<PAGE>
MITCHELL HUTCHINS/
KIDDER, PEABODY
GLOBAL FIXED
INCOME FUND
ANNUAL REPORT
August 31, 1995
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- -------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1995
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
- --------- -------------------- -------------- -----------
LONG-TERM DEBT SECURITIES--72.57%
AUSTRALIA--2.97%
1,500 New South Wales
Treasury Corp.... 04/01/97 12.500% $ 1,204,636
1,450 Queensland
Treasury Corp.... 08/14/01 8.000 1,054,238
-----------
2,258,874
-----------
CANADA--5.28%
5,595 Government of
Canada........... 09/01/00 to 06/01/25 6.500 to 9.000 4,016,743
-----------
DENMARK--2.62%
11,190 Government of
Denmark.......... 11/15/01 to 05/15/03 8.000 1,989,012
-----------
FRANCE--3.01%
10,500 Government of
France........... 03/28/00 to 04/25/23 8.500 to 9.500 2,290,181
-----------
GERMANY--15.22%
9,000 Federal Republic
of Germany....... 09/15/99 6.750 6,379,638
945 Deutschland
Republic......... 01/04/24 6.250 557,810
6,850 Treuhandanstal
Bonds............ 04/23/03 6.500 4,633,885
-----------
11,571,333
-----------
ITALY--3.66%
4,885,000 Government of
Italy............ 04/01/99 7.438 2,782,068
-----------
JAPAN--0.88%
54,500 Government of
Japan............ 06/20/00 6.700 669,194
-----------
NETHERLANDS--3.70%
4,240 Government of
Netherlands...... 06/15/99 to 03/15/01 7.500 to 8.500 2,809,021
-----------
NEW ZEALAND--4.22%
4,960 Government of New
Zealand.......... 11/15/96 to 02/15/00 6.500 to 9.000 3,209,467
-----------
NORWAY--1.16%
5,000 Government of
Norway........... 10/31/02 9.500 878,243
-----------
SPAIN--6.03%
559,000 Government of 11.450 to
Spain............ 08/30/98 to 03/25/00 12.250 4,580,674
-----------
SWEDEN--1.54%
8,300 Government of
Sweden........... 01/21/99 11.000 1,169,762
-----------
UNITED KINGDOM--4.83%
2,155 United Kingdom
Gilt............. 02/26/01 10.000 3,669,609
-----------
UNITED STATES--17.45%
6,850 U.S. Treasury
Notes............ 04/30/97 to 08/15/04 6.500 to 7.250 7,067,677
5,880 U.S. Treasury
Bonds............ 04/30/00 to 02/15/25 6.250 to 7.625 6,200,940
-----------
13,268,617
-----------
TOTAL LONG-TERM DEBT
SECURITIES
(cost--$54,925,376)........ 55,162,798
-----------
3
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
- --------- -------------------- -------------- -----------
SHORT-TERM DEBT SECURITY--18.35%
UNITED STATES--18.35%
14,000 U.S. Treasury
Bills (cost--
$13,945,914) 09/21/95 to 10/12/95 5.275 to 5.420%@ $13,945,914
-----------
REPURCHASE AGREEMENTS--3.21%
2,440 Repurchase
Agreement dated
08/31/95, with
Citicorp
Securities, Inc.,
collateralized by
$2,280,000 U.S.
Treasury Notes,
8.500% due
02/15/00;
proceeds:
$2,440,393
(cost--$2,440,000)... 9/01/95 5.800 2,440,000
-----------
CURRENCY CALL /PUT OPTIONS PURCHASED--0.07%
FACE
AMOUNT
- ---------
5,516,575 German
Deutschemarks
put, expiring
12/29/95 at GBP
2.30(a).......... 52,407
2,747,417 Canadian Dollars
call, expiring
10/31/95 at US$
1.395(b)......... 3,846
-----------
TOTAL OPTIONS PURCHASED
(cost--$130,545)............ 56,253
-----------
TOTAL INVESTMENTS
(cost--$71,441,835)--94.20%... 71,604,965
Other assets in excess of
liabilities--5.80%.......... 4,405,947
-----------
NET ASSETS--100.00%.........
$76,010,912
-----------
-----------
- ------------
Note: The Portfolio of Investments is listed by the issuer's country of origin
* In local currency
@ Yield to maturity
(a) Contract face amount denominated in U.S. dollars representing DEM
7,692,864 against British pounds
(b) Contract face amount denominated in U.S. dollars representing CAD
3,832,648 against U.S. dollars
4
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY CONTRACTS
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO MATURITY UNREALIZED UNREALIZED
DELIVER IN EXCHANGE FOR DATES APPRECIATION DEPRECIATION
-------------- -------------------- -------------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Australian Dollars........ 4,223,860 US$ 3,097,921 09/20/95 $ 73,494
Belgian Francs............ 25,988,624 US$ 901,947 09/20/95 $ 39,747 --
Belgian Francs............ 68,000,000 US$ 2,238,131 01/03/96 -- 26,905
British Pounds............ 13,982,074 US$ 22,301,591 09/20/95 611,666
Canadian Dollars.......... 7,252,770 US$ 5,337,891 09/20/95 -- 60,993
Danish Krone.............. 35,727,182 US$ 6,490,180 09/20/95 218,182 --
Dutch Guilders............ 1,190,000 US$ 757,962 09/20/95 33,383 --
French Francs............. 85,917,348 US$ 17,774,603 09/20/95 743,947 --
German Deutschemarks...... 53,977,640 US$ 38,505,291 09/20/95 1,690,222 --
Italian Lira.............. 11,271,393,346 US$ 6,761,378 09/20/95 -- 157,337
Japanese Yen.............. 75,000,000 US$ 769,389 09/05/95 -- 987
Japanese Yen.............. 3,179,590,880 US$ 37,788,378 09/20/95 5,036,667 --
New Zealand Dollars....... 16,783,778 US$ 11,236,152 09/20/95 318,585 --
Norwegian Kronas.......... 15,337,125 US$ 2,496,074 09/20/95 105,562 --
Spanish Pesetas........... 644,678,225 US$ 5,349,303 09/20/95 218,285 --
Spanish Pesetas........... 311,970,000 US$ 2,576,774 10/10/95 98,987 --
Swedish Kronas............ 15,583,200 US$ 2,122,994 09/20/95 -- 6,111
Swiss Francs.............. 8,923,654 US$ 7,749,164 09/20/95 328,657 --
U.S. Dollars.............. 734,442 AUD 974,320 09/06/95 -- 2,241
U.S. Dollars.............. 1,123,309 AUD 1,560,000 09/20/95 47,991 --
U.S. Dollars.............. 910,220 Bfr 25,998,624 09/20/95 -- 48,021
U.S. Dollars.............. 20,670,451 GBP 12,955,535 09/20/95 -- 572,962
U.S. Dollars.............. 5,245,980 CAD 7,252,770 09/20/95 152,903 --
U.S. Dollars.............. 5,848,170 DKK 32,017,543 09/20/95 -- 227,409
U.S. Dollars.............. 770,027 NLG 1,190,000 09/20/95 -- 45,448
U.S. Dollars.............. 17,354,617 FRF 85,917,348 09/20/95 -- 323,969
U.S. Dollars.............. 38,017,910 DEM 52,624,711 09/20/95 -- 2,125,597
U.S. Dollars.............. 1,265,280 ITL 2,061,288,841 09/20/95 25,854 --
U.S. Dollars.............. 4,780,935 ITL 7,788,700,394 09/20/95 -- 74,107
U.S. Dollars.............. 37,690,110 JPY 3,179,590,880 09/20/95 -- 4,938,397
U.S. Dollars.............. 11,217,189 NZD 16,783,778 09/20/95 -- 299,622
U.S. Dollars.............. 2,450,020 NOK 15,337,125 09/20/95 -- 59,508
U.S. Dollars.............. 2,457,494 ESP 301,832,232 09/20/95 -- 55,200
U.S. Dollars.............. 1,220,950 SEK 8,760,686 09/20/95 -- 23,994
U.S. Dollars.............. 7,714,819 CHF 8,923,654 09/20/95 -- 294,312
------------ --------------
$ 9,670,638 $9,416,614
------------ --------------
------------ --------------
</TABLE>
- ------------
CURRENCY TYPE ABBREVIATIONS:
AUD--Australian Dollars
Bfr--Belgian Francs
CAD--Canadian Dollars
CHF--Swiss Francs
DEM--German Deutschemarks
DKK--Danish Krones
ESP--Spanish Pesetas
FRF--French Francs
GBP--British Pounds
ITL--Italian Lira
JPY--Japanese Yen
NLG--Dutch Guilders
NOK--Norwegian Kronas
NZD--New Zealand Dollars
SEK--Swedish Kronas
5
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost--$71,441,835)...... $ 71,604,965
Cash denominated in foreign currencies, at value
(cost--$4,192,400).......................................... 4,109,659
Unrealized appreciation of forward foreign currency
contracts................................................... 9,670,638
Interest receivable.......................................... 1,623,339
Deferred organization expenses............................... 114,724
Other assets................................................. 50,293
------------
Total assets............................................. 87,173,618
------------
LIABILITIES:
Payable for investments purchased............................ 732,201
Payable for shares of beneficial interest repurchased........ 619,384
Unrealized depreciation of forward foreign currency
contracts................................................... 9,416,614
Dividends payable............................................ 155,049
Payable to affiliates........................................ 72,068
Accrued expenses and other liabilities....................... 167,390
------------
Total liabilities........................................ 11,162,706
------------
NET ASSETS:
Beneficial interest shares of $0.001 par value outstanding
(unlimited amount authorized)............................... 74,724,343
Accumulated undistributed net investment income.............. 3,491,472
Accumulated net realized losses from investment transactions,
and other assets and liabilities denominated in foreign
currencies.................................................. (2,598,016)
Net unrealized appreciation of investments and other assets,
liabilities and forward contracts denominated in foreign
currencies.................................................. 393,113
------------
Net assets............................................... $ 76,010,912
------------
------------
CLASS A:
Net assets................................................... $ 53,065,792
------------
Shares outstanding........................................... 4,184,885
------------
Net asset value and redemption value per share............... $12.68
------------
------------
Maximum offering price per share (net asset value plus sales
charge of 2.25% of offering price).......................... $12.97
------------
------------
CLASS B:
Net assets................................................... $ 14,532,160
------------
Shares outstanding........................................... 1,146,138
------------
Net asset value, offering price and redemption value per
share....................................................... $12.68
------------
------------
CLASS C:
Net assets................................................... $ 8,412,960
------------
Shares outstanding........................................... 662,904
------------
Net asset value, offering price and redemption value per
share........................................................ $12.69
------------
------------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................. $9,538,889
----------
EXPENSES:
Investment advisory and administration................... 1,012,718
Service fees--Class A.................................... 274,887
Service and distribution fees--Class B................... 157,985
Custody and accounting................................... 209,604
Transfer agency fees..................................... 96,395
Reports and notices to shareholders...................... 48,025
Amortization of organization expenses.................... 46,969
Legal and audit.......................................... 38,487
Federal and state registration fees...................... 29,904
Trustees' fees........................................... 22,000
Other expenses........................................... 15,816
----------
1,952,790
----------
NET INVESTMENT INCOME....................................... 7,586,099
----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT
TRANSACTIONS:
Net realized gains (losses) from:
Investment and option transactions.................... 3,543,817
Foreign currency transactions......................... 8,520,712
Net change in unrealized appreciation/depreciation of:
Investments and options............................... 1,580,115
Other assets, liabilities and forward contracts
denominated in
foreign currencies.................................. (599,841)
----------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT
ACTIVITIES................................................ 13,044,803
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $20,630,902
----------
----------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
August 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.......................... $ 7,586,099 $ 9,536,271
Net realized gains (losses) from investment and
options transactions......................... 3,543,817 (6,602,287)
Net realized gains from foreign currency
transactions................................. 8,520,712 1,612,276
Net change in unrealized
appreciation/depreciation of investments and
options...................................... 1,580,115 (7,737,719)
Net change in unrealized
appreciation/depreciation of other assets,
liabilities, options and forward contracts
denominated in foreign currencies............ (599,841) 315,301
------------ ------------
Net increase (decrease) in net assets resulting
from operations.............................. 20,630,902 (2,876,158)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A................. (5,827,599) (7,680,804)
Net investment income--Class B................. (1,007,028) (892,910)
Net investment income--Class C................. (751,472) (962,557)
Excess of net investment income--Class A....... -- (1,560,400)
Excess of net investment income--Class B....... -- (176,688)
Excess of net investment income--Class C....... -- (157,785)
Net realized short-term gains from investment
transactions--Class A........................ -- (6,122,714)
Net realized short-term gains from investment
transactions--Class B........................ -- (693,291)
Net realized short-term gains from investment
transactions--Class C........................ -- (619,117)
Net realized gains from foreign currency
transactions--Class A........................ (2,774,180) --
Net realized gains from foreign currency
transactions--Class B........................ (516,943) --
Net realized gains from foreign currency
transactions--Class C........................ (308,417) --
------------ ------------
Total dividends and distributions to
shareholders................................. (11,185,639) (18,866,266)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........... 17,115,746 72,966,458
Cost of shares repurchased..................... (163,277,019) (79,138,601)
Proceeds from dividends reinvested............. 9,809,465 17,364,168
------------ ------------
Net increase (decrease) in net assets derived
from beneficial interest transactions........ (136,351,808) 11,192,025
------------ ------------
Net decrease in net assets..................... (126,906,545) (10,550,399)
NET ASSETS:
Beginning of period............................ 202,917,457 213,467,856
------------ ------------
End of period.................................. $ 76,010,912 $202,917,457
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins/Kidder, Peabody Global Fixed Income Fund (formerly
Kidder, Peabody Global Fixed Income Fund) (the 'Fund') is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, as a non-diversified, open-end management investment company. The
Trustees have authority to issue an unlimited number of shares of beneficial
interest, par value $0.001.
Organizational Matters--The Fund commenced operations on December 24, 1992.
On May 10, 1993, the Fund adopted the Choice Pricing System(Service Mark). 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 structure and ongoing service and distribution
charges. All classes of shares have equal rights as to voting privileges, except
that each class has exclusive voting rights with respect to its distribution
plan. Organization costs are being amortized on a straight-line basis over a
sixty month period.
Valuation of Investments--Securities which are listed on U.S. and foreign
stock exchanges are valued at the last sale price on the day the securities are
being valued or, lacking any sales on such day, at the last available bid price.
In cases where securities are traded on more than one exchange, the securities
are valued on the exchange designated by Mitchell Hutchins Asset Management Inc.
('Mitchell Hutchins') as the primary market. Securities traded in the
over-the-counter ('OTC') market and listed on the National Association of
Securities Dealers Automated Quotation System ('NASDAQ') are valued at the last
trade price on NASDAQ prior to the time of valuation; other OTC securities are
valued at the last bid price available in the OTC market prior to the time of
valuation. The amortized cost method of valuation is used to value short-term
debt instruments with sixty days or less remaining to maturity. Securities and
assets for which market quotations are not readily available (including
restricted securities subject to limitations as to their sale) are valued at
fair value as determined in good faith by or under the direction of the Fund's
Board of Trustees. All investments quoted in foreign currencies will be valued
daily in U.S. dollars on the basis of the foreign currency exchange rates
prevailing at the time such valuation is determined by each Fund's custodian.
Foreign currency exchange rates are generally determined prior to the close
of the New York Stock Exchange ('NYSE'). Occasionally, events affecting the
value of foreign investments and such exchange rates occur between the time at
which they are determined and the close of the NYSE, which will not be reflected
in a computation of the Fund's net asset value. If events occurred materially
affecting the value of such securities or currency exchange rates during such
time period, the securities will be valued at their fair value as determined in
good faith by or under the direction of the Fund's Board of Trustees.
9
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
Repurchase Agreements--The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligations. 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.
Investment Transactions and Investment Income--Investment transactions are
recorded on trade date. Realized gains and losses from investments are
calculated using the identified cost method. Interest income is recorded on an
accrual basis. Discounts are accreted and premiums are amortized on straight
line basis as adjustments to interest income and the identified cost of
investments.
Income, expenses (excluding class-specific expenses) and
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 (after adjusting for current capital share activity of the
respective classes). Class-specific expenses are charged directly to the
applicable class of shares.
Foreign Currency Translation--The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(1) market value of investment securities, other assets and
liabilities--at the exchange rates prevailing at the end of the period.
(2) purchases and sales of investment securities, income and
expenses--at the rates of exchange prevailing on the respective dates of
such transactions.
Although the net assets and the market value of the Fund are presented at
the foreign exchange rates at the end of the period, the Fund does not generally
isolate the effect of unrealized fluctuations in foreign exchange rates from the
effect of the changes in market prices of securities. However, the Fund does
isolate the effect of realized fluctuations in foreign exchange rates when
determining the realized gain or loss upon the sale or maturity of foreign
currency-denominated debt obligations pursuant to federal income tax
regulations. Pursuant to federal income tax regulations, certain foreign
exchange gains/losses included in realized and unrealized gain/loss are included
in or are a reduction of ordinary income for federal income tax purposes.
Forward Foreign Currency Contracts--The Fund is authorized to enter into
forward foreign currency exchange contracts in connection with planned purchases
or sales of securities or to hedge the U.S. dollar value of portfolio securities
denominated in a particular currency.
The Fund has no specific limitation on the percentage of assets which may
be committed to such contracts. The Fund may enter into forward contracts or
maintain a net exposure to forward
10
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
contracts only if the consummation of the contracts would not obligate the Fund
to deliver an amount of foreign currency in excess of the value of the position
being hedged by such contracts.
Risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their forward contracts and
from unanticipated movements in the value of foreign currencies relative to the
U.S. dollar.
Fluctuations in the value of forward contracts are recorded for book
purposes as unrealized gains or losses by the Fund. Realized gains and losses
include net gains and losses recognized by the Fund on contracts which have
matured.
Option Writing/Purchasing--The Fund may write options to increase its
income or to hedge a portion of its portfolio. When the Fund writes a call or
put option, an amount equal to the premium received is included in the Fund's
statement of assets and liabilities as an asset and an equivalent liability. The
amount of the liability is subsequently 'marked to market' to reflect the
current market value of the option written. If an option which the Fund has
written expires on its stipulated date, the Fund realizes a gain in the amount
of the premium originally received, and the liability related to such option is
extinguished. If the Fund enters into a closing purchase transaction, it
realizes a gain or loss determined by the difference between the premium
received and the cost of the closing transaction. If a call option which the
Fund has written is exercised, the Fund realizes a gain or loss from the sale of
the underlying security and the proceeds from such sale are increased by the
premium originally received. If a put option which the Fund has written is
exercised, the amount of the premium originally received reduces the cost of the
security that the Fund purchases upon exercise of the option. As the writer of
an option, the Fund may have no control over whether the underlying securities
are sold (called) or purchased (put) and as a result bears the market risk of an
unfavorable change in price of the security underlying the written option.
The Fund may purchase a call or put option to hedge against adverse market
shifts. The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's statement of assets and liabilities as an investment and
subsequently 'marked to market' to reflect the current market value of the
option purchased. If a call or put option which the Fund has purchased expires
on the stipulated expiration date, the Fund realizes a loss in the amount of the
cost of the option. If the Fund enters into a closing sale transaction, it
realizes a gain or loss, depending on whether the proceeds from the sale are
greater or less than the cost of the option. If the Fund exercises a put option,
it realizes a gain or loss from the sale of the underlying security or currency
and the proceeds from such sale are decreased by the premium originally paid. If
the Fund exercises a call option, the cost of the security or currency that the
Fund purchases upon exercise is increased by the premium originally paid.
Certain risks may arise upon writing or purchasing options from the potential
inability of counterparties to meet the terms of the options.
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
11
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
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.
In accordance with US Treasury regulations, the Fund has elected to defer
$165,453 of net realized capital losses arising after October 31, 1994. Such
losses are treated for tax purposes as arising on September 1, 1995.
At August 31, 1995, the Fund had a net capital loss carryforward of
$2,343,742. The loss carryforward is available as a reduction, to the extent
provided in the regulations, of future net realized capital gains, and will
expire by August 31, 2003.
To reflect reclassifications arising from permanent 'book/tax' differences
for the year ended August 31, 1995, accumulated net realized losses from
investment transactions were decreased by $6,400,913 and accumulated
undistributed net investment income was increased by $6,400,913. Permanent
'book/tax' differences were primarily attributable to foreign currency gains.
Dividends and Distributions--Dividends and distributions to shareholders
are recorded on ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These 'book/tax' differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. 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.
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions, as
well as the ability of the issuers of debt securities held by the Fund to meet
their obligations, may involve certain considerations and risks not typically
associated with investing in U.S. companies and U.S. government securities.
These risks include revaluation of currencies, adverse fluctuations in foreign
currency values and possible adverse political, social and economic
developments, including those particular to a specific industry, country or
region, which could cause the securities and their markets to be less liquid and
prices more volatile than those of comparable U.S. companies and U.S. government
securities. These risks are greater with respect to securities of issuers
located in emerging market countries, in which the Fund is authorized to invest.
Certain investment grade debt securities in which the Fund may invest have
speculative characteristics. Such securities are subject to greater risks of
default or price fluctuation than investment grade securities and are considered
predominantly speculative. The use of options, futures contracts and forward
currency contracts also entails special risks.
12
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund has entered into an Investment Advisory and Administration
Contract with Mitchell Hutchins, a wholly owned subsidiary of PaineWebber
Incorporated, pursuant to which Mitchell Hutchins serves as the Fund's
investment adviser and administrator and receives a fee, accrued daily and paid
monthly, at the annual rate of 0.70% of the Fund's average daily net assets.
At a special meeting of shareholders that took place on April 13, 1995,
Mitchell Hutchins was appointed as investment adviser and administrator of the
Fund. The Fund pays the same fee for investment advisory and administration
services to Mitchell Hutchins as previously paid to Kidder, Peabody Asset
Management ('KPAM'), as described in the Fund's prospectus. Mitchell Hutchins
manages the Fund in accordance with the Fund's investment objective, policies
and restrictions as stated in the prospectus.
Investment advisory functions for the Fund were previously transferred from
KPAM to Mitchell Hutchins on an interim basis as a result of an asset purchase
transaction by and among Kidder, Peabody Group Inc., its parent, General
Electric Company, and Paine Webber Group Inc. That period began on February 13,
1995 and ended on April 13, 1995. At August 31, 1995, the Fund owed Mitchell
Hutchins $49,718 in investment advisory and administration fees.
In compliance with applicable state securities laws, Mitchell Hutchins will
reimburse the Fund if and to the extent that the aggregate operating expenses in
any fiscal year, exclusive of taxes, interest, brokerage fees, distribution fees
and extraordinary expenses, exceed limitations imposed by various state
regulations. Currently, the most restrictive limitations 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. No expense reimbursement
was required pursuant to the above limitation for the year ended August 31,
1995.
DISTRIBUTION PLANS
Effective February 13, 1995, Mitchell Hutchins serves as the exclusive
distributor of the Fund's shares. Under separate plans of distribution, Class A
shares are sold subject to a front-end sales load and bear a service fee of
0.25% per annum of average class net assets. Class B shares are sold at net
asset value without a sales load and bear a distribution fee of 0.50% per annum
and a service fee of 0.25% per annum of average class net assets. The Fund pays
the same distribution and service fees to Mitchell Hutchins as previously paid
to KPAM. The Fund pays Mitchell Hutchins the service and distribution fees
monthly. At August 31, 1995, $22,350 was payable to Mitchell Hutchins.
Mitchell Hutchins also receives the proceeds of any front-end sales loads
with respect to the purchase of Class A shares. Mitchell Hutchins has informed
the Fund that for the year ended August 31, 1995 it received approximately
$300,000 in sales charges.
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.
13
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME 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)................................................ $ 918,948
Gross depreciation (investments having an excess of cost
over value)............................................... (755,818)
---------
Net unrealized appreciation of investments.................. $ 163,130
---------
---------
</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................................................... $413,249,983
Sales....................................................... $507,785,466
</TABLE>
BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest, par value $.001 per share. 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................... 1,075,537 $ 13,182,363 142,873 $ 1,733,211 163,310 $ 2,200,172
Dividends and distributions
reinvested.................. 618,285 7,437,771 117,133 1,409,761 96,304 961,933
Shares repurchased............ (10,547,440) (130,486,065) (1,366,155) (16,774,721) (1,312,106) (16,016,233)
----------- ------------- ---------- ------------ ---------- ------------
Net decrease.................... (8,853,618) $(109,865,931) (1,106,149) $(13,631,749) (1,052,492) $(12,854,128)
----------- ------------- ---------- ------------ ---------- ------------
----------- ------------- ---------- ------------ ---------- ------------
Year ended August 31, 1994:
Shares sold................... 3,108,216 $ 39,707,546 1,832,752 $ 23,303,224 793,248 $ 9,955,688
Dividends and distributions
reinvested.................. 1,124,982 14,067,862 135,828 1,695,816 127,228 1,600,490
Shares repurchased............ (4,991,354) (61,405,906) (598,936) (7,372,563) (825,212) (10,360,132)
----------- ------------- ---------- ------------ ---------- ------------
Net increase (decrease)......... (758,156) $ (7,630,498) 1,369,644 $ 17,626,477 95,264 $ 1,196,046
----------- ------------- ---------- ------------ ---------- ------------
----------- ------------- ---------- ------------ ---------- ------------
</TABLE>
REORGANIZATION
The Board of Trustees of the Fund has approved a Plan of Reorganization and
Termination (the 'Reorganization') for submission to its shareholders. At a
special meeting held October 5, 1995 the proposed Reorganization was approved by
the shareholders. Once implemented, all the Fund's assets will be acquired and
its liabilities assumed by PaineWebber Global Income Fund ('Global Income Fund')
in a tax-free reorganization. As a result of the Reorganization, the two funds'
assets will be combined and each Fund shareholder will, on the closing date of
the transaction, which is expected to be October 27, 1995, receive a number of
full and fractional shares of the corresponding Class of shares of Global Income
Fund having an aggregate value equal to the value of the shareholder's holdings
in the Fund.
14
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout the
periods presented below:
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
For the Year Ended August For the Period
31, December 24, 1992+
---------------------------- to August 31,
1995 (1) 1994 1993
------------ ------------ ------------------
<S> <C> <C> <C>
Net asset value, beginning of
period...................... $ 11.93 $ 13.10 $ 12.00
------------ ------------ ----------
Net investment income......... 0.65** 0.43 0.45
Net realized and unrealized
gains (losses) from
investment and foreign
currency transactions....... 1.02** (0.56) 1.18
------------ ------------ ----------
Total increase (decrease) from
investment operations....... 1.67 (0.13) 1.63
------------ ------------ ----------
Dividends from net investment
income...................... (0.65) (0.63) (0.53)
Distributions from net
realized gains from
investment transactions..... -- (0.41) --
Distributions from net
realized gains from foreign
currency transactions....... (0.27) -- --
------------ ------------ ----------
Total dividends and
distributions............... (0.92) (1.04) (0.53)
------------ ------------ ----------
Net asset value, end of
period...................... $ 12.68 $ 11.93 $ 13.10
------------ ------------ ----------
------------ ------------ ----------
Total investment return (2)... 14.12% (1.10)% 13.79%
------------ ------------ ----------
------------ ------------ ----------
Ratios/Supplemental data:
Net assets, end of period
(000's)..................... $ 53,066 $155,575 $180,686
Ratio of expenses, excluding
distribution and service
fees, net of reimbursements,
to average net assets....... 1.05% 0.94% 0.89%*
Ratio of expenses, including
distribution and service
fees, net of reimbursements
from adviser, to average net
assets...................... 1.30% 1.19% 1.14%*
Ratio of expenses from
adviser, before
reimbursements from adviser,
to average net assets....... 1.30% 1.19% 1.22%*
Ratio of net investment income
to average net assets....... 5.30% 4.22% 4.44%*
Portfolio turnover............ 357% 535% 130%
</TABLE>
- ------------------
* Annualized
** Calculated using the average shares outstanding for the year
+ Commencement of offering of shares
(1) Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
(2) Total investment return is calculated assuming a $1,000 investment in Fund
shares on the first day of each period reported, reinvestment of all
dividends and capital gain distributions at net asset value on the payable
date, and a sale at net asset value on the last day of each period reported.
The figures do not include sales charges; results of Class A shares would be
lower if sales charges were included. Total returns for periods of less than
one year have not been annualized.
15
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
--------------------------------------------- ---------------------------------------------
For the For the
For the Year Ended August Period For the Year Ended August Period
31, May 10, 1993+ 31, May 10, 1993+
---------------------------- to August 31, ---------------------------- to August 31,
1995 (1) 1994 1993 1995 (1) 1994 1993
------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 11.93 $ 13.09 $ 12.77 $ 11.94 $ 13.10 $ 12.77
------------ ------------ ------------- ------------ ------------ -------------
Net investment income......... 0.59** 0.49 0.17 0.68** 0.57 0.20
Net realized and unrealized
gains (losses) from
investment and foreign
currency transactions....... 1.02** (0.67) 0.32 1.02** (0.66) 0.33
------------ ------------ ------------- ------------ ------------ -------------
Total increase (decrease) from
investment operations....... 1.61 (0.18) 0.49 1.70 (0.09) 0.53
------------ ------------ ------------- ------------ ------------ -------------
Dividends from net investment
income...................... (0.59) (0.57) (0.17) (0.68) (0.66) (0.20)
Distributions from net
realized gains from
investment transactions..... -- (0.41) -- -- (0.41) --
Distributions from net
realized gains from foreign
currency transactions....... (0.27) -- -- (0.27) -- --
------------ ------------ ------------- ------------ ------------ -------------
Total dividends and
distributions............... (0.86) (0.98) (0.17) (0.95) (1.07) (0.20)
------------ ------------ ------------- ------------ ------------ -------------
Net asset value, end of
period...................... $ 12.68 $ 11.93 $ 13.09 $ 12.69 $ 11.94 $ 13.10
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
Total investment return (2)... 13.83% (1.51)% 3.84% 14.64% (0.71)% 4.17%
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
Ratios/Supplemental data:
Net assets, end of period
(000's)..................... $ 14,532 $ 26,866 $11,555 $ 8,413 $ 20,474 $21,226
Ratio of expenses, excluding
distribution and service
fees, net of reimbursements,
to average net assets....... 1.06% 0.94% 0.89%* 1.04% 0.94% 0.89%*
Ratio of expenses, including
distribution and service
fees, net of reimbursements
from adviser, to average net
assets...................... 1.81% 1.68% 1.58%* 1.04% 0.94% 0.89%*
Ratio of expenses from
adviser, before
reimbursements from adviser,
to average net assets....... 1.81% 1.68% 1.66%* 1.04% 0.94% 0.97%*
Ratio of net investment income
to average net assets....... 4.78% 3.73% 4.00%* 5.50% 4.50% 4.69%*
Portfolio turnover............ 357% 535% 130% 357% 535% 130%
</TABLE>
16
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Mitchell Hutchins/Kidder, Peabody Global
Fixed Income Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Mitchell Hutchins/ Kidder, Peabody
Global Fixed Income Fund (the '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.
These financial statements and financial highlights (hereafter referred to as
'financial statements') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities owned at
August 31, 1995 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
The statement of changes in net assets for the year ended August 31, 1994 and
the financial highlights for the year ended August 31, 1994 and for the period
December 24, 1992 (commencement of operations) through August 31, 1993 were
audited by other independent accountants whose report dated October 14, 1994
expressed an unqualified opinion on those statements.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
October 24, 1995
17
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Shareholder Information--(unaudited)
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
A special meeting of shareholders of Mitchell Hutchins/Kidder, Peabody
Global Fixed Income 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 VOTED SHARES WITHHOLD AUTHORITY
--------------------- -------------------------
<S> <C> <C>
David J. Beaubien...... 20,990,961 (6,809,337) 773,340 (235,708)
William W. Hewitt,
Jr................... 20,990,961 (6,809,337) 773,340 (235,708)
Thomas R. Jordan....... 20,990,961 (6,809,337) 773,340 (235,708)
Frank P.L. Minard...... 20,990,961 (6,809,337) 773,340 (235,708)
Carl W. Schafer........ 20,990,961 (6,809,337) 773,340 (235,708)
</TABLE>
<TABLE>
<CAPTION>
ALL SHARES OF THE TRUST VOTING AS A SINGLE CLASS
(VOTES OF THE FUND'S SHAREHOLDERS NOTED IN PARENTHESIS)
-----------------------------------------------------------------------
SHARES VOTED FOR SHARES VOTED AGAINST SHARES WITHHOLD AUTHORITY
---------------------- -------------------- -------------------------
<S> <C> <C> <C>
Ratification of the
selection of Deloitte &
Touche LLP............. 20,423,671 (6,774,026) 544,111 (31,081) 796,520 (239,939)
</TABLE>
On July 20, 1995, the Board of Trustees appointed Price Waterhouse LLP as
the Fund's independent accountant.
In addition the following agreements were approved for the Fund:
(1) An interim management agreement with Mitchell Hutchins containing
substantially the same terms, conditions and fees as its previous
management agreement with KPAM.
The votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES OF THE FUND VOTING AS A SINGLE CLASS
---------------------------------------------------------------------
SHARES VOTED FOR SHARES VOTED AGAINST SHARES WITHHOLD AUTHORITY
---------------- -------------------- -------------------------
<S> <C> <C> <C>
6,745,262 32,134 267,650
</TABLE>
(2) A new investment advisory and administration agreement with
Mitchell Hutchins containing the same fees and substantively similar
material terms and conditions as its
18
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
Shareholder Information--(unaudited)
- --------------------------------------------------------------------------------
previous management agreement with KPAM to commence on the termination of
the interim agreement.
The votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES OF THE FUND VOTING AS A SINGLE CLASS
---------------------------------------------------------------------
SHARES VOTED FOR SHARES VOTED AGAINST SHARES WITHHOLD AUTHORITY
---------------- -------------------- -------------------------
<S> <C> <C> <C>
6,746,385 38,557 260,104
</TABLE>
(3) An interim investment advisory agreement with the Fund's former
investment adviser containing substantially the same terms, conditions and
fees as its previous investment advisory agreement with that investment
adviser.
The votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES OF THE FUND VOTING AS A SINGLE CLASS
---------------------------------------------------------------------
SHARES VOTED FOR SHARES VOTED AGAINST SHARES WITHHOLD AUTHORITY
---------------- -------------------- -------------------------
<S> <C> <C> <C>
6,745,377 42,580 257,089
</TABLE>
(4) A new sub-investment advisory agreement with the Fund's former
investment adviser containing substantially the same terms, conditions and
fees as its previous investment advisory agreement with that investment
adviser to commence on the termination of the interim agreement.
The votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES OF THE FUND VOTING AS A SINGLE CLASS
---------------------------------------------------------------------
SHARES VOTED FOR SHARES VOTED AGAINST SHARES WITHHOLD AUTHORITY
---------------- -------------------- -------------------------
<S> <C> <C> <C>
6,735,902 42,710 42,710
</TABLE>
Broker non-votes and abstentions are included within the 'Shares Withhold
Authority' totals.
19
<PAGE>
- --------------------------------------
TRUSTEES
David J. Beaubien
William W. Hewitt, Jr.
Thomas R. Jordan
Frank P.L. Minard
Carl W. Schafer
- --------------------------------------
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Julian F. Sluyters
Vice President and Treasurer
- --------------------------------------
INVESTMENT ADVISER, ADMINISTRATOR
AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
- --------------------------------------
This report is not to be used in
connection with the offering of shares
of the Fund unless accompanied or
preceded by an effective prospectus.
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.
(Copyright)1995 PAINEWEBBER INCORPORATED
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