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.
PAINEWEBBER AND MITCHELL
HUTCHINS/KIDDER, PEABODY
MUTUAL FUNDS
INCOME FUNDS
. PW GLOBAL INCOME FUND
. PW HIGH INCOME FUND
. PW INVESTMENT GRADE INCOME FUND
MITCHELL HUTCHINS/
. PW LOW DURATION U.S. GOVERNMENT INCOME FUND
KIDDER, PEABODY
. PW STRATEGIC INCOME FUND
ASSET ALLOCATION
. PW U.S. GOVERNMENT INCOME FUND
FUND
TAX-FREE INCOME FUNDS
. PW CALIFORNIA TAX-FREE INCOME FUND
. PW MUNICIPAL HIGH INCOME FUND
. PW NATIONAL TAX-FREE INCOME FUND
. PW NEW YORK TAX-FREE INCOME FUND
GROWTH FUNDS
. MH/KP EMERGING MARKETS EQUITY FUND
. MH/KP SMALL CAP GROWTH FUND
. PW CAPITAL APPRECIATION FUND
. PW GLOBAL EQUITY FUND
. PW GROWTH FUND
. PW REGIONAL FINANCIAL GROWTH FUND
. PW SMALL CAP VALUE FUND
GROWTH AND INCOME FUNDS
. MH/KP ASSET ALLOCATION FUND
. PW BALANCED FUND
. PW GROWTH AND INCOME FUND
. PW UTILITY INCOME FUND
ANNUAL REPORT
PAINEWEBBER MONEY MARKET FUND August 31, 1995
- ------------------
(C)1995 PaineWebber Incorporated
[LOGO] Printed on
Recycled Paper
<PAGE>
- --------------------------------------------------------------------------------
October 16, 1995
Dear Shareholder,
The Fund's total return for the year ended August 31, 1995, without
deducting sales charges, was 18.43% for Class A shares, 17.57% for Class B
shares and 18.79% for Class C shares. The Fund's total return for this period,
after deducting the maximum applicable sales charges, was 13.10% for Class A
shares, 16.57% for Class B shares and 18.79% for Class C shares. According to
Lipper Analytical Services, Inc., an independent mutual fund monitor, the
average return for this time period for the Flexible Portfolio Funds Peer Group,
in which your Fund is included, was 14.74%. The Fund's Class A, B and C shares
were ranked 24, 31 and 20, respectively, of 141 funds in the peer group for the
year ended August 31, 1995.(1) Please refer to page 6 in this report for
complete total return information for the Fund. The Standard & Poor's 500 Stock
Index ("S&P 500 Index") returned 21.42% for the same time period. Please keep in
mind that the index is unmanaged and does not reflect the deduction of
management fees and other fund costs. The maximum potential benefit from the
Fund, as from any allocation strategy, will be realized over full market cycles
which include periods of declining as well as rising equity prices.
ECONOMIC OVERVIEW
During the year ended August 31, 1995, the pace of U.S. economic growth
slowed, as consumer spending declined significantly from 1994 levels, and
markets for new and existing homes were sluggish until the close of the
twelve-month period, despite historically attractive mortgage rates. This
slowdown was in response to the Federal Reserve Board's increases in the
benchmark Federal Funds rate, the rate banks charge each other for overnight
borrowing. After seven short-term interest rate hikes between February 1994 and
February 1995, the Federal Reserve Board raised the Federal Funds rate to 6.0%,
and effectively doubled short-term interest rates in twelve months.
Besides concerns over the strength of the recovery, news concerning the
economy centered around debate over whether inflation was still likely to become
a threat and details of efforts in Washington to implement a plan to balance the
budget. While the outcome of the budgetary process remains in question, the
perception that the Federal Reserve is winning its war against inflation is
becoming increasingly widespread. On July 6, 1995, the Federal Reserve cut the
benchmark Federal Funds rate by 0.25%. This decrease, the first in nearly three
years, signals that the Federal Reserve Board believes that inflationary
pressures have eased enough to accommodate an adjustment in monetary policy from
restrictive toward neutral.
- ------------
(1) Used with permission. Returns and rankings calculated by Lipper Analytical
Services Inc. do not reflect the deduction of sales charges and would be
different if sales charges were included. Lipper returns differ slightly
from the Fund's actual returns because of the calculation method used.
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
After a 13-month long correction in the wake of the Fed's monetary
tightening policy, interest rates trended lower and the bond market rallied from
mid-November throughout the first half of 1995. The U.S. stock market has also
rallied strongly during 1995, pushing the popular Dow Jones Industrial Average
and S&P 500 indices to a string of new highs. The value of the U.S. dollar
declined for much of the period, but began to show signs of recovery in August.
Although the U.S. economy appears to have been basically flat in the second
quarter, the second half of 1995 should show signs of further, albeit slower,
growth.
PORTFOLIO REVIEW
The Fund employs a disciplined, model based approach to calculate expected
returns for U.S. stocks, bonds and cash. The expected return of the broad U.S.
stock market is then compared with that of a risk-free asset (i.e., the one-year
Treasury bill). When the stock market's expected incremental return, the "equity
risk premium," is low compared to its long-run average, the Fund's asset
allocation strategy calls for reducing the portfolio's exposure to stocks, and
shifts the assets to the 5-year maturity U.S. Treasury note or Treasury bills,
depending upon whether the risk premium available from bonds is above or below
its long-run risk premium of 0.5%.
During the twelve months ended August 31, 1995, the Fund remained primarily
invested in stocks included in the S&P 500 Index. In December 1994, based on the
Fund's asset allocation model, 25% of the Fund's net assets were invested in
5-year U.S. Treasury notes. Despite the bond market rally, on an absolute return
basis bonds did not perform as well as stocks. In March 1995, the equity risk
premium moved above 5.5%, and the Fund returned to being fully invested in
stocks included in the S&P 500 Index.
The equity risk premium, hovering around 6.37%, remains above the 5.5%
hurdle rate required for the strategy to be fully invested in the equity market.
The equity risk premium has benefitted from a decline in the yield on the
one-year Treasury bill, as well as from a relatively stable outlook for
corporate earnings. The bond risk premium, now around 0.44%, indicates that cash
is preferred to bonds. A risk premium below 0.5% suggests that investors would
not be sufficiently rewarded for extending maturity at the current time.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
The charts below provide a history of the equity risk premium and bond risk
premium going back to 1984.
History of the Equity Risk Premium
(Using 1-Year Treasury Bill Yield)
1984-1995
<TABLE>
<CAPTION>
________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-84 5.30% Jan-85 5.91% Jan-86 5.53% Jan-87 5.56% Jan-88 5.77% Jan-89 3.41%
Feb-84 5.01% Feb-85 4.68% Feb-86 5.38% Feb-87 5.51% Feb-88 5.71% Feb-89 3.15%
Mar-84 4.36% Mar-85 5.01% Mar-86 5.50% Mar-87 5.29% Mar-88 5.83% Mar-89 2.88%
Apr-84 4.00% Apr-85 5.51% Apr-86 5.27% Apr-87 4.96% Apr-88 5.48% Apr-89 3.36%
May-84 3.23% May-85 6.31% May-86 4.85% May-87 4.70% May-88 4.91% May-89 3.57%
Jun-84 3.35% Jun-85 6.60% Jun-86 5.30% Jun-87 4.68% Jun-88 5.13% Jun-89 4.35%
Jul-84 4.43% Jul-85 6.30% Jul-86 5.65% Jul-87 4.60% Jul-88 4.75% Jul-89 4.54%
Aug-84 3.82% Aug-85 6.24% Aug-86 6.19% Aug-87 4.10% Aug-88 4.50% Aug-89 3.92%
Sep-84 4.48% Sep-85 6.63% Sep-86 6.39% Sep-87 3.52% Sep-88 4.50% Sep-89 3.81%
Oct-84 5.56% Oct-85 6.49% Oct-86 6.18% Oct-87 5.60% Oct-88 4.50% Oct-89 4.60%
Nov-84 5.70% Nov-85 6.27% Nov-86 6.04% Nov-87 5.92% Nov-88 4.13% Nov-89 4.69%
Dec-84 6.19% Dec-85 5.61% Dec-86 5.97% Dec-87 5.52% Dec-88 3.65% Dec-89 4.41%
_______________________________________________________________________________________________
Jan-90 4.63% Jan-91 5.97% Jan-92 7.97% Jan-93 8.61% Jan-94 7.91% Jan-95 5.32%
Feb-90 4.59% Feb-91 5.78% Feb-92 7.84% Feb-93 8.39% Feb-94 7.65% Feb-95 5.65%
Mar-90 4.28% Mar-91 5.84% Mar-92 7.81% Mar-93 8.29% Mar-94 7.43% Mar-95 5.52%
Apr-90 4.25% Apr-91 6.24% Apr-92 7.90% Apr-93 8.36% Apr-94 6.80% Apr-95 5.74%
May-90 4.23% May-91 5.96% May-92 7.90% May-93 7.89% May-94 6.53% May-95 6.21%
Jun-90 4.41% Jun-91 5.86% Jun-92 7.97% Jun-93 7.96% Jun-94 6.55% Jun-95 6.39%
Jul-90 4.68% Jul-91 5.98% Jul-92 8.32% Jul-93 8.03% Jul-94 6.67% Jul-95 6.29%
Aug-90 5.06% Aug-91 6.35% Aug-92 8.58% Aug-93 7.98% Aug-94 6.35% Aug-95 6.37%
Sep-90 5.18% Sep-91 6.70% Sep-92 8.93% Sep-93 8.02% Sep-94 5.99%
Oct-90 5.55% Oct-91 7.09% Oct-92 8.46% Oct-93 7.95% Oct-94 5.93%
Nov-90 5.47% Nov-91 7.71% Nov-92 8.17% Nov-93 7.82% Nov-94 5.40%
Dec-90 5.74% Dec-91 7.82% Dec-92 8.43% Dec-93 7.80% Dec-94 5.08%
</TABLE>
History of the Bond Risk Premium
1984-1995
<TABLE>
<CAPTION>
_______________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-84 1.57% Jan-85 1.72% Jan-86 1.13% Jan-87 0.91% Jan-88 1.19% Jan-89 -0.04%
Feb-84 1.62% Feb-85 1.80% Feb-86 0.73% Feb-87 0.94% Feb-88 1.09% Feb-89 -0.08%
Mar-84 1.35% Mar-85 1.82% Mar-86 0.73% Mar-87 0.97% Mar-88 1.30% Mar-89 -0.23%
Apr-84 1.41% Apr-85 1.85% Apr-86 0.84% Apr-87 1.38% Apr-88 1.24% Apr-89 -0.19%
May-84 1.46% May-85 1.75% May-86 1.31% May-87 1.41% May-88 1.10% May-89 -0.24%
Jun-84 1.40% Jun-85 1.94% Jun-86 1.16% Jun-87 1.34% Jun-88 0.96% Jun-89 -0.19%
Jul-84 0.87% Jul-85 1.92% Jul-86 1.13% Jul-87 1.47% Jul-88 0.93% Jul-89 -0.22%
Aug-84 0.78% Aug-85 1.76% Aug-86 1.17% Aug-87 1.38% Aug-88 0.73% Aug-89 0.05%
Sep-84 1.00% Sep-85 1.76% Sep-86 1.37% Sep-87 1.33% Sep-88 0.54% Sep-89 -0.13%
Oct-84 1.30% Oct-85 1.58% Oct-86 1.15% Oct-87 1.73% Oct-88 0.33% Oct-89 0.01%
Nov-84 1.51% Nov-85 1.28% Nov-86 0.93% Nov-87 1.41% Nov-88 0.33% Nov-89 0.16%
Dec-84 1.83% Dec-85 0.96% Dec-86 0.92% Dec-87 1.24% Dec-88 0.18% Dec-89 0.13%
_______________________________________________________________________________________________
Jan-90 0.37% Jan-91 1.24% Jan-92 2.29% Jan-93 2.23% Jan-94 1.52% Jan-95 0.75%
Feb-90 0.47% Feb-91 1.26% Feb-92 2.29% Feb-93 1.93% Feb-94 1.62% Feb-95 0.70%
Mar-90 0.42% Mar-91 1.42% Mar-92 2.43% Mar-93 1.96% Mar-94 1.81% Mar-95 0.61%
Apr-90 0.53% Apr-91 1.70% Apr-92 2.61% Apr-93 1.90% Apr-94 1.56% Apr-95 0.58%
May-90 0.43% May-91 1.53% May-92 2.39% May-93 1.74% May-94 1.40% May-95 0.28%
Jun-90 0.43% Jun-91 1.63% Jun-92 2.25% Jun-93 1.61% Jun-94 1.46% Jun-95 0.37%
Jul-90 0.49% Jul-91 1.59% Jul-92 2.25% Jul-93 1.63% Jul-94 1.37% Jul-95 0.54%
Aug-90 0.85% Aug-91 1.63% Aug-92 2.17% Aug-93 1.42% Aug-94 1.25% Aug-95 0.44%
Sep-90 0.85% Sep-91 1.51% Sep-92 2.27% Sep-93 1.42% Sep-94 1.35%
Oct-90 0.86% Oct-91 1.68% Oct-92 2.40% Oct-93 1.38% Oct-94 1.33%
Nov-90 0.67% Nov-91 1.86% Nov-92 2.45% Nov-93 1.53% Nov-94 0.92%
Dec-90 0.91% Dec-91 1.84% Dec-92 2.45% Dec-93 1.62% Dec-94 0.68%
</TABLE>
Source: Mitchell Hutchins Asset Management Inc.
(2) Intermediate-term (five-year) Treasury note.
________________________________________________________________________________
3
<PAGE>
OUTLOOK
Despite the slowing in the pace of economic growth during the year,
corporate profits continued to exhibit strength. However, the earnings strength
corporate America experienced over the past year is facing stiff challenges.
They include a strengthening dollar, a slow down in world-wide economic growth
and increasingly tough comparisons. If the corporate earnings outlook undergoes
a material downward adjustment, the allocation process will shift Fund assets
into a lesser exposure to stocks and an allocation to 5-year U.S. Treasury notes
or 30-day U.S. Treasury bills. However, significant further declines in
short-term rates could mitigate or eliminate the extent of the reallocation.
Effective November 1, 1995, the Fund's name is changing to PaineWebber
Tactical Allocation Fund. The Fund's investment policies, objective and manager
remain unchanged.
We value you as a shareholder and as a client, and thank you for your
continued support. We welcome any comments or questions you may have.
Sincerely,
<TABLE>
<S> <C>
/s/ FRANK P.L. MINARD /s/ T. KIRKHAM BARNEBY
FRANK P.L. MINARD T. KIRKHAM BARNEBY
Chairman Managing Director and Chief
Mitchell Hutchins Asset Management, Inc. Investment Officer--Quantitative Services,
Mitchell Hutchins Asset management, Inc.
</TABLE>
4
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Comparison of Change in Value of $10,000 Investment in the Fund and the Standard
& Poor's 500 Index
- --------------------------------------------------------------------------------
The following graph depicts the performance of the Mitchell Hutchins/Kidder,
Peabody Asset Allocation Fund, versus the Standard & Poor's 500 Index. It is
important to note the Fund is a professionally managed mutual fund while the
index is not available for investment and is unmanaged. The comparison is shown
for illustrative purposes only.
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
7/22/92 2/93 8/93 2/94 8/94 2/95 8/95
<S> <C> <C> <C> <C> <C> <C> <C>
MH/KP Asset Allocation Fund; Class B $10,000 $10,868 $11,374 $11,516 $11,767 $11,974 $13,834
S&P 500 Index $10,000 $10,605 $11,243 $11,484 $11,862 $12,335 $14,404
</TABLE>
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
The performance of the other classes will vary from the performance of the class
shown based on the difference in sales charges and fees paid by shareholders
investing in different classes.
AVERAGE ANNUAL RETURN
<TABLE>
<CAPTION>
% RETURN AFTER DEDUCTING
% RETURN WITHOUT SALES CHARGE MAXIMUM SALES CHARGE
----------------------------------- -----------------------------------
CLASS CLASS
----------------------------------- -----------------------------------
A* B** C*** A* B** C***
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Twelve Months Ended 08/31/95 18.43% 17.57% 18.79% 13.10% 16.57% 18.79%
- ---------------------------------------------------------------------------------------------------------------------
Commencement of Operations+
Through 08/31/95 11.98 11.00 12.28 9.76 11.00 12.28
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Effective July 3, 1995, the Board of Directors voted to reduce the maximum
sales charge for Class A shares to 4.50% from 5.75% of the public offering
price. This reduction is reflected in the above returns. Class A shares bear
ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 1% and is
reduced to 0% after 1 year. Class B shares bear ongoing 12b-1 distribution
and service fees.
*** Class C shares are sold without initial or contingent deferred sales charges
and are available exclusively to certain eligible participants.
+ Commencement of operations dates are May 10, 1993, July 22, 1992 and May 10,
1993 for Class A, Class B and Class C shares, respectively.
The data above represents past performance of the Fund's shares, which is
not predictive of future performance.
The investment return and principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
- --------------------------------------------------------------------------------
5
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL RETURN1
NET ASSET VALUE -------------------------------
------------------------------- 12 MONTHS 6 MONTHS
ENDED ENDED
08/31/95 02/28/95 08/31/94 08/31/95 08/31/95
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
Class A Shares $14.86 $12.90 $13.78 18.43% 16.01%
- --------------------------------------------------------------------------------------
Class B Shares 14.87 12.92 13.78 17.57 15.54
- --------------------------------------------------------------------------------------
Class C Shares 14.88 12.92 13.79 18.79 16.10
- --------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE><CAPTION>
NET ASSET VALUE
-------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN1
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
05/10/93-12/31/93 $ 12.90 $13.49 $ 0.044 $0.198 6.48%
- -------------------------------------------------------------------------------------------
1994 13.49 12.20 0.972 0.234 (0.59)
- -------------------------------------------------------------------------------------------
01/01/95-08/31/95 12.20 14.86 -- 0.098 22.67
- -------------------------------------------------------------------------------------------
Total: $ 1.016 $0.530
- -------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/95: 29.85%
- -------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES
<TABLE><CAPTION>
NET ASSET VALUE
-------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN1
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
07/22/92-12/31/92 $ 12.00 $12.72 $ 0.002 $0.079 6.67%
- -------------------------------------------------------------------------------------------
1993 12.72 13.51 0.044 0.134 7.64
- -------------------------------------------------------------------------------------------
1994 13.51 12.23 0.972 0.130 (1.28)
- -------------------------------------------------------------------------------------------
01/01/95-08/31/95 12.23 14.87 -- 0.053 22.06
- -------------------------------------------------------------------------------------------
Total: $ 1.018 $0.396
- -------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/95: 38.35%
- -------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE><CAPTION>
NET ASSET VALUE
-------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN1
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
05/10/93-12/31/93 $ 12.90 $13.50 $ 0.044 $0.210 6.65%
- -------------------------------------------------------------------------------------------
1994 13.50 12.21 0.972 0.276 (0.28)
- -------------------------------------------------------------------------------------------
01/01/95-08/31/95 12.21 14.88 -- 0.111 22.85
- -------------------------------------------------------------------------------------------
Total: $ 1.016 $0.597
- -------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/95: 30.66%
- -------------------------------------------------------------------------------------------
</TABLE>
1 Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date and do not include sales charges;
results would be lower for Class A and Class B shares if sales charges were
included.
6
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--99.19%
AEROSPACE--1.22%
4,300 Boeing Co. ............................................................. $ 274,125
1,000 General Dynamics........................................................ 52,625
2,530 Lockheed Martin Corp. .................................................. 154,014
1,500 McDonnell Douglas Corp. ................................................ 120,375
700 Northrop Grumman Corp. ................................................. 42,612
-----------
643,751
-----------
AGRICULTURE/FOOD--4.18%
6,982 Archer-Daniels-Midland.................................................. 116,080
3,200 Campbell Soup Co. ...................................................... 146,400
3,100 Conagra, Inc. .......................................................... 117,413
1,800 CPC International....................................................... 113,175
2,100 General Mills Inc. ..................................................... 108,412
3,100 Heinz (H.J.) & Co. ..................................................... 131,363
1,000 Hershey Foods Corp. .................................................... 59,875
2,800 Kellogg Co. ............................................................ 189,000
10,500 Phillip Morris Companies Inc. .......................................... 783,562
1,200 Pioneer Hi Bred International Inc. ..................................... 51,600
1,800 Quaker Oats Co. ........................................................ 62,550
2,000 Unilever N.V. .......................................................... 247,250
1,600 Wrigley (Wm) Jr. Co. ................................................... 72,200
-----------
2,198,880
-----------
AIR TRANSPORT--0.45%
1,000 AMR Corp.*.............................................................. 70,500
700 Delta Air Lines, Inc. .................................................. 52,063
800 Federal Express Corp.*.................................................. 57,400
2,000 Southwest Airlines...................................................... 51,750
500 US Air Group, Inc.*..................................................... 4,062
-----------
235,775
-----------
ALUMINUM--0.54%
3,000 Alcan Aluminum Ltd. .................................................... 97,875
2,300 Aluminum Company of America............................................. 131,388
900 Reynolds Metals......................................................... 53,775
-----------
283,038
-----------
APPAREL/TEXTILES--0.66%
600 Liz Claiborne, Inc. .................................................... 13,650
700 Nike, Inc. Class B...................................................... 64,837
1,200 Reebok International Ltd. .............................................. 42,600
100 Russell Corp. .......................................................... 2,750
6,100 Sara Lee Corp. ......................................................... 169,275
1,000 V.F. Corp. ............................................................. 54,750
-----------
347,862
-----------
</TABLE>
7
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
BANKS--6.26%
5,027 Banc One Corporation.................................................... $ 169,033
4,700 Bank America Corp. ..................................................... 265,550
1,500 Bank of Boston.......................................................... 66,000
1,800 Bank of New York........................................................ 78,300
1,000 Bankers Trust NY Corp. ................................................. 68,875
1,300 Barnett Banks Fla., Inc. ............................................... 74,263
1,600 Boatman's Bancshares.................................................... 59,200
2,300 Chase Manhattan Corp. .................................................. 132,250
3,000 Chemical Banking Corp. ................................................. 174,750
5,000 Citicorp................................................................ 331,875
1,900 Corestates Financial Corp. ............................................. 70,300
1,200 First Chicago Corp. .................................................... 76,050
1,100 First Fidelity Bancorp.................................................. 71,912
1,000 First Interstate Bancorp................................................ 95,500
2,200 First Union Corp. ...................................................... 110,275
1,900 Fleet Financial Group................................................... 70,300
3,140 KeyCorp New*............................................................ 97,340
1,950 Mellon Bank Corp. ...................................................... 92,381
2,300 Morgan (JP) & Co., Inc. ................................................ 167,613
2,000 National City Corp. .................................................... 59,500
3,400 Nationsbank Corp. ...................................................... 208,675
2,200 NBD Bancorp............................................................. 78,650
4,000 Norwest Corp. .......................................................... 120,500
3,100 PNC Bank Corp. ......................................................... 81,375
1,700 Shawmut National........................................................ 55,037
1,500 Suntrust Banks, Inc. ................................................... 92,063
1,500 US Bancorp, Inc. ....................................................... 42,937
2,800 UST, Inc. .............................................................. 76,300
2,300 Wachovia Corp. ......................................................... 91,425
600 Wells Fargo and Co. .................................................... 111,825
-----------
3,290,054
-----------
BEVERAGES--2.85%
9,900 Pepsico, Inc. .......................................................... 447,975
15,800 The Coca-Cola Co. ...................................................... 1,015,150
1,800 Whitman Corp. .......................................................... 36,225
-----------
1,499,350
-----------
BUSINESS MACHINES--4.36%
1,400 Amdahl Corp. ........................................................... 12,775
1,600 Apple Computer.......................................................... 68,800
100 Cabletron Systems*...................................................... 5,288
3,500 Cisco Systems, Inc.*.................................................... 229,687
3,400 Compaq Computer Corp.*.................................................. 162,350
200 Cray Research Inc.*..................................................... 4,650
500 Data General*........................................................... 4,875
2,000 Digital Equipment Corp.*................................................ 83,500
</TABLE>
8
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
BUSINESS MACHINES--(concluded)
6,500 Hewlett-Packard Co. .................................................... $ 520,000
7,200 International Business Machines......................................... 744,300
2,100 Pitney Bowes............................................................ 85,313
2,000 Silicon Graphics, Inc.*................................................. 84,500
1,300 Sun Microsystems, Inc.*................................................. 75,237
1,900 Tandem Computers, Inc.*................................................. 23,275
2,500 Unisys Corp.*........................................................... 20,000
1,400 Xerox Corp.*............................................................ 169,050
-----------
2,293,600
-----------
CHEMICALS--3.90%
1,500 Air Products and Chemicals, Inc. ....................................... 80,438
3,600 Allied-Signal Inc. ..................................................... 159,750
300 Ashland Incorporated.................................................... 9,825
800 Avery Dennison Corp. ................................................... 32,800
3,400 Dow Chemical Co. ....................................................... 251,600
6,800 Dupont (EI) de Nemours & Co. ........................................... 444,550
1,100 Eastman Chemical Co. ................................................... 71,087
1,950 Englehard Corp. ........................................................ 55,088
600 FMC Corp.*.............................................................. 46,200
600 Freeport McMoran Corp. Class B*......................................... 14,025
1,200 Grace W.R. & Co. ....................................................... 79,950
900 Great Lakes Chemical Corp. ............................................. 59,512
1,500 Hercules, Inc. ......................................................... 83,438
1,500 Monsanto Co. ........................................................... 142,312
2,000 Morton International, Inc. ............................................. 65,000
1,100 Nalco Chemical.......................................................... 38,500
4,300 Occidental Petroleum.................................................... 93,525
2,700 PPG Industries, Inc. ................................................... 115,425
1,900 Praxair, Inc. .......................................................... 49,400
900 Rohm & Haas............................................................. 53,775
800 Sigma Aldrich........................................................... 38,400
1,900 Union Carbide Corp. .................................................... 67,450
-----------
2,052,050
-----------
CONSTRUCTION--0.30%
600 Armstrong World Industries.............................................. 34,425
100 Centex Corp. ........................................................... 2,925
200 EG&G Incorporated Common................................................ 3,800
1,100 Fluor Corp. ............................................................ 64,350
1,400 Sherwin Williams........................................................ 50,225
-----------
155,725
-----------
CONSUMER DURABLES--0.44%
1,200 Black & Decker Corp. ................................................... 38,850
2,200 Masco Corp. ............................................................ 61,600
1,800 Maytag Corp. ........................................................... 27,900
</TABLE>
9
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
CONSUMER DURABLES--(concluded)
900 Premark International Inc. ............................................. $ 47,138
1,000 Whirlpool Corp. ........................................................ 54,500
400 Zenith Electronics Corp.*............................................... 3,400
-----------
233,388
-----------
CONTAINERS--0.19%
1,300 Crown Cork and Seal, Inc.*.............................................. 58,500
800 Temple-Inland, Inc. .................................................... 41,400
-----------
99,900
-----------
COSMETICS--1.24%
900 Avon Products Inc. ..................................................... 63,563
8,500 Procter & Gamble Co. ................................................... 589,687
-----------
653,250
-----------
DOMESTIC PETROLEUM--1.05%
2,000 Atlantic Richfield Co. ................................................. 218,250
1,800 Burlington Resources.................................................... 73,125
300 Louisiana Land & Exploration............................................ 11,475
800 Pennzoil Co. ........................................................... 35,200
3,400 Phillips Petroleum...................................................... 111,775
400 Santa Fe Energy Resources, Inc.......................................... 3,800
3,300 Unocal Corp. ........................................................... 96,112
-----------
549,737
-----------
DRUGS/MEDICINE--7.30%
10,100 Abbott Labs............................................................. 391,375
400 Allergan, Inc. ......................................................... 12,150
1,100 Alza Corp.*............................................................. 26,125
3,900 American Home Products.................................................. 300,300
3,400 Amgen, Inc.*............................................................ 162,775
6,300 Bristol-Meyers Squibb Co. .............................................. 432,338
8,100 Johnson & Johnson....................................................... 558,900
3,700 Lilly (Eli) & Co. ...................................................... 302,937
15,600 Merck & Co., Inc. ...................................................... 778,050
8,000 Pfizer Inc. ............................................................ 395,000
4,800 Schering Plough......................................................... 223,800
2,300 Upjohn Co. ............................................................. 97,463
1,700 Warner Lambert Co. ..................................................... 153,637
-----------
3,834,850
-----------
ELECTRONICS--4.54%
1,400 Advanced Micro Devices, Inc.*........................................... 47,250
2,184 AMP, Inc. .............................................................. 88,725
525 Andrew Corp.*........................................................... 30,581
700 Harris Corp. ........................................................... 40,338
10,500 Intel Corp. ............................................................ 644,437
1,200 Loral Corp. ............................................................ 65,700
</TABLE>
10
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
ELECTRONICS--(concluded)
2,700 Micron Technology, Inc. ................................................ $ 207,562
7,500 Motorola, Inc. ......................................................... 560,625
1,700 National Semiconductor Corp.*........................................... 48,025
3,400 Northern Telecom Ltd. .................................................. 124,950
1,600 Raytheon Co. ........................................................... 129,400
2,800 Rockwell International Corp. ........................................... 125,300
700 Scientific-Atlanta, Inc. ............................................... 14,000
300 Tektronix, Inc. ........................................................ 13,688
2,400 Texas Instruments, Inc. ................................................ 179,700
1,100 Tyco International...................................................... 65,037
-----------
2,385,318
-----------
FOREIGN PETROLEUM--0.08%
800 Kerr-McGee Corp. ....................................................... 44,000
-----------
FOREST PRODUCTS--0.07%
120 Crown Vantage, Inc.*.................................................... 2,910
1,500 Louisiana Pacific Corp. ................................................ 35,625
-----------
38,535
-----------
HEALTH (NONDRUGS)/HEALTHCARE--1.97%
300 Bard C.R., Inc. ........................................................ 9,300
900 Bausch & Lomb, Inc. .................................................... 35,775
3,800 Baxter International Inc. .............................................. 148,200
1,000 Becton, Dickinson & Co. ................................................ 56,375
500 Beverly Enterprises, Inc.*.............................................. 6,625
1,100 Biomet, Inc.*........................................................... 17,737
1,800 Boston Scientific Corp.*................................................ 71,550
5,385 Columbia/HCA Healthcare Corp.*.......................................... 253,095
300 Community Psychiatric CE................................................ 3,525
1,100 Manor Care, Inc. ....................................................... 35,613
1,500 Medtronic, Inc. ........................................................ 141,562
200 Millipore Corp. ........................................................ 6,975
400 St. Jude Medical........................................................ 23,850
2,600 Tenet Healthcare*....................................................... 41,275
2,300 United Healthcare Corp. ................................................ 97,175
2,200 U.S. Healthcare, Inc.................................................... 70,400
600 U.S. Surgical........................................................... 15,225
-----------
1,034,257
-----------
HOTELS/RESTAURANT--1.01%
400 Bally Entertainment Corp. .............................................. 4,850
2,200 Darden Restaurants, Inc.*............................................... 22,550
1,450 Harrah's Entertainment, Inc.*........................................... 46,219
700 Hilton Hotels........................................................... 46,550
1,800 Marriott International Inc. ............................................ 63,900
8,800 McDonalds Corp. ........................................................ 321,200
525 Promus Cos.*............................................................ 10,828
</TABLE>
11
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
HOTELS/RESTAURANT--(concluded)
800 Wendy's International Inc. ............................................. $ 15,700
-----------
531,797
-----------
INTERNATIONAL OIL--4.18%
8,400 Chevron Corp. .......................................................... 406,350
15,600 Exxon Corp. ............................................................ 1,072,500
5,000 Mobil Corp. ............................................................ 476,250
1,100 Oryx Energy Co. ........................................................ 14,850
3,500 Texaco, Inc. ........................................................... 226,625
-----------
2,196,575
-----------
IRON & STEEL--0.30%
1,700 Bethlehem Steel Corp.*.................................................. 24,863
400 Inland Steel Industries, Inc.*.......................................... 10,950
1,200 NUCOR Corp. ............................................................ 58,800
1,100 USX-US Steel Group, Inc. ............................................... 36,025
1,450 Worthington Industries.................................................. 29,000
-----------
159,638
-----------
LEISURE/LUXURY--0.30%
1,500 Brunswick Corp. ........................................................ 30,188
1,300 Hasbro, Inc. ........................................................... 42,087
2,887 Mattel, Inc. ........................................................... 83,723
-----------
155,998
-----------
LIFE INSURANCE--0.51%
2,700 American General Corp. ................................................. 95,175
800 Jefferson-Pilot Corp. .................................................. 50,300
1,400 Providian Corp. ........................................................ 53,725
1,000 Transamerica Corp. ..................................................... 68,000
-----------
267,200
-----------
LIQUOR--0.73%
3,200 Anheuser-Busch Companies, Inc. ......................................... 182,800
700 Brown-Forman Class B ................................................... 25,900
4,700 Seagram Co. Ltd. ....................................................... 173,900
-----------
382,600
-----------
MEDIA--2.60%
2,000 Capital Cities/ABC...................................................... 230,000
900 CBS, Inc. .............................................................. 71,775
2,700 Comcast Special Class A................................................. 57,712
6,600 Disney (Walt) & Co. .................................................... 370,425
100 King World Production, Inc.*............................................ 3,800
1,850 Liberty Media Group*.................................................... 49,141
7,400 Telecommunications, Inc. ............................................... 136,900
4,800 Time Warner, Inc. ...................................................... 202,200
900 Tribune Co., New........................................................ 60,300
</TABLE>
12
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
MEDIA--(concluded)
3,749 Viacom, Inc. Class B*................................................... $ 182,295
-----------
1,364,548
-----------
MISCELLANEOUS FINANCE--2.03%
6,200 American Express Co. ................................................... 250,325
800 Beneficial Corp. ....................................................... 39,300
2,164 Dean Witter Discover & Co. ............................................. 110,364
2,300 Federal Home Loan Mortgage Corp. ....................................... 147,775
1,300 Household International, Inc. .......................................... 72,963
2,000 MBNA Corp. ............................................................. 71,000
2,200 Merrill Lynch & Co., Inc. .............................................. 126,775
1,400 Salomon, Inc. .......................................................... 53,725
4,106 Travelers Goup, Inc. ................................................... 197,088
-----------
1,069,315
-----------
MISCELLANEOUS MINING/METALS--0.37%
700 Asarco, Inc. ........................................................... 22,662
1,400 Cyprus Amax Minerals*................................................... 39,200
1,700 Inco Ltd. .............................................................. 59,500
1,000 Phelps Dodge Corp. ..................................................... 63,375
500 Teledyne, Inc. ......................................................... 11,875
-----------
196,612
-----------
MORTGAGE FINANCE--0.64%
3,500 Federal National Mortgage Association................................... 333,813
-----------
MOTOR VEHICLE--2.43%
4,800 Chrysler Corp. ......................................................... 258,600
1,500 DANA Corp. ............................................................. 44,812
900 Echlin, Inc. ........................................................... 31,050
12,200 Ford Motor Co. ......................................................... 373,625
9,500 General Motors Corp. ................................................... 446,500
1,800 Honeywell, Inc. ........................................................ 78,750
700 Navistar International Corp. New*....................................... 9,100
665 Paccar, Inc. ........................................................... 32,918
-----------
1,275,355
-----------
OIL REFINERIES/DISTRIBUTORS--2.79%
1,300 Amerada Hess Corp. ..................................................... 61,587
6,200 Amoco Corp. ............................................................ 395,250
1,500 Coastal Corp. .......................................................... 49,125
6,700 Royal Dutch Petroleum Co. .............................................. 798,975
992 Sun Co., Inc. .......................................................... 26,412
4,000 USX-Marathon Electric Group............................................. 82,500
1,400 Williams Companies, Inc. ............................................... 51,275
-----------
1,465,124
-----------
</TABLE>
13
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
OIL SERVICE--0.66%
1,900 Baker Hughes, Inc. ..................................................... $ 42,750
1,600 Haliburton Co. ......................................................... 67,800
600 Rowan Cos., Inc.*....................................................... 4,875
3,000 Schlumberger Ltd........................................................ 193,500
800 Western Atlas, Inc.*.................................................... 36,300
-----------
345,225
-----------
OTHER INSURANCE--2.93%
1,500 Aetna Life and Casualty Co. ............................................ 102,375
4,542 Allstate Corp. ......................................................... 153,876
6,000 American International Group, Inc. ..................................... 483,750
1,100 Chubb Corp. ............................................................ 100,375
1,000 Cigna Corp. ............................................................ 96,750
1,100 General Re Corp. ....................................................... 163,488
1,400 ITT Corp. .............................................................. 167,475
1,300 Lincoln National Corp. ................................................. 55,900
900 Safeco Corp. ........................................................... 58,162
1,000 St. Paul Companies, Inc. ............................................... 54,250
1,050 Torchmark Corp. ........................................................ 42,000
1,000 U.N.U.M. Corp........................................................... 48,000
800 USF&G Corp. ............................................................ 14,500
-----------
1,540,901
-----------
PAPER--2.18%
800 Alco Standard Corp. .................................................... 64,400
300 Boise Cascade Corp. .................................................... 12,863
1,300 Champion International.................................................. 73,612
200 Federal Paper Board..................................................... 7,925
1,200 Georgia-Pacific Corp. .................................................. 108,000
1,600 International Paper..................................................... 131,000
1,200 James River Corp. ...................................................... 41,700
2,000 Kimberly Clark Corp. ................................................... 127,750
800 Mead Corp. ............................................................. 49,100
2,000 Scott Paper Co. ........................................................ 92,750
1,320 Stone Container Corp.*.................................................. 28,710
1,000 Union Camp Corp. ....................................................... 56,875
1,000 Westvaco Corp. ......................................................... 44,125
2,600 Weyerhaeuser Co. ....................................................... 119,600
6,300 WMX Technologies, Inc. ................................................. 185,063
-----------
1,143,473
-----------
PHOTO/OPTICALS--0.52%
4,400 Eastman Kodak Co. ...................................................... 253,550
400 Polaroid Corp. ......................................................... 17,450
-----------
271,000
-----------
</TABLE>
14
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
POLLUTION CONTROL--0.22%
2,900 Browning-Ferris Industries, Inc. ....................................... $ 97,512
1,900 Laidlaw, Inc., Class B.................................................. 17,100
-----------
114,612
-----------
PRECIOUS METALS--0.57%
4,600 Barrick Gold Corp. ..................................................... 116,725
900 Echo Bay Mines.......................................................... 9,338
2,100 Homestake Mining Co. ................................................... 34,650
1,221 Newmont Mining Corp..................................................... 53,113
3,300 Placer Dome, Inc. ...................................................... 86,213
-----------
300,039
-----------
PRODUCERS' GOODS--6.85%
2,500 American Brands, Inc. .................................................. 105,000
1,000 Applied Materials, Inc.*................................................ 104,000
2,600 Caterpillar, Inc. ...................................................... 174,525
300 Cincinnati Milacron, Inc. .............................................. 9,937
1,600 Cooper Industries, Inc. ................................................ 60,800
700 Cummins Engine Co....................................................... 27,475
1,200 Deere & Co. ............................................................ 102,600
900 Dover Corp. ............................................................ 71,775
2,600 Dresser Industries, Inc. ............................................... 62,400
1,500 DSC Communications Corp.*............................................... 78,750
1,100 Eaton Corp. ............................................................ 59,538
2,900 Emerson Electric Co. ................................................... 206,987
21,100 General Electric Co. ................................................... 1,242,263
200 General Signal Corp. ................................................... 7,100
1,800 Genuine Parts and Co. .................................................. 70,875
200 Giddings & Lewis........................................................ 3,275
800 Grainger W W, Inc. ..................................................... 47,600
300 Harnischfeger Industries, Inc. ......................................... 11,025
1,600 Illinois Tool Works..................................................... 98,000
1,500 Ingersoll-Rand.......................................................... 56,812
700 Johnson Controls, Inc. ................................................. 42,613
1,200 Mallinckrodt Group, Inc. ............................................... 45,150
400 McDermott International, Inc. .......................................... 9,100
5,200 Minnesota Mining & Manufacturing Co. ................................... 284,050
300 Owens-Corning Fiberglass................................................ 11,775
1,766 Pall Corp. ............................................................. 38,631
1,200 Parker-Hannifin Corp. .................................................. 47,550
200 Perkin Elmer Corp. ..................................................... 6,825
300 Raychem Corp. .......................................................... 13,163
</TABLE>
15
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
PRODUCERS' GOODS--(concluded)
800 Stanley Works........................................................... $ 35,400
700 Tellabs, Inc.*.......................................................... 32,725
2,400 Tenneco, Inc. .......................................................... 116,400
1,200 Textron, Inc. .......................................................... 82,200
200 Timken Co............................................................... 9,025
200 Trinova Corp. .......................................................... 7,350
900 TRW, Inc. .............................................................. 70,087
1,600 United Technologies Corp. .............................................. 133,400
300 Varity Corp.*........................................................... 13,650
-----------
3,599,831
-----------
PUBLISHING--0.77%
1,100 American Greetings Class A.............................................. 33,825
2,000 Donnelley (RR) & Sons Co. .............................................. 76,000
1,800 Gannett Co. ............................................................ 96,300
700 Knight Ridder, Inc. .................................................... 39,375
700 McGraw-Hill Companies, Inc. ............................................ 55,125
1,600 Moore Corp. Ltd. ....................................................... 33,400
1,500 New York Times Co. Class A.............................................. 37,313
1,100 Times Mirror Co. ....................................................... 33,687
-----------
405,025
-----------
RAILROAD--1.17%
1,100 Burlington Northern..................................................... 76,175
1,100 Conrail Inc. ........................................................... 73,975
1,300 CSX Corp. .............................................................. 107,250
1,700 Norfolk Southern Corp. ................................................. 120,275
700 Santa Fe Pacific Gold Co.*.............................................. 8,488
2,000 Santa Fe Southern Pacific............................................... 56,750
2,600 Union Pacific Corp. .................................................... 170,300
-----------
613,213
-----------
REAL PROPERTY--0.02%
200 Kaufman & Broad Home*................................................... 2,675
200 Pulte Corp. ............................................................ 5,400
-----------
8,075
-----------
RETAIL--5.28%
3,400 Albertson's, Inc. ...................................................... 108,375
2,100 American Stores Co. .................................................... 61,687
600 Charming Shoppes, Inc. ................................................. 3,150
1,300 Circuit City Stores..................................................... 44,850
900 Dayton Hudson Corp. .................................................... 65,813
1,500 Dillards Department Stores.............................................. 46,312
1,900 Gap, Inc. .............................................................. 61,038
200 Giant Food Inc., Class A................................................ 6,225
300 Great Atlantic & Pacific Tea Co. ....................................... 8,512
1,100 Harcourt General, Inc................................................... 45,788
</TABLE>
16
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
RETAIL--(concluded)
5,800 Home Depot, Inc. ....................................................... $ 231,275
6,000 K Mart Corporation...................................................... 81,750
1,500 Kroger Co.*............................................................. 48,937
4,600 Limited, Inc. .......................................................... 85,100
2,200 Lowe's Companies, Inc. ................................................. 73,150
3,200 May Department Stores Co. .............................................. 135,600
1,500 Melville Corp. ......................................................... 50,063
600 Mercantile Stores, Inc. ................................................ 27,525
1,100 Nordstrom, Inc. ........................................................ 45,375
2,900 Penney (JC), Inc. ...................................................... 131,225
900 Pep Boys-MM&J........................................................... 24,750
2,708 Price Costco Inc.*...................................................... 45,697
1,300 Rite Aid Corp. ......................................................... 36,400
4,899 Sears, Roebuck & Co. ................................................... 158,622
1,200 Super Value Stores, Inc. ............................................... 35,550
2,600 Sysco Corp. ............................................................ 74,750
900 Tandy Corp. ............................................................ 55,913
400 TJX Cos. ............................................................... 5,000
3,600 Toys R Us, Inc.*........................................................ 93,600
3,300 Walgreen Co. ........................................................... 80,850
28,800 Wal Mart Stores, Inc. .................................................. 709,200
1,100 Winn Dixie Stores, Inc. ................................................ 65,450
2,000 Woolworth, F.W. & Co. .................................................. 26,750
-----------
2,774,282
-----------
SERVICES (CONSUMER NON-CYCLICAL)--3.98%
300 Alexander & Alexander Services.......................................... 6,938
700 Autodesk, Inc. ......................................................... 32,287
2,000 Automatic Data Processing............................................... 130,000
1,500 Block (H & R) Inc. ..................................................... 58,500
300 Ceridian Corp.*......................................................... 13,125
2,100 Computer Associates International, Inc. ................................ 145,950
800 Computer Sciences*...................................................... 48,200
1,650 CUC International Inc.*................................................. 56,306
1,300 De Luxe Corp. .......................................................... 40,625
1,400 Dow Jones and Co. ...................................................... 51,275
2,200 Dunn & Bradstreet Corp. ................................................ 127,325
1,700 First Data Corp.*....................................................... 99,238
500 Intergraph Corp.*....................................................... 6,187
1,200 Interpublic Group....................................................... 46,650
1,000 Marsh & McLennan Companies.............................................. 82,375
</TABLE>
17
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(continued)
SERVICES (CONSUMER NON-CYCLICAL)--(concluded)
7,400 Microsoft Corp.*........................................................ $ 684,500
4,900 Novell, Inc.*........................................................... 88,200
5,550 Oracle Systems Corp.*................................................... 222,694
1,400 Ryder Systems, Inc. .................................................... 33,950
1,500 Service Corp. International............................................. 52,500
5,000 Westinghouse Electric Co. .............................................. 68,125
-----------
2,094,950
-----------
SOAP/HARDWARE--1.53%
800 Clorox Co. ............................................................. 54,100
1,800 Colgate-Palmolive Co. .................................................. 122,400
3,100 Corning Inc. ........................................................... 101,138
1,400 Dial Corp. ............................................................. 33,600
5,600 Gillette Co. ........................................................... 233,800
1,500 International Flavors and Fragrances.................................... 71,812
2,200 Newell Co. ............................................................. 55,000
1,300 Ralston-Ralston Purina G................................................ 67,600
2,200 Rubbermaid, Inc. ....................................................... 65,450
-----------
804,900
-----------
THRIFT INSTITUTIONS--0.22%
1,700 Ahmanson H.F. and Co. .................................................. 40,375
800 Golden West Financial................................................... 38,200
1,700 Great Western Financial Corp. .......................................... 39,737
-----------
118,312
-----------
TIRE & RUBBER--0.22%
1,300 Cooper Tire & Rubber.................................................... 33,800
2,000 Goodyear Tire & Rubber.................................................. 80,000
-----------
113,800
-----------
TOBACCO--0.01%
200 Nabisco (RJR) Holdings Corp. ........................................... 5,725
-----------
TRUCKING/FREIGHT--0.05%
500 Roadway Services........................................................ 27,500
-----------
UTILITIES-ELECTRIC--3.60%
2,300 American Electric Power, Inc. .......................................... 78,488
2,100 Baltimore Gas & Electric................................................ 55,125
2,100 Carolina Power and Light................................................ 64,312
2,500 Central & South West Corp. ............................................. 61,250
2,025 Cinergy Corp. .......................................................... 51,891
3,100 Consolidated Edison Company of N.Y. .................................... 87,575
2,000 Detroit Edison.......................................................... 61,250
2,100 Dominion Resources...................................................... 75,862
</TABLE>
18
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- -----------
<S> <C> <C>
COMMON STOCKS--(concluded)
UTILITIES-ELECTRIC--(concluded)
2,500 Duke Power.............................................................. $ 101,563
3,000 Entergy Corp. .......................................................... 72,000
2,300 FPL Group............................................................... 89,412
1,600 General Public Utilities................................................ 45,800
1,600 Houston Industries, Inc. ............................................... 67,800
2,600 Niagara Mohawk Power Corp. ............................................. 31,200
1,000 Northern States Power Co. .............................................. 42,625
2,300 Ohio Edison............................................................. 49,738
5,300 Pacific Gas & Electric Co. ............................................. 152,375
3,700 PacifiCorp.............................................................. 67,063
2,800 Peco Energy Co.*........................................................ 74,550
3,100 Public Service Enterprise Group......................................... 85,250
5,600 SCE Corp. .............................................................. 93,100
7,400 Southern Co. ........................................................... 156,325
2,900 Texas Utilities Co. .................................................... 100,775
2,800 Unicom Corp. ........................................................... 78,750
1,400 Union Electric Co. ..................................................... 49,875
-----------
1,893,954
-----------
UTILITIES-GAS--0.59%
400 Columbia Gas System, Inc.*.............................................. 14,100
1,400 Consolidated Natural Gas Co. ........................................... 54,075
3,300 Enron Corp. ............................................................ 110,963
300 Enserch Corp. .......................................................... 4,912
1,300 Pacific Enterprises..................................................... 31,200
2,100 Panhandle Eastern....................................................... 52,500
1,300 Sonat, Inc. ............................................................ 41,275
-----------
309,025
-----------
UTILITIES-TELEPHONE & TELEGRAPH--8.33%
6,600 Airtouch Communications*................................................ 214,500
2,700 Alltel Corp. ........................................................... 76,275
7,000 Ameritech Corp. ........................................................ 358,750
19,800 AT&T Corp. ............................................................. 1,118,700
5,500 Bell Atlantic Corp. .................................................... 328,625
6,200 Bellsouth Corp. ........................................................ 426,250
12,100 GTE Corp. .............................................................. 443,163
8,800 MCI Communications Corp. ............................................... 211,750
5,500 NYNEX Corp. ............................................................ 247,500
5,600 Pacific Telesis Group................................................... 158,900
7,700 SBC Communications, Inc................................................. 389,813
4,000 Sprint Corp. ........................................................... 142,000
6,000 U.S. West, Inc. ........................................................ 261,000
-----------
4,377,226
-----------
Total Common Stocks (cost-$42,624,341).............................................. 52,132,963
-----------
</TABLE>
19
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (concluded)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- -------- ------------
NON-CONVERTIBLE PREFERRED STOCK--0.00%
MISCELLANEOUS MINING/METALS
<S> <C> <C>
11 Teledyne, Inc. (cost-$75).............................................. $ 162
-----------
</TABLE>
REPURCHASE AGREEMENT--0.90%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
- --------- ------------- ------------
<C> <S> <C> <C> <C>
$471 Repurchase Agreement dated 08/31/95,
with Citicorp Securities, Inc.,
collateralized by $440,000 U.S.
Treasury Notes, 8.500% due
02/15/00; proceeds:
$471,076 (cost-$471,000)................ 09/01/95 5.800% 471,000
-----------
Total Investments (cost-$43,095,416)--100.09%.......... 52,604,125
Liabilities in excess of other assets--(0.09)%......... (48,721)
-----------
Net Assets--100.00%.................................... $52,555,404
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
See accompanying notes to financial statements
20
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost-$43,095,416)....................... $52,604,125
Dividends and interest receivable............................................ 152,444
Receivable for shares of beneficial interest sold............................ 58,741
Other assets................................................................. 115,418
-----------
Total assets.............................................................. 52,930,728
-----------
LIABILITIES
Payable for shares of beneficial interest repurchased........................ 203,323
Payable to affiliate......................................................... 63,801
Accrued expenses and other liabilities....................................... 108,200
-----------
Total liabilities......................................................... 375,324
-----------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding (unlimited amount
authorized).................................................................. 39,667,808
Accumulated overdistribution of net investment income........................ (55,725)
Accumulated net realized gains from investment transactions.................. 3,434,612
Net unrealized appreciation of investments................................... 9,508,709
-----------
Net assets................................................................ $52,555,404
-----------
-----------
CLASS A:
Net assets................................................................... $ 1,944,057
-----------
Shares outstanding........................................................... 130,810
-----------
Net asset value and redemption value per share............................... $14.86
-----------
-----------
Maximum offering price per share (net asset value plus sales charge of 4.50%
of offering price)......................................................... $15.56
-----------
-----------
CLASS B:
Net assets................................................................... $48,105,260
-----------
Shares outstanding........................................................... 3,234,658
-----------
Net asset value and offering price per share................................. $14.87
-----------
-----------
CLASS C:
Net assets................................................................... $2,506,087
-----------
Shares outstanding........................................................... 168,374
-----------
Net asset value, offering price and redemption value per share............... $14.88
-----------
-----------
</TABLE>
See accompanying notes to financial statements
21
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Statement of Operations
For The Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends..................................................................... $1,429,015
Interest...................................................................... 284,257
----------
1,713,272
----------
EXPENSES:
Investment advisory and administration........................................ 279,950
Service-Class A............................................................... 4,345
Service and distribution fees-Class B......................................... 512,944
Custody and accounting........................................................ 173,296
Amortization of organizational expenses....................................... 51,556
Transfer agency............................................................... 45,088
Legal and audit............................................................... 37,705
Reports and notices to shareholders........................................... 31,001
Federal and state registration................................................ 27,192
Trustees' fees................................................................ 10,000
Other expenses................................................................ 18,338
----------
1,191,415
----------
NET INVESTMENT INCOME............................................................ 521,857
----------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES:
Net realized gains from investment transactions............................... 4,134,795
Net change in unrealized appreciation/depreciation of investments............. 3,525,426
----------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES..................... 7,660,221
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................. $8,182,078
----------
----------
</TABLE>
See accompanying notes to financial statements
22
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
Ended August 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................ $ 521,857 $ 933,357
Net realized gains from investment transactions.................. 4,134,795 3,552,185
Net change in unrealized appreciation/depreciation of
investments.................................................... 3,525,426 (3,258,058)
------------ ------------
Net increase in net assets resulting from operations............. 8,182,078 1,227,484
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A................................... (28,999) (54,405)
Net investment income--Class B................................... (477,902) (877,002)
Net investment income--Class C................................... (61,587) (80,425)
Net realized gains from investment transactions--Class A......... (119,229) (12,343)
Net realized gains from investment transactions--Class B......... (3,841,032) (340,008)
Net realized gains from investment transactions--Class C......... (244,263) (14,210)
------------ ------------
Total dividends and distributions to shareholders................ (4,773,012) (1,378,393)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............................. 4,589,510 33,604,534
Cost of shares repurchased....................................... (28,817,534) (80,315,061)
Proceeds from dividends reinvested............................... 4,723,579 1,365,790
------------ ------------
Net decrease in net assets from beneficial interest
transactions................................................... (19,504,445) (45,344,737)
------------ ------------
Net decrease in net assets....................................... (16,095,379) (45,495,646)
NET ASSETS:
Beginning of period.............................................. 68,650,783 114,146,429
------------ ------------
End of period (including undistributed net investment income of
$137,243 at August 31, 1994)................................... $ 52,555,404 $ 68,650,783
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund (formerly Kidder,
Peabody Asset Allocation Fund) (the "Fund") is a series of Mitchell
Hutchins/Kidder, Peabody Investment Trust (formerly Kidder, Peabody Investment
Trust) 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.
Organizational Matters--On May 10, 1993 the Fund adopted the Choice Pricing
SystemSM. The Fund 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 and ongoing
service and distribution charges. All classes of shares have equal voting
privileges, except that each class has exclusive voting rights with respect to
its service/distribution plan.
Valuation of Investments--Where market quotations are readily available,
portfolio securities are valued thereon, provided such quotations adequately
reflect, in the judgment of Mitchell Hutchins Asset Management Inc. ("Mitchell
Huntchins"), a wholly owned subsidiary of PaineWebber and investment adviser and
administrator of the Fund, the fair value of the securities. When market
quotations are not readily available, securities are valued based upon
appraisals derived from information concerning those securities or similar
securities received from recognized dealers in those securities. All other
securities are valued at fair value as determined in good faith by or under the
direction of the Fund's board of trustees. The amortized cost method of
valuation, which approximates market value, is used to value debt obligations
with 60 days or less remaining to maturity, unless the Fund's board of trustees
determines that this does not represent fair value.
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 intrest, 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.
Investment Transactions and Investment Income--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. Dividend income is recorded on the ex-dividend
date.
Income, expenses (excluding class-specific expenses), realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares (or the value of
dividend-eligible shares, as appropriate) of each class at the beginning of the
day
24
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
(after adjusting for current capital share activity of the respective classses).
Class specific expenses are charged directly to the applicable class of shares.
Futures Contracts--Upon entering into a financial futures contract, the Fund
is required to pledge to the broker an amount of cash and/or U.S. Government
securities equal to a certain percentage of the contract amount. This amount is
known as the "initial margin." Subsequent payments, known as "variation margin,"
are made or received by the Fund each day, depending on the daily fluctuations
in the value of the underlying financial futures contracts. Such variation
margin is recorded for financial statement purposes on a daily basis as
unrealized gain or loss, until the financial futures contract is closed, at
which time the net gain or loss is reclassified to realized.
Using financial futures contracts involves various market risks. The Fund is
subject to a number of guidelines which attempt to reduce this risk by seeking
to ensure that financial futures contracts are used solely for hedging purposes
and not for leverage. However, imperfect correlations between futures and the
instruments being hedged or market disruptions do not normally permit full
control of these risks at all times. At August 31, 1995, there were no open
futures contracts.
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.
Dividends and Distributions--Dividends and distributions to shareholders are
recorded on the ex-dividend date. Dividends from net investment income and
distributions from realized gains from investment transactions are determined in
accordance with Federal income tax regulations, which may differ from generally
accepted accounting principles. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment income
and net realized capital gains for financial reporting purposes, but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they exceed
net investment income and net realized capital gains for tax purposes, they are
reported as distributions of paid-in-capital.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's investment adviser and administrator receives compensation from
the Fund accrued daily and paid monthly at an annual rate of 0.50% of the Fund's
average daily net assets on assets up to, but not including $250 million and
0.45% thereafter.
At a special meeting of shareholders that took place on April 13, 1995,
shareholders approved the appointment of Mitchell Hutchins as investment adviser
and administrator of the Fund. The Fund pays
25
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
the same fee for investment advisory and administration service to Mitchell
Hutchins as previously paid to Kidder Peabody Asset Management, Inc. ("KPAM"),
as described in the Fund's prospectus. Mitchell Hutchins continues to manage the
Fund in accordance with the Fund's investment objectives, policies and
restrictions as stated in the Prospectus. At August 31, 1995, the Fund owed fees
to Mitchell Hutchins in the amount of $22,398 for investment advisory and
administration fees.
Investment advisory functions for the Fund were previously transferred from
KPAM to Mitchell Hutchins on an interim basis as a result of an asset purchase
transaction by and among Kidder, Peabody Group Inc., its parent General Electric
and Paine Webber Group Inc. That period commenced February 13, 1995 and ended on
April 13, 1995.
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 August
31, 1995, no reimbursements were required pursuant to the above limitation for
the Fund.
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 distribution pertaining to the Class A and Class B shares, the Fund
pays Mitchell Hutchins monthly service fees at the annual rate of 0.25% of the
average daily net assets of Class A and Class B shares and monthly distribution
fees at the annual rate of 0.75% of the average daily net assets of Class B
shares. At August 31, 1995, the Fund owed Mitchell Hutchins $41,403 in service
and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges
paid by the shareholders upon the purchase of Class A shares and the contingent
deferred sales charges paid by the shareholders upon certain redemptions of
Class B shares. For the year ended August 31, 1995, Kidder Peabody and Mitchell
Hutchins earned approximately $2,000 and $17,000, respectively, in initial sales
charges on Class A Shares.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
1995 was substantially the same as the cost of securities for financial
statement purposes.
26
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Notes to Financial Statements--(concluded)
- --------------------------------------------------------------------------------
At August 31, 1995, the components of the net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over
cost)....................................................... $10,235,962
Gross depreciation (investments having an excess of cost over
value)...................................................... (727,253)
-----------
Net unrealized appreciation of investments.................... $ 9,508,709
-----------
-----------
</TABLE>
For the year ended August 31, 1995, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases..................................................... $29,951,422
Sales......................................................... $56,597,335
</TABLE>
BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value of beneficial interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- ------------------------ ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended August 31, 1995:
Shares sold............... 30,699 $ 417,600 240,419 $ 3,374,974 58,954 $ 796,936
Shares repurchased........ (42,560) (569,663) (1,923,810) (25,667,593) (196,048) (2,580,278)
Dividends reinvested...... 11,959 148,029 347,832 4,275,686 24,214 299,864
-------- ----------- ---------- ------------ -------- -----------
Net increase (decrease)....... 98 $ (4,034) (1,335,559) $(18,016,933) (112,880) $(1,483,478)
-------- ----------- ---------- ------------ -------- -----------
-------- ----------- ---------- ------------ -------- -----------
Year ended August 31, 1994:
Shares sold............... 114,149 $ 1,535,843 2,174,958 $ 29,437,554 195,175 $ 2,631,137
Shares repurchased........ (210,808) (2,777,286) (5,680,673) (75,259,158) (170,866) (2,278,617)
Dividends reinvested...... 4,593 61,769 89,768 1,210,049 6,985 93,972
-------- ----------- ---------- ------------ -------- -----------
Net increase (decrease)....... (92,066) $(1,179,674) (3,415,947) $(44,611,555) 31,294 $ 446,492
-------- ----------- ---------- ------------ -------- -----------
-------- ----------- ---------- ------------ -------- -----------
</TABLE>
27
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------
FOR THE YEAR FOR THE PERIOD
ENDED MAY 10, 1993+
AUGUST 31, TO AUGUST 31,
-----------------
1995** 1994 1993
------- ------ --------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................... $ 13.78 $13.50 $12.90
------- ------ ------
Net investment income......................................... 0.22 0.24 0.08
Net realized and unrealized gains from investment
transactions................................................. 2.05 0.32 0.59
------- ------ ------
Net increase from investment operations....................... 2.27 0.56 0.67
------- ------ ------
Dividends from net investment income.......................... (0.22) (0.24) (0.07)
Distributions from net realized gains from
investment transactions...................................... (0.97) (0.04) --
------- ------ ------
Total dividends and distributions to shareholders............. (1.19) (0.28) (0.07)
------- ------ ------
Net asset value, end of period................................ $ 14.86 $13.78 $13.50
------- ------ ------
------- ------ ------
Total investment return (1)................................... 18.43% 4.21% 5.17%
------- ------ ------
------- ------ ------
Ratios and supplemental data:
Net assets, end of period (000's)............................ $ 1,944 $1,801 $3,007
Ratio of expenses to average net assets...................... 1.46% 1.13% 1.06%*
Ratio of net investment income to average net assets......... 1.60% 1.64% 1.71%*
Portfolio turnover........................................... 53.02% 4.17% 0.42%
</TABLE>
- ------------
+ Commencement of offering of shares.
* Annualized
** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
(1) Total investment return is calculated assuming a $1,000 investment 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 Class A and Class B shares would be lower
if sales charges were included. Total returns for periods of less than one
year have not been annualized.
28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
- --------------------------------------------------- -------------------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED JULY 22, 1992+ ENDED MAY 10, 1993+
AUGUST 31, TO AUGUST 31, AUGUST 31, TO AUGUST 31,
- -------------------------------- ------------------
1995** 1994 1993 1992 1995** 1994 1993
- ------- ------- -------- -------------- ------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
$ 13.78 $ 13.49 $ 12.12 $ 12.00 $ 13.79 $13.52 $ 12.90
- ------- ------- -------- ------- ------- ------ ------
0.12 0.13 0.18 0.03 0.23 0.25 0.09
2.06 0.33 1.34 0.09 2.09 0.33 0.60
- ------- ------- -------- ------- ------- ------ ------
2.18 0.46 1.52 0.12 2.32 0.58 0.69
- ------- ------- -------- ------- ------- ------ ------
(0.12) (0.13) (0.15) -- (0.26) (0.27) (0.07)
(0.97) (0.04) -- -- (0.97) (0.04) --
- ------- ------- -------- ------- ------- ------ ------
(1.09) (0.17) (0.15) -- (1.23) (0.31) (0.07)
- ------- ------- -------- ------- ------- ------ ------
$ 14.87 $ 13.78 $ 13.49 $ 12.12 $ 14.88 $13.79 $ 13.52
- ------- ------- -------- ------- ------- ------ ------
- ------- ------- -------- ------- ------- ------ ------
17.57% 3.46% 12.61% 0.98% 18.79% 4.41% 5.30%
- ------- ------- -------- ------- ------- ------ ------
- ------- ------- -------- ------- ------- ------ ------
$48,105 $62,970 $107,761 $ 50,222 $ 2,506 $3,880 $ 3,379
2.22% 1.88% 1.73% 1.75%* 1.23% 0.88% 0.81%*
0.86% 0.89% 1.04% 2.42%* 1.86% 1.90% 1.96%*
53.02% 4.17% 0.42% 0.00% 53.02% 4.17% 0.42%
</TABLE>
29
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
We have audited the accompanying statement of assets and liabilities of
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund, including the portfolio
of investments, as of August 31, 1995, and the related statements of operations
and changes in net assets, and financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended August 31, 1994 and the financial
highlights for each of the three years in the period ended August 31, 1994 were
audited by other auditors whose report dated October 14, 1994 expressed an
unqualified opinion on that statement and financial highlights.
We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at August
31, 1995, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund at August
31, 1995, and the results of its operations, the changes in its net assets, and
the financial highlights for the year then ended in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
October 23, 1995
30
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation 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 (August 31,
1995) as to federal tax status of distributions received by shareholders during
such fiscal year. Accordingly, we are advising you that the following
distributions paid during the fiscal year are taxable and are derived from the
following sources:
<TABLE>
<CAPTION>
PER SHARE DATA: CLASS A CLASS B CLASS C
- --------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Net investment income*......................................... $ 0.22 $ 0.12 $ 0.26
Long-term capital gains........................................ 0.97 0.97 0.97
Percentage of ordinary income dividends qualifying for the
dividends received deduction available to corporate
shareholders................................................. 100% 100% 100%
</TABLE>
- ------------
* Taxable as ordinary income
Dividends 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.
Since the Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 1995. 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 1996. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in the Fund.
31
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
A special meeting of shareholders of Mitchell Hutchins/Kidder, Peabody Asset
Allocation Fund ("Fund"), a series of Mitchell Hutchins, Kidder Peabody
Investment Trust ("Trust") was held on April 13, 1995. At the meeting, David J.
Beaubien, William W. Hewitt, Jr., Thomas R. Jordan, Frank P.L. Minard and Carl
W. Schafer were elected as trustees to serve without limit in time, subject to
resignation, retirement or removal. The selection of Deloitte & Touche LLP as
the Fund's independent accountants was ratified. The Trust was composed of
several series, each of which was a separate fund. Each series of the Trust
voted separately on all matters being considered by the series, except for the
election of trustees and ratification or rejection of the Trust's independent
accountants, as to which the shares of all series of the Trust voted together as
a single class.
The votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES OF THE TRUST VOTING AS A SINGLE CLASS
(VOTES OF THE FUND'S SHAREHOLDERS NOTED IN PARENTHESIS)
-------------------------------------------------------
SHARES SHARES
VOTED FOR WITHHOLD AUTHORITY
--------- ------------------
<S> <C> <C> <C> <C>
David J. Beaubien..................... 20,990,961 (2,291,047) 773,340 (90,308)
William W. Hewitt, Jr................. 20,990,961 (2,291,047) 773,340 (90,308)
Thomas R. Jordan...................... 20,990,961 (2,291,047) 773,340 (90,308)
Frank P.L. Minard..................... 20,990,961 (2,291,047) 773,340 (90,308)
Carl W. Schafer....................... 20,990,961 (2,291,047) 773,340 (90,308)
</TABLE>
<TABLE>
<CAPTION>
ALL SHARES OF THE TRUST VOTING AS A SINGLE CLASS
(VOTES OF THE FUND'S SHAREHOLDERS NOTED IN PARENTHESIS)
--------------------------------------------------------------------
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
------------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Ratification of the selection
of Deloitte & Touche LLP.... 20,423,671 (2,220,129) 544,111 (61,655) 796,520 (99,572)
</TABLE>
On July 20, 1995, the Board of Directors appointed Ernst & Young LLP as the
Fund's independent auditors.
32
<PAGE>
Mitchell Hutchins/Kidder, Peabody Asset Allocation Fund
- --------------------------------------------------------------------------------
Shareholder Information--(concluded)
- --------------------------------------------------------------------------------
In addition the following agreements were approved for the Fund:
(1) An interim investment advisory agreement between the Fund and
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") containing
substantially the same terms, conditions and fees as the previous investment
advisory agreement with Kidder Peabody Asset Management, Inc. ("KPAM").
The votes were as follows:
ALL SHARES OF THE FUND VOTING AS A SINGLE CLASS
- -----------------------------------------------
SHARES SHARES
SHARES VOTED WITHHOLD
VOTED FOR AGAINST AUTHORITY
- --------- ------- ---------
2,186,671 88,845 105,839
(2) A new investment advisory and administration agreement with Mitchell
Hutchins containing the same fees and substantially similar terms and
conditions as its previous investment advisory agreement with KPAM.
The votes were as follows:
ALL SHARES OF THE FUND VOTING AS A SINGLE CLASS
- -----------------------------------------------
SHARES SHARES
SHARES VOTED WITHHOLD
VOTED FOR AGAINST AUTHORITY
- --------- ------- ---------
2,205,907 69,460 105,987
Broker non-votes and abstentions are included within the "Shares Withhold
Authority" totals.
33
<PAGE>
---------------------------------------
DIRECTORS
David J. Beaubien
William W. Hewitt, Jr.
Thomas R. Jordan
Frank P.L. Minard
Carl W. Schafer
---------------------------------------
OFFICERS
Margo N. Alexander
President
T. Kirkham Barneby
Vice President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Julian F. Sluyters
Vice President and Treasurer
---------------------------------------
INVESTMENT ADVISER,
ADMINISTRATOR AND
DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
---------------------------------------
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.
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.
