<PAGE>
PAINEWEBBER AND MITCHELL HUTCHINS/KIDDER, PEABODY MUTUAL FUNDS
PAINEWEBBER OFFERS A FAMILY OF 29 MUTUAL FUNDS WHICH ENCOMPASS A DIVERSIFIED
RANGE OF INVESTMENT GOALS. INVESTORS MAY EXCHANGE THEIR FUND SHARES WITH OTHER
FUNDS WITHIN THE FAMILY.
INCOME FUNDS
MH/KP ADJUSTABLE RATE GOVERNMENT FUND
MH/KP GLOBAL FIXED INCOME FUND
MH/KP GOVERNMENT INCOME FUND
MH/KP INTERMEDIATE FIXED INCOME FUND
PW GLOBAL INCOME FUND
PW HIGH INCOME FUND
PW INVESTMENT GRADE INCOME FUND
PW SHORT-TERM U.S. GOVERNMENT INCOME FUND
PW STRATEGIC INCOME FUND
PW U.S. GOVERNMENT INCOME FUND
TAX-FREE INCOME FUNDS
MH/KP MUNICIPAL BOND FUND
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
MH/KP EQUITY INCOME FUND
PW BALANCED FUND
PW GROWTH AND INCOME FUND
PW GLOBAL ENERGY FUND
PW UTILITY INCOME FUND
PAINEWEBBER MONEY MARKET FUND
------------------
'c'1995 PAINEWEBBER INCORPORATED
['RECYCLED' LOGO]
Printed on
Recycled Paper
<PAGE>
MITCHELL HUTCHINS/
KIDDER, PEABODY
EMERGING MARKETS
EQUITY FUND
ANNUAL REPORT
June 30, 1995
<PAGE>
- --------------------------------------------------------------------------------
August 15, 1995
Dear Shareholder,
During the year ended June 30, 1995, crises that included the Mexican
government's decision to devalue its currency in December 1994, and the
unraveling of Barings PLC, the British investment bank in February 1995, shook
the financial world and led to an investor flight to quality. The U.S. dollar
continued to depreciate against the yen and the Deutschemark, and there were
signs that the Federal Reserve's monetary tightening policy had slowed the pace
of U.S. economic growth. On July 6, 1995, the Federal Reserve decreased the
benchmark Federal Funds rate, the rate banks charge each other for overnight
borrowing, by 0.25%. This decrease, the first in nearly three years, signals
that the Federal Reserve Board believes that U.S. inflationary pressures have
eased enough to accommodate an adjustment in monetary conditions.
The Mexican peso devaluation and the liquidity crisis it precipitated dominated
the emerging market securities world for most of the year ended June 30, 1995.
The crisis decimated valuations across the sector, as many investors attempted
to sell their emerging market holdings all at once. Emerging markets, in
general, suffered during most of 1994 and early 1995 because of a correction to
the sharp, speculative run-up in 1993 and the crisis in most Latin American
markets due to the Mexican peso devaluation. However, the $50 billion plus
international bailout of Mexico and encouraging signs of recovery brought a
degree of improvement to Latin American markets by April 1995. In the last six
months, Brazil's new government has taken deliberate steps to introduce economic
reform based on fiscal responsibility, privatization and deregulation. In
Eastern Europe and the former Soviet Union, companies are adjusting to more open
economies.
PORTFOLIO REVIEW
The twelve months ended June 30, 1995 were marked by volatility in many emerging
markets. As a result, the Fund's total return for the year ended June 30, 1995,
without deducting sales charges, was (9.29)% for Class A shares, (10.01)% for
Class B shares and (9.03)% for Class C shares. The Fund's total return for this
period, after deducting the maximum applicable sales charges, was (14.52)% for
Class A shares, (10.91)% for Class B shares and (9.03)% for Class C shares. In
comparison, the IFC Global Composite Index returned (1.3)% and the IFC Emerging
Markets Investable Index returned (3.2)% for the same time period.
The Fund did not avoid the impact of the crisis in Mexico. However, this does
not explain the Fund's underperformance versus the IFC Composite Index during
the period. In fact, the Fund's Mexican holdings added value in recent months
during that market's strong rebound. The Fund's underperformance came largely
during the third quarter of 1994, when the Brazilian market (where the Fund was
underweighted) soared, while austerity measures in China (where the Fund had a
major weighting) caused the Chinese market to decline.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
The Fund's investment approach focuses on creating long-term value and, over the
years, Emerging Markets Management, the Fund's sub-adviser, has become used to
significant ups and downs in emerging markets. They have learned that it rarely
pays to sell in a panic because markets usually recover -- often quicker and
sharper than expected. This is exactly what has been happening since early
March. Those markets most affected by the Mexican peso devaluation (Mexico and
others in Latin America) have also recovered most sharply, although they have
not yet regained all of their losses. Our strategy has been to sell some highly
indebted stocks in Mexico, which were most vulnerable to the current recession,
and to buy more of several solid stocks during the crisis period.
During the year ended June 30, 1995, the Fund's country allocation did not
change substantially. Market losses brought down the Fund's weighting in Latin
America, but only in an absolute sense. The Fund remained underweighted in South
East Asia and South Africa (which was included in the IFC Composite Index for
the first time in April 1995). The Fund's largest weightings relative to the
benchmark continued to be East Asia and Eastern Europe (which is minimally
represented in the benchmark).
Emerging Markets Management believes emerging markets are again attractively
valued, after the steep drop following the Mexican peso crisis. In fact, they
believe that emerging markets are at the beginning of a new, long-term,
up-cycle -- similar in nature to those of 1983-1987, 1988-1989 and 1990-1993,
each of which lasted for several years before major corrections set in. In the
near-term, Asia's growth continues, several major Latin American countries
should come out of their current recessions with more disciplined economic
policies, and Eastern Europe is turning around economically while its politics
are stabilizing.
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>
FRANK P.L. MINARD ANTOINE W. VAN AGTMAEL
FRANK P.L. MINARD ANTOINE W. VAN AGTMAEL
Chairman, Portfolio Manager,
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins/Kidder, Peabody
Emerging Markets Equity Fund
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE FUND
AND THE IFC GLOBAL COMPOSITE INDEX (UNAUDITED)
The following graph depicts the performance of the Mitchell Hutchins/Kidder,
Peabody Emerging Markets Equity Fund versus the IFC Global Composite Index. It
is important to note the Mitchell Hutchins/Kidder, Peabody Emerging Markets
Equity 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.
[PERFORMANCE GRAPHS]
CLASS A
IFC GLOBAL
COMPOSITE
FUND INDEX
01/19/94 10,000 10,000
03/31/94 8,665 8,957
06/30/94 8,476 9,074
09/30/94 9,623 11,036
12/31/94 8,240 9,769
03/31/95 7,120 8,517
06/30/95 7,689 8,961
CLASS B
IFC GLOBAL
COMPOSITE
FUND INDEX
01/19/94 10,000 10,000
03/31/94 9,175 8,957
06/30/94 8,958 9,074
09/30/94 10,150 11,036
12/31/94 8,683 9,769
03/31/95 7,486 8,517
06/30/95 8,061 8,961
CLASS C
IFC GLOBAL
COMPOSITE
FUND INDEX
01/19/94 10,000 10,000
03/31/94 9,192 8,957
06/30/94 9,000 9,074
09/30/94 10,225 11,036
12/31/94 8,767 9,769
03/31/95 7,574 8,517
06/30/95 8,187 8,961
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
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.
3
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL RETURN (1)
NET ASSET VALUE --------------------------------------
------------------------- 12 MONTHS 6 MONTHS
06/30/95 06/30/94 ENDED 06/30/95 ENDED 06/30/95
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Class A Shares $9.73 $10.79 (9.29)% (6.70)%
- ---------------------------------------------------------------------------------------------------------------------------
Class B Shares 9.67 10.75 (10.01)% (7.16)%
- ---------------------------------------------------------------------------------------------------------------------------
Class C Shares 9.75 10.80 (9.03)% (6.61)%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID (2) RETURN (1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
01/19/94 - 12/31/94 $12.00 $10.49 -- -- (12.58)%
- ------------------------------------------------------------------------------------------------------------------------------
01/01/95 - 06/30/95 10.49 9.73 -- 0.0517 (6.70)%
- ------------------------------------------------------------------------------------------------------------------------------
Totals: $ -- 0.0517
- ------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 06/30/95: (18.44)%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID(2) RETURN (1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
01/19/94 - 12/31/94 $12.00 $10.42 -- -- (13.17)%
- ------------------------------------------------------------------------------------------------------------------------------
01/01/95 - 06/30/95 10.42 9.67 -- 0.0034 (7.16)%
- ------------------------------------------------------------------------------------------------------------------------------
Totals: $ -- 0.0034
- ------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 06/30/95: (19.39)%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID(2) RETURN (1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
01/19/94 - 12/31/94 $12.00 $10.52 -- -- (12.33)%
- ------------------------------------------------------------------------------------------------------------------------------
01/01/95 - 06/30/95 10.52 9.75 -- 0.0668 (6.61)%
- ------------------------------------------------------------------------------------------------------------------------------
Totals: $ -- 0.0668
- ------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 06/30/95: (18.13)%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------------------- ------------------------------------------
CLASS CLASS
------------------------------------------- ------------------------------------------
A* B** C*** A* B** C***
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Twelve Months Ended 06/30/95 (9.29)% (10.01)% (9.03)% (14.52)% (10.01)% (9.03)%
- ------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 06/30/95 N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Commencement of operations
Through 06/30/95`D' (13.16)% (13.86)% (12.94)% (16.64)% (13.86)% (12.94)%
- ------------------------------------------------------------------------------------------------------------------------------
</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 for Class A shares would be lower if sales charges
were included.
(2) Certain distributions may contain short-term capital gains.
* Maximum sales charge for Class A shares is 5.75% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Class B shares are sold without initial or contingent deferred sales
charges, but 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.
`D' Commencement of operations was January 19, 1994 for all three classes.
- --------------------------------------------------------------------------------
THE DATA ABOVE REPRESENT PAST PERFORMANCE OF THE FUND'S SHARES, WHICH IS NO
GUARANTEE OF FUTURE RESULTS.
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.
4
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
June 30, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS -- 81.68%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
ARGENTINA -- 2.53%
DEPOSITORY INSTITUTION -- 0.15%
24,249 Galicia........................................................................... $ 96,294
-----------
FOOD & FOOD SERVICES -- 0.21%
1,000 Buenos Aires Embotelladora ADR.................................................... 25,125
84,250 Cinba............................................................................. 109,553
-----------
134,678
-----------
GENERAL BUILDING CONTRACTORS -- 0.09%
25,710 Dycasa S. A. ..................................................................... 54,005
-----------
INFRASTURE -- 0.52%
79,134 Perez Companc (Cia Naviera)....................................................... 332,448
-----------
OIL & GAS -- 1.28%
167,740 Astra CIA Argentina de Petro...................................................... 251,673
13,167 YPF Sociedad Anonima ADR.......................................................... 248,527
129,060 Comercial del Plata S. A. ........................................................ 320,149
-----------
820,349
-----------
REAL ESTATE -- 0.28%
75,915 IRSA Inversiones y Representaciones S. A. Class B................................. 179,964
-----------
TOTAL ARGENTINA COMMON STOCKS................................................................... 1,617,738
-----------
AUSTRALIA -- 0.28%
MINING -- 0.28%
62,900 Niugini Mining.................................................................... 163,086
15,725 Niugini Mining Options............................................................ 16,197
-----------
TOTAL AUSTRALIA COMMON STOCKS................................................................... 179,283
-----------
BALTICS -- 0.09%
DEPOSITORY INSTITUTIONS -- 0.09%
28,800 Hansabank......................................................................... 57,600
-----------
BANGLADESH -- 0.16%
CHEMICALS -- 0.03%
8,400 Beximco Pharmaceuticals........................................................... 18,949
-----------
LEATHER & LEATHER PRODUCTS -- 0.13%
3,500 Apex Tannery...................................................................... 85,938
-----------
TOTAL BANGLADESH COMMON STOCKS.................................................................. 104,887
-----------
</TABLE>
5
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
BRAZIL -- 2.42%
ELECTRIC, GAS & SANITARY SERVICES -- 0.21%
6,901 Cemig............................................................................. $ 136,295
-----------
FOOD, BEVERAGE & TOBACCO -- 0.25%
53,678,410 Avipal S. A. ..................................................................... 161,531
-----------
FOOD & FOOD SERVICE -- 0.09%
75,000 Santista Alimentos S. A. ......................................................... 57,034
-----------
INDUSTRIAL -- 0.21%
9,200 Makro ADR......................................................................... 135,700
-----------
INVESTMENT COMPANIES -- 0.99%
2,284 Eternity Fund..................................................................... 634,547
-----------
METAL -- 0.25%
5,860,000 Cia Siderurgica Nacional Class ON................................................. 132,414
21,500,000 Usinas Siderurgicas de Minas Gerais S. A. ........................................ 24,058
-----------
156,472
-----------
PAPER PRODUCTS -- 0.10%
5,333 Aracruz Cellulose S. A. .......................................................... 62,663
-----------
TELEPHONE -- 0.32%
6,900,000 Telebras.......................................................................... 200,891
-----------
TOTAL BRAZIL COMMON STOCKS...................................................................... 1,545,133
-----------
CANADA (COMMONWEALTH OF INDEPENDENT STATES) -- 0.24%
METAL MINING -- 0.24%
89,300 Nelson Gold Corp. ................................................................ 152,872
-----------
CHILE -- 2.66%
CHEMICAL & ALLIED PRODUCTS -- 0.31%
4,200 Soquinich ADR..................................................................... 198,450
-----------
CHEMICALS -- 0.32%
11,000 Laboratorio Chile S. A. ADR....................................................... 207,625
-----------
COMMUNICATIONS -- 0.28%
2,200 Telefonos De Chile ADR............................................................ 179,025
-----------
ELECTRIC, GAS & SANITARY SERVICES -- 0.74%
15,000 Chilgener ADR..................................................................... 474,375
-----------
</TABLE>
6
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
INVESTMENT COMPANIES -- 1.01%
18,100 Genesis Chile Fund................................................................ $ 642,550
-----------
TOTAL CHILE COMMON STOCKS....................................................................... 1,702,025
-----------
COLOMBIA -- 1.24%
FOOD, BEVERAGE & TOBACCO -- 0.18%
37,800 Bavaria........................................................................... 111,682
-----------
FOOD & KINDRED PRODUCTS -- 0.23%
25,500 Ind Alimenticias.................................................................. 144,886
-----------
HOLDING & OTHER INVESTMENT OFFICES -- 0.31%
8,960 Suramericana de Segu.............................................................. 200,581
-----------
RETAIL -- 0.16%
6,007 Carulla & CIA ADS................................................................. 105,123
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.21%
8,200 Cementos Paz Del Rio.............................................................. 135,300
-----------
TIRE & RUBBER -- 0.15%
32,000 Pavco............................................................................. 96,364
-----------
TOTAL COLOMBIA COMMON STOCKS.................................................................... 793,936
-----------
CZECH REPUBLIC -- 1.37%
CHEMICAL -- 0.57%
4,871 Deza Valasske Meririci............................................................ 364,618
-----------
ELECTRIC, GAS & SANITARY PRODUCTS -- 0.27%
2,840 Ceske Energeticke................................................................. 102,240
2,000 Cez............................................................................... 72,727
-----------
174,967
-----------
INDUSTRIAL MACHINERY & EQUIPMENT -- 0.16%
2,230 Zavody Presneho Stro.............................................................. 100,070
-----------
MANUFACTURING -- 0.31%
4,591 Elektro-Praga..................................................................... 117,217
3,260 Fatra A. S. ...................................................................... 82,477
-----------
199,694
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.06%
2,280 Cement Hranice A. S. ............................................................. 39,250
-----------
TOTAL CZECH REPUBLIC COMMON STOCKS.............................................................. 878,599
-----------
</TABLE>
7
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
ECUADOR -- 0.07%
STONE, CLAY & GLASS PRODUCTS -- 0.07%
200 Le Cemento Nacional of Ecuador.................................................... $ 46,000
-----------
GHANA -- 0.34%
METAL MINING -- 0.34%
9,700 Ash Gold GDS...................................................................... 214,613
-----------
GREECE -- 2.53%
BANKS -- 0.68%
7,840 Alpha Credit Bank................................................................. 435,808
-----------
CONSTRUCTION -- 0.96%
4,700 Hellenic Technodomik.............................................................. 107,726
32,450 Michaniki S. A. .................................................................. 508,363
-----------
616,089
-----------
FOOD, BEVERAGE & TOBACCO -- 0.73%
7,303 Chipita International............................................................. 132,231
2,060 Delta Dairy S. A. ................................................................ 42,907
9,680 Hellenic Bottling Co. ............................................................ 287,785
-----------
462,923
-----------
PLASTICS -- 0.07%
8,750 A.G. Petzetakis S. A. ............................................................ 42,837
-----------
RETAIL (SUPERMARKET) -- 0.09%
6,030 Alfa-Beta Vassilopou.............................................................. 59,041
-----------
TOTAL GREECE COMMON STOCKS...................................................................... 1,616,698
-----------
HONG KONG -- 8.35%
AGRICULTURE -- 2.21%
4,006,000 CP Pokphand Co. .................................................................. 1,410,800
-----------
CHEMICAL -- 0.41%
100,000 Kingboard Chemical................................................................ 32,955
665,000 Yizheng Chemical.................................................................. 232,046
-----------
265,001
-----------
COMMUNICATIONS -- 0.28%
1,991,087 Champion Technology Holdings...................................................... 180,126
-----------
CONGLOMERATE -- 0.44%
512,000 Guangdong Investments Ltd......................................................... 279,567
-----------
</TABLE>
8
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
DISTRIBUTION -- WHOLESALE TRADE -- 0.65%
848,000 Pacific Concord Holding........................................................... $ 151,239
163,000 Semi-Tech Corp. .................................................................. 262,268
-----------
413,507
-----------
ELECTRONICS -- 0.93%
396,000 Legend Holdings Ltd. ............................................................. 58,343
131,240 Shanghai Shangling Electric Appliances Co., Ltd. Class B.......................... 108,929
1,824,000 Tomei International Holdings, Ltd. ............................................... 141,437
162,000 Varitronix International Ltd. .................................................... 283,689
-----------
592,398
-----------
FABRICATED METAL PRODUCTS -- 0.12%
362,000 Singamas Container(1)............................................................. 77,661
-----------
FURNITURE & FIXTURE -- 0.15%
710,000 Lamex Holdings Ltd. .............................................................. 96,346
-----------
HOUSEHOLD PRODUCTS -- 0.36%
1,018,712 World Houseware Holdings Ltd. .................................................... 233,031
-----------
LEATHER & LEATHER PRODUCTS -- 0.30%
1,608,802 KTP Holdings Ltd. ................................................................ 191,284
-----------
MACHINERY -- INDUSTRIAL SPECIALTY -- 1.13%
468,000 Chen Hsong Holdings............................................................... 297,879
430,000 Dong Fang Electric Machinery...................................................... 161,159
922,000 Sinocan Holdings Ltd. ............................................................ 262,145
-----------
721,183
-----------
MANUFACTURING -- MISCELLANEOUS -- 0.15%
305,000 China Bicycles Class B............................................................ 98,543
-----------
MISCELLANEOUS MANUFACTURING INDUSTRIES -- 0.19%
530,000 Lung Kee.......................................................................... 123,292
-----------
PACKAGING & CONTAINER -- 0.30%
553,000 M. C. Packaging Ltd. ............................................................. 191,178
-----------
REAL ESTATE -- 0.25%
1,046,500 Tian An China Investments......................................................... 162,296
-----------
TEXTILE PRODUCTS -- 0.24%
680,000 High Fashion International........................................................ 58,002
199,500 Shanghai Haixin Co., Ltd. Class B................................................. 95,760
-----------
153,762
-----------
</TABLE>
9
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
TRANSPORTATION -- MISCELLANEOUS -- 0.24%
632,000 Qingling Motors Co., Ltd. Class H................................................. $ 151,105
-----------
TOTAL HONG KONG COMMON STOCKS................................................................... 5,341,080
-----------
HUNGARY -- 2.44%
CHEMICALS -- 0.24%
70 Chinoin........................................................................... 20,052
6,300 Graboplast........................................................................ 70,132
2,953 Primagaz Hungaria Rights.......................................................... 68,144
-----------
158,328
-----------
FOOD, BEVERAGE & TOBACCO -- 0.04%
1,560 Sopron Brewery Ltd................................................................ 25,227
-----------
HOTEL -- 0.22%
14,540 Danubius Hotel.................................................................... 138,651
-----------
PLASTICS -- 0.22%
14,150 Pannonplast....................................................................... 140,745
-----------
RETAIL -- 1.54%
5,280 Julius Meinl International A.G. New Shares........................................ 163,712
26,400 Julius Meinl International A.G. .................................................. 818,563
-----------
982,275
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.18%
5,773 Zalakeramia A. G. ................................................................ 113,800
-----------
TOTAL HUNGARY COMMON STOCKS..................................................................... 1,559,026
-----------
INDIA -- 4.17%
INVESTMENTS COMPANIES -- 0.49%
22,124 Himalayan Fund.................................................................... 307,524
3,364 Himalayan Fund Warrants........................................................... 2,523
-----------
310,047
-----------
PRIMARY METAL INDUSTRIES -- 1.10%
17,600 Hindalco Industries............................................................... 512,688
17,400 Indian Aluminum GDR............................................................... 189,225
-----------
701,913
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.69%
38,800 India Cements Ltd................................................................. 442,231
-----------
TEXTILE PRODUCTS -- 0.40%
10,400 Grasim Industries Ltd. GRD........................................................ 256,100
-----------
</TABLE>
10
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
TRANSPORTATION EQUIPMENT -- 1.49%
34,859 Telco GDR......................................................................... $ 881,791
15,200 Telco Warrants.................................................................... 72,200
-----------
953,991
-----------
TOTAL INDIA COMMON STOCKS....................................................................... 2,664,282
-----------
INDONESIA -- 3.87%
BANKS -- 0.28%
57,000 P. T. Bank International Indonesia................................................ 175,965
-----------
ELECTRONICS -- 0.14%
121,500 P. T. Astra Graphia............................................................... 87,292
-----------
FINANCIAL SERVICES -- 0.24%
278,000 P. T. Dharmala Sakti Sejahtera.................................................... 156,040
-----------
FOOD, BEVERAGE & TOBACCO -- 0.31%
90,000 C. P. Pokphand Indonesia.......................................................... 196,004
-----------
FOOD & FOOD SERVICES -- 0.53%
378,250 P. T. Ultrajaya Milk Industry & Trading Co. ...................................... 339,695
-----------
HEAVY CONSTRUCTION, EXCLUDING BUILDING -- 0.10%
46,500 Petrosea.......................................................................... 62,640
-----------
LODGING, ENTERTAINMENT & MEDIA -- 0.36%
185,500 P. T. Jakarta International Hotel................................................. 233,229
-----------
METALS -- 0.06%
17,500 P. T. Inco........................................................................ 35,361
-----------
PAPER & ALLIED PRODUCTS -- 0.10%
31,500 Tjiwi Kimia....................................................................... 63,651
-----------
REAL ESTATE -- 0.38%
210,000 P. T. Pakuwon Jati................................................................ 155,590
72,000 P. T. Modernland Realty Ltd. ..................................................... 87,293
-----------
242,883
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.42%
84,000 Mulia Industrindo................................................................. 184,823
12,500 Semen Gresik...................................................................... 83,913
-----------
268,736
-----------
TELECOMMUNICATIONS -- 0.35%
72,000 P. T. Bakrie & Brothers........................................................... 225,505
-----------
</TABLE>
11
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
TEXTILE PRODUCTS -- 0.34%
11,600 P. T. Indorama Synthetics Rights.................................................. $ 8,725
70,000 P. T. Indorama Synthetics......................................................... 209,811
-----------
218,536
-----------
TRANSPORTATION -- MISCELLANEOUS -- 0.26%
94,000 P. T. Astra International......................................................... 166,726
-----------
TOTAL INDONESIA COMMON STOCKS................................................................... 2,472,263
-----------
KOREA -- 15.16%
BANKS -- 1.35%
3,580 Shinhan Bank New Shares........................................................... 73,299
26,780 Shinhan Bank...................................................................... 550,963
4,138 Kwang Ju Bank New Shares.......................................................... 35,472
19,800 Kwang Ju Bank..................................................................... 199,763
-----------
859,497
-----------
CHEMICALS -- 0.59%
3,170 Korea Chemical.................................................................... 375,843
-----------
COMMUNICATIONS -- 0.37%
90 Korea Mobile Telecom.............................................................. 56,855
5,000 Korea Mobile Telecom GDR.......................................................... 178,750
-----------
235,605
-----------
CONSTRUCTION -- 1.19%
16,358 Hyundai Engineering & Construction Co. ........................................... 761,540
-----------
DEPARTMENT STORES -- 0.04%
1,050 Taegu Department Store............................................................ 28,665
-----------
ELECTRONICS -- 2.78%
726 Samsung Company New Shares........................................................ 115,375
5,000 Samsung Company................................................................... 37,500
3,672 Samsung Electronics Co. .......................................................... 591,782
18,567 Samsung Electronics Non-Voting GDS................................................ 997,976
376 Samsung Electronics Voting GDS.................................................... 27,030
-----------
1,769,663
-----------
FINANCIAL SERVICES -- 0.57%
10,260 Daewoo Securities................................................................. 289,589
4,536 Ssangyong Investment & Securities Co. Ltd. ....................................... 77,170
-----------
366,759
-----------
</TABLE>
12
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
FOOD & FOOD SERVICES -- 0.14%
1,400 Cheil Foods....................................................................... $ 87,702
-----------
INSURANCE CARRIERS -- 0.12%
250 Samsung Fire & Marine Insurance................................................... 75,503
-----------
INVESTMENT COMPANIES -- 2.08%
30 Daehan Blue Chip Trust............................................................ 596,400
37,522 Korea Fund........................................................................ 736,369
-----------
1,332,769
-----------
METALS -- 2.47%
41,100 Pohang Iron & Steel Co., Ltd...................................................... 1,191,900
11,457 Pusan Steel Pipe Corp. ........................................................... 389,860
-----------
1,581,760
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.66%
500 Keumkang Co. ..................................................................... 44,444
14,040 Ssangyong Cement Company Ltd. .................................................... 377,734
-----------
422,178
-----------
TRANSPORTATION EQUIPMENT -- 0.62%
9,700 Hyundai Motor GDR................................................................. 194,000
10,100 Hyundai Motor GDR -- 144A......................................................... 202,000
-----------
396,000
-----------
TRUCKING & WAREHOUSING -- 0.15%
2,540 Korea Express..................................................................... 97,814
-----------
UTILITIES -- ELECTRIC -- 2.03%
32,800 Korea Electric Power Corp. ....................................................... 1,228,513
3,100 Korea Electric ADR................................................................ 70,138
-----------
1,298,651
-----------
TOTAL KOREA COMMON STOCKS....................................................................... 9,689,949
-----------
MALAYSIA -- 2.94%
BUILDING, PAPER & FOREST PRODUCTS -- 0.33%
85,000 Aokam Perdana..................................................................... 210,931
-----------
COMMUNICATION -- 0.27%
61,000 Technology Resources Industries Berhad............................................ 175,144
-----------
</TABLE>
13
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
CONSTRUCTION -- 0.66%
87,000 Ekran Berhad...................................................................... $ 267,638
39,000 I.J.M. Corp. ..................................................................... 155,168
-----------
422,806
-----------
FINANCIAL SERVICES -- 0.17%
9,000 AMMB Holdings Berhad.............................................................. 107,055
-----------
INSURANCE -- 0.17%
70,500 Arab Malaysian Corp. 5% Cumulative Loan Stock..................................... 34,701
20,000 Arab Malaysian Corp. ............................................................. 71,370
-----------
106,071
-----------
LODGING, ENTERTAINMENT & MEDIA -- 0.19%
12,000 Genting Berhad.................................................................... 118,622
-----------
PACKAGING & CONTAINER -- 0.51%
18,200 Kian Joo Can Factory Berhad Warrants.............................................. 27,322
21,500 Kian Joo Can Factory Berhad....................................................... 84,219
87,000 Malaysian Pacific Industries Berhad............................................... 217,678
-----------
329,219
-----------
REAL ESTATE -- 0.49%
29,750 O.Y.L. Industries Berhad.......................................................... 212,325
48,000 Sime U.E.P. Properties Berhad..................................................... 99,426
-----------
311,751
-----------
TELECOMMUNICATIONS -- 0.15%
13,000 Telekom Malaysian................................................................. 98,646
-----------
TOTAL MALAYSIA COMMON STOCKS.................................................................... 1,880,245
-----------
MEXICO -- 9.13%
BANKS -- 0.66%
35,000 Banacci Class B................................................................... 53,046
1,750 Banacci Class L................................................................... 2,658
472,000 Grupo Financiero Bancrecer S. A. Class B.......................................... 109,416
78,735 Grupo Financiero Bancrecer S. A. Class L.......................................... 19,007
185,000 Grupo Financiero Banorte S. A. Class C............................................ 236,611
-----------
420,738
-----------
BUILDING, PAPER & FOREST PRODUCTS -- 0.80%
120,000 Empaques Ponderosa S. A. Class B.................................................. 311,175
25,200 Grupo Industrial Durango S.A. de C.V. ADR......................................... 201,600
-----------
512,775
-----------
</TABLE>
14
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
COMMUNICATIONS -- 0.43%
9,180 Telefonos de Mexico S. A. Class L ADS............................................. $ 271,958
-----------
FINANCIAL SERVICES -- 0.09%
200,000 Grupo Financiero Bancomer, S. A. de C. V. Class C................................. 57,554
-----------
FOOD, BEVERAGE & TOBACCO -- 0.18%
370,000 Grupo Herdez S. A. Class B........................................................ 114,756
-----------
FOOD & FOOD SERVICES -- 0.90%
165,000 Femsa Class B..................................................................... 387,770
67,720 Gruma S. A. ...................................................................... 189,031
-----------
576,801
-----------
HEAVY CONSTRUCTION, EXCLUDING BUILDING -- 0.10%
6,000 ICA............................................................................... 61,966
-----------
HOLDING COMPANIES -- 0.83%
17,000 ALFA, S. A. de C. V. Class A...................................................... 206,283
46,000 Desc, S. A. de C. V. Class B...................................................... 153,701
185,600 Grupo Sidek S. A. de C. V. Class B................................................ 162,604
9,214 Grupo Sidek S. A. de C. V. Class L................................................ 9,604
-----------
532,192
-----------
HOTELS & OTHER LODGING PLACES -- 0.24%
3,400 Posada ADS........................................................................ 18,700
405,000 Posada Class A.................................................................... 132,086
-----------
150,786
-----------
MACHINERY -- CONSTRUCTION & MATERIAL HANDLING -- 0.30%
18,600 Empresas ICA Sociedad Controladora S. A. de C..................................... 190,650
-----------
MACHINERY -- INDUSTRIAL SPECIALTY -- 0.59%
113,800 Cydsa S. A. ...................................................................... 380,243
-----------
METAL MINING -- 0.69%
90,000 Gmexico Class B................................................................... 438,849
-----------
METALS -- 0.43%
13,800 Hylsamex ADR...................................................................... 244,950
10,000 Hylsamex.......................................................................... 30,536
-----------
275,486
-----------
REAL ESTATE -- 0.19%
265,000 Situr Class B..................................................................... 124,556
-----------
</TABLE>
15
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
RETAIL -- 0.89%
179,000 Cifra S. A. de C. V. Class B...................................................... $ 246,679
245,000 Cifra S. A. de C. V. Class C...................................................... 322,750
-----------
569,429
-----------
STONE, CLAY & GLASS PRODUCTS -- 1.36%
10,000 Cementos de Mexico S. A. CPO...................................................... 33,733
97,875 Cementos de Mexico S. A. Class B.................................................. 350,504
123,000 Tolmex S. A. ..................................................................... 479,808
-----------
864,045
-----------
TIRE & RUBBER -- 0.22%
420,000 Industria Automotriz S. A. Class A................................................ 143,693
-----------
TRANSPORTATION EQUIPMENT -- 0.20%
1,500 Gissa Class A..................................................................... 18,417
9,000 Gissa Class B..................................................................... 110,791
-----------
129,208
-----------
TRANSPORTATION -- MISCELLANEOUS -- 0.03%
4,000 Grupo Condumex S. A. Class A...................................................... 18,034
-----------
TOTAL MEXICO COMMON STOCKS...................................................................... 5,833,719
-----------
MOROCCO -- 1.57%
HOLDING COMPANY -- 1.57%
24,100 Omnium Nord Africain.............................................................. 1,001,524
-----------
PAKISTAN -- 0.87%
BANK -- 0.05%
45,100 Bank of Punjab.................................................................... 34,576
-----------
BUILDING, PAPER & FOREST PRODUCTS -- 0.22%
32,500 Packages.......................................................................... 136,383
-----------
CHEMICALS -- 0.11%
14,160 Engro Chemicals................................................................... 70,848
-----------
INVESTMENT COMPANIES -- 0.11%
13,000 The Pakistan Fund................................................................. 73,125
-----------
OIL & GAS -- 0.16%
8,840 Pakistan State Oil................................................................ 101,301
-----------
TELECOMMUNICATIONS -- 0.04%
280 Pakistan Telecommunications Co. GDR............................................... 27,860
-----------
</TABLE>
16
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
TEXTILE PRODUCTS -- 0.18%
118,967 Nishat Mills...................................................................... $ 107,527
17,845 Nishat Mills Rights............................................................... 5,040
-----------
112,567
-----------
TOTAL PAKISTAN COMMON STOCKS.................................................................... 556,660
-----------
PERU -- 2.16%
BANKS -- 0.19%
72,410 Banco de Credito del Peru......................................................... 118,838
-----------
COMMUNICATIONS -- 0.19%
73,600 Telefonica Del Peru............................................................... 120,130
-----------
FOOD, BEVERAGE & TOBACCO -- 0.50%
274,885 CNC Brewery Class Trabajo......................................................... 185,399
28,300 Compania Embotelladora del Pacifico............................................... 29,140
64,075 San Juan Brewery Class C.......................................................... 104,228
-----------
318,767
-----------
INSURANCE CARRIERS -- 0.29%
5,901 El Pacifico-Peruano Suiza S. A,................................................... 185,747
-----------
MACHINERY -- CONSTRUCTION & MATERIAL HANDLING -- 0.06%
29,772 Ferreyros Tractors Class Trabajo.................................................. 41,900
-----------
METAL MINING -- 0.41%
27,672 Compania Da Minas................................................................. 157,397
23,176 Southern Peru Copper.............................................................. 104,107
-----------
261,504
-----------
METALS -- 0.15%
7,650 Minsur Class Trabajo.............................................................. 96,313
-----------
MINING -- 0.37%
42,344 Buenaventura, S. A. Class C....................................................... 237,996
-----------
TOTAL PERU COMMON STOCKS........................................................................ 1,381,195
-----------
PHILIPPINES -- 1.67%
BANKS -- 0.24%
7,050 Metropolitan Bank & Trust......................................................... 153,201
-----------
COMMUNICATIONS -- 0.24%
2,100 Philippine Long Distance ADR...................................................... 150,675
-----------
CONSTRUCTION -- 0.16%
1,340,100 Engineering Equipment, Inc. ...................................................... 104,942
-----------
</TABLE>
17
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
FOOD & KINDRED PRODUCTS -- 0.20%
30,920 San Miguel Corp Class B........................................................... $ 128,329
-----------
HOLDING COMPANIES -- 0.17%
39,920 First Philippine Holdings Corp. Class B........................................... 107,068
-----------
MINING -- 0.12%
548,800 Philex Mining Corp. Class B....................................................... 78,431
-----------
REAL ESTATE -- 0.28%
153,187 Ayala Land, Inc. ................................................................. 176,939
-----------
UTILITIES -- ELECTRIC -- 0.26%
21,000 Manila Electric Co. Class B....................................................... 168,559
-----------
TOTAL PHILIPPINES COMMON STOCKS................................................................. 1,068,144
-----------
PORTUGAL -- 2.36%
BANKS -- 0.72%
18,500 Banco Comercial Portugues......................................................... 245,063
12,900 Banco Espirito Santo Comercial de Lisboa.......................................... 215,721
-----------
460,784
-----------
BUILDING, PAPER & FOREST PRODUCTS -- 0.25%
2,800 Papelaria Fernandes Industria E Comercio S. A. ................................... 16,649
5,960 Sonae Investimentos............................................................... 142,771
-----------
159,420
-----------
CONSTRUCTION -- 0.18%
4,900 Engil Sociedade de Construcao Civil, S. A. ....................................... 77,113
1,900 Mota E Companhia S. A. ........................................................... 40,301
-----------
117,414
-----------
FURNITURE & FIXTURES -- 0.10%
5,968 Cinca............................................................................. 65,336
-----------
HEAVY CONSTRUCTION, EXCLUDING BUILDING -- 0.16%
500 Cimpor Baby....................................................................... 8,142
10,600 Somec............................................................................. 97,188
-----------
105,330
-----------
MACHINERY -- CONSTRUCTION & MATERIAL HANDLING -- 0.31%
16,400 Empresa Fabril de Maquinas Electricas, S. A,...................................... 195,251
-----------
MANUFACTURING -- MISCELLANEOUS -- 0.18%
7,694 Corticeira Amorim S. A. .......................................................... 115,818
-----------
PACKAGING & CONTAINER -- 0.11%
2,432 Barbosa E Almeida S. A. .......................................................... 70,705
-----------
</TABLE>
18
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
REAL ESTATE -- 0.28%
4,200 Lusotur Sociedade Finan de........................................................ $ 84,776
3,900 Mundicenter Sociedade Imobiliaria, S. A. ......................................... 93,397
-----------
178,173
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.07%
2,500 Cimentos de Portugal S. A. ....................................................... 40,711
-----------
TOTAL PORTUGAL COMMON STOCKS.................................................................... 1,508,942
-----------
RUSSIA -- 1.25%
BUSINESS SERVICES -- 1.25%
80,000 San Fran/Moscow Teleport.......................................................... 800,000
-----------
SINGAPORE -- 1.75%
CONSTRUCTION -- 0.22%
43,000 IPCO International................................................................ 141,040
-----------
ELECTRONICS -- 0.53%
103,000 GP Batteries International Ltd. .................................................. 252,350
29,000 Singapore Technologies............................................................ 38,196
52,000 Tri-M Technologies................................................................ 50,440
-----------
340,986
-----------
MANUFACTURING -- MISCELLANEOUS -- 0.62%
33,000 Venture Manufacturing Ltd. ....................................................... 86,929
393,200 San Teh Ltd. ..................................................................... 306,792
-----------
393,721
-----------
TRANSPORTATION -- MISCELLANEOUS -- 0.38%
177,000 Chuan Hup Holdings Ltd. .......................................................... 144,438
106,000 Pacific Carriers Ltd. ............................................................ 98,640
-----------
243,078
-----------
TOTAL SINGAPORE COMMON STOCKS................................................................... 1,118,825
-----------
SLOVAKIA -- 0.79%
ELECTRIC, GAS & SANITARY SERVICES -- 0.46%
3,734 Nafta............................................................................. 295,836
-----------
INDUSTRIAL MACHINERY & EQUIPMENT -- 0.13%
14,832 Povazske Strojarne................................................................ 83,745
-----------
INSTRUMENTS & RELATED PRODUCTS -- 0.20%
4,140 Chirana Prama..................................................................... 128,070
-----------
TOTAL SLOVAKIA COMMON STOCKS.................................................................... 507,651
-----------
</TABLE>
19
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
SRI LANKA -- 0.35%
BANKS -- 0.04%
5,000 National Development Bank......................................................... $ 24,545
-----------
FINANCIAL SERVICES -- 0.26%
19,706 Dev Fin Corp of Ceylon............................................................ 151,156
24,300 Vanik............................................................................. 17,769
-----------
168,925
-----------
HOTELS & OTHER LODGING SERVICES -- 0.05%
7,470 Aitken Spence..................................................................... 29,794
-----------
TOTAL SRI LANKA COMMON STOCKS................................................................... 223,264
-----------
TAIWAN -- 1.64%
BUILDING MATERIALS -- 0.29%
14,559 Hocheng GDR....................................................................... 186,017
-----------
ELECTRIC EQUIPMENT -- 0.54%
22,900 GVC Corporation GDS............................................................... 343,500
-----------
METALS -- 0.81%
25,300 China Steel Corp. GDR............................................................. 518,650
-----------
TOTAL TAIWAN COMMON STOCKS...................................................................... 1,048,167
-----------
THAILAND -- 4.27%
AGRICULTURE -- 0.07%
6,900 C. P. Feedmill Co., Ltd. ......................................................... 41,928
-----------
BANKS -- 1.08%
13,100 Bangkok Bank Co., Ltd. ........................................................... 144,347
87,000 Bank of Asia...................................................................... 207,940
24,000 Bank of Ayudhya Ltd. ............................................................. 117,642
159,400 Siam City Bank.................................................................... 219,550
-----------
689,479
-----------
COMMUNICATIONS -- 0.12%
5,300 Adv Info Service.................................................................. 78,153
-----------
CONSTRUCTION -- 0.36%
89,000 Siam Syntech Construction Co., Ltd................................................ 230,747
-----------
ELECTRONIC & OTHER ELECTRIC EQUIPMENT -- 0.28%
6,700 Hana Micro Local.................................................................. 34,199
29,500 Hana Microelectronic.............................................................. 146,992
-----------
181,191
-----------
</TABLE>
20
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
HEALTH SERVICES -- 0.15%
55,000 Ramkamhaeng Hospital Co., Ltd. ................................................... $ 93,579
-----------
LODGING, ENTERAINMENT & MEDIA -- 0.22%
257,000 First Pacific Land, Ltd. ......................................................... 143,154
-----------
METAL -- 0.19%
27,000 Alucon Manufacturing Co., Ltd. ................................................... 123,597
-----------
REAL ESTATE -- 0.49%
112,200 M. D. X. Co. Ltd. ................................................................ 256,808
22,200 Raimon Land Local................................................................. 55,309
-----------
312,117
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.37%
2,000 Siam Cement....................................................................... 127,689
39,500 Thai-German Ceramic Industry Co., Ltd. ........................................... 111,211
-----------
238,900
-----------
TELECOMMUNICATIONS -- 0.27%
45,200 Telecom Asia Corp. ............................................................... 170,290
-----------
TEXTILE PRODUCTS -- 0.43%
169,000 Saha-Union Corp., Ltd. ........................................................... 272,139
-----------
TRANSPORTATION -- MISCELLANEOUS -- 0.24%
13,600 Precious Shipping Ltd. ........................................................... 153,162
-----------
TOTAL THAILAND COMMON STOCKS.................................................................... 2,728,436
-----------
TURKEY -- 1.04%
BANKS -- 0.39%
976,100 Akbank T. A. S. .................................................................. 248,357
-----------
FOOD, BEVERAGE & TOBACCO -- 0.10%
54,000 Ege Biracilik Ve Malt Sanayii A. S. .............................................. 63,508
-----------
HOLDING COMPANIES -- 0.20%
143,000 Alarko Holdings................................................................... 126,134
-----------
METALS -- 0.17%
418,000 Sarkuysan Electrolitik Bakir...................................................... 111,082
-----------
NON-DEPOSITORY INSTITUTIONS -- 0.05%
264,300 Aktif Finans Factori.............................................................. 34,073
-----------
</TABLE>
21
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
RETAIL -- 0.13%
25,000 Migros Turks Rights............................................................... $ 27,423
50,000 Migros Turks...................................................................... 55,976
-----------
83,399
-----------
TOTAL TURKEY COMMON STOCKS...................................................................... 666,553
-----------
UNITED KINGDOM -- 0.06%
METAL MINING -- 0.06%
12,400 Bakyrchik Gold.................................................................... 35,392
-----------
VENEZUELA -- 1.63%
METAL FABRICATING -- 0.73%
280,900 Sivensa........................................................................... 467,361
-----------
PRIMARY METAL INDUSTRIES -- 0.09%
140,400 Sivensa........................................................................... 46,721
1,872 Venprecar Ca...................................................................... 10,670
-----------
57,391
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.63%
392,172 Electricidad de Caracas........................................................... 405,373
-----------
UTILITIES -- ELECTRIC -- 0.18%
79,249 Venezolana de Cementos Class I.................................................... 114,357
-----------
TOTAL VENEZUELA COMMON STOCKS................................................................... 1,044,482
-----------
ZAMBIA -- 0.28%
AEROSPACE & DEFENSE -- 0.28%
125,900 Trans Zambezi Industries Ltd. .................................................... 176,261
-----------
TOTAL COMMON STOCKS (COST -- $60,456,076)....................................................... 52,215,444
-----------
</TABLE>
22
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 6.57%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
AUSTRIA -- 0.08%
FOOD & KINDRED PRODUCTS -- 0.08%
277 Mautner Markhof................................................................... $ 53,182
-----------
BRAZIL -- 5.38%
BANKS -- 1.06%
1,929,874 Antarctica de Pardiba............................................................. 264,165
794,399 Bradesco S. A. Rights............................................................. 863
48,631,496 Bradesco S. A. ................................................................... 412,087
-----------
677,115
-----------
BUILDING, PAPER & FOREST PRODUCTS -- 0.26%
604,000 Melpaper S. A. ................................................................... 164,041
-----------
CHEMICALS -- 0.38%
10,931,394 Bombril S. A. .................................................................... 231,572
752,000 IAP S.A. ......................................................................... 11,519
-----------
243,091
-----------
ELECTRIC, GAS & SANITARY SERVICES -- 0.15%
4,848,000 Cemig............................................................................. 95,854
-----------
ELECTRONIC & OTHER ELECTRIC EQUIPMENT -- 0.12%
93,000 Multibras S. A. .................................................................. 76,885
-----------
FOOD & KINDRED PRODUCTS -- 0.44%
14,610 Brahma New Shares................................................................. 3,260
615,000 Brahma............................................................................ 201,764
79,000 Sadia Concordia................................................................... 73,379
-----------
278,403
-----------
MACHINERY -- INDUSTRIAL SPECIALTY -- 0.24%
189,500 Dixie Toga........................................................................ 150,282
-----------
MANUFACTURING -- MISCELLANEOUS -- 0.63%
18,437,731 Cosigua PN........................................................................ 230,346
16,688,000 Mangels Industrial S. A. ......................................................... 60,733
346,000 Nakata PN......................................................................... 113,141
-----------
404,220
-----------
MINING -- 0.32%
1,343,000 Vale Do Rio Doce S. A. ........................................................... 206,447
-----------
PAPER & ALLIED PRODUCTS -- 0.34%
5,719,591 Votorantin Celulose e Papel....................................................... 217,413
-----------
</TABLE>
23
<PAGE>
MITCHELL HUTCHINS/KIDDER PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ----------- -----------
<S> <C> <C>
RETAIL -- 0.07%
636,950 Mesbla S. A. ..................................................................... $ 44,977
-----------
TELEPHONE -- 0.52%
8,443,880 Telebras.......................................................................... 288,495
390,000 Telebras Spon. ADR................................................................ 48,512
-----------
337,007
-----------
TIRE & RUBBER -- 0.27%
1,019,900 Marcopolo S. A. .................................................................. 169,522
-----------
TRANSPORTATION EQUIPMENT -- 0.12%
201,000 Iochpe Maxion..................................................................... 76,208
-----------
UTILITIES -- ELECTRIC -- 0.46%
711,000 Iven S. A. ....................................................................... 295,654
-----------
TOTAL BRAZIL PREFERRED STOCKS................................................................... 3,437,119
-----------
GREECE -- 0.58%
CONSTRUCTION -- 0.18%
9,140 Michaniki S. A. .................................................................. 116,543
-----------
FOOD & FOOD SERVICES -- 0.34%
11,350 Delta Dairy S. A. ................................................................ 218,473
-----------
PLASTICS -- 0.06%
9,218 A. G Petzetakis S. A. ............................................................ 36,923
-----------
TOTAL GREECE PREFERRED STOCKS................................................................... 371,939
-----------
KOREA -- 0.08%
FINANCIAL SERVICES -- 0.08%
2,500 Daewoo Securities................................................................. 49,456
-----------
PORTUGAL -- 0.45%
PACKAGING & CONTAINER -- 0.45%
10,610 Barbosa E Almeida S. A. .......................................................... 290,387
-----------
TOTAL PREFERRED STOCKS (COST -- $4,157,546)..................................................... 4,202,083
-----------
</TABLE>
24
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 7.38%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- --------------------- -------- -----------
<S> <C> <C> <C> <C>
HONG KONG -- 0.28%
REAL ESTATE -- 0.28%
$ 163,000 Guangdong Investment Ltd................................ 10/07/98 4.500% $ 181,134
-----------
INDIA -- 1.26%
MACHINERY -- CONSTRUCTION & MATERIALS HANDLING -- 0.08%
45,000 Essar Gujarat........................................... 08/05/98 5.500 49,303
-----------
PRIMARY METAL INDUSTRIES -- 0.19%
135,000 TISCO................................................... 04/01/99 2.250 124,200
-----------
STONE, CLAY & GLASS PRODUCTS -- 0.99%
460,000 Gujurat Ambuja Cement................................... 06/03/99 3.500 628,762
-----------
TOTAL INDIA CONVERTIBLE BONDS....................................... 802,265
-----------
INDONESIA -- 0.12%
REAL ESTATE -- 0.12%
72,000 P.T. Modernland Realty.................................. 02/17/03 6.000 77,593
-----------
TAIWAN -- 5.72%
CONSTRUCTION -- 0.43%
300,000 Pacific Construction.................................... 10/01/98 2.125 277,862
-----------
ELECTRONICS -- 3.13%
350,000 ACER Incorporated....................................... 06/10/01 4.000 1,031,625
567,000 United Microelectronics Corp. .......................... 06/08/04 1.250 968,153
-----------
1,999,778
-----------
MACHINERY -- 0.57%
390,000 Teco.................................................... 01/01/04 to 04/15/04 2.750 362,700
-----------
PETROLEUM & COAL PRODUCTS -- 0.80%
535,000 Nan Ya Plastics......................................... 07/19/01 1.750 512,263
-----------
TRANSPORTATION -- 0.79%
498,000 U-Ming Marine........................................... 02/07/01 1.500 502,980
-----------
TOTAL TAIWAN CONVERTIBLE BONDS...................................... 3,655,583
-----------
TOTAL CONVERTIBLE BONDS (COST -- $4,436,497)........................ 4,716,575
-----------
TOTAL INVESTMENTS (COST -- $69,050,119) -- 95.63%................... 61,134,102
Other assets in excess of liabilities -- 4.37%...................... 2,792,548
-----------
NET ASSETS -- 100.00%............................................... $63,926,650
-----------
-----------
</TABLE>
- ---------------
(1) Includes 72,400 non-detachable warrants.
See accompanying notes to financial statements
25
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost -- $69,050,119)....................................... $61,134,102
Cash............................................................................................ 1,672,086
Cash denominated in foreign currencies, at value (cost -- $357,676)............................. 368,277
Receivable for investments sold................................................................. 1,899,975
Receivable for shares of beneficial interest sold............................................... 549,858
Dividends and interest receivable............................................................... 281,990
Receivable from investment adviser.............................................................. 81,217
Deferred organization expenses.................................................................. 198,902
Prepaid expenses................................................................................ 13,936
-----------
Total assets................................................................................ 66,200,343
-----------
LIABILITIES
Payable for investments purchased............................................................... 1,724,386
Payable for shares of beneficial interest repurchased........................................... 326,744
Accrued expenses and other liabilities.......................................................... 137,990
Payable to affiliates........................................................................... 84,573
-----------
Total liabilities........................................................................... 2,273,693
-----------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding (unlimited amount authorized)........ 80,088,145
Accumulated net realized losses from investments................................................ (8,192,019)
Net unrealized depreciation of investments and other assets and liabilities denominated in
foreign currencies............................................................................. (7,907,849)
Overdistributed net investment income........................................................... (61,627)
-----------
Net assets.................................................................................. $63,926,650
===========
CLASS A:
Net assets...................................................................................... $33,043,137
-----------
Shares outstanding.............................................................................. 3,397,159
-----------
Net asset value and redemption value per share.................................................. $9.73
======
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering
price)......................................................................................... $10.32
=======
CLASS B:
Net assets...................................................................................... $18,551,301
-----------
Shares outstanding.............................................................................. 1,917,500
-----------
Net asset value, offering price and redemption value per share.................................. $9.67
=====
CLASS C:
Net assets...................................................................................... $12,332,212
-----------
Shares outstanding.............................................................................. 1,265,419
-----------
Net asset value, offering price and redemption value per share.................................. $9.75
=====
</TABLE>
See accompanying notes to financial statements
26
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes)..................................................... $ 1,158,541
Interest (net of foreign withholding taxes)...................................................... 153,015
-----------
1,311,556
-----------
EXPENSES:
Investment advisory.............................................................................. 1,261,493
Service fees -- Class A.......................................................................... 102,254
Service and distribution fees -- Class B......................................................... 226,672
Amortization of organization expenses............................................................ 57,673
Legal and audit fees............................................................................. 54,856
Custody and accounting fees...................................................................... 220,012
Reports and notices to shareholders.............................................................. 53,508
Federal and state registration fees.............................................................. 33,380
Transfer agency fees............................................................................. 94,144
Trustees' fees and expenses...................................................................... 10,000
Other............................................................................................ 1,140
-----------
Total expenses................................................................................... 2,115,132
Less: Fee waivers and expense reimbursements..................................................... (81,217)
-----------
Net expenses................................................................................. 2,033,915
-----------
NET INVESTMENT LOSS.................................................................................. (722,359)
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT AND FOREIGN CURRENCY ACTIVITIES:
Net realized gains (losses) from:
Investment activities........................................................................ (7,704,890)
Foreign currency activities.................................................................. (185,851)
Net change in unrealized appreciation/depreciation of:
Investments.................................................................................. 1,768,294
Other assets, liabilities and forward contracts denominated in foreign currencies............ 19,491
-----------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENT AND FOREIGN CURRENCY ACTIVITIES................... (6,102,956)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................. $(6,825,315)
-----------
-----------
</TABLE>
See accompanying notes to financial statements
27
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Year Ended Period Ended
June 30, 1995 June 30, 1994`D'
------------- ---------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss)................................................. $ (722,359 ) $ 216,937
Net realized losses from investment activities............................... (7,704,890 ) (362,639)
Net realized gains (losses) from foreign currency activities................. (185,851 ) 61,361
Net change in unrealized appreciation (depreciation) of investments.......... 1,768,294 (9,695,634)
Net change in unrealized appreciation (depreciation) of other assets,
liabilities and forward contracts denominated in foreign currencies........ 19,491 --
------------- ---------------------
Net increase (decrease) in net assets resulting from operations.............. (6,825,315 ) (9,779,975)
------------- ---------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- Class A............................................. (184,109 ) --
Net investment income -- Class B............................................. (6,584 ) --
Net investment income -- Class C............................................. (87,871 ) --
------------- ---------------------
Total dividends and distributions to shareholders............................ (278,564 ) --
------------- ---------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from sale of shares............................................. 18,199,542 104,747,667
Proceeds from dividends reinvested........................................... 272,835 --
Cost of shares repurchased................................................... (36,356,442 ) (6,058,102)
------------- ---------------------
Net increase (decrease) in net assets from beneficial interest
transactions............................................................... (17,884,065 ) 98,689,565
------------- ---------------------
Total increase (decrease) in net assets...................................... (24,987,944 ) 88,909,590
------------- ---------------------
NET ASSETS:
Beginning of period.......................................................... 88,914,594 5,004
------------- ---------------------
End of period................................................................ $ 63,926,650 $ 88,914,594
------------- ---------------------
------------- ---------------------
</TABLE>
- ------------
`D' For the period January 19, 1994 (commencement of investment operations) to
June 30, 1994.
See accompanying notes to financial statements
28
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins/Kidder, Peabody Emerging Markets Equity Fund (formerly
Kidder, Peabody Emerging Markets Equity Fund) (the 'Fund') is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
investment company.
Organizational Matters -- The Fund commenced investment operations on
January 19, 1994. The Fund adopted the Choice Pricing System'sm'. The Fund
offers three classes of shares, Class A, Class B and Class C. Each class
represents interest in the same assets of the Fund and the classes are identical
except for differences in their sales charge structures 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.
Valuation of Investments -- Securities that are primarily traded on foreign
exchanges are generally valued at the preceding closing value of the securities
on their respective exchanges. When an occurrence, subsequent to time a value
was so established, is likely to have changed that value, the fair market value
of those securities will be determined by consideration of other factors by or
under the direction of the Board of Trustees.
A security that is primarily traded on a domestic stock exchange is valued
at the last sale price on that exchange or, if no sales occurred during the day,
at the current quoted bid price. Investments in government securities and other
securities traded over-the-counter are valued at the average of the quoted bid
and asked prices in the over-the-counter market. In the absence of a market
value, investments are valued at fair value as determined by or under the
direction of the Board of Trustees. Short-term obligations with maturities of 60
days or less are valued at amortized cost.
An option that is written by the Fund is valued at the last sale price or,
in the absence of the last sales price, the last bid price. In carrying out the
Trustees' valuation policies, the Fund may consult with an independent pricing
service.
The value of a futures contract is equal to the unrealized gain or loss on
the contract that is determined by marking the contract to the current
settlement price for a like contract on the valuation date of the futures
contract. A settlement price may not be used if the market makes a limit move
with respect to a particular futures contract or if the securities underlying
the futures contract experience significant price fluctuation after the
determination of the settlement price. When a settlement price cannot be used
futures contracts will be valued at their fair market value as determined by or
under the direction of the Trustees.
Investment Transactions and Investment Income -- Investment transactions
are recorded as of the trade date. Realized gains and losses from investment
transactions are calculated using the
29
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements -- (continued)
- --------------------------------------------------------------------------------
identified cost method. Interest income is recorded on an accrual basis.
Discounts are accreted and premiums are amortized on a straight-line basis as
adjustments to interest income and the identified cost of the investments.
Income and expenses (excluding class-specific expenses) are allocated
proportionately to each class of shares based upon each class' daily settled net
assets. Realized and unrealized gains and losses are allocated proportionately
to each class of share based on the relative value of shares outstanding at the
beginning of the day. 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 exchange rates 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 rate 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. Foreign security and currency transactions may involve certain
considerations and risks not typically associated with investing in U.S.
companies and U.S. government securities. These risks include re-evaluation of
currencies and future adverse political and economic developments, which could
cause securities to be less liquid and their prices more volatile than those of
comparable U.S. companies and the U.S. government.
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. dollars value of portfolio
securities denominated in a particular currency.
A forward currency contract is a commitment to purchase or sell foreign
currency at a future date at a negotiated exchange rate. Generally, the Fund
will enter into such forward contracts on the transaction's trade date with a
contracted date coinciding with the settlement date of the underlying security.
Certain risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of foreign currencies relative to the U.S.
dollar. During the period between the forward currency contract's trade date and
settlement date movements in the value of foreign currencies
30
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements -- (continued)
- --------------------------------------------------------------------------------
relative to the U.S. dollar are recognized as unrealized gains or losses. On a
daily basis the Fund records an unrealized gain or loss to recognize the U.S.
dollar value of the foreign currency contract at the end of each day's trading.
Should the underlying security fail to settle within the contracted period the
forward currency contract is renegotiated at a new exchange rate. The gain or
loss resulting from the difference between the original and renegotiated
settlement value is recognized and included in realized transaction gain/loss.
Federal Tax Status -- The Fund intends to distribute all of its taxable
income and to comply with the other requirements of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provision for
federal income taxes is required. In addition, by distributing during each
calendar year substantially all of its net investment income, capital gains and
certain other amounts, if any, the Fund intends not to be subject to a federal
excise tax.
At June 30, 1995, the Fund had a net capital loss carryforward of
approximately $350,000. This loss carryforward is available as a reduction, to
the extent provided in the regulations, of future net realized capital gains and
will expire by June 30, 2003.
In accordance with Treasury Regulations, the Fund has elected to defer
realized losses arising after October 31, 1994. Such losses have been treated
for tax purposes as arising on July 1, 1995.
To the extent that such losses are used to offset future capital gains, it
is probable that the gains so offset will not be distributed to shareholders.
Dividends and Distributions -- The Fund declares dividends from net
investment income annually. Dividends from net investment income and
distributions from realized gains from investment transactions are determined in
accordance with 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 income tax classification. Net capital gains and certain other
amounts, if any, will be distributed at least annually but each Fund may make
more frequent distributions of such amounts, if necessary, to avoid income or
excise taxes.
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 1.62% of the Fund's
average daily net assets on assets up to $100 million and 1.50% thereafter.
At a special meeting of shareholders held on April 13, 1995, Mitchell
Hutchins Asset Management Inc. ('Mitchell Hutchins') was appointed as investment
adviser and administrator of
31
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements -- (continued)
- --------------------------------------------------------------------------------
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, Inc. ('KPAM'), the Fund's predecessor investment adviser and
administrator, as described in the Fund's prospectus. Mitchell Hutchins
continues to manage the Fund in accordance with the Fund's investment objective,
policies and restrictions as stated in the prospectus.
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 June
30, 1995, no reimbursement was required pursuant to the above limitation.
Mitchell Hutchins voluntarily reimbursed the Fund for a portion of its expenses
and waived its investment adviser fee.
Under a separate contract with Mitchell Hutchins ('Sub-Advisory Contract'),
Emerging Markets Management serves as the Fund's sub-adviser. Under the
Sub-Advisory Contract, Mitchell Hutchins (not the Fund) will pay the Sub-Adviser
a fee, accrued daily and paid monthly, at the annual rate of 1.12% of the Fund's
daily net assets on assets up to $100 million and 0.90% thereafter.
DISTRIBUTION PLAN
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 are sold at net asset value
without a sales load and bear distribution fee of 0.75% per annum and a service
fee of 0.25% per annum of average class net assets. The Fund pays Mitchell
Hutchins the service and distribution fee monthly. For the period ended February
13, 1995, Kidder, Peabody & Co. Incorporated, the Fund's predecessor
distributor, earned $230,791 in fees. For the period February 13, 1995 to June
30, 1995, Mitchell Hutchins earned $98,135 as the Fund's distributor. At June
30, 1995, the Fund owed Mitchell Hutchins $21,764 in service and distribution
fees. Mitchell Hutchins also receives the proceeds of any front-end sales loads
with respect to the purchase of Class A shares.
32
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements -- (continued)
- --------------------------------------------------------------------------------
INVESTMENT IN SECURITIES
For federal income tax purposes, the cost of securities owned at June 30,
1995 was substantially the same as the cost of securities for financial
statement purposes.
At June 30, 1995, the components of the net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost)......... $ 4,739,761
Gross depreciation ( investments having an excess of cost over value)........ (12,655,778)
------------
Net unrealized depreciation of investments................................... $ (7,916,017)
------------
------------
</TABLE>
For the year ended June 30, 1995, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases..................................................................... $55,858,309
Sales......................................................................... $64,903,314
</TABLE>
33
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements -- (concluded)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares 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 June 30, 1995:
Shares sold................. 1,014,098 $ 11,084,369 432,605 $ 4,522,619 242,720 $ 2,592,554
Dividends reinvested in
additional Fund shares.... 20,613 180,155 749 6,520 9,847 86,160
Shares repurchased.......... (1,971,947) (21,159,863) (1,001,168) (10,754,854) (416,367) (4,441,725)
---------- ------------ ---------- ------------ ---------- -----------
Net decrease.................... (937,236) $ (9,895,339) (567,814) $ (6,225,715) (163,800) $(1,763,011)
---------- ------------ ---------- ------------ ---------- -----------
---------- ------------ ---------- ------------ ---------- -----------
Period ended June 30, 1994`D':
Shares sold................. 4,688,180 $ 55,827,960 2,605,316 $ 31,080,972 1,499,980 $17,838,735
Dividends reinvested in
additional Fund shares.... -- -- -- -- -- --
Shares repurchased.......... (354,202) (3,939,116) (120,001) (1,333,876) (70,761) (785,110)
---------- ------------ ---------- ------------ ---------- -----------
Net increase.................... 4,333,978 $ 51,888,844 2,485,315 $ 29,747,096 1,429,219 $17,053,625
---------- ------------ ---------- ------------ ---------- -----------
---------- ------------ ---------- ------------ ---------- -----------
</TABLE>
- ------------
`D' For the period January 19, 1994 (commencement of investment operations) to
June 30, 1994.
34
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout
each period is presented below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- --------------------- ---------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994`D' 1995 1994`D' 1995 1994`D'
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $10.79 $12.00 $10.75 $12.00 $10.80 $12.00
-------- -------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income (loss)....................... (0.04) 0.04 (0.17) -- 0.01 0.05
Net realized and unrealized losses from
investment transactions.......................... (0.97) (1.25) (0.90) (1.25) (0.99) (1.25)
-------- -------- -------- -------- -------- --------
Net decrease in net assets resulting from
investment operations............................ (1.01) (1.21) (1.07) (1.25) (0.98) (1.20)
-------- -------- -------- -------- -------- --------
Less dividends to shareholders from:
Net investment income.............................. (0.05) -- (0.01) -- (0.07) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period..................... $9.73 $10.79 $9.67 $10.75 $9.75 $10.80
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total Investment Return(1)......................... (9.29)% (10.08)% (10.01)% (10.42)% (9.03)% (10.00)%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period (000's omitted).......... $33,043 $46,758 $18,551 $26,721 $12,332 $15,435
Ratios of expenses, net of fee waivers and expense
reimbursements, to average net assets............ 2.44% 2.47%* 3.19% 3.22%* 2.19% 2.22%*
Ratios of expenses, before fee waivers and expense
reimbursements, to average net assets............ 2.54% 2.47%* 3.29% 3.22%* 2.29% 2.22%*
Ratios of net investment income to average net
assets........................................... (0.76)% 0.72%* (1.50)% (0.03)%* (0.51)% 0.97%*
Portfolio turnover................................. 76.07% 8.11% 76.07% 8.11% 76.07% 8.11%
</TABLE>
- ------------
`D' For the period January 19, 1994 (commencement of investment operations) to
June 30, 1994.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
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 of Class A would be lower if sales charges
were included. Total returns for periods of less than one year have not
been annualized.
35
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders,
Mitchell Hutchins/Kidder, Peabody Emerging Markets Equity Fund
(One of the portfolios constituting the Mitchell Hutchins/Kidder, Peabody
Investment Trust II):
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Mitchell Hutchins/Kidder, Peabody Emerging
Markets Equity Fund as of June 30, 1995, and the related statements of
operations and of changes in net assets and the financial highlights for each of
the periods presented. 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
audits.
We conducted our audits 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 as of June
30, 1995, by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. 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 audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Mitchell
Hutchins/Kidder, Peabody Emerging Markets Equity Fund as of June 30, 1995, the
results of its operations, the changes in its net assets and the financial
highlights for the periods presented in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
August 25, 1995
36
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY 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 (June 30,
1995) as to federal tax status of distributions received by shareholders during
such fiscal year. Accordingly, we are advising you that all of the distributions
paid by the Fund during the year were derived from net investment income and are
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 reporting.
Since the Fund's fiscal year is not the calendar year, another notification will
be sent in respect of calendar 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.
37
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
A special meeting of shareholders of Mitchell Hutchins/Kidder, Peabody Emerging
Markets Equity Fund ('Fund'), a series of Mitchell Hutchins/Kidder, Peabody
Investment Trust II, 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 votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES VOTING AS A SINGLE CLASS
-----------------------------------
SHARES SHARES
VOTED FOR WITHHOLD AUTHORITY
--------- ------------------
<S> <C> <C>
David J. Beaubien................................................. 4,099,395 114,800
William W. Hewitt, Jr............................................. 4,099,395 114,800
Thomas R. Jordan.................................................. 4,099,395 114,800
Frank P.L. Minard................................................. 4,099,395 114,800
Carl W. Schafer................................................... 4,099,395 114,800
</TABLE>
<TABLE>
<CAPTION>
ALL SHARES VOTING AS A SINGLE CLASS
------------------------------------------------
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
--------- ------------- ------------------
<S> <C> <C> <C>
Ratification of the selection of Deloitte & Touche
LLP............................................... 4,091,770 12,245 110,180
</TABLE>
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:
<TABLE>
<CAPTION>
ALL SHARES VOTING AS A SINGLE CLASS
- ----------------------------------------------------
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
- --------- ------------- ------------------
<S> <C> <C>
4,082,804 23,286 108,005
</TABLE>
38
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Shareholder Information -- (continued)
- --------------------------------------------------------------------------------
(2) An interim investment advisory agreement with the Fund's current
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 VOTING AS A SINGLE CLASS
- ----------------------------------------------------
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
- --------- ------------- ------------------
<S> <C> <C>
4,080,049 27,561 106,585
</TABLE>
(3) A new investment advisory and administration agreement between the
Fund and Mitchell Hutchins containing the same fees and substantively
similar material terms and conditions as the previous investment advisory
agreement with KPAM to commence on the termination of the interim
agreement.
The votes were as follows:
<TABLE>
<CAPTION>
ALL SHARES VOTING AS A SINGLE CLASS
- ----------------------------------------------------
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
- --------- ------------- ------------------
<S> <C> <C>
4,082,135 24,832 107,228
</TABLE>
(4) A new sub-investment advisory agreement with the Fund's current
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 VOTING AS A SINGLE CLASS
- ----------------------------------------------------
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
- --------- ------------- ------------------
<S> <C> <C>
4,080,572 26,642 106,981
</TABLE>
Broker non-votes and abstentions are included within the 'Shares Withhold
Authority' totals.
39
<PAGE>
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40
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
41
<PAGE>
-------------------------------------
TRUSTEES
David J. Beaubien
William W. Hewitt, Jr.
Thomas R. Jordan
Frank P.L. Minard
Carl W. Schafer
-------------------------------------
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
-------------------------------------
INVESTMENT SUB-ADVISER
Emerging Markets Management
1001 Nineteenth Street North
Arlington, Virginia 22209-1722
-------------------------------------
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.
STATEMENT OF DIFFERENCES
------------------------
Copyright symbol shall be represented as...... 'c'
Dagger shall be represented as................ 'D'
Registration sign shall be expressed as....... 'sm'
