<PAGE>
SEMI-ANNUAL REPORT--NOVEMBER 14, 1996
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER,
We are pleased to present you with the
semiannual report for PaineWebber Cashfund, Inc.
(the "Fund") for the six months ended September
30, 1996.
G E N E R A L M A R K E T O V E R V I E W
Early in the year, government reports showing
higher-than-expected economic growth prompted a
shift in market sentiment, which in turn caused a
sharp drop in bond prices and ensuing stock
market volatility. Several factors helped move
stocks higher despite this volatility, including
an overall positive environment for corporate
earnings and profit growth as well as strong cash
flows into equity mutual funds. Then, in July, a
spate of disappointing earnings announcements
helped contribute to the first meaningful overall
stock market correction since 1994. This was
short-lived, however, and in August the 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, a commonly used measure of
stock market performance, to a new record high (a
circumstance which underscores the hazards of
market timing). The Federal Reserve Board (the
"Fed") echoed investor confidence when, as it did
during its May and July 1996 meetings, it chose
to keep key interest rates unchanged at the
September 1996 Federal Open Market Committee
meeting. The Fed's decision to do so suggested
that officials continued to discount the
potential for an overheating economy or
accelerating inflation.
P O R T F O L I O R E V I E W
PaineWebber Cashfund's current yield for the
seven-day period ended September 30, 1996 was
4.85% and net assets totalled approximately $5.1
billion. 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, as a
result, kept the Fund's average weighted maturity
slightly longer than those of its peers investing
in similar types of money market investments over
the six-month period. As a result, the Fund had
minimal cash to invest at lower interest rates, a
situation that
<PAGE>
-----------------------------------------------------------------
PORTFOLIO REVIEW
ultimately proved beneficial to Fund performance
and contributed to the Fund's outperformance of
its Lipper peer group average (Money Market
Funds) over the period.
Going forward, we believe that the Fed will
continue on its present course at least until the
beginning of the new year, as inflation does not
appear to be a problem and the economy continues
to grow at a comfortable rate. We are
particularly confident with respect to this
scenario given that, at the time of this writing,
the results of the Presidential election have
been determined. Had the results been other than
what they were, it would have been more likely
that the Fed could have strayed from its steady
path.
Given our belief that the current economic
environment will persist, we plan to maintain the
Fund's current position. 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.
As of September 30, 1996, the Fund continued
to be rated AAAm by Standard & Poor's Ratings
Group ("S&P"), the highest rating given to money
market funds. The rating of the Fund reflects
S&P's view concerning the creditworthiness of the
Fund's portfolio and its sound investment and
management policies. The rating indicates that
there is a superior capacity to maintain
principal value and limit exposure to loss. The
rating also reflects S&P's view that the
portfolio credit quality is strong, with all
assets rated either 'A-1+' or 'A-1', in
accordance with S&P's ratings guidelines.
2
<PAGE>
-----------------------------------------------------------------
PORTFOLIO REVIEW
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,
[SIGNATURE] [SIGNATURE]
MARGO N. ALEXANDER DENNIS L. MCCAULEY
President, Managing Director and Chief Investment
Mitchell Hutchins Asset Management Officer--Fixed Income, Mitchell
Inc. Hutchins Asset Management Inc.
[SIGNATURE] [SIGNATURE]
SUSAN P. RYAN KRIS DORR
Senior Vice President, Portfolio Manager
Taxable Money Funds PaineWebber Cashfund, Inc.
Mitchell Hutchins Asset Management
Inc.
3
<PAGE>
PaineWebber Cashfund, Inc.
Statement of Net Assets
September 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--5.93%
$ 10,000 U.S. Treasury Bills................................. 02/06/97 4.650%@ $ 9,834,667
15,000 Federal Farm Credit Bank*........................... 10/01/96 5.405 14,997,578
15,000 Federal Farm Credit Bank............................ 03/03/97 4.950 14,984,342
65,000 Federal Home Loan Bank.............................. 03/20/97 to 09/19/97 5.400 to 6.215 64,990,117
10,000 Federal Home Loan Mortgage Corp..................... 08/28/97 5.640 9,977,891
20,000 Federal National Mortgage Association*.............. 10/01/96 5.500 20,000,000
60,000 Federal National Mortgage Association............... 10/07/96 to 2/14/97 4.780 to 5.680 59,985,673
85,520 Student Loan Marketing Association*................. 10/01/96 5.410 to 5.510 85,489,080
20,000 Student Loan Marketing Association.................. 07/03/97 to 09/30/97 6.000 to 6.070 20,000,000
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost--$300,259,348).......................................... 300,259,348
--------------
DOMESTIC BANKERS ACCEPTANCES--0.30%
15,550 Chase Manhattan Bank (cost--$15,397,264)............ 12/05/96 5.440 15,397,264
--------------
DOMESTIC CERTIFICATES OF DEPOSIT--0.40%
10,190 F.C.C. National Bank................................ 10/15/96 5.550 10,190,053
10,000 Morgan Guaranty Trust Co............................ 08/12/97 5.730 9,995,714
--------------
TOTAL DOMESTIC CERTIFICATES OF DEPOSIT (cost--$20,185,767)...... 20,185,767
--------------
DOMESTIC BANK NOTES--8.42%
20,000 Bank of America, Illinois........................... 10/16/96 to 10/29/96 5.340 to 5.520 20,000,000
20,000 Bank of Hawaii...................................... 01/03/97 5.500 20,006,909
48,000 Bank One, Dayton.................................... 03/25/97 5.560 47,986,223
30,000 Comerica Bank of Detroit............................ 07/11/97 6.150 30,006,212
33,000 F.C.C. National Bank*............................... 10/01/96 5.260 to 5.360 32,996,738
45,000 F.C.C. National Bank................................ 11/01/96 to 04/17/97 5.080 to 5.650 44,966,880
15,000 Fifth Third Bank of Northwestern Ohio, N.A.......... 10/16/96 5.350 14,999,679
15,000 Harris Trust & Savings Bank......................... 06/17/97 6.040 14,993,902
55,000 LaSalle National Bank............................... 10/17/96 to 02/11/97 5.400 to 5.530 55,000,000
25,000 Morgan Guaranty Trust Co............................ 01/15/97 5.250 25,006,479
15,000 NationsBank of TX, N.A.............................. 11/08/96 5.550 14,999,152
10,000 Old Kent Bank Illinois.............................. 03/17/97 7.230 10,052,360
40,000 PNC Bank N.A.*...................................... 10/01/96 to 10/07/96 5.285 to 5.413 39,988,020
25,000 Seattle-First National Bank......................... 10/24/96 5.730 24,998,944
10,000 Society National Bank*.............................. 10/10/96 5.414 9,997,421
20,000 Wachovia Bank of North Carolina*.................... 10/07/96 5.355 19,994,239
--------------
TOTAL DOMESTIC BANK NOTES (cost--$425,993,158).................. 425,993,158
--------------
COMMERCIAL [email protected]%
Aerospace-Defense--0.59%
30,000 Rockwell International Corp......................... 10/29/96 5.300 29,876,333
--------------
Agriculture--1.18%
35,000 Cargill Inc......................................... 10/23/96 to 10/29/96 5.290 to 5.330 34,868,853
25,000 Cargill Financial Services Corp..................... 10/23/96 5.330 24,918,569
--------------
59,787,422
--------------
Asset-Backed--8.73%
117,150 Asset Securitization Cooperative Corp............... 10/01/96 to 11/15/96 5.290 to 5.400 116,870,478
126,028 Delaware Funding Corp............................... 10/08/96 to 11/08/96 5.300 to 5.450 125,694,097
115,427 Eiger Capital Corp.................................. 10/08/96 to 10/25/96 5.280 to 5.450 115,108,363
20,000 New Center Asset Trust.............................. 11/26/96 to 01/29/97 5.420 to 5.500 19,733,778
64,220 Triple A One Funding................................ 10/03/96 to 10/21/96 5.320 to 5.420 64,110,481
--------------
441,517,197
--------------
</TABLE>
4
<PAGE>
PaineWebber Cashfund, Inc.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--(continued)
Auto & Truck--4.05%
$ 73,700 PACCAR Financial Corp............................... 10/03/96 to 10/28/96 5.300 to 5.420% $ 73,508,867
132,000 Toyota Motor Credit Corp............................ 10/02/96 to 10/24/96 5.340 to 5.350 131,757,981
--------------
205,266,848
--------------
Banking--8.23%
60,000 Abbey National North America........................ 11/29/96 to 03/17/97 5.300 to 5.480 59,127,633
15,000 ABN Amro North America Finance Inc.................. 03/10/97 5.400 14,640,000
30,000 Banc One Corp....................................... 10/04/96 5.290 29,986,775
20,000 Bankers Trust New York Corp*........................ 10/01/96 5.420 20,000,000
20,000 Bankers Trust New York Corp......................... 01/22/97 5.420 19,659,745
10,000 BCI Funding Corp.................................... 10/07/96 5.320 9,991,133
10,000 Cariplo Finance Inc................................. 10/09/96 5.380 9,988,044
100,000 Cregem North America Inc............................ 10/01/96 to 10/10/96 5.390 to 5.500 99,919,228
25,000 Den Danske Corp. Inc................................ 10/21/96 5.380 24,925,278
50,000 Morgan (J.P.) & Co Inc.............................. 11/05/96 to 01/16/97 5.370 to 5.410 49,469,486
30,000 Nordbanken North America Inc........................ 02/10/97 to 03/14/97 5.420 to 5.490 29,326,750
30,000 Societe Generale North America, Inc................. 02/05/97 5.390 to 5.400 29,428,853
20,000 Unifunding Inc...................................... 10/17/96 5.380 19,952,178
--------------
416,415,103
--------------
Broker-Dealer--6.25%
25,000 Dean Witter, Discover & Co.......................... 01/09/97 5.380 24,626,389
15,000 Goldman Sachs Group L.P............................. 10/29/96 5.320 14,937,933
85,000 Merrill Lynch & Co., Inc............................ 10/15/96 to 01/13/97 4.950 to 5.450 84,620,250
155,000 Morgan Stanley Group Inc............................ 10/08/96 to 03/24/97 5.300 to 5.600 154,394,669
38,000 Nomura Holding America Inc.......................... 10/09/96 to 11/05/96 5.380 to 5.420 37,901,609
--------------
316,480,850
--------------
Chemical--2.47%
125,295 dupont (E.I.) deNemours & Co........................ 10/10/96 to 12/20/96 5.290 to 5.450 124,864,608
--------------
Computer--0.49%
25,000 IBM Credit Corp..................................... 10/16/96 5.330 24,944,479
--------------
Conglomerate--0.69%
35,000 BTR Dunlop Finance Inc.............................. 10/21/96 to 11/05/96 5.340 to 5.350 34,869,319
--------------
Consumer Products--0.39%
20,000 Procter & Gamble Co................................. 10/09/96 to 10/18/96 5.300 to 5.330 19,963,053
--------------
Drugs, Health Care--6.83%
31,500 Bayer Corp.......................................... 10/10/96 to 10/21/96 5.300 to 5.340 31,439,439
50,000 Lilly (Eli) & Co.................................... 10/15/96 to 11/12/96 5.280 to 5.380 49,791,750
20,000 Pfizer Inc.......................................... 10/02/96 5.320 19,997,044
89,000 Sandoz Corporation.................................. 10/09/96 to 10/25/96 5.290 to 5.340 88,798,087
26,500 Schering Corp....................................... 01/07/97 5.400 26,110,450
105,000 Warner-Lambert Co................................... 10/02/96 to 10/31/96 5.290 to 5.400 104,868,397
25,000 Zeneca Wilmington Inc............................... 12/17/96 5.350 24,713,924
--------------
345,719,091
--------------
Electronics--2.16%
20,000 Motorola Credit Corp................................ 10/04/96 5.280 19,991,200
5,672 Motorola Inc........................................ 10/24/96 5.300 5,652,794
20,000 Panasonic Finance Inc............................... 11/08/96 5.400 19,886,000
25,000 Sony Capital Corp................................... 10/25/96 5.450 24,909,167
</TABLE>
5
<PAGE>
PaineWebber Cashfund, Inc.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--(continued)
Electronics--(concluded)
$ 5,000 Toshiba America Inc................................. 10/25/96 5.350% $ 4,982,167
34,000 Vermont American Corporation........................ 10/09/96 to 10/11/96 5.310 to 5.320 33,954,242
--------------
109,375,570
--------------
Energy--1.60%
46,085 Exxon Imperial U.S. Inc............................. 10/01/96 to 10/16/96 5.270 to 5.350 46,057,511
10,000 Mobil Australia Finance Co.......................... 10/21/96 5.340 9,970,333
25,000 Shell Oil........................................... 10/22/96 5.310 24,922,563
--------------
80,950,407
--------------
Entertainment--0.39%
20,000 The Walt Disney Company............................. 03/12/97 5.230 19,529,300
--------------
Finance-Conduit--6.37%
25,000 ANZ (Delaware) Inc.................................. 11/12/96 5.390 24,842,792
80,000 Commerzbank U.S. Finance............................ 10/07/96 to 10/28/96 5.300 to 5.350 79,838,283
149,936 MetLife Funding Inc................................. 10/01/96 to 11/12/96 5.280 to 5.420 149,606,022
21,000 Svenska Handelsbanken Inc........................... 11/22/96 to 02/20/97 5.350 to 5.490 20,754,153
47,700 Toronto-Dominion Holdings U.S.A. Inc................ 10/01/96 to 10/07/96 5.350 to 5.430 47,668,726
--------------
322,709,976
--------------
Finance-Consumer--0.89%
45,000 American General Finance Corp....................... 10/16/96 to 10/17/96 5.360 44,896,522
--------------
Finance-Credit Union--0.49%
25,000 U.S. Central Credit Union........................... 10/23/96 5.400 24,917,500
--------------
Finance-Diversified--3.25%
130,000 Associates Corp. of North America................... 10/01/96 to 10/18/96 5.290 to 5.380 129,829,653
35,000 Barclays U.S. Funding Corp.......................... 10/10/96 5.340 34,953,275
--------------
164,782,928
--------------
Finance-Independent--2.51%
127,000 National Rural Utilities Coop. Finance Corp......... 10/01/96 to 10/15/96 5.270 to 5.330 126,922,979
--------------
Finance-Subsidiary--1.87%
25,000 Deutsche Bank Financial Inc......................... 10/23/96 5.350 24,918,264
45,000 Dresdner U.S. Finance Inc........................... 10/01/96 to 10/17/96 5.320 44,917,244
25,000 National Australia Funding (Delaware) Inc........... 01/13/97 5.450 24,606,389
--------------
94,441,897
--------------
Food, Beverage & Tobacco--0.98%
10,000 Campbell Soup Co.................................... 10/22/96 5.330 9,968,908
40,000 Sara Lee Corp....................................... 10/17/96 to 10/22/96 5.280 to 5.300 39,887,667
--------------
49,856,575
--------------
General Trade--2.24%
114,000 Mitsubishi International Corp....................... 10/08/96 to 12/10/96 5.310 to 5.450 113,529,476
--------------
Insurance--3.25%
25,000 American General Corp............................... 10/16/96 5.360 24,944,167
95,000 Prudential Funding Corp............................. 10/03/96 to 10/16/96 5.300 to 5.370 94,913,647
25,000 St. Paul Companies Inc.............................. 10/23/96 to 10/24/96 5.350 to 5.380 24,915,747
19,990 USAA Capital Corp................................... 11/18/96 5.390 19,846,339
--------------
164,619,900
--------------
</TABLE>
6
<PAGE>
PaineWebber Cashfund, Inc.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--(concluded)
Insurance-Property/Casualty--1.94%
$ 40,000 A.I. Credit Corp.................................... 10/11/96 to 11/01/96 5.300 to 5.330% $ 39,879,111
25,000 AIG Funding Inc..................................... 10/28/96 5.300 24,900,625
33,625 John Hancock Capital Corp........................... 10/09/96 to 10/22/96 5.330 to 5.350 33,568,461
--------------
98,348,197
--------------
Machine & Machine Tools--0.37%
19,000 Caterpillar Financial Services Corp................. 10/25/96 5.320 18,932,613
--------------
Metals & Mining--1.84%
69,800 RTZ America Inc..................................... 10/15/96 to 10/23/96 5.350 to 5.420 69,612,597
24,000 U.S. Borax Inc...................................... 12/19/96 5.470 23,711,913
--------------
93,324,510
--------------
Miscellaneous--1.89%
96,000 Beta Finance Inc.................................... 10/07/96 to 01/21/97 5.330 to 5.620 95,540,422
--------------
Printing and Publishing--0.69%
35,000 Reed Elsevier Inc................................... 10/18/96 5.300 34,912,403
--------------
Pollution Control--1.62%
84,175 WMX Technologies Inc................................ 02/04/97 to 03/26/97 5.610 to 5.800 82,032,463
--------------
Retail Merchandising--0.69%
35,000 Wal-Mart Stores Inc................................. 10/29/96 5.280 34,856,267
--------------
Telecommunications--2.42%
105,000 Ameritech Capital Funding Corp...................... 10/03/96 to 12/30/96 5.310 to 5.520 104,630,111
18,000 BellSouth Telecommunications Inc.................... 10/08/96 5.300 17,981,450
--------------
122,611,561
--------------
Utility-Gas--0.61%
30,900 Consolidated Natural Gas Co......................... 10/22/96 to 10/23/96 5.300 30,802,127
--------------
TOTAL COMMERCIAL PAPER (cost--$3,947,597,896)................... 3,947,597,896
--------------
SHORT TERM CORPORATE OBLIGATIONS--6.60%
Auto & Truck--0.20%
10,000 Ford Motor Credit Corp*............................. 10/01/96 5.700 10,000,000
--------------
Banking--0.17%
8,500 Security Pacific Corp............................... 12/01/96 7.750 8,525,281
--------------
Broker/ Dealer--3.74%
30,000 Bear Stearns Companies, Inc*........................ 10/17/96 to 10/31/96 5.468 to 5.542 30,000,000
60,000 Bear Stearns Companies, Inc......................... 04/21/97 to 07/03/97 5.750 to 6.010 60,023,396
40,000 Merrill Lynch & Co., Inc*........................... 10/01/96 5.670 to 5.720 40,000,000
40,000 Merrill Lynch & Co., Inc............................ 03/17/97 to 05/14/97 5.400 to 5.880 39,999,137
19,000 Morgan Stanley Group Inc............................ 02/03/97 7.790 19,151,342
--------------
189,173,875
--------------
Business Services--0.49%
25,000 PHH Corp.*.......................................... 10/01/96 5.330 24,998,456
--------------
</TABLE>
7
<PAGE>
PaineWebber Cashfund, Inc.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- --------------
<C> <S> <C> <C> <C>
SHORT TERM CORPORATE OBLIGATIONS--(concluded)
Finance-Diversified--0.62%
$ 11,420 Associates Corp. of North America*.................. 01/01/97 8.700% $ 11,508,582
20,000 CIT Group Holdings Inc*............................. 10/01/96 5.350 19,989,499
--------------
31,498,081
--------------
Miscellaneous--1.38%
20,000 Beta Finance Inc*................................... 10/01/96 5.700 20,000,000
50,000 Beta Finance Inc.................................... 04/10/97 to 09/30/97 5.600 to 6.080 49,998,924
--------------
69,998,924
--------------
TOTAL SHORT TERM CORPORATE OBLIGATIONS (cost--$334,194,617)..... 334,194,617
--------------
REPURCHASE AGREEMENT--0.23%
11,868 Repurchase agreement dated 09/30/96 with Citicorp
Securities, Inc., collateralized by $11,960,000
U.S. Treasury Notes, 6.875% due 02/28/97;
proceeds: $11,869,886;(cost--$11,868,000)......... 10/01/96 5.720 11,868,000
--------------
TOTAL INVESTMENTS--(cost--$5,055,496,050 which approximates cost
for federal tax purposes)--99.85%............................. 5,055,496,050
Other assets in excess of liabilities--0.15%.................... 7,467,130
--------------
NET ASSETS (applicable to 5,064,488,215 shares outstanding at
$1.00 per share)--100.00%..................................... $5,062,963,180
--------------
--------------
</TABLE>
- ---------------
* Variable rate securities--maturity date reflects earlier of reset date or
maturity date. The interest rates shown are the current rates as of September
30, 1996 and reset periodically.
@ Interest rates shown are discount rates at date of purchase.
Weighted Average Maturity--50 days
See accompanying notes to financial statements
8
<PAGE>
PaineWebber Cashfund, Inc.
Statement of Operations
For the Six Months Ended September 30, 1996 (unaudited)
<TABLE>
<S> <C>
Interest income..................................................................................... $142,049,589
------------
Expenses:
Investment advisory and administration............................................................ 9,520,612
Transfer agency and service fees.................................................................. 4,157,182
Reports and notices to shareholders............................................................... 1,978,910
Custody and accounting............................................................................ 768,332
Federal and state registration.................................................................... 144,799
Legal and audit................................................................................... 130,244
Insurance......................................................................................... 81,882
Directors' fees................................................................................... 6,125
Other expenses.................................................................................... 22,227
------------
16,810,313
------------
Net investment income............................................................................... 125,239,276
Net realized gains from investment transactions..................................................... 60,351
------------
Net increase in net assets resulting from operations................................................ $125,299,627
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six
Months Ended
September 30, For the Year
1996 Ended
(unaudited) March 31, 1996
------------------- ---------------
<S> <C> <C>
From operations:
Net investment income..................................................... $ 125,239,276 $ 238,494,636
Net realized gains from investment transactions........................... 60,351 331,945
------------------- ---------------
Net increase in net assets resulting from operations...................... 125,299,627 238,826,581
------------------- ---------------
Dividends to shareholders from:
Net investment income..................................................... (125,239,276) (238,494,636)
------------------- ---------------
Net increase (decrease) in net assets derived from capital share
transactions.............................................................. (245,654,975) 1,607,547,540
------------------- ---------------
Net increase (decrease) in net assets..................................... (245,594,624) 1,607,879,485
Net assets:
Beginning of period....................................................... 5,308,557,804 3,700,678,319
------------------- ---------------
End of period............................................................. $ 5,062,963,180 $5,308,557,804
------------------- ---------------
------------------- ---------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PaineWebber Cashfund, Inc.
Notes to Financial Statements (unaudited)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Cashfund, Inc. (the "Fund"), was organized under the laws of
Maryland on January 20, 1978 and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as an open-end
diversified management investment company.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. Following is a summary of
significant accounting policies:
VALUATION AND ACCOUNTING FOR INVESTMENTS--Investments are valued at amortized
cost which approximates market value. Investment transactions are accounted for
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 occasionally participates in joint repurchase
agreement transactions with other funds managed by Mitchell Hutchins.
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.
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, PaineWebber
receives compensation from the Fund, computed daily and paid monthly equivalent
to 0.500% per annum of the Fund's first $500 million of average daily net
assets; 0.425% of the next $500 million; 0.390% of the next
10
<PAGE>
PaineWebber Cashfund, Inc.
$500 million; 0.380% of the next $500 million; 0.350% of the next $500 million;
0.345% of the next $1.0 billion; 0.325% of the next $500 million; 0.315% of the
next $500 million; 0.300% of the next $500 million; 0.290% of the next $500
million; and 0.280% of assets in excess of $5.5 billion. At September 30, 1996,
the Fund owed PaineWebber $1,548,547 in investment advisory and administration
fees.
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly-owned
subsidiary of PaineWebber serves as sub-adviser to the Fund pursuant to a
Sub-Advisory Contract between PaineWebber and Mitchell Hutchins. In accordance
with the sub-advisory contract, PaineWebber (not the Fund) pays Mitchell
Hutchins for sub-advisory services provided.
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 Funds's transfer agent. For these services for the six months
ended September 30, 1996, PaineWebber earned $1,444,490. At September 30, 1996,
the Fund owed PaineWebber $219,707 for such shareholder service fees and
reimbursement of out-of-pocket expenses.
OTHER LIABILITIES
At September 30, 1996, dividends payable aggregated $4,701,160.
FEDERAL TAX STATUS
The 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, the Fund intends not to be subject to federal excise tax.
At March 31, 1996, the Fund had net capital loss carryforwards of $1,414,115.
These loss carryforwards are available as reductions, to the extent provided in
the regulations, of any future net realized gains, and will expire by March 31,
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.
11
<PAGE>
PaineWebber Cashfund, Inc.
CAPITAL SHARE TRANSACTIONS
There are 20 billion shares of $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 FOR THE YEAR
ENDED SEPTEMBER ENDED
30, 1996 MARCH 31, 1996
------------------ -----------------
<S> <C> <C>
Shares sold................................................................ 10,440,166,308 18,372,688,369
Shares repurchased......................................................... (10,806,911,540) (16,994,663,459)
Dividends reinvested in additional Fund shares............................. 121,090,257 229,522,630
------------------ -----------------
Net increase (decrease) in shares outstanding.............................. (245,654,975) 1,607,547,540
------------------ -----------------
------------------ -----------------
</TABLE>
12
<PAGE>
PaineWebber Cashfund, 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
SEPTEMBER 30, FOR THE YEARS ENDED MARCH 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.................. 0.0240 0.0523 0.0433 0.0272 0.0317 0.0509
Dividends from net investment income... (0.0240) (0.0523) (0.0433) (0.0272) (0.0317) (0.0509)
------------- --------- --------- --------- --------- ---------
Net asset value, end of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
Total investment return(1)............. 2.43% 5.36% 4.44% 2.75% 3.17% 5.09%
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)...... $ 5,062,963 $5,308,558 $3,700,678 $3,436,278 $3,774,298 $4,234,968
Expenses to average net assets......... 0.64%* 0.60% 0.62% 0.61% 0.57% 0.56%
Net investment income to average net
assets............................... 4.79%* 5.24% 4.35% 2.73% 3.17% 5.09%
</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.
13
<PAGE>
PaineWebber Cashfund, Inc.
Shareholder Information
A Special Meeting of Shareholders of the Fund was held on May 1, 1996, at which
the following votes were cast on the proposals submitted to the Fund's
shareholders:
PROPOSAL 1
To elect ten members of its Board of Directors:
<TABLE>
<CAPTION>
SHARES SHARES WITHHOLD
VOTED FOR AUTHORITY
--------------- ---------------
<S> <C> <C>
Margo N. Alexander............................................................. 2,303,646,060 277,853,770
Richard Q. Armstrong........................................................... 2,304,353,942 277,145,888
E. Garrett Bewkes, Jr.......................................................... 2,302,887,339 278,612,490
Richard R. Burt................................................................ 2,304,223,026 277,276,803
Mary C. Farrell................................................................ 2,304,297,825 277,202,005
Meyer Feldberg................................................................. 2,304,253,726 277,246,103
George W. Gowen................................................................ 2,303,019,634 278,480,195
Frederic V. Malek.............................................................. 2,303,042,532 278,457,297
Carl W. Schafer................................................................ 2,304,161,662 277,338,167
John R. Torell III............................................................. 2,304,132,971 277,366,858
</TABLE>
PROPOSAL 2
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR AGAINST ABSTAIN
--------------- ------------ -------------
<S> <C> <C> <C>
To vote for or against the ratification of the selection of Ernst &
Young LLP as independent auditors for the current fiscal year: 2,299,826,965 18,961,046 262,711,821
</TABLE>
PROPOSAL 3
To vote for or against following changes to the Fund's fundamental investment
restrictions and policies:
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR AGAINST ABSTAIN
--------------- ------------ -------------
<S> <C> <C> <C>
Modification of fundamental restriction on portfolio
diversification for diversified funds: .......................... 2,250,372,446 47,556,191 283,571,192
Modification of fundamental restriction on concentration: ......... 2,250,613,047 47,315,590 283,571,192
Modification of fundamental restriction on senior securities and
borrowing: ...................................................... 2,247,360,842 50,567,796 283,571,192
Modification of fundamental restriction on making loans: .......... 2,249,295,856 48,632,782 283,571,192
Modification of fundamental restriction on underwriting
securities: ..................................................... 2,249,950,360 47,978,277 283,571,192
Modification of fundamental restriction on real estate
investments: .................................................... 2,249,990,501 47,938,137 283,571,192
Modification of fundamental restriction on investing in
commodities: .................................................... 2,246,943,133 50,985,505 283,571,192
</TABLE>
14
<PAGE>
PaineWebber Cashfund, Inc.
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR AGAINST ABSTAIN
--------------- ------------ -------------
Elimination of fundamental restriction on margin transactions: .... 2,247,189,044 50,739,593 283,571,192
<S> <C> <C> <C>
Elimination of fundamental restriction on short sales: ............ 2,247,847,297 50,081,340 283,571,192
Elimination of fundamental restriction on investments in oil, gas
and mineral leases and programs: ................................ 2,248,274,447 49,654,191 283,571,192
Elimination of fundamental restriction on investments in other
investment companies: ........................................... 2,249,973,660 47,954,978 283,571,192
Elimination relating to purchases of certain types of
securities: ..................................................... 2,249,710,493 48,218,145 283,571,192
</TABLE>
PROPOSAL 4
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR AGAINST ABSTAIN
--------------- ------------ -------------
<S> <C> <C> <C>
To vote for or against the approval of Amended and Restated
Articles of Incorporation: 2,219,774,619 58,639,075 303,086,138
</TABLE>
PROPOSAL 5
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR AGAINST ABSTAIN
--------------- ------------ -------------
<S> <C> <C> <C>
To vote for or against the approval of Changes to Bylaws: 2,236,612,625 43,142,614 301,844,592
</TABLE>
- ------------
(Broker non-votes and abstentions are included within the "Shares Abstain" and
"Shares Withhold Authority" totals.)
15
<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
Susan P. Ryan
VICE PRESIDENT
ADMINISTRATOR AND DISTRIBUTOR
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
INVESTMENT ADVISERS
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
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.
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Recycled Paper
-C-1996 PaineWebber Incorporated
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- --------------------------------------------------------------------------------
CASH FUND,
INC.
SEPTEMBER 30, 1996
SEMI-ANNUAL REPORT
