<PAGE>
PAINEWEBBER MUTUAL FUNDS
PAINEWEBBER OFFERS A FAMILY OF 22 MUTUAL FUNDS WHICH ENCOMPASS A DIVERSIFIED
RANGE OF INVESTMENT GOALS. INVESTORS MAY EXCHANGE THEIR FUND SHARES WITH OTHER
FUNDS WITHIN THE FAMILY.
INCOME FUNDS
o GLOBAL INCOME FUND
o HIGH INCOME FUND
o INVESTMENT GRADE INCOME FUND
o LOW DURATION U.S. GOVERNMENT INCOME FUND
o STRATEGIC INCOME FUND
o U.S. GOVERNMENT INCOME FUND
TAX-FREE INCOME FUNDS
o CALIFORNIA TAX-FREE INCOME FUND
o MUNICIPAL HIGH INCOME FUND
o NATIONAL TAX-FREE INCOME FUND
o NEW YORK TAX-FREE INCOME FUND
GROWTH FUNDS
o EMERGING MARKETS EQUITY FUND
o SMALL CAP GROWTH FUND
o CAPITAL APPRECIATION FUND
o GLOBAL EQUITY FUND
o GROWTH FUND
o FINANCIAL SERVICES GROWTH FUND
o SMALL CAP VALUE FUND
GROWTH AND INCOME FUNDS
o TACTICAL ALLOCATION FUND
o BALANCED FUND
o GROWTH AND INCOME FUND
o UTILITY INCOME FUND
- ------------------
(COPYRIGHT)1996 PAINEWEBBER INCORPORATED
[LOGO] PRINTED ON
RECYCLED PAPER
PAINEWEBBER
MONEY
MARKET
/ / FUND
ANNUAL REPORT
FEBRUARY 29, 1996
<PAGE>
- --------------------------------------------------------------------------------
April 16, 1996
Dear Shareholder,
During the year ended February 29, 1996, the Federal Reserve Board signaled
its assessment of low inflationary pressure by bringing the Federal Funds rate
down to 5.25% via three rate cuts in July and December, 1995 and January, 1996.
Although the pace of economic growth in 1995 was lackluster, falling
interest rates and strong corporate profits created an exceptional investment
environment. Stocks reached record-breaking highs and, in November, the Dow
posted its fourth-best monthly advance since World War II. After a dismal 1994,
bonds rallied throughout 1995, providing investors with their third-best year
since the 1920s.
As we entered 1996, the fear that the economy could turn recessionary led
to a general consensus that the Federal Reserve Board would act again to cut
short-term interest rates. However, during the first quarter of 1996, sentiment
changed quickly in response to government reports showing higher-than-expected
growth, causing a sharp drop in bond prices and volatility in the stock market.
Moving forward, our view is that the economy will continue to expand, but
slowly. We forecast that inflation will remain in check, creating an environment
for stable to lower interest rates. Most important, although corporate earnings
will probably decline from 1995 levels, we believe that corporate profits will
not decrease, but will face a slowing rate of increase.
PORTFOLIO REVIEW
PaineWebber Money Market Fund's current yields for Class A, B and C shares
for the seven-day period ended February 29, 1996 were 3.95%, 3.44% and 3.34%,
respectively. The Fund maintained a weighted average maturity of 54 days as of
February 29, 1996.
Going forward, the Fund expects to maintain a neutral weighted average
maturity as short-term rates find stability. The Federal Reserve Board appears
to have engineered a soft landing for the economy. We expect that the
combination of weak economic activity and continued low inflation will lead to
further easing by the Federal Reserve Board during 1996. However, if inflation
becomes problematic, further increases in short-term interest rates could be
possible. Investment decisions in the Fund will continue to be dominated by
credit quality and liquidity. Although we are interested in maintaining higher
yields, we will not do so by sacrificing the Fund's emphasis on security,
quality and liquidity.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
We value you as a shareholder and as a client, and thank you for your
continued support. We welcome any questions or comments you may have.
Sincerely,
/s/ Margo Alexander
MARGO ALEXANDER DENNIS L. MCCAULEY
President, Managing Director and Chief
Mitchell Hutchins Asset Management Inc. Investment Officer--Fixed
Income, Mitchell Hutchins
Asset Management Inc.
/s/ Susan P. Messina
SUSAN P. MESSINA PETER YUEN
Senior Vice President, Portfolio Manager,
Mitchell Hutchins Asset Management Inc. PaineWebber Money Market Fund
- --------------------------------------------------------------------------------
2
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
Statement of Net Assets
February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- --------------------- --------------- -----------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--6.24%
$2,000 Federal National Mortgage Association............... 10/07/96 5.680% $ 2,001,762
1,000 Federal National Mortgage Association............... 03/05/96 5.170* 1,000,000
500 Student Loan Marketing Association.................. 07/01/96 6.080* 500,000
-----------
Total U.S. Government Agency Obligations (cost - $3,501,762).... 3,501,762
-----------
BANK NOTES--3.92%
DOMESTIC--3.92%
1,000 Morgan Guaranty Trust Co............................ 01/15/97 5.250 1,000,782
1,200 NationsBank of TX N.A............................... 05/21/96 5.610 1,200,000
-----------
Total Bank Notes (cost - $2,200,782)............................ 2,200,782
-----------
CERTIFICATES OF DEPOSIT--14.27%
DOMESTIC--3.57%
1,000 Bank One Milwaukee N.A.............................. 03/06/96 5.230 999,998
1,000 Bank of America, Illinois........................... 03/14/96 5.700 1,000,000
-----------
1,999,998
-----------
YANKEE--10.70%
1,000 Dai-Ichi Kangyo Bank Ltd............................ 03/15/96 5.310 1,000,004
1,000 National Westminster Bank PLC....................... 03/05/96 5.700 1,000,046
2,000 Societe Generale.................................... 03/04/96 5.510 2,000,000
2,000 Sumitomo Bank Ltd................................... 03/20/96 5.330 1,999,998
-----------
6,000,048
-----------
Total Certificates of Deposit (cost - $8,000,046)............... 8,000,046
-----------
COMMERCIAL [email protected]%
ASSET-BACKED--9.62%
1,900 Eiger Capital Corp.................................. 03/01/96 5.250 1,900,000
2,500 New Center Asset Trust.............................. 03/01/96 5.480 2,500,000
1,000 Preferred Receivables Funding Corp.................. 03/19/96 5.220 997,390
-----------
5,397,390
-----------
AGRICULTURE--1.78%
1,000 Cargill Inc......................................... 03/01/96 5.200 1,000,000
-----------
</TABLE>
3
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- --------------------- --------------- -----------
COMMERCIAL PAPER@--(CONTINUED)
<S> <C> <C> <C>
BANKING--10.53%
$2,500 ABN-AMRO N.A. Finance Inc........................... 10/21/96 5.000% $ 2,418,750
2,500 Canadian Imperial Holdings Inc...................... 03/11/96 5.440 2,496,222
1,000 MPS U.S. Commercial Paper Corp...................... 05/08/96 5.100 990,367
-----------
5,905,339
-----------
BROKER/DEALER--11.24%
2,000 Goldman Sachs Group L.P............................. 04/04/96 5.460 1,989,687
850 Merrill Lynch & Co. Inc............................. 10/28/96 4.950 821,833
1,000 Morgan Stanley Group Inc............................ 04/29/96 5.320 991,281
2,500 Nomura Holding America Inc.......................... 03/01/96 5.450 2,500,000
-----------
6,302,801
-----------
BUSINESS SERVICES--1.78%
1,000 PHH Corp............................................ 03/21/96 5.220 997,100
-----------
CHEMICALS--3.34%
1,875 Du Pont (E.I.) de Nemours & Co...................... 03/06/96 to 03/29/96 5.200 to 5.300 1,870,311
-----------
CONGLOMERATE--1.70%
960 BTR Dunlop Finance Inc.............................. 04/01/96 5.520 955,437
-----------
DRUGS, HEALTH CARE--2.61%
1,470 Bayer Corp.......................................... 03/20/96 5.190 1,465,973
-----------
ELECTRONICS--5.33%
2,000 Siemens Corp........................................ 03/26/96 5.180 1,992,805
1,000 Vermont American Corp............................... 03/22/96 5.200 996,967
-----------
2,989,772
-----------
ENERGY--1.78%
1,000 Exxon Imperial U.S. Inc............................. 03/07/96 5.210 999,132
-----------
FINANCE--DIVERSIFIED--6.23%
1,000 CIT Group Holdings Inc.............................. 04/11/96 5.170 994,112
2,500 UBS Finance (DE) Inc................................ 03/01/96 5.450 2,500,000
-----------
3,494,112
-----------
FOOD & BEVERAGE--6.39%
850 Heinz (H.J.) Co..................................... 04/19/96 5.160 844,030
747 PepsiCo Inc......................................... 03/01/96 5.210 747,000
2,000 Sara Lee Corp....................................... 03/27/96 5.360 1,992,258
-----------
3,583,288
-----------
</TABLE>
4
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- --------------------- --------------- -----------
COMMERCIAL PAPER@--(CONCLUDED)
<S> <C> <C> <C>
INSURANCE--4.46%
$2,500 Prudential Funding Corp............................. 03/05/96 5.220% $ 2,498,550
-----------
METALS & MINING--2.49%
1,400 RTZ America Inc..................................... 03/25/96 5.200 1,395,147
-----------
UTILITY--TELEPHONE--3.55%
2,000 AT&T Corp........................................... 04/10/96 5.485 1,987,811
-----------
Total Commercial Paper (cost - $40,842,163)..................... 40,842,163
-----------
SHORT-TERM CORPORATE OBLIGATION--3.83%
BANKING--3.83%
2,100 Norwest Corp. (cost - $2,147,656)................... 01/30/97 7.875 2,147,656
-----------
REPURCHASE AGREEMENT--5.18%
2,907 Repurchase Agreement dated 2/29/96, with Daiwa
Securities America, Inc., collateralized by
$2,875,000 U.S. Treasury Notes, 6.3750%
due 01/15/00; proceeds: $2,907,438
(cost - $2,907,000).............................. 03/01/96 5.420 2,907,000
-----------
Total Investments (which approximates cost for federal income
tax purposes) - 106.27%....................................... 59,599,409
Liabilities in excess of other assets - (6.27%)................. (3,518,269)
-----------
Net Assets (applicable to 23,735,399; 26,606,945; and 5,757,577
shares of Class A, Class B, and Class C, respectively, each
equivalent to $1.00 per share) - 100.00%...................... $56,081,140
-----------
-----------
</TABLE>
- ------------
@ Interest rates shown are discount rates at date of purchase.
* Variable rate security--maturity date reflects earlier of reset date or
maturity date. The interest rates shown are the current rates as of February
29, 1996 and reset periodically.
Weighted average maturity (unaudited)--54 days
See accompanying notes to financial statements
5
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................. $ 3,738,777
-----------
EXPENSES:
Investment advisory and administration................... 312,991
Service fees--Class A.................................... 44,610
Service and distribution fees--Class B................... 255,457
Service and distribution fees--Class C................... 80,194
Legal and audit.......................................... 76,066
State registration fees.................................. 72,529
Transfer agency and service fees......................... 64,900
Custody and accounting................................... 53,099
Reports and notices to shareholders...................... 34,304
Directors' fees.......................................... 10,000
Other expenses........................................... 29,285
-----------
1,033,435
-----------
NET INVESTMENT INCOME....................................... 2,705,342
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS............. 2,889
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 2,708,231
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
February February
29, 1996 28, 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.......................... $2,705,342 $3,802,358
Net realized gains (losses) from investment
transactions................................. 2,889 (6,398)
----------- -----------
Net increase in net assets resulting from
operations................................... 2,708,231 3,795,960
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Class A................. (832,449) (1,257,492)
Net investment income--Class B................. (1,417,388) (1,465,996)
Net investment income--Class C................. (455,505) (1,078,870)
----------- -----------
(2,705,342) (3,802,358)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
STOCK TRANSACTIONS................................ (20,224,020) 42,855,410
----------- -----------
Net increase (decrease) in net assets............. (20,221,131) 42,849,012
NET ASSETS:
Beginning of year.............................. 76,302,271 33,453,259
----------- -----------
End of year.................................... $56,081,140 $76,302,271
============ ===========
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Master Series, Inc. ('Master Series') was incorporated in Maryland
on October 29, 1985 and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as an open-end,
diversified series investment company which currently offers two series of
shares: PaineWebber Money Market Fund ('Fund') and PaineWebber Balanced Fund.
The financial statements for PaineWebber Balanced Fund are not included herein.
The Fund offers Class A, Class B and Class C (formerly Class D) shares.
Effective November 10, 1995 the Fund began using industry standardized
nomenclature and Class D shares were renamed Class C shares. Each class
represents interest in the same assets of the Fund and the classes are identical
except for differences in their sales charge structure, ongoing service and
distribution charges and certain transfer agency expenses. In addition, Class B
shares automatically convert to Class A shares approximately six years after
initial issuance. All classes of shares have equal voting privileges, except
that each class has exclusive voting rights with respect to its distribution
plan. All classes of shares may be obtained only through an exchange of shares
of the corresponding class of other PaineWebber mutual funds.
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--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.
Repurchase Agreements--The Fund's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral may be subject
to legal proceedings. The Fund may participate in joint repurchase agreement
transactions with other funds managed by Mitchell Hutchins Asset Management Inc.
('Mitchell Hutchins'), a wholly owned subsidiary of PaineWebber and investment
adviser and administrator of the Fund.
Net Investment Income and Investment Transactions--Income and expenses
(excluding class-specific expenses) are allocated proportionately to each class
of shares based upon the relative net asset value of dividend-eligible shares of
each class at the beginning of the day (after adjusting for current capital
share activity of the respective classes). Realized and unrealized gains and
losses are allocated proportionately to each class of shares based upon the
relative value of shares outstanding
7
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
at the beginning of the day (after adjusting for current capital share activity
of the respective classes). Class-specific expenses are charged directly to the
applicable class of shares.
Dividends and Distributions--Dividends and distributions to shareholders are
recorded on the ex-dividend date. 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. Net capital gains, if any, will be distributed at least
annually, but the Fund may make more frequent distributions of such gains, if
necessary, to avoid income or excise taxes.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Fund to meet their
obligations may be affected by economic developments, including those particular
to a specific industry or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Board of Directors of Master Series has approved an Investment Advisory and
Administration Contract ('Advisory Contract') with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance with the Advisory Contract, the Fund pays Mitchell Hutchins
an investment advisory and administration fee, which is accrued daily and paid
monthly, at the annual rate of 0.50% of the Fund's average daily net assets. At
February 29, 1996, the Fund owed Mitchell Hutchins $20,342 for investment
advisory and administration fees.
In compliance with applicable state securities laws, Mitchell Hutchins will
reimburse the Fund if and to the extent that the aggregate operating expenses in
any fiscal year, exclusive of taxes, interest, brokerage fees, distribution fees
and extraordinary expenses, exceed limitations imposed by various state
regulations. Currently, the most restrictive limitation applicable to the Fund
is 2.5% of the first $30 million of average daily net assets, 2.0% of the next
$70 million and 1.5% of any excess over $100 million. For the year ended
February 29, 1996, no reimbursements were required pursuant to the above
limitation.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of the Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under separate
plans of service/distribution pertaining to the Class A, Class B and Class C
shares, the Fund pays Mitchell Hutchins monthly service fees at the annual rate
of 0.25% of the average daily net assets of each class of shares and monthly
distribution fees at an annual rate of 0.50% of the average daily net assets of
Class B and Class C shares. At February 29, 1996, the Fund owed Mitchell
Hutchins $23,259 in service and distribution fees.
Mitchell Hutchins also receives the proceeds of the contingent deferred sales
charges paid upon certain redemptions of Class A, Class B and Class C shares.
Mitchell Hutchins has informed the
8
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fund that for the year ended February 29, 1996, it earned $285,185 in contingent
deferred sales charges.
TRANSFER AGENCY SERVICE FEES
The Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account for certain services not provided by the Fund's transfer
agent. For these services for the year ended February 29, 1996, PaineWebber
earned $17,432 in service fees. At February 29, 1996, the Fund owed PaineWebber
$1,230 for such fees.
OTHER LIABILITIES
At February 29, 1996, the amounts payable for Fund shares repurchased and
dividends payable aggregated $3,563,725 and $113,029, respectively.
CAPITAL STOCK
There are 10 billion shares of $0.001 par value common stock authorized for
Master Series, of which 1 billion were allocated to the Fund. Transactions in
shares of common stock, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------- ------------------------
FOR THE YEARS ENDED FOR THE YEARS ENDED
------------------------- ------------------------
FEBRUARY FEBRUARY 28, FEBRUARY FEBRUARY
29, 1996 1995 29, 1996 28, 1995
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Shares sold............. 68,390,061 117,676,115 47,337,869 116,941,605
Shares repurchased...... (67,443,035) (113,830,133) (60,008,482) (86,598,306)
Shares converted from
Class B to Class A.... 1,031,503 2,107,427 (1,031,503) (2,107,427)
Dividends
reinvested............ 713,442 886,345 1,169,924 1,069,086
----------- ------------ ----------- -----------
Net increase (decrease)
in shares
outstanding........... 2,691,971 6,839,754 (12,532,192) 29,304,958
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
<CAPTION>
CLASS C
-------------------------
FOR THE YEARS ENDED
-------------------------
FEBRUARY FEBRUARY
29, 1996 28, 1995
---------- ------------
<S> <C> <C>
Shares sold............. 57,291,344 159,907,120
Shares repurchased...... (68,064,126) (154,003,721)
Shares converted from
Class B to Class A.... -- --
Dividends
reinvested............ 388,983 807,299
---------- ------------
Net increase (decrease)
in shares
outstanding........... (10,383,799) 6,710,698
---------- ------------
---------- ------------
</TABLE>
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 February 29, 1996, the Fund had capital loss carryforwards of $18,780
available as a reduction, to the extent provided in the regulations, of future
net realized gains, which will expire between February 28, 1999 and February 28,
2003. To the extent that such losses are used to offset future capital gains, it
is probable that the gains so offset will not be distributed.
9
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
FOR THE YEARS ENDED
--------------------------------------------- FOR THE PERIOD
JULY 1, 1991+
FEBRUARY 29, FEBRUARY 28, TO
------------ ----------------------------- FEBRUARY 29,
1996 1995 1994 1993 1992
------------ ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Net investment income................... 0.046 0.037 0.016 0.022 0.026
Dividends from net investment income.... (0.046) (0.037) (0.016) (0.022) (0.026)
------- ------- ------- ------- -------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return(1).............. 4.69% 3.95% 1.64% 2.25% 2.47%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets, end of period (000's)..... $23,735 $21,042 $14,204 $11,716 $ 3,806
Ratio of expenses to average net
assets.............................. 1.31% 1.06% 1.72% 1.74% 1.90%*
Ratio of net investment income to
average net assets.................. 4.68% 3.85% 1.70% 2.18% 3.61%*
</TABLE>
- ------------------
<TABLE>
<S> <C>
* Annualized
** Formerly Class D
+ Commencement of issuance of shares
(1) Total return is calculated assuming a $1,000 investment in Fund shares on the first day of each period
reported, reinvestment of all dividends and capital gain distributions at net asset value on the payable dates,
and a sale at net asset value on the last day of each period reported. The figures do not include sales
charges; results for each class would be lower if sales charges were included. Total return information for
periods less than one year is not annualized.
</TABLE>
10
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------
FOR THE YEARS ENDED
-------------------------------------------------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
------------ ----------------------------- ------------
1996 1995 1994 1993 1992
-------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- -------
Net investment income................... 0.041 0.032 0.011 0.016 0.039
Dividends from net investment income.... (0.041) (0.032) (0.011) (0.016) (0.039)
-------- ------- ------- ------- -------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Total investment return(1).............. 4.18% 3.41% 1.12% 1.73% 4.16%
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets, end of period (000's)..... $ 26,592 $39,123 $ 9,819 $15,280 $ 29,341
Ratio of expenses to average net
assets.............................. 1.79% 1.55% 2.25% 2.28% 2.06%
Ratio of net investment income to
average net assets.................. 4.17% 3.46% 1.16% 1.69% 4.07%
<CAPTION>
CLASS C**
----------------------------------------------------
FOR THE YEARS ENDED
--------------------------------- FOR THE PERIOD
JULY 14, 1992+
FEBRUARY 29, FEBRUARY 28, TO
------------ ----------------- FEBRUARY 28,
1996 1995 1994 1993
----- ------ ------ -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- ------- ------ -------
Net investment income................... 0.041 0.033 0.012 0.009
Dividends from net investment income.... 0.041) (0.033) (0.012) (0.009)
-------- ------- ------ -------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------ -------
-------- ------- ------ -------
Total investment return(1).............. 4.14% 3.44% 1.19% 0.81%
-------- ------- ------ -------
-------- ------- ------ -------
Ratios/supplemental data:
Net assets, end of period (000's)..... $ 5,754 $16,137 $9,430 $ 2,220
Ratio of expenses to average net
assets.............................. 1.79% 1.55% 2.14% 2.14%*
Ratio of net investment income to
average net assets.................. 4.27% 3.35% 1.36% 1.67%*
</TABLE>
11
<PAGE>
PAINEWEBBER MONEY MARKET FUND
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
PaineWebber Money Market Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
PaineWebber Money Market Fund (the 'Fund', one of the portfolios constituting
PaineWebber Master Series, Inc.) at February 29, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as 'financial statements') are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at February 29, 1996 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 15, 1996
12
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PAINEWEBBER MONEY MARKET FUND
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Tax Information
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We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (February
29, 1996) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all distributions
paid during the fiscal year were derived from net investment income and are
taxable as ordinary income. No portion of these distributions qualifies for the
corporate dividend received deduction available to corporate shareholders.
Distributions received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information
reporting.
Because the Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar 1996. The second notification, which will
reflect the amount to be used by calendar year taxpayers on their federal income
tax returns, will be made in conjunction with Form 1099 DIV and will be mailed
in January 1997. Shareholders are advised to consult their own tax advisers with
respect to the tax consequences of their investment in the Fund.
13
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DIRECTORS
E. Garrett Bewkes, Jr.
Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
John R. Torell III
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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
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INVESTMENT ADVISER,
ADMINISTRATOR AND
DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
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This report is not to be used in
connection with the offering of shares
of the Fund unless accompanied or
preceded by an effective prospectus.
A prospectus containing more complete
information for any of the Funds
listed on the back cover can be
obtained from a PaineWebber investment
executive or correspondent firm. Read
the prospectus carefully before
investing.
