<PAGE>
PAINEWEBBER/
KIDDER, PEABODY
CASH RESERVE
FUND, INC.
ANNUAL REPORT
JULY 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
September 15, 1995
Dear Shareholder,
During the year ended July 31, 1995, the pace of U.S. economic growth was
perceived to have slowed in response to the Federal Reserve Board's repeated
increases in the benchmark Federal Funds rate, the rate banks charge each other
for overnight borrowing. After seven short-term interest rate hikes between
February 1994 and February 1995, the Federal Reserve Board raised the Federal
Funds rate to 6.0%, and effectively doubled short-term rates in twelve months.
On July 6, 1995, the Federal Reserve cut the benchmark Federal Funds rate by
0.25%. This decrease, the first in nearly three years, signals that the Federal
Reserve Board believes that inflationary pressures have eased enough to
accommodate an adjustment in monetary conditions from restrictive toward
neutral.
ECONOMIC OVERVIEW
News concerning the economy during the year ended July 31, 1995 was dominated by
debate over whether inflation was likely to become a threat, discussions about
the dismal performance of the dollar and details of efforts in Washington to
implement a plan to balance the budget. Interest rates trended downward, as the
perception that the Federal Reserve would win its battle with inflation and that
the next policy action would be to lower short-term interest rates became
widespread. The U.S. bond and stock markets rallied in the first half of 1995,
and strength in corporate earnings pushed stock prices higher. Employment
reports indicated a slowing economy, with consumer spending declining
significantly from 1994 and consumer credit reports showing high ratios of
installment debt to disposable income. Side effects of higher interest rates
lingered, however. Markets for new and existing homes were sluggish until the
close of the twelve-month period, despite historically attractive mortgage
rates. Although the U.S. economy appears to have been flat in the second
quarter, the second half of 1995 should show signs of further, albeit slower,
growth.
PORTFOLIO REVIEW
Net assets of PaineWebber/Kidder, Peabody Cash Reserve Fund (the 'Fund')
totalled $1.4 billion as of July 31, 1995. The Fund's current yield for the
seven-day period ended July 31, 1995 was 5.325%. In anticipation of a possible
Federal Reserve Board action, the Fund maintained a neutral weighted average
maturity during the year ended July 31, 1995.
Going forward, the Fund will maintain a neutral weighted average maturity as
short-term rates find stability. On July 31, 1995, the Fund's weighted average
maturity was 47 days. The Federal Reserve Board appears to have engineered a
soft landing and it seems as though the next short-term interest rate move will
be another decrease in the Federal Funds rate. However, if inflation becomes
problematic, further increases in short-term interest rates could be possible.
Investment decisions in the Fund will continue to 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 emphasis on security, quality and liquidity.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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>
<S> <C>
FRANK P.L. MINARD DENNIS L. MCCAULEY
Chairman, Managing Director and Chief Investment
Mitchell Hutchins Asset Management Inc. Officer -- Fixed Income,
Mitchell Hutchins Asset Management Inc.
SUSAN P. MESSINA
Senior Vice President,
Taxable Money Funds
Mitchell Hutchins Asset Management Inc.
Portfolio Manager,
PaineWebber/Kidder, Peabody Cash Reserve Fund
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets
July 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- ------------------ ------------
<C> <S> <C> <C> <C>
GOVERNMENT SECURITIES -- 1.75%
$25,000 U.S. Treasury Bills (cost -- $24,715,750).... 10/12/95 5.685%* $ 24,715,750
------------
BANK NOTES -- 5.82%
Domestic -- 4.05%
15,000 Banc One Milwaukee, N.A...................... 02/09/96 7.250 15,014,118
20,000 La Salle National Bank....................... 09/14/95 6.040 20,000,000
22,000 PNC Bank N.A................................. 05/24/96 6.040 22,082,570
------------
57,096,688
------------
Yankee -- 1.77%
25,000 Westdeutsche Landesbank Girozentrale......... 03/01/96 6.625 24,982,591
------------
TOTAL BANK NOTES (cost -- $82,079,279)................... 82,079,279
------------
CORPORATE BOND -- 0.50%
7,000 Morgan (JP) & Co. Inc.
(cost -- $7,000,764)......................... 05/13/96 6.200 7,000,764
------------
CERTIFICATES OF DEPOSIT -- 3.54%
Domestic -- 0.71%
10,000 BancOne Akron, N.A........................... 09/22/95 5.720 9,998,855
------------
Yankee -- 2.83%
10,000 Sanwa Bank Ltd............................... 08/24/95 5.850 10,000,064
30,000 Societe Generale............................. 09/25/95 5.780 30,000,000
------------
40,000,064
------------
TOTAL CERTIFICATES OF DEPOSIT (cost -- $49,998,919)...... 49,998,919
------------
COMMERCIAL PAPER* -- 87.48%
Asset-Backed -- 5.53%
30,000 Asset Securitization Cooperative Corp. ...... 09/21/95 to 09/28/95 5.700 to 5.720 29,746,344
5,000 Delaware Funding Corp. ...................... 09/08/95 5.740 4,969,706
13,450 Falcon Asset Securitization Corp. ........... 08/03/95 5.950 13,445,554
30,000 New Center Asset Trust....................... 08/08/95 5.840 29,965,933
------------
78,127,537
------------
Auto & Truck -- 4.35%
29,030 Ford Motor Credit Corp....................... 08/18/95 5.920 28,948,845
32,835 Toyota Motor Credit Corp..................... 08/04/95 to 12/08/95 5.910 to 6.200 32,431,844
------------
61,380,689
------------
Banking -- 5.80%
37,000 Abbey National North America................. 08/07/95 5.930 36,963,432
10,000 BEX America Finance.......................... 08/23/95 5.920 9,963,822
20,000 Cregem N.A. Inc.............................. 08/01/95 to 09/12/95 5.880 to 5.980 19,931,400
15,000 Morgan (JP) & Co. Inc........................ 08/18/95 5.720 14,959,483
------------
81,818,137
------------
</TABLE>
3
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- ------------------ ------------
COMMERCIAL PAPER* -- (CONTINUED)
<C> <S> <C> <C> <C>
Broker/Dealer -- 5.97%
$50,000 Goldman Sachs Group L.P...................... 08/17/95 to 09/28/95 5.720 to 5.950% $ 49,670,644
35,000 Merrill Lynch & Co., Inc..................... 08/21/95 to 10/17/95 5.750 to 6.080 34,679,182
------------
84,349,826
------------
Business Services -- 2.12%
30,000 PHH Corp..................................... 08/03/95 to 08/07/95 5.950 to 5.970 29,980,150
------------
Chemicals -- 3.25%
47,000 E.I. duPont de Nemours and Company........... 08/17/95 to 07/18/96 5.580 to 6.090 45,963,032
------------
Computers -- 1.06%
15,000 IBM Credit Corp.............................. 08/04/95 5.950 14,992,563
------------
Conglomerates -- 1.76%
15,000 BTR Dunlop Finance Inc....................... 08/15/95 to 08/23/95 5.720 to 6.160 14,953,067
10,000 Minnesota Mining & Manufacturing............. 08/25/95 5.870 9,960,867
------------
24,913,934
------------
Consumer Products -- 0.70%
10,000 Clorox Co.................................... 10/17/95 5.610 9,880,008
------------
Drugs and Healthcare -- 5.58%
20,000 Bayer Corp................................... 09/28/95 to 10/12/95 5.610 to 5.690 19,796,128
25,500 Lilly (Eli) & Co............................. 08/24/95 to 01/12/96 5.700 to 6.080 25,226,717
33,890 Pfizer, Inc.................................. 08/31/95 to 09/08/95 5.700 33,705,095
------------
78,727,940
------------
Electronics -- 3.90%
10,000 Emerson Electric Co.......................... 08/18/95 5.900 9,972,139
10,000 Motorola, Inc................................ 08/22/95 5.700 9,966,750
25,250 Siemens Corp................................. 08/22/95 to 08/24/95 5.700 25,161,294
10,000 Vermont American Corporation................. 08/24/95 5.720 9,963,456
------------
55,063,639
------------
Energy -- 1.55%
10,000 Chevron Oil Finance.......................... 08/10/95 5.920 9,985,200
12,000 Exxon Imperial U.S. Inc...................... 08/25/95 5.700 11,954,400
------------
21,939,600
------------
Finance-Conduit -- 5.01%
20,000 ANZ Delaware Inc............................. 08/14/95 5.750 19,958,472
51,000 Metlife Funding Inc.......................... 08/28/95 to 09/01/95 5.700 to 5.840 50,763,822
------------
70,722,294
------------
</TABLE>
4
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- ------------------ ------------
COMMERCIAL PAPER* -- (CONTINUED)
<C> <S> <C> <C> <C>
Finance-Diversified -- 5.09%
$30,000 Associates Corp. of North America............ 08/09/95 to 08/18/95 5.910 to 5.950% $ 29,945,647
20,000 Barclays US Funding Corp..................... 08/11/95 5.730 19,968,167
22,000 Sanwa Business Credit Corp................... 08/01/95 to 08/04/95 5.970 to 5.990 21,995,025
------------
71,908,839
------------
Finance-Independent -- 3.45%
49,000 National Rural Utilities..................... 08/22/95 to 09/20/95 5.900 to 5.920 48,664,039
------------
Finance-Subsidiary -- 2.81%
10,000 MCA Funding Corp., Inc....................... 09/28/95 6.140 9,901,078
30,000 Pitney Bowes Credit Corp..................... 09/07/95 to 09/28/95 5.650 to 5.690 29,775,388
------------
39,676,466
------------
Food and Beverage -- 7.18%
35,000 Anheuser-Busch Cos. Inc...................... 08/17/95 to 08/18/95 5.680 to 5.700 34,909,100
25,000 Campbell Soup Co............................. 09/06/95 to 09/26/95 5.700 24,810,000
12,000 Philip Morris Companies, Inc................. 10/04/95 5.680 11,878,826
30,000 Sara Lee Corp................................ 09/27/95 5.630 29,732,575
------------
101,330,501
------------
General Trade -- 0.70%
10,000 Mitsubishi International Corp................ 09/29/95 5.720 9,906,256
------------
Insurance -- 3.25%
30,000 Prudential Funding Corp...................... 08/04/95 to 08/16/95 5.720 to 5.940 29,956,825
5,000 St. Pauls Companies Inc...................... 08/21/95 5.700 4,984,167
11,000 USAA Capital Corp............................ 08/24/95 5.700 10,959,942
------------
45,900,934
------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
Insurance-Property/Casualty -- 2.80%
20,000 A.I. Credit Corp.............................. 08/16/95 5.700 19,952,500
20,000 A.I.G. Funding Inc............................ 09/07/95 to 02/01/96 5.700 to 5.850 19,642,417
------------
39,594,917
------------
Metals & Mining -- 4.12%
32,800 RTZ America Inc............................... 09/26/95 5.710 32,508,663
25,700 U.S. Borax Inc................................ 08/04/95 to 08/07/95 5.930 to 5.950 25,682,332
------------
58,190,995
------------
Miscellaneous -- 1.06%
15,000 Beta Finance Inc.............................. 08/29/95 5.900 14,931,167
------------
Printing & Publishing -- 1.41%
20,000 Reed Elsevier (USA) Inc....................... 08/14/95 5.720 19,958,689
------------
Retail-Merchandise -- 5.30%
10,000 J.C. Penney Funding Corp...................... 08/25/95 5.900 9,960,667
35,000 Toys R Us Inc................................. 08/25/95 to 09/01/95 5.700 34,850,375
30,000 Wal-Mart Stores Inc........................... 08/01/95 to 08/15/95 5.700 to 5.920 29,977,832
------------
74,788,874
------------
</TABLE>
5
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- ------------------ --------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER* -- (CONCLUDED)
Utility-Electric -- 0.70%
$10,000 Florida Power Corp.......................... 09/11/95 5.700% $ 9,935,083
--------------
Utility-Telephone -- 3.03%
43,000 U.S. West Communications Inc................ 08/22/95 to 09/11/95 5.700 to 5.880 42,778,633
--------------
TOTAL COMMERCIAL PAPER (cost -- $1,235,424,742)......... 1,235,424,742
--------------
REPURCHASE AGREEMENTS -- 1.10%
15,573 Repurchase Agreement dated 7/31/95, with
Citicorp Securities Inc., collateralized by
$15,680,000 U.S. Treasury Notes, 6.125% due
5/15/98; proceeds: $15,575,522
(cost -- $15,573,000)....................... 08/01/95 5.830 15,573,000
--------------
TOTAL INVESTMENTS (cost -- $1,414,792,454,
which approximates cost for federal
income tax purposes) -- 100.19%....................... 1,414,792,454
Liabilities in excess of other assets -- (0.19)%........ (2,665,525)
--------------
NET ASSETS (applicable to 1,412,126,929 shares
outstanding at $1.00 per share) -- 100.00%............ $1,412,126,929
--------------
--------------
</TABLE>
- ------------
* Yield to maturity for discounted securities.
Weighted average maturity -- 47 days
See accompanying notes to financial statements
6
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended July 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INTEREST INCOME.................................................................................... $84,836,751
-----------
EXPENSES:
Investment advisory and administration......................................................... 7,194,947
Distribution fees.............................................................................. 1,824,254
Transfer agency and service fees............................................................... 996,982
Custody and accounting......................................................................... 537,138
Reports and notices to shareholders............................................................ 315,622
State registration fees........................................................................ 150,987
Legal and audit fees........................................................................... 105,719
Directors' fees and expenses................................................................... 35,600
Other expenses................................................................................. 112,182
-----------
11,273,431
-----------
NET INVESTMENT INCOME.............................................................................. 73,563,320
NET REALIZED LOSSES FROM INVESTMENT TRANSACTIONS................................................... (3,124)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................... $73,560,196
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended July 31,
--------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.................................................... $ 73,563,320 $ 52,545,864
Net realized losses from investment transactions......................... (3,124) (14,604)
-------------- --------------
Net increase in net assets resulting from operations..................... 73,560,196 52,531,260
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................... (73,560,196) (52,531,260)
-------------- --------------
NET DECREASE FROM CAPITAL SHARE TRANSACTIONS................................. (338,321,268) (30,800,097)
-------------- --------------
Net decrease in net assets............................................... (338,321,268) (30,800,097)
NET ASSETS:
Beginning of period...................................................... 1,750,448,197 1,781,248,294
-------------- --------------
End of period............................................................ $1,412,126,929 $1,750,448,197
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc. (the 'Fund') was
organized under the laws of Maryland on May 31, 1979 and is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended ('1940 Act'), as an open-end, diversified management investment company.
Valuation and Accounting for Investments -- Investments are valued at
amortized cost which approximates market value. Investment transactions are
recorded on trade date. Interest income is recorded on an accrual basis.
Premiums paid on purchases of portfolio securities are amortized and discounts
are accreted as adjustments to interest income and the identified cost of
securities. Realized gains and losses from security transactions are calculated
using the identified cost method.
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.
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.
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 a Federal
excise tax.
In accordance with U.S. Treasury regulations, the Fund has elected to defer
$2,359 of net realized capital losses arising after October 31, 1994. Such
losses are treated, for tax purposes, as arising on August 1, 1995.
At July 31, 1995, the Fund had a net capital loss carryforward of $15,369.
The loss carryforward is available as a reduction, to the extent provided in the
regulations, of future net realized capital gains, and will expire between
fiscal years 2002 and 2003.
Dividends -- The Fund declares dividends on a daily basis from net
investment income. Such dividends are normally paid monthly. Net capital gains,
if any, will be declared and paid at least annually. To the extent that the Fund
earns net realized capital gains which can be offset by capital loss carryovers,
if any, it is the policy of the Fund not to distribute such gains.
8
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements -- (continued)
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
At a special meeting of shareholders held on April 13, 1995, shareholders
approved the appointment of PaineWebber Incorporated ('PaineWebber') as
investment adviser and administrator of the Fund and Mitchell Hutchins Asset
Management Inc. ('Mitchell Hutchins') as the Fund's sub-adviser and
sub-administrator. The Fund pays the same fee for investment advisory and
administration services to PaineWebber as previously paid to Kidder Peabody
Asset Management, Inc. ('KPAM'), the Fund's former investment adviser.
PaineWebber (not the Fund) pays Mitchell Hutchins a fee for sub-advisory and
sub-administration services at the annual rate of 20% of the fee received by
PaineWebber from the Fund. PaineWebber and Mitchell Hutchins continue to manage
the Fund in accordance with the Fund's investment objective, policies and
restrictions as stated in the Prospectus. At July 31, 1995, the Fund owed
PaineWebber $577,979 in investment advisory and administration fees.
Investment advisory functions for the Fund were previously transferred from
KPAM to Mitchell Hutchins on an interim basis as a result of an asset purchase
transaction by and among Kidder, Peabody Group Inc., its parent, General
Electric Company, and Paine Webber Group Inc. The interim period commenced on
January 30, 1995 and ended April 13, 1995.
The Fund's current investment adviser and administrator receives
compensation from the Fund, computed daily and paid on a monthly basis
equivalent to 0.500% of the first $750 million of average daily net assets;
0.475% of the next $250 million; 0.450% of the next $250 million; 0.425% of the
next $250 million; and 0.400% of assets in excess of $1.5 billion.
In compliance with applicable state securities laws, the Fund's investment
adviser and administrator 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 July 31, 1995, no reimbursements were
required pursuant to the above limitation.
DISTRIBUTION PLAN
PaineWebber has been serving as the exclusive distributor of the Fund's
shares. For its services, which include payment of sales commissions to
registered representatives and various other promotional and sales related
expenses, it receives from the Fund a distribution fee accrued daily and paid
monthly at the rate of 0.12% per annum of the Fund's average daily net assets,
which is at the same rate paid to the former distributor. At July 31, 1995, the
Fund owed PaineWebber $145,208 for such services.
9
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements -- (concluded)
- --------------------------------------------------------------------------------
OTHER LIABILITIES
At July 31, 1995, the amount payable for dividends was $2,430,396.
CAPITAL SHARE TRANSACTIONS
There are 5 billion shares of $0.01 par value common stock authorized.
Transactions in capital shares at $1.00 per share were as follows:
<TABLE>
<CAPTION>
For the Years Ended July 31,
--------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Shares sold...................................................... 5,330,400,604 6,993,148,724
Shares repurchased............................................... (5,737,627,012) (7,074,025,059)
Dividends reinvested in additional Fund shares................... 68,905,140 50,076,238
-------------- --------------
Net decrease in shares outstanding............................... (338,321,268) (30,800,097)
-------------- --------------
-------------- --------------
</TABLE>
10
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
For the Years Ended July 31,
-----------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Net investment income...................................... 0.0484 0.0285 0.0258 0.0405 0.0655
Dividends from net investment income....................... (0.0484) (0.0285) (0.0258) (0.0405) (0.0655)
------- ------- ------- ------- -------
Net asset value, end of period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return(1)................................. 4.95% 2.87% 2.62% 4.22% 6.75%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)...................... $1,412,127 $1,750,448 $1,781,248 $1,860,557 $2,171,758
Expenses to average net assets......................... 0.74% 0.70% 0.72% 0.68% 0.66%
Net investment income to average net assets............ 4.84% 2.85% 2.58% 4.09% 6.52%
</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 date and a sale at net asset value on the last
day of each period reported.
11
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc.
We have audited the accompanying statement of net assets of
PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc. as of July 31, 1995, and the
related statements of operations and changes in net assets, and financial
highlights for the year 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 audit. The statement of operations for the year ended July 31,
1994, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended were audited by other auditors whose report dated September 9,
1994 expressed an unqualified opinion on those statements and financial
highlights.
We have conducted our audit 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 July 31,
1995, 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial 1995 statements and financial highlights
referred to above and audited by us present fairly, in all material respects,
the financial position of PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc. at
July 31, 1995, the results of its operations, the changes in its net assets, and
financial highlights for the year then ended in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
September 21, 1995
12
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
A special meeting of shareholders of PaineWebber/Kidder, Peabody Cash
Reserve Fund, Inc. ('Fund') was held on April 13, 1995. At the meeting David J.
Beaubien, William W. Hewitt, Jr., Thomas R. Jordan, Frank P.L. Minard and Carl
W. Schafer were elected as directors to serve without limit in time, subject to
resignation, retirement or removal. The selection of Deloitte & Touche LLP as
the Fund's independent accountants was ratified.
The votes were as follows:
<TABLE>
<CAPTION>
Shares Shares
Voted For Withhold Authority
----------- ------------------
<S> <C> <C>
David J. Beaubien................................................. 711,398,600 42,852,897
William W. Hewitt, Jr............................................. 711,398,600 42,852,897
Thomas R. Jordan.................................................. 711,398,600 42,852,897
Frank P.L. Minard................................................. 711,398,600 42,852,897
Carl W. Schafer................................................... 711,398,600 42,852,897
</TABLE>
<TABLE>
<CAPTION>
Shares Shares Shares
Voted For Voted Against Withhold Authority
----------- ------------- ------------------
<S> <C> <C> <C>
Ratification of the selection of Deloitte & Touche
LLP............................................. 707,377,997 6,361,989 40,511,511
</TABLE>
On July 20, 1995 the Board of Directors appointed Ernst & Young LLP the
Fund's independent auditors.
In addition the following agreements were approved for the Fund:
(1) An interim investment advisory agreement between the Fund and Mitchell
Hutchins Asset Management Inc. ('Mitchell Hutchins') containing substantially
the same terms, conditions and fees as the previous investment advisory
agreement with Kidder Peabody Asset Management, Inc. ('KPAM').
The votes were as follows:
<TABLE>
<CAPTION>
Shares Shares Shares
Voted For Voted Against Withhold Authority
------------ ------------- ------------------
<S> <C> <C>
703,011,645 7,245,021 43,994,831
</TABLE>
(2) A new investment advisory and administration agreement between the Fund
and PaineWebber Incorporated ('PaineWebber') containing the same fees and
substantively similar material terms and conditions as the previous investment
advisory agreement with KPAM to commence on the termination of the interim
agreement.
13
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Shareholder Information -- (concluded)
- --------------------------------------------------------------------------------
The votes were as follows:
<TABLE>
<CAPTION>
Shares Shares Shares
Voted For Voted Against Withhold Authority
- ------------ ------------- ------------------
<S> <C> <C>
703,367,010 7,010,910 43,873,577
</TABLE>
(3) A new sub-advisory and sub-administration agreement between PaineWebber
and Mitchell Hutchins to commence on the termination of the interim agreement
for the Fund.
The votes were as follows:
<TABLE>
<CAPTION>
Shares Shares Shares
Voted For Voted Against Withhold Authority
- ------------ ------------- ------------------
<S> <C> <C>
699,133,230 8,406,193 46,712,074
</TABLE>
Broker non-votes and abstentions are included within the 'Shares Withhold
Authority' totals.
14
<PAGE>
PAINEWEBBER/KIDDER, PEABODY CASH RESERVE FUND, 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 (July 31,
1995) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all of the
distributions paid during the fiscal year were federally-exempt interest
dividends, none of which qualifies for the dividend received deduction available
to corporate shareholders. Since the Fund did not invest in any security which
paid interest subject to the federal alternative minimum tax for individual
taxpayers during its fiscal year, none of the dividends paid by the Fund were
subject to such tax.
Because the Fund's fiscal year is not the calendar year, another
notification will be sent in respect of calendar 1995. The second notification,
which reflects any 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 1996. Shareholders are advised to consult their own
tax advisers with respect to the tax consequences of their investment in the
Fund.
15
<PAGE>
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16
<PAGE>
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17
<PAGE>
- ---------------------------------------------------------
DIRECTORS
David J. Beaubien
William W. Hewitt, Jr.
Thomas R. Jordan
Frank P.L. Minard
Carl W. Schafer
- ---------------------------------------------------------
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
- ---------------------------------------------------------
INVESTMENT ADVISER,
ADMINISTRATOR AND
DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
- ---------------------------------------------------------
SUB-ADVISER AND
SUB-ADMINISTRATOR
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 can be obtained from a PaineWebber
investment executive or correspondent firm. Read
the prospectus carefully before investing.
