................. 04/11/96 to 05/07/96 5.170 to 5.280 89,719,867
13,650 Falcon Asset Securitization
Corp............................... 04/23/96 5.270 13,606,039
30,000 New Center Asset Trust............. 04/04/96 5.260 29,986,850
15,000 Preferred Receivables Funding
Corp............................... 04/24/96 5.350 14,948,729
--------------
462,706,264
--------------
Auto-Truck--3.58%
88,800 PACCAR Financial Corp. ............ 04/01/96 to 05/10/96 5.050 to 5.360 88,578,984
101,600 Toyota Motor Credit Corp........... 04/10/96 to 05/02/96 5.230 to 5.360 101,284,541
--------------
189,863,525
--------------
</TABLE>
4
<PAGE>
PaineWebber Cashfund, Inc.
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<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
COMMERCIAL PAPER@--(continued)
<C> <S> <C> <C> <C>
Banking--7.57%
$ 20,000 Abbey National North America....... 05/30/96 5.300 % $ 19,826,278
56,000 ABN Amro North America Finance
Corp............................... 05/06/96 to 08/27/96 4.950 to 5.070 55,248,809
30,000 Banc One Corp...................... 04/17/96 to 04/18/96 5.140 29,929,325
25,000 Bankers Trust N.Y. Corp............ 07/03/96 5.300 24,657,708
12,000 BCI Funding Corp. ................. 05/13/96 5.350 11,925,100
130,000 BEX America Finance Inc............ 04/15/96 to 08/16/96 4.875 to 5.350 129,073,648
47,000 Cregem North America Inc. ......... 04/09/96 to 04/10/96 5.370 46,939,438
15,000 MPS U.S. Commercial Paper Corp. ... 04/08/96 5.390 14,984,279
70,000 Societe Generale N.A. Inc. ........ 05/07/96 to 07/19/96 5.070 to 5.150 69,171,562
--------------
401,756,147
--------------
Broker/Dealer--7.04%
25,000 Bear Stearns Co., Inc. ............ 04/19/96 5.400 24,932,500
90,000 Goldman Sachs Group L.P. .......... 04/04/96 to 05/14/96 5.320 to 5.600 89,707,283
80,000 Merrill Lynch & Co., Inc. ......... 04/04/96 to 10/28/96 4.950 to 5.420 79,088,300
156,000 Morgan Stanley Group, Inc. ........ 04/01/96 to 08/01/96 5.060 to 5.500 154,785,564
25,000 Nomura Holding America Inc. ....... 04/01/96 5.600 25,000,000
--------------
373,513,647
--------------
Chemicals--1.59%
60,000 dupont (E.I.) deNemours & Co. ..... 04/11/96 to 07/19/96 5.120 to 5.500 59,699,013
25,000 Hoechst Celanese Corp. ............ 04/19/96 5.380 24,932,750
--------------
84,631,763
--------------
Conglomerates--2.67%
142,000 BTR Dunlop Finance Inc............. 04/01/96 to 06/07/96 5.100 to 5.520 141,597,856
--------------
Consumer Products--0.19%
10,000 Unilever Capital Corp. ............ 05/10/96 5.350 9,942,042
--------------
Drugs and Health Care--6.93%
95,000 Bayer Corp. ....................... 04/19/96 to 05/28/96 5.060 to 5.275 94,434,356
155,000 Lilly (Eli) & Co. ................. 04/04/96 to 08/20/96 4.830 to 5.650 153,762,554
81,660 Pfizer Inc. ....................... 04/01/96 to 04/03/96 5.160 to 5.200 81,642,943
38,625 Warner Lambert Co. ................ 05/22/96 to 09/16/96 4.840 to 5.420 38,174,238
--------------
368,014,091
--------------
Electronics--3.85%
40,000 Motorola Credit Corp. ............. 04/12/96 to 04/19/96 5.200 to 5.220 39,926,233
118,575 Siemens Corporation................ 04/19/96 to 06/05/96 5.140 to 5.270 118,067,242
46,536 Sony Capital Corp.................. 04/08/96 to 04/25/96 5.260 to 5.430 46,445,457
--------------
204,438,932
--------------
</TABLE>
5
<PAGE>
PaineWebber Cashfund, Inc.
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<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
COMMERCIAL PAPER@--(continued)
<C> <S> <C> <C> <C>
Energy--2.16%
$ 25,000 Exxon Asset Management Co. ........ 04/15/96 5.160 % $ 24,949,833
80,026 Exxon Imperial U.S. Inc............ 04/08/96 to 04/26/96 5.200 to 5.270 79,789,513
10,000 Shell Oil Co. ..................... 05/10/96 5.270 9,942,908
--------------
114,682,254
--------------
Entertainment--0.36%
20,000 The Walt Disney Company Inc. ...... 03/12/97 5.230 18,997,583
--------------
Finance-Conduit--4.49%
55,100 CommerzBank U.S. Finance........... 04/09/96 to 04/19/96 5.150 to 5.350 54,979,048
94,257 MetLife Funding Inc. .............. 04/03/96 to 05/03/96 5.100 to 5.300 94,005,235
60,000 SBNSW (Delaware) Inc. ............. 04/15/96 to 05/17/96 5.060 to 5.270 59,686,566
30,000 Svenska Handelsbanken Inc. ........ 04/22/96 5.350 29,906,375
--------------
238,577,224
--------------
Finance-Diversified--1.43%
45,000 Associates Corp. of North
America............................ 04/02/96 to 04/24/96 5.240 to 5.350 44,911,638
31,000 Sumitomo Bank Capital Markets
Inc................................ 04/10/96 5.500 30,957,375
--------------
75,869,013
--------------
Finance-Independent--1.05%
56,000 National Rural Utility Coop.
Finance Corp. ..................... 04/15/96 to 05/03/96 5.200 to 5.310 55,806,699
--------------
Finance-Subsidiary--4.69%
20,000 Deutsche Bank Financial Inc. ...... 04/08/96 5.200 19,979,778
63,000 Dresdner U.S. Finance, Inc. ....... 04/08/96 to 05/08/96 5.120 62,809,280
100,000 National Australia Funding
(Delaware) Inc. ................... 04/18/96 to 08/05/96 5.000 to 5.410 99,325,097
67,000 Pitney Bowes Credit Corp. ......... 04/08/96 to 04/11/96 5.120 66,912,106
--------------
249,026,261
--------------
Food, Beverage and Tobacco--3.09%
20,000 Allied Domecq North America
Corp. ............................. 04/26/96 to 05/02/96 5.300 to 5.385 19,916,823
91,000 Campbell Soup Co. ................. 04/09/96 to 06/04/96 5.220 to 5.320 90,623,059
40,000 Coca-Cola Co. ..................... 05/02/96 5.050 39,826,056
14,000 Nestle Capital Corp. .............. 04/15/96 to 07/02/96 5.100 to 5.250 13,927,450
--------------
164,293,388
--------------
General Trade--3.64%
193,850 Mitsubishi International Corp. .... 04/01/96 to 06/21/96 5.140 to 5.430 193,021,634
--------------
Insurance--1.45%
40,000 St. Paul Companies Inc. ........... 04/18/96 to 04/22/96 5.280 to 5.320 39,888,066
37,000 USAA Capital Corp. ................ 04/08/96 to 04/25/96 5.200 to 5.270 36,928,142
--------------
76,816,208
--------------
</TABLE>
6
<PAGE>
PaineWebber Cashfund, Inc.
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<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
COMMERCIAL PAPER@--(concluded)
<C> <S> <C> <C> <C>
Insurance-Property/Casualty--2.34%
$ 55,000 A.I. Credit Corp. ................. 04/03/96 to 04/17/96 5.250 to 5.320% $ 54,942,503
30,000 A.I.G. Funding Corp. .............. 07/31/96 5.250 29,470,625
40,135 John Hancock Capital Corp. ........ 04/08/96 to 04/25/96 5.200 to 5.350 40,039,113
--------------
124,452,241
--------------
Metals and Mining--2.53%
118,800 RTZ America Inc. .................. 04/03/96 to 04/26/96 5.200 to 5.320 118,595,431
16,000 U.S. Borax Inc..................... 05/14/96 5.060 15,903,298
--------------
134,498,729
--------------
Miscellaneous--2.88%
153,750 Beta Finance Inc. ................. 04/30/96 to 07/29/96 5.050 to 5.270 152,672,261
--------------
Oil Equipment and Services--1.87%
99,800 Colonial Pipeline Co. ............. 04/11/96 to 05/06/96 5.160 to 5.350 99,488,011
--------------
Printing and Publishing--1.03%
55,000 Reed Elsevier Inc. ................ 04/11/96 to 04/25/96 5.220 to 5.300 54,857,750
--------------
Retail Merchandising--0.47%
25,000 Toys R Us Inc. .................... 05/03/96 5.330 24,881,556
--------------
Telecommunications--4.15%
142,800 American Telephone & Telegraph..... 04/10/96 to 06/10/96 5.230 to 5.485 142,290,398
44,000 BellSouth Capital Funding Corp. ... 04/04/96 to 04/17/96 5.240 to 5.280 43,935,307
25,000 BellSouth Telecommunications
Inc. .............................. 04/12/96 5.200 24,960,278
9,000 Southwestern Bell Capital Corp. ... 04/15/96 5.230 8,981,695
--------------
220,167,678
--------------
Transportation--0.79%
41,822 Norfolk Southern Corp. ............ 04/09/96 to 05/30/96 5.070 to 5.140 41,681,060
--------------
4,336,618,945
TOTAL COMMERCIAL PAPER
(cost--$4,336,618,945).........................
--------------
SHORT-TERM CORPORATE OBLIGATIONS--5.89%
Banking--1.66%
33,000 F.C.C. National Bank*.............. 04/01/96 5.360 32,993,053
5,000 NationsBank Corp. ................. 08/15/96 4.750 4,979,512
20,000 PNC Bank N.A*...................... 04/02/96 5.425 19,990,405
10,000 Society National Bank*............. 04/11/96 5.295 9,993,951
20,000 Wachovia Bank of North Carolina*... 05/06/96 5.188 19,983,024
--------------
87,939,945
--------------
</TABLE>
7
<PAGE>
PaineWebber Cashfund, Inc.
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<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
SHORT-TERM CORPORATE OBLIGATIONS--(concluded)
<C> <S> <C> <C> <C>
Broker/Dealer--2.80%
$ 15,000 Bear Stearns Companies, Inc. ...... 04/21/97 6.010 % $ 15,044,592
20,000 Goldman Sachs Group LP*............ 04/02/96 5.440 19,997,315
53,500 Merrill Lynch & Co, Inc. .......... 04/09/96 to 03/17/97 5.560 to 6.491 53,513,757
10,000 Merrill Lynch & Co, Inc.*.......... 04/01/96 5.460 10,000,000
28,000 Morgan (J.P.) & Co. Inc. .......... 05/13/96 6.200 28,011,422
10,000 Morgan Stanley Group, Inc. ........ 02/03/97 7.790 10,224,241
12,000 Morgan Stanley Group, Inc.*........ 04/01/96 5.640 12,002,507
--------------
148,793,834
--------------
Business Services--0.47%
25,000 PHH Corporation*................... 04/01/96 5.330 24,995,956
--------------
Computer--0.36%
19,000 IBM Credit Corp. .................. 06/13/96 15.000 19,339,779
--------------
Finance-Diversified--0.22%
11,420 Associates Corp. of North
America............................ 01/01/97 8.700 11,684,784
--------------
Miscellaneous--0.38%
10,000 Beta Finance, Inc.*................ 04/02/96 5.160 10,000,000
10,000 Beta Finance, Inc. ................ 08/19/96 5.870 9,999,090
--------------
19,999,090
--------------
TOTAL SHORT-TERM CORPORATE OBLIGATIONS
312,753,388
(cost--$312,753,388)..........................
--------------
REPURCHASE AGREEMENT--0.39%
20,910 Repurchase Agreement dated 03/29/96
with Lehman Brothers, Inc.,
collateralized by $14,420,000 U.S.
Treasury Bonds, 11.250% due
02/15/15; proceeds: $20,919,305;
(cost--$20,910,000)................ 04/01/96 5.340 20,910,000
--------------
5,303,038,076
TOTAL INVESTMENTS--(cost--$5,303,038,076 which
approximates cost for federal tax
purposes)--99.90%..............................
5,519,728
Other assets in excess of liabilities--0.10%...
--------------
$5,308,557,804
NET ASSETS (applicable to 5,310,143,190 shares
outstanding at $1.00 per share)--100.00%......
--------------
--------------
</TABLE>
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<TABLE>
<C> <S>
* Variable rate securities--maturity date reflects earlier of reset date or maturity date.
The interest rates shown are the current rates as of March 31, 1996 and reset
periodically.
</TABLE>
<TABLE>
<C> <S>
@ Interest rates shown are discount rates at date of purchase.
</TABLE>
Weighted Average Maturity--52 days
See accompanying notes to financial statements
8
<PAGE>
PaineWebber Cashfund, Inc.
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Statement of Operations
For the Year Ended March 31, 1996
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<TABLE>
<S> <C>
INTEREST INCOME.............................................................. $265,772,305
------------
EXPENSES:
Investment advisory and administration..................................... 16,998,964
Transfer agency and service fees........................................... 7,633,214
Reports and notices to shareholders........................................ 1,487,033
Custody and accounting..................................................... 477,931
Insurance.................................................................. 291,132
Legal and audit............................................................ 182,905
Federal and state registration............................................. 133,880
Directors' fees............................................................ 52,500
Other expenses............................................................. 20,110
------------
Total expenses............................................................. 27,277,669
------------
NET INVESTMENT INCOME........................................................ 238,494,636
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS.............................. 331,945
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $238,826,581
------------
------------
</TABLE>
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Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income..................................... $ 238,494,636 $ 154,325,918
Net realized gains (losses) from investment
transactions................................................ 331,945 (1,511,404)
-------------- --------------
Net increase in net assets resulting from operations...... 238,826,581 152,814,514
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income..................................... (238,494,636) (154,325,918)
-------------- --------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE
TRANSACTIONS................................................ 1,607,547,540 265,911,471
-------------- --------------
Net increase in net assets................................ 1,607,879,485 264,400,067
NET ASSETS:
Beginning of year......................................... 3,700,678,319 3,436,278,252
-------------- --------------
End of year............................................... $5,308,557,804 $3,700,678,319
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PaineWebber Cashfund, Inc.
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Notes to Financial Statements
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ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Cashfund, Inc. (the "Fund"), was organized under the laws of
Maryland on January 20, 1978 and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as an open-end
diversified management investment company.
The preparation of financial statements in accordance with generally
accepted accounting principles requires Fund management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
Valuation and Accounting for Investments--Investments are valued at
amortized cost which approximates market value. Investment transactions are
accounted for 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 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 of default of the obligation to repurchase, the 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 Fund occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
Dividends and Distributions to Shareholders--The Fund declares dividends on
a daily basis from net investment income. Dividends from net investment income
and distributions from realized gains from investment transactions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal tax-basis treatment; temporary differences do not require
reclassification. Net capital gains, if any, will be distributed annually, but
the Fund may make more frequent distributions of such gains, if necessary, to
maintain its net asset value per share at $1.00 or to avoid income or excise
taxes.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Fund to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
10
<PAGE>
PaineWebber Cashfund, Inc.
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INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's Board of Directors has approved an investment advisory and
administration contract ("Advisory Contract") with PaineWebber Incorporated
("PaineWebber"), under which PaineWebber serves as investment adviser and
administrator of the Fund. In accordance with the Advisory Contract, PaineWebber
receives compensation from the Fund, computed daily and paid monthly equivalent
to 0.500% per annum of the Fund's first $500 million of average daily net
assets; 0.425% of the next $500 million; 0.390% of the next $500 million; 0.380%
of the next $500 million; 0.350% of the next $500 million; 0.345% of the next
$1.0 billion; 0.325% of the next $500 million; 0.315% of the next $500 million;
0.300% of the next $500 million; 0.290% of the next $500 million; and 0.280% of
assets in excess of $5.5 billion. At March 31, 1996, the Fund owed PaineWebber
$1,631,684 in investment advisory and administration fees.
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a
wholly-owned subsidiary of PaineWebber serves as sub-adviser to the Fund
pursuant to a Sub-Advisory Contract between PaineWebber and Mitchell Hutchins.
In accordance with the sub-advisory contract, PaineWebber (not the Fund) pays
Mitchell Hutchins for sub-advisory services provided.
In compliance with applicable state securities laws, PaineWebber will reimburse
the Fund for those operating expenses, exclusive of taxes, interest, brokerage
fees, distribution fees and extraordinary expenses, which exceed applicable
limitations in any fiscal year. Currently, the most restrictive limitation is
2.5% on the first $30 million of average daily net assets, 2.0% of the next $70
million and 1.5% of any excess over $100 million. For the year ended March 31,
1996, no reimbursements were required pursuant to the above limitation.
TRANSFER AGENCY SERVICE FEES
The Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account, plus certain out-of-pocket expenses, for services not
provided by the Funds's transfer agent. For these services for the year ended
March 31, 1996, PaineWebber earned $2,762,836. At March 31, 1996, the Fund owed
PaineWebber $217,875 for such shareholder service fees and reimbursement of
out-of-pocket expenses.
OTHER LIABILITIES
At March 31, 1996, dividends payable aggregated $4,124,669.
FEDERAL TAX STATUS
The Fund intends to distribute all of its taxable income and to comply with
the other requirements of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provision
11
<PAGE>
PaineWebber Cashfund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
for federal income taxes is required. In addition, by distributing during each
calendar year substantially all of its net investment income, capital gains and
certain other amounts, if any, the Fund intends not to be subject to federal
excise tax. At March 31, 1996, the Fund had net capital loss carryforwards of
$1,414,115. These loss carryforwards are available as reductions, to the extent
provided in the regulations, of any future net realized gains, and will expire
by March 31, 2003. To the extent that such losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed.
CAPITAL SHARE TRANSACTIONS
There are 20 billion shares of $0.001 par value common stock. Transactions
in capital shares, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
MARCH 31,
----------------------------------
<S> <C> <C>
1996 1995
--------------- ---------------
Shares sold............................................... 18,372,688,369 11,629,927,695
Shares repurchased........................................ (16,994,663,459) (11,514,158,936)
Dividends reinvested...................................... 229,522,630 150,142,712
--------------- ---------------
Net increase in shares outstanding........................ 1,607,547,540 265,911,471
--------------- ---------------
--------------- ---------------
</TABLE>
12
<PAGE>
PaineWebber Cashfund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each year
is presented below:
<TABLE>
<CAPTION>
For the Years Ended March 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<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.............. 0.0523 0.0433 0.0272 0.0317 0.0509
Dividends from net investment
income............................. (0.0523) (0.0433) (0.0272) (0.0317) (0.0509)
---------- ---------- ---------- ---------- ----------
Net asset value,
end of year....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return(1)......... 5.36% 4.44% 2.75% 3.17% 5.09%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratios/Supplemental Data:
Net assets, end of period
(000's)............................ $5,308,558 $3,700,678 $3,436,278 $3,774,298 $4,234,968
Ratios of expenses to average net
assets............................. 0.60% 0.62% 0.61% 0.57% 0.56%
Ratios of net
investment income to
average net assets.............. 5.24% 4.35% 2.73% 3.17% 5.09%
</TABLE>
- -------------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates and a sale at net asset value on the last
day of each period reported.
13
<PAGE>
PaineWebber Cashfund, Inc.
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
PaineWebber Cashfund, Inc.
We have audited the accompanying statement of net assets of PaineWebber
Cashfund, Inc. as of March 31, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We have conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
PaineWebber Cashfund, Inc. at March 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
May 14, 1996
14
<PAGE>
PaineWebber Cashfund, Inc.
- --------------------------------------------------------------------------------
Tax Information
- --------------------------------------------------------------------------------
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (March 31,
1996) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all distributions
paid during the fiscal year were derived from net investment income and are
taxable as ordinary income. No portion of these distributions qualifies for the
dividends received deduction available to corporate shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information
reporting.
Because the Fund's fiscal year is not the calendar year, another
notification will be sent in respect of calendar 1996. The second notification,
which will reflect the amount 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 1997. Shareholders are advised to consult their own
tax advisers with respect to the tax consequences of their investment in the
Fund.
15
<PAGE>
---------------------------------
DIRECTORS
E. Garrett Bewkes, Jr., Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
John R. Torell III
---------------------------------
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Julian F. Sluyters
Vice President and Treasurer
---------------------------------
ADMINISTRATOR AND
DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
---------------------------------
INVESTMENT ADVISERS
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Mitchell Hutchins Asset
Management Inc.
1285 Avenue of the Americas
New York, New York 10019
---------------------------------
This report is not to be used in
connection with the offering of
shares of the Fund unless
accompanied or preceded by an
effective prospectus.
A prospectus containing more
complete information for any of
the above funds, including
charges and expenses, can be
obtained from a PaineWebber
investment executive or
correspondent firm. Read the
prospectus carefully before
investing.
Recycled Paper
(C)1996 PaineWebber Incorporated
