Annual Report August 15, 1996
- --------------------------------------------------------------------------------
Dear Shareholder,
We are pleased to present you with the Annual Report for PaineWebber RMA
Money Fund, Inc. and PaineWebber RMA Tax-Free Fund, Inc. for the year ended
June 30, 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 in early March, however, in response to government reports
showing higher-than-expected economic growth; there was a sharp drop in bond
prices which caused volatility in the stock market.
After exceptional performance during most of 1995, the first half of the
year was difficult for fixed income investors. Accelerating economic growth,
reflected in strong employment, retail sales and investment spending numbers, as
well as a surprisingly robust housing sector, combined to change market
expectations from the Fed easing to the Fed tightening. The 30-year U.S.
Treasury bond, a benchmark of bond market performance, was yielding 5.95% on
December 29, 1995 and 6.87% on June 28, 1996. When bond yields increase, bond
prices decrease. Meanwhile, the Federal Reserve's Open Market Committee decided
to keep monetary policy unchanged at the March, May and July 1996 meetings. The
Fed's decision to hold rates steady suggested that officials did not foresee a
recession or accelerating inflation.
<PAGE>
Portfolio Review
PaineWebber RMA Money Market Portfolio
PaineWebber RMA Money Market Portfolio's net assets totalled $7.5 billion
as of June 30, 1996. The Portfolio's current yield for the seven-day period
ended June 30, 1996, was 4.85%. The Portfolio's weighted average maturity was 69
days as of June 30, 1996.
During the first half of 1996, short-term interest rates began to decrease
in the six-month to one-year sector, steepening the short end of the yield
curve. The discounted 30-day commercial paper rate also decreased, to
approximately 5.35% on June 30, 1996. It now appears that the Federal Reserve
Board will leave rates unchanged until after the 1996 presidential election. In
anticipation of a possible rising interest rate environment, the Fund's weighted
average maturity was decreased during the second half of 1995. However, during
the second half of the Fund's fiscal year, the weighted average maturity was
increased slightly to accommodate a stable to lower interest rate environment.
Going forward, the Fund expects to maintain its current position until
further economic data is released. At this writing, second quarter economic data
was not as strong as analysts expected, leading to a general consensus that the
Fed will not raise short-term rates in the near future. Although we are
interested in maintaining higher yields, we will not do so by sacrificing the
Portfolio's emphasis on security, quality and liquidity.
PaineWebber RMA U.S. Government Portfolio
PaineWebber RMA U.S. Government Portfolio's net assets totalled $1.1
billion as of June 30, 1996. The Portfolio's current yield for the seven-day
period ended June 30, 1996, was 4.66%. As of June 30, 1996, the Fund's weighted
average maturity was 68 days.
PaineWebber RMA Tax-FreeFund, Inc.
<PAGE>
PaineWebber RMA Tax-Free Fund's net assets totalled $2.0 billion as of
June 30, 1996. The Fund's current yield for the seven-day period ended June 30,
1996, was 2.84%. The Fund maintained a weighted average maturity of 56 days as
of June 30, 1996. In addition, the Fund did not invest in any securities subject
to the federal alternative minimum tax for individual taxpayers.
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.
Sincerely,
/s/ Margo Alexander /s/ Dennis L. McCauley
MARGO ALEXANDER DENNIS L. McCAULEY
President, Managing Director and Chief
Mitchell Hutchins Asset Investment Officer Fixed
Management Inc. Income, Mitchell Hutchins Asset
Managing Inc.
/s/ Susan P. Messina /s/ Debbie Vermann
SUSAN P. MESSINA DEBBIE VERMANN
Senior Vice President, Portfolio Manager,
Mitchell Hutchins Asset PaineWebber RMA Tax-Free
Management Inc. Fund, Inc.
Portfolio Manager,
PaineWebber RMA Money Fund,
Inc.
/s/ Roger S. Stern
ROGER S. STERN
Portfolio Manager,
PaineWebber RMA U.S.
Government Portfolio
<PAGE>
PaineWebber RMA Money Market Portfolio
- --------------------------------------------------------------------------------
Statement of Net Assets
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--9.79%
$ 144,500 United States Treasury Bills .......... 08/22/96 to 05/29/97 4.650 to 5.300%@ $ 140,350,156
25,900 United States Treasury Note ........... 02/28/97 6.875 26,200,930
143,795 Federal Farm Credit Bank .............. 08/01/96 to 04/01/97 4.950 to 5.875 143,733,835
25,000 Federal Farm Credit Bank* ............. 07/01/96 5.345 24,993,985
100,000 Federal Home Loan Bank ................ 07/01/96 to 03/20/97 5.400 to 6.060 99,973,349
30,000 Federal Home Loan Bank* ............... 09/20/96 6.000 30,000,000
29,400 Federal Home Loan Mortgage
Corporation ........................... 08/15/96 5.645 29,399,524
91,700 Federal National Mortgage
Association ........................... 10/07/96 to 02/14/97 4.780 to 5.680 91,707,976
30,000 Student Loan Marketing Association .... 07/03/97 6.070 30,000,000
120,250 Student Loan Marketing Association* ... 07/02/96 5.350 to 5.410 120,244,582
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
736,604,337
(cost--$736,604,337)...............................
--------------
BANK NOTES--11.21%
Domestic--10.48%
52,000 Bank of Hawaii ........................ 01/03/97 5.500 52,017,089
43,000 Bank One, N.A. ........................ 03/25/97 5.560 43,001,294
16,000 Commerica Bank Detroit* ............... 07/02/96 5.540 15,999,708
177,000 FCC National Bank ..................... 07/05/96 to 03/13/97 5.030 to 5.700 177,015,836
48,500 FCC National Bank* .................... 07/01/96 5.320 to 5.360 48,491,987
24,850 Huntington National Bank* ............. 07/01/96 5.520 24,849,078
35,200 Morgan Guaranty Trust Company ......... 01/15/97 5.250 35,220,243
60,000 NationsBank of Tx, N.A. ............... 11/08/96 5.550 59,987,515
25,900 Old Kent Bank & Trust Co. ............. 12/04/96 5.530 25,895,751
24,750 PNC Bank, N.A. ........................ 09/18/96 5.650 24,778,320
145,000 PNC Bank, N.A.* ....................... 07/01/96 to 09/18/96 5.320 to 5.515 144,942,685
38,000 Seattle-First National Bank ........... 10/24/96 5.730 37,991,976
40,000 Society National Bank* ................ 07/11/96 5.386 39,980,710
23,000 Wachovia Bank of N.C. ................. 07/09/96 5.320 22,999,941
35,000 Wachovia Bank of N.C.* ................ 07/02/96 5.340 34,980,051
--------------
788,152,184
--------------
Yankee--0.73%
55,000 ABN Amro Bank N.V. .................... 03/18/97 to 04/17/97 5.530 to 5.690 54,998,342
--------------
843,150,526
TOTAL BANK NOTES (cost--$843,150,526)..............
--------------
BANKERS ACCEPTANCES--0.96%
Yankee--0.96%
26,000 Bank of Tokyo ......................... 08/13/96 to 08/21/96 5.350 to 5.450% 25,817,642
39,800 Fuji Bank Ltd. ........................ 07/12/96 to 07/29/96 5.460 to 5.500 39,673,969
7,100 Sanwa Bank Ltd. ....................... 07/16/96 5.390 7,084,055
--------------
72,575,666
TOTAL BANKERS ACCEPTANCES (cost--$72,575,666)......
--------------
</TABLE>
1
<PAGE>
PaineWebber RMA Money Market Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
CERTIFICATES OF DEPOSIT--17.48%
Domestic--0.40%
$ 30,000 Union Bank of California .............. 07/12/96 5.400 % $ 30,000,000
--------------
Yankee--17.08%
40,000 Bank of Tokyo--Mitsubishi Ltd. ........ 08/01/96 to 09/04/96 5.450 to 5.490 40,000,526
39,250 Bayerische Vereinsbank ................ 04/29/97 5.800 39,250,000
39,000 Dai-Ichi Kangyo Bank .................. 07/08/96 5.460 to 5.470 38,999,992
35,000 Deutsche Bank ......................... 03/31/97 5.570 34,993,019
37,000 Dresdner Bank AG ...................... 02/26/97 5.010 to 5.050 36,983,821
184,000 Fuji Bank Ltd. ........................ 07/02/96 to 07/16/96 5.460 to 5.490 184,000,316
20,000 Industrial Bank of Japan Ltd. ......... 07/19/96 5.450 20,000,191
332,000 Sanwa Bank Ltd. ....................... 07/03/96 to 10/08/96 5.420 to 5.640 332,003,684
193,880 Societe Generale ...................... 03/31/97 to 06/19/97 5.580 to 6.090 193,925,108
310,000 Sumitomo Bank Ltd. .................... 07/03/96 to 08/01/96 5.430 to 5.580 310,000,174
55,000 Westpac Banking Corp. ................. 02/26/97 to 03/19/97 5.080 to 5.610 54,991,574
--------------
1,285,148,405
--------------
1,315,148,405
TOTAL CERTIFICATES OF DEPOSIT
(cost--$1,315,148,405).............................
--------------
COMMERCIAL [email protected]%
Aerospace-Defense--0.73%
54,730 Raytheon Co. .......................... 07/08/96 to 07/12/96 5.330 to 5.370 54,652,555
--------------
Agriculture--0.27%
20,000 Cargill Financial Services Corp. ...... 07/01/96 5.280 20,000,000
--------------
Asset-Backed--4.72%
83,598 Delaware Funding Corp. ................ 07/11/96 to 07/25/96 5.290 to 5.320 83,361,799
22,852 Eiger Capital Corp. ................... 07/11/96 5.370 22,817,912
99,360 Falcon Asset Securitization Corp. ..... 07/10/96 to 07/17/96 5.300 to 5.390 99,166,661
150,324 Triple-A One Funding Corporation ...... 07/10/96 to 07/22/96 5.300 to 5.430 150,048,763
--------------
355,395,135
--------------
Auto & Truck--0.90%
15,255 Ford Motor Credit Co. ................. 07/02/96 5.310 15,252,750
52,800 PACCAR Financial Corp. ................ 07/08/96 to 09/10/96 4.820 to 5.370 52,630,855
--------------
67,883,605
--------------
Banking--9.88%
45,500 ABN AMRO N.A. Finance Inc. ............ 08/26/96 to 10/21/96 4.820 to 4.975 45,100,712
120,000 Bankers Trust N.Y. Corp. .............. 07/03/96 to 11/18/96 4.950 to 5.360 119,420,592
30,000 BCI Funding Corp. ..................... 07/15/96 5.300 29,938,167
119,550 BEX America Finance Inc. .............. 07/02/96 to 08/16/96 4.820 to 5.450 119,344,605
25,000 Cariplo Finance Incorporated .......... 07/11/96 5.335 24,962,951
50,000 Citicorp .............................. 07/01/96 5.550 50,000,000
</TABLE>
2
<PAGE>
PaineWebber RMA Money Market Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--(continued)
$ 44,249 Credito Italiano Delaware Inc. ........ 07/17/96 to 09/12/96 5.310 to 5.440% $ 44,035,749
?????
158,000 Crogem North American Inc. ............ 07/01/96 to 08/16/96 5.280 to 5.310 157,326,554
10,000 MPS U.S. Commercial Paper Corp. ....... 07/22/96 5.290 9,969,142
83,900 Societe General N.A., Inc. ............ 07/09/96 to 07/09/96 4.920 to 5.150 83,752,311
10,000 SunTrust Banks Incorporated ........... 08/07/96 5.310 9,945,425
50,000 Unifunding Incorporated ............... 7/10/96 to 08/14/96 4.880 to 5.32 49,794,467
--------------
743,590,675
--------------
Broker/Dealer--5.57%
20,000 Bear Stearns Companies, Inc. .......... 07/18/96 5.150 19,951,361
10,000 BT Securities Corp. ................... 07/03/96 5.310 9,997,050
16,000 Merrill Lynch & Co., Inc. ............. 10/28/96 4.870 to 4.950 15,740,316
324,700 Morgan Stanley Group Inc. ............. 07/01/96 to 10/28/96 4.820 to 5.600 323,285,325
49,645 Nomura Holding America Incorporated ... 07/01/96 5.550 49,645,000
--------------
418,619,052
--------------
Business Services--1.04%
49,000 Electronic Data Systems Corporation ... 7/09/96 to 07/11/96 5.310 to 5.320 48,933,544
28,950 PHH Corp. ............................. 07/15/96 5.310 28,890,218
--------------
77,823,762
--------------
Chemicals--0.61%
6,000 Air Products & Chemicals,
Incorporated .......................... 7/10/96 5.300 5,992,050
40,000 Dupont (E.I.) de Nemours & Co. ........ 07/09/96 to 08/06/96 4.920 to 5.510 39,899,756
--------------
45,891,806
--------------
Computer--1.13%
85,000 IBM Credit Corp. ...................... 07/08/96 to 07/10/96 5.320 to 5.370 84,901,290
--------------
Conglomerate--0.15%
11,603 Minnesota Mining & Manufacturing
Company ............................... 07/09/96 5.330 11,589,257
--------------
Consumer Products--0.21%
16,000 Rubbermaid Incorporated ............... 07/23/96 5.300 15,948,178
--------------
Drugs, Health Care--5.83%
10,000 Abbot Laboratories .................... 07/25/96 5.320 9,964,533
132,000 Bayer Corp. ........................... 07/10/96 to 09/04/96 5.270 to 5.400 131,478,222
182,000 Lilly (Eli) & Company ................. 07/01/96 to 08/22/96 4.830 to 5.350 181,261,587
72,260 Pfizer Inc. ........................... 07/17/96 to 07/25/96 5.300 to 5.350 72,048,377
44,200 Warner-Lambert Co. .................... 07/10/96 to 09/16/96 4.840 to 5.280 44,000,714
--------------
438,753,433
--------------
</TABLE>
3
<PAGE>
PaineWebber RMA Money Market Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--(continued)
Electronics--0.81%
$ 50,950 Sony Capital Corp. .................... 07/01/96 to 07/29/96 5.340 to 5.380% $ 50,887,234
10,000 Toshiba America Inc. .................. 07/26/96 5.350 9,962,847
--------------
60,850,081
--------------
Energy--1.08%
81,628 Exxon Imperial U.S. Inc. .............. 07/18/96 to 07/23/96 5.320 to 5.350 81,387,193
--------------
Entertainment--0.32%
25,000 Walt Disney Company ................... 03/14/97 5.230 24,070,222
--------------
Finance-Conduit--2.06%
15,000 Compagnie Bancaire .................... 08/06/96 5.320 14,920,200
20,766 MetLife Funding Inc. .................. 07/16/96 5.310 20,720,055
119,900 Svenska Handelsbanken Inc. ............ 08/08/96 to 08/29/96 4.880 to 5.070 119,090,712
--------------
154,730,967
--------------
Finance-Consumer--0.53%
40,000 Household Finance Corporation ......... 07/08/96 5.290 39,958,855
--------------
Finance-Diversified--0.66%
50,000 Associates Corp. of North America ..... 07/01/96 5.290 50,000,000
--------------
Finance-Equipment--0.27%
20,000 AT&T Capital Corp. .................... 07/02/96 5.310 19,997,050
--------------
Finance-Retail--0.33%
25,000 American Express Credit Corporation ... 08/01/96 5.040 24,891,500
--------------
Finance-Subsidary--0.27%
20,000 National Australia Funding (DE)
Inc. .................................. 07/17/96 5.345 19,952,489
--------------
Food, Beverage & Tobacco--2.80%
10,000 American Brands Incorporated .......... 01/17/97 5.480 9,695,555
4,800 Allied Domecq North America Corp. ..... 07/11/96 5.350 4,792,867
48,950 BAT Capital Corp. ..................... 07/09/96 to 07/23/96 5.340 to 5.350 48,841,707
105,000 Campbell Soup Co. ..................... 07/01/96 to 10/04/96 5.300 to 5.445 104,512,573
22,800 PepsiCo Inc. .......................... 07/12/96 5.300 22,763,077
20,000 Philip Morris Capital Corp. ........... 07/15/96 5.300 19,958,778
--------------
210,564,557
--------------
General Trade--1.89%
142,221 Mitsubishi International Corp. ........ 07/01/96 to 09/09/96 5.320 to 5.400 141,918,606
--------------
Insurance--0.84%
40,000 Prudential Funding Corp. .............. 07/08/96 5.310 39,958,700
23,010 USAA Capital Corp. .................... 07/09/96 5.300 22,982,899
--------------
62,941,599
--------------
</TABLE>
4
<PAGE>
PaineWebber RMA Money Market Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--(concluded)
Insurance-Property/Casualty--1.99%
$ 70,000 A.I. Credit Corp. ..................... 07/09/96 to 07/25/96 5.290 to 5.340% $ 69,871,506
80,000 AIG Funding Inc. ...................... 07/09/96 to 07/30/96 5.320 to 5.360 79,800,375
--------------
149,671,881
--------------
Machine & Machine Tools--0.13%
10,000 Caterpillar Financial Services NV ..... 08/19/96 4.930 9,932,897
--------------
Metals & Mining--0.26%
19,750 RTZ America Incorporated .............. 07/26/96 5.370 19,676,349
--------------
Miscellaneous--0.66%
50,000 Beta Finance Inc. ..................... 08/16/96 4.870 49,688,861
--------------
Pollution Control--1.95%
148,200 WMX Technologies Inc. ................. 07/17/96 to 10/29/96 4.770 to 5.350 146,699,539
--------------
Printing, Publishing--0.60%
45,000 Reed Elsevier Incorporated............. 07/22/96 to 08/12/96 5.350 44,812,750
--------------
Retail-Merchandise--0.46%
35,000 Penney (J.C.) Funding Corp. ........... 07/22/96 to 07/23/96 5.330 34,887,478
--------------
Telecommunications--1.59%
20,000 Ameritech Corporation ................. 07/10/96 5.320 19,973,400
90,050 Bellsouth Capital Funding
Corporation ........................... 07/02/96 to 07/08/96 5.300 to 5.375 89,996,532
10,000 Southwestern Bell Telephone Company ... 07/29/96 5.350 9,958,389
--------------
119,928,321
--------------
Utility-Electric--1.09%
60,000 Southern Company ...................... 07/02/96 5.340 to 5.400 59,991,067
22,000 Florida Power Corporation ............. 07/03/96 to 07/09/96 5.340 21,980,123
--------------
81,971,190
--------------
3,883,581,133
TOTAL COMMERCIAL PAPER (cost--$3,883,581,133)......
--------------
SHORT-TERM CORPORATE OBLIGATIONS--9.46%
Auto & Truck--0.33%
25,000 Toyota Motor Credit Co. ............... 07/18/96 5.350@ 24,936,840
--------------
Banking--0.74%
29,600 Bankers Trust New York Corp.* ......... 07/01/96 5.480 29,600,000
6,000 Nationsbank Corp. ..................... 08/15/96 4.750 5,992,667
20,000 Norwest Corp. ......................... 01/30/97 7.875 20,293,979
--------------
55,886,646
--------------
</TABLE>
5
<PAGE>
PaineWebber RMA Money Market Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM CORPORATE OBLIGATIONS--(CONCLUDED)
Broker-Dealer--6.45%
$ 251,000 Bear Stearns Companies Inc. ........... 07/17/96 to 06/05/97 5.160 to 6.010% $ 251,036,322
78,000 Bear Stearns Companies Inc.* .......... 07/03/96 to 07/25/96 5.507 to 5.542 78,000,000
15,000 Dean Witter, Discover & Company* ...... 08/13/96 5.700 15,010,897
15,000 Goldman Sachs Group, LP*............... 07/02/96 5.720 14,999,566
60,000 Merrill Lynch & Co., Inc. ............. 09/03/96 to 05/12/97 5.560 to 5.900 60,000,000
55,960 Merrill Lynch & Co. Inc.* ............. 07/01/96 to 07/02/96 5.420 to 5.650 55,960,000
10,000 Morgan Stanley Group L.P. ............. 02/03/97 7.790 10,157,988
--------------
485,164,773
--------------
Business Services--0.88%
66,000 PHH Corp.* ............................ 07/01/96 to 07/02/96 5.330 to 5.670 65,992,879
--------------
Drugs, Health Care--0.13%
10,000 Pfizer Inc. ........................... 10/01/96 7.125 10,034,220
--------------
Finance-Diversified--0.73%
10,000 Associates Corp. of North America ..... 10/15/96 7.500 10,044,965
15,000 CIT Group Holdings Inc. ............... 11/15/96 7.125 15,085,723
30,000 CIT Group Holdings Inc.* .............. 07/01/96 5.350 29,977,412
--------------
55,108,100
--------------
Miscellaneous--0.20%
15,000 Beta Finance Inc. ..................... 03/18/97 5.550 14,998,932
--------------
712,122,390
TOTAL SHORT-TERM CORPORATE OBLIGATIONS
(cost--$712,122,390)..............................
--------------
REPURCHASE AGREEMENTS--0.62%
20,000 Repurchase Agreement dated 6/28/96 with
Citicorp Securities, Inc. collateralized
by $20,280,000 U.S. Treasury Notes,
6.375% due 5/15/99; proceeds;
$20,008,833 ........................... 07/01/96 5.300 20,000,000
26,462 Repurchase Agreement dated 6/28/96 with
Citicorp Securities, Inc. collateralized
by $26,830,000 U.S. Treasury Notes,
6.375% due 5/15/99; proceeds;
$26,474,018............................ 07/01/96 5.450 26,462,000
--------------
46,462,000
TOTAL REPURCHASE AGREEMENTS (cost--$46,462,000)...........................
--------------
7,609,644,457
TOTAL INVESTMENTS (cost--$7,609,644,457 which approximates cost for
federal income tax purposes)--101.16%....................................
(87,032,186)
Liabilities in excess of other assets--(1.16)% ...........................
--------------
$7,522,612,271
NET ASSETS (applicable to 7,526,776,163 shares outstanding at $1.00 per
share)-- 100.00%.........................................................
--------------
--------------
</TABLE>
- ------------
* Variable rate securities--maturity date reflects earlier of reset date or
maturity date.
@ Interest rates shown are discount rates at date of purchase.
Weighted average maturity--69 days
See accompanying notes to financial statements
6
<PAGE>
PaineWebber RMA U.S. Government Portfolio
- --------------------------------------------------------------------------------
Statement of Net Assets
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- ---------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--54.24%
$ 213,000 U.S. Treasury Bills................. 07/05/96 to 02/06/97 4.670 to 5.295%@ $ 211,198,175
404,250 U.S. Treasury Notes................. 07/31/96 to 06/30/97 4.375 to 8.500 405,768,257
--------------
616,966,432
TOTAL U.S. GOVERNMENT OBLIGATIONS
(cost--$616,966,432)..........................
--------------
REPURCHASE AGREEMENTS--45.21%
45,000 Repurchase Agreement dated 06/28/96,
with B.T. Securities Corp.,
collateralized by $45,495,000 U.S.
Treasury Notes, 6.375% due
05/15/99; proceeds: $45,019,875..... 07/01/96 5.300 45,000,000
45,000 Repurchase Agreement dated 06/28/96,
with Citicorp Securities, Inc.,
collateralized by $44,890,000 U.S.
Treasury Notes, 6.625% due
03/31/97; proceeds: $45,020,438..... 07/01/96 5.450 45,000,000
45,000 Repurchase Agreement dated 06/28/96,
with Daiwa Securities America,
Inc., collateralized by $44,618,000
U.S. Treasury Bonds, 7.125% due
02/15/23; proceeds: $45,020,438..... 07/01/96 5.450 45,000,000
19,324 Repurchase Agreement dated 06/28/96,
with Dean Witter Reynolds, Inc.,
collateralized by $18,830,000 U.S.
Treasury Notes, 7.500% due
12/31/96; proceeds: $19,332,374..... 07/01/96 5.200 19,324,000
45,000 Repurchase Agreement dated 06/24/96,
with Dresdner Securities(USA),
Inc., collateralized by $45,250,000
U.S. Treasury Notes 4.375% due
08/15/96; proceeds: $45,046,200..... 07/01/96 5.280 45,000,000
45,000 Repurchase Agreement dated 06/28/96,
with First Chicago Capital Markets,
Inc., collateralized by $43,615,000
U.S. Treasury Notes, 7.500% due
11/15/01; proceeds: $45,020,438.... 07/01/96 5.450 45,000,000
45,000 Repurchase Agreement dated 06/28/96,
with Fuji Securities Inc.,
collateralized by $44,808,000 U.S.
Treasury Notes, 5.625% due
06/30/97; proceeds: $45,020,438..... 07/01/96 5.450 45,000,000
45,000 Repurchase Agreement dated 06/28/96,
with J.P. Morgan Securities Inc.,
collateralized by $40,132,000 U.S.
Treasury Bonds, 8.125% due
08/15/21; proceeds: $45,019,875..... 07/01/96 5.300 45,000,000
15,585 Repurchase Agreement dated 06/24/96,
with Lehman Government Securities
Inc., collateralized by $16,340,000
U.S. Treasury Notes, 5.750% due
10/31/00; proceeds: $15,601,031.... 07/01/96 5.290 15,585,000
14,445 Repurchase Agreement dated 06/24/96,
with Lehman Government Securities
Inc., collateralized by $12,620,000
U.S. Treasury Bonds, 8.500% due
02/15/20; proceeds: $14,459,858.... 07/01/96 5.290 14,445,000
</TABLE>
7
<PAGE>
PaineWebber RMA U.S. Government Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- ---------------- --------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS--(concluded)
$ 14,970 Repurchase Agreement dated 06/24/96,
with Lehman Government Securities
Inc., collateralized by $11,840,000
U.S. Treasury Bonds, 10.750% due
08/15/05; proceeds: $14,985,398.... 07/01/96 5.290% $ 14,970,000
45,000 Repurchase Agreement dated 06/28/96,
with Nomura Securities
International,Inc., collateralized
by $46,370,000 U.S. Treasury Notes,
5.125% due 04/30/98; proceeds;
$45,019,875......................... 07/01/96 5.300 45,000,000
45,000 Repurchase Agreement dated 06/28/96,
with Salomon Brothers, Inc.,
collateralized by $45,465,000 U.S.
Treasury Notes, 6.125% due
07/31/00; proceeds: $45,020,438..... 07/01/96 5.450 45,000,000
45,000 Repurchase Agreement dated 06/27/96,
with Smith Barney, Inc.,
collateralized by $41,765,000 U.S.
Treasury Bonds, 8.000% due
11/15/21; proceeds; $45,026,400..... 07/01/96 5.280 45,000,000
--------------
514,324,000
TOTAL REPURCHASE AGREEMENTS
(cost--$514,324,000)............................
--------------
TOTAL INVESTMENTS (cost--$1,131,290,432 which 1,131,290,432
approximates
cost for federal income tax
purposes)--99.45%...............................
6,220,054
Other assets in excess of liabilities--0.55%....
--------------
$1,137,510,486
NET ASSETS (applicable to 1,137,939,635 shares
outstanding at $1.00 per share)--100.00%........
--------------
--------------
</TABLE>
- ------------
@Interest rates shown are discount rates at date of purchase.
Weighted average maturity--68 days
See accompanying notes to financial statements
8
<PAGE>
PaineWebber RMA Money Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET U.S. GOVERNMENT
PORTFOLIO PORTFOLIO
------------ ---------------
<S> <C> <C>
INVESTMENT INCOME:
Interest..................................................... $376,195,056 $56,703,384
------------ ---------------
EXPENSES:
Investment advisory and administration....................... 32,952,818 4,457,510
Transfer agency and service fees............................. 3,058,724 334,542
Federal and state registration............................... 1,355,396 513,848
Fund acquisition expense..................................... 700,720 175,950
Custody and accounting....................................... 387,915 153,795
Reports and notices to shareholders.......................... 266,216 44,939
Insurance.................................................... 233,004 23,257
Legal and audit.............................................. 153,598 37,752
Directors' fees.............................................. 8,750 8,750
Distribution fees............................................ -- 817,222
Other expenses............................................... 85,034 22,901
------------ ---------------
39,202,175 6,590,466
------------ ---------------
NET INVESTMENT INCOME......................................... 336,992,881 50,112,918
NET REALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS...... 338,176 (16,273)
------------ ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $337,331,057 $50,096,645
------------ ---------------
------------ ---------------
</TABLE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
--------------------------------- ---------------------------------
MONEY MARKET U.S. GOVERNMENT MONEY MARKET U.S. GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income......... $ 336,992,881 $ 50,112,918 $ 230,828,434 $ 37,510,417
Net realized gains (losses)
from investment
transactions................... 338,176 (16,273 ) (1,080,732) 79,003
-------------- --------------- -------------- ---------------
Net increase in net assets
resulting from operations... 337,331,057 50,096,645 229,747,702 37,589,420
-------------- --------------- -------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income......... (337,693,601) (50,288,868 ) (230,828,434) (37,510,417)
-------------- --------------- -------------- ---------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS................... 2,124,829,044 321,921,848 1,062,217,441 (39,225,757)
-------------- --------------- -------------- ---------------
Net increase (decrease) in net
assets......................... 2,124,466,500 321,729,625 1,061,136,709 (39,146,754)
NET ASSETS:
Beginning of year............. 5,398,145,771 815,780,861 4,337,009,062 854,927,615
-------------- --------------- -------------- ---------------
End of year................... $7,522,612,271 $1,137,510,486 $5,398,145,771 $ 815,780,861
-------------- --------------- -------------- ---------------
-------------- --------------- -------------- ---------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PaineWebber RMA Money Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber RMA Money Fund, Inc. ("Corporation") was organized under the laws of
Maryland on July 2, 1982 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 Corporation is a series mutual
fund with three portfolios: PaineWebber RMA Money Market Portfolio ("Money
Market Portfolio"), PaineWebber RMA U.S. Government Portfolio ("U.S. Government
Portfolio") (collectively the "Funds") and PaineWebber Retirement Money Fund.
The financial statements of PaineWebber Retirement Money Fund are not included
herein.
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 recorded on
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 securities.
Repurchase Agreements--The Funds' 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, each 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.
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 Funds to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
10
<PAGE>
PaineWebber RMA Money Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACQUISITIONS
Effective November 20, 1995, the U.S. Government Portfolio acquired all the net
assets of PaineWebber/Kidder, Peabody Government Money Fund, Inc. ("PW/KP
Government Money Fund") pursuant to a plan of reorganization approved by PW/KP
Government Money Fund shareholders on November 10, 1995. The acquisition was
accomplished by a tax-free exchange of 236,411,466 shares of the U.S. Government
Portfolio for the 236,411,466 shares of PW/KP Government Money Fund outstanding
on November 20, 1995. PW/KP Government Money Fund's net assets at that date,
valued at $236,258,548, including accumulated net realized losses of $952 were
combined with those of the U.S. Government Portfolio.
Effective February 20, 1996, the Money Market Portfolio acquired all the net
assets of PaineWebber/Kidder, Peabody Cash Reserve Fund, Inc. ("PW/KP Cash
Reserve Fund") and PaineWebber/Kidder, Peabody Premium Account Fund ("PW/KP
Premium Account Fund") pursuant to a plan of reorganization approved by PW/KP
Cash Reserve Fund and PW/KP Premium Account Fund shareholders on February 13,
1996. The acquisition was accomplished by a taxable exchange of 881,401,323
shares of Money Market Portfolio for 881,401,323 shares of PW/KP Cash Reserve
Fund and a tax-free exchange of 528,420,026 shares of Money Market Portfolio for
528,420,026 shares of PW/KP Premium Account Fund outstanding on February 20,
1996. PW/KP Cash Reserve Fund's and PW/KP Premium Account Fund's net assets at
that date, valued at $881,308,148 and $528,254,921, respectively, were combined
with those of the Money Market Portfolio.
INVESTMENT ADVISER AND ADMINISTRATOR
The Corporation'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 Corporation and each of its series. In accordance with the
Advisory Contract, each Fund pays PaineWebber an investment advisory and
administration fee, which is accrued daily and paid monthly, in accordance with
the following schedule:
<TABLE>
<CAPTION>
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- ------------------------------------------------------------------- ------
<S> <C>
MONEY MARKET PORTFOLIO:
All.............................................................. 0.50%
U.S. GOVERNMENT PORTFOLIO:
Up to $300 million............................................... 0.50
In excess of $300 million up to $750 million..................... 0.44
Over $750 million................................................ 0.36
</TABLE>
At June 30, 1996, the Money Market Portfolio and the U.S. Government Portfolio
owed PaineWebber $3,132,238, and $404,694 respectively, for investment advisory
and administration fees.
11
<PAGE>
PaineWebber RMA Money Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly-owned
subsidiary of PaineWebber, serves as sub-adviser and sub-administrator of the
Fund pursuant to a Sub-Advisory and Sub-Administration Contract between
PaineWebber and Mitchell Hutchins. In accordance with that contract, PaineWebber
(not the Fund) pays Mitchell Hutchins a fee, computed daily and paid monthly, at
an annual rate of 20% of the fee paid by the Fund to PaineWebber under the
Advisory Contract.
In compliance with applicable state securities laws, PaineWebber will reimburse
each Fund if and to the extent that the aggregate operating expenses in any
fiscal year, exclusive of taxes, distribution fees, interest, brokerage fees and
extraordinary expenses, exceed limitations imposed by various state regulations.
Currently, the most restrictive limitation applicable to each Fund is 2.5% of
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 June 30, 1996, no
reimbursements were required pursuant to the above limitation.
DISTRIBUTION PLAN
PaineWebber is the distributor of the shares of both the U.S. Government
Portfolio and Money Market Portfolio. Under the plan of distribution, the U.S.
Government Portfolio is authorized to pay PaineWebber a monthly service fee at
the annual rate of up to 0.15% of its average daily net assets for providing
shareholder services and maintaining shareholder accounts. Currently,
PaineWebber is compensated for providing such services at the annual rate of
0.08% of the U.S. Government Portfolio's average daily net assets. No such fees
are charged by PaineWebber for the similar services it provides for the Money
Market Portfolio. At June 30, 1996, the U.S. Government Portfolio owed
PaineWebber $75,724 for such service fees.
TRANSFER AGENCY SERVICE FEES
Each 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' transfer agent. For these services for the year ended
June 30, 1996, PaineWebber earned $1,391,745 and $144,758 from the Money Market
Portfolio and the U.S. Government Portfolio, respectively. At June 30, 1996, the
Money Market Portfolio and the U.S. Government Portfolio owed PaineWebber
approximately $135,000 and $12,900, respectively, for such shareholder service
fees and reimbursement of out-of-pocket expenses.
OTHER LIABILITIES
At June 30, 1996, the Money Market Portfolio and the U.S. Government Portfolio,
had dividends payable aggregating $11,012,457 and $1,614,111, respectively, and
payables for investments purchased aggregating $110,000,214 for the Money Market
Portfolio.
12
<PAGE>
PaineWebber RMA Money Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEDERAL TAX STATUS
Each Fund intends to distribute all of its taxable income and to comply with the
other requirements of the Internal Revenue Code applicable to regulated
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, each Fund intends not to be subject to a federal excise tax.
At June 30, 1996, RMA Money Market Portfolio and RMA U.S. Government Portfolio
had net capital loss carryforwards of $3,224,592, and $79,878, respectively.
These loss carryforwards are available as reductions, to the extent provided in
the regulations, of future net realized capital gains, and will expire between
June 30, 1997 and June 30, 2003 for both Funds. To the extent that these losses
are used to offset future net capital gains, the gains so offset will not be
distributed.
CAPITAL SHARE TRANSACTIONS
There are 20 billion $0.001 par value authorized shares of Series A Common Stock
relating to the Money Market Portfolio and Series B Common Stock relating to the
U.S. Government Portfolio. Transactions in capital shares, at $1.00 per share
were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
---------------------------------- ----------------------------------
MONEY MARKET U.S. GOVERNMENT MONEY MARKET U.S. GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold............... 36,981,794,128 5,529,586,191 27,630,575,450 4,573,104,400
Shares issued in
connection with the
acquisition of:
PW/KP Cash Reserve
Fund.................. 881,401,323 -- -- --
PW/KP Government Money
Fund.................. -- 236,411,466 -- --
PW/KP Premium Account
Fund.................. 528,420,026 -- -- --
Shares repurchased........ (36,593,662,079) (5,492,802,034) (26,793,531,223) (4,649,073,447)
Dividends reinvested...... 326,875,646 48,736,225 225,173,214 36,743,290
--------------- --------------- --------------- ---------------
Net increase (decrease) in
shares outstanding........ 2,124,829,044 321,921,848 1,062,217,441 (39,225,757)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
13
<PAGE>
PaineWebber RMA Money Market Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of Common Stock outstanding throughout each year is
presented below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
---------------------------------------------------------------
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..................... 0.051 0.049 0.030 0.029 0.046
Dividends from net investment income...... (0.051) (0.049) (0.030) (0.029) (0.046)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return(1)................ 5.25% 5.00% 2.95% 2.98% 4.56%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's)........... $7,522,612 $5,398,146 $4,337,009 $4,031,398 $4,054,344
Expenses to average net assets............ 0.60%(2) 0.59% 0.59% 0.59% 0.59%
Net investment income to average net
assets.................................... 5.14%(2) 4.91% 2.98% 2.95% 4.57%
</TABLE>
- ---------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each year reported.
(2) These ratios include non-recurring acquisition expenses of 0.01%.
14
<PAGE>
PaineWebber RMA U.S. Government Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of Common Stock outstanding throughout each year is
presented below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
-------------------------------------------------------------
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.................... 0.049 0.046 0.027 0.028 0.044
Dividends from net investment year....... (0.049) (0.046) (0.027) (0.028) (0.044)
---------- -------- -------- -------- --------
Net asset value, end of year income...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
Total investment return(1)............... 5.04% 4.67% 2.74% 2.83% 4.36%
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
RATIOS/SUPPLEMENT DATA:
Net assets, end of year (000's).......... $1,137,510 $815,781 $854,928 $880,834 $838,023
Expenses to average net assets........... 0.65%(2) 0.63% 0.62% 0.61% 0.62%
Net investment income to average net
assets................................... 4.91%(2) 4.55% 2.75% 2.80% 4.37%
</TABLE>
- ---------
(1) Total investment return is calculated assuming $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each year reported.
(2) These ratios include non-recurring acquisition expenses of 0.02%.
15
<PAGE>
PaineWebber RMA Money Fund, Inc.
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
- --------------------------------------------------------------------------------
Board of Directors and Shareholders
PaineWebber RMA Money Fund, Inc.
We have audited the accompanying statements of net assets of the Money Market
Portfolio and the U.S. Government Portfolio (two of the portfolios comprising
the PaineWebber RMA Money Fund, Inc.) as of June 30, 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 periods indicated therein. 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. Our procedures included confirmation of investments owned at June
30, 1996 by correspondence with the custodian and others. 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 the
Money Market Portfolio and the U.S. Government Portfolio at June 30, 1996, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated periods, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
August 12, 1996
16
<PAGE>
PaineWebber RMA Money 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 (June 30,
1996) as to the federal tax status of distributions received by shareholders
during such fiscal year from each portfolio. Accordingly, we are advising you
that all of the distributions paid during the fiscal year were derived from net
investment income of the Money Market Portfolio and the U.S. Government
Portfolio. These amounts are taxable as ordinary income, none of which qualifies
for the dividend received deduction available to corporate shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need 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 Funds' 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 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.
17
<PAGE>
PaineWebber RMA Money Fund, Inc.
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders was held on May 1, 1996, at which the
following votes were cast on the proposals submitted to the Fund's shareholders.
Each series of the Corporation voted separately on all matters being considered
by each of its three series, except for the election of directors, as to which
the shares of all series of the Corporation voted together as a single class.
<TABLE>
<CAPTION>
PROPOSAL 1
To elect ten members of its Board of Directors: FUNDS VOTING TOGETHER
--------------------------------
<CAPTION>
SHARES VOTED SHARES WITHHOLD
FOR AUTHORITY
------------- ---------------
<S> <C> <C>
Margo N. Alexander............................................ 5,023,415,796 570,368,509
Richard Q. Armstrong.......................................... 5,023,233,669 570,550,636
E. Garrett Bewkes, Jr......................................... 5,022,087,121 571,697,183
Richard Burt.................................................. 5,023,063,892 570,720,413
Mary C. Farrell............................................... 5,023,602,022 570,182,283
Meyer Feldberg................................................ 5,022,953,937 570,830,368
George W. Gowen............................................... 5,022,305,900 571,478,405
Frederic V. Malek............................................. 5,022,403,509 571,380,796
Carl W.Schafer................................................ 5,023,142,720 570,641,585
John R. Torell, III........................................... 5,023,317,476 570,466,829
</TABLE>
<TABLE>
<CAPTION>
PROPOSAL 2
To vote for or against ratification of the selection of Ernst & Young LLP as the independent
auditors for the Fund's fiscal year ended June 30, 1996:
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
FOR AGAINST ABSTAIN
------------- ------------ -----------
<S> <C> <C> <C>
Money Market Portfolio............................ 2,927,608,373 18,095,594 289,238,809
U.S. Government Portfolio......................... 516,785,762 1,694,438 62,721,975
PROPOSAL 3
To vote for or against the following changes to each Fund's fundamental investment restrictions
and policies:
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
FOR AGAINST ABSTAIN
------------- ------------ -----------
<S> <C> <C> <C>
Modification of fundamental restriction on
portfolio diversification for diversified funds:
Money Market Portfolio............................ 2,867,524,867 54,304,275 313,113,634
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
</TABLE>
18
<PAGE>
PaineWebber RMA Money Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
FOR AGAINST ABSTAIN
------------- ------------ -----------
<S> <C> <C> <C>
Modification of fundamental restriction on
concentration:
Money Market Portfolio............................ 2,867,133,775 54,695,367 313,113,634
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
Modification of fundamental restriction on senior
securities and borrowing:
Money Market Portfolio............................ 2,865,759,240 56,103,547 313,079,989
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
Modification of fundamental restriction on making
loans:
Money Market Portfolio............................ 2,865,214,544 56,614,598 313,113,634
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
Modification of fundamental restriction on
underwriting securities:
Money Market Portfolio............................ 2,867,652,719 54,176,423 313,113,634
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
Modification of fundamental restriction on real
estate investments:
Money Market Portfolio............................ 2,865,574,877 56,254,264 313,113,635
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
Modification of fundamental restriction on
investing in commodities:
Money Market Portfolio............................ 2,865,238,016 56,591,125 313,113,635
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
Elimination of fundamental restriction on pledging
portfolio securities:
Money Market Portfolio............................ 2,866,466,579 55,362,563 313,113,634
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
</TABLE>
19
<PAGE>
PaineWebber RMA Money Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
FOR AGAINST ABSTAIN
------------- ------------ -----------
<S> <C> <C> <C>
Elimination of fundamental restriction on margin
transactions:
Money Market Portfolio............................ 2,865,732,174 56,096,968 313,113,634
U.S.Government Portfolio.......................... 500,652,562 7,454,379 73,095,234
Elimination of fundamental restriction on short
sales:
Money Market Portfolio............................ 2,865,407,662 56,421,480 313,113,634
U.S.Government Portfolio.......................... 500,652,562 7,454,379 73,095,234
Elimination of fundamental restriction on
investments in oil, gas and mineral leases and
programs:
Money Market Portfolio............................ 2,866,700,732 55,128,410 313,113,634
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
Elimination of fundamental restriction on
investments in other investment companies:
Money Market Portfolio............................ 2,867,149,617 54,679,525 313,113,634
U.S. Government Portfolio......................... 500,652,562 7,454,379 73,095,234
PROPOSAL 4
To vote for or against the approval of Amended and
Restated Articles of Incorporation:
4,861,894,257 102,920,459 628,969,589
</TABLE>
- ------------
(Broker non-votes and abstentions are included within the "Shares Withhold
Authority" and "Shares Abstain" totals.)
20
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Net Assets
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
ALABAMA--1.67%
$ 9,900 Chatom Industrial Development Board 07/22/96 to 09/13/96 3.650% $ 9,900,000
Pollution Control Revenue Bonds
(National Rural Utility)
Tax-Exempt Commercial Paper..............
17,700 Mcintosh Industrial Development Board A 3.600 17,700,000
Pollution Control Revenue Bonds
(Ciba Geigy).............................
6,000 St. Clair County Industrial Development A 3.400 6,000,000
Board
(National Cement Company Inc. Project)...
--------------
33,600,000
--------------
ALASKA--0.40%
3,900 Alaska Industrial Development & Export A 3.600 3,900,000
Authority
(Alaska Hotel Property Inc.).............
4,200 Alaska Industrial Development & Export A 3.600 4,200,000
Authority
(Sheldon College)........................
--------------
8,100,000
--------------
ARIZONA--1.04%
2,000 Maricopa County Industrial Development 07/31/96 4.500 2,001,641
Authority
Tax Anticipation Notes...................
8,000 Phoenix Multi-Family Housing Authority A 3.350 8,000,000
(Southwest Villages Project).............
11,000 Salt River Agricultural Improvement & 08/23/96 to 10/01/96 3.600 to 3.650 11,000,000
Power Project
Tax-Exempt Commercial Paper..............
--------------
21,001,641
--------------
CALIFORNIA--4.60%
6,000 California Community College Financing 07/02/97 4.750 6,051,840
Tax and Revenue Anticipation Bonds.......
9,100 California Higher Education Loan Authority A 3.400 9,100,000
(Student Loans)..........................
12,000 California Higher Education Loan Authority 07/01/96 to 07/01/97 3.900 to 3.950 12,000,000
(Student Loans)
Adjustable Rate Demand Notes.............
8,000 California Statewide Communities 06/30/97 4.750 8,057,520
Development Authority
Tax and Revenue Anticipation Notes.......
5,000 Contra Costa County 07/03/97 4.500 5,031,000
Tax and Revenue Anticipation Notes.......
4,180 Grand Terrace Community Redevelopment A 3.400 4,180,000
Authority
(Multi-Family Housing)...................
12,000 Los Angeles County Pension Obligation..... A 3.150 12,000,000
12,300 Los Angeles County 07/01/96 to 06/30/97 4.500 12,349,160
Tax and Revenue Anticipation Notes.......
2,000 Los Angeles County Transportation 02/27/97 4.000 2,002,649
Authority Notes...........................
</TABLE>
21
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
CALIFORNIA--(CONCLUDED)
$ 6,100 Los Angeles Unified School District 07/03/96 to 06/30/97 4.500% $ 6,120,959
Tax and Revenue Anticipation Notes.......
9,500 San Bernardino County 07/05/96 4.500 9,500,549
Tax and Revenue Anticipation Notes.......
6,200 San Francisco Redevelopment Agency A 3.400 6,200,000
Multi-Family
(Bayside Village)........................
--------------
92,593,677
--------------
COLORADO--1.97%
8,100 Colorado Health Facilities Authority A 3.400 8,100,000
(Kaiser Permanente Series A).............
13,600 Colorado Housing Finance Authority A 3.350 13,600,000
Multi-Family Housing Revenue Bonds
(Central Park Coren).....................
10,000 Colorado Housing Finance Authority A 3.425 10,000,000
Multi-Family Housing Revenue Bonds
(Grant Plaza Project)....................
4,550 Colorado Housing Finance Authority A 3.450 4,550,000
Multi-Family Housing Revenue Bonds
(Hamden & Estes).........................
3,450 Moffat County Pollution Control Revenue A 3.600 3,450,000
(Pacificorp).............................
--------------
39,700,000
--------------
CONNECTICUT--0.49%
8,400 Connecticut Industrial Development A 3.350 8,400,000
Authority
(Connecticut Light & Power)..............
900 Connecticut Industrial Development A 3.100 900,000
Authority
(Western Electric Company)...............
500 State of Connecticut General Obligation 08/15/96 5.250 500,952
Bonds.....................................
--------------
9,800,952
--------------
DELAWARE--1.12%
22,600 Delaware Economic Development Authority A 3.500 22,600,000
(Hospital Billing & Collection Service,
Ltd.).....................................
--------------
FLORIDA--6.80%
16,987 Florida Local Government Finance 08/07/96 to 08/26/96 3.650 to 3.700 16,987,000
Commission
Tax-Exempt Commercial Paper..............
10,565 Dade County Aviation Revenue.............. 07/03/96 3.200 10,565,000
15,000 Jacksonville Electric Facilities Authority 07/23/96 to 09/09/96 3.400 to 3.700 15,000,000
Tax-Exempt Commercial Paper..............
29,100 Jacksonville Hospital Revenue A 3.500 29,100,000
(University Medical Center Project)......
6,100 Orange County Health Facilities Authority A 3.450 6,100,000
(Mayflower Retirement Center)............
13,050 Orlando Waste Water Systems 08/12/96 to 09/20/96 3.200 to 3.500 13,050,000
Tax-Exempt Commercial Paper..............
</TABLE>
22
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
FLORIDA--(CONCLUDED)
$ 2,000 Palm Beach County School District 09/27/96 4.500% $ 2,005,975
Tax Anticipation Notes...................
3,100 Pinellas County Educational Facilities 07/18/96 3.500 3,100,000
Authority
Tax-Exempt Commercial Paper..............
3,500 Putnam County Industrial Development 09/15/96 3.250 3,500,000
Authority
(Semenole Electric)
Adjustable Rate Bonds....................
5,750 Sarasota County Public Hospital District 07/12/96 3.550 5,750,000
Tax-Exempt Commercial Paper..............
26,855 Sunshine State Government Finance 08/07/96 to 10/24/96 3.250 to 3.650 26,855,000
Commission
Tax-Exempt Commercial Paper..............
5,000 University of North Florida Foundation A 3.300 5,000,000
Incorporated..............................
--------------
137,012,975
--------------
GEORGIA--4.97%
16,999 Georgia Municipal Association A 3.300 16,998,819
Pooled Revenue Bonds.....................
8,000 Georgia Municipal Electric Authority 01/01/97 7.750 8,333,628
Revenue Bonds (Pre-refunded with U.S.
Government Securities to 01/01/97 @
102)......................................
30,100 Georgia Municipal Electric Authority 09/09/96 to 09/16/96 3.400 to 3.700 30,100,000
Tax-Exempt Commercial Paper..............
13,295 Georgia Municipal Gas Authority 08/21/96 to 09/06/96 3.700 13,295,000
Tax-Exempt Commercial Paper..............
6,000 Burke County Development Authority A 3.300 6,000,000
Pollution Control
(Oglethorpe Power Corp.).................
5,600 Burke County Development Authority 07/25/96 3.650 5,600,000
Pollution Control
(Oglethorpe Power Corp.)
Tax-Exempt Commercial Paper..............
14,600 Cobb County 12/31/96 4.000 14,631,741
Tax Anticipation Notes...................
5,100 Savannah Port Authority Revenue A 3.750 5,100,000
(Powell Duffacs).........................
--------------
100,059,188
--------------
IDAHO--0.77%
7,000 Idaho State 06/30/97 4.500 7,040,180
Tax Anticipation Notes...................
8,400 Power County Pollution Control Revenue A 3.600 8,400,000
(FMC Corporation Project)................
--------------
15,440,180
--------------
ILLINOIS--10.11%
4,900 Illinois Development Finance Authority A 3.750 4,900,000
(Bridgestone/ Firestone Tire Company)....
16,200 Illinois Development Finance Authority A 3.350 16,200,000
Pollution Control Revenue
(Commonwealth Edison)....................
</TABLE>
23
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
ILLINOIS--(CONCLUDED)
$ 3,400 Illinois Educational Facilities Authority A 3.500% $ 3,400,000
Revenues
(Cultural Pool)..........................
5,000 Illinois Educational Facilities Authority 08/15/96 3.650 5,000,000
Revenues
(Field Museum of Natural History)
Tax-Exempt Commercial Paper..............
10,000 Illinois Educational Facilities Authority A 3.650 10,000,000
Revenues
(College of Optometry)...................
12,995 Illinois Educational Facilities Authority A 3.400 to 4.125 12,995,000
Revenues
(Northwestern University)................
9,700 Illinois Health Facilities Authority A 3.900 9,700,000
Revenue
(Central Dupage Healthcorp)..............
23,040 Illinois Health Facilities Authority A 3.500 23,040,000
Revenue
(Central Health and Northwest
Community)................................
21,290 Illinois Health Facilities Authority A 3.750 21,290,000
Revenue
(Elmhurst Memorial Hospital).............
2,060 Illinois Health Facilities Authority A 3.450 2,060,000
Revenue
(Evangelical Hospitals Corp.)............
22,000 Illinois Health Facilities Authority 02/28/97 3.750 22,000,000
Revenue
(Evanston Hospital)
Adjustable Rate Bonds....................
3,200 Illinois Health Facilities Authority A 3.750 3,200,000
Revenue
(Health Corporation Affiliates
Project)..................................
5,680 Illinois Health Facilities Authority A 3.550 5,680,000
Revenue
(Ingalls Memorial Hospital)..............
5,500 Illinois Health Facilities Authority A 3.750 5,500,000
Revenue
(Methodist Medical Center)...............
6,000 Illinois Health Facilities Authority 08/08/96 3.900 6,000,000
Revenue
(SHAD Aquarium)
Tax-Exempt Commercial Paper..............
5,000 Illinois State Toll and Highway A 3.300 5,000,000
Authority.................................
10,000 Chicago O'Hare International Airport A 3.400 10,000,000
Revenue Bonds............................
11,100 Chicago O'Hare International Airport A 3.700 11,100,000
Pollution Control Revenue
(American Airlines)......................
5,000 City of Chicago 11/25/96 3.700 5,000,000
Equipment Tender Notes...................
10,500 Lisle Multi-Family Housing Revenue Bonds A 3.300 10,500,000
(Ashley of Lisle Project)................
8,900 Lisle Multi-Family Housing Revenue Bonds A 3.350 8,900,000
(Four Lakes Project).....................
2,000 Northwest Water Commission 05/01/97 6.500 2,087,720
Cook and Lake County Water Revenue Bonds
(Pre-refunded with MBIA to 05/01/97 @
102)......................................
--------------
203,552,720
--------------
</TABLE>
24
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
INDIANA--2.57%
$ 8,180 Indiana Bond Bank 01/09/97 4.250% $ 8,221,283
Advanced Funding Notes...................
6,900 Indianapolis Public Improvement Board..... 07/11/96 to 01/09/97 4.250 to 4.500 6,908,629
16,300 Jasper County Pollution Control Revenue 08/15/96 to 09/06/96 3.450 to 3.650 16,300,000
(Northern Indiana Public Service)
Tax-Exempt Commercial Paper..............
8,000 Mount Vernon Pollution Control Revenue 05/01/97 4.000 8,000,000
(Southern Indiana Gas)
Adjustable Rate Bonds....................
4,225 Petersburg Pollution Control Revenue 09/10/96 3.550 4,225,000
Tax-Exempt Commercial Paper..............
8,000 Rockport Pollution Control Revenue A 3.600 8,000,000
(AEP Generating Station).................
--------------
51,654,912
--------------
IOWA--0.88%
17,800 Iowa Finance Authority A 3.300 17,800,000
(Village Court Project)..................
--------------
KANSAS--0.50%
3,000 Burlington Pollution Control Revenue 09/16/96 3.600 3,000,000
(Kansas Electric Power)
Tax-Exempt Commercial Paper..............
3,800 Burlington Pollution Control Revenue 08/09/96 3.250 3,800,000
(National Rural Utilities)
Tax-Exempt Commercial Paper..............
3,200 Kansas City Industrial Revenue A 3.700 3,200,000
(PQ Corporation Project).................
--------------
10,000,000
--------------
KENTUCKY--2.07%
1,875 Kentucky Economic Development Finance 11/01/96 5.750 1,886,588
Authority
(Sisters of Charity Health)..............
10,635 Jefferson County Pollution Control Revenue 08/01/96 to 08/15/96 3.150 to 3.550 10,635,000
Bonds
(Louisville Gas & Electric Company)
Tax-Exempt Commercial Paper..............
2,000 Pendleton County 08/23/96 3.700 2,000,000
(Association of Multi-County Leasing
Program)
Tax-Exempt Commercial Paper..............
1,700 Pendleton County 07/01/96 4.000 1,700,000
(Association of Multi-County Leasing
Program)
Adjustable Rate Bonds....................
25,415 Trimble County Pollution Control 08/01/96 to 09/13/96 3.150 to 3.600 25,415,000
(Louisville Gas & Electric Company)
Tax-Exempt Commercial Paper..............
--------------
41,636,588
--------------
</TABLE>
25
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
LOUISIANA--2.95%
$15,865 Louisiana Offshore Terminal Port A 3.500% $ 15,865,000
Authority.................................
4,000 Louisiana Public Facilities Authority 07/18/96 3.500 4,000,000
(Sisters of Charity)
Tax-Exempt Commercial Paper..............
12,000 Louisiana Public Facilities Authority A 3.400 12,000,000
Pollution Control Revenue
(Ciba Geigy).............................
7,300 Louisiana Public Facilities Authority 07/31/96 3.600 7,300,000
Health Care Systems
(Sisters of Charity)
Tax-Exempt Commercial Paper..............
9,700 Calcasieu Parish Industrial Development A 3.350 9,700,000
Board
Pollution Control Revenue
(Citgo Petrol Corp.).....................
2,000 Greater New Orleans Expressway Commission 11/01/96 7.800 2,086,509
(Pre-refunded with U.S. Government
Securities to 11/01/96 @ 103)............
8,400 Parish of East Baton Rouge Pollution A 3.600 8,400,000
Control Revenue
(Exxon Project)..........................
--------------
59,351,509
--------------
MAINE--0.37%
7,500 Baileyville Pollution Control Revenue A 3.425 7,500,000
(Georgia Pacific)........................
--------------
MARYLAND--3.47%
16,570 Maryland Health & Higher Education 07/31/96 to 08/14/96 3.650 to 3.750 16,570,000
Facilities Revenue
(John Hopkins Medical)
Tax-Exempt Commercial Paper..............
10,000 Maryland State Health & Higher Education A 3.300 10,000,000
Facilities Revenue
(Pooled Loan Program)....................
15,000 Baltimore County Consolidated Public 07/25/96 to 09/24/96 3.450 to 3.550 15,000,000
Improvement
Tax-Exempt Commercial Paper..............
9,000 Howard County 08/20/96 3.500 9,000,000
Tax-Exempt Commercial Paper..............
10,000 Montgomery County 07/17/96 3.700 10,000,000
Tax-Exempt Commercial Paper..............
9,200 University of Maryland A 3.250 9,200,000
Equipment Tender Notes...................
--------------
69,770,000
--------------
</TABLE>
26
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
MASSACHUSETTS--3.73%
$ 5,000 Massachusetts Health & Education A 3.400% $ 5,000,000
(Capital Access Pool)....................
6,000 Massachusetts Health & Education 08/22/96 3.650 6,000,000
(Boston University)
Tax-Exempt Commercial Paper..............
19,655 Massachusetts Health & Education A 3.050 19,655,000
(Harvard University).....................
17,350 Massachusetts Health & Education 07/23/96 to 08/13/96 3.200 to 3.600 17,350,000
(Harvard University)
Tax-Exempt Commercial Paper..............
19,600 Massachusetts Water Resources Authority 07/30/96 to 10/18/96 3.100 to 3.650 19,600,000
Tax-Exempt Commercial Paper..............
7,500 Montachusett Regional Transit Authority 06/28/97 4.500 7,535,925
Revenue Anticipation Notes...............
--------------
75,140,925
--------------
MICHIGAN--4.61%
3,000 Michigan Municipal Bond Authority Revenue 07/03/97 4.500 3,017,310
(Series A)...............................
6,000 Michigan Municipal Bond Authority Revenue 07/03/96 4.500 6,000,221
Notes.....................................
10,000 Michigan Building Authority 08/28/96 3.700 10,000,000
Tax-Exempt Commercial Paper..............
3,000 Michigan South Central Power Agency 11/01/96 7.250 3,098,974
(Pre-refunded with U.S. Government
Securities to 11/01/96 @ 102)............
4,000 Michigan Strategic Fund A 3.600 4,000,000
(Dow Chemical Company)...................
15,200 Michigan Underground Storage 07/17/96 to 08/15/96 3.450 to 3.650 15,200,000
Tax-Exempt Commercial Paper..............
21,000 State of Michigan General Obligation 09/30/96 4.000 21,036,972
Notes.....................................
5,100 Delta County Economic Development A 3.600 5,100,000
Authority.................................
100 Flint Hospital Building Authority A 3.550 100,000
(Hurley Medical Center)..................
3,000 Northville Township Industrial Revenue A 3.500 3,000,000
Bond
(Thrifty Northville).....................
5,620 University of Michigan.................... A 3.550 5,620,000
12,240 Wayne County Sewage Revenue 08/02/96 to 08/28/96 3.500 to 3.700 12,240,000
Tax-Exempt Commercial Paper..............
4,290 Western Michigan University Revenues 10/01/96 7.375 4,418,972
(Special Projects) (Pre-refunded with
U.S. Government Securities to 10/01/96 @
102)......................................
--------------
92,832,449
--------------
MINNESOTA--1.00%
20,050 University of Minnesota Board of Regents 07/26/96 to 08/12/96 3.150 to 3.650 20,050,000
Tax-Exempt Commercial Paper..............
--------------
MISSISSIPPI--1.09%
15,500 Harrison County Pollution Control Revenue A 3.600 15,500,000
(DuPont).................................
6,500 Perry County Pollution Control Revenue.... A 3.400 6,500,000
--------------
22,000,000
--------------
</TABLE>
27
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
MISSOURI--1.68%
$ 5,000 Missouri Environment Pollution Control 06/01/97 3.650% $ 5,000,000
Revenue Bonds
(Union Electric)
Adjustable Rate Bonds....................
15,000 Missouri Health & Education Facilities 08/14/96 to 08/19/96 3.200 15,000,000
Authority
(SSM Healthcare)
Tax-Exempt Commercial Paper..............
3,800 Missouri Health & Education Facilities A 3.350 3,800,000
Authority
(Washington University)..................
10,000 University of Missouri Project Notes...... 06/30/97 4.750 10,084,200
--------------
33,884,200
--------------
NEBRASKA--1.34%
5,085 Nebraska Higher Education Authority....... A 3.400 5,085,000
21,915 Nebraska Public Power District Revenue 09/18/96 to 09/23/96 3.500 to 3.700 21,915,000
Tax-Exempt Commercial Paper..............
--------------
27,000,000
--------------
NEVADA--0.97%
19,600 Clark County Airport Improvement Revenue A 3.300 19,600,000
Bonds.....................................
--------------
NEW HAMPSHIRE--0.23%
4,640 New Hampshire Higher Education Authority 06/01/97 3.800 4,640,000
(Dartmouth College)
Adjustable Rate Bonds....................
--------------
NEW JERSEY--1.18%
8,500 New Jersey State Transportation Trust Fund 12/15/96 5.500 8,571,870
Authority Bonds..........................
9,300 Morris Township 05/16/97 4.125 9,330,886
Bond Anticipation Notes..................
5,800 Wildwood Crest 05/08/97 4.125 5,815,412
Bond Anticipation Notes..................
--------------
23,718,168
--------------
NEW MEXICO--1.18%
13,700 Albuquerque Airport Revenue Bonds......... A 3.300 13,700,000
6,350 Albuquerque Gross Receipts A 3.400 6,350,000
Lodges Tax Revenue Series A..............
3,800 Dona Ana County Pollution Control Revenue A 3.300 3,800,000
Bonds.....................................
--------------
23,850,000
--------------
NEW YORK--4.19%
5,200 New York State 07/22/96 3.700 5,200,000
Tax-Exempt Commercial Paper..............
8,950 New York State Dormitory Authority A 3.000 8,950,000
(New York Public Library)................
</TABLE>
28
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
NEW YORK--(CONCLUDED)
$12,000 New York State Local Government Assistance A 3.050% $ 12,000,000
Corp......................................
15,000 Metropolitan Transportation Authority 12/12/96 4.250 15,046,109
Revenue Anticipation Notes...............
5,000 Nassau County 08/15/96 4.000 5,005,221
Bond Anticipation Notes..................
1,000 Nassau County 03/05/97 3.750 1,002,619
Revenue Anticipation Notes...............
6,000 New York City 08/21/96 3.250 6,000,000
Tax-Exempt Commercial Paper..............
8,400 New York City Housing Development A 3.300 8,400,000
Authority
(East 96th Street Project)...............
13,900 New York City Municipal Water Authority 09/13/96 to 09/25/96 3.550 to 3.600 13,900,000
Tax-Exempt Commercial Paper..............
8,900 Yonkers Industrial Development Authority A 3.550 8,900,000
(Consumers Union)........................
--------------
84,403,949
--------------
NORTH CAROLINA--1.49%
15,100 North Carolina Education and Medicare A 3.250 15,100,000
(Duke University)........................
6,000 North Carolina Educational Facility A 3.250 6,000,000
(Duke University)........................
9,000 Charlotte Airport Revenue Bonds........... A 3.300 9,000,000
--------------
30,100,000
--------------
NORTH DAKOTA--0.95%
19,200 Grand Forks Health Care Facilities Revenue A 3.700 19,200,000
(The United Hospital Group Project)......
--------------
OHIO--1.99%
6,000 Columbus Electric Systems Revenue......... A 3.550 6,000,000
12,700 Columbus Sewer Revenue.................... A 3.300 12,700,000
21,400 Montgomery County Hospital Revenue 08/14/96 to 09/11/96 3.200 to 3.550 21,400,000
(Miami Valley Hospital)
Tax-Exempt Commercial Paper..............
--------------
40,100,000
--------------
OKLAHOMA--1.22%
4,715 Oklahoma Water Resource Board 09/01/96 3.250 4,715,000
Adjustable Rate Bond.....................
15,000 Tulsa Industrial Authority Hospital A 3.500 15,000,000
Revenue
(Hillcrest Hospital).....................
4,795 Tulsa Parking Authority Revenue 11/15/96 3.750 4,795,000
(Williams Center)
Adjustable Rate Bonds....................
--------------
24,510,000
--------------
</TABLE>
29
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
OREGON--1.42%
$18,200 Oregon State General Obligation A 3.250 to 3.350% $ 18,200,000
(Veterans Welfare).......................
7,000 Hillsboro Higher Education A 3.450 7,000,000
(Oregon Graduate Institute)..............
3,300 Portland Pollution Control Revenue A 3.650 3,300,000
(Reynolds Metals)........................
--------------
28,500,000
--------------
PENNSYLVANIA--2.11%
4,400 Alleghany County Pollution Control Revenue 09/13/96 3.650 4,400,000
(U.S. Steel)
Tax-Exempt Commercial Paper..............
5,000 Allegheny County Port Authority 06/30/97 3.900 5,000,000
Grant Anticipation Note Series A.........
8,830 Beaver County Industrial Development 08/29/96 3.550 8,830,000
Authority
Tax-Exempt Commercial Paper..............
4,000 Northeastern Pennsylvania Hospital 07/22/96 3.650 4,000,000
Authority Revenue
Tax-Exempt Commercial Paper..............
15,500 Northumberland County Industrial A 3.550 15,500,000
Development Authority.....................
4,800 Schuylkill County Pollution Control A 3.600 4,800,000
Revenue
(Northeastern Power Company).............
--------------
42,530,000
--------------
PUERTO RICO--1.00%
10,000 Puerto Rico Commonwealth 08/22/96 3.600 10,000,000
(Government Development Bank)
Tax-Exempt Commercial Paper..............
10,100 Puerto Rico Development Bank 07/19/96 to 08/19/96 3.450 to 3.650 10,100,000
Tax-Exempt Commercial Paper..............
--------------
20,100,000
--------------
SOUTH CAROLINA--1.40%
22,000 South Carolina Public Service Authority 07/23/96 to 10/01/96 3.300 to 3.600 22,000,000
Tax-Exempt Commercial Paper..............
6,200 Greenville Industrial Development Board... A 3.300 6,200,000
--------------
28,200,000
--------------
TENNESSEE--2.23%
5,000 Tennessee Health & Education 07/22/96 3.500 5,000,000
(Baptist Hospital)
Tax-Exempt Commercial Paper..............
3,000 Chattanooga Industrial Development A 3.800 3,000,000
Board.....................................
4,000 Metropolitan Nashville & Davidson Health & 07/29/96 3.650 4,000,000
Education
(Vanderbilt University)
Tax-Exempt Commercial Paper..............
</TABLE>
30
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
TENNESSEE--(CONCLUDED)
$ 8,000 Metropolitan Nashville & Davidson Health & 01/15/97 3.500% $ 8,000,000
Education
(Vanderbilt University)
Adjustable Rate Bond.....................
8,600 Metropolitan Nashville & Davidson A 3.500 8,600,000
Industrial
(Timberlake).............................
4,000 Metropolitan Nashville Airport A 3.400 4,000,000
Authority.................................
12,310 Shelby County Health & Education 08/01/96 3.900 12,310,000
Facilities Revenue
(Methodist Health Systems)
Adjustable Rate Bond.....................
--------------
44,910,000
--------------
TEXAS--14.40%
20,780 State of Texas 08/30/96 4.750 20,806,803
Tax and Revenue Anticipation Notes.......
5,000 State of Texas 08/20/96 3.650 5,000,000
Tax-Exempt Commercial Paper..............
22,300 Texas A&M University 08/22/96 to 09/16/96 3.200 to 3.350 22,300,000
Tax-Exempt Commercial Paper..............
24,600 Texas Municipal Power Agency 08/01/96 to 09/03/96 3.150 to 3.400 24,600,000
Tax-Exempt Commercial Paper..............
7,590 Bexar County Health Facilities Development A 3.300 7,590,000
(Army Retirement Foundation).............
3,500 Bowie County Industrial Development A 3.750 3,500,000
Corp......................................
3,700 Brownsville Utility Systems 08/09/96 3.150 3,700,000
Tax-Exempt Commercial Paper..............
15,325 City of Austin Combined Utilities System 07/24/96 to 08/29/96 3.200 to 3.550 15,325,000
Tax-Exempt Commercial Paper..............
2,325 City of Austin General Obligation......... 09/01/96 7.900 2,340,638
7,000 City of Houston 08/13/96 3.750 7,000,000
Tax-Exempt Commercial Paper..............
15,000 City of Houston Water & Sewer Authority 08/05/96 to 08/15/96 3.400 to 3.450 15,000,000
Tax-Exempt Commercial Paper..............
40,500 Dallas Rapid Transportation Authority 07/29/96 to 10/23/96 3.250 to 3.650 40,500,000
Revenue
Tax-Exempt Commercial Paper..............
2,000 Dallas Waterworks & Sewer System 04/01/97 6.800 2,078,829
Revenue Bonds (Pre-refunded with U.S.
Government Securities to 04/01/97 @
101.5)....................................
2,000 Garland Independent School District....... 02/15/97 6.200 2,030,905
12,800 Georgetown Higher Education Finance Corp. A 3.300 12,800,000
(Southwestern University)................
12,300 Guadalupe Blanco River Authority A 3.600 12,300,000
(Central Tax Power)......................
3,640 Gulf Coast Pollution Control Revenue 07/15/96 3.600 3,640,206
(Amoco)
Adjustable Rate Bonds....................
</TABLE>
31
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
TEXAS--(CONCLUDED)
$ 3,300 Harris County GO 09/11/96 3.700% $ 3,300,000
Tax-Exempt Commercial Paper..............
12,000 Harris County Health Facilities 07/10/96 to 07/24/96 3.550 to 3.650 12,000,000
(SSM Healthcare)
Tax-Exempt Commercial Paper..............
7,700 Harris County Health Facilities A 3.350 7,700,000
(Texas Children).........................
8,900 Harris County Health Facilities 07/25/96 3.900 8,900,000
(YMCA)
Tax-Exempt Commercial Paper..............
18,000 Harris County Toll Roads.................. A 3.400 18,000,000
6,000 Hockley County Pollution Control Revenue 09/01/96 3.300 6,000,966
(Amoco)
Adjustable Rate Bonds....................
3,000 Katy Independent School District.......... 02/15/97 4.400 3,020,037
8,400 North Central Health Facilities 10/22/96 3.650 8,400,000
(Methodist Hospital)
Tax-Exempt Commercial Paper..............
4,200 Port of Corpus Christi Authority 09/03/96 3.400 4,200,000
(Koch Industries)
Tax-Exempt Commercial Paper..............
17,886 University of Texas Board of Regents 07/22/96 to 10/11/96 3.250 to 3.650 17,886,000
Tax-Exempt Commercial Paper..............
--------------
289,919,384
--------------
UTAH--2.66%
4,700 Carbon County Pollution Control Revenue A 3.600 4,700,000
(Pacificorp).............................
2,400 Davis County Utah School District 06/30/97 4.500 2,413,752
Tax Anticipation Notes...................
25,950 Intermountain Power Agency 07/26/96 to 09/19/96 3.300 to 3.600 25,950,000
Tax-Exempt Commercial Paper..............
4,000 Intermountain Power Agency 06/16/97 3.930 4,000,000
Adjustable Rate Bonds....................
3,400 Provo City Housing Authority.............. A 3.550 3,400,000
3,000 Salt Lake City 12/31/96 4.500 3,011,039
Tax and Revenue Anticipation Notes.......
10,000 Salt Lake City Pooled Hospital Revenue 09/12/96 3.600 10,000,000
Bonds
Tax-Exempt Commercial Paper..............
--------------
53,474,791
--------------
VIRGINIA--0.36%
2,170 Virginia State Housing Development 08/01/96 5.625 2,173,994
Authority
(Series A)...............................
5,000 Norfolk Industrial Development Authority 09/11/96 3.600 5,000,000
(Norfolk Hospital Sentera)
Tax-Exempt Commercial Paper..............
--------------
7,173,994
--------------
</TABLE>
32
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------------- --------------
<C> <S> <C> <C> <C>
WASHINGTON--1.84%
$ 6,700 Washington Health Care Facilities A 3.650% $ 6,700,000
(Fred Hutchinson)........................
8,500 King County Sewer Revenue (Series A) 09/06/96 3.550 8,500,000
Tax-Exempt Commercial Paper..............
7,100 Port of Vancouver Refunding Revenue Bonds A 3.750 7,100,000
(United Grain Corporation of Oregon).....
14,800 Snohomish Public Utility District......... A 3.300 14,800,000
--------------
37,100,000
--------------
WEST VIRGINIA--0.11%
2,300 West Virginia Hospital Finance A 3.350 2,300,000
Authority.................................
--------------
WISCONSIN--0.35%
6,100 City of Oak Creek Pollution Control A 3.450 6,100,000
Revenue
(Wisconsin Electric Power Company).......
1,000 Milwaukee Revenue Anticipation Notes 09/01/96 5.400 1,003,130
(Metropolitan Sewer).....................
--------------
7,103,130
--------------
WYOMING--1.30%
4,800 Carbon County Pollution Control Revenue 11/01/96 3.600 4,800,000
(Amoco)
Adjustable Rate Bonds....................
2,500 Converse County Pollution Control Revenue 09/19/96 3.650 2,500,000
(Pacificorp)
Tax-Exempt Commerical Paper..............
8,700 Platte County Pollution Control Revenue... A 3.700 8,700,000
3,200 Platte River Power Authority 08/20/96 3.700 3,200,000
Tax-Exempt Commercial Paper..............
2,800 Sweetwater County Pollution Control 09/20/96 3.550 2,800,000
Revenue
(Pacificorp)
Tax-Exempt Commercial Paper..............
4,000 Uinta County Pollution Control Revenue 12/01/96 3.980 4,003,528
(Amoco)
Adjustable Rate Bonds....................
--------------
26,003,528
--------------
TOTAL INVESTMENTS (cost--$2,069,518,860 which
approximates cost for federal income tax
purposes)--102.78%.................................... 2,069,518,860
Liabilities in excess of other assets--(2.78)%........ (56,070,775)
--------------
NET ASSETS--(applicable to 2,014,777,848 shares
outstanding at $1.00 per share)--100.00%............. $2,013,448,085
--------------
--------------
</TABLE>
- ------------
A--Variable Rate Demand Notes and Variable Rate Certificates of Participation
are payable on demand. The interest rates shown are the current rates as of June
30, 1996 and reset periodically.
Weighted average maturity--56 days
See accompanying notes to financial statements
33
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest..................................................................... $72,768,382
-----------
EXPENSES:
Investment advisory and administration....................................... 9,012,871
Distribution fees............................................................ 1,602,861
Transfer agency and service fees............................................. 623,052
Custody and accounting....................................................... 225,535
Fund acquisition expense..................................................... 222,750
Federal and state registration............................................... 184,466
Reports and notices to shareholders.......................................... 167,738
Legal and audit.............................................................. 150,303
Directors' fees.............................................................. 21,250
Other expenses............................................................... 102,153
-----------
12,312,979
-----------
NET INVESTMENT INCOME........................................................... 60,455,403
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS................................. 7,684
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $60,463,087
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
--------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income......................................... $ 60,455,403 $ 46,120,956
Net realized gains from investment transactions............... 7,684 26,835
-------------- --------------
Net increase in net assets resulting from operations.......... 60,463,087 46,147,791
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income......................................... (60,678,153 ) (46,120,956 )
-------------- --------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS..... 451,622,833 134,289,509
-------------- --------------
Net increase in net assets..................................... 451,407,767 134,316,344
-------------- --------------
NET ASSETS:
Beginning of year............................................. 1,562,040,318 1,427,723,974
-------------- --------------
End of year................................................... $2,013,448,085 $1,562,040,318
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements
34
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber RMA Tax-Free Fund, Inc. (the "Fund") was organized under the laws of
Maryland on July 2, 1982 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 recorded on
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 securities.
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.
ACQUISITION
Effective November 20, 1995, the Fund acquired all the net assets of
PaineWebber/Kidder, Peabody Tax-Exempt Money Fund, Inc. ("PW/KP Tax-Exempt Money
Fund") pursuant to a plan of reorganization approved by PW/KP Tax-Exempt Money
Fund shareholders on November 10, 1995. The acquisition was accomplished by a
tax-free exchange of 395,167,695 shares of the Fund for 395,167,695 shares of
PW/KP Tax-Exempt Money Fund outstanding on November 20, 1995. PW/KP Tax-Exempt
Money Fund's net assets at that date, valued at $395,038,835, including
accumulated net realized losses of $2,134, were combined with those of the Fund.
35
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, the Fund
pays PaineWebber an investment advisory and administration fee, which is accrued
daily and paid monthly, in accordance with the following schedule:
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- ------------------------------------------------------------------- ------
Up to $1.0 billion................................................. 0.50%
In excess of $1.0 billion up to $1.5 billion....................... 0.44
Over $1.5 billion.................................................. 0.36
At June 30, 1996, the Fund owed PaineWebber $764,558 for investment advisory and
administration fees.
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly-owned
subsidiary of PaineWebber, serves as sub-adviser and sub-administrator of the
Fund pursuant to a Sub-Advisory and Sub-Administration Contract between
PaineWebber and Mitchell Hutchins. In accordance with that contract, PaineWebber
(not the Fund) pays Mitchell Hutchins a fee, computed daily and paid monthly, at
an annual rate of 20% of the fee paid by the Fund to PaineWebber under the
Advisory Contract.
In compliance with applicable state securities laws, PaineWebber will reimburse
the Fund if and to the extent that the aggregate operating expenses in any
fiscal year, exclusive of taxes, interest, brokerage fees, distribution fees and
extraordinary expenses, exceed limitations imposed by various state regulations.
Currently, the most restrictive limitation applicable to the Fund is 2.5% of 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 June 30, 1996, no
reimbursements were required pursuant to the above limitation.
DISTRIBUTION PLAN
PaineWebber is the distributor of the Fund's shares. Under the plan of
distribution, the Fund is authorized to pay PaineWebber a monthly service fee at
the annual rate of up to 0.15% of its average daily net assets for providing
shareholder services and maintaining shareholder accounts. Currently,
PaineWebber is compensated for providing such services at the annual rate of
0.08% of the Fund's average daily net assets. At June 30, 1996, the Fund owed
PaineWebber $137,115 for such service fees.
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 Fund's transfer agent. For these services
36
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
for the year ended June 30, 1996, PaineWebber earned $242,449. At June 30, 1996,
the Fund owed PaineWebber $21,796 for such shareholder service fees and
reimbursement of out-of-pocket expenses.
OTHER LIABILITIES
At June 30, 1996, the amounts payable for investments purchased and dividends
payable aggregated $67,410,570 and $1,748,840, respectively.
FEDERAL TAX STATUS
The Fund intends to distribute all of its tax-exempt income and any 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.
At June 30, 1996, the Fund had net capital loss carryforwards of $861,687. The
capital loss carryforward includes capital loss carryforwards acquired by the
Fund pursuant to its reorganization with PW/KP Tax Exempt Money Fund (which was
acquired during the current fiscal year) in the amount of $2,135. The loss
carryforwards are available as reductions, to the extent provided in the
regulations, of future net realized capital gains, and will expire between June
30, 1997 and June 30, 2004.
In accordance with U.S. Treasury Regulations, the Fund has elected to defer
realized capital losses of $1,497 arising after October 31, 1995. Such losses
have been treated for tax purposes as arising on July 1, 1996. To the extent
that these losses are used to offset future net capital gains, the gains so
offset will not be distributed.
CAPITAL SHARE TRANSACTIONS
There are 20 billion $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 JUNE 30,
----------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
Shares sold............................................... 10,951,139,261 8,451,980,282
Shares issued in connection with the acquisition of PW/KP
Tax Exempt Money Fund..................................... 395,167,695 --
Shares repurchased........................................ (10,953,673,355) (8,362,807,186)
Dividends reinvested...................................... 58,989,232 45,116,413
------------------ ------------------
Net increase in shares outstanding........................ 451,622,833 134,289,509
------------------ ------------------
------------------ ------------------
</TABLE>
37
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of Common Stock outstanding throughout each year is
presented below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------------
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................. 0.030 0.030 0.019 0.021 0.033
Dividends from net investment
income................................ (0.030) (0.030) (0.019) (0.021) (0.033)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return(1)............ 3.09% 3.03% 1.88% 2.07% 3.30%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's)....... $2,013,448 $1,562,040 $1,427,724 $1,248,702 $1,183,719
Expenses to average net assets........ 0.61%(2) 0.63% 0.64% 0.65% 0.62%
Net investment income to average net
assets................................ 3.02%(2) 3.00% 1.90% 2.06% 3.30%
</TABLE>
- ---------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each year reported.
(2) These ratios include non-recurring acquisition expenses of 0.01%.
38
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
- --------------------------------------------------------------------------------
Board of Directors and Shareholders
PaineWebber RMA Tax-Free Fund, Inc.
We have audited the accompanying statement of net assets of PaineWebber RMA
Tax-Free Fund, Inc. as of June 30, 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
periods indicated therein. 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.
We 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 investments owned at June 30, 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 audit provides 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 RMA Tax-Free Fund, Inc. at June 30, 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 indicated periods, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
August 12, 1996
39
<PAGE>
PaineWebber RMA Tax-Free 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 (June 30,
1996) 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 1996. 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 1997. Shareholders are advised to consult their own
tax advisers with respect to the tax consequences of their investment in the
Fund.
40
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders was held on May 1, 1996, at which the
following votes were cast on the proposals submitted to the Fund's shareholders:
PROPOSAL 1
To elect ten members of its Board of Directors:
<TABLE>
<CAPTION>
SHARES VOTED FOR SHARES WITHHOLD AUTHORITY
---------------- -------------------------
<S> <C> <C>
Margo N. Alexander..................................... 1,021,050,390 140,501,759
Richard Q. Armstrong................................... 1,021,021,878 140,530,271
E. Garrett Bewkes, Jr.................................. 1,020,863,506 140,688,643
Richard Burt........................................... 1,020,994,521 140,557,628
Mary C. Farrell........................................ 1,021,059,836 140,492,313
Meyer Feldberg......................................... 1,020,952,781 140,599,368
George W. Gowen........................................ 1,020,808,130 140,744,019
Frederic V. Malek...................................... 1,020,906,538 140,645,611
Carl W. Schafer........................................ 1,020,922,506 140,629,643
John R. Torell, III.................................... 1,021,077,364 140,474,785
</TABLE>
PROPOSAL 2
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES VOTED SHARES VOTED SHARES
To vote for or against the ratification of the FOR AGAINST ABSTAIN
selection of Ernst & Young LLP as the independent ------------- ------------ -----------
auditors for the Fund's fiscal year ended June 30,
1996: 1,018,522,393 7,096,171 135,933,585
</TABLE>
41
<PAGE>
PaineWebber RMA Tax-Free Fund, Inc.
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
PROPOSAL 3
To vote for or against the following changes to the Fund's fundamental
investment restrictions and policies:
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
FOR AGAINST ABSTAIN
------------- ------------ -----------
<S> <C> <C> <C>
Modification of fundamental restriction on
portfolio diversification for diversified
funds:............................................ 994,034,112 24,991,124 142,526,913
Modification of fundamental restriction on
concentration:.................................... 994,023,646 25,001,590 142,526,913
Modification of fundamental restriction on senior
securities and borrowing:......................... 991,509,208 27,516,028 142,526,913
Modification of fundamental restriction on making
loans:............................................ 993,769,323 25,255,914 142,526,912
Modification of fundamental restriction on
underwriting securities:.......................... 993,975,992 25,049,244 142,526,913
Modification of fundamental restriction on real
estate investments:............................. 993,796,856 25,228,380 142,526,913
Modification of fundamental restriction on
investing in commodities:....................... 991,020,912 28,004,324 142,526,913
Elimination of fundamental restriction on pledging
portfolio securities:............................. 991,775,551 27,249,685 142,526,913
Elimination of fundamental restriction on margin
transactions:..................................... 991,413,423 27,611,813 142,526,913
Elimination of fundamental restriction on short
sales:............................................ 991,535,016 27,490,221 142,526,912
Elimination of fundamental restriction on
investments in oil, gas and mineral leases and
programs:......................................... 993,921,069 25,104,167 142,526,913
Elimination of fundamental restriction on
investments in other investment companies:...... 992,063,356 26,961,880 142,526,913
</TABLE>
PROPOSAL 4
To vote for or against the approval of Amended and
Restated Articles of Incorporation:
<TABLE>
<S> <C> <C> <C>
981,728,521 27,324,556 152,499,072
</TABLE>
- -------------------
(Broker non-votes and abstentions are included within the "Shares Withhold
Authority" and "Shares Abstain" totals.)
42
<PAGE>
Directors
E. Garrett Bewkes, Jr., CHARIRMAN
Margo N. Alexander
Richard Q. Armstrong [PAINEWEBBER LOGO]
Richard 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 R M A M O N E Y
Julian F. Sluyters F U N D , I N C .
Vice President and Treasurer
Investment Adviser, Administrator and R M A T A X - F R E E
Distributor F U N D , I N C .
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 Funds
unless accompanied or preceded by an effective
prospectus.
PaineWebber Incorporated JUNE 30, 1996
Member SIPC
A N N U A L R E P O R T
