<PAGE>
PAINEWEBBER CASHFUND, INC.
ANNUAL REPORT
May 15, 1998
Dear Shareholder,
We are pleased to present you with the annual report for the PaineWebber
Cashfund, Inc. (the "Fund") for the fiscal year ended March 31, 1998.
PAINEWEBBER
CASHFUND, INC.
FUND PROFILE
- - GOAL:
Principal stability and current income
- - PORTFOLIO MANAGER:
Susan P. Ryan,
Mitchell Hutchins
Asset Management Inc.
- - TOTAL NET ASSETS:
$5.7 billion as of
March 31, 1998
- - DIVIDEND PAYMENTS:
Monthly
GENERAL MARKET OVERVIEW
- -------------------------------------------------------------------------------
[GRAPHIC]
The Treasury market stayed in a "trading range" -- i.e., little movement up
or down -- from the spring of 1997 into early 1998. Interest rates also
stayed in a trading range through January as investors continued to favor the
stability of U.S. markets and began to discount the possibility that the
Federal Reserve would raise short-term interest rates. Treasurys weakened
slightly in February as volatility in overseas markets subsided and stable
domestic growth eliminated the need for Fed intervention. Quarter over
quarter, short-term yields fell modestly while longer-term yields ended the
period mostly unchanged.
The Fed is trying to discern the net effect of the countervailing forces at
work in the markets. The domestic economy is moderately strong, as evidenced
by stock prices, housing, employment, income growth and consumer confidence.
However, global influences, particularly Asia, could slow economic growth and
lower inflation
PORTFOLIO REVIEW
- -------------------------------------------------------------------------------
[GRAPHIC]
PERFORMANCE--
The Fund's current yield for the seven-day period ended March 31, 1998 was
5.10%; net assets totaled $5.7 billion as of March 31, 1998.
PORTFOLIO HIGHLIGHTS--
Because of continuing volatility in the marketplace, we maintained the Fund's
weighted-average maturity at 51 days as of March 31, 1998, slightly above the
IBC Financial Data average for similar money market funds.
The Fund invests in high-quality, short-term money market instruments such as
commercial paper, medium-term notes, U.S. Treasurys, U.S. government
agencies, bankers' acceptances and certificates of deposit. Through March 31,
1998 the Fund maintained its AAAm credit rating, the highest given to money
market funds by Standard & Poor's. At least 50% of the Fund's portfolio
consists of credits rated "A1+" according to Standard & Poor's quality
criteria.
1
<PAGE>
ANNUAL REPORT
CASHFUND, INC.
Percent breakdown of portfolio assets, March 31, 1998*
<TABLE>
<S> <C>
Commercial Paper 64.2%
Bank Notes 11.2%
U.S. Government & Agency Obligations 10.9%
Short-Term Corporate Obligations 6.7%
Certificates of Deposit 5.2%
Bankers' Acceptances 1.5%
Cash & Cash Equivalents 0.3%
* Allocations subject to change
</TABLE>
OUTLOOK
- -------------------------------------------------------------------------------
[GRAPHIC]
We think 1998 will be a strong year for the U.S. bond markets. The U.S.
economy is slowing slightly due to Asia, though the effects will not show up
in economic statistics for awhile. Inflation is likely to remain low. The
Federal budget is now running a surplus, which should reduce government
borrowing and ease the upward pressure on market interest rates. We believe
interest rates will continue to fall in 1998.
We currently expect to maintain the Fund's weighted-average maturity slightly
above the IBC Financial Data average number of days. A higher
weighted-average maturity should benefit the Fund if our outlook for interest
rates proves correct.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued
support and welcome any comments or questions you may have.
For a quarterly FUND PROFILE on any of the PaineWebber Family of Funds,(1)
please contact your investment executive.
Sincerely,
/s/Margo Alexander /s/Dennis L. McCauley /s/Susan P. Ryan
MARGO ALEXANDER DENNIS L. McCAULEY SUSAN P. RYAN
President, Managing Director Senior Vice President
Mitchell Hutchins and Chief Investment Mitchell Hutchins Asset
Asset Management Inc. Officer--Fixed Income, Management Inc.
Mitchell Hutchins Portfolio Manager,
Asset Management Inc. Cashfund, Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended March 31, 1998, and reflects our views
at the time we are writing this report. Of course, these views may change in
response to changing circumstances. We encourage you to consult your
investment executive regarding your personal investment program.
(1) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses,
and should be read carefully before investing.
2
<PAGE>
PAINEWEBBER CASHFUND, INC.
STATEMENT OF NET ASSETS MARCH 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--10.96%
$ 170,000 U.S. Treasury Bills............................... 04/23/98 to 03/04/99 5.030 to 5.260%@ $ 167,572,107
170,000 U.S. Treasury Notes............................... 06/30/98 to 10/31/98 5.875 to 6.250 170,416,355
20,000 Federal Home Loan Bank............................ 03/02/99 5.625 20,000,000
25,000 Federal Home Loan Bank............................ 04/08/98 5.618* 24,988,935
25,000 Federal Home Loan Mortgage Corporation............ 06/19/98 5.950 24,997,403
25,000 Federal Home Loan Mortgage Corporation............ 04/27/98 5.488* 24,985,760
55,000 Federal National Mortgage Association............. 04/07/98 5.368 to 5.653* 54,986,827
25,000 Student Loan Marketing Association................ 01/27/99 5.560 24,989,692
110,000 Student Loan Marketing Association................ 04/07/98 5.378 to 5.668* 109,999,055
--------------
Total U.S. Government and Agency Obligations
(cost--$622,936,134)........................................ 622,936,134
--------------
DOMESTIC BANKERS ACCEPTANCES--1.52%
19,400 Chase Manhattan Bank.............................. 05/13/98 5.610 19,273,027
67,137 SunTrust Bank, Atlanta............................ 04/01/98 5.550 67,136,500
--------------
Total Domestic Bankers Acceptances (cost--$86,409,527)........ 86,409,527
--------------
DOMESTIC BANK NOTES--11.26%
100,000 Bank of America National Trust & Savings
Association..................................... 04/29/98 to 10/22/98 5.490 to 6.150 99,995,169
20,000 Bank of America National Trust & Savings
Association..................................... 04/01/98 5.660* 19,992,411
15,000 Bank One, Wisconsin, N.A.......................... 04/07/98 5.470* 14,993,420
40,000 Comerica Bank N.A., Detroit....................... 06/24/98 5.930 40,002,474
15,000 Comerica Bank N.A., Detroit....................... 04/07/98 5.728* 14,996,746
25,000 FCC National Bank................................. 09/18/98 5.820 25,020,394
55,000 FCC National Bank................................. 04/01/98 5.550 to 5.610* 54,978,723
55,000 Fifth Third Bank of Northwestern, Ohio, N.A....... 05/19/98 to 05/20/98 5.545 to 5.550 55,000,000
25,000 Greenwood Trust Company........................... 04/21/98 5.560 25,000,000
85,000 Harris Trust & Savings Bank....................... 04/13/98 to 05/26/98 5.540 84,999,093
85,000 Huntington National Bank.......................... 09/18/98 to 09/22/98 5.800 to 5.890 84,966,374
15,000 LaSalle National Bank............................. 04/13/98 6.230 15,000,000
85,000 NationsBank of the Carolinas, N.A................. 04/09/98 to 05/13/98 5.520 to 5.560 85,000,000
20,000 SunTrust Bank, Atlanta............................ 07/14/98 to 07/24/98 5.800 to 5.830 19,996,383
--------------
Total Domestic Bank Notes (cost--$639,941,187)................ 639,941,187
--------------
DOMESTIC CERTIFICATES OF DEPOSIT--5.26%
25,000 American Express Centurion Bank................... 04/13/98 5.550 25,000,000
110,000 Bankers Trust Company............................. 05/26/98 to 03/05/99 5.690 to 6.190 109,983,049
14,000 Bankers Trust Company............................. 04/01/98 5.580* 13,991,599
50,000 Morgan Guaranty Trust Company..................... 04/30/98 to 08/06/98 5.810 to 5.870 50,001,698
25,000 Old Kent Bank & Trust Company..................... 04/16/98 5.550 25,000,000
75,000 SunTrust Bank, Atlanta............................ 05/12/98 5.500 74,999,015
--------------
Total Domestic Certificates of Deposit (cost--$298,975,361)... 298,975,361
--------------
COMMERCIAL [email protected]%
AGRICULTURE--0.26%
14,650 Cargill Incorporated.............................. 05/11/98 5.510 14,560,309
--------------
</TABLE>
3
<PAGE>
PAINEWEBBER CASHFUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
</TABLE>
COMMERCIAL PAPER@ (CONTINUED)
<TABLE>
<C> <S> <C> <C> <C>
ASSET-BACKED--12.10%
$ 197,000 Asset Securitization Cooperative Corporation...... 04/14/98 to 06/17/98 5.440 to 5.570% $ 195,907,576
122,728 Atlantis One Funding Corporation.................. 04/24/98 to 06/22/98 5.470 to 5.540 121,966,415
25,000 Delaware Funding Corporation...................... 05/04/98 5.550 24,872,813
75,938 Eiger Capital Corporation......................... 04/28/98 to 05/14/98 5.510 to 5.540 75,532,107
132,543 Enterprise Funding Corporation.................... 04/01/98 to 06/10/98 5.460 to 5.540 131,965,843
48,215 New Center Asset Trust............................ 04/30/98 to 05/26/98 5.520 to 5.535 47,907,751
20,330 Preferred Receivables Funding Corporation......... 05/04/98 5.540 20,226,758
69,255 Triple-A One Funding Corporation.................. 04/07/98 to 04/21/98 5.550 to 5.560 69,110,728
--------------
687,489,991
--------------
AUTO & TRUCK--1.20%
30,000 Ford Motor Credit Corporation..................... 04/06/98 5.480 29,977,167
38,000 PACCAR Financial Corporation...................... 04/02/98 to 04/09/98 5.520 to 5.540 37,986,493
--------------
67,963,660
--------------
BANKING--12.44%
46,879 Abbey National North America...................... 04/21/98 to 05/04/98 5.425 to 5.440 46,714,277
35,000 ABN Amro North America Finance Incorporated....... 04/30/98 5.540 34,843,803
50,000 Bank of Nova Scotia............................... 05/12/98 5.620 49,679,972
18,345 Bankers Trust New York Corporation................ 07/21/98 5.460 18,036,162
54,750 Bankers Trust New York Corporation................ 04/01/98 5.810* 54,762,233
25,000 BBL North America Incorporated.................... 06/23/98 5.490 24,683,563
25,000 BCI Funding Corporation........................... 06/11/98 5.500 24,728,820
70,000 Canadian Imperial Bank of Commerce................ 04/09/98 to 05/20/98 5.425 to 5.510 69,731,641
100,000 Cregem North America Incorporated................. 04/03/98 to 06/18/98 5.425 to 5.530 99,391,224
82,500 J.P. Morgan & Company, Incorporated............... 04/15/98 to 06/23/98 5.470 to 5.510 81,934,011
25,000 Kreditbank North America.......................... 05/04/98 5.500 24,873,958
25,000 San Paolo U.S. Financial Company.................. 04/15/98 5.440 24,947,111
110,000 Societe Generale North America, Incorporated...... 04/02/98 to 05/19/98 5.510 to 5.540 109,616,707
22,850 Unifunding Incorporated........................... 07/27/98 5.390 22,449,725
20,000 Westpac Capital Corporation....................... 04/06/98 5.510 19,984,694
--------------
706,377,901
--------------
BROKER-DEALER--5.88%
181,000 Goldman Sachs Group L.P........................... 04/09/98 to 05/20/98 5.440 to 5.650 180,226,549
155,000 Merrill Lynch & Company, Incorporated............. 04/27/98 to 06/25/98 5.490 to 5.550 153,750,579
--------------
333,977,128
--------------
BUSINESS SERVICES--0.45%
5,600 Block Financial Corporation....................... 05/14/98 5.510 5,563,144
20,000 PHH Corporation................................... 05/14/98 5.520 19,868,134
--------------
25,431,278
--------------
CHEMICALS--2.41%
119,504 duPont (E. I.) deNemours & Company................ 04/09/98 to 05/06/98 5.500 to 5.510 119,150,513
18,000 Henkel Corporation................................ 04/16/98 5.530 17,958,525
--------------
137,109,038
--------------
</TABLE>
4
<PAGE>
PAINEWEBBER CASHFUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
</TABLE>
COMMERCIAL PAPER@ (CONTINUED)
<TABLE>
<C> <S> <C> <C> <C>
DRUGS, HEALTH CARE--2.37%
$ 25,000 Abbott Laboratories............................... 04/16/98 5.510% $ 24,942,604
28,800 Bayer Corporation................................. 04/07/98 to 05/12/98 5.500 28,666,656
51,500 Novartis Finance Corporation...................... 04/22/98 to 05/05/98 5.500 to 5.520 51,321,738
30,000 Pfizer Incorporated............................... 04/24/98 5.500 29,894,583
--------------
134,825,581
--------------
ELECTRONICS--0.62%
18,475 Emerson Electric Company.......................... 05/07/98 5.500 18,373,388
10,000 Motorola Incorporated............................. 05/21/98 5.480 9,923,889
7,157 Vermont American Corporation...................... 04/13/98 5.520 7,143,831
--------------
35,441,108
--------------
ENERGY--2.07%
13,000 Chevron USA Incorporated.......................... 05/11/98 5.500 12,920,555
25,000 Exxon Imperial U.S. Incorporated.................. 04/13/98 5.500 24,954,167
50,000 Koch Industries, Incorporated..................... 04/01/98 6.050 50,000,000
30,000 Shell Oil Company................................. 04/30/98 5.420 29,869,017
--------------
117,743,739
--------------
FINANCE-CONDUIT--7.00%
185,310 Commerzbank U.S. Finance Incorporated............. 05/15/98 to 05/21/98 5.440 to 5.510 183,993,320
36,790 MetLife Funding Incorporated...................... 04/17/98 to 04/29/98 5.500 to 5.530 36,667,685
38,500 Svenska Handelsbanken Incorporated................ 04/27/98 5.570 38,345,123
139,279 Toronto-Dominion Holdings USA Incorporated........ 04/03/98 to 06/15/98 5.430 to 5.550 138,650,410
--------------
397,656,538
--------------
FINANCE-DIVERSIFIED--0.79%
45,000 Associates Corporation of North America........... 04/01/98 6.050 45,000,000
--------------
FINANCE-INDEPENDENT--1.66%
95,000 National Rural Utilities Cooperative Finance
Corporation..................................... 04/03/98 to 05/22/98 5.430 to 5.500 94,417,508
--------------
FINANCE-SUBSIDIARY--6.98%
180,000 Deutsche Bank Financial Incorporated.............. 04/07/98 to 06/04/98 5.420 to 5.530 179,205,553
70,000 Dresdner U.S. Finance Incorporated................ 04/02/98 to 04/15/98 5.540 69,889,200
149,000 National Australia Funding (Delaware)
Incorporated.................................... 04/27/98 to 11/10/98 5.320 to 5.510 147,618,972
--------------
396,713,725
--------------
FOOD, BEVERAGE & TOBACCO--1.14%
33,332 Coca-Cola Company................................. 05/07/98 5.430 33,151,007
21,925 McDonald's Corporation............................ 04/06/98 5.500 21,908,252
10,000 Sara Lee Corporation.............................. 04/27/98 5.500 9,960,278
--------------
65,019,537
--------------
INSURANCE--2.27%
56,000 American General Corporation...................... 05/13/98 to 05/26/98 5.450 to 5.510 55,571,843
30,000 St. Paul Companies Incorporated................... 04/17/98 to 05/14/98 5.430 to 5.450 29,846,061
</TABLE>
5
<PAGE>
PAINEWEBBER CASHFUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
</TABLE>
COMMERCIAL PAPER@ (CONCLUDED)
INSURANCE (CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
$ 43,450 USAA Capital Corporation.......................... 04/06/98 to 05/12/98 5.430 to 5.460% $ 43,308,534
--------------
128,726,438
--------------
METALS & MINING--1.38%
37,600 Rio Tinto America Incorporated.................... 04/09/98 to 04/22/98 5.420 to 5.460 37,512,294
41,200 U.S. Borax Incorporated........................... 04/20/98 to 06/15/98 5.420 to 5.510 40,909,804
--------------
78,422,098
--------------
MISCELLANEOUS--1.20%
69,000 Beta Finance Incorporated......................... 04/02/98 to 06/25/98 5.450 to 5.540 68,444,275
--------------
PRINTING, PUBLISHING--0.47%
27,000 Reed Elsevier (USA) Incorporated.................. 04/08/98 to 05/12/98 5.430 to 5.500 26,909,748
--------------
TELECOMMUNICATIONS--1.84%
55,000 Ameritech Capital Funding Corporation............. 05/11/98 5.420 54,668,778
25,300 BellSouth Capital Funding Corporation............. 04/08/98 5.520 25,272,845
10,000 BellSouth Telecommunications...................... 04/27/98 5.500 9,960,278
15,000 Lucent Technologies Incorporated.................. 05/28/98 5.510 14,869,137
--------------
104,771,038
--------------
Total Commercial Paper (cost--$3,667,000,638)................. 3,667,000,638
--------------
SHORT-TERM CORPORATE OBLIGATIONS--6.69%
BROKER-DEALER--5.64%
20,300 Bear Stearns Companies, Incorporated.............. 04/05/99 5.800 20,300,000
180,000 Bear Stearns Companies, Incorporated.............. 04/07/98 to 04/27/98 5.588 to 5.777* 180,000,000
50,000 Merrill Lynch & Company, Incorporated............. 04/06/98 to 04/07/98 5.580 to 5.638* 50,000,000
70,000 Morgan Stanley Group Incorporated................. 04/01/98 to 05/13/98 5.625 to 5.780* 70,000,000
--------------
320,300,000
--------------
MISCELLANEOUS--1.05%
60,000 Beta Finance Incorporated......................... 06/10/98 to 03/08/99 5.710 to 6.120 60,000,000
--------------
Total Short-Term Corporate Obligations (cost--$380,300,000)... 380,300,000
--------------
</TABLE>
6
<PAGE>
PAINEWEBBER CASHFUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATE INTEREST RATE VALUE
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--0.33%
$ 18,788 Repurchase Agreement dated 03/31/98 with Citicorp
Securities Incorporated, collateralized by
$19,215,000 U.S. Treasury Notes, 5.500% due
03/31/00 (value--$19,164,968); proceeds:
$18,791,079 (cost--$18,788,000)................. 04/01/98 5.900% $ 18,788,000
--------------
Total Investments (cost--$5,714,350,847, which approximates
cost for federal income tax purposes)--100.55%.............. 5,714,350,847
Liabilities in excess of other assets--(0.55)%................ (31,088,596)
--------------
Net Assets (applicable to 5,684,640,191 shares outstanding at
$1.00 per share)--100.00%................................... $5,683,262,251
--------------
--------------
</TABLE>
- -----------------
* 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,
1998 and reset periodically.
@ Interest rates shown are discount rates at date of purchase.
Weighted Average Maturity--51 Days
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER CASHFUND, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
MARCH 31, 1998
--------------
<S> <C>
Interest income............................................................ $ 304,597,232
--------------
EXPENSES:
Investment advisory and administration..................................... 19,457,916
Transfer agency and related services fees.................................. 8,097,633
Reports and notices to shareholders........................................ 1,084,737
Custody and accounting..................................................... 539,438
State registration......................................................... 416,888
Legal and audit............................................................ 360,608
Insurance.................................................................. 122,997
Directors' fees............................................................ 10,500
Other expenses............................................................. 13,341
--------------
30,104,058
--------------
NET INVESTMENT INCOME...................................................... 274,493,174
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS............................ 110,739
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $ 274,603,913
--------------
--------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-------------------------------------
1998 1997
------------------ --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................. $ 274,493,174 $ 251,603,670
Net realized gains from investment transactions... 110,739 96,707
------------------ --------------
Net increase in net assets resulting from
operations...................................... 274,603,913 251,700,377
------------------ --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income............................. (274,493,174) (251,603,670)
------------------ --------------
Net increase (decrease) in net assets derived from
capital share transactions...................... 422,683,526 (48,186,525)
------------------ --------------
Net increase (decrease) in net assets............. 422,794,265 (48,089,818)
NET ASSETS:
Beginning of year................................. 5,260,467,986 5,308,557,804
------------------ --------------
End of year....................................... $ 5,683,262,251 $5,260,467,986
------------------ --------------
------------------ --------------
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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. Following is a summary of
significant accounting policies:
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--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Fund to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
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, 1998, the Fund owed PaineWebber
$1,715,258 in investment advisory and administration fees.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly-owned
asset management 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.
TRANSFER AGENCY SERVICE FEES
Prior to August 1, 1997, the Fund paid PaineWebber an annual fee of $4.00 per
active PaineWebber shareholder account, plus certain out-of-pocket expenses, for
certain services not provided by the Fund's transfer agent. For these services
for the four months ended July 31, 1997, PaineWebber earned $1,002,742.
Subsequent to July 31, 1997, PaineWebber provides transfer agency related
services to the Fund pursuant to a delegation of authority from PFPC Inc., the
Fund's transfer agent, and is compensated for these services by PFPC Inc., not
the Fund. For the eight months ended March 31, 1998, PaineWebber received from
PFPC Inc., not the Fund, approximately 56% of the total transfer agency and
related service fees collected by PFPC Inc. from the Fund.
OTHER LIABILITIES
At March 31, 1998, the amounts payable for investments purchased and dividends
payable aggregated $45,173,271 and $6,280,540, respectively.
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 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, 1998, the Fund had a net capital loss carryforward of $1,206,669.
This loss carryforward is available as a reduction, 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 authorized shares of common
stock. Transactions in capital shares, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Shares sold............................. 22,110,092,602 21,275,322,387
Shares repurchased...................... (21,952,532,510) (21,566,944,490)
Dividends reinvested.................... 265,123,434 243,435,578
--------------- ---------------
Net increase (decrease) in shares
outstanding........................... 422,683,526 (48,186,525)
--------------- ---------------
--------------- ---------------
</TABLE>
10
<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,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<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................... 0.0511 0.0482 0.0523 0.0433 0.0272
Dividends from net investment income.... (0.0511) (0.0482) (0.0523) (0.0433) (0.0272)
------------ ------------ ------------ ------------ ------------
Net asset value, end of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total investment return(1).............. 5.23% 4.93% 5.36% 4.44% 2.75%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratios/Supplemental Data:
Net assets, end of year (000's)......... $ 5,683,262 $ 5,260,468 $ 5,308,558 $ 3,700,678 $ 3,436,278
Expenses to average net assets.......... 0.56% 0.63% 0.60% 0.62% 0.61%
Net investment income to average net
assets................................ 5.11% 4.82% 5.24% 4.35% 2.73%
</TABLE>
- -----------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year 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 year reported.
11
<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, 1998, 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of March 31, 1998, 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. as of March 31, 1998, 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.
[ERNST & YOUNG SIGNATURE]
New York, New York
May 13, 1998
12
<PAGE>
PAINEWEBBER CASHFUND, INC.
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 the Fund's fiscal year end (March 31,
1998) 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 1998. 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 1999. Shareholders are advised to consult their own tax advisers with
respect to the tax consequences of their investment in the Fund.
13
<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
PRINCIPAL OFFICERS
Margo N. Alexander
PRESIDENT
Victoria E. Schonfeld
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
Dennis L. McCauley
VICE PRESIDENT
Susan P. Ryan
VICE PRESIDENT
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.
<PAGE>
PaineWebber
- ---------------------------
CASHFUND INC.
ANNUAL REPORT
MARCH 31, 1998
[LOGO]
PaineWebber
- -C- 1998 PaineWebber Incorporated
Member SIPC
