<PAGE>
- -------------------------------------------------------------------------
PAINEWEBBER/
KIDDER, PEABODY
GOVERNMENT MONEY
FUND, INC.
SEMI-ANNUAL REPORT
September 30, 1995
<PAGE>
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets
September 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ---------- --------------------- -------------- ------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--91.83%
<C> <S> <C> <C> <C>
$ 89,000 U.S. Treasury Bills......................... 11/02/95 to 03/28/96 5.170 to 5.450@% $ 88,038,872
30,000 U.S. Treasury Notes......................... 01/15/96 to 08/15/96 4.000 to 9.250 30,123,181
22,000 Federal Home Loan Bank...................... 10/11/95 to 10/25/95 5.580 to 5.640@ 21,944,000
47,000 Federal Home Loan Mortgage.................. 10/03/95 to 10/24/95 5.550 to 5.660@ 46,909,389
30,000 Federal National Mortgage Association....... 10/10/95 to 10/12/95 5.530 to 5.660 29,951,586
5,000 Tennessee Valley Authority.................. 10/23/95 5.630 4,982,797
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(cost--$221,949,825) .................................. 221,949,825
------------
<CAPTION>
REPURCHASE AGREEMENTS--8.15%
<C> <S> <C> <C> <C>
8,707 Repurchase agreement dated 9/29/95, with
Citicorp Securities, Inc., collateralized
by $7,860,000 U.S. Treasury Bonds, 7.500%
due 11/15/24; proceeds: $8,711,644........ 10/02/95 6.400 8,707,000
11,000 Repurchase agreement dated 9/28/95, with
Morgan Stanley Group, Inc., collateralized
by $10,100,000 U.S. Treasury Bonds, 7.500%
due 11/15/16; proceeds: $11,007,150....... 10/02/95 5.850 11,000,000
------------
TOTAL REPURCHASE AGREEMENTS (cost--$19,707,000).......... 19,707,000
------------
TOTAL INVESTMENTS (cost--$241,656,825, which approximates
cost for federal income tax purposes)--99.98%.......... 241,656,825
Other assets in excess of liabilities --0.02%............ 40,961
------------
NET ASSETS (applicable to 241,667,402 shares of
beneficial
interest at $1.00 per share)--100.00%..................
$241,697,786
------------
------------
</TABLE>
- ------------------
@Interest rates shown represent yield to maturity for discounted securities.
Weighted average maturity--56 days
See accompanying notes to financial statements
<PAGE>
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended September 30, 1995 (unaudited)
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<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $7,659,097
----------
EXPENSES:
Investment advisory and administration...................... 656,771
Distribution fees........................................... 157,626
Transfer agency fees........................................ 56,170
Custody and accounting...................................... 28,513
Federal and state registration.............................. 24,957
Legal and audit............................................. 20,598
Reports and notices to shareholders......................... 12,641
Directors' fees............................................. 11,880
Other expenses.............................................. 6,483
----------
975,639
----------
NET INVESTMENT INCOME....................................... 6,683,458
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS............. 31,336
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $6,714,794
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE
SEPTEMBER YEAR ENDED
30, 1995 MARCH 31,
(UNAUDITED) 1995
---------- ----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income....................................... $6,683,458 $12,325,212
Net realized gains (losses) from investment transactions.... 31,336 (759,452)
---------- ----------
Net increase in net assets resulting from operations........ 6,714,794 11,565,760
---------- ----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income....................................... (6,683,458) (12,325,212)
---------- ----------
NET DECREASE IN NET ASSETS FROM CAPITAL STOCK
TRANSACTIONS.............................................. (20,602,549) (93,867,754)
---------- ----------
CONTRIBUTION TO CAPITAL FROM PREDECESSOR ADVISER............ -- 758,500
---------- ----------
Net decrease in net assets.................................. (20,571,213) (93,868,706)
NET ASSETS:
Beginning of period......................................... 262,268,999 356,137,705
---------- ----------
End of period............................................... $241,697,786 $262,268,999
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements--(unaudited)
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber/Kidder, Peabody Government Money Fund, Inc. (the 'Fund') was
organized under the laws of Maryland on February 2, 1983 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.
Valuation and Accounting for Investments--Investments are valued at amortized
cost which approximates market value. Investment transactions are recorded on
the trade date. Realized gains and losses from investment transactions are
calculated using the identified cost method. Interest income is recorded on an
accrual basis. Premiums are amortized and discounts are accreted as adjustments
to interest income and the identified cost of investments.
The ability of the issuers of the debt securities held by the Fund to meet their
obligations may be affected by economic developments, including those particular
to a specific industry or region.
Repurchase Agreement--The Fund's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Fund has the right to liquidate the
collateral an apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral may be subject
to legal proceedings.
Federal Tax Status--The Fund intends to distribute substantially all of its
taxable income and to comply with the other requirements of the Internal Revenue
Code applicable to regulated investment companies. Accordingly, no provision for
federal income taxes is required. In addition, by distributing during each
calendar year substantially all of its net investment income, capital gains and
certain other amounts, if any, the Fund intends not to be subject to a federal
excise tax. At March 31, 1995, the Fund had a capital loss carryforward of $952
which will expire in the year 2003.
Dividends and Distributions to Shareholders--Dividends and distributions to
shareholders are recorded on the ex-dividend date. Dividends from net investment
income and distributions from realized gains from investment transactions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These '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 income tax classification. Net capital
gains, if any, will be distributed at least annually, but
3
<PAGE>
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
the Fund may make more frequent distributions of such gains, if necessary, to
maintain its net asset value per share at $1.00 or to avoid income or excise
taxes.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's investment adviser and administrator receives compensation from the
Fund for its services. Fees paid by the Fund for investment advisory and
administration services are accrued daily and paid monthly at the annual rate of
0.50% of the Fund's average daily net assets.
At a special meeting of shareholders that took place on April 13, 1995,
shareholders approved the appointment of PaineWebber Incorporated
('PaineWebber') as investment adviser and administrator of the Fund and Mitchell
Hutchins Asset Management Inc. ('Mitchell Hutchins') as the Fund's sub-adviser
and sub-administrator. The Fund pays the same fee for investment advisory and
administration services to PaineWebber as previously paid to Kidder Peabody
Asset Management, Inc. ('KPAM'), as described in the Fund's Prospectus.
PaineWebber (not the Fund) pays Mitchell Hutchins a fee for sub-advisory and
sub-administration services at the annual rate of 20% of the fee received by
PaineWebber from the Fund. PaineWebber and Mitchell Hutchins continue to manage
the Fund in accordance with the Fund's investment objective, policies and
restrictions as stated in the Prospectus. At September 30, 1995, the Fund owed
PaineWebber $102,658 in investment advisory and administration fees.
Investment advisory functions for the Fund were previously transferred from KPAM
to Mitchell Hutchins on an interim basis as a result of an asset purchase
transaction by and among Kidder, Peabody Group Inc., its parent, General
Electric Company, and Paine Webber Group Inc. That period commenced on January
30, 1995 and ended April 13, 1995.
In compliance with applicable state securities laws, PaineWebber, the Fund's
investment adviser, will reimburse the Fund, if and to the extent that the
aggregate operating expenses in any fiscal year, exclusive of taxes, interest,
brokerage fees, distribution fees and extraordinary expenses, exceed limitations
imposed by various state regulations. Currently, the most restrictive limitation
is 2.5% on the first $30 million of average daily net assets, 2.0% of the next
$70 million and 1.5% of any excess over $100 million. For the six months ended
September 30, 1995, no reimbursements were required pursuant to the above
limitation.
DISTRIBUTION PLAN
Effective January 30, 1995, PaineWebber serves as the exclusive distributor of
the Fund's shares. For its services PaineWebber receives from the Fund a
distribution fee accrued daily and paid monthly at the annual rate of 0.12% of
the Fund's average daily net assets. At September 30, 1995, $24,638 was payable
to PaineWebber for these services.
4
<PAGE>
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements--(concluded)
- --------------------------------------------------------------------------------
OTHER LIABILITIES
At September 30, 1995, the amount payable for dividends was $318,960.
CAPITAL STOCK
There are 5 billion shares of $0.001 par value common stock authorized.
Transactions in shares of common stock, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE
SEPTEMBER 30, YEAR ENDED
1995 MARCH 31, 1995
-------------- --------------
<S> <C> <C>
Shares sold................................... 479,004,997 1,127,097,804
Shares repurchased............................ (506,241,447 ) (1,232,605,834)
Dividends reinvested.......................... 6,633,901 11,640,276
-------------- --------------
Net decrease in shares outstanding............ (20,602,549 ) (93,867,754 )
-------------- --------------
-------------- --------------
</TABLE>
CAPITAL CONTRIBUTION AND AFFILIATED TRANSACTIONS
Kidder Peabody Asset Management, Inc. ('KPAM') purchased certain of the Fund's
variable rate securities on July 6, 1994 for an aggregate purchase price of
$15,573,977. The purchases were made at prices equal to the securities'
amortized cost plus accrued and unpaid interest. Since the purchases by KPAM
were made at prices above the securities' then current fair values, the Fund
recorded a capital contribution from KPAM in the amount of $758,500 or $0.002
per share
PROPOSED REORGANIZATION
The Board of Directors of the Fund have approved a Plan of Reorganization and
Termination (the 'Reorganization') which was submitted to and approved by the
Fund's shareholders, at a special meeting held on November 10, 1995. The
Reorganization occurred on November 20, 1995, when all of the Fund's assets were
acquired and its liabilities were assumed by PaineWebber RMA U.S. Government
Portfolio ('RMA U.S. Government Portfolio'), a series of PaineWebber RMA Money
Fund, Inc., in a tax-free reorganization. As a result of the Reorganization, the
two funds' assets were combined and each of the Fund's shareholders received
shares of RMA U.S. Government Portfolio having an aggregate value equal to the
value of the shareholder's holdings in the Fund.
5
<PAGE>
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD IS
PRESENTED BELOW:
<TABLE>
<CAPTION>
FOR THE
SIX
MONTHS
ENDED
SEPTEMBER FOR THE YEAR ENDED MARCH 31,
30, 1995 ------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<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........................ 0.03 0.04 0.03 0.03 0.05 0.07
Dividends from net investment income......... (0.03) (0.04) (0.03) (0.03) (0.05) (0.07)
-------- -------- -------- -------- -------- --------
Net asset value, end of period............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total investment return (1).................. 2.60% 4.23% 2.54% 2.90% 4.78% 7.20%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000's)............ $241,698 $262,269 $356,138 $361,278 $511,065 $638,167
Expenses to average net assets............... 0.74%* 0.72% 0.71% 0.71% 0.69% 0.69%
Net investment income to average net
assets...................................... 5.07%* 4.07% 2.51% 2.84% 4.69% 6.88%
</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 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 returns for periods less than
one year have not been annualized.
6
<PAGE>
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
A special meeting of shareholders of PaineWebber/Kidder, Peabody Government
Money Fund, Inc. ('Fund') was held on April 13, 1995. At the meeting David J.
Beaubien, William W. Hewitt, Jr., Thomas R. Jordan, Frank P.L. Minard and Carl
W. Schafer were elected as directors to serve without limit in time, subject to
resignation, retirement or removal. The selection of Deloitte & Touche LLP as
the Fund's independent accountants was ratified.
The votes were as follows:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED WITHHOLD
FOR AUTHORITY
---------- ----------
<S> <C> <C> <C>
David J. Beaubien.................. 151,078,261 5,650,160
William W. Hewitt, Jr.............. 151,078,261 5,650,160
Thomas R. Jordan................... 151,078,261 5,650,160
Frank P.L. Minard.................. 151,078,261 5,650,160
Carl W. Schafer.................... 151,078,261 5,650,160
</TABLE>
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED VOTED WITHHOLD
FOR AGAINST AUTHORITY
---------- ---------- ----------
<S> <C> <C> <C>
Ratification of the selection of
Deloitte & Touche LLP............ 149,668,229 1,783,023 5,277,169
</TABLE>
On July 20, 1995, the Board of Directors appointed Ernst & Young, LLP as the
Fund's independent auditors.
In addition the following agreements were approved for the Fund:
1) An interim investment advisory agreement between the Fund and Mitchell
Hutchins Asset Management Inc. ('Mitchell Hutchins') containing substantially
the same terms, conditions and fees as the previous investment advisory
agreement with Kidder Peabody Asset Management, Inc. ('KPAM').
The votes were as follows:
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED VOTED WITHHOLD
FOR AGAINST AUTHORITY
---------- ---------- ----------
<S> <C> <C> <C>
148,412,365 2,443,251 5,872,806
</TABLE>
7
<PAGE>
PAINEWEBBER/KIDDER, PEABODY GOVERNMENT MONEY FUND, INC.
- --------------------------------------------------------------------------------
Shareholder Information--(concluded)
- --------------------------------------------------------------------------------
2) A new investment advisory and administration agreement between the Fund and
PaineWebber Incorporated ('PaineWebber') containing the same fees and
substantively similar material terms and conditions as the previous investment
advisory agreement with KPAM to commence on the termination of the interim
agreement.
The votes were as follows:
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED VOTED WITHHOLD
FOR AGAINST AUTHORITY
---------- ---------- ----------
<S> <C> <C> <C>
146,732,863 3,783,839 6,211,720
</TABLE>
3) A new sub-advisory and sub-administration agreement between PaineWebber and
Mitchell Hutchins to commence on the termination of the interim agreement for
the Fund.
The votes were as follows:
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED VOTED WITHHOLD
FOR AGAINST AUTHORITY
---------- ---------- ----------
<S> <C> <C> <C>
147,562,466 2,579,319 6,586,636
</TABLE>
Broker non-votes and abstentions are included within the 'Shares Withhold
Authority' totals.
8
<PAGE>
- ------------------------------------------------------
DIRECTORS
David J. Beaubien
William W. Hewitt, Jr.
Thomas R. Jordan
Frank P.L. Minard
Carl W. Schafer
- ------------------------------------------------------
OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Julian F. Sluyters
Vice President and Treasurer
Dennis L. McCauley
Vice President
Susan P. Messina
Vice President
- ------------------------------------------------------
INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
- ------------------------------------------------------
SUB-ADVISER AND
SUB-ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
- ------------------------------------------------------
This report is not to be used in connection with the
offering of shares of the Fund unless accompanied or
preceded by an effective prospectus.
The financial information included herein is taken from the records of the Fund
without examination by independent accountants who do not express an opinion
thereon.
(Copyright) 1995 PaineWebber Incorporated
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