April 16, 1999
Dear Shareholder,
We are pleased to present you with the annual report for the PaineWebber
Money Market Fund (the "Fund") for the fiscal year ended February 28, 1999.
MARKET REVIEW
- --------------------------------------------------------------------------------
Money market mutual fund assets increased during the Fund's fiscal year as
investors emphasized safety of principal in response to volatility in the
financial markets. The Federal Reserve cut the Federal Funds rate by 0.25% in
September, October and November of 1998, lowering the rate from 5.50% to 4.75%.
At the same time, European central banks were cutting rates in preparation for
the January 1, 1999 debut of the euro currency.
Lower interest rates helped to calm the global financial markets, which had
become unsettled after Russia's default in August. Money market yields were
lower across the short-term yield curve. Because inflation remained low,
however, money market yields stayed relatively strong on an inflation-adjusted
basis and versus overseas short-term rates.
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
We remained positive on the fixed income markets over the fiscal year ended
February 28, 1999, expecting interest rates to hold steady or fall slightly. As
always, the Fund's focus was on liquidity and credit quality. The Fund's current
yields for the seven-day period ended February 28, 1999 were 3.91% for Class A
shares, 3.39% for Class B shares and 3.41% for Class C shares. The Fund's
weighted-average maturity was 33 days, and net assets totaled $92.0 million as
of February 28, 1999.
ANNUAL REPORT
PAINEWEBBER
MONEY MARKET FUND
SECTOR ALLOCATION*
[The following table represents a pie chart in the printed piece.]
U.S. Government & Agency Obligations 46.8%
Commercial Paper 34.3%
Other Short-Term Corporate Obligations 8.2%
Certificates of Deposit 4.1%
Bank Notes 3.3%
Repurchase Agreements 3.3%
* Weightings represent percentages of portfolio assets as of February 28, 1999.
The Fund's portfolio is actively managed and its composition will vary over
time.
1
<PAGE>
ANNUAL REPORT
================================================================================
PAINEWEBBER
MONEY MARKET FUND
PROFILE
GOAL:
Principal stability and
current income
PORTFOLIO MANAGER:
Susan P. Ryan,
Mitchell Hutchins
Asset Management Inc.
TOTAL NET ASSETS:
$92.0 MILLION AS OF
FEBRUARY 28, 1999
DIVIDEND PAYMENTS:
Monthly
================================================================================
OUTLOOK
- --------------------------------------------------------------------------------
We expect the U.S. economy to grow more slowly in 1999, with inflation
remaining low and no recession on the immediate horizon. The Federal Reserve is
likely to maintain a steady monetary policy. We believe the fixed income markets
will remain volatile in 1999. As always, we intend to keep the Fund invested in
high credit quality investments.
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. For a QUARTERLY REVIEW on
another fund in the PaineWebber Family of Funds,1 please contact your Financial
Advisor. Sincerely,
/s/Margo Alexander
- ------------------
MARGO ALEXANDER
Chairman and Chief Executive Officer
Mitchell Hutchins Asset Management Inc.
/s/Dennis L. McCauley /s/Susan P. Ryan
- --------------------- ----------------
DENNIS L. MCCAULEY SUSAN P. RYAN
Managing Director and Senior Vice President
Chief Investment Officer -- Mitchell Hutchins Asset Management Inc.
Fixed Income
Mitchell Hutchins Asset Management Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended February 28, 1999, and reflects our views
at the time of its writing . Of course, these views may change in response to
changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
- ----------
1 Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
2
<PAGE>
PAINEWEBBER MONEY MARKET FUND
STATEMENT OF NET ASSETS FEBRUARY 28, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- -----------
<S> <C> <C> <C>
U.S. Government and Agency Obligations--46.98%
$ 2,000 Federal Home Loan Bank 01/27/00 5.000%@ $ 2,000,000
1,000 Federal Home Loan Bank 03/26/99 5.081* 999,969
23,811 Federal Home Loan Bank 03/01/99 4.680@ 23,811,000
10,441 Federal Home Loan Mortgage Corporation 03/01/99 4.700@ 10,441,000
1,000 Federal National Mortgage Association 05/25/99 4.826* 1,000,000
5,010 U.S. Treasury Bills 04/22/99 4.670@ 4,976,205
-----------
Total U.S. Government and Agency Obligations
(cost--$43,228,174) 43,228,174
-----------
Bank Notes--3.26%
Domestic--2.18%
2,000 Huntington National Bank 05/03/99 6.460 2,002,525
-----------
Yankee--1.08%
1,000 Westpac Banking Corp. 04/23/99 5.730 999,917
-----------
Total Bank Notes (cost--$3,002,442) 3,002,442
-----------
Certificates Of Deposit--4.13%
Domestic--1.96%
1,800 Bankers Trust Co. 05/12/99 to 05/14/99 4.820 to 4.880* 1,799,773
-----------
Yankee--2.17%
1,000 Societe Generale 04/16/99 5.760 999,999
1,000 Svenska Handelsbanken 04/30/99 5.820 1,000,023
-----------
2,000,022
-----------
Total Certificates of Deposit (cost--$3,799,795) 3,799,795
-----------
Commercial [email protected]%
Asset-Backed-Banking--2.17%
2,000 Atlantis One Funding Corp. 03/05/99 4.850 1,998,922
-----------
Asset-Backed-Finance--2.16%
2,000 CC USA Inc. 04/23/99 4.810 1,985,837
-----------
Auto & Truck--5.41%
3,000 Ford Motor Credit Corp. 04/15/99 4.810 2,981,963
2,000 PACCAR Financial Corp. 03/03/99 4.820 1,999,464
-----------
4,981,427
-----------
Banking--1.08%
1,000 J.P. Morgan & Company Inc. 03/22/99 5.200 996,967
-----------
Business Services--2.17%
2,000 Block Financial Corp. 03/19/99 4.830 1,995,170
-----------
Drugs & Healthcare--2.17%
2,000 Bayer Corp. 03/30/99 4.820 1,992,234
-----------
Electronics--2.17%
2,000 Emerson Electric Co. 03/01/99 4.800 2,000,000
-----------
</TABLE>
3
<PAGE>
PAINEWEBBER MONEY MARKET FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- -----------
<S> <C> <C> <C>
Commercial Paper@--(concluded)
Finance - Independent--2.17%
$ 2,000 National Rural Utilities Cooperative
Finance Corp. 03/19/99 5.010% $ 1,994,990
-----------
Food & Beverage & Tobacco--9.30%
2,000 Allied Domecq Corp. N A 03/18/99 4.830 1,995,438
2,600 Campbell Soup Co. 04/27/99 4.820 2,580,158
2,000 Diageo Capital PLC 05/20/99 4.810 1,978,622
2,000 Sara Lee Corp. 03/01/99 4.800 2,000,000
-----------
8,554,218
-----------
Insurance--2.17%
2,000 American General Corp. 03/12/99 4.820 1,997,055
-----------
Telecommunications--3.45%
2,000 Bellsouth Capital Funding Corp. 03/25/99 4.800 1,993,600
1,180 SBC Communications Inc. 03/19/99 4.820 1,177,156
-----------
3,170,756
-----------
Total Commercial Paper (cost--$31,667,576) 31,667,576
-----------
Short-Term Corporate Obligations--8.27%
Banking--2.17%
2,000 Norwest Corp. 08/31/99 5.550* 1,999,711
-----------
Broker-Dealer--4.13%
500 Bear Stearns Companies Inc. 04/05/99 5.800 500,000
1,300 Credit Suisse First Boston 04/05/99 5.226* 1,300,000
2,000 Morgan Stanley Dean Witter &Co. 03/01/99 5.625 2,000,000
-----------
3,800,000
-----------
Finance-Diversified--1.97%
1,800 Associates Corp. N A 09/17/99 6.680 1,811,243
-----------
Total Short-Term Corporate Obligations (cost--$7,610,954) 7,610,954
-----------
Repurchase Agreements--3.30%
3,000 Repurchase Agreement dated 2/26/99 with
Dresdner Kleinwort Benson NA LLC,
collateralized by $2,989,000 U.S.
Treasury Notes, 6.500% due 4/30/99
(value-$3,061,035); proceeds: $3,001,183 03/01/99 4.730 3,000,000
35 Repurchase Agreement dated 2/26/99 with
State Street Bank & Trust Company,
collateralized by $33,988 U.S.
Treasury Notes, 6.50% due 5/31/02
(value-$35,738); proceeds: $35,012 03/01/99 4.000 35,000
-----------
Total Repurchase Agreements (cost--$3,035,000) 3,035,000
-----------
Total Investments (amortized cost--$92,343,941 which
approximates cost for federal income tax purposes)--100.36% 92,343,941
Liabilities in excess of other assets --(0.36)% (332,672)
-----------
Net Assets (applicable to 60,259,735, 18,789,322 and 12,962,155 shares of Class
A, Class B, and Class C, respectively,
each equivalent to $1.00 per share)--100.00% $92,011,269
===========
</TABLE>
- ----------
* Variable rate securities-maturity date reflects earlier of reset date or
maturity date. The interest rates shown are the current rates as of February
28, 1999, and reset periodically.
@ Interest rates shown are discount rates at date of purchase.
Weighted average maturity -- 33 days
See accompanying notes to financial statements
4
<PAGE>
PAINEWEBBER MONEY MARKET FUND
STATEMENT OF OPERATIONS
FOR THE YEAR
ENDED
FEBRUARY 28, 1999
-----------------
Investment income:
Interest ....................................................... $3,441,251
----------
Expenses:
Investment advisory and administration ......................... 314,378
Service fees--Class A .......................................... 88,231
Service and distribution fees--Class B ......................... 134,452
Service and distribution fees--Class C ......................... 72,413
Legal and audit ................................................ 76,800
State registration fees ........................................ 72,639
Reports and notices to shareholders ............................ 49,573
Transfer agency and related service fees ....................... 44,566
Directors' fees ................................................ 10,500
Custody and accounting ......................................... 7,071
Other expenses ................................................. 16,312
----------
886,935
----------
NET INVESTMENT INCOME .......................................... 2,554,316
NET REALIZED GAIN FROM INVESTMENT TRANSACTIONS ................. 11,401
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $2,565,717
==========
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED
FEBRUARY 28,
-----------------------------
1999 1998
------------ ------------
From operations:
Net investment income ........................ $ 2,554,316 $ 1,609,088
Net realized gain (loss) from
investment transactions .................... 11,401 (327)
------------ ------------
Net increase in net assets resulting
from operations ............................ 2,565,717 1,608,761
------------ ------------
Dividends to shareholders from:
Net investment income--Class A ............... (1,514,274) (663,134)
Net investment income--Class B ............... (672,891) (713,255)
Net investment income--Class C ............... (367,151) (232,699)
------------ ------------
(2,554,316) (1,609,088)
------------ ------------
Net increase (decrease) in net assets from
capital share transactions ................. 58,993,707 (2,693,832)
------------ ------------
Net increase (decrease) in net assets ........ 59,005,108 (2,694,159)
Net assets:
Beginning of year ............................ 33,006,161 35,700,320
------------ ------------
End of year .................................. $ 92,011,269 $ 33,006,161
============ ============
See accompanying notes to financial statements
5
<PAGE>
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 currently offers Class A, Class B and Class C shares. Each class
represents interests 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 and related
services 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 service and/or 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"), an asset management
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 gains and losses are
allocated proportionately to each class of shares based upon the relative value
of shares outstanding 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.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 28, 1999, the Fund owed Mitchell Hutchins $25,737 for investment
advisory and administration fees.
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 and/or 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 28, 1999 the Fund owed
Mitchell Hutchins $24,242 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 Fund that for the year ended February 28,
1999, it earned $231,332 in sales charges.
TRANSFER AGENCY SERVICE FEES
PaineWebber provides transfer agency related services to the Fund pursuant to
a delegation of authority from PFPC, Inc., the Fund's transfer agent, and is
compensated for these services by PFPC, Inc., not the Fund. For the year ended
February 28, 1999, PaineWebber received from PFPC, Inc., not the Fund,
approximately 52% of the total transfer agency and related service fees
collected by PFPC, Inc. from the Fund.
OTHER LIABILITIES
At February 28, 1999, the amounts payable for Fund shares repurchased and
dividends payable aggregated $642,797 and $44,244, respectively.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 CLASS C
--------------------------- --------------------------- ----------------------------
FOR THE YEARS ENDED FOR THE YEARS ENDED FOR THE YEARS ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
--------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
------------ ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ........................ 724,078,370 83,455,097 48,405,259 38,617,856 185,696,212 168,632,470
Shares repurchased ................. (683,232,436) (87,554,268) (39,655,873) (38,164,045) (178,311,578) (168,978,832)
Shares converted from Class B
to Class A ....................... 5,296,686 4,719,104 (5,296,686) (4,719,104) -- --
Dividends reinvested ............... 1,135,151 555,101 611,122 592,135 267,480 150,654
------------ ----------- ----------- ----------- ------------ ------------
Net increase (decrease) in
shares outstanding ............... 47,277,771 1,175,034 4,063,822 (3,673,158) 7,652,114 (195,708)
============ =========== =========== =========== ============ ============
</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 federal excise tax.
8
<PAGE>
PAINEWEBBER MONEY MARKET FUND
This page intentionally left blank.
9
<PAGE>
PAINEWEBBER MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR IS
PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
FOR THE YEARS ENDED
---------------------------------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
------------------------------------ ------------ ------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Net investment income .............................. 0.042 0.042 0.040 0.046 0.037
Dividends from net investment income ............... (0.042) (0.042) (0.040) (0.046) (0.037)
------- ------- ------- ------- -------
Net asset value, end of year ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total investment return(1) ......................... 4.32% 4.33% 4.11% 4.69% 3.95%
======= ======= ======= ======= =======
Ratios/Supplemental data:
Net assets, end of year (000's) .................... $60,267 $12,983 $11,808 $23,735 $21,042
Expenses to average net assets ..................... 1.17% 1.41% 1.42% 1.31% 1.06%
Net investment income to average net assets ........ 4.29% 4.29% 4.09% 4.68% 3.85%
</TABLE>
- ----------
(1)Total investment return is calculated assuming a $1,000 investment in Fund
shares on the first day of each year reported, reinvestment of all dividends
and other distributions at net asset value on the payable dates, and a sale
at net asset value on the last day of each year reported. The figures do not
include sales charges; results for each class would be lower if sales charges
were included.
10
<PAGE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------
FOR THE YEARS ENDED
------------------------------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
----------------------------------- ----------- -----------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Net investment income .............................. 0.037 0.037 0.035 0.041 0.032
Dividends from net investment income ............... (0.037) (0.037) (0.035) (0.041) (0.032)
------- ------- ------- ------- -------
Net asset value, end of year ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total investment return(1) ......................... 3.79% 3.81% 3.60% 4.18% 3.41%
======= ======= ======= ======= =======
Ratios/Supplemental data:
Net assets, end of year (000's) .................... $18,782 $14,715 $18,389 $26,592 $39,123
Expenses to average net assets ..................... 1.73% 1.90% 1.90% 1.79% 1.55%
Net investment income to average net assets ........ 3.75% 3.78% 3.55% 4.17% 3.46%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------
FOR THE YEARS ENDED
--------------------------------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
--------------------------------- ----------- -----------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------ ------ ------ -------
Net investment income .............................. 0.037 0.037 0.034 0.041 0.033
Dividends from net investment income ............... (0.037) (0.037) (0.034) (0.041) (0.033)
------- ------ ------ ------ -------
Net asset value, end of year ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ====== =======
Total investment return(1) ......................... 3.81% 3.78% 3.50% 4.14% 3.44%
======= ====== ====== ====== =======
Ratios/Supplemental data:
Net assets, end of year (000's) .................... $12,962 $5,308 $5,504 $5,754 $16,137
Expenses to average net assets ..................... 1.70% 1.95% 1.99% 1.79% 1.55%
Net investment income to average net assets ........ 3.80% 3.76% 3.47% 4.27% 3.35%
</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 28, 1999, 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 five years in the period then ended, 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 28, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, New York 10036
April 16, 1999
12
<PAGE>
PAINEWEBBER MONEY MARKET FUND
TAX INFORMATION
We are required by subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (February
28, 1999) as to the federal tax status of distributions received by stockholders
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 1999. 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 2000. Shareholders are advised to consult their own tax advisers with
respect to the tax consequences of their investment in the Fund.
13
<PAGE>
PAINEWEBBER MONEY MARKET FUND
This page intentionally left blank.
14
<PAGE>
DIRECTORS
E. Garrett Bewkes, Jr. Mary C. Farrell
CHAIRMAN Meyer Feldberg
Margo N. Alexander George W. Gowen
Richard Q. Armstrong Frederic V. Malek
Richard R. Burt Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander Paul H. Schubert
PRESIDENT VICE PRESIDENT AND TREASURER
Victoria E. Schonfeld Dennis McCauley
VICE PRESIDENT VICE PRESIDENT
Dianne E. O'Donnell Susan P. Ryan
VICE PRESIDENT AND SECRETARY VICE PRESIDENT
INVESTMENT ADVISER
ADMINISTRATOR AND DISTRIBUTOR
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.
<PAGE>
PAINEWEBBER
(C)1999 PaineWebber Incorporated
Member SIPC
PAINEWEBBER
MONEY MARKET
FUND
FEBRUARY 28, 1999
ANNUAL REPORT
