<PAGE>
February 14, 1997
Dear Shareholder,
We are pleased to present you with the semiannual report for PaineWebber
RMA Money Market Portfolio, PaineWebber RMA Tax-Free Fund, Inc. and PaineWebber
RMA U.S. Government Portfolio for the six months ended December 31, 1996.
GENERAL MARKET OVERVIEW
Early in 1996, government reports showing higher-than-expected economic
growth prompted a sharp drop in bond prices and ensuing stock market volatility,
a scenario that would continue early into the semiannual period covered by this
report.
Several factors helped stocks move higher despite this volatility,
including an overall positive environment for corporate earnings and profit
growth, as well as strong cash inflows into 401(k)s and equity mutual funds.
Then, in July, a spate of disappointing earnings announcements contributed to
the first meaningful overall stock market correction since 1994. This proved
short-lived, however, and in August the stock market retraced much of the ground
it had lost. By mid-September, as investor confidence grew, money returning to
the equity markets propelled the Standard & Poor's 500 Index, a commonly used
measure of stock market performance, to a then-record high (a circumstance which
underscores the hazards of market timing). Although October, November and
December were characterized by continued market volatility, the nation's
economic out-look continued to encourage investors, and the stock market
continued its upward climb.
"Volatile" also best describes the nature of the bond market over the six
months ended December 31, 1996. Early in the period, ongoing uncertainty over
the direction of interest rates persistently unsettled an already-jittery
market. By mid-summer, a moderating economy helped bolster the market for a
short period of time, a situation that was, however, only fleeting as renewed
fears of an overheating economy quickly reemerged. The market would repeat
this about-face in late fall, when new economic data appeared to affirm the
moderation in economic activity that brought about mid-summer's brief revival in
the market. A 28-basis point rally ensued that would be over before year end as
the release of unexpected economic data would again cause a correction in
yields that would last well into January 1997.
1
<PAGE>
PORTFOLIO REVIEW
PAINEWEBBER RMA MONEY MARKET PORTFOLIO
PaineWebber RMA Money Market Portfolio's net assets totalled $7.9 billion
as of December 31, 1996. The Portfolio's current yield for the seven-day period
ended December 31, 1996 was 4.92%. The Portfolio's weighted average maturity was
68 days as of December 31, 1996.
During the six-month period, the Fed maintained a Federal Funds rate of
5.25%, an indication of the Fed's perception that the economic environment had
assumed a measure of stability. We anticipated this scenario and kept the
Portfolio's weighted average maturity slightly longer than those of its peers.
As a result, the Portfolio had a minimum of cash to invest at lower interest
rates, a situation that ultimately proved beneficial to performance.
PAINEWEBBER RMA U.S. GOVERNMENT PORTFOLIO
PaineWebber RMA U.S. Government Portfolio also maintained a longer weighted
average maturity than its peers, for reasons similar to those cited for
PaineWebber RMA Money Market Portfolio. The Portfolio's net assets totalled $1.1
billion as of December 31, 1996. The Portfolio's current yield for the seven-day
period ended December 31, 1996 was 4.87%. As of December 31, 1996, the
Portfolio's weighted average maturity was 77 days.
PAINEWEBBER RMA TAX-FREE FUND, INC.
During the period, PaineWebber RMA Tax-Free Fund maintained a longer weighted
average maturity than its peers in order to be better positioned for January's
usual large inflow of cash. The Fund's net assets totalled $2.0 billion as of
December 31, 1996. The Fund's current yield for the seven-day period ended
December 31, 1996 was 3.14%. The Fund's weighted average maturity as of
December 31, 1996 was 57 days. In addition, the Fund did not invest in any
securities subject to the federal alternative minimum tax for individual
taxpayers during the fiscal period.
2<PAGE>
OUTLOOK
As we enter the new year, the consensus seems to be for moderate gross
domestic product growth and inflation. The economy is presently characterized by
slow growth and stable inflation, with interest rates varying little. Inflation,
currently at 3%, seems to be at a comfort level and should persist. Overall,
short-term rates should remain stable for the first half of 1997. As of
December 31, 1996, the Federal Funds rate remained at 5.25%, while commercial
paper was at approximately a 5.30% discount level for the one month product,
with a yield that ranged from 5.75% to 5.85% for the one year product.
Given our belief that the current economic environment will persist, we
plan to maintain the Funds' current positions. Although we are interested in
maintaining higher yields, we will not do so by sacrificing the Funds' emphasis
on security, quality and liquidity.
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,
<TABLE>
<S> <C> <C>
/s/ Margo Alexander /s/ Dennis L. McCauley /s/ Susan P. Ryan
MARGO ALEXANDER DENNIS L. McCAULEY SUSAN P. RYAN
President, Managing Director and Chief Senior Vice President,
Mitchell Hutchins Asset Investment Officer--Fixed Income Taxable Money Funds
Management Inc. Mitchell Hutchins Asset Mitchell Hutchins Asset
Management Inc. Management Inc.
Portfolio Manager,
PaineWebber RMA
Money Fund Inc.
/s/ Roger S. Stern /s/ Debbie Vermann
ROGER S. STERN DEBBIE VERMANN
Portfolio Manager, Portfolio Manager,
PaineWebber RMA PaineWebber RMA
U.S. Government Portfolio Tax-Free Fund, Inc.
</TABLE>
3
<PAGE>
PaineWebber RMA MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS December 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- --------------- ---------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--13.71%
$ 105,000 United States Treasury Bills ................... 02/06/97 to 01/08/98 4.650 to 5.190 %@ $ 101,569,317
25,900 United States Treasury Note .................... 02/28/97 6.875 25,972,124
109,795 Federal Farm Credit Bank ....................... 03/03/97 to 05/01/97 4.950 to 5.400 109,779,716
25,000 Federal Farm Credit Bank ....................... 01/02/97 5.355* 24,997,479
269,450 Federal Home Loan Bank ......................... 01/28/97 to 12/26/97 5.400 to 6.050 269,386,395
30,000 Federal Home Loan Bank ......................... 03/20/97 5.582* 30,000,000
81,700 Federal National Mortgage Association .......... 02/14/97 to 05/02/97 4.780 to 5.180 80,996,810
30,000 Federal National Mortgage Association .......... 01/07/97 5.420* 29,987,363
186,300 Student Loan Marketing Association ............. 01/07/97 to 12/24/97 5.630 to 6.070 186,306,126
217,300 Student Loan Marketing Association ............. 01/07/97 5.310 to 5.420 * 217,280,087
---------------
Total U.S. Government and Agency Obligations
1,076,275,417
(cost--$1,076,275,417)...................................
---------------
BANK NOTES--11.35%
DOMESTIC--9.31%
37,400 Bank America National Trust & Savings
Association .................................. 05/07/97 to 11/21/97 5.500 to 5.520 37,390,692
75,000 Bank of America Illinois ....................... 01/08/97 to 12/29/97 5.410 to 5.660 74,981,042
52,000 Bank of Hawaii ................................. 01/03/97 5.500 52,000,184
43,000 Bank One, Milwaukee, NA ........................ 03/25/97 5.560 43,000,402
30,000 Comerica Bank Detroit .......................... 07/11/97 6.150 30,000,000
16,000 Comerica Bank Detroit .......................... 01/07/97 5.520* 15,999,866
100,000 FCC National Bank .............................. 03/13/97 to 07/18/97 5.500 to 6.000 100,004,189
48,500 FCC National Bank .............................. 01/02/97 5.360 to 5.580 * 48,497,792
19,000 First National Bank Chicago .................... 05/06/97 5.700 18,995,974
15,000 Huntington Bancshares Incorporated ............. 03/14/97 5.700 15,002,355
30,000 Key Bank of New York ........................... 11/04/97 5.600 30,001,695
35,200 Morgan Guaranty Trust Company .................. 01/15/97 5.250 35,201,431
25,000 Old Kent Bank & Trust Company .................. 11/05/97 5.600 24,987,764
110,000 PNC Bank, N.A. ................................. 01/02/97 to 01/27/97 5.245 to 5.503 * 109,985,896
40,000 Society National Bank .......................... 01/10/97 5.525* 39,996,277
20,000 Wachovia Bank of North Carolina ................ 01/08/97 5.360 20,000,000
35,000 Wachovia Bank of North Carolina ................ 01/03/97 5.438* 34,999,786
---------------
731,045,345
---------------
YANKEE--2.04%
160,400 ABN-AMRO Bank N.V. ............................. 02/18/97 to 12/04/97 5.500 to 5.690 160,338,182
---------------
891,383,527
Total Bank Notes (cost--$891,383,527)......................
---------------
BANKERS [email protected]%
DOMESTIC--0.30%
23,802 Chase Manhattan Bank ........................... 01/28/97 to 03/31/97 5.290 to 5.600 23,630,635
YANKEE--0.50%
39,350 Bank of Tokyo-Mitsubishi Limited ............... 02/04/97 to 02/19/97 5.350 39,105,809
---------------
62,736,444
Total Bankers Acceptances (cost--$62,736,444)..............
---------------
</TABLE>
4
<PAGE>
PaineWebber RMA MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- --------------- ---------------
<C> <S> <C> <C> <C>
CERTIFICATES OF DEPOSIT--22.60%
DOMESTIC--1.51%
$ 85,000 Bankers Trust New York Corporation ............. 01/07/97 5.470 to 5.530 %* $ 84,968,785
34,000 Bankers Trust New York Corporation ............. 12/10/97 5.500 33,954,041
---------------
118,922.826
---------------
YANKEE--21.09%
312,000 Bank of Tokyo-Mitsubishi Limited ............... 01/06/97 to 03/06/97 5.440 to 5.600 312,002,602
35,000 Commerzbank AG ................................. 01/21/97 5.520 35,000,364
25,000 Den Danske Bank A/S ............................ 02/10/97 5.390 25,000,000
57,000 Deutsche Bank AG ............................... 03/31/97 to 07/11/97 5.570 to 6.110 56,996,076
37,000 Dresdner Bank AG ............................... 02/26/97 5.010 to 5.050 36,996,225
258,000 Fuji Bank Limited .............................. 01/03/97 to 01/31/97 5.650 to 5.930 258,001,155
24,900 Industrial Bank of Japan Limited ............... 01/09/97 5.610 24,900,055
30,000 Rabobank Nederland ............................. 04/28/97 5.500 30,000,949
385,000 Sanwa Bank Limited ............................ 01/02/97 to 03/17/97 5.470 to 5.650 384,995,062
301,730 Societe Generale................................ 03/31/97 to 12/03/97 5.530 to 6.090 301,752,365
135,000 Sumitomo Bank Limited .......................... 01/02/97 to 01/24/97 5.630 to 5.850 135,004,720
55,000 Westpac Banking Corporation .................... 02/26/97 to 03/19/97 5.080 to 5.610 54,997,866
---------------
1,655,647,439
---------------
1,774,570,265
Total Certificates of Deposit (cost--$1,774,570,265).......
---------------
COMMERCIAL [email protected]%
AEROSPACE - DEFENSE--1.00%
79,000 Raytheon Company ............................... 01/03/97 to 01/16/97 5.380 to 6.230 78,886,596
---------------
AGRICULTURE--0.64%
50,000 Cargill Financial Services Corporation ......... 01/08/97 to 01/09/97 5.360 49,944,167
---------------
ASSET-BACKED--7.18%
119,700 Asset Securitization Cooperative Corporation ... 01/09/97 to 03/19/97 5.310 to 5.360 119,193,433
41,449 Delaware Funding Corporation ................... 01/07/97 to 02/07/97 5.380 to 5.470 41,318,529
85,000 Eiger Capital Corporation ...................... 01/06/97 to 02/18/97 5.320 to 5.450 84,727,783
65,000 New Center Asset Trust ......................... 01/29/97 to 02/27/97 5.300 to 5.420 64,558,944
93,150 Preferred Receivables Funding Corporation ...... 01/02/97 to 01/16/97 5.330 to 5.450 93,000,025
161,248 Triple-A One Funding Corporation ............... 01/10/97 to 02/19/97 5.400 to 5.720 160,619,814
---------------
563,418,528
---------------
AUTO & TRUCK--4.13%
175,000 Ford Motor Credit Company ...................... 01/10/97 to 04/10/97 5.340 to 5.415 174,355,965
150,000 General Motors Acceptance Corporation .......... 01/02/97 7.350 149,969,375
---------------
324,325,340
---------------
BANKING--4.72%
40,000 Abbey National North America ................... 03/03/97 5.300 39,640,778
25,000 B.B.V. Finance (DE) Incorporated ............... 01/22/97 5.310 24,922,563
25,000 BCI Funding Corporation ........................ 01/07/97 5.350 24,977,708
24,850 BEX America Finance Incorporated ............... 01/08/97 5.360 24,824,101
28,600 BHF Finance (DE) Incorporated .................. 02/04/97 to 02/18/97 5.300 to 5.400 28,414,807
25,000 Canadian Imperial Holdings Incorporated ........ 01/10/97 5.330 24,966,687
15,000 Credito Italiano (DE) Incorporated ............. 01/06/97 5.410 14,988,729
</TABLE>
5
<PAGE>
PaineWebber RMA MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- --------------- ---------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER@--(continued)
BANKING--(CONCLUDED)
$ 48,000 Cregem North America Incorporated .............. 01/02/97 to 01/27/97 5.300 to 5.400 % $ 47,911,844
25,000 Den Danske Corporation Incorporated ............ 01/09/97 5.420 24,969,889
30,677 Nordbanken North America Incorporated .......... 01/07/97 5.320 30,649,800
15,000 San Paolo U.S. Financial Company ............... 01/13/97 5.390 14,973,050
69,600 Unifunding Incorporated ........................ 01/06/97 to 02/04/97 5.340 to 5.410 69,440,405
---------------
370,680,361
---------------
BROKER/DEALER--7.56%
15,000 BT Securities Corporation ...................... 01/22/97 5.420 14,952,575
124,373 Lehman Brothers Holdings Incorporated .......... 01/02/97 to 05/14/97 5.360 to 7.200 123,858,070
179,900 Merrill Lynch & Company Incorporated ........... 01/15/97 to 02/03/97 5.320 to 5.500 179,318,391
277,000 Morgan Stanley Group Incorporated .............. 01/15/97 to 05/02/97 5.320 to 5.400 275,433,764
---------------
593,562,800
---------------
COMPUTERS--1.27%
100,000 IBM Credit Corporation ......................... 01/13/97 to 01/22/97 5.380 to 5.400 99,753,083
---------------
CONGLOMERATE--0.74%
59,000 BTR Dunlop Finance Incorporated ................ 03/03/97 to 03/06/97 5.300 to 5.320 58,456,308
---------------
CONSUMER PRODUCTS--0.16%
13,000 Clorox Company ................................. 02/28/97 5.320 12,888,576
---------------
DRUGS, HEALTHCARE--1.13%
10,000 Bayer Corporation .............................. 02/13/97 5.320 9,936,456
55,000 Lilly (Eli) & Company .......................... 02/13/97 to 07/03/97 5.300 to 5.350 53,817,208
25,000 Sandoz Corporation ............................. 01/16/97 5.310 24,944,688
---------------
88,698,352
---------------
ELECTRONICS--0.23%
18,000 Sony Capital Corporation ....................... 01/23/97 5.380 17,940,820
---------------
ENERGY--0.71%
25,000 Exxon Imperial U.S. Incorporated ............... 01/06/97 5.370 24,981,354
31,000 Mobil Australia Finance Company ................ 02/03/97 5.320 30,848,824
---------------
55,830,178
---------------
ENTERTAINMENT--0.32%
25,000 Walt Disney Company ............................ 03/14/97 5.230 24,738,500
---------------
FINANCE - CONDUIT--0.83%
15,000 Commerzbank U.S. Finance Incorporated .......... 01/31/97 5.550 14,930,625
20,000 MetLife Funding Incorporated ................... 01/23/97 5.300 19,935,222
6,000 Svenska Handelsbanken Incorporated ............. 02/20/97 5.490 5,954,250
24,600 Toronto-Dominion Holdings USA Incorporated ..... 01/14/97 5.400 24,552,030
---------------
65,372,127
---------------
FINANCE - CREDIT UNION--0.32%
25,000 U.S. Central Credit Union ...................... 01/27/97 5.330 24,903,764
---------------
</TABLE>
6
<PAGE>
PaineWebber RMA MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- --------------- ---------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER@--(continued)
FINANCE - DIVERSIFIED--0.63%
$ 50,000 Associates Corporation of North America ........ 01/16/97 5.380% $ 49,887,916
---------------
FINANCE - SUBSIDIARY--2.98%
29,600 Creditanstalt Finance Incorporated ............. 01/08/97 5.420 29,568,805
15,000 Deutsche Bank Financial Incorporated ........... 01/06/97 5.550 14,988,438
110,000 Dresdner U.S. Finance Incorporated ............. 01/06/97 to 01/16/97 5.290 to 5.400 109,840,972
79,800 National Australia Funding (DE) Incorporated ... 01/02/97 to 01/06/97 5.410 to 5.450 79,771,349
---------------
234,169,564
---------------
FOOD, BEVERAGE & TOBACCO--0.88%
10,000 American Brands Incorporated ................... 01/17/97 5.480 9,975,644
30,000 B.A.T. Capital Corporation ..................... 01/16/97 5.420 29,932,250
30,000 Campbell Soup Company .......................... 07/17/97 5.370 29,118,425
---------------
69,026,319
---------------
GENERAL TRADE--0.25%
20,000 Mitsubishi International Corporation ........... 01/07/97 5.330 19,982,233
---------------
INSURANCE--1.53%
20,000 ITT Hartford Group Incorporated ................ 01/23/97 5.440 19,933,511
100,000 Prudential Funding Corporation ................. 01/09/97 to 01/13/97 5.390 to 5.400 99,850,167
---------------
119,783,678
---------------
INSURANCE - PROPERTY/CASUALTY--0.87%
20,000 A.I. Credit Corporation ........................ 01/14/97 5.280 19,961,866
48,200 AIG Funding Incorporated ....................... 01/15/97 5.350 to 5.370 48,099,537
---------------
68,061,403
---------------
MACHINE & MACHINE TOOLS--0.24%
18,700 Caterpillar Financial Services Corporation ..... 01/08/97 5.700 18,679,274
---------------
METALS & MINING--0.36%
28,236 RTZ America Incorporated ....................... 01/17/97 5.600 28,165,724
---------------
MISCELLANEOUS--0.88%
69,500 Beta Finance Incorporated ...................... 01/17/97 to 02/26/97 5.300 to 5.620 69,150,844
---------------
OIL EQUIPMENT & SERVICES--0.08%
6,000 Colonial Pipeline Company ...................... 01/17/97 5.300 5,985,867
---------------
POLLUTION CONTROL--0.50%
39,800 WMX Technologies Incorporated .................. 03/25/97 to 04/10/97 5.580 to 5.670 39,233,969
---------------
PRINTING, PUBLISHING--0.96%
21,900 Gannett Company ................................ 01/14/97 5.380 21,857,453
19,000 Mcgraw-Hill Companies Incorporated (The) ....... 03/25/97 5.300 18,767,831
35,000 Reed Elsevier Incorporated ..................... 02/07/97 5.300 34,809,347
---------------
75,434,631
---------------
</TABLE>
7
<PAGE>
PaineWebber RMA MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- --------------- ---------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER@--(concluded)
TELECOMMUNICATIONS--1.01%
$ 39,500 Ameritech Capital Funding Corporation .......... 02/18/97 5.550% $ 39,207,700
39,900 Bellsouth Capital Funding Corporation .......... 01/10/97 to 01/27/97 5.300 to 5.320 39,797,227
---------------
79,004,927
---------------
3,305,965,849
Total Commercial Paper (cost--$3,305,965,849)..............
---------------
SHORT-TERM CORPORATE OBLIGATIONS--9.74%
BANKING--1.01%
59,600 Bankers Trust New York Corporation ............. 01/02/97 5.690 to 5.740 * 59,600,000
20,000 Norwest Corporation ............................ 01/30/97 7.875 20,040,025
---------------
79,640,025
---------------
BROKER/DEALER--6.06%
267,500 Bear Stearns Companies Incorporated ............ 01/09/97 to 08/12/97 5.160 to 6.010 267,513,590
78,000 Bear Stearns Companies Incorporated ............ 01/02/97 to 01/24/97 5.613* 78,000,000
35,000 Merrill Lynch & Company Incorporated ........... 03/17/97 to 05/12/97 5.560 to 5.900 35,000,000
84,900 Merrill Lynch & Company Incorporated ........... 01/02/97 to 01/07/97 5.430 to 5.520 * 84,895,942
10,000 Morgan Stanley Group Incorporated .............. 02/03/97 7.790 10,024,026
---------------
475,433,558
---------------
BUSINESS SERVICES--0.51%
40,000 PHH Corporation ................................ 01/02/97 5.330* 39,999,541
---------------
FINANCE - DIVERSIFIED--0.80%
62,800 .. CIT Group Holdings Incorporated................. 01/02/97 5.330 to 5.350 * 62,765,434
---------------
FOOD, BEVERAGE & TOBACCO--0.09%
7,000 Heinz (H J) Company ............................ 09/15/97 5.500 6,994,286
---------------
MISCELLANEOUS--1.27%
75,000 Beta Finance Incorporated ...................... 03/18/97 to 12/10/97 5.550 to 6.080 74,999,253
25,000 Beta Finance Incorporated ...................... 01/07/97 5.500* 25,000,000
---------------
99,999,253
---------------
764,832,097
Total Short-Term Corporate Obligations
(cost--$764,832,097).....................................
---------------
</TABLE>
8
<PAGE>
PaineWebber RMA MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- --------------- ---------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS--0.51%
$ 20,319 Repurchase Agreement dated 12/31/96 with
Citicorp Securities Incorporated,
collateralized by $20,675,000 U.S. Treasury
Bonds, 6.500% due 11/15/26; proceeds:
$20,326,902 .................................. 01/02/97 7.000% $ 20,319,000
20,000 Repurchase Agreement dated 12/31/96 with Goldman
Sachs & Company, collateralized by $13,065,000
U.S. Treasury Bonds, 13.250% due 05/15/14;
proceeds: $20,006,611 ........................ 01/02/97 5.950 20,000,000
---------------
40,319,000
Total Repurchase Agreements (cost--$40,319,000)............
---------------
7,916,082,599
TOTAL INVESTMENTS (cost--$7,916,082,599 which approximates
cost for federal income tax purposes)-- 100.82%..........
(64,179,691)
Liabilities in excess of other assets--(0.82)% ............
---------------
$7,851,902,908
NET ASSETS (applicable to 7,855,788,178 shares outstanding
at $1.00 per share)--100.00%.............................
---------------
---------------
</TABLE>
- ---------------
* Variable rate securities--maturity date reflects earlier of reset date or
stated maturity date.
@ Interest rates shown are discount rates at date of purchase.
Weighted average maturity--68 days
See accompanying notes to financial statements
9
<PAGE>
PaineWebber RMA U.S. GOVERNMENT PORTFOLIO
STATEMENT OF NET ASSETS December 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--54.75%
$ 35,000 U.S. Treasury Bills ............................. 02/06/97 to 08/21/97 4.960 to 5.315%@ $ 34,237,651
567,250 U.S. Treasury Notes ............................. 01/31/97 to 11/15/97 4.750 to 8.750 568,741,845
---------------
602,979,496
Total U.S. Government Obligations (cost--$602,979,496)......
---------------
REPURCHASE AGREEMENTS--44.67%
48,000 Repurchase agreement dated 12/31/96 with Citicorp
Securities, Inc., collateralized by $40,760,000
U.S. Treasury Bonds, 8.125% due 08/15/19;
proceeds: $48,018,667.......................... 01/02/97 7.000 48,000,000
48,000 Repurchase agreement dated 12/31/96 with Daiwa
Securities America, Inc., collateralized by
$45,281,000 U.S. Treasury Bonds, 7.250% due
08/15/04; proceeds: $48,018,133................ 01/02/97 6.800 48,000,000
48,000 Repurchase agreement dated 12/31/96 with Dresdner
Kleinwort Benson N.A. LLC Inc., collateralized
by $46,937,000 U.S. Treasury Notes, 8.750% due
10/15/97; proceeds: $48,017,333................ 01/02/97 6.500 48,000,000
48,000 Repurchase agreement dated 12/31/96 with First
Chicago Capital Markets, Inc., collateralized
by $48,965,000 U.S. Treasury Notes, 5.50% due
11/15/98; proceeds: $48,017,867................ 01/02/97 6.700 48,000,000
45,000 Repurchase agreement dated 12/31/96 with Fuji
Securities, Inc., collateralized by $45,194,000
U.S. Treasury Notes, 4.750% due 02/15/97;
proceeds: $45,016,375.......................... 01/02/97 6.550 45,000,000
29,959 Repurchase agreement dated 12/31/96 with Goldman,
Sachs & Co. LP, collateralized by $26,110,000
U.S. Treasury Bonds, 8.125% due 05/15/21;
proceeds: $29,968,903.......................... 01/02/97 5.950 29,959,000
45,000 Repurchase agreement dated 12/31/96 with Lehman
Government Securities, Inc., collateralized by
$35,745,000 U.S. Treasury Bonds, 8.875% due
02/15/19; proceeds: $45,016,250................ 01/02/97 6.500 45,000,000
45,000 Repurchase agreement dated 12/31/96 with Morgan
Stanley & Co., Inc., collateralized by
$31,980,000 U.S. Treasury Bonds, 12.750% due
11/15/10; proceeds: $45,015,625................ 01/02/97 6.250 45,000,000
45,000 Repurchase agreement dated 12/31/96 with Salomon
Brothers, Inc., collateralized by $47,224,000
U.S. Treasury Bonds, 6.250% due 08/15/23;
proceeds: $45,016,250.......................... 01/02/97 6.500 45,000,000
45,000 Repurchase agreement dated 12/30/96 with Smith
Barney, Inc., collateralized by $31,835,000
U.S. Treasury Bonds, 12.750% due 11/15/10;
proceeds: $45,023,625.......................... 01/02/97 6.300 45,000,000
</TABLE>
10
<PAGE>
PaineWebber RMA U.S. GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Date Rate Value
- --------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS--(concluded)
$ 45,000 Repurchase agreement dated 12/31/96 with UBS
Securities LLC, collateralized by $45,843,000
U.S. Treasury Notes, 5.625% due 11/30/98;
proceeds: $45,016,750.......................... 01/02/97 6.700% $ 45,000,000
---------------
491,959,000
Total Repurchase Agreements (cost--$491,959,000)............
---------------
1,094,938,496
TOTAL INVESTMENTS (cost--$1,094,938,496 which approximates
cost for federal income tax purposes)--99.42%.............
6,343,512
Other assets in excess of liabilities--0.58%................
---------------
$1,101,282,008
NET ASSETS (applicaple to 1,101,689,461 shares outstanding
at $1.00 per share)--100.00%..............................
---------------
---------------
</TABLE>
- ---------------
@ Interest rates shown are discount rates at date of purchase.
Weighted average maturity--77 days
See accompanying notes to financial statements
11
<PAGE>
PaineWebber RMA MONEY FUND, INC.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET U.S. GOVERNMENT
PORTFOLIO PORTFOLIO
--------------- ------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest................................................................... $ 216,669,593 $ 31,212,030
--------------- ------------------
EXPENSES:
Investment advisory and administration..................................... 19,749,607 2,491,291
Transfer agency and service fees........................................... 1,526,344 233,930
State registration......................................................... 543,892 217,366
Custody and accounting..................................................... 393,307 58,700
Reports and notices to shareholders........................................ 152,246 74,478
Legal and audit............................................................ 97,469 45,417
Insurance.................................................................. 26,727 17,393
Directors' fees............................................................ 6,175 6,175
Distribution fees.......................................................... -- 466,241
Other expenses............................................................. 29,796 65,964
--------------- ------------------
22,525,563 3,676,955
--------------- ------------------
NET INVESTMENT INCOME........................................................ 194,144,030 27,535,075
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS.............................. 278,622 21,696
--------------- ------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $ 194,422,652 $ 27,556,771
--------------- ------------------
--------------- ------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1996 FOR THE YEAR ENDED
(UNAUDITED) JUNE 30, 1996
------------------------------- -------------------------------
MONEY MARKET U.S. GOVERNMENT MONEY MARKET U.S. GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income............ $194,144,030 $ 27,535,075 $336,992,881 $ 50,112,918
Net realized gains (losses) from
investment transactions........ 278,622 21,696 338,176 (16,273)
------------- ---------------- ------------- ----------------
Net increase in net assets
resulting from operations...... 194,422,652 27,556,771 337,331,057 50,096,645
------------- ---------------- ------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income............ (194,144,030) (27,535,075) (337,693,601) (50,288,868)
------------- ---------------- ------------- ----------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS..................... 329,012,015 (36,250,174) 2,124,829,044 321,921,848
------------- ---------------- ------------- ----------------
Net increase (decrease) in net
assets........................... 329,290,637 (36,228,478) 2,124,466,500 321,729,625
NET ASSETS:
Beginning of period.............. 7,522,612,271 1,137,510,486 5,398,145,771 815,780,861
------------- ---------------- ------------- ----------------
End of period.................... 7$,851,902,908 $1,101,282,008 7$,522,612,271 $1,137,510,486
------------- ---------------- ------------- ----------------
------------- ---------------- ------------- ----------------
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
PaineWebber RMA MONEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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. The following is a summary of
significant accounting policies:
VALUATION AND ACCOUNTING FOR INVESTMENTS AND INVESTMENT INCOME--Investments are
valued at amortized cost which approximates market value. Investment
transactions are recorded on trade date. Realized gains and losses from
investment transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Premiums are amortized and
discounts are accreted as adjustments to interest income and the identified cost
of investments.
REPURCHASE AGREEMENTS--The 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 is
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.
13
<PAGE>
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 December 31, 1996, the Money Market Portfolio and the U.S. Government
Portfolio owed PaineWebber $3,474,269, and $398,878 respectively, for investment
advisory and administration fees.
14
<PAGE>
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.
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 December 31, 1996, the U.S. Government Portfolio owed
PaineWebber $74,393 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 six months
ended December 31, 1996, PaineWebber earned $843,473 and $75,197 from the Money
Market Portfolio and the U.S. Government Portfolio, respectively. At December
31, 1996, the Money Market Portfolio and the U.S. Government Portfolio owed
PaineWebber approximately $143,359 and $12,300, respectively, for such
shareholder service fees and reimbursement of out-of-pocket expenses.
OTHER LIABILITIES
At December 31, 1996, the Money Market Portfolio and the U.S. Government
Portfolio, had dividends payable aggregating $14,319,798 and $1,942,778,
respectively, and the Money Market Portfolio had payables for investments
purchased aggregating $109,350,467.
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.
15
<PAGE>
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 common stock relating
to the Money Market Portfolio and the U.S. Government Portfolio. Transactions in
capital shares, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
DECEMBER 31, 1996 JUNE 30, 1996
------------------------------------- -------------------------------------
MONEY MARKET U.S. GOVERNMENT MONEY MARKET U.S. GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Shares sold....................... $ 21,135,248,757 $ 2,764,927,316 $ 36,981,794,128 $ 5,529,576,191
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................ (20,993,275,490) (2,827,940,110) (36,593,662,079) (5,492,802,034)
Dividends reinvested.............. 187,038,748 26,762,620 326,875,646 48,736,225
------------------ ----------------- ------------------ -----------------
Net increase (decrease) in shares
outstanding..................... $ 329,012,015 $ (36,250,174) $ 2,124,829,044 $ 321,921,848
------------------ ----------------- ------------------ -----------------
------------------ ----------------- ------------------ -----------------
</TABLE>
16
<PAGE>
PaineWebber RMA MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEARS ENDED JUNE 30,
DECEMBER 31, 1996 ----------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------ ---------- ---------- ---------- ---------- ----------
Net investment income................... 0.025 0.051 0.049 0.030 0.029 0.046
Dividends from net investment income.... (0.025) (0.051) (0.049) (0.030) (0.029) (0.046)
------------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------ ---------- ---------- ---------- ---------- ----------
------------------ ---------- ---------- ---------- ---------- ----------
Total investment return(1).............. 2.50% 5.25% 5.00% 2.95% 2.98% 4.56%
------------------ ---------- ---------- ---------- ---------- ----------
------------------ ---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....... $ 7,851,903 $7,522,612 $5,398,146 $4,337,009 $4,031,398 $4,054,344
Expenses to average net assets.......... 0.57%* 0.60%(2) 0.59% 0.59% 0.59% 0.59%
Net investment income to average net
assets................................ 4.91%* 5.14%(2) 4.91% 2.98% 2.95% 4.57%
</TABLE>
- ------------
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment return
for a period of less than one year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.01%.
17
<PAGE>
PaineWebber RMA U.S. GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEARS ENDED JUNE 30,
DECEMBER 31, 1996 ------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------------ ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------ ---------- --------- --------- --------- ---------
Net investment income................. 0.024 0.049 0.046 0.027 0.028 0.044
Dividends from net investment income.. (0.024) (0.049) (0.046) (0.027) (0.028) (0.044)
------------------ ---------- --------- --------- --------- ---------
Net asset value, end of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------ ---------- --------- --------- --------- ---------
------------------ ---------- --------- --------- --------- ---------
Total investment return(1)............ 2.40% 5.04% 4.67% 2.74% 2.83% 4.36%
------------------ ---------- --------- --------- --------- ---------
------------------ ---------- --------- --------- --------- ---------
RATIOS/SUPPLEMENT DATA:
Net assets, end of period (000's)..... $ 1,101,282 $1,137,510 $ 815,781 $ 854,928 $ 880,834 $ 838,023
Expenses to average net assets........ 0.63%* 0.65%(2) 0.63% 0.62% 0.61% 0.62%
Net investment income to average net
assets.............................. 4.72%* 4.91%(2) 4.55% 2.75% 2.80% 4.37%
</TABLE>
- ------------
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment return
for a period of less than one year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.02%.
18
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
STATEMENT OF NET ASSETS December 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
ALABAMA--1.12%
$ 16,300 Mcintosh Industrial Development Board
Pollution Control Revenue Bonds
(Ciba Geigy)........................................ A 5.100% $ 16,300,000
6,000 St. Clair County Industrial Development Board
(National Cement Company Inc. Project).............. A 4.300 6,000,000
---------------
22,300,000
---------------
ALASKA--0.45%
3,900 Alaska Industrial Development & Export Authority
(Alaska Hotel Property Inc.)........................ A 4.200 3,900,000
5,000 Anchorage Alaska
Tax Anticipation Notes.............................. 12/17/97 4.000 5,021,731
---------------
8,921,731
---------------
ARIZONA--3.63%
15,000 Apache County Industrial Development Authority
(Tucson Electric Power Company Project Series B).... A 4.000 15,000,000
16,200 Apache County Industrial Development Authority
(Tucson Electric Power Springerville Project)....... A 4.000 to 4.100 16,200,000
6,600 Maricopa County Pollution Control
(Arizona Public Service Company).................... A 4.150 6,600,000
7,900 Phoenix Multi-Family Housing Authority
(Southwest Villages Project)........................ A 3.100 7,900,000
4,200 Phoenix Multi-Family Housing Authority
(Delaware Mar Terrace Apartments Project)........... A 4.150 4,200,000
22,715 Salt River Agricultural Improvement & Power Project
Tax-Exempt Commercial Paper......................... 01/24/97 to 03/28/97 3.400 to 3.650 22,715,000
---------------
72,615,000
---------------
CALIFORNIA--4.77%
6,000 California Community College Financing
Tax and Revenue Anticipation Bonds.................. 07/02/97 4.750 6,025,920
6,800 California State General Obligation
Tax-Exempt Commercial Paper......................... 03/19/97 3.450 6,800,000
9,100 California Higher Education Loan Authority
(Student Loans)..................................... A 3.900 9,100,000
2,000 California Higher Education Loan Authority
(Student Loans)
Adjustable Rate Bonds............................... 07/01/97 3.950 2,000,000
8,000 California Statewide Communities Development Authority
Tax and Revenue Anticipation Notes.................. 06/30/97 4.750 8,028,444
3,500 Contra Costa County
Tax and Revenue Anticipation Notes.................. 07/03/97 4.500 3,510,940
7,600 Grand Terrace Community Redevelopment Agency
(Multi-Family Housing).............................. A 4.150 7,600,000
12,000 Irvine Improvement Bond Act 1915 Assessment District.. A 3.900 12,000,000
2,000 Los Angeles County Transportation Authority Notes..... 02/27/97 4.000 2,000,627
7,100 Los Angeles Regional Airports Improvement Corporation
Lease Revenue....................................... A 4.950 7,100,000
6,500 Los Angeles Transportation Commission
Tax-Exempt Commercial Paper......................... 03/14/97 3.450 6,500,000
</TABLE>
19
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
CALIFORNIA--(CONCLUDED)
$ 3,500 Los Angeles County
Tax and Revenue Anticipation Notes.................. 06/30/97 4.500% $ 3,510,137
3,100 Los Angeles Unified School District
Tax and Revenue Anticipation Notes.................. 06/30/97 4.500 3,110,301
10,700 San Francisco Redevelopment Agency Multi-Family
(Bayside Village)................................... A 3.950 10,700,000
7,500 Southern California Metropolitan Water District
Tax-Exempt Commercial Paper......................... 03/14/97 3.400 7,500,000
---------------
95,486,369
---------------
COLORADO--1.17%
11,100 Colorado Health Facilities Authority
(Kaiser Permanente Series A)........................ A 4.150 11,100,000
10,000 Colorado Housing Finance Authority
Multi-Family Housing Revenue Bonds
(Grant Plaza Project)............................... A 4.125 10,000,000
2,400 Regional Transportation District Colorado
Special Passenger Fare Revenue...................... A 3.900 2,400,000
---------------
23,500,000
---------------
CONNECTICUT--0.60%
730 Connecticut State Series B............................ 08/15/97 4.750 733,945
200 Berlin Connecticut General Obligation Bonds........... 06/15/97 5.950 201,931
500 Cheshire Connecticut
Bond Anticipation Notes............................. 08/08/97 4.250 501,300
9,500 Connecticut Development Authority Pollution Control
Revenue
(Connecticut Light & Power Company Project)......... A 4.150 9,500,000
500 Groton City Connecticut
Bond Anticipation Notes............................. 07/10/97 4.000 501,101
300 Trumbull Connecticut General Obligation Bonds......... 05/01/97 6.600 302,835
---------------
11,741,112
---------------
DELAWARE--1.28%
25,600 Delaware Economic Development Authority
(Hospital Billing & Collection Service, Ltd.)....... A 4.050 25,600,000
---------------
FLORIDA--6.73%
10,160 Dade County Aviation Revenue.......................... A 4.300 10,160,000
32,425 Florida Local Government Finance Commission
Tax-Exempt Commercial Paper......................... 01/30/97 to 02/27/97 3.500 to 3.650 32,425,000
4,180 Indian Trace Community Development
(Basin 1 Water Management Series A)................. A 3.750 4,180,000
4,000 Jacksonville Electric Facilities Authority............ 02/12/97 3.550 4,000,000
8,100 Jacksonville Electric Facilities Authority
Tax-Exempt Commercial Paper......................... 03/03/97 to 04/08/97 3.500 8,100,000
29,100 Jacksonville Hospital Revenue
(University Medical Center Project)................. A 4.200 29,100,000
6,100 Orange County Health Facilities Authority
(Mayflower Retirement Center)....................... A 4.200 6,100,000
10,200 Orlando Waste Water Systems
Tax-Exempt Commercial Paper......................... 01/30/97 to 03/10/97 3.400 to 3.500 10,200,000
3,500 Putnam County Development Authority
Pollution Control Revenue
(Seminole Electric H-4)
Adjustable Rate Bonds............................... A 3.800 3,500,000
</TABLE>
20
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
FLORIDA--(CONCLUDED)
$ 21,740 Sunshine State Government Finance Commission
Tax-Exempt Commercial Paper......................... 03/21/97 to 04/10/97 3.400 to 3.450% $ 21,740,000
5,000 University of North Florida Foundation Incorporated... A 4.050 5,000,000
---------------
134,505,000
---------------
GEORGIA--3.05%
6,000 Burke County Development Authority Pollution Control
(Oglethorpe Power Corp.)............................ A 4.000 6,000,000
10,000 Cobb County Housing Authority Multifamily Housing
(Greenhouse Frey Apartment Project)................. A 3.900 10,000,000
1,400 Fulton County School District
(Pre-refunded with U.S. Government Securities to
05/01/97 @ 103)..................................... 05/01/97 7.050 1,443,680
8,000 Georgia Municipal Electric Authority
Power Revenue Series L
(Pre-refunded with U.S. Government Securities to
01/01/97 @ 102)..................................... 01/01/97 7.750 8,160,000
19,000 Georgia Municipal Electric Authority
Tax-Exempt Commercial Paper......................... 04/04/97 to 04/11/97 3.500 to 3.550 19,000,000
3,000 Georgia Municipal Gas Authority
(Transco Portfolio I Project B)
Tax-Exempt Commercial Paper......................... 05/14/97 3.500 3,000,000
13,400 Glynn Brunswick Memorial Hospital
Variable Anticipation Certificates
(Southeast Georgia Project)......................... A 3.900 13,400,000
---------------
61,003,680
---------------
IDAHO--1.03%
5,500 Idaho State
Tax Anticipation Notes.............................. 06/30/97 4.500 5,515,655
5,785 Idaho Health Facilities Authority
(St. Lukes Medical Center Project).................. A 5.250 5,785,000
9,200 Power County Pollution Control Revenue
(FMC Corporation Project)........................... A 5.100 9,200,000
---------------
20,500,655
---------------
DISTRICT OF COLUMBIA--0.33%
6,600 District Columbia Revenue
(Georgetown University Series C).................... A 3.900 6,600,000
---------------
ILLINOIS--10.11%
6,700 Chicago Park District
Tax and Revenue Anticipation Warrants............... 09/30/97 4.700 6,751,080
10,000 Chicago O'Hare International Airport Revenue.......... A 4.150 10,000,000
2,775 Du Page Water Commission Water Revenue
(Pre-refunded with U.S. Government Securities to
05/01/97 @ 102)..................................... 05/01/97 6.875 2,841,826
4,900 Illinois Development Finance Authority
(Bridgestone/ Firestone Tire Company)............... A 4.750 4,900,000
18,500 Illinois Development Finance Authority
(Illinois Power Company)
Tax-Exempt Commercial Paper......................... 02/07/97 to 03/19/97 3.400 to 3.500 18,500,000
16,200 Illinois Development Finance Authority
Pollution Control Revenue
(Commonwealth Edison)............................... A 4.100 16,200,000
4,000 Illinois Development Finance Authority Revenue
(Chicago Symphony Orchestra)........................ A 4.100 4,000,000
</TABLE>
21
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
ILLINOIS--(CONCLUDED)
$ 5,000 Illinois Educational Facilities Authority Revenue
(Field Museum of Natural History)................... 05/15/97 3.600% $ 5,000,000
1,000 Illinois Educational Facilities Authority Revenue
(Northwestern University)........................... A 4.250 1,000,000
10,000 Illinois Educational Facilities Authority Revenue
(Illinois College of Optometry)..................... A 4.500 10,000,000
4,995 Illinois Educational Facilities Authority Revenue
(Northwestern University)........................... A 4.200 4,995,000
6,000 Illinois Educational Facilities Authority Revenue
(Adjustment Shedd Aquarium Society B)............... 05/06/97 3.550 6,000,000
14,500 Illinois Health Facilities Authority Revenue
(Central Dupage Healthcorp)......................... A 5.250 14,500,000
22,670 Illinois Health Facilities Authority Revenue
(Central Health and Northwest Community)............ A 4.050 22,670,000
22,915 Illinois Health Facilities Authority Revenue
(Elmhurst Memorial Hospital)........................ A 5.300 22,915,000
22,000 Illinois Health Facilities Authority Revenue
(Evanston Hospital)
Tax-Exempt Commercial Paper......................... 02/28/97 to 10/15/97 3.750 to 3.850 22,000,000
5,400 Illinois Health Facilities Authority Revenue
(Methodist Medical Center).......................... A 4.100 5,400,000
7,000 Illinois Education Facilities Authority
(Northwestern University)........................... A 4.100 7,000,000
5,000 Illinois State Toll and Highway Authority............. A 4.100 5,000,000
10,500 Lisle Multi-Family Housing Revenue
(Ashley of Lisle Project)........................... A 3.900 10,500,000
2,000 Northwest Water Commission
Cook and Lake County Water Revenue
(Pre-refunded with U.S. Government Securities to
05/01/97 @ 102)..................................... 05/01/97 6.500 2,057,458
---------------
202,230,364
---------------
INDIANA--2.58%
19,500 City of Indianapolis Gas Utility System
(Citizens Gas/Coal Utility)
Tax-Exempt Commercial Paper......................... 03/10/97 to 03/27/97 3.400 to 3.450 19,500,000
8,180 Indiana Bond Bank
Advanced Funding Notes.............................. 01/09/97 4.250 8,181,720
1,000 Indianapolis Indiana Resource Recovery Revenue
(Refunding Ogden Martin Systems Incorporated
Project)............................................ 12/01/97 6.000 1,020,456
8,400 Indianapolis Public Improvement Board Bond Bank Series
B................................................... 01/09/97 to 07/10/97 4.125 to 4.250 8,415,491
8,000 Mount Vernon Pollution Control Revenue
(Southern Indiana Gas)
Adjustable Rate Bonds............................... 05/01/97 4.000 8,000,000
6,500 Petersburg Pollution Control Revenue
(Indianapolis Power and Light Company)
Tax-Exempt Commercial Paper......................... 03/12/97 3.450 6,500,000
---------------
51,617,667
---------------
IOWA--0.89%
17,800 Iowa Finance Authority
(Village Court Project)............................. A 4.000 17,800,000
---------------
</TABLE>
22
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
KENTUCKY--1.04%
$ 8,000 Jefferson County Pollution Control Revenue Bonds
(Louisville Gas & Electric Company)
Tax-Exempt Commercial Paper......................... 02/12/97 to 03/10/97 3.450 to 3.500% $ 8,000,000
1,000 Kentucky St Turnpike Authority Economic Development
Road Revenue Series A
(Pre-refunded with U.S. Government Securities to
07/01/97 @ 102)..................................... 07/01/97 8.250 1,040,923
3,335 Pendleton Multi-County Lease Revenue
(Kentucky Associates Leasing Program)
Tax-Exempt Commercial Paper......................... 02/07/97 3.550 3,335,000
8,400 Trimble County Pollution Control
(Louisville Gas & Electric Company)
Tax-Exempt Commercial Paper......................... 01/10/97 to 04/11/97 3.450 to 3.600 8,400,000
---------------
20,775,923
---------------
LOUISIANA--1.59%
5,400 Ascension Parish Pollution Control Revenue
(BASF Wyandotte Corporation)........................ A 5.100 5,400,000
9,700 Calcasieu Parish Industrial Development Board
Pollution Control Revenue
(Citgo Petrol Corp.)................................ A 4.100 9,700,000
1,715 Lake Charles Harbor And Terminal District Revenue
(Reynolds Metals Company)
Adjustable Rate Bons................................ 12/01/97 3.750 1,715,755
12,000 Louisiana Public Facilities Authority
Pollution Control Revenue
(Ciba Geigy)........................................ A 4.150 12,000,000
3,000 Plaquemines Port Harbor and Terminal District
Marine Terminal Facilities Revenue Electro
Coal Transfer Series A (Tampa Electric)............. 03/13/97 3.550 3,000,000
---------------
31,815,755
---------------
MAINE--0.38%
7,500 Baileyville Maine Pollution Control Revenue
(Georgia Pacific Corporation Project)............... A 4.125 7,500,000
---------------
MARYLAND--1.75%
9,000 Howard County Series B
Tax-Exempt Commercial Paper......................... 04/11/97 to 04/15/97 3.400 to 3.500 9,000,000
16,716 Maryland Health & Higher Education Facilities Revenue
Series C (Johns Hopkins)
Tax-Exempt Commercial Paper......................... 04/11/97 to 05/09/97 3.500 to 3.550 16,716,000
9,200 University of Maryland
Equipment Tender Notes.............................. A 4.050 9,200,000
---------------
34,916,000
---------------
MASSACHUSETTS--2.67%
3,750 Lowell Massachusetts Regional Transit Authority
Revenue Anticipation Notes.......................... 07/18/97 4.400 3,754,875
5,000 Massachusetts Convention Center Authority
(Refunding Hynes Convention Center)................. 09/01/97 5.700 5,061,335
5,400 Massachusetts Health & Education
(Boston University)
Tax-Exempt Commercial Paper......................... 02/13/97 3.700 5,400,000
</TABLE>
23
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
MASSACHUSETTS--(CONCLUDED)
$ 10,000 Massachusetts Health And Educational Facilities
Authority
(Capital Asset Program)............................. A 3.650% $ 10,000,000
6,700 Massachusetts Industrial Finance Agency Resources
Recovery Revenue
(Refunding Ogden Haverhill Project A)............... A 3.750 6,700,000
5,000 Massachusetts Municipal Wholesale Electric Company
Power Supply Systems Revenue........................ A 3.750 5,000,000
10,000 Massachusetts Water Resources Authority
Tax-Exempt Commercial Paper......................... 02/26/97 3.400 10,000,000
7,500 Montachusett Regional Transit Authority
Revenue Anticipation Notes.......................... 06/28/97 4.500 7,517,714
---------------
53,433,924
---------------
MICHIGAN--1.92%
16,930 Michigan Building Authority Revenue Series 1.......... 05/01/97 3.500 16,930,000
4,000 Michigan Housing Development Authority
(Shoal Creek)....................................... A 4.100 4,000,000
3,000 Michigan Municipal Bond Authority Revenue Series A.... 07/03/97 4.500 3,008,679
9,100 Michigan Strategic Fund
(Dow Chemical Company).............................. A 5.100 9,100,000
5,400 Northville Township Economic Development Corporation
Limited Obligation Revenue
(Various Thrifty Northville Incorporated Project)... A 4.125 5,400,000
---------------
38,438,679
---------------
MINNESOTA--0.63%
7,800 University Minnesota.................................. 01/30/97 3.550 7,800,000
4,860 University of Minnesota Board of Regents
Tax-Exempt Commercial Paper......................... 01/29/97 3.600 4,860,000
---------------
12,660,000
---------------
MISSISSIPI--1.29%
3,900 Claiborne County Pollution Control Revenue
(Southern Mississippi Electric)
Tax-Exempt Commercial Paper......................... 04/01/97 3.500 3,900,000
15,500 Harrison County Pollution Control Revenue
(DuPont)............................................ A 5.100 15,500,000
6,500 Perry County Pollution Control Revenue
(Leaf River Forest)................................. A 4.300 6,500,000
---------------
25,900,000
---------------
MISSOURI--1.51%
2,500 Columbia Special Obligation........................... A 4.100 2,500,000
1,200 Independence Missouri Water Utility Revenue
Tax-Exempt Commercial Paper......................... 02/03/97 3.500 1,200,000
5,000 Missouri Environmental Improvement & Energy Resource
Authority Pollution Control Revenue
(Union Electric) Adjustable Rate Bonds.............. 06/01/97 3.650 5,000,000
7,500 Missouri Health & Education Facilities Authority
(SSM Healthcare)
Tax-Exempt Commercial Paper......................... 03/07/97 3.550 7,500,000
</TABLE>
24
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
MISSOURI--(CONCLUDED)
$ 4,000 Missouri Health & Education Facilities Authority
(Mehlville School District Series H)................ 09/08/97 4.500% $ 4,015,836
10,000 University of Missouri
Project Notes....................................... 06/30/97 4.750 10,041,752
---------------
30,257,588
---------------
NEBRASKA--1.96%
5,000 Lincoln Electric Systems Revenue
Tax-Exempt Commercial Paper......................... 03/03/97 3.500 5,000,000
16,085 Nebraska Higher Education Loan Authority.............. A 4.150 16,085,000
18,200 Nebraska Public Power District Revenue
Tax-Exempt Commercial Paper......................... 02/11/97 to 03/18/97 3.450 to 3.500 18,200,000
---------------
39,285,000
---------------
NEVADA--1.39%
27,884 Clark County Airport Improvement Revenue.............. A 4.000 27,884,000
---------------
NEW HAMPSHIRE--0.23%
4,670 New Hampshire Higher Education Authority Revenue
(Dartmouth College) Adjustable Rate Bonds........... 06/01/97 3.800 4,670,000
---------------
NEW JERSEY--1.21%
6,200 New Jersey Tax
Revenue Anticipation Notes
Tax-Exempt Commercial Paper......................... 02/25/97 3.500 6,200,000
2,900 Mendham Township New Jersey
Bond Anticipation Notes............................. 10/07/97 4.500 2,915,582
9,300 Morris Township
Bond Anticipation Notes............................. 05/16/97 4.125 9,313,071
5,800 Wildwood Crest
Bond Anticipation Notes............................. 05/08/97 4.125 5,806,293
---------------
24,234,946
---------------
NEW MEXICO--1.79%
13,400 Albuquerque Airport Revenue........................... A 4.000 13,400,000
10,500 Albuquerque Gross Receipts
Lodges Tax Revenue Series A......................... A 4.000 to 4.100 10,500,000
12,000 University New Mexico University Revenues............. A 3.900 12,000,000
---------------
35,900,000
---------------
NEW YORK--4.14%
9,500 New York State
Tax-Exempt Commercial Paper......................... 02/21/97 3.550 9,500,000
2,000 New York State Energy Research And Development
Authority Pollution Control Revenue
(NYS Electric and Gas)
Adjustable Rate Bonds............................... 10/15/97 3.850 2,000,000
11,000 New York State Housing Finance Agency Revenue
(Normandie Court I Project)......................... A 4.000 11,000,000
15,000 New York State Power Authority........................ 04/07/97 3.550 15,000,000
1,000 Nassau County New York
Revenue Anticipation Notes Series A................. 03/05/97 3.750 1,000,668
</TABLE>
25
<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)
$ 3,000 Nassau County New York
Bond Anticipation Notes Series D.................... 08/15/97 4.500% $ 3,010,755
6,000 Nassau County New York
General Improvement Series V........................ 11/01/97 5.125 6,070,693
6,000 Nassau County New York
Tax Anticipation Notes Series C..................... 09/25/97 4.250 6,029,892
8,500 New York City
Revenue Anticipation Notes Series B................. 06/30/97 4.500 8,528,572
12,000 Oyster Bay New York
Bond Anticipation Notes............................. 10/03/97 4.250 12,042,402
8,500 Suffolk County New York
Tax Anticipation Notes RA Series II................. 09/11/97 4.500 8,532,887
---------------
82,715,869
---------------
NORTH CAROLINA--3.25%
15,350 Charlotte Airport Revenue............................. A 4.000 15,350,000
10,500 Charlotte Mecklenberg Hospital Authority
Health Care Systems Revenue Series D................ A 3.900 10,500,000
7,000 North Carolina Eastern Municipal Power
Tax-Exempt Commercial Paper......................... 03/03/97 3.500 7,000,000
15,100 North Carolina Education and Medicare
(Duke University)................................... A 3.950 15,100,000
6,000 North Carolina Educational Facility
(Duke University)................................... A 3.950 6,000,000
11,100 North Carolina Municipal Power Series A
Tax-Exempt Commercial Paper......................... 02/18/97 to 04/10/97 3.500 to 3.550 11,100,000
---------------
65,050,000
---------------
NORTH DAKOTA--1.76%
25,200 Grand Forks Health Care Facilities Revenue
(The United Hospital Group Project)................. A 5.250 25,200,000
10,000 Oliver County Pollution Control Revenue
(Square Butte Electric A)........................... A 3.900 10,000,000
---------------
35,200,000
---------------
OHIO--1.72%
5,800 Columbus Electric Systems Revenue..................... A 3.350 5,800,000
12,700 Columbus Sewer Revenue................................ A 4.000 12,700,000
10,000 Cuyahoga County Ohio Hospital Revenue
(Cleveland Clinic Foundation A)..................... A 3.900 10,000,000
6,000 Montgomery County Ohio Hospital Revenue
(Ohio Valley Hospital)
Tax-Exempt Commercial Paper......................... 03/25/97 3.450 6,000,000
---------------
34,500,000
---------------
OKLAHOMA--0.56%
7,500 Tulsa Industrial Authority Hospital Revenue
(Hillcrest Medical Center Project).................. A 4.150 7,500,000
3,795 Tulsa Parking Authority Revenue
(Williams Center)
Adjustable Rate Bond................................ 05/15/97 3.700 3,795,000
---------------
11,295,000
---------------
OREGON--0.91%
18,200 Oregon State General Obligation
(Veterans Welfare).................................. A 3.850 18,200,000
---------------
</TABLE>
26
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
PENNSYLVANIA--3.16%
$ 20,700 Alleghany County Pollution Control Revenue
(U.S. Steel)
Tax-Exempt Commercial Paper......................... 04/09/97 to 04/10/97 3.500 to 3.550% $ 20,700,000
5,000 Allegheny County Port Authority
Grant Anticipation Note Series A.................... 06/30/97 3.900 5,000,000
7,400 Bucks County Industrial Development Authority Revenue
(Edgcomb Metals Company Project).................... A 4.000 7,400,000
14,140 Northeastern Pennsylvania Hospital Authority Revenue
Tax-Exempt Commercial Paper......................... 02/14/97 to 04/14/97 3.450 to 3.500 14,140,000
12,200 Northumberland County Industrial Development Authority
Pollution Control Revenue........................... A 3.700 12,200,000
3,800 Philadelphia Gas Works
Tax-Exempt Commercial Paper......................... 05/19/97 3.500 3,800,000
---------------
63,240,000
---------------
PUERTO RICO--2.73%
3,500 Puerto Rico Commonwealth
(Government Development Bank)
Tax-Exempt Commercial Paper......................... 02/06/97 3.550 3,500,000
30,000 Puerto Rico Commonwealth
Tax and Revenue Anticipation Notes.................. 07/30/97 4.000 30,096,600
20,900 Puerto Rico Commonwealth Development Bank
Tax-Exempt Commercial Paper......................... 02/11/97 to 03/20/97 3.400 to 3.600 20,900,000
---------------
54,496,600
---------------
RHODE ISLAND--0.60%
11,900 State of Rhode Island and Providence Plantation Series
1996
Tax-Exempt Commercial Paper......................... 01/30/97 to 02/24/97 3.450 to 3.500 11,900,000
---------------
SOUTH CAROLINA--2.42%
6,200 Greenville County Industrial Revenue
(Edgcomb Metals Company Project).................... A 4.000 6,200,000
3,600 South Carolina Jobs Economic Development Authority
Hospital Facilities Revenue
(Baptist Healthcare Systems)........................ A 3.900 3,600,000
33,053 South Carolina Public Service Authority
Tax-Exempt Commercial Paper......................... 01/27/97 to 04/15/97 3.450 to 3.650 33,053,000
5,490 South Carolina Public Service Authority
Refunding Series A.................................. 01/01/98 5.400 5,585,914
---------------
48,438,914
---------------
TENNESSEE--2.56%
3,000 Chattanooga Industrial Development Board
(Seabord Project)................................... A 3.800 3,000,000
18,000 Metropolitan Nashville & Davidson Health & Education
(Vanderbilt University)
Tax-Exempt Commercial Paper......................... 01/15/97 to 01/28/97 3.500 to 3.600 18,000,000
</TABLE>
27
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
TENNESSEE--(CONCLUDED)
$ 8,600 Metropolitan Nashville & Davidson Industrial
(Timberlake)........................................ A 4.000% $ 8,600,000
4,000 Metropolitan Nashville Airport Authority.............. A 4.000 4,000,000
6,640 Nashville Health
(Baptist Hospital)
Tax-Exempt Commercial Paper......................... 02/25/97 3.500 6,640,000
1,285 Shelby County Tennessee
Public Improvement Series A
(Pre-refunded with U.S. Government Securities to
08/01/97 @ 101.75).................................. 08/01/97 6.500 1,328,047
9,550 Tennessee Local Development Authority Revenue
Bond Anticipation Notes Series A.................... 05/29/97 4.000 9,563,557
---------------
51,131,604
---------------
TEXAS--15.82%
34,650 Texas State
Tax and Revenue Anticipation Notes.................. 08/29/97 4.750 34,843,203
7,590 Bexar County Health Facilities Development
(Army Retirement Foundation)........................ A 4.000 7,590,000
2,250 Brownsville Utilities
Tax-Exempt Commercial Paper......................... 04/09/97 3.450 2,250,000
14,000 City of Austin Combined Utilities System
Tax-Exempt Commercial Paper......................... 05/12/97 to 05/13/97 3.450 14,000,000
31,200 City of Houston Water & Sewer Authority 3.500 to
Tax-Exempt Commercial Paper......................... 01/22/97 to 03/11/97 3.700......... 31,200,000
4,000 City of Houston Water & Sewer Authority
Tax-Exempt Commercial Paper
(Pre-refunded with U.S. Government Securities to
12/01/97 @ 102)..................................... 12/01/97 7.400 4,198,404
37,000 Dallas Area Rapid Transportation Authority Revenue 01/27/97 to
Tax-Exempt Commercial Paper......................... 03/26/97............ 3.400 to 3.600 37,000,000
2,000 Dallas Waterworks & Sewer System Revenue
(Pre-refunded with U.S. Government Securities to
04/01/97 @ 101.5)................................... 04/01/97 6.800 2,046,039
2,000 Garland Independent School District................... 02/15/97 6.200 2,006,073
12,800 Georgetown Higher Education Finance Corp.
(Southwestern University)........................... A 4.000 12,800,000
13,800 Guadalupe Blanco River Authority
(Central Texas Power)............................... A 5.100 13,800,000
6,300 Gulf Coast Pollution Control Revenue
(Refunding Exxon Project)
Tax-Exempt Commercial Paper......................... 02/20/97 3.550 6,300,000
7,700 Harris County Health Facilities
(Texas Children's Hospital)......................... A 4.050 7,700,000
8,000 Harris County Health Facilities
(YMCA)
Tax-Exempt Commercial Paper......................... 03/24/97 3.550 8,000,000
10,700 Harris County Texas
Tax Anticipation Notes.............................. 02/28/97 4.500 10,712,171
18,000 Harris County Toll Roads.............................. A 4.050 18,000,000
5,000 Houston Texas General Obligation
Tax-Exempt Commercial Paper......................... 02/21/97 3.550 5,000,000
3,000 Katy Independent School District...................... 02/15/97 4.400 3,003,938
4,500 Lower Colorado River Authority........................ A 3.900 4,500,000
3,500 North Central Texas Health Series 1991 A
(Methodist Hosptial)
Tax-Exempt Commercial Paper......................... 04/15/97 3.500 3,500,000
</TABLE>
28
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
TEXAS--(CONCLUDED)
$ 11,700 Port of Corpus Christi Authority
(Koch Industries)
Tax-Exempt Commercial Paper......................... 02/12/97 to 04/08/97 3.450 to 3.550% $ 11,700,000
5,000 San Antonio Texas Water Systems
Tax-Exempt Commercial Paper......................... 02/07/97 3.500 5,000,000
15,000 Texas A&M University
Tax-Exempt Commercial Paper......................... 02/13/97 to 03/21/97 3.150 to 3.500 15,000,000
8,000 Texas Municipal Power Agency
Tax-Exempt Commercial Paper......................... 02/21/97 3.550 8,000,000
15,600 Texas Public Finance Authority
Tax-Exempt Commercial Paper......................... 02/27/97 3.450 15,600,000
2,200 Texas Public Finance Authority Series B
Tax-Exempt Commercial Paper......................... 01/28/97 3.650 2,200,000
21,845 University of Texas
(Permanent University Fund)......................... 01/10/97 to 04/08/97 3.400 to 3.650 21,845,000
8,550 University of Texas Board of Regents
Tax-Exempt Commercial Paper......................... 01/31/97 to 02/28/97 3.500 8,550,000
---------------
316,344,828
---------------
UTAH--1.36%
4,700 Carbon County Pollution Control Revenue
(Pacificorp)........................................ A 5.100 4,700,000
2,400 Davis County Utah School District
Tax Anticipation Notes.............................. 06/30/97 4.500 2,406,819
14,000 Intermountain Power Agency
Series 85E
Tax-Exempt Commercial Paper......................... 02/10/97 to 02/13/97 3.600 14,000,000
4,000 Intermountain Power Agency
Adjustable Rate Bonds............................... 06/16/97 3.930 4,000,000
2,100 Salt Lake City Health Facilities
(Pooled Hospital)
Tax-Exempt Commercial Paper......................... 02/10/97 3.450 2,100,000
---------------
27,206,819
---------------
VERMONT--1.20%
19,000 State of Vermont Series I
Tax-Exempt Commercial Paper......................... 01/30/97 to 03/25/97 3.400 to 3.550 19,000,000
5,000 Vermont Educational & Health Bldgs Agency
(Norwich University Project Series A)............... A 4.250 5,000,000
---------------
24,000,000
---------------
WASHINGTON--2.81%
7,100 Port of Vancouver Refunding Revenue
(United Grain Corporation of Oregon)................ A 4.250 7,100,000
3,900 Seattle Washington Municipal Light And Power Revenue
Tax-Exempt Commercial Paper......................... 01/15/97 3.550 3,900,000
14,800 Snohomish Public Utility District..................... A 4.000 14,800,000
20,355 Washington Health Care Facilities Authority Revenue
(Fred Hutchinson Cancer Center)..................... A 5.250 20,355,000
10,000 Washington Public Power Supply Systems Nuclear........ A 4.100 10,000,000
---------------
56,155,000
---------------
</TABLE>
29
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- ----------- -------------------- -------------- ---------------
<C> <S> <C> <C> <C>
WISCONSIN--0.78%
$ 6,100 City of Oak Creek Pollution Control Revenue
(Wisconsin Electric Power Company).................. A 4.150% $ 6,100,000
9,500 Southeast Wisconsin Professional Baseball Park
District Sales Tax Revenue.......................... 01/15/97 4.100 9,500,000
---------------
15,600,000
---------------
WYOMING--0.45%
4,000 Carbon County Pollution Control Revenue
(Amoco)
Adjustable Rate Bonds............................... 05/01/97 3.600 4,000,000
1,000 Converse County Pollution Control Revenue
(Pacificorp)
Tax-Exempt Commercial Paper......................... 02/03/97 3.500 1,000,000
4,000 Uinta County Pollution Control Revenue
(Amoco)
Adjustable Rate Bonds............................... 12/01/97 3.900 4,010,681
---------------
9,010,681
---------------
TOTAL INVESTMENTS (cost--$2,066,578,708 which approximates cost for
federal income tax purposes)--103.33%........................... 2,066,578,708
Liabilities in excess of other assets--(3.33)%.................... (66,568,076)
---------------
NET ASSETS--(applicable to 2,001,293,775 shares outstanding at
$1.00 per share)--100.00%........................................ $2,000,010,632
---------------
---------------
</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
December 31, 1996 and reset periodically.
Weighted average maturity--57 days
See accompanying notes to financial statements
30
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................................. $36,758,162
-----------
EXPENSES:
Investment advisory and administration............................................... 4,704,173
Distribution fees.................................................................... 843,727
Transfer agency and service fees..................................................... 340,495
Custody and accounting............................................................... 115,865
Insurance............................................................................ 31,849
Federal and state registration....................................................... 101,084
Reports and notices to shareholders.................................................. 117,394
Legal and audit...................................................................... 103,055
Directors' fees...................................................................... 6,175
Other expenses....................................................................... 88,009
-----------
6,451,826
-----------
NET INVESTMENT INCOME.................................................................... 30,306,336
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS.......................................... 45,817
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................................... $30,352,153
-----------
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
DECEMBER 31, 1996 ENDED JUNE 30,
(UNAUDITED) 1996
-------------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................................................... $ 30,306,336 $ 60,455,403
Net realized gains from investment transactions......................... 45,817 7,684
-------------------- ---------------
Net increase in net assets resulting from operations.................... 30,352,153 60,463,087
-------------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income................................................... (30,306,336) (60,678,153)
-------------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS..... (13,483,270) 451,622,833
-------------------- ---------------
Net increase (decrease) in net assets..................................... (13,437,453) 451,407,767
NET ASSETS:
Beginning of period..................................................... 2,013,448,085 1,562,040,318
-------------------- ---------------
End of period........................................................... $ 2,000,010,632 $ 2,013,448,085
-------------------- ---------------
-------------------- ---------------
</TABLE>
See accompanying notes to financial statements
31
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 AND INVESTMENT INCOME--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 investments.
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.
ACQUISITIONS
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.
Effective November 26, 1996, the Fund acquired all the net assets of PaineWebber
RMA Connecticut Municipal Money Fund ("RMA Connecticut") pursuant to a plan of
reorganization approved by RMA Connecticut shareholders on November 25, 1996.
The acquisition was accomplished by a tax-free exchange of 19,670,455 shares of
the Fund for 19,670,455 shares of RMA Connecticut outstanding on November 26,
32
<PAGE>
1996. RMA Connecticut's net assets at that date, valued at $19,671,259 were
combined with those of the Fund.
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:
<TABLE>
<CAPTION>
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- ------------------------------------------------------------------------------------- -----------
<S> <C>
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
</TABLE>
At December 31, 1996, the Fund owed PaineWebber $745,456 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.
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 December 31, 1996, the Fund
owed PaineWebber $132,780 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 for the six months
ended December 31, 1996, PaineWebber earned $125,862. At December 31, 1996, the
Fund owed PaineWebber $20,471 for such shareholder service fees and
reimbursement of out-of-pocket expenses.
33
<PAGE>
OTHER LIABILITIES
At December 31, 1996, the amounts payable for investments purchased and
dividends payable aggregated $44,509,638 and $2,365,069, 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 acquisition of PW/KP Tax Exempt Money Fund 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 SIX
MONTHS ENDED
DECEMBER 31, FOR THE YEAR
1996 ENDED JUNE 30,
(UNAUDITED) 1996
-------------- ---------------
Shares sold................................................ $5,432,969,415 $10,951,139,261
<S> <C> <C>
Share issued in connection with the acquisition of PW RMA
Connecticut.............................................. 19,670,455 --
Shares issued in connection with the acquisition of PW/KP
Tax Exempt Money Fund.................................... -- 395,167,695
Shares repurchased......................................... (5,495,180,088) (10,953,673,355)
Dividends reinvested....................................... 29,056,948 58,989,232
-------------- ---------------
Net increase in shares outstanding......................... $ (13,483,270) $ 451,622,833
-------------- ---------------
-------------- ---------------
</TABLE>
34
<PAGE>
PaineWebber RMA TAX-FREE FUND, INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of Common Stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEARS ENDED JUNE 30,
DECEMBER 31, 1996 ---------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------ ----------- ----------- ----------- ----------- -----------
Net investment income....... 0.014 0.030 0.030 0.019 0.021 0.033
Dividends from net
investment income......... (0.014) (0.030) (0.030) (0.019) (0.021) (0.033)
------------------ ----------- ----------- ----------- ----------- -----------
Net asset value, end of
period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------ ----------- ----------- ----------- ----------- -----------
------------------ ----------- ----------- ----------- ----------- -----------
Total investment return(1).. 1.46% 3.09% 3.03% 1.88% 2.07% 3.30%
------------------ ----------- ----------- ----------- ----------- -----------
------------------ ----------- ----------- ----------- ----------- -----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)................... $ 2,000,011 $ 2,013,448 $ 1,562,040 $ 1,427,724 $ 1,248,702 $ 1,183,719
Expenses to average net
assets.................... 0.61%* 0.61%(2) 0.63% 0.64% 0.65% 0.62%
Net investment income to
average net assets........ 2.87%* 3.02%(2) 3.00% 1.90% 2.06% 3.30%
</TABLE>
- ----------
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment return
information for a period less than one year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.01%.
35
<PAGE>
DIRECTORS
E. Garrett Bewkes, Jr.
CHAIRMAN
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
John R. Torell III
PRINCIPAL OFFICERS
Margo N. Alexander
PRESIDENT
Victoria E. Schonfeld
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Julian F. Sluyters
VICE PRESIDENT AND TREASURER
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
SUB-ADVISER AND SUB-ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
THE FINANCIAL INFORMATION HEREIN IS TAKEN FROM THE RECORDS OF THE FUNDS WITHOUT
EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION THEREON.
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF A
FUND UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
PAINEWEBBER
C1997 PaineWebber Incorporated
Member SIPC
[LOGO]
RMA MONEY MARKET PORTFOLIO
RMA U.S. GOVERNMENT PORTFOLIO
RMA TAX-FREE FUND, INC.
DECEMBER 31, 1996
SEMIANNUAL REPORT
